UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (date of earliest event reported): May 1, 2018 (April 30, 2018)
KLX Inc.
(Exact name of Registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation) |
001-36610
(Commission File Number) |
47-1639172
(I.R.S. Employer Identification No.) |
1300 Corporate Center Way, Wellington, Florida 33414-2105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 383-5100
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
On April 30, 2018, KLX Inc. ("KLX" or the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Boeing Company, a Delaware corporation ("Boeing"), and Kelly Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Boeing, pursuant to which Boeing has agreed to acquire KLX's Aerospace Solutions Group ("ASG"). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the closing, Merger Sub will merge with and into KLX, with KLX surviving as a direct or indirect wholly owned subsidiary of Boeing (the "Merger").
At the effective time of the Merger (the "Effective Time"), each share of KLX common stock that is issued and outstanding immediately prior to the Effective Time (other than shares of KLX common stock (i) held by KLX as treasury stock, (ii) held, directly or indirectly, by Boeing or Merger Sub immediately prior to the Effective Time or (iii) that are outstanding immediately prior to the Effective Time and that are held by any person who is entitled to demand, and properly demands, appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the Delaware General Corporation Law) will be converted into the right to receive $63.00 per share in cash, without interest (the "Merger Consideration").
Prior to the consummation of the Merger, KLX and KLX Energy Services Holdings, Inc. ("KLX Energy"), a to-be-formed wholly owned subsidiary of KLX and the eventual parent company of KLX's Energy Services Group ("ESG"), will enter into a distribution agreement (the "Distribution Agreement"), pursuant to which KLX Energy will distribute all of its issued and outstanding shares of common stock to the holders of the outstanding shares of KLX common stock on a pro rata basis (the "distribution") and spin off ESG from KLX (the "spin-off"). KLX Energy is expected to be a stand-alone independent public company, and its common stock is expected to be listed on Nasdaq at the time of the spin-off. Within 30 days of the date of the Merger Agreement, KLX may elect in lieu of the spin-off to sell ESG to a third party (either such sale or the spin-off, the "ESG Transaction"). Prior to the completion of the spin-off, KLX will contribute $50 million in cash, subject to a potential adjustment based on KLX Energy's cash flows from the date of the Merger Agreement to the distribution date.
Prior to the distribution, KLX will solicit consents from holders of its 5.875% Senior Notes due 2022 to waive certain covenants to permit KLX to consummate the distribution and the spin-off. If appropriate consents are not received, KLX intends to consummate the spin-off immediately prior to the closing of the Merger.
At the Effective Time, each award of KLX common stock subject to time-based, performance or other vesting or lapse restrictions, and each KLX restricted stock unit award, including any stock unit awards deferred under any of KLX's deferred compensation plans or otherwise, will become fully vested and, to the extent such award is subject to performance conditions, such performance conditions will be deemed satisfied at the maximum level, and will be canceled and converted into the right to receive a cash payment equal to the product of (a) the Merger Consideration multiplied by (b) the number of shares of KLX common stock represented by such award.
The respective boards of directors of KLX and Boeing have unanimously approved the Merger Agreement, and the board of directors of KLX has agreed to recommend that KLX's stockholders adopt the Merger Agreement. KLX has agreed, subject to certain exceptions, not to directly or indirectly solicit competing alternative proposals and to terminate all existing discussions, negotiations and communications with respect to any alternative proposal. However, prior to the adoption of the Merger Agreement and the approval of the Merger Agreement by KLX's stockholders, the board of directors of KLX may, subject to certain conditions, withdraw its recommendation in favor of adoption of the Merger Agreement, terminate the Merger Agreement and simultaneously, upon payment to Boeing of a $105 million termination fee, enter into an alternative acquisition agreement if, in connection with the receipt of an alternative proposal, the board of directors of KLX determines in
good faith that (i) such alternative proposal constitutes a superior proposal and (ii) a failure to effect such a withdrawal would be inconsistent with its fiduciary duties. In addition, the KLX board of directors may withdraw its recommendation (but not terminate the Merger Agreement) if, in connection with a material event or circumstance occurring after the date of the Merger Agreement that was not known at the date of the Merger Agreement, it determines in good faith that a failure to effect such a withdrawal of recommendation would be inconsistent with its fiduciary duties.
The completion of the Merger is subject to the satisfaction or waiver of customary closing conditions, including: (i) adoption of the Merger Agreement and approval of the Merger Agreement by KLX's stockholders; (ii) unless KLX has timely elected to sell ESG to a third party, the Exchange Act registration statement with respect to the KLX Energy shares to be issued in connection with the distribution having been declared effective by the SEC and such shares having been approved for listing on Nasdaq and the period of time specified by applicable law for the mailing of an information statement in connection with the spin-off having expired (assuming the information statement in connection with the spin-off is mailed immediately after the Exchange Act registration statement is declared effective by the SEC, whether or not the information statement in connection with the spin-off has in fact been mailed), (iii) consummation of the ESG Transaction, (iv) expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain other approvals under foreign competition, antitrust or merger control laws (collectively, the "Required Approvals"); (v) there being no law or order prohibiting the Merger; (vi) subject to specified materiality standards, the accuracy of the representations and warranties of the parties; (viii) compliance by the parties in all material respects with their respective covenants; (ix) the absence of a material adverse effect with respect to KLX; (x) filing of all reports that contain financial statements required to be filed with the SEC prior to the closing of the Merger; and (xi) the delivery of an officer's closing certificate by both parties.
KLX and Boeing have made customary representations and warranties in the Merger Agreement. The Merger Agreement also contains customary covenants and agreements, including covenants and agreements relating to (a) the conduct of KLX's business between the date of the signing of the Merger Agreement and the consummation of the Merger and (b) the efforts of the parties to cause the Merger to be completed.
The Merger Agreement provides that Boeing may be required to pay KLX a termination fee equal to $175 million if the Merger Agreement is terminated by KLX or Boeing if (i) the Merger has not been consummated prior to April 30, 2019 because antitrust clearances have not been obtained or (ii) a U.S. governmental authority has issued or entered an order or an applicable antitrust law has been issued or enacted that has the effect of permanently restraining, enjoining or otherwise prohibiting the Merger and, in the case of an order, such order has become final and non-appealable, and, in each case, the only condition that has not been satisfied or waived (other than conditions that by their nature are to be satisfied at closing) is the receipt of the Required Approvals.
The Merger Agreement provides KLX may be required to pay Boeing a termination fee equal to (I) $175 million if the Merger Agreement is terminated by Boeing at any time after 5:00pm on January 11, 2019 if the conditions relating to the effectiveness of the spin-off registration statement, the listing of the KLX Energy common stock on Nasdaq (or a sale of KLX Energy if timely elected) or completion of the spin-off are the only conditions (other than conditions that by their nature are to be satisfied at closing) that has not been satisfied or waived, (II) $105 million if the Merger Agreement is terminated (i) by KLX to enter into an agreement with respect of a superior proposal or (ii) by Boeing (A) following a withdrawal of the recommendation of the board of directors of KLX or (B) a material breach of a covenant or agreement by KLX related to non-solicitation, acquisition proposals and changes in recommendation or (III) $70 million if the Merger Agreement is terminated (i) by either KLX or Boeing if the approval by the KLX stockholders of the Merger Agreement has not been obtained upon a vote taken at a KLX stockholder meeting and, within nine months, KLX enters into a definitive agreement with respect to an alternative proposal or (ii) by Boeing if KLX has materially breached any of its covenants or obligations under the Merger Agreement and, within nine months, KLX enters into a definitive agreement with respect to an alternative proposal.
The Merger Agreement is filed herewith as Exhibit 2.1 and is incorporated herein by reference. The foregoing summary has been included to provide investors and security holders with information regarding the terms of the Merger Agreement, and is qualified in its entirety by the terms and conditions of the Merger Agreement. It is not intended to provide any other factual information about KLX, Boeing or their respective subsidiaries and affiliates. The Merger Agreement contains representations and warranties by each of the parties to the Merger Agreement, which were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement, are subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and are subject to standards of materiality applicable to the contracting parties that may differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of KLX, Boeing or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in KLX's public disclosures.
The schedules to the Merger Agreement, which include lists of items required to be disclosed by, and exceptions to, the representations, warranties and covenants contained in the Merger Agreement, have not been filed. Upon request, KLX will furnish to the SEC a copy of any omitted exhibit or schedule.
Spin-Off Agreements
In connection with the spin-off, KLX will enter into the following agreements with KLX Energy.
Distribution Agreement
KLX will enter into a Distribution Agreement with KLX Energy before KLX Energy's common stock is distributed to KLX stockholders. That agreement will set forth the principal actions to be taken in connection with ESG's spin-off from KLX. It will also set forth other agreements that govern certain aspects of KLX's relationship with KLX Energy following the spin-off.
The Distribution. The Distribution Agreement will govern the rights and obligations of the parties regarding the proposed distribution. KLX will cause its agent to distribute all such shares to KLX stockholders who hold KLX shares as of the record date for the spin-off.
Conditions. The Distribution Agreement will provide that the distribution is subject to several conditions that must be satisfied. The Distribution Agreement will provide that KLX may, in its sole discretion, determine the record date, the distribution date and the terms of the distribution and may, at any time prior to the completion of the distribution, decide to abandon or modify the distribution, subject to compliance with the terms of the Merger Agreement.
Termination. The Distribution Agreement will provide that it may be terminated by KLX at any time prior to the distribution date, subject to compliance with the terms of the Merger Agreement. Unless the Merger Agreement has been terminated, the Distribution Agreement can only be terminated by a written agreement signed by KLX and KLX Energy.
Release of Claims. KLX and KLX Energy will each release the other and its wholly owned subsidiaries and affiliates, and their respective stockholders (other than the public stockholders of KLX), directors, officers, agents and employees (in their respective capacities as such) from any claims against any of them that arise out of or relate to events or actions occurring or failing to occur or any conditions existing at or prior to the distribution. These releases will be subject to certain exceptions set forth in the Distribution Agreement.
Indemnification. KLX Energy, on the one hand, and KLX, on the other hand, will agree to indemnify each other against certain liabilities, among others, in connection with their respective businesses. The amount of each party's indemnification obligations for breaches of the Distribution Agreement or the other Spin-Off Agreements will be limited to $300 million in the aggregate.
KLX Energy will indemnify KLX to the extent that KLX determines that it is required to account for any gain on the distribution for U.S. federal or corresponding state and local income purposes, as calculated in the manner described in the Distribution Agreement. KLX Energy will pay any such indemnity to KLX either, at KLX Energy's option, in cash, by issuing shares of its common stock to KLX or a combination of cash and shares of its common stock. In the event that, prior to January 11, 2019, KLX Energy has not received any required consent or waiver from its lenders or bond holders to effect the spin-off, KLX Energy's total indemnification obligation pursuant to this provision will not exceed $50 million.
Negative Free Cash Flow Reimbursement. The Distribution Agreement will provide that KLX Energy will reimburse KLX for the amount of negative free cash flow of KLX Energy (defined as "FCF Net Amount" in the Distribution Agreement), if any, in the period from the date of execution of the Merger Agreement through the date of effectiveness of the spin-off.
Transaction Expenses. Subject to the consummation of the Merger, KLX Energy will reimburse KLX for certain expenses incurred in connection with the spin-off in excess of $10 million. All other transaction costs and expenses will be borne by KLX.
Non-Compete. The Distribution Agreement will provide for a worldwide 5-year non-compete obligation of KLX Energy pursuant to which KLX Energy may not, subject to certain carve-outs, provide services or otherwise participate in the business of any competitor of KLX's business.
Access to Information. The Distribution Agreement will provide that each party will provide information reasonably requested by the other party: in connection with any reporting, disclosure, filing or other requirements imposed on the requesting party by a governmental authority; for use in any judicial, regulatory, administrative, tax, insurance or other proceeding or to satisfy audit, accounting or other similar requirements; to comply with its obligations under the Distribution Agreement; or for certain other purposes.
The description of the Distribution Agreement contained in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the form of the Distribution Agreement, which is filed herewith as Exhibit A to Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
Employee Matters Agreement
KLX will enter into an Employee Matters Agreement with KLX Energy (the "Employee Matters Agreement") that will set forth KLX's agreement with KLX Energy on the allocation of employees to KLX Energy and obligations and responsibilities regarding compensation, benefits and labor matters. Key aspects of the Employee Matters Agreement include the following:
Assignment of Employees. Under the Employee Matters Agreement, KLX and KLX Energy will allocate all employees of KLX and its affiliates on or prior to the distribution date to either KLX or to KLX Energy based upon whether each employee's employment duties before the distribution date relate to the KLX business or the business of KLX Energy and upon various other factors as applicable. Notwithstanding the foregoing, certain employees of KLX and its affiliates whose employment duties relate to the KLX Energy business will remain employed by KLX after the distribution date and will provide certain shared services to KLX and KLX Energy. Such employees will transfer to KLX Energy following completion of the Merger.
Equity Awards. The Employee Matters Agreement will provide that the outstanding KLX equity awards held by employees moving to KLX Energy in connection with the spin-off will be permitted to remain outstanding under the KLX Long Term Incentive Plan ("LTIP") and continue vesting and be
satisfied at the relevant time following the distribution date in accordance with the KLX LTIP's rules and relevant award agreements, with continued service at KLX Energy considered to be continued service at KLX for the purposes of vesting of such awards. Outstanding restricted stock awards and restricted stock units held by employees moving to KLX Energy that remain in the KLX LTIP as well as restricted stock awards and restricted stock units held by employees remaining with KLX after the spin-off will be adjusted to preserve the aggregate fair market value (and thus the aggregate intrinsic value) of the award immediately before the distribution by multiplying the number of shares of KLX common stock subject to each such restricted stock award or restricted stock unit immediately prior to the distribution by a fraction, the numerator of which is the KLX Pre-Distribution Stock Value and the denominator of which is the KLX Post-Distribution Stock Value, where "KLX Pre-Distribution Stock Value" means the closing price per share of KLX's common stock trading regular way with due bills on the distribution date during the period beginning at 9:30 AM, New York City time, and ending at 4:00 PM, New York City time ("Regular Trading Hours"), and "KLX Post-Distribution Stock Value" means the opening price per share of KLX's common stock trading on the first trading day following the distribution date during Regular Trading Hours.
The Employee Matters Agreement will also provide that, with respect to the KLX Employee Stock Purchase Plan, payroll deductions for participating employees transferring to KLX Energy will cease after the last payroll payment date prior to the distribution and that the option period during which the distribution occurs will be appropriately shortened for employees transferring to KLX Energy and employees remaining with KLX.
Welfare Benefit Plans. The Employee Matters Agreement will explain the treatment, with regard to welfare benefits, of employees remaining with KLX and employees transferring to KLX Energy in connection with the spin-off. In connection with the spin-off, KLX Energy will establish its own welfare benefit programs. Employees transferring to KLX Energy who participate in the KLX health and welfare plans will cease participation in such plans and will commence participation in the KLX Energy health and welfare plans. KLX will generally be responsible for all liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by KLX Energy participants under the KLX health and welfare plans prior to such transfer, and KLX Energy shall be so responsible for liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by KLX Energy participants under the KLX Energy health and welfare plans after such transfer.
Non-Qualified Deferred Compensation Plans. The Employee Matters Agreement will provide that, in connection with the spin-off, KLX Energy will establish deferred compensation plans for eligible KLX Energy employees and directors similar to those maintained by KLX. Prior to and following the distribution, KLX will retain all liability and responsibility in accordance with and pursuant to the KLX Deferred Compensation Plan.
Defined Contribution Plan. The Employee Matters Agreement shall provide that, prior to the distribution date, KLX Energy will establish a tax qualified defined contribution plan (the "KLX Energy Savings Plan") that is comparable to the KLX tax qualified defined contribution plan (the "KLX Savings Plan") and KLX and KLX Energy will cause the accounts under the KLX Savings Plan of each KLX employee that is moving to KLX Energy to be transferred to the KLX Energy Savings Plan.
Annual Incentive Plans. The Employee Matters Agreement will provide that KLX Energy will assume all obligations to pay eligible KLX employees that are moving to KLX Energy their annual cash bonuses for the fiscal year ending January 31, 2019, in accordance with the terms and conditions of the KLX annual incentive plan. KLX Energy will implement its own annual incentive plans for the fiscal year ending January 31, 2020 and beyond.
The description of the Employee Matters Agreement contained in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the form of the Employee Matters Agreement, which is filed herewith as Exhibit B to Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
IP Matters Agreement
Prior to the spin-off, KLX will enter into an IP Matters Agreement with KLX Energy, which will govern the transfer of the KLX trademarks for use by KLX Energy following the spin-off and the Merger.
Co-existence. Following the spin-off but prior to the closing of the Merger, KLX will grant KLX Energy a non-exclusive, irrevocable, royalty-free, non-transferable, non-sublicensable license to use the KLX trademarks in the form of KLX Energy Services. If the Merger Agreement is terminated after the distribution has been consummated, KLX and KLX Energy will enter into a long-term brand co-existence agreement.
Assignment. Upon the closing of the Merger, KLX will assign the KLX trademarks and related rights to KLX Energy.
Rebranding. Following the closing of the Merger, as soon as reasonably practicable, but no later than 180 days thereafter, the name of all ASG entities will be renamed to remove KLX from their names and will cease using KLX in the ASG business and, as soon as reasonably practicable, but no later than 365 days thereafter, will remove KLX from all ASG products and marketing materials. For the six month period following the closing of the Merger, KLX Energy will grant KLX a non-exclusive, irrevocable, royalty-free, non-transferable, non-sublicensable license to use the KLX trademarks to enable ASG to rebrand.
The description of the IP Matters Agreement contained in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the form of the IP Matters Agreement, which is filed herewith as Exhibit C to Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
Transition Services Agreement
Prior to the spin-off, KLX will enter into a Transition Services Agreement with KLX Energy, under which KLX, certain of its subsidiaries or certain third party service providers contracted by KLX will provide KLX Energy with certain services for a limited time following the spin-off to help ensure an orderly transition following the distribution.
The services to be provided by KLX include treasury (including accounts payable and payroll), internal audit, accounting, tax compliance and planning, human resources, IT services and other administrative services.
The Transition Services Agreement will provide for a term of not more than six months post-Merger.
The Transition Services Agreement generally will require that KLX and its subsidiaries will have no liability to KLX Energy in connection with the transition services and that the sole remedy from KLX to KLX Energy in connection with the transition services is a refund of the total fees paid for the particular transition services. KLX Energy is generally required to indemnify KLX for any losses arising out of or in connection with the transition services.
KLX Energy will have the right to terminate certain services prior to the end of the term of the Transition Services Agreement, and each party is entitled to terminate if the other party materially breaches any of its obligations under the agreement after notice and an opportunity to cure.
The description of the Transition Services Agreement contained in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the form of the Transition Services Agreement, which is attached as Exhibit D to Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
Other Events
On May 1, 2018, KLX issued a press release issued a press release announcing the entry into the Merger Agreement and the planned spin-off of its Energy Services Group. A copy of the press release is filed herewith as Exhibit 99.1 in compliance with Rule 14a-12 under the Securities Exchange Act, as amended (the "Exchange Act"), and is incorporated herein by reference.
Also on May 1, 2018, KLX made available on its website a slide show presentation regarding the Merger and the spin-off in connection with a call held with investors. A copy of the presentation is filed herewith as Exhibit 99.2 in compliance with Rule 14a-12 under the Exchange Act and is incorporated herein by reference.
Item 5.02 Departures of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Transaction Bonus and Noncompetition Agreements
In connection with ensuring that the interests of KLX's stockholders and KLX's senior executives are aligned in the event of a transaction that would constitute a change of control of KLX, the compensation committee and the board of directors of KLX have each previously concluded that it would favorably consider a discretionary transaction bonus at such time for certain senior executives of KLX. Accordingly, on April 30, 2018, KLX entered into transaction bonus and noncompetition agreements ("Transaction Bonus and Noncompetition Agreements") with each of Amin Khoury, Tom McCaffrey, Mike Senft and Roger Franks. The Transaction Bonus and Noncompetition Agreements provide that, upon and subject to the completion of the Merger, Messrs. Khoury, McCaffrey, Senft and Franks will receive transaction bonuses equal to, respectively, $20,720,000, $9,620,000, $3,330,000 and $3,330,000. The Transaction Bonus and Noncompetition Agreements provide that, during each of the executives' employment with KLX and, following completion of the Merger, for a period of three (3) years subsequent to each of the executives' termination of employment with KLX, the executives will not engage in any employment, consulting or other activity in any business directly competitive with KLX's operations and services as of the date of the completion of the Merger, without KLX's written consent, which consent will not be unreasonably withheld; provided, however, that nothing in the Transaction Bonus and Noncompetition Agreements will preclude the executives from serving as a director of any corporation or a partner or investor in any private equity firm. The Transaction Bonus and Noncompetition Agreements also provide the executives with KLX-paid customary and market outplacement services following their termination of employment in connection with the completion of the Merger, until the earlier of (i) a period of twelve (12) months following completion of the Merger or (ii) until the applicable executive obtains substantially comparable employment.
In the event that Messrs. Khoury, McCaffrey, Senft or Franks is terminated prior to the completion of the Merger by KLX for any reason other than for "Cause", by the applicable executive for "Good Reason", or due to the applicable executive's death or "Incapacity" (in each case, as such term is defined in the applicable executive's employment agreement), the Transaction Bonus and Noncompetition Agreements provide that such terminated executive will remain eligible to receive the transaction bonus. Payment of the transaction bonuses is conditioned upon the completion of the Merger on or prior to December 31, 2019.
The foregoing summary does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Transaction Bonus and Noncompetition Agreements, which are filed herewith as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and each of which is incorporated herein by reference.
Employment Agreement Amendment
On April 30, 2018, KLX entered into an employment agreement amendment (the "Employment Agreement Amendment") with Amin Khoury, effective upon the completion of the Merger, that amends Mr. Khoury's amended and restated employment agreement, dated as of May 25, 2017, by and
between KLX and Mr. Khoury. The Employment Agreement Amendment addresses certain matters relating to Mr. Khoury's contemplated employment by KLX Energy, as well as the elimination of KLX's and Mr. Khoury's obligations pursuant to the consulting agreement by and between KLX and Mr. Khoury, which would otherwise arise upon the consummation of the Merger, in exchange for a lump sum payment to Mr. Khoury of $7,500,000. The elimination of KLX's and Mr. Khoury's obligations pursuant to the consulting agreement and the lump sum payment to Mr. Khoury of $7,500,000 are both conditioned upon the completion of the Merger. The Employment Agreement Amendment generally requires Mr. Khoury to cooperate with KLX and its subsidiaries and affiliates after Mr. Khoury's termination of employment with KLX in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings (excluding any such proceeding in which Mr. Khoury is an adverse party) as reasonably requested by KLX without any compensation therefor. The foregoing obligation of cooperation is conditioned upon and subject to the completion of the Merger.
The foregoing summary does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Employment Agreement Amendment, which is filed herewith as Exhibit 10.5 and is incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On April 30, 2018, the board of directors of KLX amended and restated the Company's Bylaws to include a new Article IX, which provides that, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for certain legal actions involving KLX will be the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, the federal district court for the District of Delaware).
The foregoing description is not complete and is qualified in its entirety by reference to full text of the Bylaws, which are filed herewith as Exhibit 3.1 and are incorporated herein by reference.
Cautionary Statement on Forward-Looking Statements
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forward-looking statements, including those regarding the timing and consummation of the transactions described herein, involve risks and uncertainties. The actual experience and results of KLX Inc. (the "Company") and of the Energy Services Group ("ESG") may differ materially from the experience and results anticipated in such statements. Factors that might cause such a difference include those discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), which include its Annual Report on Form 10-K and Current Reports on Form 8-K, and in the Form 10 to be filed in connection with the proposed spin-off of ESG. For more information, see the sections entitled "Risk Factors" and "Forward-Looking Statements" contained in the Company's Annual Report on Form 10-K and in other filings. The forward-looking statements included in this communication are made only as of the date hereof and, except as required by federal securities laws and rules and regulations of the SEC, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information
In connection with the proposed transaction between KLX and The Boeing Company ("Boeing"), KLX will file a proxy statement with the Securities and Exchange Commission (the "SEC"). KLX will also file with the SEC a registration statement with respect to the spin-off of its Energy Services Group. KLX SHAREHOLDERS ARE ENCOURAGED TO READ THE PROXY STATEMENT AND THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTIONS AND RELATED MATTERS. Investors and security holders will be able to obtain the documents free of charge when they are available at the SEC's website, www.sec.gov, or from KLX at its website, www.klx.com, or by contacting KLX Investor Relations at (561) 383-5100.
Participants in Solicitation
KLX and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information concerning KLX's directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is set forth in KLX's Annual Report on Form 10-K for the fiscal year ended January 31, 2018 and its proxy statement filed on May 26, 2017, which are filed with the SEC. A more complete description will be available in the proxy statement with respect to the merger and the registration statement with respect to the spin-off when they become available.
Item 9.01 Financial Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 1, 2018
KLX INC. | ||||||
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By: |
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/s/ MICHAEL F. SENFT |
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Name: | Michael F. Senft | |||||
Title: | Vice President and Chief Financial Officer |
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CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
Exhibit 2.1
April 30, 2018
THE BOEING COMPANY
KELLY MERGER SUB, INC.
and
KLX INC.
AGREEMENT AND PLAN OF MERGER
CLAUSE
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Article I Definitions |
2 | ||||||
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12 |
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2.01 |
The Merger |
12 | |||||
2.02 |
The Closing |
13 | |||||
2.03 |
Effective Time |
13 | |||||
2.04 |
Certificate of Incorporation; Bylaws |
13 | |||||
2.05 |
Board of Directors; Officers |
13 | |||||
2.06 |
ESG Sale Election |
13 | |||||
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14 |
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3.01 |
Effect on Securities |
14 | |||||
3.02 |
Exchange of Certificates |
15 | |||||
3.03 |
Company Equity Awards |
17 | |||||
3.04 |
Lost Certificates |
18 | |||||
3.05 |
Dissenting Shares |
19 | |||||
3.06 |
Transfers; No Further Ownership Rights |
19 | |||||
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19 |
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4.01 |
Organization; Qualification |
20 | |||||
4.02 |
Capitalization; Subsidiaries |
20 | |||||
4.03 |
Authority Relative to Agreement |
22 | |||||
4.04 |
No Conflict; Required Filings and Consents |
23 | |||||
4.05 |
Company SEC Reports; Financial Statements |
23 | |||||
4.06 |
Absence of Certain Changes or Events |
25 | |||||
4.07 |
No Undisclosed Liabilities |
25 | |||||
4.08 |
Litigation |
26 | |||||
4.09 |
Permits; Compliance with Applicable Laws |
26 | |||||
4.10 |
Information Supplied |
26 | |||||
4.11 |
Employee Benefit Plans; Labor |
27 | |||||
4.12 |
Taxes |
30 | |||||
4.13 |
Material Contracts |
32 | |||||
4.14 |
Trademarks, Patents and Copyrights |
34 | |||||
4.15 |
Real Property; Personal Property; Sufficiency of Assets |
35 | |||||
4.16 |
Environmental Matters |
36 | |||||
4.17 |
Government Contracts |
36 | |||||
4.18 |
Insurance |
37 | |||||
4.19 |
Takeover Statutes |
37 | |||||
4.20 |
Brokers |
37 | |||||
4.21 |
Opinion of Financial Advisor |
38 | |||||
4.22 |
Relations with Governments |
38 | |||||
4.23 |
Customers and Suppliers |
39 | |||||
4.24 |
Affiliate Transactions |
39 | |||||
4.25 |
No Other Representations or Warranties |
39 | |||||
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|
|
|
39 |
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5.01 |
Organization; Qualification |
40 | |||||
5.02 |
Authority Relative to Agreement |
40 | |||||
5.03 |
No Conflict; Required Filings and Consents |
40 | |||||
5.04 |
Information Supplied |
41 |
i
CLAUSE
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PAGE | ||||||
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5.05 |
Brokers |
41 | |||||
5.06 |
Sufficient Funds |
41 | |||||
5.07 |
Share Ownership |
42 | |||||
5.08 |
No Other Representations or Warranties |
42 | |||||
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|
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42 |
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6.01 |
Conduct of Business by the Company Pending the Merger |
42 | |||||
6.02 |
Preparation of Proxy Statement; Company Stockholder Meeting; ESG Registration Statement |
47 | |||||
6.03 |
Regulatory Authorizations and Consents; Efforts |
49 | |||||
6.04 |
Access to Information; Confidentiality |
50 | |||||
6.05 |
No Solicitation by the Company |
51 | |||||
6.06 |
Directors' and Officers' Indemnification and Insurance |
54 | |||||
6.07 |
Notification of Certain Matters |
55 | |||||
6.08 |
Public Disclosure |
55 | |||||
6.09 |
Employee Benefits; Labor |
56 | |||||
6.10 |
Merger Sub |
57 | |||||
6.11 |
Rule 16b-3 Matters |
57 | |||||
6.12 |
State Takeover Laws |
57 | |||||
6.13 |
Stockholder Litigation |
58 | |||||
6.14 |
Company Notes |
58 | |||||
6.15 |
Payoff Letter |
59 | |||||
6.16 |
Intercompany Arrangements |
59 | |||||
6.17 |
IT Monitoring |
59 | |||||
6.18 |
Post-Signing Date Tax Letter |
60 | |||||
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|
60 |
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7.01 |
Conditions to the Obligations of Each Party to Effect the Merger |
60 | |||||
7.02 |
Conditions to Obligations of Parent and Merger Sub to Effect the Merger |
60 | |||||
7.03 |
Conditions to Obligation of the Company to Effect the Merger |
61 | |||||
7.04 |
Frustration of Closing Conditions |
62 | |||||
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62 |
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8.01 |
Termination |
62 | |||||
8.02 |
Effect of Termination |
64 | |||||
8.03 |
Termination Fees |
64 | |||||
8.04 |
Amendment |
66 | |||||
8.05 |
Extension; Waiver |
66 | |||||
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|
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|
67 |
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9.01 |
Non-Survival of Representations and Warranties |
67 | |||||
9.02 |
Expenses |
67 | |||||
9.03 |
Notices |
67 | |||||
9.04 |
Interpretation; Certain Definitions |
68 | |||||
9.05 |
Severability |
69 | |||||
9.06 |
Assignment |
69 | |||||
9.07 |
Entire Agreement |
69 | |||||
9.08 |
No Third-Party Beneficiaries |
69 | |||||
9.09 |
Governing Law |
69 | |||||
9.10 |
Specific Performance |
69 | |||||
9.11 |
Consent to Jurisdiction |
70 | |||||
9.12 |
Counterparts |
70 | |||||
9.13 |
WAIVER OF JURY TRIAL |
70 |
ii
THIS AGREEMENT AND PLAN OF MERGER , dated as of April 30, 2018 (this Agreement ), is made by and among The Boeing Company, a Delaware corporation ( Parent ), Kelly Merger Sub, Inc., a Delaware corporation and a wholly owned Subsidiary of Parent ( Merger Sub ), and KLX Inc., a Delaware corporation (the Company ). Parent, Merger Sub and the Company are referred to herein individually as a Party and collectively as the Parties .
WHEREAS , the respective boards of directors of the Company (the Company Board ), Parent (the Parent Board ) and Merger Sub have unanimously approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the merger of Merger Sub with and into the Company, with the Company surviving as a direct or indirect wholly owned Subsidiary of Parent (the Merger ), upon the terms and subject to the conditions and limitations set forth in this Agreement and in accordance with the General Corporation Law of the State of Delaware (the DGCL ).
WHEREAS , the Company Board has unanimously resolved to recommend that the Company's stockholders approve the adoption of this Agreement.
WHEREAS , in connection with the transactions contemplated hereby, the Parties wish to effect the separation of the ASG Business (as hereinafter defined) and the ESG Business (as hereinafter defined) through either (i) a taxable spin-off of the ESG Business prior to the Effective Time into a separate, publicly traded company, or (ii) a sale of the entities comprising the ESG Business, in each case, in accordance with this Agreement and the ESG Documents.
WHEREAS , each of Parent, Merger Sub and the Company desires to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.
WHEREAS , as a condition and inducement to Parent's and Merger Sub's willingness to enter into this Agreement and consummate the transactions contemplated hereby, certain members of Company management have accepted in writing an offer of employment from Parent and have not revoked such acceptance.
NOW , THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the mutual terms, conditions and other agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
1
As used in this Agreement, the following terms shall have the following meanings:
Affiliate means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meaning, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.
Agreed Form Spin-Off Agreements means the Distribution Agreement, Transition Services Agreement, IP Matters Agreement and Employee Matters Agreement, in each case, in the form attached hereto.
Agreement has the meaning set forth in the Preamble .
Alternative Acquisition Agreement has the meaning set forth in Section 6.05(c) .
Ancillary Spin-Off Agreements has the meaning set forth in the definition of Spin-Off Agreements.
Antitrust Laws means any federal, state or foreign antitrust, competition or trade regulatory Applicable Law, including the Sherman Act; the Clayton Act; the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and the Federal Trade Commission Act.
Applicable Law means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other Order of, or agreement issued, promulgated or entered into by, any Governmental Authority.
ASG Business means all businesses of the Company and its Subsidiaries, other than the ESG Business.
Bank Consent means the consent or waiver of the lenders under the Existing Credit Agreement in order to permit the consummation of the Spin-Off.
B/E Aerospace means B/E Aerospace, Inc., a Delaware corporation.
B/E Tax Agreement means the Tax Sharing and Indemnification Agreement between B/E Aerospace, Inc. and the Company, dated as of December 15, 2014.
Book-Entry Shares has the meaning set forth in Section 3.01(a)(ii) .
Business Day means a day, other than a Saturday or Sunday or other day on which commercial banks are authorized or required by Applicable Law to close in New York City, New York.
Bylaws has the meaning set forth in Section 4.01 .
Canceled Shares has the meaning set forth in Section 3.01(a)(i) .
Capitalization Date has the meaning set forth in Section 4.02(a) .
Certificate of Incorporation has the meaning set forth in Section 4.01 .
Certificate of Merger has the meaning set forth in Section 2.03 .
Certificates has the meaning set forth in Section 3.01(a)(ii) .
Closing has the meaning set forth in Section 2.02 .
2
Closing Date has the meaning set forth in Section 2.02 .
Code means the U.S. Internal Revenue Code of 1986, as amended.
Company has the meaning set forth in the Preamble .
Company Acquisition Proposal means any inquiry, indication of interest, proposal or offer from any Person (other than Parent, Merger Sub, or their Subsidiaries), relating to, or that would reasonably be expected to lead to, any (i) merger, consolidation, share exchange, business combination, recapitalization (including a leveraged recapitalization or extraordinary dividend), reorganization, equity investment, business combination, joint venture or similar transaction involving the Company or any of its Subsidiaries, pursuant to which any such Person would own or control, directly or indirectly, twenty percent (20%) or more of the voting power of the Company or any of its Subsidiaries, (ii) sale, lease, license, dissolution, liquidation or other disposition, directly or indirectly, of assets of the Company or any Subsidiary of the Company (excluding the sale of inventory held for sale in the ordinary course of business) representing twenty percent (20%) or more of the consolidated assets, revenues or net income of the Company and its Subsidiaries taken as a whole, or to which twenty percent (20%) or more of the Company's revenues, earnings or assets on a consolidated basis are attributable, taken as a whole, (iii) issuance or sale or other disposition of capital stock or other equity interests representing twenty percent (20%) or more of the voting power of the Company, (iv) tender offer (including self-tender), exchange offer or any other transaction or series of transactions in which any Person will acquire, directly or indirectly, beneficial ownership or the right to acquire beneficial ownership of capital stock or other equity interests representing twenty percent (20%) or more of the voting power of the Company or (v) any combination of the foregoing; provided that in no event shall the Distribution or any other proposal solely with respect to KLX Energy, the ESG Business or any of the assets or operations thereof constitute a Company Acquisition Proposal.
Company Adverse Recommendation Change has the meaning set forth in Section 6.05(c) .
Company Alternative Termination Fee means $175,000,000.
Company Benefit Plan has the meaning set forth in Section 4.11(a) .
Company Board has the meaning set forth in the Recitals .
Company Common Stock has the meaning set forth in Section 3.01(a)(i) .
Company Data means all data and information (including sensitive and confidential information and other personally identifiable information) accessed, collected, used, processed, stored, shared, distributed, transferred or disclosed by the Ex-ESG Company.
Company Disclosure Schedule means the disclosure schedule delivered by the Company to Parent simultaneously with the execution of this Agreement.
Company Equity Awards means the Company Restricted Stock Awards, Company RSU Awards and Company PSU Awards.
Company Equity Plan means the KLX Inc. Long-Term Incentive Plan, as amended from time to time, and any other equity or equity-based plan, program, or arrangement of the Company or any of its Subsidiaries or any predecessor thereof, other than the Company ESPP.
Company ERISA Affiliate means any Person under common control with the Company within the meaning of Section 414(b), Section 414(c), Section 414(m) or Section 414(o) of the Code, and the regulations issued thereunder.
Company ESPP means the KLX Inc. Employee Stock Purchase Plan, effective as of January 1, 2015, as amended from time to time.
3
Company Government Bid means any offer, bid, quotation or proposal to sell products made or services provided by the Company or any Company Subsidiary that, if accepted or awarded, would lead to a Company Government Contract and for which an award has not been issued as of the date of this Agreement.
Company Government Contracts means (i) any Contract, including an individual task order, delivery order, purchase order, basic ordering agreement, letter contract or blanket purchase agreement between the Company and any Governmental Authority, or (ii) any subcontract or other Contract by which the Company has agreed to provide goods or services through a prime contractor directly to a Governmental Authority that is expressly identified in such subcontract or other Contract as the ultimate consumer of such goods or services. For purposes hereof, a task, purchase, delivery, change or work order under a Company Government Contract will not constitute a separate Company Government Contract but will be part of the Company Government Contract to which it relates.
Company Leased Real Property has the meaning set forth in Section 4.15(b) .
Company Material Adverse Effect means any event, change, circumstance, state of fact, condition, occurrence or effect that, individually or in the aggregate, (i) has or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), assets, liabilities or results of operations of the Ex-ESG Company, taken as a whole or (ii) prevents or materially (x) interferes with, (y) hinders or (z) delays the consummation of the Transactions; provided , however , that none of the following, either alone or in combination, will constitute, or be considered in determining whether there has been, a Company Material Adverse Effect: any event, change, circumstance, state of fact, condition, occurrence or effect resulting from or related to (a) any acts of God, earthquakes, floods, hurricanes, tropical storms or other natural disasters, (b) any outbreak or escalation of war or major hostilities or any act of terrorism, (c) changes after the date hereof in Applicable Law or GAAP or the interpretation thereof, (d) changes that generally affect the industries and markets in which the Ex-ESG Company operates, (e) changes in general economic conditions or political or regulatory conditions in general, (f) changes in the credit, debt, financial or capital markets or in interest or exchange rates, in each case, in the United States or elsewhere in the world; (g) any failure, in and of itself, of the Company to meet any published or internally prepared projections, budgets, plans or forecasts of revenues, earnings predictions or other financial performance measures (it being agreed that the facts and circumstances giving rise to such failure that are not otherwise excluded by this proviso may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur), (h) any change in the price or trading volume of the Company's securities or other financial instruments or change in the Company's credit rating (it being agreed that the facts and circumstances giving rise to such change that are not otherwise excluded by this proviso may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur); (i) any action specifically required to be taken pursuant to this Agreement or the ESG Documents, (j) any specific action taken or failed to be taken at the express written direction of, or with the express written consent of, Parent or Merger Sub, or (k) the Distribution, the public announcement or other disclosure with respect to the Transactions or the identity of Parent or Merger Sub or any of their Affiliates (including the impact of any of the foregoing on relationships with any customer, supplier, lender, or employee); provided , however , that any event, change, circumstance, state of fact, condition, occurrence, effect or other matter referred to in clauses (a), (b), (c), (d), (e) or (f) immediately above will be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change, circumstance, effect, state of fact, condition, occurrence or other matter has a disproportionate impact on the Ex-ESG Company taken as a whole, as compared to other participants in the industries and markets in which the Ex-ESG Company operates.
Company Material Bid has the meaning set forth in Section 4.17(a) .
4
Company Material Contracts has the meaning set forth in Section 4.13(a) .
Company Material Government Contracts has the meaning set forth in Section 4.17(a) .
Company Notes means the Company's 5.875% Senior Notes due 2022 governed by the Indenture.
Company Owned Real Property has the meaning set forth in Section 4.15(a) .
Company Permits has the meaning set forth in Section 4.09(a) .
Company Proxy Statement means the proxy statement to be sent to the Company's stockholders (together with all amendments and supplements thereto) relating to the Merger and this Agreement.
Company PSU Award has the meaning set forth in Section 3.03(b) .
Company Recommendation means the recommendation of the Company Board that the stockholders of the Company adopt this Agreement and approve the Merger and the other transactions contemplated hereby.
Company Restricted Stock Award has the meaning set forth in Section 3.03(a) .
Company RSU Award has the meaning set forth in Section 3.03(b) .
Company SEC Reports means the forms, documents, proxy or information statements and reports, schedules and registration statements filed with or furnished to the SEC prior to the date hereof by the Company since January 1, 2015 and publically available (as such reports and statements may have been amended since the date of their filing), together with all information incorporated therein by reference in accordance with applicable SEC regulations.
Company Stockholder Approval means the adoption of this Agreement and the approval of the Merger by the holders of a majority of the outstanding shares of the Company Common Stock entitled to vote thereon at a stockholders meeting duly called and held for such purposes.
Company Stockholder Meeting has the meaning set forth in Section 6.02(d) .
Company Systems means all of the following: computers, computer systems, servers, hardware, software, firmware, middleware, websites, databases, networks, servers, workstations, routers, hubs, switches, data communication equipment and lines, in each case solely to the extent owned or licensed to the Ex-ESG Company.
Company Tail Fee means $70,000,000.
Company Termination Fee means $105,000,000.
Confidentiality Agreement means the confidentiality agreement, dated December 19, 2017, between Parent and the Company.
Consent has the meaning set forth in Section 4.04(b) .
Continuation Period has the meaning set forth in Section 6.09(a) .
Contract means any written or oral arrangement, contract, agreement, instrument, lease, license, sublicense, sale or purchase order or commitment that, in each case, is binding on the Ex-ESG Company (and/or any of its Subsidiaries).
Covered Employees has the meaning set forth in Section 6.09(a) .
D&O Indemnified Parties has the meaning set forth in Section 6.06(a) .
Delaware Secretary of State means the Secretary of State of the State of Delaware.
DGCL has the meaning set forth in the Recitals .
5
Dissenting Shares has the meaning set forth in Section 3.05 .
Distribution means either (i) the ESG Spin Distribution or (ii) the distribution of the ESG Sale Proceeds following the consummation of the transactions contemplated by an ESG Purchase Agreement.
Distribution Agreement means that Distribution Agreement by and between ESG Spin Co. and the Company, in the form attached as Exhibit A hereto.
Effective Time has the meaning set forth in Section 2.03 .
Election Date has the meaning set forth in Section 2.06 .
Employee Matters Agreement means that Employee Matters Agreement by and between ESG Spin Co. and the Company, in the form attached as Exhibit B hereto.
Encumbrance means any security interest, pledge, hypothecation, mortgage, lien, right of first refusal, right of way, license, encroachment, claim, charge, mortgage or encumbrance of any kind.
Environmental Laws means all Applicable Laws governing Environmental Matters.
Environmental Matters means any matters arising out of or relating to pollution or protection of the environment or worker safety, including any of the foregoing relating to the use, generation, transport, treatment, storage, release, or disposal of any material defined as a "hazardous substance" or "hazardous waste" under any applicable Environmental Law.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ESG Business means the business of providing technical services and related rental equipment to oil and gas exploration and production companies in remote oil and gas producing regions solely as conducted by KLX Energy and ESG Spin Co., as applicable, but does not include any other business operated or conducted by the Company or any of its other Subsidiaries.
ESG Cash means an amount in cash equal to $50,000,000.
ESG Documents means (i) the Spin-Off Agreements or, (ii) if the Company makes an ESG Sale Election in accordance with Section 2.06 , the ESG Purchase Agreement.
ESG Purchase Agreement means, collectively, all written Contracts entered into with respect to an ESG Sale and all other material instruments and documents delivered in connection therewith; provided that such Contracts, instruments and documents shall not constitute an "ESG Purchase Agreement" if (i) any of the terms contained in such Contracts, instruments or documents are or would reasonably be expected to be more adverse to Parent, the Surviving Corporation or any of their respective Subsidiaries in comparison to the most closely comparable corresponding terms individually, or in comparison to all terms taken as a whole, contained in the Agreed Form Spin-Off Agreements or (ii) any transactions contemplated thereby would (A) require any amendment, supplement or modification to the Company Proxy Statement or any Other Required Company Filing other than de minimis or solely ministerial amendments, supplements or modifications or (B) require a Company Stockholder Approval other than the Company Stockholder Approval first received in accordance with Section 6.05(d) .
ESG Registration Statement means the registration statement on Form 10 filed by KLX Energy or ESG Spin Co., as applicable, with the SEC relating to the Spin-Off, as amended or supplemented from time to time.
ESG Sale means a transaction or series of related transactions in which the ESG Business is sold or transferred, directly or indirectly, whether structured as a sale of equity interests in KLX Energy, a merger, sale of assets or otherwise; provided that such transaction or transactions shall not constitute an "ESG Sale" if (i) any of the terms of such transaction or transactions are or would reasonably be
6
expected to be more adverse to Parent, the Surviving Corporation or any of their respective Subsidiaries in comparison to the most closely comparable corresponding terms individually, or in comparison to all terms taken as a whole, of the transactions contemplated by the Agreed Form Spin-Off Agreements, or (ii) any transactions contemplated thereby would (A) require any amendment, supplement or modification to the Company Proxy Statement or any Other Required Company Filing other than de minimis or solely ministerial amendments, supplements or modifications or (B) require a Company Stockholder Approval other than the Company Stockholder Approval first received in accordance with Section 6.05(d) .
ESG Sale Election has the meaning set forth in Section 2.06 .
ESG Sale Proceeds means (i) any cash proceeds received by the Company or any of its Affiliates for the sale of the ESG Business under the ESG Purchase Agreement plus (ii) an amount in cash equal to (A) the ESG Cash less (B) any cash on the balance sheet of KLX Energy as of the closing of the ESG Sale to the extent such cash was taken into account in determining the amount of net cash proceeds classified in clause (i) hereof.
ESG Spin Co. means either KLX Energy, following conversion into a Delaware corporation, or a newly formed Delaware corporation into which the membership interests of KLX Energy are contributed.
ESG Spin Co. Common Stock means the common stock of ESG Spin Co.
ESG Spin Distribution means the distribution to the Company's stockholders of all of the issued and outstanding shares of ESG Spin Co. Common Stock, and the related treatment of Company Restricted Stock Awards, Company PSU Awards and Company RSU Awards, each in accordance with the Spin-Off Agreements.
ESG Termination Date means January 11, 2019.
Ex-ESG Company means the Company and its Subsidiaries, as of any given time prior to the Effective Time, assuming and having given effect to the consummation of the Distribution, whether or not the Distribution has actually occurred.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Existing Credit Agreement has the meaning set forth in Section 6.15 .
Export Control Laws means the Arms Export Control Act (22 U.S.C. 2778), the International Traffic in Arms Regulations (22 C.F.R. §120, et. seq.), the Export Administration Regulations (15 C.F.R. §730, et. seq.) and all Applicable Laws implemented by the Office of Foreign Assets Controls of the U.S. Department of the Treasury.
FCF Net Amount has the meaning set forth in the Distribution Agreement.
Final Termination Date has the meaning set forth in Section 8.01(b)(i) .
Foreign Plan means Company Benefit Plans that are subject to any Applicable Law other than U.S., federal, state or local law.
GAAP means the United States generally accepted accounting principles.
Government Contract Laws means the United States False Claims Act, the Program Fraud Civil Remedies Act, the United States Procurement Integrity Act, the Federal Property and Administrative Services Act, the Armed Services Procurement Act or the United States Truth in Negotiations Act, the Federal Acquisition Regulation (and supplement thereto) and the cost principles and the Cost Accounting Standards thereunder and any other United States federal Applicable Law implementing regulations applicable to Company Government Contracts.
7
Governmental Authority means any (a) nation, region, state, county, city, town, village, district or other jurisdiction, (b) federal, state, local, municipal, foreign or other government, (c) governmental or quasi-governmental authority of any nature (including any governmental, agency, branch, department or other entity and any court, arbitrator, arbitration panel or other tribunal), (d) multinational or supra-national organization exercising judicial, legislative or regulatory power or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, fiscal, legislative, police, regulatory or taxing power of any nature of any federal, state, local, municipal, foreign or other government, in each case, anywhere throughout the world.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Indebtedness means, with respect to a Person, all liabilities of such Person (i) for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money; (ii) to repay any amounts owed as evidenced by notes, debentures, bonds or other similar instruments reflecting indebtedness; (iii) under any conditional sale, title retention or similar arrangement, or with respect to any deferred purchase price of any assets or services, contingent or otherwise (including "earn-outs", indemnities, post-closing true-ups and "seller notes" payable with respect to the acquisition of any business, assets or securities, but excluding trade accounts payable arising in the ordinary course of business consistent with past practice); (iv) on any letter of credit or similar credit transaction securing obligations of any Person (to the extent drawn or outstanding); (v) to pay rent or other amounts under any lease of real or personal property, or other similar Contract, that is required to be classified or accounted for as a capital lease in accordance with GAAP; (vi) constituting a guarantee of any liabilities of any other Persons; (vii) for deferred rent or royalties under any lease, license, concession or other similar arrangement and (viii) secured by an Encumbrance (other than Permitted Encumbrances) on any of such Person's assets, including as may be applicable in connection with any of the forgoing clauses (i) through (viii) any unpaid principal, premium, accrued and unpaid interest, prepayment penalties, commitments and other fees payable in connection with the payoff or termination thereof, and (ix) any cash advances made by such Person to any of its customers or suppliers.
Indenture means that certain Indenture, dated as of December 8, 2014, between the Company and the Indenture Trustee, as supplemented by the First Supplemental Indenture thereto, dated as of December 16, 2014, by and among the Company, the guarantors party thereto and the Indenture Trustee, as supplemented by the Second Supplemental Indenture thereto, dated as of August 2, 2016, by and among the Company, the additional guarantors party thereto and the Indenture Trustee, as such Indenture may be amended or supplemented subsequent to the date hereof in compliance with the terms of this Agreement.
Indenture Trustee means Wilmington Trust, National Association, as Trustee.
Initial Termination Date has the meaning set forth in Section 8.01(b)(i) .
Intellectual Property means all patents and patent applications; registered trademarks and trademark applications; design rights, trade names and service marks; trade dress; Internet domain names; copyrights; rights in inventions; trade secrets and know-how and any other proprietary or intellectual property right, subsisting now or in the future, having equivalent or similar effect to the rights referred to above; in each case, anywhere in the world.
Intervening Event means any material change, event, effect, occurrence, consequence or development relating to the Company that (a) is unknown and not reasonably foreseeable as of the date of this Agreement, (b) does not relate to any Company Acquisition Proposal, any inquiry, indication of interest, proposal or offer that would reasonably be expected to lead to a Company Acquisition Proposal and (c) becomes known to the Company Board prior to the Stockholder Approval; provided that that in no event shall the following constitute an Intervening Event: any change, event, effect, occurrence, consequence or development relating to (i) Parent or Merger Sub or
8
any of their Affiliates or any competitor of the Company or (ii) the market price or trading volume of the equity securities of the Company, the ratings or the ratings outlook for the Company or any of its Subsidiaries by any applicable rating agency or any analyst's recommendations or ratings with respect to the Company, except that the underlying reasons for such change, event, effect, occurrence, consequence or development may be considered in determining the existence of an Intervening Event to the extent not excluded by clause (i) of this proviso.
IP Matters Agreement means that IP Matters Agreement by and between ESG Spin Co. and the Company, in the form attached as Exhibit C hereto.
IRS means the United States Internal Revenue Service.
KLX Energy means KLX Energy Services Holdings, Inc.
Knowledge means the knowledge of any of the officers and employees of the Company or Parent, as applicable, set forth on Section 1.1(a) of the Company Disclosure Schedule, after reasonable inquiry by each such individual.
Labor Agreement has the meaning set forth in Section 4.11(j) .
Liability or liability means any liability, debt, obligation, duty, deficiency, interest, Tax, penalty, fine, demand, judgment, cause of action or other damage or loss (including loss of benefit), cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, whether or not foreseeable, and whether due or to become due and regardless of when asserted.
Merger has the meaning set forth in the Recitals .
Merger Consideration has the meaning set forth in Section 3.01(a)(ii) .
Merger Sub has the meaning set forth in the Preamble .
NASDAQ means The NASDAQ Stock Market.
Order means any decree, order, judgment, injunction, temporary restraining order, writ, determination, ruling, settlement or stipulation or other order in any Proceeding or similar requirement by or with any Governmental Authority.
Other ESG Required Company Filing has the meaning set forth in Section 6.02(b) .
Other Required Company Filing has the meaning set forth in Section 6.02(a) .
Owned Intellectual Property means all Intellectual Property owned by the Ex-ESG Company.
Parent has the meaning set forth in the Preamble .
Parent Board has the meaning set forth in the Recitals .
Parent Disclosure Schedule means the disclosure schedule delivered by Parent to the Company simultaneously with the execution of this Agreement.
Parent Organizational Documents means the certificate of incorporation and bylaws, each as amended as of the date of this Agreement, of each of Parent and Merger Sub.
Parent Termination Fee means an amount equal to $175,000,000.
Party has the meaning set forth in the Preamble .
Paying Agent has the meaning set forth in Section 3.02(a) .
Payment Fund has the meaning set forth in Section 3.02(a) .
Payoff Amount has the meaning set forth in Section 6.15 .
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Payoff Letter has the meaning set forth in Section 6.15 .
Permitted Encumbrance means: (i) Encumbrances for Taxes, assessments and charges or levies of any Governmental Authority not yet due and payable or that are being contested in good faith by appropriate Proceedings and for which adequate accruals or reserves have been established in accordance with GAAP; (ii) Encumbrances imposed by Applicable Law that relate to materialmen's, mechanics', carriers', workmen's and repairmen's liens or other similar Encumbrances that, in the aggregate, do not materially interfere with the use or value of the properties or assets related thereto, (iii) Encumbrances which are listed on Section 1.1(b) of the Company Disclosure Schedule; (iv) pledges or deposits to secure obligations under Applicable Law relating to workers' compensation, unemployment insurance, pension programs and similar obligations; (v) liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (vi) in respect of real property: (A) easements, licenses, covenants, rights of way and other similar restrictions; (B) any conditions which may be shown by survey, title report or physical inspection of any such real property; (C) zoning, building and other similar restrictions with which the ASG Business is currently operating in material compliance; and (D) environmental restrictions and regulations; (vii) in the case of Intellectual Property, non-exclusive licenses and other non-exclusive rights granted to or by third parties in the ordinary course of business; and (viii) transfer restrictions imposed by federal or state securities laws.
Person means any individual or any corporation, limited liability company, partnership, trust, association, joint venture, firm, Governmental Authority or other entity of any kind.
Post-Signing Date Tax Letter means an executed letter substantially in the form attached hereto as Schedule 1.1(b) .
Proceedings means legal, administrative, arbitral, civil, criminal, investigative, appellate or other proceedings, suits, claims, charges, complaints, settlements, hearings, audits, examinations, or actions.
Redemption Amount means the amount of cash required pursuant to the terms of the Indenture to effect the satisfaction and discharge of the Indenture at Closing, and the redemption of the Company Notes on the Redemption Date, including all accrued and unpaid interest up to the Redemption Date.
Redemption Date means the date on which the Company Notes are to be redeemed as may be directed by Parent in accordance with Section 6.14 . In no event may the Redemption Date be earlier than one (1) Business Day following the Closing Date.
Representatives means, with respect to a Person, the directors, managers, officers, employees, agents or advisors (including attorneys, accountants, consultants, bankers and financial advisors) of such Person.
Required Notifications has the meaning set forth in Section 6.03(a) .
Sarbanes-Oxley Act means the Sarbanes-Oxley Act of 2002, as amended.
SEC means the United States Securities and Exchange Commission.
SEC Clearance Date has the meaning set forth in Section 6.02(d) .
Securities Act means the Securities Act of 1933, as amended.
Security Clearances means all personnel and facility security clearances required for access to information classified pursuant to Executive Order 13526 or similar Order that is necessary for operation of a Person's business as presently conducted.
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Signing Date Tax Letter means the signed, executed letter from the Company to the Parent dated as of the Signing Date titled "Signing Date Tax Letter."
Spin-Off means (i) the transactions contemplated by the Distribution Agreement and the ESG Registration Statement including the formation of, contribution of KLX Energy into, or conversion into, as applicable, ESG Spin Co. and (ii) the ESG Spin Distribution.
Spin-Off Agreements means (i) the Agreed Form Spin-Off Agreements and (ii) all other written Contracts with unaffiliated third parties entered into with respect to the Spin-Off and all other material instruments and documents with unaffiliated third parties delivered in connection therewith other than the ESG Registration Statement and any Other ESG Required Company Filing (the Ancillary Spin-Off Agreements ); provided that no Ancillary Spin-Off Agreement shall constitute a "Spin-Off Agreement" if (i) any of the terms contained in such Ancillary Spin-Off Agreements are or would reasonably be expected to be more adverse to Parent, the Surviving Corporation or any of their respective Subsidiaries in comparison to the most closely comparable corresponding terms individually, or in comparison to all terms taken as a whole, contained in the Agreed Form Spin-Off Agreements unless such Contracts, instruments or documents provide for no obligations of, or other effect on, the Surviving Corporation and its Subsidiaries, or (ii) any transactions contemplated thereby would (A) require any amendment, supplement or modification to the Company Proxy Statement or any Other Required Company Filing other than de minimis or solely ministerial amendments, supplements or modifications or (B) require a Company Stockholder Approval other than the Company Stockholder Approval first received in accordance with Section 6.05(d) .
Subsidiary of a Person means any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than fifty percent (50%) of the voting stock (or of any other form of voting or controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
Superior Proposal means a bona fide written Company Acquisition Proposal (with all references to "twenty" and "20%" in the definition thereof deemed to be "a majority" for purposes of this definition) that (i) would be reasonably likely to be consummated if accepted, and (ii) is more favorable to the Company and its stockholders, solely in their capacity as such, from a financial point of view, than the transactions contemplated by this Agreement, taking into account (a) all financial considerations (including the form of consideration), (b) the identity of the third party making such Company Acquisition Proposal, (c) the anticipated timing, conditions (including any financing condition or the reliability of any debt or equity funding commitments) and prospects for completion of such Company Acquisition Proposal, (d) the legal and regulatory approvals, termination fee and expense reimbursement provisions reasonably deemed relevant by the Company Board or any committee thereof, and (e) any revisions to the terms of this Agreement and the Merger proposed by the Parent during the notice period set forth in Section 6.05(e) ; provided that , in no event will a Company Acquisition Proposal be deemed to be a Superior Proposal solely by excluding a condition to the consummation thereof relating to the ESG Business.
Surviving Corporation has the meaning set forth in Section 2.01 .
Tax or Taxes means any and all national, federal, state, local municipal and foreign income, capital gains, profits, margin franchise, gross receipts, margin, capital, net worth, sales, use, withholding, payroll, estimated, goods and services, value added, ad valorem, alternative or add-on, registration, environmental, custom, general business, employment, social security (or similar), disability, workmen's compensation, business, occupation, unemployment, premium, real property, personal property (tangible and intangible), capital stock, stamp, customs, transfer (including real property transfer or gains), conveyance, severance, production, excise, environmental (including Code section 59A), windfall profits and other taxes, governmental fees, withholdings, duties, charges, fees, levies, imposts, license
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and registration fees and other similar charges and assessments in lieu of, or in the nature of, a tax (including any and all fines, penalties, assessments, and additions attributable to or otherwise imposed on or with respect to any such taxes, fees, levies, duties, tariffs, imposts, and other similar charges or assessments (together with any and all interest, penalties and additions to tax)) computed on a separate or consolidated, unitary or combined basis, imposed by or on behalf of any Taxing Authority and (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee liability, joint and several liability, or for being a member of an affiliated, consolidated, combined, unitary or other group (defined within the meaning of Section 1504(a) of the Code or any similar provision of foreign, state or local Applicable Law) for any period, or payable by reason of contract assumption, operation of Applicable Law, or otherwise, and (iii) any liability for the payment of amounts described in clause (i) or (ii) as a result of any Tax sharing, Tax indemnity or Tax allocation agreement or any other express agreement to pay or indemnify any other Person whether by contract or otherwise.
Tax Returns means, with respect to any Tax, any information return for such Tax, and any return, report, statement, estimate, declaration, claim for refund, amended return, or other filing or document, including any schedule or attachment thereto, with respect to Taxes required to be submitted, filed or required to be filed with the IRS or any other Governmental Authority or Taxing Authority.
Taxing Authority means any Governmental Authority having jurisdiction over the assessment, determination, collection or other imposition of any Tax.
Termination Date means the Initial Termination Date or, if extended pursuant to the final proviso in Section 8.01(b)(i) , the Final Termination Date.
Top Customer has the meaning set forth in Section 4.23 .
Top Supplier has the meaning set forth in Section 4.23 .
Trading Day means any day on which the NASDAQ is open for trading; provided that a "Trading Day" only includes those days that have a scheduled closing time of 4:00 p.m. New York City time.
Transactions means collectively, the transactions contemplated by this Agreement and by the ESG Documents.
Transition Services Agreement means that transition services agreement by and between ESG Spin Co. and the Company, substantially in the form attached hereto as Exhibit D .
Treasury Regulations means regulations promulgated by the IRS under the Code.
WARN Act means the Worker Adjustment and Retraining Notification Act of 1988.
Willful Breach means an action or failure to act by one of the Parties that constitutes a breach of this Agreement, and such action was taken or such failure occurred with such Party's actual knowledge or intention that such action or failure to act would, or could be expected to, constitute a breach of this Agreement.
Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, whereupon the separate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Merger and a direct or indirect, wholly owned Subsidiary of Parent (the Surviving Corporation ).
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Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the Closing ) and the consummation of the Distribution shall take place concurrently (unless the ESG Spin Distribution has been completed as of an earlier date) at 10:00 a.m. (local time) on a date to be specified by the Parties, but no later than the third (3 rd ) Business Day after the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), unless another time, date or place is agreed to in writing by the Parties (such date being the Closing Date ). The Closing shall take place at the offices of Freshfields Bruckhaus Deringer US LLP, 601 Lexington Avenue, 31st Floor, New York, NY 10022.
Concurrently with the Closing, but in any event following the Distribution, the Company shall cause a certificate of merger with respect to the Merger substantially in the form attached hereto as Exhibit E (the Certificate of Merger ) to be executed and filed with the Delaware Secretary of State as provided under the DGCL. The Merger shall become effective at the time the Certificate of Merger has been duly filed with the Delaware Secretary of State or at such other date and time as is agreed between Parent and the Company and specified in the Certificate of Merger (such date and time being hereinafter referred to as the Effective Time ). The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL.
The members of the board of directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the members of the board of directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time (or as otherwise designated by Parent) shall, from and after the Effective Time, be the officers of the Surviving Corporation, in each case to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until the earlier of their death, resignation or removal or until their respective successors are duly elected, designated or qualified.
Within thirty (30) days after the date hereof (the Election Date ), the Company may notify Parent in writing of its election to enter into an ESG Purchase Agreement on or prior to the Election Date (such election, an ESG Sale Election ). In the event the Company delivers an ESG Sale Election, from and after such delivery the Company shall (a) use its reasonable best efforts to satisfy on a timely basis all conditions precedent to the transactions contemplated by the ESG Purchase Agreement, (b) keep Parent informed on a reasonably prompt basis and in reasonable detail of material developments in connection with the transactions contemplated by the ESG Purchase Agreement, including by
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(i) furnishing Parent with complete, correct and executed copies of the ESG Purchase Agreement and any and all amendments thereto, (ii) giving Parent prompt written notice of any material default or material breach (or any event that, with or without notice, lapse of time or both, would give rise to any material default or material breach) under the ESG Purchase Agreement of which the Company becomes aware that would reasonably be expected to result in termination of the ESG Purchase Agreement or a material liability or other material obligation of the Ex-ESG Company, and (iii) responding to Parent's reasonable requests for, and discussing, updates on the status of the transactions contemplated by the ESG Purchase Agreement, and (c) notwithstanding anything to the contrary contained in this Agreement, the Company shall not, and shall cause its Subsidiaries not to, without the prior written consent of Parent, take any actions with respect to the Spin-Off or the ESG Spin Distribution. If an ESG Sale Election is made in accordance with the first sentence of this Section 2.06 , the Company shall be permitted to consummate a Spin-Off (in lieu of an ESG Sale) only with the prior written consent of Parent. If an ESG Sale Election is not made in accordance with the first sentence of this Section 2.06 , then (x) the Company shall have elected to conduct the Spin-Off and may not thereafter enter into an ESG Purchase Agreement without the prior written consent of Parent, and (y) each of the Company and KLX Energy shall execute and enter into the Distribution Agreement within 75 days after the date hereof.
ARTICLE III
EFFECT OF THE MERGER ON CAPITAL STOCK
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Prior to the Closing, Parent shall enter into a customary paying agent agreement with a nationally recognized financial institution reasonably acceptable to the Company and Parent (the Paying Agent ) for the payment of the Merger Consideration as provided in Section 3.01(a)(ii) . At or prior to the Effective Time, Parent shall deposit or cause to be deposited with the Paying Agent, for payment in accordance with this Article III through the Paying Agent, cash in an aggregate amount necessary to pay the Merger Consideration (it being understood, for the avoidance of doubt, that such aggregate amount shall not include any amounts payable in respect of Company Restricted Stock Awards, Company RSU Awards or Company PSU Awards or any shares of Company Common Stock issuable pursuant thereto, which amounts Parent shall cause to be paid pursuant to Sections 3.03(a) and 3.03(b) , as applicable) (the Payment Fund ). In the event the Payment Fund shall at any time be insufficient for any reason (including losses) to make the payments contemplated by Section 3.01(a)(ii) , Parent shall promptly deposit, or shall take all steps necessary to cause to be deposited, additional cash with the Paying Agent in an amount which is equal to the deficiency in the amount required to make all payments under this Agreement. The Payment Fund shall not be used for any purpose not contemplated by the terms of this Agreement. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the payment of the Merger Consideration for shares of the Company Common Stock.
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shall be entitled to receive in exchange therefor, and Parent shall direct the Paying Agent to pay and deliver in exchange therefor as promptly as reasonably practicable, cash in an amount equal to the Merger Consideration multiplied by the number of shares of Company Common Stock previously represented by such Certificate or Book-Entry Shares. The Paying Agent shall accept such Certificates (or affidavits of loss in lieu thereof) or Book-Entry Shares upon compliance with such reasonable terms and conditions as the Paying Agent may impose. Subject to Section 3.02(f) and Section 3.05 , without prejudice to any rights in respect of the Distribution, after the Effective Time and until so surrendered, each Certificate and Book-Entry Share shall represent only the right to receive the Merger Consideration payable in respect of the Company Common Stock represented thereby.
In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment of the appropriate amount of Merger Consideration may be made to a Person other than the Person in whose name the Certificate or Book-Entry Share so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer (and accompanied by all documents reasonably required by the Paying Agent) or such Book-Entry Share shall be properly transferred and the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of such Certificate or Book-Entry Share or establish to the satisfaction of Parent that such Tax has been paid or is not applicable.
Any portion of the Payment Fund which remains undistributed to the holders of the Certificates or Book-Entry Shares for six (6) months after the Effective Time shall be delivered to Parent or its designee upon demand, and any such holders who have not theretofore complied with this Article III shall thereafter look only to Parent or the Surviving Corporation (subject to abandoned property, escheat or similar Applicable Law) as general creditor thereof for payment of their claims for Merger Consideration.
None of Parent, Merger Sub, the Company or the Paying Agent shall be liable to any Person in respect of any cash held in the Payment Fund delivered to a Governmental Authority pursuant to any applicable abandoned property, escheat or similar Applicable Law. If any Certificate or Book-Entry Share shall not have been surrendered immediately prior to the date on which any Merger Consideration in respect of such Certificate or Book-Entry Share would otherwise escheat to or become the property of any Governmental Authority, any such Merger Consideration in respect of such Certificate or Book-Entry Share shall, to the extent permitted by Applicable Law, become the property of Parent free and clear of all claims or interest of any Person previously entitled thereto.
The Paying Agent shall invest any cash included in the Payment Fund as directed by Parent; provided that no such investment shall relieve Parent or the Paying Agent from making the payments required by this Article III , and following any losses resulting from such investment Parent shall promptly provide additional funds to the Paying Agent for the benefit of the holders of Company Common Stock in the amount of such losses. Any interest or income produced by such investments will be payable to Parent or its designee as directed by Parent.
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Notwithstanding anything herein to the contrary, each of Parent, the Company, the Surviving Corporation and the Paying Agent shall be entitled to, without duplication, (i) deduct and withhold from the Merger Consideration and any other amounts otherwise payable or distributable in cash or in kind (including, for the avoidance of doubt, as a result of the ESG Spin Distribution) pursuant to this Agreement such amounts as Parent, the Company, the Surviving Corporation or the Paying Agent are required to deduct and withhold with respect to the making of such payments under the Code or any provision of Applicable Tax Law and (ii) collect any forms required by Applicable Law to comply with withholding obligations with respect to payments made pursuant to clause (i). Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by Parent, the Company, the Surviving Corporation or the Paying Agent, as the case may be.
Parent shall not assume any award of Company Common Stock subject to time-based, performance or other vesting or lapse restrictions (each, a Company Restricted Stock Award ). Without prejudice to any rights in respect of the Distribution, as of the Effective Time, (i) each Company Restricted Stock Award that is outstanding immediately prior to the Effective Time, shall, to the extent not vested, become fully vested; provided that to the extent that such award is subject to performance conditions, any performance conditions shall be deemed to have been satisfied at the maximum level and (ii) each Company Restricted Stock Award shall be canceled without any action on the part of any holder or beneficiary thereof in consideration for the right to receive, in accordance with the Surviving Company's general payroll practices, a lump sum cash payment with respect thereto equal to the product of (A) the Merger Consideration, and (B) the number of shares of Company Common Stock represented by such Company Restricted Stock Award, less any applicable withholding or other Taxes or other amounts required by Applicable Law to be withheld, without interest.
Parent shall not assume any performance stock unit awards, including any performance stock unit awards deferred under any of the Company's deferred compensation plans or otherwise (each a Company PSU Award ) or any restricted stock unit awards, including any stock unit awards deferred under any of the Company's deferred compensation plans or otherwise (each a Company RSU Award ). Without prejudice to any rights in respect of the Distribution, as of the Effective Time, each Company PSU Award and Company RSU Award, in each case, subject to time-based, performance or other vesting restrictions that is outstanding immediately prior to the Effective Time, shall, to the extent not vested, become fully vested; provided that to the extent that such award is subject to performance conditions, any performance conditions shall be deemed to have been satisfied at the maximum level and (ii) each Company PSU Award and Company RSU Award, in each case, whether payable in cash or shares of Company Common Stock, shall be canceled without any action of the part of any holder or beneficiary thereof in consideration for the right to receive, in accordance with the Surviving Company's general payroll practices, a lump sum cash payment with respect thereto equal to the product of (A) the Merger Consideration, and (B) the number of shares of Company Common Stock represented by such Company PSU Award or Company RSU Award, less any applicable withholding or other Taxes or other amounts required by Applicable Law to be withheld, without interest; provided, further , that notwithstanding anything to the contrary contained in this Agreement, any payment in respect of any Company PSU Award and Company RSU Award, in each case, which immediately prior to such cancellation
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was treated as "deferred compensation" subject to Section 409A of the Code shall be converted to the Merger Consideration and paid on the applicable settlement date for such Company RSU Award or Company PSU Award if required in order to comply with Section 409A of the Code.
As soon as practicable following the date of this Agreement, the Company Board (or, if applicable, any committee thereof administering the Company ESPP) shall adopt such resolutions and take all such other necessary actions such that (i) with respect to any Option Period(s) (as such term is defined in the Company ESPP) outstanding as of the date of this Agreement under the Company ESPP, such Option Period(s) shall terminate and each Option (as such term is defined in the Company ESPP) shall be deemed to have been exercised in accordance with the terms of the Company ESPP upon the earlier to occur of (A) the day that is four (4) complete Trading Days prior to the Effective Time or (B) the date on which such Option Period(s) would otherwise end, and no additional Option Period(s) shall commence under such Company ESPP after the date of this Agreement; (ii) no individual participating in the Company ESPP shall be permitted to (A) increase the amount of his, her or its rate of payroll contributions thereunder from the rate in effect as of the date of this Agreement, or (B) except to the extent required by Applicable Law, make separate non-payroll contributions to the Company ESPP on or following the date of this Agreement; (iii) no individual who is not participating in the Company ESPP as of the date of this Agreement may commence participation in the Company ESPP following the date of this Agreement; (iv) no new offerings will commence, nor will any existing offerings be extended, following the date hereof; and (v) subject to the consummation of the Merger, the Company ESPP shall terminate, effective immediately prior to the Effective Time.
Prior to the Effective Time, the Company shall provide such notice, if any, to the extent required under the terms of the Company Equity Plan or the Company ESPP, obtain any necessary consents, adopt applicable resolutions, amend the terms of the Company Equity Plan, the Company ESPP or any outstanding awards, and take all other appropriate actions to (i) give effect to the Transactions; (ii) terminate the Company Equity Plan and the Company ESPP as of the Effective Time; (iii) ensure that after the Effective Time, no holder of a Company Equity Award, Option (as such term is defined in the Company ESPP), any beneficiary thereof or any other participant in the Company Equity Plan or the Company ESPP shall have any right thereunder to acquire any securities of the Company or to receive any payment or benefit with respect to any award previously granted under the Company Equity Plan or the Company ESPP, except as provided in this Section 3.03 ; and (iv) without prejudice to any rights in respect of the Distribution, ensure that as of the Effective Time, all or any portion of incentive or deferred compensation arrangements that (A) is payable following the Effective Time and (B) immediately prior to the Effective Time, was deemed invested or otherwise measured by a share of Company Stock, will be converted to an amount equal to the product of (1) the Merger Consideration and (2) the number of whole or partial shares of Company Stock by which such compensation arrangement is measured or deemed invested. The Company shall provide Parent with documentation evidencing the completion of the foregoing actions not later than the Business Day preceding the Effective Time.
If any Certificate shall have been lost, stolen or destroyed, then upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Paying Agent, the posting by such Person of a bond, in such reasonable amount as Parent or the Paying Agent may determine is reasonably necessary, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to this Article III .
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Notwithstanding anything in this Agreement to the contrary, to the extent that holders of Company Common Stock are entitled to appraisal rights under Section 262 of the DGCL, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the adoption of this Agreement or consented thereto in writing, has properly exercised and perfected his, her or its demand for appraisal rights under Section 262 of the DGCL and has not effectively withdrawn or lost such holder's rights to appraisal (the Dissenting Shares ), shall not be converted into the right to receive the Merger Consideration, but the holders of such Dissenting Shares shall be entitled to receive such consideration as shall be determined pursuant to Section 262 of the DGCL (it being understood and acknowledged that at the Effective Time, such Dissenting Shares shall no longer be outstanding, shall automatically be canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto other than the right to receive the "fair value" of such Dissenting Shares as determined in accordance with Section 262 of the DGCL); provided, however , that if any such holder shall have failed to perfect or shall have effectively withdrawn or lost his, her or its right to appraisal and payment under the DGCL (whether occurring before, at or after the Effective Time), such holder's shares of Company Common Stock shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon and less any withholding Taxes, and such shares shall not be deemed to be Dissenting Shares. The Company shall give prompt written notice to Parent of (and in any event within three (3) Business Days after receiving) any demands for appraisal of any shares of Company Common Stock, withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to appraisal demands, and Parent shall have the right to control and direct all negotiations and Proceedings with respect to such demands after the Effective Time, provided that, prior to the Effective Time, the Company will consult with Parent and consider in good faith Parent's advice with respect to such negotiations and Proceedings, and Parent will have the right to participate in such negotiations and Proceedings at its sole cost and expense prior to the Effective Time; provided further that, prior to the Effective Time, the Company will not settle, or agree to settle, any such appraisal demands that would require payment of any amounts or would impose obligations on Parent or the Surviving Corporation without Parent's prior written consent. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, make any payment with respect to or settle or compromise or offer to settle or compromise any such demand or Proceeding, or agree to do any of the foregoing.
At the Effective Time, the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the Effective Time, and there shall be no registration of transfers on the stock transfer books of the Company of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If Certificates or Book-Entry Shares are presented to the Surviving Corporation, Parent or the Paying Agent for transfer following the Effective Time, they shall be canceled against delivery of the Merger Consideration, as provided for in Section 3.01(a)(ii) , for each share of Company Common Stock formerly represented by such Certificates or Book-Entry Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the Company SEC Reports (excluding any information set forth in (a) risk factor disclosures contained under the heading "Risk Factors" or any disclosure of risks including in any "forward-looking statements" disclaimers in such Company SEC Reports or any other statements in the Company SEC Reports to the extent that such statements are cautionary, predictive
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or forward-looking in nature or (b) any exhibits or other documents appended thereto), it being acknowledged that nothing disclosed in the Company SEC Reports shall be deemed to be a qualification of, or modification to, the representations and warranties set forth in Sections 4.01 , 4.02(a) , 4.03 , 4.04 , or 4.10 , or (ii) as set forth in the Company Disclosure Schedule (it being understood and agreed that any information set forth in one section or subsection of the Company Disclosure Schedule also shall be deemed to apply to each other section and subsection of this Agreement to which its applicability is reasonably apparent on its face), the Company hereby represents and warrants to Parent and Merger Sub as follows:
Each of the Company and its Subsidiaries is duly organized and validly existing under the laws of the jurisdiction of its incorporation, formation or organization, as applicable, and has the requisite corporate or similar power and authority to conduct its business as it is now being conducted and to own, lease and operate its properties and assets in the manner in which its properties and assets are currently operated, except with respect to the Subsidiaries of the Company, only where the failure to be so organized or existing, or to have such power and authority would not have a Company Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and, to the extent applicable, is in good standing in each jurisdiction in which the character or location of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Company Material Adverse Effect. The Company's Amended and Restated Certificate of Incorporation (the Certificate of Incorporation ) and Amended and Restated Bylaws (the Bylaws ), each as amended as of the date of this Agreement, have been made available to Parent and are in full force and effect, and the Company is not in material violation of any of the provisions thereof.
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arrangement under Applicable Law, the organizational documents of such Subsidiary or any Contract to which such Subsidiary is a party or otherwise bound. Except as would not reasonably be expected to be material to the Company, (i) each such Subsidiary's certificate of incorporation, certificate of formation, bylaws, limited liability company agreement, operating agreement or similar document, each as amended as of the date of this Agreement, has been made available to Parent and are in full force and effect, and (ii) no Subsidiary of the Company is in material violation of any of the provisions thereof. Except as set forth in the Spin-Off Agreements, all assets, properties and operations of KLX Energy relate, and have always related, solely to the ESG Business, and neither KLX Energy, nor any of its assets, operations or properties, is used or has ever been used in the ASG Business.
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specific performance, injunctive relief and other equitable remedies. As of the date hereof, there are no Contracts to which the Company or any of its Subsidiaries is a party relating to the Spin-Off. There are no conditions precedent or other contingencies between the Company or any of its Subsidiary, on the one hand, and any other party to the ESG Documents or any of their respective Affiliates, on the other hand, related to the Spin-Off or the transactions contemplated by the ESG Purchase Agreement, other than as expressly set forth in the ESG Documents.
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stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each Company SEC Report that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No Subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or is required to file or furnish any report, statement, schedule, form or other document with the SEC.
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Since January 31, 2018 through the date of this Agreement, there has not been any Company Material Adverse Effect. Since January 31, 2018 except for matters in connection with the Transactions, the businesses of the Ex-ESG Company have been conducted in the ordinary course of business consistent with past practice in all material respects, and there has not been any action or event of a type that would require the consent of Parent pursuant to Section 6.01(a)(y) if such action or event occurred after the date hereof prior to the Closing.
Except for Liabilities (a) as reflected, disclosed or reserved against in the consolidated balance sheet of the Company and its Subsidiaries as of January 31, 2018 (or the notes thereto) included in the Company's annual report on Form 10-K for the fiscal year ended January 31, 2018, (b) incurred in the ordinary course of business consistent with past practice since January 31, 2018, (c) arising out of this Agreement or the ESG Documents or (d) that are not expected to be material to the Ex-ESG Company, the Ex-ESG Company does not have any liabilities of any nature, whether or not accrued, contingent, absolute or otherwise.
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Since January 31, 2015, (a) there are and have been no Proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any present or former director, manager or employee of the Company or any of its Subsidiaries (in such individual's capacity as such and for which they are or have been entitled to indemnification by the Company or its Subsidiaries) or any asset or property of the Ex-ESG Company that involves an amount in excess of $5,000,000, and (b) there are and have been no Orders outstanding against, or involving, the Company or any of its Subsidiaries or any present or former director, manager or employee of the Ex-ESG Company (in such individual's capacity as such and for which they are or have been entitled to indemnification by the Company or its Subsidiaries) or any asset or property of the Ex-ESG Company that involves an amount in excess of $5,000,000. As of the date of this Agreement, there is no pending Proceeding or outstanding Order that challenges the validity or propriety, or seeks to prevent, materially impair or materially delay, or would reasonably be expected to have the effect of preventing, impairing or materially delaying the consummation of the Merger.
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Company Proxy Statement will comply in all material respects with the requirements of the Exchange Act.
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the Company, any third party, has engaged in any non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any Company Benefit Plan that would result in the imposition of any liability to the Ex-ESG Company.
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aggregate or which otherwise includes any covenants that impact the operation of the business of the Ex-ESG Company;
The Contracts disclosed or required to be disclosed at Section 4.13(a) of the Company Disclosure Schedule are referred to as the Company Material Contracts .
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To the Knowledge of the Company, as of the date of this Agreement,
except in each of the foregoing clauses (a), (b), (c) and (d) as would not reasonably be expected to have a Company Material Adverse Effect. This Section 4.16 provides the sole and exclusive representations and warranties of the Company in respect of Environmental Matters, including any and all matters arising under Environmental Laws.
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The Company and each of its Subsidiaries currently maintains policies of insurance with reputable insurance carriers of the types and in the amounts that is adequate and necessary to protect the business, properties and assets of the Ex-ESG Company (taking into account the costs and availability of such insurance) against all risks of a character as are usually insured against by similarly situated companies in similar businesses and as required to comply with Applicable Law. All insurance policies maintained by the Ex-ESG Company are in full force and effect and all premiums due and payable thereon have been paid and neither the Company nor any of its Subsidiaries is in breach of or default under any of such insurance policies, except as would not be material to the Ex-ESG Company. Since January 1, 2018, the neither the Company nor any of its Subsidiaries has received any notice of termination or cancelation or denial of coverage with respect to any insurance policy. There is no material claim by the Ex-ESG Company pending under any such policies that has been denied or disputed by the insurer except for denials or disputes which would not, individually or in the aggregate, be reasonably expected to have a Company Material Adverse Effect.
The Company Board has taken such actions and votes as are necessary to, and no action by the by the stockholders of the Company is required to, render the provisions of Section 203 of the DGCL inapplicable to this Agreement, the Merger or any other Transaction.
No investment banker, broker or finder other than Goldman, Sachs & Co., the fees and expenses of each of which will be paid by the Company and a copy of whose engagement Contract (and all indemnification and other Contracts related to such engagement) has been made available to Parent, is entitled to any investment banking, brokerage, finder's or similar fee or commission in connection with this Agreement or the Transactions.
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The Company has received the written opinion of Goldman, Sachs & Co., dated as of the date of this Agreement, to the effect that, as of the date of this Agreement, and based upon and subject to the various qualifications, limitations, assumptions and other matters set forth in such opinion, the Merger Consideration to be paid to the holders of shares of Company Common Stock (other than Parent and its Affiliates) pursuant to this Agreement is fair from a financial point of view to such holders. A true, correct and complete copy of such opinion will be delivered to Parent for informational purposes after delivery thereof to the Company.
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Section 4.23 of the Company Disclosure Schedule lists the 20 largest customers of the Ex-ESG Company (determined on the basis of gross revenues recognized by the Company and its Subsidiaries for the fiscal year 2017) (each, a Top Customer ) and the 20 largest suppliers of the Ex-ESG Company (determined on the basis of gross spend by the Company and its Subsidiaries for the fiscal year 2017) (each, a Top Supplier ). Since January 31, 2018, there has not been (i) any material adverse change in the business relationship of the Company and any Top Customer or Top Supplier, or (ii) any material adverse change in any material term of the agreements or related arrangements with any Top Customer or Top Supplier. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has received any notice, whether written or otherwise communicated to a director or executive officer, from any Top Customer or Top Supplier that such Top Customer or Top Supplier intends to terminate or not renew, its relationship with the Company or any of its Subsidiaries.
Except as set forth on Section 4.24 of the Company Disclosure Schedule, no director or Employee of the Ex-ESG Company, to the Knowledge of the Company, (a) owns or holds any enforceable interest in, directly or indirectly, in whole or in part, any asset that is associated with the Ex-ESG Company or that is used or held for use in connection with business of the Ex-ESG Company or necessary for the conduct of the business of the Ex-ESG Company; (b) has filed any application with respect to any Intellectual Property that arises out of or relates to the business of the Ex-ESG Company and its Subsidiaries; (c) has any right to use any of the Owned Intellectual Property or any of the Intellectual Property used in the operation of the business of the Ex-ESG Company; (d) is a party to any transaction or Contract to which the Ex-ESG Company is a party or any of its assets are bound providing for any loans or advances by or to, or the lease of assets from or to, any such Person; or (e) is an officer or employee of, or owns, directly or indirectly, any material, non-passive interest in, any competitor, franchisee, vendor, supplier or customer of the Ex-ESG Company.
Except for the representations and warranties contained in this Article IV , any certificate provided hereunder or any Contract entered into in connection with the transactions contemplated hereby, neither the Company nor any other Person on behalf of the Company makes any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or any other information provided to Parent or Merger Sub in connection with the transactions contemplated by this Agreement, including information conveyed at management presentations, in virtual data rooms or in due diligence sessions, and without limiting the foregoing, including any estimates, projections, predictions or other forward-looking information. The Company acknowledges and agrees that, except as explicitly set forth in Article V , any certificate provided hereunder or any Contract entered into in connection with the transactions contemplated hereby, neither the Parent nor Merger Sub (or any of their respective officers, directors, employees or agents) make or have made any other representation or warranty, express or implied, at law or in equity with respect to the Parent or Merger Sub.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Schedule (it being understood and agreed that any information set forth in one section or subsection of the Parent Disclosure Schedule also shall be deemed to apply to each other section and subsection of this Agreement to which its applicability is reasonably apparent on its face), Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company as follows:
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Each of Parent and Merger Sub is a corporation duly organized and validly existing under the laws of Delaware and has the requisite corporate power and authority to conduct its business as it is now being conducted and to own, lease and operate its properties and assets in the manner in which its properties and assets are currently operated. Each of Parent and Merger Sub is duly qualified or licensed to do business and, to the extent applicable, is in good standing in each jurisdiction in which the character or location of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing has not had, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Parent's and Merger Sub's ability to consummate the transactions contemplated hereby, taken as a whole. The Parent Organizational Documents have been made available to the Company and are in full force and effect, and neither Parent nor Merger Sub, as applicable, is in violation of any of the provisions thereof, except where such failure or violation has not had, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Parent's and Merger Sub's ability to consummate the transactions contemplated hereby.
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rise to any right of termination, acceleration or cancellation of or require the Consent of, notice to or filing with any third party pursuant to any of the terms or provisions of any Contract to which Parent or Merger Sub is a party or to or by which any property or asset of Parent or Merger Sub is bound or affected, or result in the creation of an Encumbrance upon any of the property or assets of Parent or Merger Sub, other than, in the case of clause (iii), any such conflict, violation, breach, default, termination, acceleration, cancellation or Encumbrance that would not reasonably be expected to, individually or in the aggregate, have a material adverse effect on Parent's or Merger Sub's ability to consummate the transactions contemplated by this Agreement.
None of the information supplied or to be supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement will, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company or at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except, in each case, that no representation or warranty is made by Parent or Merger Sub with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of the Company for inclusion or incorporation by reference therein.
No investment banker, broker or finder other than Citigroup Global Markets Inc., the fees and expenses of which will be paid or caused to be paid by Parent, is entitled to any investment banking, brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated by this Agreement.
Parent has, and as of the Closing, will have sufficient funds to consummate the Merger, to pay the aggregate Merger Consideration and all fees and expenses related to the transactions contemplated by this Agreement and to pay all costs, fees and expenses related to the refinancing of any indebtedness of the Ex-ESG Company. The obligations of Parent and Merger Sub hereunder are not subject to any condition regarding Parent's, Merger Sub's or any other Person's ability to obtain financing for the Merger, the aggregate Merger Consideration or the other transactions contemplated by this Agreement.
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None of Parent, Merger Sub or any of their Affiliates has been, at any time during the three (3) years preceding the date of this Agreement, an "interested stockholder" of the Company, as defined in Section 203 of the DGCL. As of the date of this Agreement, none of Parent, Merger Sub or their respective Affiliates owns (directly or indirectly, beneficially or of record) any Company Common Stock and none of Parent, Merger Sub or any of their respective Affiliates holds any rights to acquire any Company Common Stock except pursuant to this Agreement.
Except for the representations and warranties contained in this Article V , any certificate provided hereunder or any Contract entered into in connection with the transactions contemplated hereby, neither the Parent nor any Merger Sub nor any other Person on behalf of the Parent or any Merger Sub makes any express or implied representation or warranty with respect to the Parent or any of its Subsidiaries or any other information provided to the Company in connection with the transactions contemplated by this Agreement, including information conveyed at management presentations, in virtual data rooms or in due diligence sessions, and without limiting the foregoing, including any estimates, projections, predictions or other forward-looking information. The Parent acknowledges and agrees that, except as explicitly set forth in Article IV , any certificate provided hereunder or any Contract entered into in connection with the transactions contemplated hereby, neither the Company nor its Subsidiaries (or any of their respective officers, directors, employees or agents) make or have made any other representation or warranty, express or implied, at law or in equity with respect to the Company or its Subsidiaries.
ARTICLE VI
COVENANTS AND AGREEMENTS
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assets, business, properties or rights of the Company or any of its Subsidiaries, except (A) sales of inventory in the ordinary course of business and consistent with past practice, (B) transfers among the Company and its Subsidiaries (other than non-cash transfers to KLX Energy, ESG Spin Co. or any of their respective Subsidiaries) or (C) disposition of obsolete assets or expired inventory in the ordinary course of business and consistent with past practice;
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of state, local or non-U.S. Law) with respect to any material Tax; or (G) surrender any right to claim a material Tax refund;
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amendment, modification or waiver is not more adverse to KLX Energy, ESG Spin Co., the Surviving Corporation or any of their respective Subsidiaries in comparison to the most closely comparable corresponding terms individually, or in comparison to all terms taken as a whole, contained in the Agreed Form Spin-Off Agreements, and (ii) no transactions contemplated thereby would (A) require any amendment, supplement or modification to the Company Proxy Statement or any Other Required Company Filing other than de minimis or solely ministerial amendments, supplements or modifications or other than amendments to cure any ambiguity, omission, mistake, defect or inconsistency or (B) require a Company Stockholder Approval other than the Company Stockholder Approval first received in accordance with Section 6.05(d) .
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(i) to comply as to form and substance in all material respects with the requirements of the Exchange Act and, the rules and regulations promulgated thereunder and the rules of the SEC and NASDAQ and (ii) not to contain any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company shall use its reasonable best efforts to resolve all SEC comments with respect to the ESG Registration Statement and any Other ESG Required Company Filing and to cause the ESG Registration Statement and any Other ESG Required Company Filing in definitive form to be cleared by the SEC, in each case as promptly as reasonably practicable. Notwithstanding anything to the contrary in this Agreement, the Company has the sole right to control and direct all filings with the SEC relating to the Spin-Off (including the ESG Registration Statement) and all strategy, communications and correspondence in connection with the review by the SEC of the ESG Registration Statement and the Other ESG Required Company Filings.
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solicitation results as and when requested by Parent or Merger Sub. Once the Company Stockholder Meeting has been called and noticed, the Company shall not postpone or adjourn the Company Stockholder Meeting without the written consent of Parent (other than: (A) in order to obtain a quorum of its stockholders, (B) to allow reasonable additional time after the filing and mailing of any supplemental or amended disclosures to the Company Proxy Statement, or (C) for compliance with Applicable Law or an Order from the SEC), and in no event more than twice (without the written consent of Parent, which shall not be unreasonably withheld, delayed or conditioned). In the event that the Company Stockholder Meeting as originally called is for any reason adjourned or postponed or otherwise delayed, the Company agrees that unless Parent shall have otherwise approved in writing, it shall implement such postponement or adjournment or other delay in such a way that the Company does not establish a new record date for the Company Stockholder Meeting, as so adjourned, postponed or delayed, except as required by Applicable Law. If the Company Board makes a Company Adverse Recommendation Change as expressly permitted pursuant to Section 6.05 , it will not alter the obligation of the Company to submit the Company Stockholder Approval to Company's stockholders at the Company Stockholder Meeting to consider and vote upon, unless this Agreement shall have been terminated in accordance with its terms prior to the Company Stockholder Meeting.
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(ii) the sale, divestiture, license, or disposition, in whole or part of the assets, properties or businesses to be acquired by Parent pursuant hereto.
Until the Closing and upon reasonable advance written notice from Parent, the Company will allow Parent and its Representatives reasonable access, at Parent's expense, during normal business hours, under the supervision of personnel of the Company, its Affiliates or their respective Representatives and in such a manner as not to unreasonably interfere with the normal operations of the business of the Company to (a) such materials and information (including Contracts, properties, books, Tax Returns, work papers and records) about the Ex-ESG Company as Parent may reasonably request and (b) specified members of management of the business of the Ex-ESG Company as the Parties may reasonably agree, and which shall in any event include the individuals set forth on Schedule 6.04 ; provided, however , that except as required by Applicable Law, Parent shall not initiate any one-on-one discussion with any employee of the Company or its Subsidiaries regarding such employees potential compensation following the Closing without the prior written consent of the Company (not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, the Company will not be required to disclose any information to Parent or its Representatives if such disclosure would be reasonably likely, after consultation with counsel, to: (i) result in the loss of any attorney-client or other legal privilege (it being agreed that the Company will notify Parent of the fact that it is withholding such information on such basis and will provide a description of such information,
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and shall use reasonable best efforts to allow disclosure of such information in a manner that does not result in the loss of any such privilege, including entering into a joint defense agreement or other agreements or arrangements) or (ii) contravene any Applicable Law (including Antitrust Laws). In no event shall Parent be permitted to conduct any invasive testing of the Company Owned Real Property or the Company Leased Real Property or the building, or improvements thereon, including sampling of soil, sediment, groundwater, surface water or building material. Parent will, and will cause its Representatives to, hold all information so obtained in accordance with the terms of the Confidentiality Agreement. No investigation or access permitted pursuant to this Section 6.04 shall affect or be deemed to modify or cure any breach of, or inaccuracy in, any representation or warranty made by the Company hereunder.
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twenty-four (24) hours) provide Parent notice of the receipt of any Company Acquisition Proposal and any confidentiality agreement entered into with any third party, and shall disclose the identity of the third party (or parties) and the terms of such Company Acquisition Proposal (including, in the case of written terms, copies of any Alternative Acquisition Agreement and materials containing the material terms of such Alternative Acquisition Agreement and, in the case of oral terms, a reasonable description of the material terms thereof), (B) shall promptly (and in any case within twenty-four (24) hours) make available to Parent copies of all information of the Company and the same access provided by the Company to such third party but not previously made available to Parent, and (C) shall keep Parent informed on a reasonably prompt (and at Parent's request, which shall not be more frequently than daily) basis of the status and material details of (including amendments and proposed amendments to and the negotiations or discussion of) any such Company Acquisition Proposal, or such other inquiry, offer or proposal. Notwithstanding the foregoing, the Company shall not, shall cause its Subsidiaries not to and shall instruct and cause its officers, directors and other Representatives not to, provide any commercially sensitive non-public information to any competitor of the Company in connection with the actions permitted by this Section 6.05 , except in a manner consistent with the Company's past practices in dealing with the disclosure of such information in the context of considering Company Acquisition Proposals prior to the date of this Agreement.
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discussed and negotiated in good faith and made the Company's Representatives available to discuss and negotiate in good faith (in each case to the extent Parent desires to negotiate) with Parent's Representatives any proposed modifications to the terms and conditions of this Agreement or the transactions contemplated by this Agreement so that the failure to take such action would no longer be inconsistent with the Company Board's fiduciary duties under Applicable Law (it being understood and agreed that any amendment to any material term or condition of any Superior Proposal shall require a new notice and a new negotiation period that shall expire on the later to occur of (1) three (3) Business Days following delivery of such new notice from the Company to Parent and (2) the expiration of the original four (4) Business Day period described in this clause (C); and (D) no earlier than the end of such negotiation period, the Company Board shall have determined in good faith, after considering the terms of any proposed amendment or modification to this Agreement, that the Company Acquisition Proposal that is the subject of the notice described in clause (B) above still constitutes a Superior Proposal.
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respect thereto) that addresses or relates to the approval, recommendation or declaration of advisability by the Company Board with respect to this Agreement or a Company Acquisition Proposal shall be deemed to be a Company Adverse Recommendation Change.
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such D&O Indemnified Parties than the insurance coverage otherwise required under Section 6.06(a) . If the Company or the Surviving Corporation for any reason fails to obtain such "tail" insurance policies prior to, as of or after the Effective Time, Parent shall, for a period of six (6) years from the Effective Time, cause the Surviving Corporation to maintain in effect the current policies of directors' and officers' liability insurance and fiduciary liability insurance maintained by the Company with respect to matters arising on or before the Effective Time; provided further, however , that after the Effective Time, neither the Surviving Corporation nor Parent shall be required to pay annual premiums in excess of 300% of the last annual premium paid by the Company prior to the date of this Agreement in respect of the coverage required to be obtained pursuant hereto, but in such case shall purchase as much coverage as reasonably practicable for such amount.
Subject to Applicable Law, from and after the date hereof until the earlier to occur of the Effective Time and the termination of this Agreement pursuant to Section 8.01 , the Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company (and each will subsequently keep the other informed, on a reasonably current basis, of any material developments related to such notice), of (i) any notice or other communication received by such Party or its Subsidiaries from any Governmental Authority in connection with this Agreement, the Merger or the other Transactions, or from any Person alleging that the consent of such Person is or may be required in connection with the Merger or the other Transactions (ii) any claims, investigations or Proceedings commenced, threatened in writing or, to such Party's Knowledge, threatened orally against, relating to or involving or otherwise affecting such Party or any of its Subsidiaries that relate to this Agreement, the Merger or the other Transactions, (iii) any inaccuracy in or breach of any representation or warranty or breach of covenant or agreement contained in this Agreement that would reasonably be expected to cause, in the case of the Company, any of the conditions set forth in Sections 7.01 or 7.02 not to be satisfied or any conditions of the Company, its Subsidiaries, or, in the case of Parent or Merger Sub, any of the conditions set forth in Sections 7.01 or 7.03 not to be satisfied. Notwithstanding anything in this Agreement to the contrary, no such notification shall cure any breach of, or inaccuracy in the representations, warranties, covenants or agreements of the Parties or cure any failure of the conditions to the obligations of the Parties or otherwise limit or affect the remedies available hereunder to the Party receiving such notice.
So long as this Agreement is in effect, Parent and Merger Sub and their respective Affiliates, on the one hand, and the Company and its Affiliates, on the other hand, shall consult with each other before making, and give each other a reasonable opportunity to review and comment upon, any press release or other public statements with respect to this Agreement, the Merger and the other Transactions, and shall not issue any such press release or make any such public statement prior to obtaining the other Party's prior consent (which shall not be unreasonably withheld, conditioned or
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delayed) except (a) as may be required by Applicable Law or the rules of a national securities exchange or (b) that Parent may, without such consultation, make such statements as are not inconsistent with the disclosure in the joint press release announcing the execution of this Agreement and the ESG Purchase Agreement or as may be required by Applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange. The text of the joint press release announcing the execution of this Agreement and the Spin-Off will be as previously agreed to by the Parties. Notwithstanding any other provision of this Agreement, the requirements of this Section 6.08 shall not apply to (i) any such press release or public announcement if the Company Board has effected any Company Adverse Recommendation Change and (ii) any statements, filings and other communications with respect to the ESG Business, the Spin-Off, the ESG Sale or the Distribution, including participation in meetings, investor calls and presentations, due diligence sessions, drafting sessions and "roadshow" presentations and ratings agency meetings; provided that the Company will not be permitted to make any statements to the extent relating to the Transactions (and not the business or operations of ESG Spin Co.) without first providing Parent with a reasonable opportunity to review and comment upon such statements, except to the extent such statement (A) is included in the Company's SEC reports, (B) is not inconsistent with or does not contain more substantive information than statements filed by the Parties with the SEC as required, or (C) is contained in communications approved by the Parties pursuant to this Section 6.08 .
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Parent will take all actions necessary to (a) cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement and (b) ensure that Merger Sub prior to the Effective Time shall not conduct any business, incur or guarantee any indebtedness or make any investments, other than as specifically contemplated by this Agreement.
Prior to the Effective Time, the Company shall take all such steps as may be reasonably necessary or advisable (to the extent permitted under Applicable Law and no-action letters issued by the SEC) to cause any dispositions of Company Common Stock (including derivative securities with respect to Company Common Stock) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act, to the extent permitted by Applicable Law.
If any state takeover statute or other similar Applicable Law becomes or is deemed to become applicable to the Company or the Merger or the other Transactions, then the Company Board shall
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take any and all reasonable actions necessary and sufficient to render such statutes inapplicable to the foregoing.
The Company shall, as promptly as practicable (and in any event within two (2) Business Days), notify Parent in writing of, and give Parent the opportunity, at Parent's sole cost and expense, to review and comment on all filings and responses to be made by the Company in connection with (which comments will be considered in good faith by the Company) and to participate and consult in the defense or settlement of any stockholder litigation against the Company and/or its directors or executive officers relating to the Merger and the other Transactions, whether commenced prior to or after the execution and delivery of this Agreement. The Company agrees that it shall not settle or enter into any other arrangement to mitigate or resolve or offer to settle or enter into any other arrangement to mitigate or resolve any litigation commenced prior to or after the date of this Agreement against the Company or any of its directors or executive officers by any stockholder of the Company relating to this Agreement, the Merger, any other transaction contemplated by this Agreement or otherwise, without the prior written consent of Parent.
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issue or cause to be issued the Conditional Redemption Notice, the Company shall issue a conditional notice of redemption of the Company Notes in accordance with the Indenture and in a form reasonably acceptable to the Company and Parent (such notice, the Conditional Redemption Notice ) for all of the outstanding aggregate principal amount of the Company Notes pursuant to the Indenture, (ii) Parent shall, upon the Closing, be responsible for the payment of the Redemption Amount, (iii) the Company shall (A) deliver to the Indenture Trustee such "Officer's Certificates," "Opinions of Counsel," and other documents and certificates in form and substance reasonably satisfactory to the Indenture Trustee and Parent and (B) take such other reasonable actions that are necessary or customary to, in each case, effect the satisfaction and discharge of the Indenture and the redemption of the Company Notes on the Redemption Date pursuant to the applicable provisions of the Indenture, (iv) the Company shall provide Parent with a reasonable opportunity to review and comment on drafts of the documents to be delivered in connection with the satisfaction and discharge of the Indenture and the redemption of the Company Notes, and (v) the Company shall satisfy and discharge the Indenture in accordance with the Indenture and redeem the Company Notes in accordance with the Indenture on the Redemption Date; provided , that prior to the Closing Date, within six (6) Business Days of receiving written notice from Parent instructing the Company to delay the Redemption Date to a subsequent redemption date, the Company shall amend the Conditional Redemption Notice setting forth such new subsequent redemption date.
At least two (2) Business Days prior to the Closing Date, the Company shall cause the agent under the Amended and Restated Credit Agreement, dated as of May 19, 2015 (the Existing Credit Agreement ), among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, to provide a copy of an executed payoff letter (the Payoff Letter ) with respect to the Existing Credit Agreement, in customary form, which shall (a) indicate the total amount required to be paid to fully satisfy all principal, interest, prepayment premiums, penalties, breakage costs and any other monetary obligations then due and payable (and not contingent or unasserted) under the Existing Credit Agreement as of the anticipated Closing Date (and the daily accrual thereafter) (the Payoff Amount ), (b) state that upon receipt of Payoff Amount under the Payoff Letter, the Existing Credit Agreement and all related loan documents shall be terminated, as applicable and (c) provide that all Encumbrances and all guarantees (if any) in connection therewith relating to the assets and properties of the Company or any of its Subsidiaries securing such obligations shall be released and terminated upon the payment of the Payoff Amount; provided that the effectiveness of such repayment, termination or release may be contingent upon the occurrence of the Closing unless otherwise agreed by the Company.
Except as set forth on Schedule 6.16 , the Company will cause any intercompany Contracts, arrangements, financing agreements or intercompany loans between KLX Energy or ESG Spin Co., as applicable, on the one hand, and the Company and any of its Affiliates or Subsidiaries (other than KLX Energy), on the other hand, to be terminated, effective no later than Closing.
Beginning as of the date hereof and until the Effective Time, the Company shall: (a) maintain the monitoring, alerting, and auditing of log files on the Company Systems; (b) implement, maintain, and comply with an end user communication protocol and procedure regarding targeted phishing and threats relating to viruses, worms, Trojan horses, or similar disabling code or programs; (c) provide to Parent evidence of compliance with the foregoing prior to the Effective Time and (d) for any malicious
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or suspicious activity detected by monitoring, provide evidence that a response occurred in a reasonable time and that steps were taken to identify root cause and close within a reasonable time (suggested evidence would include a record of date and time for detection, initial response, closure along with steps taken and root cause).
6.18 Post-Signing Date Tax Letter
Within five (5) Business Days after the date that is thirty (30) days after the date hereof, the Company will deliver to Parent the Post-Signing Date Tax Letter.
ARTICLE VII
CONDITIONS TO THE MERGER
The respective obligations of each Party to consummate the Merger are subject to the satisfaction or (to the extent permitted by Applicable Law) written waiver by the Company, Parent and Merger Sub at or prior to the Closing of the following conditions:
7.02 Conditions to Obligations of Parent and Merger Sub to Effect the Merger
The obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction or (to the extent permitted by Applicable Law) written waiver by Parent at or prior to the Closing of the following additional conditions:
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as of the Closing Date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only);
7.03 Conditions to Obligation of the Company to Effect the Merger
The obligation of the Company to effect the Merger is subject to the satisfaction or (to the extent permitted by Applicable Law) written waiver by the Company at or prior to the Closing of the following additional conditions:
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and correct would not, individually or in the aggregate, prevent, materially delay or materially impair Parent's or Merger Sub's ability to consummate the transactions contemplated by this Agreement.
7.04 Frustration of Closing Conditions
Neither Parent nor Merger Sub may rely on the failure of any condition set forth in Section 7.01 or Section 7.02 to be satisfied if such failure was proximately caused by the failure of Parent or Merger Sub to perform any of their respective material obligations under this Agreement. The Company may not rely on the failure of any condition set forth in Section 7.01 or Section 7.03 to be satisfied if such failure was proximately caused by its failure to perform any of its material obligations under this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Effective Time as follows:
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a Party if the issuance of such Order was proximately caused by the failure of such Party, and in the case of Parent, including the failure of Merger Sub, to perform or comply with any of its obligations under this Agreement (including Section 6.03 ); or
63
Closing, but that are capable of being satisfied as of such time (assuming the Closing were to occur as of such time)); provided that the right to terminate this Agreement pursuant to this Section 8.01(d)(iv) shall not be available to Parent if the inaccuracy of Parent's representations or warranties or the failure of Parent to perform or comply with any of its obligations under this Agreement is the proximate cause of the failure of the conditions set forth in Sections 7.01(b) , 7.02(f) and 7.02(g) , as applicable.
In the event that this Agreement is terminated and the Merger and the other transactions contemplated hereby are abandoned pursuant to Section 8.01 , written notice thereof shall be given by the terminating Party to the other Party, specifying the provisions hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void and of no effect, without liability on the part of any Party, and all rights and obligations of any Party shall cease; provided , however , that no such termination shall relieve any Party of any liability or damages resulting from (a) fraud, or (b) except as provided in Section 8.03 , any Willful Breach prior to such termination, and in each such case, the aggrieved Party shall be entitled to all remedies available at law or in equity; and provided , further , that the Confidentiality Agreement, this Section 8.02 , Section 8.03 , and Article IX shall survive any termination of this Agreement pursuant to Section 8.01 .
then, in the case of a termination pursuant to (A) Section 8.03(a)(i) , the Company shall pay, or cause to be paid, to Parent the Company Tail Fee or (B) either Section 8.03(a)(ii) or Section 8.03(a)(iii) , the Company shall pay, or cause to be paid, to Parent the Company Termination Fee.
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Section 7.01(c) or the condition set forth in Section 7.01(d) (to the extent such Order or Applicable Law is issued, enacted or promulgated under applicable Antitrust Laws) or (ii) pursuant to Section 8.01(b)(ii) , in the event such Order or Applicable Law prevents the satisfaction of the condition set forth in Section 7.01(c) or the condition set forth in Section 7.01(d) (to the extent such Order or Applicable Law is issued, enacted or promulgated under applicable Antitrust Laws), then, in each of the foregoing clauses (i) and (ii), the Parent shall pay, or caused to be paid, to the Company the Parent Termination Fee.
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This Agreement may be amended by mutual agreement of the Parties in writing at any time before or after receipt of the Company Stockholder Approval; provided , however , that after the Company Stockholder Approval has been obtained, there shall not be any amendment that by Applicable Law or in accordance with the applicable rules of any stock exchange requires further approval by the stockholders of the Company without such further approval of such stockholders nor any amendment or change not permitted under Applicable Law.
At any time prior to the Effective Time, subject to Applicable Law, any Party may (a) extend the time for the performance of any obligation or other act of any other Party, (b) waive any inaccuracy in the representations and warranties of the other Party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the Party or Parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party.
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The representations and warranties in this Agreement and any certificate delivered pursuant hereto by any Person shall terminate at the Effective Time.
Except as expressly set forth herein, all expenses incurred in connection with this Agreement and the Transactions shall be paid by the Party incurring such expenses, whether or not the Merger is consummated; provided, however , Parent, on the one hand, and the Company, on the other hand, shall share equally (i) filing and other fees and expenses in connection with the Required Notifications and (ii) all SEC filing fees.
All notices, consents, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by e-mail or facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third (3 rd ) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 9.03 ):
if to Parent or Merger Sub:
The
Boeing Company
100 N. Riverside Plaza
Chicago, IL 60606
Phone: (312) 544 2820
Fax: (312) 544 2829
Email: Edward.J.Neveril@boeing.com
Attention: Edward J. Neveril, Chief Counsel of Mergers and Acquisitions
with a copy (which shall not constitute notice) to:
Kirkland &
Ellis LLP
300 North LaSalle
Chicago, IL 60654
Phone: (312) 862-2000
Fax: (312) 862 2200
Email: scott.falk@kirkland.com
michael.weed@kirkland.com
joydeep.dasmunshi@kirkland.com
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if to the Company:
KLX Inc.
1300 Corporate Center Way
Wellington, FL 33414
Phone: (561) 383-5100
Fax: (561) 791-5479
Email: Roger.Franks@klx.com
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
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If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the Merger be consummated as originally contemplated to the fullest extent possible.
Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Applicable Law or otherwise) without the prior written consent of the other Parties, except that any Merger Sub may assign any or all of its rights, interests and obligations hereunder to one or more direct or indirect wholly owned Subsidiaries of Parent, or a combination thereof so long as such assignment would not materially delay, impair or prevent consummation of the Merger and so long as Parent remains primarily liable for Merger Sub's obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 9.06 shall be null and void.
This Agreement (including the exhibits, annexes and appendices hereto and any other agreement entered into among Parent and/or Merger Sub, on the one hand, and the Company, on the other hand, in connection herewith) constitutes, together with the Confidentiality Agreement, the Company Disclosure Schedule and the Parent Disclosure Schedule, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the Parties, or any of them, with respect to the subject matter hereof.
This Agreement is not intended to and shall not confer upon any Person other than the Parties any rights or remedies hereunder; provided , however , that it is specifically intended that the D&O Indemnified Parties (with respect to Section 6.06 and this Section 9.08 from and after the Effective Time) are intended third-party beneficiaries of such provisions.
This Agreement and all Proceedings (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of Parent, Merger Sub or the Company in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Applicable Laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Applicable Laws of any jurisdiction other than the State of Delaware.
Each Party agrees that that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any Party does not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to
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consummate the Transactions) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the Parties acknowledge and agree that, prior to any termination of this Agreement in accordance with Section 8.01 , the Parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other Party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.
This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
EACH OF PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BETWEEN ANY OF THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[ Remainder of page intentionally left blank; signature page follows. ]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
THE BOEING COMPANY | ||||
By: |
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/s/ ANTHONY K. FISHER |
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Name: | Anthony K. Fisher | |||
Title: | Vice President, Corporate Development | |||
KELLY MERGER SUB, INC. |
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By: |
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/s/ DENISE MCKINNEY |
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Name: | Denise McKinney | |||
Title: | Vice President | |||
KLX INC. |
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By: |
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/s/ AMIN J. KHOURY |
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Name: | Amin J. Khoury | |||
Title: | Chief Executive Officer |
[ Signature PageAgreement and Plan of Merger ]
, 2018
KLX INC.
and
KLX ENERGY SERVICES HOLDINGS, INC.
DISTRIBUTION AGREEMENT
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PAGE | ||||
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ARTICLE |
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A-1 |
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A-9 |
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2.01 |
The Distribution |
A-9 |
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2.02 |
Fractional Shares |
A-9 |
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2.03 |
Distribution Date |
A-10 |
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2.04 |
Conditions to the Distribution |
A-10 |
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A-11 |
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3.01 |
ESG Funding Adjustment |
A-11 |
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3.02 |
Credit and Performance Support Obligations |
A-12 |
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3.03 |
Certificate of Incorporation; Bylaws; Directors and Officers |
A-13 |
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3.04 |
Transfer of Business Assets and Liabilities after the Distribution Date |
A-13 |
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3.05 |
Former Directors, Managers and Officers |
A-14 |
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3.06 |
Insurance Matters |
A-15 |
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3.07 |
Auditors and Audit; Annual Financial Statements and Accounting; Tax Cooperation |
A-15 |
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3.08 |
Further Assurances |
A-17 |
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3.09 |
Non-Competition |
A-18 |
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3.10 |
Transfer of Permits |
A-18 |
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A-19 |
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4.01 |
Release of Pre-Distribution Claims |
A-19 |
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4.02 |
Tax Matters |
A-20 |
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4.03 |
Indemnification by KLX |
A-20 |
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4.04 |
Indemnification by ESG SpinCo |
A-20 |
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4.05 |
Distribution Gain Tax Indemnification |
A-21 |
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4.06 |
Tax Elections |
A-22 |
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4.07 |
Third Party Claims; Notice of Direct Claims |
A-22 |
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4.08 |
Additional Matters |
A-24 |
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4.09 |
Survival |
A-25 |
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4.10 |
Registration Rights |
A-25 |
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A-26 |
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5.01 |
Provision of Corporate Records |
A-26 |
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5.02 |
Access to Information |
A-26 |
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PAGE | ||||
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5.03 |
Disposition of Information |
A-27 | ||||
5.04 |
Witness Services |
A-27 |
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5.05 |
Reimbursement |
A-28 |
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5.06 |
Confidentiality |
A-28 |
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5.07 |
Privileged Matters |
A-29 |
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5.08 |
Ownership of Information |
A-30 |
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5.09 |
Control of Legal Matters |
A-31 |
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A-33 |
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6.01 |
Termination |
A-33 |
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6.02 |
Effect of Termination |
A-33 |
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6.03 |
Amendment |
A-33 |
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6.04 |
Waiver |
A-33 |
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A-33 |
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7.01 |
Disputes |
A-33 |
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7.02 |
Dispute Resolution |
A-33 |
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A-35 |
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8.01 |
Transition Services Agreements |
A-35 |
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8.02 |
Employee Matters |
A-35 |
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8.03 |
Intellectual Property Matters |
A-35 |
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8.04 |
No Representation and Warranties |
A-35 |
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8.05 |
Limitation of Liability |
A-35 |
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8.06 |
Expenses |
A-35 |
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8.07 |
Notices |
A-36 |
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8.08 |
Interpretation; Certain Definitions |
A-37 |
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8.09 |
Public Announcements |
A-37 |
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8.10 |
Severability |
A-37 |
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8.11 |
Assignment |
A-37 |
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8.12 |
Entire Agreement |
A-38 |
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8.13 |
No Third-Party Beneficiaries |
A-38 |
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8.14 |
Governing Law |
A-38 |
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8.15 |
Consent to Jurisdiction |
A-38 |
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8.16 |
Counterparts |
A-39 |
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8.17 |
Waiver of Jury Trial |
A-39 |
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PAGE | ||||
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EXHIBIT 8.01 TRANSITION SERVICES AGREEMENT |
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THIS DISTRIBUTION AGREEMENT (this Agreement ), dated as of [ · ], 2018, is entered into by and between KLX Inc., a corporation formed under the laws of the State of Delaware ( KLX ), and KLX Energy Services Holdings, Inc., a corporation formed under the laws of the State of Delaware ( ESG SpinCo ). KLX and ESG SpinCo are referred to herein individually as a Party and collectively as the Parties .
WHEREAS , the KLX Group currently conducts the ASG Business, and, through the ESG Group, KLX also currently conducts the ESG Business;
WHEREAS , the board of directors of KLX (the Board ) has determined that it is appropriate, desirable and in the best interests of KLX and its shareholders to separate the ASG Business and the ESG Business through a taxable spin-off of the ESG Business into a separate publicly traded company (the Spin-Off );
WHEREAS , [ESG SpinCo has been converted into a Delaware corporation] / [the membership interests in KLX Energy Services LLC have been contributed into ESG SpinCo prior to the date hereof] (the Pre-Spin Transaction ) and KLX owns all of the issued and outstanding shares of common stock, par value $[ · ] per share, of ESG SpinCo (the ESG SpinCo Common Stock );
WHEREAS , in order to effect the Spin-Off, KLX wishes to distribute all of the ESG SpinCo Common Stock to the holders of issued and outstanding shares of common stock, par value $0.01 per share, of KLX ( KLX Common Stock ) as of the Record Date (the Distribution ) in accordance with this Agreement, and to provide for, among other things, the treatment of restricted stock, RSU and PSU awards of KLX in connection with the Spin-Off in accordance with the Employee Matters Agreement;
WHEREAS , KLX and The Boeing Company (the ASG Buyer ) entered into an Agreement and Plan of Merger on April 30, 2018 (the ASG Merger Agreement ), pursuant to which a wholly owned subsidiary of the ASG Buyer ( Merger Sub ) will be merged with and into KLX, whereupon the separate existence of the Merger Sub shall cease, and KLX will continue as the surviving corporation and as a direct or indirect wholly owned subsidiary of the ASG Buyer (the ASG Merger ); and
WHEREAS , it is a condition to the consummation of the ASG Merger Agreement that the Distribution shall have occurred.
NOW , THEREFORE , in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the mutual terms, conditions and other agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
As used herein, the following terms have the following meanings:
336 Election has the meaning set forth in Section 4.06(a) .
Agent means the distribution agent appointed by KLX (who shall be a reputable, nationally recognized agent, reasonably acceptable to the ASG Buyer) to distribute to the Record Holders, pursuant to the Distribution, the shares of ESG SpinCo Common Stock held by KLX.
Affiliate means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meaning, the terms "controlled by" and "under
A-1
common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.
Agreement has the meaning set forth in the Preamble.
Agreement Disputes has the meaning set forth in Section 7.01 .
Ancillary Agreements means the agreements entered into by the Parties and their Subsidiaries in connection with the Spin-Off and the Distribution (other than the ASG Merger Agreement), including the Transition Services Agreement, the IP Matters Agreement and the Employee Matters Agreement.
Applicable Law means any supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, order (whether executive, legislative, judicial or otherwise), judgment, injunction, notice, decree or other requirement or rule of law or legal process (including common law), or any other Order of, or agreement issued, promulgated or entered into by, any Governmental Authority.
ASG Business means all businesses of KLX and its Subsidiaries, other than the ESG Business.
ASG Buyer has the meaning set forth in the Recitals.
ASG Merger has the meaning set forth in the Recitals.
ASG Merger Agreement has the meaning set forth in the Recitals.
Asset means, with respect to any Person, all assets, properties, claims and rights (including goodwill and rights pursuant to Contracts), wherever located (including in the possession of vendors or other Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible or intangible, or accrued or contingent, in each case, whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of such Person.
Audit Firm means an internationally recognized accounting firm experienced in resolving disputes of a type contemplated by Section 3.01(b) .
Audited Party has the meaning set forth in Section 3.07(b) .
Business Day means a day, other than a Saturday or Sunday or other day on which commercial banks are authorized or required by Applicable Law to close in New York City, New York.
Carry-Over Basis Election has the meaning set forth in Section 4.06(a) .
Closing Date has the meaning set forth in the ASG Merger Agreement.
Code means the U.S. Internal Revenue Code of 1986, as amended.
Confidential Information means confidential or proprietary information concerning a Party and/or any other member of such Party's Group which, prior to or following the Effective Time, has been disclosed by a Party or any other member of such Party's Group to another Party or any other member of such Party's Group, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other Party or any other member of such Party's Group, including pursuant to any provision of this Agreement (except to the extent that such information can be shown to have been (i) in the public domain through no fault of such Party or any other member of such Party's Group, (ii) lawfully acquired from other sources (other than the other Group) by such Party or any other member of such Party's Group to which it was furnished 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; provided, however , in the case of clause (ii) that, to the knowledge of the Party or other member of such Party's Group to which such
A-2
information was furnished, such sources did not provide such information in breach of any confidentiality obligations).
Contract means any written or oral arrangement, contract, agreement, instrument, lease, license, sublicense, or commitment that, in each case, is binding on any member of the KLX Group or the ESG Group, as applicable.
Disclosure Documents means any registration statement (including any registration statement on Form 10) or other document filed with the SEC by or on behalf of any Party or any of its controlled Affiliates, and also includes any information statement, prospectus, offering memorandum, offering circular or similar disclosure document, whether or not filed with the SEC or any other Governmental Authority, in each case which offers for sale or registers the transfer or distribution of any security of such Party or any of its controlled Affiliates.
Disputed Items has the meaning set forth in Section 3.01(b) .
Distribution has the meaning set forth in the Recitals.
Distribution Date means the date on which the Distribution occurs.
Effective Time means 11:59 pm Eastern Time on the Distribution Date.
Employee Matters Agreement has the meaning set forth in Section 8.02 .
Encumbrance means any security interest, pledge, hypothecation, lien, right of first refusal, right of way, license, encroachment, claim, charge, mortgage or encumbrance of any kind.
Escalation Notice has the meaning set forth in Section 7.02(a) .
ESG Assets means all Assets of the KLX Group or the ESG Group (other than any inter-Group Contracts or arrangements) that are (i) primarily used by a member of the ESG Group in support of the ESG Business, but excluding any Asset without which the ASG Business would not have all Assets necessary to operate in the same manner in which the ASG Business operated as of prior to the execution of the ASG Merger Agreement and (ii) set forth in Exhibit A .
ESG Business means the business of providing technical services and related rental equipment to oil and gas exploration and production companies in remote oil and gas producing regions solely as conducted by the ESG Group but does not include any other business operated or conducted by any member of the KLX Group.
ESG Business Employee means (a) any employee of any member of the ESG Group and (b) those employees of the KLX Group set forth on Schedule IPart A .
ESG SpinCo has the meaning set forth in the Recitals.
ESG SpinCo Common Stock has the meaning set forth in the Recitals.
ESG D&O Indemnified Parties has the meaning set forth in Section 3.05(a) .
ESG D&O Release has the meaning set forth in Section 3.05(b) .
ESG Group means ESG SpinCo, KLX RE Holdings LLC and each Person that becomes a Subsidiary of ESG SpinCo after the Distribution, including in each case any Person that is merged or consolidated with and into ESG SpinCo or any Subsidiary of ESG SpinCo.
ESG Indemnitees means each member of the ESG Group and each of their respective Affiliates and their respective directors, officers, employees, managers and agents and each of the heirs, executors, successors and assigns of any of the foregoing, other than the KLX Indemnitees.
A-3
ESG Liability means any and all Liabilities to the extent relating to, arising out of or resulting from (whether or not such Liabilities arise under "successor liability," "piercing the corporate veil," or similar legal theories): (A) the operation or conduct of the ESG Business prior to, on or after the Effective Time; (B) the operation or conduct of any business conducted by any member of the ESG Group at any time after the Effective Time; (C) any ESG Assets, whether arising before, on or after the Effective Time; (D) any Indebtedness to the extent relating to or incurred by, in support of or in connection with the ESG Business or to the extent secured by any of the ESG Assets (including any Liabilities relating to, arising out of or resulting from a claim by a holder of any such Indebtedness, in its capacity as such); (E) any ESG Litigation Matter, Future ESG Litigation Matter and, and solely to the extent relating to the ESG Business or ESG Assets, any Future Joint Litigation Matter; and (F) activities of any member of the KLX Group or their Representatives acting on behalf of or in support of the ESG Business at any time prior to the Effective Time; provided that (i) in no event shall any Transaction Expenses be an ESG Liability (without prejudice to any reimbursement of Spin Costs pursuant to Section 3.01(c) ) and (ii) for purposes of this definition of "ESG Liability", Indebtedness shall exclude (x) all amounts taken into in the calculation of the FCF Net Amount and (y) all Indebtedness set forth on Section 4.04(b) of the Company Disclosure Schedule to the ASG Merger Agreement.
ESG Litigation Matters means the Proceedings set forth in Schedule I- Part B and any other Proceedings to the extent related to ESG Assets or to ESG Liabilities.
ESG Names and Marks means, collectively, any Trademark included in ESG SpinCo's Intellectual Property and/or ESG Assets, any variation or acronym thereof, or any Trademark or other identifier of source or goodwill containing, incorporating or associated with any such Trademark.
Expiration Time has the meaning set forth in Section 3.01(b) .
FCF Net Amount means the amount of "Business Free Cash Flows, Net" of the ESG Group measured for the period beginning on May 1, 2018 through the Effective Time, calculated in accordance with the statement of cash flows of the ESG Group attached as Schedule IPart C and consisting of the line items set forth thereon, in each case as derived from the books and records of the KLX Group and calculated in a manner consistent with the accounting practices and principles applied by KLX in the preparation of its financial statements filed with the SEC; provided, however , that (i) Transaction Expenses and (ii) the ESG Cash (as defined in the ASG Merger Agreement) contributed to ESG in connection with the Distribution, shall be excluded from the calculation of Business Free Cash Flows Net.
Final Funding Statement has the meaning set forth in Section 3.01(b) .
Form 10 means the Registration Statement on Form 10, including the Information Statement, filed in connection with the Distribution, as amended from time to time, in the form in which it is declared effective by the SEC.
Funding Statement has the meaning set forth in Section 3.01(a) .
Future ESG Litigation Matter has the meaning set forth in Section 5.09(b)(ii) .
Future Joint Litigation Matter has the meaning set forth in Section 5.09(b)(iii) .
Future KLX Litigation Matter has the meaning set forth in Section 5.09(b)(i) .
GAAP shall mean United States generally accepted accounting principles.
Governing Documents means the charter, organizational and other documents by which any Person other than an individual establishes its legal existence or which govern its internal affairs, and shall include: (i) in respect of a corporation, its certificate or articles of incorporation or association and its bylaws; (ii) in respect of a partnership, its certificate of partnership and its partnership agreement; and
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(iii) in respect of a limited liability company, its certificate of formation and operating or limited liability company agreement.
Governmental Authority means any (a) nation, region, state, county, city, town, village, district or other jurisdiction, (b) federal, state, local, municipal, foreign or other government, (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department or other entity and any court or other tribunal), (d) multinational or supra-national organization exercising judicial, legislative or regulatory power or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, fiscal, legislative, police, regulatory or taxing power of any nature of any federal, state, local, municipal, foreign or other government, in each case, anywhere throughout the world.
Group means the KLX Group or the ESG Group, as the context may require.
Indebtedness shall mean, with respect to a Person, all Liabilities of such Person (i) for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money; (ii) to repay any amounts owed as evidenced by notes, debentures, bonds or other similar instruments reflecting indebtedness; (iii) under any conditional sale, title retention or similar arrangement, or with respect to any deferred purchase price of any assets or services, contingent or otherwise (including "earn-outs", indemnities, post-closing true-ups and "seller notes" payable with respect to the acquisition of any business, assets or securities, but excluding trade accounts payable arising in the ordinary course of business consistent with past practice); (iv) on any letter of credit or similar credit transaction securing obligations of any Person (to the extent drawn or outstanding); (v) to pay rent or other amounts under any lease of real or personal property, or other similar Contract, that is required to be classified or accounted for as a capital lease in accordance with GAAP; (vi) constituting a guarantee of any liabilities of any other Persons; (vii) for deferred rent or royalties under any lease, license, concession or other similar arrangement; and (viii) secured by an encumbrance on any of such Person's assets, including as may be applicable in connection with any of the forgoing clauses (i) through (viii) any unpaid principal, premium, accrued and unpaid interest, prepayment penalties, commitments and other fees payable in connection with the payoff or termination thereof, and (ix) any cash advances made by such Person to any of its customers or suppliers.
Indemnified Party has the meaning set forth in Section 4.07(a) .
Indemnifying Party has the meaning set forth in Section 4.07(a) .
Indemnitees means the KLX Indemnitees or the ESG Indemnitees, as the case may be.
Information Statement means the Information Statement attached as an exhibit to the Form 10 to be sent to the holders of KLX Common Stock in connection with the Distribution, as such Information Statement may be amended from time to time.
Intercompany Balances means all intercompany receivables, payables, loans and other accounts or transactions between any member of the KLX Group, on the one hand, and any member of the ESG Group, on the other hand, in existence as of the end of the Distribution Date.
Intellectual Property means all intellectual property rights of any type in any jurisdiction, including patents and patent applications; registered trademarks and trademark applications; design rights, trade names and service marks; trade dress; Internet domain names; copyrights; rights in computer software (including source code and object code) data, databases, and documentation thereof; rights in inventions; trade secrets and know-how; and any other intellectual property right having equivalent or similar effect to the rights referred to above; in each case, anywhere in the world.
Internal Control Audit has the meaning set forth in Section 3.07(a) .
IP Matters Agreement has the meaning set forth in Section 8.03 .
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KLX Assets means all Assets of the KLX Group or the ESG Group (other than any inter-Group Contracts or arrangements) owned or leased by any member of the KLX Group or that is not an ESG Asset.
KLX Combined Income Tax Return means any consolidated, combined unitary or other similar Tax Return with respect to any profit and/or loss sharing group, group payment or similar group or fiscal unity that actually includes, by election or otherwise, one or more members of the KLX Group together with one or more members of the ESG Group.
KLX D&O Indemnified Parties has the meaning set forth in Section 3.05(c) .
KLX D&O Release has the meaning set forth in Section 3.05(d) .
KLX Group means KLX, each Person that will be a Subsidiary of KLX (other than the members of the ESG Group) immediately following the Distribution, and each Person that becomes a Subsidiary of KLX after the Distribution, including in each case any Person that is merged or consolidated with and into KLX or any Subsidiary of KLX after the Distribution.
KLX Indemnitees means each member of the KLX Group and each of their respective Affiliates and their respective directors, officers, employees, managers and agents and each of the heirs, executors, successors and assigns of any of the foregoing, other than the ESG Indemnitees.
KLX Liability means any and all Liabilities to the extent relating to, arising out of or resulting from (whether or not such Liabilities arise under "successor liability," "piercing the corporate veil," or similar legal theories): (A) the operation or conduct of the ASG Business prior to, on or after the Effective Time; (B) the operation or conduct of any business conducted by any member of the KLX Group at any time after the Effective Time; (C) any KLX Assets, whether arising before, on or after the Effective Time; (D) any Indebtedness other than Indebtedness that is an ESG Liability pursuant to clause (E) of the definition thereof; (F) any KLX Litigation Matter, Future KLX Litigation Matter and, to the extent relating to the ASG Business, any Future Joint Litigation Matter; (G) activities of any member of the ESG Group or their Representatives acting on behalf of or in support of the ASG Business at any time prior to the Effective Time; and (H) any Transaction Expenses (without prejudice to any reimbursement of Spin Costs pursuant to Section 3.01(c) ).
KLX Litigation Matters means the Proceedings set forth in Schedule IPart D , any Proceedings by any shareholders by or on behalf of shareholders of KLX in their capacity as such (including any derivative Proceeding) and any other Proceedings related to the KLX Assets or KLX Liabilities.
KLX Names and Marks means, collectively, any Trademark included in the KLX Intellectual Property and/or KLX assets, any variation or acronym thereof, or any Trademark or other identifier of source or goodwill containing, incorporating or associated with any such Trademark.
Liability means any liability, debt, obligation, duty, deficiency, interest, Tax, penalty, fine, demand, judgment, cause of action or other damage or loss (including loss of benefit), cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, whether or not foreseeable, and whether due or to become due and regardless of when asserted.
Losses means any and all damages, losses, Liabilities, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the costs and expenses of any and all Proceedings, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys', accountants', consultants' and other professionals' fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder) and excluding Taxes.
Management Assessments has the meaning set forth in Section 3.07(a) .
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Merger Sub has the meaning set forth in the Recitals.
Order shall mean any decree, order, judgment, injunction, temporary restraining order, writ, determination, ruling, settlement or stipulation or other order in any Proceeding or similar requirement by or with any Governmental Authority.
Other Party's Auditors has the meaning set forth in Section 3.07(a) .
Party or Parties has the meaning set forth in the Preamble.
Party has the meaning set forth in the Preamble.
Person shall mean any individual or any corporation, limited liability company, partnership, trust, association or other entity of any kind.
Pre-Spin Transaction has the meaning set forth in the Recitals.
Proceeding shall mean legal, administrative, arbitral, civil, criminal, investigative, appellate or other proceedings, suits, claims, charges, complaints, settlements, hearings, audits, examinations, or actions.
Record Date means 11:59 pm Eastern Time on the date to be determined by the Board as the record date for determining the KLX Shares in respect of which shares of ESG SpinCo Common Stock will be distributed pursuant to the Distribution.
Record Holders has the meaning set forth in Section 2.01(b)(i) .
Registration Expenses has the meaning set forth in Section 4.10(e) .
Representatives means, with respect to a Person, the directors, managers, officers, employees, agents or advisors (including attorneys, accountants, consultants, bankers and financial advisors) of such Person.
Review Period has the meaning set forth in Section 3.01(b) .
SEC means the United States Securities and Exchange Commission.
Securities Act means the United States Securities Act of 1933, as amended.
Spin Costs means all fees, expenses, and other amounts that have been incurred or are payable by any member of the KLX Group (or incurred or paid by the ESG Group prior to the Effective Time) to the extent payable or incurred in connection with the preparation, negotiation and execution of this Agreement, the ESG Documents, the ESG Registration Statement and the Other ESG Required Filings (in each case, as defined in the ASG Merger Agreement), and the other transaction documents contemplated hereby and thereby and the evaluation, preparation for, review of, negotiation and consummation of the Spin-Off and the other transactions contemplated hereby and thereby, including the following: (a) the fees and disbursements of, or other similar amounts charged by, counsel to any such Persons, (b) the out of pocket expenses, if any, of any such Persons; and (c) the fees and expenses of, or other similar amounts charged by, any accountants, agents, financial advisors, consultants, and experts employed by any such Person; provided that in no event shall Spin Costs include (i) any of the foregoing incurred in connection with any dispute between the Parties hereto (or any member of their respective Groups) or Section 3.01 or (ii) any consent fees payable to bondholders, lenders or an agent on their behalf in connection with the Consent or the Bank Consent (each as defined in the ASG Merger Agreement) and any fees of JPMorgan Chase Bank associated therewith.
Spin Costs Cap means $10,000,000.
Spin-Off has the meaning set forth in the Recitals.
Subsidiary of a Person shall mean any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or
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(ii) beneficially owns more than fifty percent (50%) of the voting stock (or of any other form of voting or controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
Tax means any and all national, federal, state, local municipal and foreign income, capital gains, profits, margin franchise, gross receipts, margin, capital, net worth, sales, use, withholding, payroll, estimated, goods and services, value added, ad valorem, alternative or add-on, registration, environmental, custom, general business, employment, social security (or similar), disability, workmen's compensation, business, occupation, unemployment, premium, real property, personal property (tangible and intangible), capital stock, stamp, customs, transfer (including real property transfer or gains), conveyance, severance, production, excise, environmental (including Code section 59A), windfall profits and other taxes, governmental fees, withholdings, duties, charges, fees, levies, imposts, license and registration fees and other similar charges and assessments in lieu of, or in the nature of, a tax (including any and all fines, penalties, assessments, and additions attributable to or otherwise imposed on or with respect to any such taxes, fees, levies, duties, tariffs, imposts, and other similar charges or assessments (together with any and all interest, penalties and additions to tax)) computed on a separate or consolidated, unitary or combined basis, imposed by or on behalf of any Taxing Authority and (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee liability, joint and several liability, or for being a member of an affiliated, consolidated, combined, unitary or other group (defined within the meaning of Section 1504(a) of the Code or any similar provision of foreign, state or local Applicable Law) for any period, or payable by reason of contract assumption, operation of Law, or otherwise, and (iii) any liability for the payment of amounts described in clause (i) or (ii) as a result of any Tax sharing, Tax indemnity or Tax allocation agreement or any other express agreement to pay or indemnify any other Person whether by contract or otherwise.
Tax Contest means any audit, examination, investigation, dispute, claim or other administrative or judicial proceeding or review or other Proceeding by or with a Taxing Authority with respect to Taxes or Tax Returns.
Tax Elections has the meaning set forth in Section 4.06(a) .
Tax Return means any return, declaration of estimated Tax, report, estimate, claim for refund, information return or statement, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Tax.
Taxing Authority means any Governmental Authority exercising Tax regulatory authority.
Third Party Claim has the meaning set forth in Section 4.07(a) .
Trademarks means trademarks, slogans, logos, symbols, certification marks, collective marks, uniform resource locators (URL's), corporate names, service marks, trade dress and Internet domain names, trade names, whether statutory or common law, whether registered or unregistered, whether establisher or registered in the United States or any other country, and registrations and applications for registration thereof, together with the goodwill associated therewith and any and all (i) rights and privileges arising under Applicable Law and international treaties and conventions with respect to such use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present.
Transaction Expenses means all fees, expenses, and other amounts that have been incurred or are payable by any member of the KLX Group in connection with the preparation, negotiation, and execution of this Agreement, the ASG Merger Agreement, the Ancillary Agreements and the other transaction documents contemplated hereby and thereby and the evaluation, preparation for, review of, negotiation and consummation of the transactions contemplated hereby and thereby and of other
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strategic alternatives, including the following: (a) the fees and disbursements of, or other similar amounts charged by, counsel to any such Persons, (b) the out of pocket expenses, if any, of any such Persons; (c) the fees and expenses of, or other similar amounts charged by, any accountants, agents, financial advisors, consultants, and experts employed by any such Person and (d) any and all consent fees payable to bondholders, lenders or an agent on their behalf in connection with the Consent or the Bank Consent (each, as defined in the ASG Merger Agreement) and any fees of JPMorgan Chase Bank associated therewith, but specifically excluding any Spin Costs in excess of the Spin Costs Cap and any fees, expenses, and other amounts incurred or payable by the ESG Group after the Effective Time; provided that in no event shall Transaction Expenses include any of the foregoing incurred in connection with any dispute between the Parties hereto (or any member of their respective Groups) or Section 3.01 .
Transition Services Agreement has the meaning set forth in Section 8.01 .
Shareholders holding a number of shares of KLX Shares, on the Record Date, which would entitle such shareholders to receive less than one whole share of ESG SpinCo Common Stock in the Distribution will receive cash, without any interest thereon, in lieu of fractional shares. Fractional shares of ESG SpinCo Common Stock will not be distributed in the Distribution nor credited to
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book-entry accounts. The Agent shall, as soon as practicable after the Distribution Date, (a) determine the number of whole shares and fractional shares of ESG SpinCo Common Stock allocable to each Record Holder, (b) aggregate (as completely as possible) all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions, in each case, at then-prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests and (c) distribute to each such holder, or for the benefit of each beneficial owner, such holder's or owner's ratable share of the net proceeds of such sale, based upon the average gross selling price per share of ESG SpinCo Common Stock after making appropriate deductions for any amount required to be withheld under Applicable Law and less any brokers' charges, commissions or transfer Taxes. ESG SpinCo shall bear the cost of brokerage fees incurred in connection with these sales of fractional shares, which sales shall occur as soon after the applicable Distribution Date as practicable and as determined by the Agent. None of KLX, ESG SpinCo or the Agent will guarantee any minimum sale price for the fractional shares of ESG SpinCo Common Stock. Neither KLX nor ESG SpinCo will pay any interest on the proceeds from the sale of fractional shares. The Agent will have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Agent nor the broker-dealers through which the aggregated fractional shares are sold will be Affiliates of KLX or ESG SpinCo.
The consummation of the transactions provided for in this ARTICLE II shall only be effected after the Distribution has been declared by the Board and after all of the conditions set forth in Section 2.04 shall have been satisfied.
The consummation of the Distribution shall be subject to the satisfaction of the following conditions:
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Notwithstanding anything to the contrary in this Agreement, none of the Parties shall consummate the Distribution prior to obtaining the Consent and the Bank Consent (each, as defined in the ASG Merger Agreement) if the Distribution occurs other than substantially concurrently with the Closing, and no Party shall be obligated to consummate the Distribution prior to obtaining such Consent and such Bank Consent unless the Distribution occurs substantially concurrently with the Closing (as defined in the ASG Merger Agreement) and the ASG Buyer provides a sufficient amount of cash on the Closing Date in order to enable KLX to satisfy and discharge the Company Notes and to pay the Payoff Amount with respect to the Existing Credit Agreement (each, as defined in the ASG Merger Agreement).
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other matter relating to the Final Funding Statement shall be subject to determination by the Audit Firm. KLX and ESG SpinCo shall reasonably cooperate with the Audit Firm in an effort to resolve any Disputed Item as soon as reasonably possible after the Audit Firm is engaged. The decision of the Audit Firm shall be made within thirty (30) days after being engaged, or as soon as possible thereafter. In any event, the Audit Firm's decision with respect to the Disputed Items shall be final and binding on the Parties. The Funding Statement shall be revised, if necessary, to reflect the final determination of the FCF Net Amount (the final form of the Funding Statement, including any revisions that are made thereto pursuant to this Section 3.01 , if any, is referred to herein as the Final Funding Statement ). The fees of the Audit Firm shall be borne equally by KLX and ESG SpinCo.
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(or another member of the ESG Group, as applicable) would be reasonably unable to comply or (y) ESG SpinCo would not reasonably be able to avoid breaching. In the event a release is not procured on or prior to the Distribution Date as required pursuant to the first sentence of this Section 3.02(b) , then on the Distribution Date, ESG Spinco or another member of the ESG Group shall provide KLX an Acceptable Letter of Credit in an amount equal to any obligation(s) for which a release was not procured. "Acceptable Letter of Credit" means an unconditional, irrevocable letter(s) of credit in form satisfactory to KLX, in favor of KLX, issued by a financial institution with a short term commercial paper rating from (i) S&P of at least A-1 or (ii) Moody's of at least P-1, or such other financial institution acceptable to KLX (in its sole discretion).
On or prior to the Distribution Date,
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transferred, to ESG SpinCo (or, as designated by ESG SpinCo, to one of its Subsidiaries) such Asset for no value. Pending such transfer, KLX shall or shall cause its Subsidiaries to operate or retain such Asset as may reasonably be instructed by ESG SpinCo and provide to ESG SpinCo all of the benefits and Liabilities associated with the ownership and operation thereof.
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respect thereof, provide the other Party with a copy of any comment or notice of such review or investigation and shall, to the extent not prohibited by Applicable Law, the SEC or such other Governmental Authority, give the other Party a reasonable opportunity to be involved in responding to such comment, review, audit or investigation, and such other Party shall reasonably cooperate with such Party in connection with responding to such comment, review, audit or investigation.
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all actions, and to do, or to cause to be done, all things reasonably necessary on its part to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements; provided that in no event shall either Party hereto be required to violate Applicable Law or applicable contractual obligations pursuant to this Section 3.08(b) .
ESG SpinCo acknowledges and agrees, on its and its controlled Affiliates' behalf, that KLX and its Affiliates (including following the consummation of the transactions contemplated by the ASG Merger Agreement, Parent and its Affiliates) would be irreparably damaged if ESG SpinCo or any of its controlled Affiliates were to provide services or to otherwise participate in the ownership, management, operation or control of a business that engages in the sale of aerospace fasteners and other consumables directly to suppliers to the commercial, business jet, military and defense airframe manufacturers, the airframe manufacturers, the airlines, aircraft leasing companies, MRO providers, domestic military depots, general aviation, and other distributors anywhere in the world (the Restricted Business ) and that any such competition or activity by ESG SpinCo or any of its controlled Affiliates would result in a significant loss of goodwill by KLX and its Affiliates in respect of the Restricted Business. Effective as of, and contingent upon, the Effective Time, ESG SpinCo agrees that until the fifth (5th) anniversary of the Distribution Date, it will not, and will cause its controlled Affiliates not to, directly or indirectly, through one or more Representatives or other third parties, own, manage, operate, control or participate in the ownership, management, operation or control of a Restricted Business anywhere in the world (it is understood and agreed that for this purpose the Restricted Business shall be deemed to be conducted everywhere in the world); provided, however , that it shall not be a violation of this Section 3.09 for ESG SpinCo or its Affiliates to (i) own (directly or indirectly), as a passive investment, any class of securities that are publicly traded or listed on any securities exchange or automated quotation system and that constitutes less than two percent (2%) of the outstanding voting power of the issuing Person; (ii) permit their Representatives to perform speaking engagements and receive honoraria in connection with such speaking engagements; or (iii) engage or participate in any activity consented to in advance in writing by Parent where Parent acknowledges in such writing that such activity would be a violation of this Section 3.09 and expressly waives compliance with this Section 3.09 . ESG SpinCo agrees, on its and its controlled Affiliates' behalf, that this covenant is reasonably designed to protect KLX's substantial investment and is reasonable with respect to its duration, geographical area and scope.
From the date hereof until the Effective Time, at KLX's sole cost and expenses, KLX and ESG SpinCo shall, and shall cause each member of their respective Group to, take all actions necessary or
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desirable to transfer the record and beneficial ownership of those certain franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, exemptions, consents, certificates, approvals, registrations, clearances, orders and other authorizations that constitute ESG Assets (the Transferred Permits ) from each and every member of the KLX Group who is the record and/or beneficial owners of such Transferred Permits to a member of the ESG Group.
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Except as otherwise specifically set forth in any provision of this Agreement or any Ancillary Agreement, following the Effective Time, KLX shall, and shall cause the other members of the KLX Group to, indemnify, reimburse, defend and hold harmless the ESG Indemnitees from and against (i) any and all Losses arising out of, by reason of, or otherwise in connection with (A) the KLX Liabilities or (B) any breach by KLX of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder; provided that such indemnity shall not extend to any past, present or future director, officer or employee or agent of the KLX Group to the extent such Person would not be eligible for indemnification under KLX's certificate of incorporation or bylaws with respect to such matter and (ii) any and all Taxes due with respect to or required to be paid on any KLX Combined Income Tax Return to the extent imposed on or assessed against any ESG Indemnitees.
Except as otherwise specifically set forth in any provision of this Agreement or any Ancillary Agreement, following the Effective Time, ESG SpinCo shall, and shall cause the other members of the ESG Group to, indemnify, reimburse, defend and hold harmless the KLX Indemnitees from and against any and all Losses arising out of, by reason of or otherwise in connection with (i) the ESG Liabilities, (ii) any action taken by ESG SpinCo or any member of the ESG Group or any Person acting on behalf of any member of the ESG Group, in each case, after the Effective Time and to the extent relating to the Spin-Off, (iii) any Liabilities to the extent relating to, to the extent arising out of or to the extent resulting from 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 in any Disclosure Document, or necessary to make the statements therein not misleading, with respect to all information contained in, or incorporated by reference into, any Disclosure Document filed by any Party in connection with the Distribution, or (iv) any breach by ESG SpinCo of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder; provided that such indemnity shall not extend to any past, present or future director, officer or employee or agent of the ESG Group to the extent such Person would not be eligible for indemnification under ESG SpinCo's certificate of incorporation or bylaws with respect to such matter. Notwithstanding anything herein to the contrary, in no event shall ESG SpinCo be required to indemnify, reimburse, defend or hold harmless any KLX Indemnitee from or against any Losses that arise out of or are otherwise incurred in connection with any Proceeding commenced prior to or after the Effective Time by or on behalf of a
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KLX shareholder in its capacity as such to the extent such Proceeding relates to the Transactions (as defined in the ASG Merger Agreement) or any filings with the SEC made in connection therewith, other than to the extent such Proceedings (A) relate to the ESG Registration Statement or the Other ESG Required Filings (in each case, as defined in the ASG Merger Agreement), or (B) arise after the Effective Time and relate solely to the Spin-Off. From and after the Effective Time, ESG SpinCo will indemnify, reimburse, defend and hold harmless the KLX Indemnitees from or against any Losses that arise out of or are otherwise incurred in connection with any Proceeding commenced after the Effective Time by or on behalf of a KLX shareholder in its capacity as such to the extent such litigation relates to the Distribution.
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Common Stock distributed and to treat (x) any transfer of shares of ESG SpinCo Common Stock to KLX in satisfaction of the indemnity due hereunder as if such shares were issued to KLX by ESG SpinCo immediately before the Distribution and retained by KLX and (y) any cash paid to KLX in satisfaction of the indemnity due under this Section 4.05 as if such cash had been distributed by ESG SpinCo to KLX immediately before the Distribution.
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Party (provided such counsel is reasonably satisfactory to the Indemnified Party) if the Indemnifying Party (i) agrees in writing to assume responsibility for all indemnity losses arising out of such Third Party Claim (with no reservation of any rights) and (ii) reasonably demonstrates to the Indemnified Party the financial ability of the Indemnifying Party to provide full indemnification with respect to such Third Party Claim (including the ability to post any bond required) to the extent ultimately payable. If the Indemnifying Party assumes such defense, the Indemnified Party shall nonetheless have the right to employ counsel separate from the counsel employed by the Indemnifying Party; provided that the Indemnifying Party shall not be liable to such Indemnified Party for any fees of such separate counsel with respect to the defense of such Third Party Claim, unless the engagement of such separate counsel is consented to by the Indemnifying Party in writing or a conflict of interest exists between such Indemnified Party and the Indemnifying Party that requires such separate representation under applicable standards of professional conduct. If the Indemnifying Party does not assume such defense, and for any period during which the Indemnifying Party has not assumed such defense, the Indemnified Party may defend the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees and expenses of one single counsel employed (and reasonably acceptable to the Indemnifying Party) by such Indemnified Party (which reasonable fees and expenses shall be considered Losses for purposes of this Agreement). If the Indemnifying Party chooses to defend a Third Party Claim or prosecute a claim in connection therewith, each Indemnified Party shall provide all reasonable cooperation in such defense or prosecution.
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Claim which seeks only monetary relief, the Indemnified Party will not agree to any settlement of, or the entry of any judgement (other than a judgment of dismissal on the merits with prejudice and without costs), in respect of such Third Party Claim without the prior written consent of the Indemnifying Party, which consent will not be unreasonably withheld, conditioned or delayed; provided that if such consent is withheld for any reason and the final resolution of such Third Party Claim results in Losses which are greater than the amount of Losses that would have resulted if the Third Party Claim had been settled on the terms pursuant to which consent was initially requested (such greater amount, the Excess Losses ), then the Indemnifying Party shall be responsible for the amount of the Excess Losses.
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All covenants and agreements of the Parties and their respective Indemnitees contained in this ARTICLE IV will survive the Distribution, the sale or transfer by any Party of any assets or businesses, and the assignment by any Party of any Liabilities, and will continue in full force and effect regardless of (i) any investigation made by or on behalf of any Indemnitee, (ii) any sale or transfer by either Party or any member of its Group of any Asset or Liability or business, (iii) 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 member of its Group and (iv) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder.
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or not it has become effective and whether or not such registration has counted as a permitted registrations hereunder.
ARTICLE V
ACCESS TO RECORDS; ACCESS TO INFORMATION; LEGAL AND OTHER MATTERS
Other than in circumstances in which indemnification is or may be sought pursuant to ARTICLE IV (in which event the provisions of such Article will govern) and subject to appropriate restrictions for privileged or Confidential Information:
Other than in circumstances in which indemnification is sought pursuant to ARTICLE IV (in which event the provisions of such Article will govern), from the Distribution Date and for so long as any
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access is required, each of KLX and ESG SpinCo shall afford to the members of the respective other Group and their authorized accountants, counsel and other designated Representatives reasonable access during normal business hours, upon reasonable advance notice, subject to appropriate restrictions for privileged or Confidential Information and to preserve the completeness and integrity of the information, to the personnel, properties, and information of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party and relates to (i) such other Group or the conduct of its business prior to the Effective Time or (ii) any Ancillary Agreement. Nothing in this Section 5.02 shall require any Party to violate any agreement with any third party regarding the confidentiality of information relating to that third party or its business; provided, however , that (i) in the event that a request for access to such third party-related information is made pursuant to this provision, the Party from whom the information is requested shall use commercially reasonable efforts to obtain such third party's consent to the disclosure of such information, or (ii) in the event that the providing Party reasonably determines that disclosure of any information could be commercially detrimental, violates Applicable Law or results in the loss of any legal privilege, 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.
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from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees' employer regardless of the employees' service as witnesses), as may be reasonably incurred and properly payable under Applicable Law.
Except to the extent otherwise provided by this Agreement or any Ancillary Agreement, a Party providing information or access to information to the other Party under this Article V shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such information or access to such information.
Notwithstanding any termination of this Agreement, the Parties shall hold, and shall cause each of the other members of their respective Groups to hold, and shall each cause their respective Representatives (including those of each other member of their respective Groups) to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party, any and all Confidential Information concerning the other Party (or any other member of such Party's Group) or its respective business; provided, however , that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such information and are informed of their obligation to hold such information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any other member of their respective Groups are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Applicable Law or stock exchange rule, (iii) as required in connection with any Proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, Tax Returns or other required disclosures. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party shall, to the extent not prohibited by Applicable Law, promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will reasonably cooperate in obtaining, at the sole cost of the Party seeking such order or other remedy. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall use commercially reasonable efforts, at the sole cost and expense of the Party whose Confidential Information is required to be disclosed, to ensure that confidential treatment is accorded such information. Notwithstanding anything in this Agreement to the contrary, including Section 7.02(f) , each Party hereby acknowledges that the other Party, in addition to any other remedies available to it for any breach or threatened breach of this Section 5.06 , shall be entitled to seek a preliminary injunction, temporary restraining order or other equivalent relief restraining such Party and any member of such Party's Group from any such breach or threatened breach.
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A-29
A-30
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This Agreement may be terminated, and the Distribution may be abandoned at any time, prior to the Distribution Date by and in the sole discretion of KLX, subject to compliance with the terms of the ASG Merger Agreement. After the Effective Time, this Agreement may only be terminated by an agreement in writing signed by a duly authorized officer of each of the Parties and, unless the ASG Merger Agreement has been terminated, Parent (as defined under the ASG Merger Agreement).
In the event of termination of this Agreement in accordance with Section 6.01 , this Agreement shall forthwith become void and there shall be no Liability on the part of either Party; provided that Section 5.06 shall survive any termination of this Agreement.
This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Parties or (b) by a waiver in accordance with Section 6.04 , in each case subject to compliance with the terms of the ASG Merger Agreement.
Subject to the restrictions set forth in the ASG Merger Agreement, either Party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other Party and (b) waive compliance with any of the agreements of the other Party or conditions to such Party's obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either Party to assert any of its rights hereunder shall not constitute a waiver of any of such rights.
ARTICLE VII
DISPUTE RESOLUTION
Except as otherwise specifically provided in any Ancillary Agreement (the terms of which, to the extent so provided therein, shall govern the resolution of disputes, controversies or claims that are the subject of such Ancillary Agreement), the procedures for discussion, negotiation and arbitration set forth in this ARTICLE VII shall apply to all disputes, controversies or claims (whether arising in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with, this Agreement or any Ancillary Agreement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the Effective Time), between or among any member of the KLX Group, on the one hand, and any member of the ESG Group, on the other hand (collectively, Agreement Disputes ).
A-33
notice (an Escalation Notice ) demanding an in-person meeting involving senior-level management representatives of KLX and ESG SpinCo (including, if appropriate, a senior management representative within the relevant strategic business unit or division within each such entity). A copy of any such Escalation Notice shall be given to the Law Department of each of KLX and ESG SpinCo (which copy shall state that it is an Escalation Notice pursuant to this Section 7.02 ). Any agenda, location or procedures for such discussions or negotiations between KLX and ESG SpinCo may be established by KLX and ESG SpinCo from time to time; provided, however, that the representatives of KLX and ESG SpinCo shall use their commercially reasonable efforts to meet in person, or telephonically if the representatives are unable to meet in person, within 30 days of the Escalation Notice.
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The provision of certain services by KLX to ESG SpinCo following the Distribution Date shall be exclusively governed by the Transition Services Agreement attached as Exhibit 8.01 (the Transition Services Agreement ).
Except as otherwise provided herein and not inconsistent with the Employee Matters Agreement, this Agreement shall not govern any employee matters, which shall be exclusively governed by the Employee Matters Agreement attached as Exhibit 8.02 (the Employee Matters Agreement ).
Except as otherwise provided herein and not inconsistent with the IP Matters Agreement, this Agreement shall not govern any matters relating to the KLX Names and Marks and the ESG Names and Marks, which shall be exclusively governed by the IP Matters Agreement attached as Exhibit 8.03 (the IP Matters Agreement ).
EACH OF KLX (ON BEHALF OF ITSELF AND EACH OTHER KLX GROUP COMPANY) AND ESG SPINCO (ON BEHALF OF ITSELF AND EACH OTHER ESG GROUP COMPANY) UNDERSTANDS AND AGREES THAT, EXCEPT AS SET FORTH IN THE ASG MERGER AGREEMENT OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES, INFORMATION OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY (OR OTHER MEMBER OF SUCH PARTY'S GROUP), OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY (OR OTHER MEMBER OF SUCH PARTY'S GROUP), OR AS TO THE LEGAL SUFFICIENCY OF ANY TRANSACTION, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER.
IN NO EVENT SHALL ANY MEMBER OF THE KLX GROUP OR THE ESG GROUP BE LIABLE TO ANY MEMBER OF THE OTHER GROUP FOR ANY PUNITIVE DAMAGES OR LOST PROFITS ARISING IN ANY WAY OUT OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES AWARDED TO THIRD PARTIES IN A THIRD PARTY CLAIM SET FORTH HEREIN.
Subject to Section 3.01 , all Transaction Expenses shall be borne by KLX.
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All notices, consents, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by e-mail or facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third (3 rd ) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 8.07 ):
[**************************]
[**************************]
[**************************]
Phone: [*****************]
Fax: [*****************]
Email: [********************]
Attention: [*****************];
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
KLX Inc.
1300 Corporate Center Way
Wellington, FL 33414
Phone: (561) 383-5100
Fax: (561) 791-5479
Email: Roger.Franks@klx.com
Attention: General Counsel;
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
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Following the Effective Time, except as expressly permitted by the Merger Agreement, the Parties shall not make, and shall procure that none of its respective Group members makes, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other Party unless otherwise required by Applicable Law or applicable stock exchange regulation.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the Distribution be consummated as originally contemplated to the fullest extent possible.
Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Applicable Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 8.11 shall be null and void.
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This Agreement (including the exhibits, annexes and appendices hereto and any other agreement entered into by and between the Parties in connection herewith) constitutes, together with the Ancillary Agreements, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, by and between the Parties with respect to the subject matter hereof.
This Agreement is not intended to and shall not confer upon any Person other than the Parties any rights or remedies hereunder; provided , however , that it is specifically intended that the KLX D&O Indemnified Parties and the ESG D&O Indemnified Parties (with respect to Section 3.05 and this Section 8.13 from and after the Effective Time) are intended third-party beneficiaries of such provisions.
This Agreement and all Proceedings (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of KLX and ESG SpinCo in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Applicable Laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Applicable Laws of any jurisdiction other than the State of Delaware.
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This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
EACH OF KLX AND ESG SPINCO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BETWEEN ANY OF THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF KLX OR ESG SPINCO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[ Signature Page Follows ]
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IN WITNESS WHEREOF , the Parties have duly executed this Agreement as of the date first written above.
KLX Inc. | ||||||
By: |
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Name: | ||||||
Title: | ||||||
KLX Energy Services Holdings, Inc. |
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By: |
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Name: | ||||||
Title: |
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, 2018
KLX INC.
and
KLX ENERGY SERVICES HOLDINGS, INC.
EMPLOYEE MATTERS AGREEMENT
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ARTICLE I DEFINITIONS |
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1.1 |
Definitions |
B-1 |
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1.2 |
Terms |
B-1 |
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ARTICLE II ASSIGNMENT OF EMPLOYEES |
B-3 |
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2.1 |
Active Employees |
B-3 |
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2.2 |
Former Employees |
B-4 |
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2.3 |
Employment Law Obligations |
B-4 |
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2.4 |
Employee Records |
B-5 |
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ARTICLE III EQUITY AWARDS |
B-6 |
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3.1 |
General Principals |
B-6 |
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3.2 |
Establishment of Long-Term Incentive Plan |
B-6 |
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3.3 |
Treatment of Outstanding KLX Equity Awards |
B-6 |
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3.4 |
Employee Stock Purchase Plan |
B-7 |
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3.5 |
Liabilities for Settlement of Awards |
B-7 |
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3.6 |
Tax Reporting, Withholding and Deduction for Equity-Based Awards |
B-7 |
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ARTICLE IV CERTAIN U.S. WELFARE BENEFIT MATTERS |
B-8 |
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4.1 |
Establishment of Welfare Plans |
B-8 |
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4.2 |
Accrued Paid Time Off |
B-9 |
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4.3 |
Flexible Spending Accounts |
B-9 |
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4.4 |
COBRA and HIPAA |
B-9 |
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4.5 |
Third Party Vendors |
B-9 |
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ARTICLE V NONQUALIFIED DEFERRED COMPENSATION PLANS |
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5.1 |
Deferred Compensation Plan |
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5.2 |
Non-Employee Directors Deferred Compensation Plan |
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ARTICLE VI U.S. DEFINED CONTRIBUTION PLAN |
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6.1 |
KLX Savings Plan |
B-10 |
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ARTICLE VII ANNUAL INCENTIVE PLANS |
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7.1 |
KLX Annual Incentive Plans |
B-11 |
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ARTICLE VIII COMPENSATION MATTERS AND GENERAL BENEFIT AND EMPLOYEE MATTERS |
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8.1 |
Restrictive Covenants in Employment and Other Agreements |
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8.2 |
Termination of Participation |
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8.3 |
Leaves of Absence |
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8.4 |
Workers' and Unemployment Compensation |
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8.5 |
Preservation of Rights to Amend |
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8.6 |
Confidentiality |
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8.7 |
Administrative Complaints/Litigation |
B-13 |
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8.8 |
Reimbursement and Indemnification |
B-13 |
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8.9 |
Fiduciary Matters; Restrictive Covenants and Confidentiality |
B-14 |
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8.10 |
Section 409A |
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8.11 |
Non-Solicitation |
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ARTICLE IX MISCELLANEOUS |
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9.1 |
Limitation of Liability |
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9.2 |
Expenses |
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9.3 |
Notices |
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9.4 |
Interpretation; Certain Definitions |
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9.5 |
Public Announcements |
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9.6 |
Severability |
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9.7 |
Entire Agreement |
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9.8 |
Assignment |
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9.9 |
No Third-Party Beneficiaries |
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9.10 |
Governing Law |
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9.11 |
Consent to Jurisdiction |
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9.12 |
Effect if Distribution Does Not Occur |
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9.13 |
Counterparts |
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9.14 |
Waiver of Jury Trial |
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B-ii
This EMPLOYEE MATTERS AGREEMENT (this Agreement ), dated as of [ · ], by and between KLX Inc., a corporation organized under the laws of the State of Delaware ( KLX ), and KLX Energy Services Holdings, Inc., a corporation organized under the laws of the State of Delaware ( ESG SpinCo ). Each of KLX and ESG SpinCo is sometimes referred to herein as a "Party" and together, as the "Parties".
WHEREAS , KLX and ESG SpinCo have entered into a Distribution Agreement as of the date hereof (the Distribution Agreement ) pursuant to which KLX shall separate the ASG Business and the ESG Business through a taxable spin-off of the ESG Business into a separate publicly traded company and distribute to the holders of KLX Common Stock all of the ESG SpinCo Common Stock; and
WHEREAS , in connection with the Distribution, the Parties desire to enter into this Agreement as a complement to the Distribution Agreement.
NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements contained herein and in the Distribution Agreement, and intending to be legally bound hereby, KLX and ESG SpinCo hereby agree as follows:
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Distribution Agreement.
As used herein, the following terms have the following meanings:
Agreement has the meaning as set forth in the Preamble.
ASG Business Employee means an individual whose employment duties are primarily related to the ASG Business immediately prior to the Distribution Date.
Benefit Plan shall mean any plan, program, policy, agreement, arrangement or understanding that is an employment, consulting, deferred compensation, executive compensation, incentive bonus or other bonus, employee pension, profit sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation right, restricted stock, restricted stock unit, deferred stock unit, other equity-based compensation, severance pay, retention, change in control, salary continuation, life, death benefit, health, hospitalization, workers' compensation, sick leave, vacation pay, disability or accident insurance or other employee benefit plan, program, agreement or arrangement, including any "employee benefit plan" (as defined in Section 3(3) of ERISA) (whether or not subject to ERISA) sponsored or maintained by such entity or to which such entity is a party.
COBRA means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
Committee means the Compensation Committee of the Board.
Distribution Agreement has the meaning as set forth in the Recitals.
Employee Records means all records pertaining to employment, including benefits, eligibility, training history, performance reviews, disciplinary actions, job experience and history and compensation history.
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ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
ESG Deferred Compensation Plan has the meaning as set forth in Section 5.1(b) .
ESG Employee means any individual who shall be employed by ESG SpinCo or a member of the ESG Group (a) on and after the date two days prior to the Distribution Date or (b) in the case of the Specified Employees, each of whom shall transfer employment from KLX to ESG SpinCo on or prior to the closing of the transactions contemplated by the ASG Merger (the ASG Closing ), on and after the Transfer Date.
ESG Equity Plan has the meaning as set forth in Section 3.2 .
ESG ESPP has the meaning as set forth in Section 3.3 .
ESG FSA has the meaning as set forth in Section 4.3 .
ESG NEDDSP has the meaning as set forth in Section 5.2 .
ESG Non-Employee Director means any individual who shall be a non-employee member of the board of directors of ESG immediately after the Distribution Date and who is not a KLX Non-Employee Director.
ESG Savings Plans has the meaning as set forth in Section 6.1(a) .
ESG SpinCo has the meaning as set forth in the Preamble.
ESG Welfare Plans has the meaning as set forth in Section 4.1(a) .
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
FICA has the meaning as set forth in Section 2.1(e) .
Former ESG Employee has the meaning as set forth in Section 2.2(b) .
Former KLX Employee has the meaning as set forth in Section 2.2(c) .
FSA Participation Period has the meaning as set forth in Section 4.4 .
FUTA has the meaning as set forth in Section 2.1(e) .
HIPAA shall mean the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.
KLX Adjustment Ratio means a fraction, the numerator of which is the KLX Pre-Distribution Stock Value and the denominator of which is the KLX Post-Distribution Stock Value.
KLX Annual Incentive Plan means any annual incentive bonus or commission program maintained by KLX.
KLX Deferred Compensation Plan means the KLX Inc. 2014 Deferred Compensation Plan, as amended.
KLX DSU means any stock unit held by a non-employee member of the Board pursuant to the KLX NEDDSP and/or the KLX Deferred Compensation Plan.
KLX Employee means any individual who shall be employed by a member of the KLX Group on and after the Distribution Date.
KLX Equity Awards means KLX RSAs, KLX RSUs, KLX PSUs, and KLX DSUs.
KLX Equity Plan means the KLX Inc. Long-Term Incentive Plan, as amended from time to time.
KLX ESPP means the KLX Inc. Employee Stock Purchase Plan, effective as of January 1, 2015, as amended.
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KLX has the meaning as set forth in the Preamble.
KLX NEDDSP means the KLX Inc. Non-Employee Directors Stock and Deferred Compensation Plan, as amended.
KLX PSU means a KLX stock unit award subject to performance-based vesting.
KLX Post-Distribution Stock Value means the opening price per share of the KLX Common Stock trading on the first trading day following the Distribution Date during Regular Trading Hours.
KLX Pre-Distribution Stock Value means the closing price per share of the KLX Common Stock trading regular way with due bills on the Distribution Date during Regular Trading Hours.
KLX RSA means the portion of any restricted stock awards issued under the KLX Equity Plan that is subject only to time-based vesting.
KLX RSU means any stock unit award issued under the KLX Equity Plan that is subject only to time-based vesting.
Party has the meaning as set forth in the Preamble.
Regular Trading Hours means the period beginning at 9:30 AM, New York City time, and ending at 4:00 PM, New York City time.
Specified Employee means an individual set forth on Schedule 1.2 .
Transfer Date means with respect to a Specified Employee, the date on which such individual's employment transfers to ESG SpinCo.
ARTICLE II
ASSIGNMENT OF EMPLOYEES
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On and after the Distribution Date (i) the members of the ESG Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the ESG Employees and (ii) the members of the KLX Group shall remain responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the KLX Employees and the treatment of the Former KLX Employees and Former ESG Employees in respect of their former employment with KLX.
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B-5
On or prior to the Distribution Date, ESG SpinCo shall establish a long-term incentive plan for the benefit of eligible ESG Employees that is substantially similar to the KLX Equity Plan (the ESG Equity Plan ). Prior to the Distribution Date, KLX, as the sole stockholder of ESG SpinCo, shall approve the ESG Equity Plan.
B-6
From and after the Distribution Date KLX shall remain responsible for all Liabilities associated with KLX Equity Awards, including share delivery, registration or other obligations related to the exercise, vesting or settlement of the KLX Equity Awards.
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ARTICLE IV
CERTAIN U.S. WELFARE BENEFIT MATTERS
B-8
the event giving rise to the benefit under the applicable plan has occurred as set forth in the governing plan documents, if it is clear based on the governing documents of both the KLX Welfare Plan and ESG Welfare Plans which plan should be responsible for the claim or, if not, as follows: (ii) (A) health, dental, vision, employee assistance program, education assistance program and prescription drug benefits (including in respect of any hospital confinement), upon provision of such services, materials or supplies; and (B) life, accidental death and dismemberment and business travel accident insurance benefits, upon the death, or other event giving rise to such benefits. The members of the KLX Group shall retain liability and responsibility in accordance with the applicable KLX Welfare Plan for all reimbursement claims (such as medical and dental claims) for expenses incurred and for all non-reimbursement claims (such as life insurance claims) for individuals who, immediately prior to the Distribution Date are Former ESG Employees (and their dependents and beneficiaries), including any such employee on long-term disability on the Distribution Date.
ESG SpinCo shall credit each ESG Employee with the amount of accrued but unused vacation time, sick time and other time-off benefits as such ESG Employee had with the KLX Group as of the Distribution Date or the Transfer Date, as applicable.
On or prior to the Distribution Date, ESG SpinCo shall establish and adopt ESG Welfare Plans that will provide health care flexible spending account and dependent care flexible spending account benefits to ESG Employees (each an ESG FSA ).
KLX shall retain responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to Former ESG Employees who, prior to the Distribution Date or the Transfer Date, as applicable, were covered under a KLX Welfare Plan pursuant to COBRA. KLX shall be responsible for administering compliance with any certificate of creditable coverage requirements of HIPAA or Medicare applicable to the KLX Welfare Plans with respect to ESG Employees. The Parties agree that neither the Distribution nor any transfers of employment that occur in connection with and on or prior to the Distribution shall constitute a COBRA qualifying event for purposes of COBRA; provided, that, in all events, ESG SpinCo shall assume, or shall have caused the ESG Welfare Plans to assume, responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to ESG Employees who, on or after the Distribution Date or the Transfer Date, as applicable, incur a qualifying event for purposes of COBRA.
Except as provided below, to the extent any KLX Welfare Plan is administered by a third-party vendor, KLX and ESG SpinCo will cooperate and use their reasonable commercial efforts to "clone"
B-9
any contract with such third-party vendor for ESG SpinCo and to maintain any pricing discounts or other preferential terms for both KLX and ESG SpinCo. Neither party shall be liable for failure to obtain such pricing discounts or other preferential terms for ESG SpinCo. Each party shall be responsible for any additional premiums, charges or administrative fees that such party may incur pursuant to this Section 4.5 .
ARTICLE V
NONQUALIFIED DEFERRED COMPENSATION PLANS
On or prior to the Distribution Date, ESG SpinCo shall establish a nonqualified deferred compensation plan for the benefit of ESG Non-Employee Directors that is comparable to the KLX NEDDSP (the ESG NEDDSP ).
ARTICLE VI
U.S. DEFINED CONTRIBUTION PLAN
B-10
transferred to the ESG Savings Plan and its related trust as of the time of such transfer, and (iii) ESG SpinCo will cause such transferred accounts to be accepted by the ESG Savings Plan and its related trust and will cause the ESG Savings Plan to satisfy all protected benefit requirements under the Code and Applicable Law with respect to the transferred accounts.
ARTICLE VII
ANNUAL INCENTIVE PLANS
ARTICLE VIII
COMPENSATION MATTERS AND GENERAL BENEFIT AND EMPLOYEE MATTERS
To the fullest extent permitted by the agreements described in this Section 8.1 and Applicable Law, KLX shall assign, or cause an applicable member of the KLX Group to assign (including through notification to employees, as applicable), to ESG SpinCo or a member of the ESG Group, as designated by ESG SpinCo, all agreements containing restrictive covenants (including confidentiality,
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non-competition and non-solicitation provisions) between a member of the KLX Group and an ESG Employee, with such assignment to be effective as of the Distribution Date or the Transfer Date, as applicable. Notwithstanding any such assignment, the restrictive covenant obligations noted above shall continue in effect with respect to ESG Employees' ongoing obligations to maintain and not use or disclose, without prior written authorization from KIAWAH, any confidential information of KIAWAH, except in the good faith performance of such ESG Employees' duty to ESG SpinCo or a member of the ESG Group. To the extent that assignment of such agreements is not permitted, effective as of the Distribution Date or the Transfer Date, as applicable, each member of the ESG Group shall be considered to be a successor to each member of the KLX Group for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between a member of the KLX Group and an ESG Employee, such that each member of the ESG Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the ESG Group; provided , however, that in no event shall KLX be permitted to enforce such restrictive covenant agreements against ESG Employees for action taken in their capacity as employees of a member of the ESG Group.
Except as otherwise provided under this Agreement, effective as of the Distribution Date or the Transfer Date, as applicable, ESG Employees shall cease participation in each KLX Benefit Plan and shall no longer be eligible to participate in any KLX Benefit Plan.
ESG SpinCo will continue to apply the appropriate leave of absence policies applicable to inactive ESG Employees who are on an approved leave of absence as of the Distribution Date. Leaves of absence taken by ESG Employees prior to the Distribution Date shall be deemed to have been taken as employees of a member of the ESG Group.
All workers' compensation Liabilities relating to, arising out of, or resulting from any claim by a KLX Employee, Former KLX Employee ESG Employee or Former ESG Employee that results from an accident, incident or event occurring, or from an occupational disease which becomes manifest, prior to the Distribution Date shall be retained by KLX. Effective as of the Distribution Date, ESG SpinCo, acting through the member of the ESG Group employing each ESG Employee, will be responsible for (a) obtaining workers' compensation insurance, including providing all collateral required by the insurance carriers and providing all notices to ESG Employees required by applicable workers' compensation Laws and (b) establishing new or transferred unemployment insurance employer accounts, policies and claims handling contracts with the applicable government agencies.
The rights of KLX or ESG SpinCo to amend or terminate any plan, program, or policy referred to herein shall not be limited in any way by this Agreement.
Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith is confidential and is subject to the terms of the confidentiality provisions set forth in the Distribution Agreement.
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To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both KLX Employees (or Former KLX Employees) and ESG Employees (or Former ESG Employees) and such action involves employment or Benefit Plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of KLX Employees (or Former KLX Employees) and ESG Employees (or Former ESG Employees) included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Distribution Agreement shall apply with respect to each Party's indemnification obligations under this Section 8.7 .
To the extent provided for under this Agreement, each Party agrees to reimburse the other Party, within 30 days of receipt from the other Party of reasonable verification, for all costs and expenses which the other Party may incur on its behalf as a result of any of the respective Welfare Plans and other Benefit Plans. All Liabilities retained, assumed, or indemnified against by ESG SpinCo pursuant to this Agreement, and all Liabilities retained, assumed, or indemnified against by KLX pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Distribution Agreement. Notwithstanding anything to the contrary, (i) no provision of this Agreement shall require any member of the ESG Group to pay or reimburse to any member of the KLX Group any benefit-related cost item that a member of the ESG Group has paid or reimbursed to any member of the KLX Group prior to the Distribution Date; and (ii) no provision of this Agreement shall require any member of the KLX Group to pay or reimburse to any member of the ESG Group any benefit-related cost item that a member of the KLX Group has paid or reimbursed to any member of the ESG Group prior to the Distribution Date.
Each Party acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other Applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
Each Party acknowledges and agrees that no Party or individual shall be deemed to be in breach of such Party's or individual's fiduciary duty to ESG or the ESG Group, or KLX or the KLX Group, as applicable, solely by virtue of the fact that such Party or individual is, while an ESG Employee or KLX Employee, as applicable, providing services to ESG or the ESG Group, and KLX or the KLX Group, simultaneously, as applicable. Each Party shall fully release and indemnify the other Party for any Liabilities caused by any such dual and simultaneous obligations.
Each Party acknowledges and agrees that no Party or individual shall be deemed to be in breach of such Party's or individual's obligation of confidentiality or other restrictive covenant obligations (including non-competition and non-solicitation restrictions) to ESG or the ESG Group, or KLX or the KLX Group, as applicable, solely by virtue of the fact that such Party or individual is, while an ESG Employee or KLX Employee, as applicable, providing services to ESG or the ESG Group, and KLX or the KLX Group, simultaneously, as applicable. Each Party shall fully release and indemnify the other Party for any Liabilities caused by any such dual and simultaneous obligations.
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KLX and ESG SpinCo shall cooperate in good faith so that the transactions contemplated by this Agreement and the Distribution Agreement will not result in adverse Tax consequences under Section 409A of the Code to any ESG Employee, ESG Non-Employee Director, Former ESG Employee, KLX Employee, KLX Non-Employee Director or Former KLX Employee, in respect of their respective benefits under any Benefit Plan. In the event the Parties determine that the actions described in this Agreement may result in any ESG Employee, ESG Non-Employee Director, Former ESG Employee, KLX Employee, KLX Non-Employee Director or Former KLX Employee becoming subject to additional Taxes pursuant to Section 409A of the Code, the Parties agree to cooperate in good faith to modify the procedures described in this Agreement to prevent such ESG Employee, ESG Non-Employee Director, Former ESG Employee, KLX Employee, KLX Non-Employee Director or Former KLX Employee from becoming subject to such additional Tax.
From the Distribution Date until the 18-month anniversary of the Closing Date, KLX and ESG SpinCo shall not, and each shall cause, in the case of KLX, each member of the KLX Group and, in the case of ESG SpinCo, each member of the ESG Group, not to, solicit, hire, or in any other capacity recruit, offer employment, employ or engage as a consultant or independent representative, in the case of EGS SpinCo, any KLX Employee, and, in the case of KLX, any ESG Employee (such individuals described in the foregoing, Covered Employees ); provided that, the foregoing shall not restrict (a) KLX, ESG SpinCo or their respective Affiliates from making general solicitations of employment in the ordinary course of business that are not specifically directed to any Covered Employee, (b) KLX, ESG SpinCo or their respective Affiliates from employing, hiring, engaging, recruiting or soliciting any Covered Employee whose service with the Company or a Member or any of its Affiliates, as the case may be, has been terminated, or (c) ESG SpinCo from soliciting, engaging, recruiting and/or hiring any Specified Employee.
IN NO EVENT SHALL ANY MEMBER OF THE KLX GROUP OR THE ESG GROUP BE LIABLE TO ANY MEMBER OF THE ESG GROUP OR THE KLX GROUP, RESPECTIVELY, FOR ANY PUNITIVE DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES AWARDED TO THIRD PARTIES.
Except as otherwise provided in this Agreement in this Agreement, the Distribution Agreement or in any Ancillary Agreement, each Party shall pay its own expenses in fulfilling its obligations under this Agreement. Notwithstanding anything in this Agreement, the Distribution Agreement or in any Ancillary Agreement to the contrary, all ESG Transaction Costs shall be borne by ESG SpinCo and all KLX Transaction Costs shall be borne by KLX.
All notices, consents, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when
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received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by e-mail or facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third (3 rd ) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 9.3 ):
[**************************]
[**************************]
[**************************]
Facsimile: [*****************]
Email: [********************]
Attention: [*****************];
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
KLX Inc.
1300 Corporate Center Way
Wellington, FL 33414
Phone: (561) 383-5100
Fax: (561) 791-5479
Email: Roger.Franks@klx.com
Attention: General Counsel;
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
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as if drafted collectively by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.
Following the Effective Time, KLX shall not make, and shall procure that none of the members of the KLX Group makes, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement without the prior written consent of ESG SpinCo unless otherwise required by Applicable Law or applicable stock exchange regulation.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the Distribution be consummated as originally contemplated to the fullest extent possible.
This Agreement and the Distribution Agreements (including the other Ancillary Documents) constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, by and between the Parties with respect to the subject matter hereof and thereof. Irrespective of anything else contained herein, the Parties do not intend for this Agreement constitute the establishment or adoption of, or amendment to, any Benefit Plan, and no person participating in any such Benefit Plan shall have any claim or cause of action, under ERISA or otherwise, in respect of any provision of this Agreement as it relates to any such Benefit Plan or otherwise.
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Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Applicable Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 9.8 shall be null and void.
The Parties acknowledge and agree that all provisions contained in this Agreement with respect to ESG Business Employees and ASG Business Employees are included for the sole benefit of the respective Parties and shall not create any right (i) in any other Person, including employees, former employees, any participant or any beneficiary thereof, in any Benefit Plan, or (ii) to continued employment with the ESG Group or the KLX Group. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement, whether express or implied, shall be treated as an amendment or other modification of any Benefit Plan or shall prohibit the KLX group or the ESG Group from amending or terminating any Benefit Plan.
This Agreement and all Proceedings (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of KLX and ESG SpinCo in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Applicable Laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Applicable Laws of any jurisdiction other than the State of Delaware.
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be sufficient to confer personal jurisdiction over such Party in such claim or Proceeding and shall otherwise constitute effective and binding service in every respect.
Notwithstanding anything in this Agreement to the contrary, if the Distribution Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect.
This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
EACH OF KLX AND ESG SPINCO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BETWEEN ANY OF THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF KLX OR ESG SPINCO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[Signature Page Follows]
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IN WITNESS WHEREOF , the Parties hereto have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the day and year first above written.
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Title: | ||||||
KLX ENERGY SERVICES HOLDINGS, INC. |
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By: |
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Title: |
THIS IP MATTERS AGREEMENT (this Agreement ), dated as of [ · ], 2018, is entered into by and between KLX Inc., a corporation formed under the laws of the State of Delaware ( KLX ), and KLX Energy Services Holdings, Inc., a corporation formed under the laws of the State of Delaware ( ESG SpinCo ). KLX and ESG SpinCo are referred to herein individually as a Party and collectively as the Parties .
WHEREAS , KLX owns the KLX Trademarks (as defined herein);
WHEREAS, KLX has been using certain KLX Trademarks in relation to the ASG Business and ESG SpinCo has been using certain KLX Trademarks in relation to the ESG Business;
WHEREAS , KLX and The Boeing Company (the ASG Buyer ) entered into an Agreement and Plan of Merger on April 30, 2018 (the ASG Merger Agreement ), pursuant to which a wholly owned subsidiary of the ASG Buyer ( Merger Sub ) will be merged with and into KLX, whereupon the separate existence of the Merger Sub shall cease, and KLX will continue as the surviving corporation and as a direct or indirect wholly owned subsidiary of the ASG Buyer (the ASG Merger );
WHEREAS , concurrently with the execution of this Agreement, KLX and ESG SpinCo are entering into a distribution agreement (the Distribution Agreement ) pursuant to which, inter alia, KLX agrees to separate the ASG Business and the ESG Business through a taxable spin-off of the ESG Business into a separate publicly traded company upon the terms and subject to the conditions set forth in the Distribution Agreement (the Spin-Off );
WHEREAS, following the Spin-Off and the ASG Merger, the Parties intend that ESG SpinCo will own the KLX Trademarks; and
WHEREAS , KLX and ESG SpinCo wish to enter into this Agreement setting forth their rights and obligations with respect to the transfer of the KLX Trademarks and associated rights (as set forth in Section 3.01 ), on an as-is basis, to ESG SpinCo and the rebranding of the ASG Business (as more fully described in Article IV ).
NOW , THEREFORE , in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the mutual terms, conditions and other agreements set forth herein, and intending to be legally bound hereby, the Parties agree, with effect as of the Effective Time, as follows:
As used herein, the following terms have the following meanings:
Acquired Rights has the meaning set forth in Section 3.01 .
Affiliate means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meaning, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.
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Agreement has the meaning set forth in the Preamble.
Ancillary Agreement has the meaning given in the Distribution Agreement.
Applicable Law has the meaning given in the ASG Merger Agreement.
ASG Business means all businesses of KLX and its Subsidiaries, other than the ESG Business.
Assignment has the meaning set forth in Section 3.02 .
Closing has the meaning given in the ASG Merger Agreement.
Closing Date has the meaning given in the ASG Merger Agreement.
Effective Time has the meaning given in the Distribution Agreement.
ESG Business means the business of providing technical services and related rental equipment to oil and gas exploration and production companies in remote oil and gas producing regions solely as conducted by the ESG Group, but does not include any other business operated or conducted by any member of the KLX Group.
ESG Group means ESG SpinCo, KLX RE Holdings LLC and each Person that is or becomes a Subsidiary of ESG SpinCo, including in each case any Person that is merged or consolidated with and into ESG SpinCo or any Subsidiary of ESG SpinCo.
Governmental Authority has the meaning given in the ASG Merger Agreement.
KLX ES Mark means the United States trademark "KLX ENERGY SERVICES" (Registration No. 5212182).
KLX Group means KLX, each Person that is or becomes a Subsidiary of KLX (other than the members of the ESG Group), including in each case any Person that is merged or consolidated with and into KLX or any Subsidiary of KLX.
KLX Trademarks means the trademarks and trademark applications listed on Schedule 1, together with any other trademarks, trade names, service marks, logos or similar rights, in each case, (a) owned as of the Effective Time by the KLX Group and (b) containing "KLX".
Parties has the meaning set forth in the Preamble.
Party has the meaning set forth in the Preamble.
Person means any individual or any corporation, limited liability company, partnership, trust, association or other entity of any kind.
Proceeding has the meaning given in the ASG Merger Agreement.
Similar Marks means the "KLX" name and any trademarks, trade names, service marks, logos or similar rights that are likely to cause confusion with the KLX Trademarks.
Subsidiary of a Person means any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than fifty percent (50%) of the voting stock (or of any other form of voting or controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
Capitalized terms used but not defined in this Agreement shall have the meaning set forth in the Distribution Agreement.
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With effect from the Effective Time until such time as the Acquired Rights are assigned to ESG SpinCo in accordance with Section 3.01 , KLX consents to and grants the ESG Group a non-exclusive, irrevocable, royalty-free, non-transferable, non-sublicensable license to use the KLX Trademarks in the form "KLX ENERGY SERVICES" (or any form which varies in insignificant ways thereto), solely in connection with the ESG Business.
KLX shall not, and shall procure that the members of the KLX Group shall not (except, in each case, as otherwise permitted herein):
Notwithstanding anything to the contrary in this Agreement, the ASG Merger Agreement, the Distribution Agreement, or any Ancillary Agreement, with effect from the Closing Date, including after the Acquired Rights have been assigned to ESG SpinCo in accordance with Section 3.01 , ESG SpinCo shall not, and shall procure that each member of the ESG Group shall not, use or otherwise attempt to procure a registration for the KLX Trademarks or any Similar Mark, or otherwise permit (whether directly through a license grant or indirectly) any other Person to use or otherwise attempt to procure a registration for the KLX Trademarks or any Similar Mark: (a) in relation to goods or services equivalent or similar to those provided by the ASG Business at any time; (b) in a manner calculated to cause confusion with the ASG Business; or (c) otherwise within the fields of use in which the ASG Business may operate.
ARTICLE III
ASSIGNMENT OF ACQUIRED RIGHTS
KLX hereby, with effect from immediately prior to the Closing Date (but subject to the occurrence of the Closing), assigns, and causes all members of the KLX Group to assign, to ESG SpinCo, all of its and their right, title and interest in and to:
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Within a reasonable amount of time after the consummation of the assignment pursuant to Section 3.01 , KLX shall promptly deliver to ESG SpinCo:
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perfect the assignment of the Acquired Rights to ESG SpinCo, or any of ESG SpinCo's successors or assigns.
ARTICLE IV
REBRANDING OF KLX GROUP
If the ASG Merger is consummated, then, KLX shall:
Provided that the Assignment has been consummated in accordance with Section 3.01 ESG SpinCo hereby grants to the KLX Group a non-exclusive, irrevocable, royalty-free, non-transferable,
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sublicensable license to use the KLX Trademarks, for three hundred sixty-five (365) days after the Closing Date, to enable the KLX Group to rebrand in accordance with this Article IV and otherwise wind-down and transition off any trademark usage of the KLX Trademarks or any Similar Mark; provided such use (including sublicensing) is generally consistent with the purposes for which, the manner in which, and the extent to which the KLX Trademarks or Similar Marks were used (or licensed) by the KLX Group in the six (6) months prior to the Closing Date.
This Agreement shall automatically terminate on the earlier of (i) the termination of the ASG Merger Agreement and (ii) the termination of the Distribution Agreement; provided that if the ASG Merger Agreement is terminated after the consummation of the Spin-Off, KLX and ESG SpinCo shall enter into a long-term brand co-existence agreement on customary terms and conditions to provide for the use of the KLX Trademarks between KLX and ESG SpinCo.
Without affecting any other right or remedy available to it, either Party may terminate this Agreement with immediate effect by giving written notice to the other Party if the other Party commits a material breach of any term of this Agreement which is incapable of remedy or (if such breach is remediable) fails to remedy that breach within a period of thirty (30) days after being notified in writing to do so.
In the event of termination of this Agreement as provided in this Article V , this Agreement will be of no further force or effect; provided , however , that no such termination shall affect this paragraph or any of Section 2.03 , Article I , Article V or Article VI , which Section and Articles shall survive any termination of this Agreement.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.
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Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Applicable Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 6.02 shall be null and void. Without limiting the foregoing, the licenses and other rights granted, and obligations made, under Section 2.03 (but solely for a period of 10 years from the Closing Date) and Section 4.02 are intended to be and will be binding on any Person to which the KLX Trademarks may be sold, assigned, transferred, or otherwise divested, and on any subsequent purchaser, assignee, or transferee, and any subsequent owner of the Acquired Rights, and ESG SpinCo shall procure that any such sale, assignment, transfer, or divestiture that it or its Affiliate makes of such Acquired Rights will be made subject to the rights of, and obligations owed to, the KLX Group therein.
This Agreement and all Proceedings (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of KLX and ESG SpinCo in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Applicable Laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Applicable Laws of any jurisdiction other than the State of Delaware.
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mailing copies thereof by registered or certified United States mail, postage prepaid, return receipt requested, to its address as specified in or pursuant to Section 6.06 and such service of process shall be sufficient to confer personal jurisdiction over such Party in such claim or Proceeding and shall otherwise constitute effective and binding service in every respect.
All notices, consents, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by e-mail or facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 6.06 ):
[**************************]
[**************************]
[**************************]
Attention: [*****************]
Facsimile: [*****************]
Email: [********************];
with a copy (which shall not constitute notice) to:
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
KLX Inc.
1300 Corporate Center Way
Wellington, FL 33414
Phone: (561) 383-5100
Fax: (561) 791-5479
Email: Roger.Franks@klx.com
Attention: General Counsel;
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
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Email:
Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
EACH OF KLX (ON BEHALF OF ITSELF AND EACH OTHER KLX GROUP COMPANY) AND ESG SPINCO (ON BEHALF OF ITSELF AND EACH OTHER ESG GROUP COMPANY) UNDERSTANDS AND AGREES THAT, EXCEPT AS SET FORTH IN THE ASG MERGER AGREEMENT, ANY ASSIGNMENT OF THE KLX TRADEMARKS AND ACQUIRED RIGHTS HEREUNDER IS MADE "AS-IS" WITHOUT ANY REPRESENTATION OR WARRANTY, AND NO PARTY TO THIS AGREEMENT IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE KLX TRADEMARKS OR ACQUIRED RIGHTS, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY (OR OTHER MEMBER OF SUCH PARTY'S GROUP), OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY (OR OTHER MEMBER OF SUCH PARTY'S GROUP), OR AS TO THE LEGAL SUFFICIENCY OF ANY TRANSACTION, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER.
This Agreement is not intended to and shall not confer upon any Person other than the Parties any rights or remedies hereunder
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This Agreement (including the schedules hereto and any other agreement entered into by and between the Parties in connection herewith) constitutes, together with the ASG Merger Agreement and the Distribution Agreement, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, by and between the Parties with respect to the subject matter hereof.
This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
[ Signature Page Follows ]
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IN WITNESS WHEREOF , the Parties have duly executed this Agreement as of the Effective Time.
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KLX Energy Services Holdings, Inc. |
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[ ], 2018
KLX INC.
and
KLX ENERGY SERVICES HOLDINGS, INC.
TRANSITION SERVICES AGREEMENT
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ARTICLE I DEFINITIONS |
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1.1 |
Definitions |
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1.2 |
Terms |
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2.1 |
Services; Time Period |
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2.2 |
Fees and Invoicing |
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2.3 |
Cooperation |
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2.4 |
Access to Systems |
D-3 |
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2.5 |
Subcontractors |
D-3 |
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2.6 |
Migration Planning |
D-4 |
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2.7 |
Compliance Matters |
D-4 |
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2.8 |
Limitation of Services |
D-5 |
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D-5 |
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3.1 |
Term |
D-5 |
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3.2 |
Termination Rights |
D-5 |
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D-6 |
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4.1 |
Nature of Services; Limited Warranty |
D-6 |
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4.2 |
Limitations on Liability; Disclaimer of Warranties |
D-7 |
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4.3 |
Indemnification |
D-8 |
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4.4 |
Employment-Related Liabilities |
D-8 |
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4.5 |
Force Majeure |
D-8 |
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D-8 |
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5.1 |
Owned Intellectual Property |
D-8 |
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5.2 |
Notices |
D-10 |
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5.3 |
Interpretation; Certain Definitions |
D-11 |
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5.4 |
Severability |
D-11 |
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5.5 |
Assignment |
D-11 |
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5.6 |
Entire Agreement |
D-11 |
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5.7 |
No Third Party Beneficiary |
D-12 |
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5.8 |
Governing Law |
D-12 |
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5.9 |
Consent to Jurisdiction and Service of Process |
D-12 |
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5.10 |
Counterparts |
D-12 |
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5.11 |
WAIVER OF JURY TRIAL |
D-12 |
D-i
THIS TRANSITION SERVICES AGREEMENT (this Agreement ), dated as of [ · ] 2018 (the Effective Date ), is entered into by and between KLX Inc., a corporation formed under the laws of the State of Delaware ( KLX ), and KLX Energy Services Holdings, Inc., a corporation formed under the laws of the State of Delaware ( ESG SpinCo ). KLX and ESG SpinCo are referred to herein individually as a Party and collectively as the Parties.
WHEREAS , KLX and The Boeing Company (the ASG Buyer ) have entered into an Agreement and Plan of Merger on April 30, 2018 (the ASG Merger Agreement ), pursuant to which a wholly owned subsidiary of the ASG Buyer ( Merger Sub ) will be merged with and into KLX, whereupon the separate existence of the Merger Sub shall cease, and KLX will continue as the surviving corporation and as a direct or indirect wholly owned subsidiary of the ASG Buyer (the ASG Merger );
WHEREAS , concurrently with the execution of this Agreement, KLX and ESG SpinCo are entering into a distribution agreement (the Distribution Agreement ) pursuant to which, inter alia, KLX agrees to separate the ASG Business and the ESG Business through a taxable spin-off of the ESG Business into a separate publicly traded company upon the terms and subject to the conditions set forth in the Distribution Agreement;
WHEREAS , the Distribution Agreement contemplates that ESG SpinCo and KLX enter into this Agreement; and
WHEREAS , in connection therewith, KLX agrees to provide to the ESG Group, for the time periods set forth herein, certain services to support the operation of the ESG Business after the Distribution Date (as defined in the Distribution Agreement) in accordance with the terms and subject to the conditions set forth herein, in order to allow the ESG Group a period of time after the Distribution to make arrangements to purchase from one or more third parties, or develop the capability to perform itself, such services in connection with its independent operation.
NOW, THEREFORE , in consideration of the mutual covenants, representations, warranties and agreements entered into herein and in the Distribution Agreement, and intending to be legally bound hereby, the Parties hereto agree as follows:
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Distribution Agreement.
As used herein, the following terms have the following meanings:
Agreement has the meaning set forth in the Recitals.
Closing Date has the meaning set forth in the ASG Merger Agreement.
Distribution Agreement has the meaning set forth in the Recitals.
ESG SpinCo has the meaning set forth in the Recitals.
KLX has the meaning set forth in the Recitals.
Migration Plan has the meaning set forth in Section 2.6 .
D-1
Reference Period means the twelve (12) month period prior to April 30, 2018.
Representatives means, with respect to a Party, (i) an Affiliate of such Party or (with respect to KLX) a subcontractor or delegate; (ii) any director, officer, or employee of such Party or of any such Party's Affiliates; or (iii) any attorney, accountant, business, financial, technical or other advisor, or consultant retained by such Party, or any investor or potential purchaser of such Party.
Services means the services set forth in Exhibit A hereto.
Third Party Provider has the meaning set forth in Section 2.5 .
Third Party Services has the meaning set forth in Section 2.5 .
Transition Service Period has the meaning set forth in Section 3.1 .
ARTICLE II
TRANSITION SERVICES; FEES
Subject to the terms and conditions of this Agreement, KLX shall provide, or cause to be provided through its Affiliates or Third Party Providers, each of the Services to the ESG Group. The Services shall be provided for the Transition Service Period unless terminated earlier in accordance with ARTICLE III .
D-2
Each Party agrees to use commercially reasonable efforts in good faith to cooperate with the other Party in all matters relating to the provision and receipt of the Services. KLX will have no liability for any failure to perform (or to timely perform) its obligations if such failure results from any member of the ESG Group's failure to cooperate in any applicable matter relating to the provision and receipt of the Services, and any such KLX failure in such circumstances will not be deemed a breach of this Agreement. Notwithstanding anything to the contrary in this Agreement, in no event shall KLX's obligation to cooperate with ESG SpinCo provided for under the terms of this Agreement require KLX to (i) advance funds to, or on behalf of, ESG SpinCo, (ii) assume any liability or obligation of ESG SpinCo, or (iii) to incur any new liability or obligation to any third party. To the extent any Service requires KLX to disburse funds on behalf of ESG SpinCo, upon written notice by KLX (which such notice may be based on an estimated amount subject to a subsequent "true-up" to the actual amount disbursed by KLX), ESG SpinCo shall provide such funds to KLX (subject, in the case of any estimated amount, to any subsequent "true-up"), in advance of such disbursement by KLX, by electronic funds transfer to an account designated by KLX in writing.
On or before the Distribution Date, ESG SpinCo shall inform in writing all employees of the ESG Group who have access to KLX's information technology systems, telecommunications, networks and data, computer software, and hardware (collectively, the KLX Systems ) pursuant to this Agreement or the Distribution Agreement or any ancillary agreements related to the transactions contemplated hereby or thereby, or in connection with the performance, receipt or delivery of any Service, (x) to comply with the written security guidelines (including physical security, network access, internet security, confidentiality and personal data security guidelines) of KLX (which may be updated from time to time during the Transition Service Period), and (y) that failure to abide by such policies and procedures shall be grounds for immediate termination. ESG SpinCo shall, in addition, request access in writing from KLX (with consent for such access not to be unreasonably withheld) with respect to any additional personnel, advisors, agents or independent contractors of the ESG Group who are granted access to such systems by KLX after the Distribution Date of the foregoing prior to such individuals obtaining access to any such systems. ESG SpinCo shall cooperate and fully implement this Section 2.4 and shall be liable to KLX for any breach hereof by any of its Representatives. The Parties acknowledge that additional conditions and restrictions may apply to satisfy the requirements of Governmental Authorities and Applicable Laws with respect to any KLX Systems subject to a government security classification. For the avoidance of doubt, the KLX Systems shall exclude the information technology systems, telecommunications, networks and data, computer software, and hardware of ASG Buyer and its Affiliates (other than the KLX Group).
D-3
Immediately on signing this Agreement (if not already established prior to the date of this Agreement), the Parties shall establish a joint transition project team to begin planning for the efficient migration of the Services to the IT systems or other facilities of the ESG Group, or of third parties approved by KLX in writing (approval not to be unreasonably withheld or delayed). The Parties shall work together in good faith to finalize a plan to achieve such migration (the Migration Plan ) as soon as reasonably practicable after the Effective Date. ESG SpinCo shall be primarily responsible for preparing and documenting the Migration Plan, subject to KLX's review and final approval. The Parties shall, and shall cause their Affiliates to, comply with their obligations set out in the Migration Plan. KLX shall charge ESG SpinCo for its time spent and other reasonably incurred expenses in complying with its Migration Plan obligations in accordance with Exhibit A .
Each Party shall comply with Applicable Laws in connection with this Agreement and, subject to Section 2.5 , shall obtain and maintain in force all licenses, consents, permits and regulatory approvals that are necessary in connection with this Agreement. Neither Party assumes any responsibility for compliance by the other Party with any Applicable Laws applicable to the other Party (and, for the avoidance of doubt, ESG SpinCo shall be responsible for ensuring that the operations of the ESG Business complies with all Applicable Laws on and from the Effective Date). Neither KLX nor any Third Party Provider shall be required to provide any Service to the extent the performance of such Service would constitute a violation of, or would result in the breach of, any Applicable Law.
D-4
Services provided under this agreement shall generally be limited to transitional access to systems and data that are necessary for ESG SpinCo to operate. Notwithstanding anything to the contrary herein, in no event shall KLX be obligated to (a) make modifications to its existing systems; (b) acquire additional assets, equipment, rights or properties (including computer equipment, software, furniture, furnishings, fixtures, machinery, vehicles, tools and other personal property) that are not in KLX's or any of its Affiliates' ordinary course of operations; (c) hire additional employees; (d) pay any costs related to the transfer or conversion of data from KLX or any of its Affiliates to the ESG Group; or (e) perform any Services that would cause KLX to violate its contractual obligations to any other Party or would violate any applicable requirements, consents, policies or approval of any Governmental Authority, relating to the subject matter of the services at issue.
The term of this Agreement shall commence on the Effective Date and shall terminate upon the earlier of (i) the date that is six (6) months after the Closing Date and (ii) the date on which this Agreement has been terminated in accordance with Section 3.2(a) (the Transition Service Period ). ESG SpinCo shall, and shall cause the ESG Group to, use commercially reasonable efforts to end the ESG Group's dependency on and use of each Service as promptly as is reasonably practicable after the Effective Date.
D-5
after the Closing, the information technology systems, telecommunications, networks and data, computer software or hardware of the ASG Buyer or any of its Affiliates; and
ARTICLE IV
LIMITATION ON LIABILITY
D-6
D-7
SUITABILITY OF DATA, TITLE AND NON-INFRINGEMENT OF ANY SOFTWARE OR HARDWARE PROVIDED HEREUNDER, AND ANY WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE.
Except as otherwise specifically set forth in any provision of this Agreement, the Distribution Agreement or any other Ancillary Agreement, following the Effective Time, ESG SpinCo shall, and shall cause the other members of the ESG Group to, indemnify, defend and hold harmless the KLX Indemnitees from and against any and all Losses arising out of, by reason of or otherwise in connection with (i) the provision of or the ESG Group's receipt or use of the Services, (ii) ESG SpinCo's (or a member of the ESG Group's) exercise of its rights under this Agreement or (iii) any breach by any member of the ESG Group of this Agreement.
In the event that any member of the KLX Group is determined by any administrative agency or court of competent jurisdiction to be an employer of any of the ESG Group's employees or agents, or is otherwise deemed to be or required to become an employer of such employees or agents of the ESG Group pursuant to any Applicable Laws, for the purpose of any Tax or to provide such employees or agents with compensation, benefits, coverages, damages or other payments under: (a) any Employee Benefit Plan of the ESG Group, (b) any state unemployment insurance, worker's compensation or disability benefits programs, (c) Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, as amended, ERISA, the Worker Adjustment Retraining and Notification Act or any other local, state or federal civil rights or employment statue, (d) the Federal Insurance Contributions Act, as amended, the Federal Unemployment Tax Act or the Fair Labor Standards Act, as amended, or any local or state analogue thereof, or (e) any other Applicable Law, then ESG SpinCo shall be financially responsible for, and shall indemnify, hold harmless and reimburse KLX (or the applicable Affiliate thereof) for the total costs of any compensation, benefits, coverage, taxes, damages, penalties or other payments provided by KLX (or any Affiliate thereof), together with related attorney's fees and other Losses, on account of same.
KLX shall not be responsible for any delay or failure to perform any of its obligations hereunder due to any cause or causes beyond its control, including any of the following: labor disturbances, accidents, hurricanes, fires, floods, wars, riots, rebellions, blockages, acts of governments, acts of terrorism, governmental requirements and regulations, restrictions imposed by law, interruption or outages of communication or data networks or power supply, infrastructure disruptions, or any criminal or tortious acts of any person other than KLX.
D-8
Intellectual Property rights owned by the other Party or any of its Affiliates. In no event shall KLX by virtue of performing the Services, or ESG SpinCo by virtue of receiving the Services, be required to transfer or deliver any Intellectual Property to the other Party.
D-9
All notices, consents, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by e-mail or facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third (3 rd ) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Party 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 5.2 ):
[**************************]
[**************************]
[**************************]
Attention: [*****************]
Facsimile: [*****************]
Email: [********************];
with a copy (which shall not constitute notice) to:
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
KLX Inc.
1300 Corporate Center Way
Wellington, FL 33414
Facsimile: [*****************]
Email: [********************]
Attention: General Counsel;
with a copy (which shall not constitute notice) to :
Freshfields
Bruckhaus Deringer US LLP
601 Lexington Avenue, 31st Floor
New York, NY 10022
Phone: (212) 277-4000
Fax: (212) 277-4001
Email: Valerie.Jacob@freshfields.com
Omar.Pringle@freshfields.com
Attention: Valerie Ford Jacob, Esq.
Omar Pringle, Esq.
D-10
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the Distribution be consummated as originally contemplated to the fullest extent possible.
Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Applicable Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 5.5 shall be null and void.
This Agreement (including the exhibits, annexes and appendices hereto and any other agreement entered into by and between the Parties in connection herewith) constitutes, together with the Ancillary Agreements, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, by and between the Parties with respect to the subject matter hereof.
D-11
This Agreement is not intended to and shall not confer upon any Person other than the Parties any rights or remedies hereunder.
This Agreement and all Proceedings (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of KLX and ESG SpinCo in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Applicable Laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Applicable Laws of any jurisdiction other than the State of Delaware.
This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
EACH OF KLX AND ESG SPINCO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BETWEEN ANY OF THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF KLX OR ESG SPINCO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[ Signature Page Follows ]
D-12
IN WITNESS WHEREOF , the Parties hereto have caused this Agreement to be duly executed by their respective officers, each of whom is duly authorized, all as of the Effective Date.
KLX Inc. | ||||||
By: |
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Name: | ||||||
Title: | ||||||
KLX Energy Services Holdings, Inc. |
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By: |
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Name: | ||||||
Title: |
Table of Contents
Section |
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Page |
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ARTICLE I |
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OFFICES |
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Section 1.01. Offices |
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1 |
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ARTICLE II |
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MEETINGS OF STOCKHOLDERS |
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Section 2.01. Annual Meetings |
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1 |
Section 2.02. Special Meetings |
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1 |
Section 2.03. Notice of Meetings |
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1 |
Section 2.04. Waiver of Notice |
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1 |
Section 2.05. Postponements and Adjournments |
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1 |
Section 2.06. Quorum |
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2 |
Section 2.07. Voting |
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2 |
Section 2.08. Proxies |
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2 |
Section 2.09. Nominations and Proposals |
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2 |
Section 2.10. Submission of Questionnaire, Representation and Agreement |
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5 |
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ARTICLE III |
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BOARD |
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Section 3.01. General |
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6 |
Section 3.02. Number |
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6 |
Section 3.03. Resignation |
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6 |
Section 3.04. Meetings |
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6 |
Section 3.05. Committees of the Board |
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7 |
Section 3.06. Directors Consent in Lieu of Meeting |
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8 |
Section 3.07. Action by Means of Telephone or Similar Communications Equipment |
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8 |
Section 3.08. Compensation |
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8 |
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ARTICLE IV |
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OFFICERS |
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Section 4.01. Officers |
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8 |
Section 4.02. Authority and Duties |
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8 |
Section 4.03. Term of Office, Resignation and Removal |
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8 |
Section 4.04. Vacancies |
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8 |
Section 4.05. The Chairman |
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9 |
Section 4.06. The Chief Executive Officer |
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9 |
Section 4.07. The President |
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9 |
Section 4.08. Vice Presidents |
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9 |
Section 4.09. The Secretary |
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9 |
Section 4.10. Assistant Secretaries |
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9 |
Section 4.11. The Treasurer |
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9 |
Section 4.12. Assistant Treasurers |
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10 |
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ARTICLE V |
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CHECKS, DRAFTS, NOTES, AND PROXIES |
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Section 5.01. Checks, Drafts and Notes |
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10 |
Section 5.02. Execution of Proxies |
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10 |
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ARTICLE VI |
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SHARES AND TRANSFERS OF SHARES |
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Section 6.01. Certificates Evidencing Shares |
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10 |
Section 6.02. Stock Ledger |
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10 |
Section 6.03. Transfers of Shares |
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10 |
Section 6.04. Addresses of Stockholders |
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10 |
Section 6.05. Lost, Destroyed and Mutilated Certificates |
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10 |
Section 6.06. Regulations |
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11 |
Section 6.07. Fixing Date for Determination of Stockholders of Record |
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11 |
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ARTICLE VII |
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SEAL |
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Section 7.01. Seal |
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11 |
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ARTICLE VIII |
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FISCAL YEAR |
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Section 8.01. Fiscal Year |
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11 |
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ARTICLE IX |
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FORUM AND VENUE |
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Section 9.01 Forum and Venue |
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11 |
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ARTICLE X |
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AMENDMENTS |
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Section 10.01. Amendments |
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12 |
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ARTICLE XI |
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CERTAIN DEFINITIONS |
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Section 11.01. Certain Definitions |
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12 |
AMENDED AND RESTATED
BYLAWS
OF
KLX INC.
ARTICLE I
OFFICES
Section 1.01. Offices . In addition to its registered office in the State of Delaware, KLX Inc. (the Corporation ) may also have an office or offices at any other place or places within or without the State of Delaware as the Board of Directors of the Corporation (the Board ) may from time to time determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Annual Meetings . The annual meeting of stockholders of the Corporation for the election of directors of the Corporation, and for the transaction of such other business as may properly come before such meeting, shall be held at such place, date and time as shall be fixed by the Board pursuant to the Certificate of Incorporation of the Corporation (the Certificate of Incorporation ) and designated in the notice or waiver of notice of such annual meeting.
Section 2.02. Special Meetings . Special meetings of stockholders for any purpose or purposes may be called by the Board or the Chairman of the Board of the Corporation (the Chairman ) or the Chief Executive Officer of the Corporation (the Chief Executive Officer ), to be held at such place, date and time as shall be designated in the notice or waiver of notice thereof.
Section 2.03. Notice of Meetings . Except as otherwise provided by law, written notice of each annual or special meeting of stockholders stating the place, date and time of such meeting and, in the case of a special meeting, the purpose or purposes for which such meeting is to be held, shall be given personally, by internationally recognized overnight courier service, or by first-class mail (airmail in the case of international communications) to each recordholder of shares entitled to vote thereat, no less than ten (10) nor more than sixty (60) days before the date of such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholders address as it appears in the records of the Corporation. If sent by internationally recognized courier service, such notice shall be deemed to be given when deposited with such courier service, carriage and delivery prepaid, directed to the stockholder at such stockholders address as it appears in the records of the Corporation. If, prior to the time of mailing, the Secretary shall have received from any stockholder a written request that notices intended for such stockholder are to be mailed to some address other than the address that appears in the records of the Corporation, notices intended for such stockholder shall be mailed to the address designated in such request.
Section 2.04. Waiver of Notice . Notice of any annual or special meeting of stockholders need not be given to any stockholder who files a written waiver of notice with the Secretary, signed by the person entitled to notice, whether before or after such meeting. Neither the business to be transacted at, nor the purpose of any meeting of stockholders need be specified in any written waiver of notice thereof. Attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the notice of such meeting was inadequate or improperly given.
Section 2.05. Postponements and Adjournments . Whenever an annual or special meeting of stockholders is postponed to another date, time or place by the Board, notice need not be given of the postponed meeting if a public announcement of such postponement is made prior to the original date of the meeting. Whenever an annual or special meeting of stockholders is adjourned to another date, time or place, notice need not be given of the adjourned meeting if the date, time and place thereof are announced at the meeting at which the adjournment is taken. If the postponement or adjournment is for more than thirty (30) days, or if after the postponement or adjournment a new record date is fixed for the postponed or adjourned meeting, a notice of the postponed or
adjourned meeting shall be given to each stockholder entitled to vote thereat. At any postponed or adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
Section 2.06. Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the recordholders of a majority of the shares entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, whether annual or special. If, however, such quorum shall not be present in person or by proxy at any meeting of stockholders, the chairman of the meeting or the stockholders present and entitled to vote thereat may, by the vote of the recordholders of a majority of the shares held by such present stockholders, adjourn the meeting from time to time in accordance with Section 2.05 hereof until a quorum shall be present in person or by proxy.
Section 2.07. Voting . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question, and the vote of the recordholders of a majority of the shares constituting such quorum shall decide any question brought before such meeting.
Section 2.08. Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such proxy shall be filed with the Secretary before such meeting of stockholders, at such time as the Board may require. No proxy shall be voted or acted upon more than three (3) years from its date, unless the proxy provides for a longer period.
Section 2.09. Nominations and Proposals . (a) At any annual meeting of the stockholders, only such nominations of persons for election to the Board and such other business shall be conducted as shall have been properly brought before the meeting.
(b) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporations notice of meeting.
(c) To be properly brought before an annual meeting of stockholders, nominations or such other business must be: (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board or any committee thereof, (ii) otherwise properly brought before the meeting by or at the direction of the Board or any committee thereof, or (iii) otherwise properly brought before the meeting by a stockholder who is a stockholder of record of the Corporation at the time notice of such meeting is given, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.09. In addition, any proposal of business (other than the nomination of persons for election to the Board) must be a proper matter for stockholder action.
(d) For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder, the stockholder or stockholders of record intending to propose the business (the Proposing Stockholder ) must have given timely and proper notice thereof, in full compliance with this Section 2.09, in writing to the Secretary.
(e) To be timely, a Proposing Stockholders notice of nominations or other business to be brought before an annual meeting must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation:
(i) With regard to notice of nominations or other business proposed to be brought before an annual meeting of stockholders to be held on a day that is not more than thirty (30) days in advance of the anniversary of the previous years annual meeting nor later than seventy (70) days after the anniversary of the previous years annual meeting, not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred and twentieth (120th) day in advance of the anniversary of the previous years annual meeting;
(ii) With regard to notice of nominations or other business proposed to be brought
before any other annual meeting of stockholders, by the close of business on the tenth (10th) day following the public announcement of the date of such meeting.
In no event shall the public announcement of an adjournment or postponement of a meeting of stockholders commence a new notice time period (or extend any notice time period).
(f) To be proper, a Proposing Stockholders notice must include:
(i) as to each person whom the stockholder proposes to nominate for election as a director (A) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act ) and the rules and regulations promulgated thereunder, (B) such persons written consent to being named in the proxy statement as a nominee and to serve as a director if elected, and (C) the information, written representation and agreement required to be delivered pursuant to Section 2.10;
(ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and
(iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(A) the name and address of such stockholder, as they appear on the Corporations books, and of (1) such beneficial owner (if any) and (2) each Associated Person (as defined below) of each such stockholder and such beneficial owner;
(B) the class or series and number of shares of capital stock of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder and/or such beneficial owner, or by any Associated Person thereof;
(C) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing;
(D) a description of any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (each of the foregoing, a Derivative Instrument ), directly or indirectly owned or held beneficially by such stockholder, such beneficial owner, and/or any Associated Person thereof;
(E) a description of any proxy, contract, arrangement, understanding, or
relationship pursuant to which such stockholder and/or such beneficial owner, and any Associated Person thereof, has a right to vote any shares of any security of the Corporation;
(F) a description of any short interest in any security of the Corporation held by such stockholder and/or such beneficial owner, and any Associated Person thereof (for purposes of this Section 2.09(f), a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
(G) a description of any rights to dividends on the shares of the Corporation owned beneficially by such stockholder and/or such beneficial owner, and any Associated Person thereof, that are separated or separable from the underlying shares of the Corporation;
(H) a description of any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership or limited liability company in which such stockholder and/or such beneficial owner, and any Associated Person thereof, is a general partner or manager, or, directly or indirectly, beneficially owns an interest in such general partner or manager;
(I) a description of any performance-related fees (other than an asset-based fee) that such stockholder and/or such beneficial owner, and any Associated Person thereof, is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice;
(J) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
(K) a representation as to whether the stockholder or the beneficial owner, if any, is or will be part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporations outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (2) otherwise to solicit proxies from stockholders in support of such proposal or nomination; and
(L) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.
With regard to the information required by items (B)-(I) of this Section 2.09(f)(iii), such information shall include, without limitation, any such information with regard to any members of such shareholders immediate family sharing the same household. The information required by this Section 2.09(f) shall be supplemented by such shareholder and beneficial owner, if any, not later than ten (10) days after the record date for the meeting to disclose such information as of the record date.
For the purposes of this Section 2.09(f), an Associated Person of any stockholder or
beneficial owner means (1) any affiliate or person acting in concert with such stockholder or beneficial owner in relation to the nomination or proposal, and (2) each director, officer, employee, general partner or manager of such stockholder or beneficial owner or any such affiliate or person with which such stockholder or beneficial owner is acting in concert in relation to the nomination or proposal.
(g) The foregoing notice requirements of Section 2.09(f) shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with the applicable rules and regulations promulgated under Section 14(a) of the Exchange Act and such stockholders proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.
(h) In addition to the information required by the provisions of this Section 2.09, and the information, written representation and agreement required to be delivered pursuant to Section 2.10, the Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
(i) Notwithstanding anything in these Bylaws to the contrary: (i) no nominations shall be made and no business shall be conducted at any meeting of stockholders except in accordance with the procedures set forth in this Section 2.09, and (ii) unless otherwise required by law, if the Proposing Stockholder does not provide the information required under this Section 2.09 to the Corporation (or any such information provided should be found to be materially inaccurate), or the Proposing Stockholder (or a qualified representative of the Proposing Stockholder) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation. For purposes of this Section 2.09, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(j) Except as otherwise provided by law, the chairman of any meeting of stockholders shall have the power and duty (i) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.09 and (ii) if any proposed nomination or business was not made or proposed in compliance with this Section 2.09, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted.
(k) Notwithstanding the foregoing provisions of this Section 2.09, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.09; provided , however , that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.09, and compliance with the provisions of this Section 2.09 shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 2.09 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (ii) of the holders of any series of preferred stock to elect directors as provided for or fixed pursuant to any applicable provision of the Certificate of Incorporation.
Section 2.10. Submission of Questionnaire, Representation and Agreement . To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under the applicable sections of Section 2.09 above) to the Secretary at the principal executive offices of the Corporation a written and signed questionnaire (in the form customarily used by the Corporation for its directors) with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall
be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person:
(a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a Voting Commitment ), except as has been disclosed to the Board, or (ii) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law;
(b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation, except as has been disclosed to the Board;
(c) is not and will not become a party to any agreement, arrangement or understanding with any person or entity with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of any public company (other than the Corporation), except as has been disclosed to the Board;
(d) in such persons individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation;
(e) is not and will not serve as a director on the boards of more than two (2) other public companies, unless the Board has determined in advance that such simultaneous service will not impair his ability to effectively serve on the Board; and
(f) will promptly tender his resignation to the Board in the event that, at any time he or she is serving as a director of the Corporation, (i) any of the above representations are found by the Board to have been false at the time such representation was made, or (ii) any of the above representations are found by the Board to have become false thereafter.
ARTICLE III
BOARD
Section 3.01. General . The business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done by stockholders. Directors need not be stockholders of the Corporation.
Section 3.02. Number . The total number of directors shall be not less than three (3) nor more than nine (9), as such shall be fixed within these limits from time to time by the Board.
Section 3.03. Resignation . Any director may resign at any time by delivering his written resignation to the Board, the Chairman or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chairman or the Secretary, as the case may be.
Section 3.04. Meetings . (a) Annual Meetings . As soon as practicable after each annual election of directors by the stockholders, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 3.06 hereof.
(b) Other Meetings . Other meetings of the Board shall be held at such times as the Chairman, the Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings . The Secretary shall give written notice to each director of each meeting of the Board, which notice shall state the place, date, time and purpose of such meeting. Notice of each such meeting shall be given to each director, if by mail, addressed to him at his residence or usual place of business, at least three (3) days before the day on which such meeting is to be held, or shall be sent to him at such place by telecopy, facsimile, electronic mail or other form of recorded communication, or be delivered personally or by an internationally recognized courier service or by telephone not later than the day before the day on which such meeting is to be held. A written waiver of notice, signed by the director entitled to notice, whether before or after the time of the meeting referred to in such waiver, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of any meeting of the Board need be specified in any written waiver of notice thereof. Attendance of a director at a meeting of the Board shall constitute a waiver of notice of such meeting, except as provided by law.
(d) Place of Meetings . The Board may hold its meetings at such place or places within or without the State of Delaware as the Board or the Chairman may from time to time determine, or as shall be designated in the respective notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting . One-third of the total number of directors then in office shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law, the Certificate of Incorporation or these Bylaws. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present.
(f) Organization . At each meeting of the Board, one of the following shall act as chairman of the meeting and preside, in the following order of precedence:
(1) the Chairman;
(2) the Chief Executive Officer;
(3) any director chosen by a majority of the directors present.
The Secretary or, in the case of the Secretarys absence, any person (who shall be an Assistant Secretary (as defined below), if an Assistant Secretary is present) whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof.
Section 3.05. Committees of the Board . The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more directors. The Board 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 thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member; provided , however , that any director so appointed must be found by such committee to meet the qualifications, if any, for service on such committee, including any requirement of independence. Any committee of the Board, to the extent provided in the resolution of the Board designating such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided , however , that no such committee shall have such power or authority in reference to amending the Certificate of Incorporation (except that such a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board as provided in Section 151(a) of the General Corporation Law of the State of Delaware (the General Corporation Law ), fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation under Sections 251, 252, 254, 255, 256, 257, 258, 263 or 264 of the General Corporation Law, recommending to the
stockholders the sale, lease or exchange of all or substantially all the Corporations property and assets, recommending to the stockholders a dissolution of the Corporation or the revocation of a dissolution, or amending these Bylaws; provided further , however , that, unless expressly so provided in the resolution of the Board designating such committee, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law. Each committee of the Board shall keep regular minutes of its proceedings and report the same to the Board when so requested by the Board.
Section 3.06. Directors Consent in Lieu of Meeting . Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, without prior notice and without a vote, if a consent in writing or by electronic transmission, setting forth the action so taken, shall be signed by all the members of the Board or such committee and such consent or electronic transmission is filed with the minutes of the proceedings of the Board or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 3.07. Action by Means of Telephone or Similar Communications Equipment . Any one or more members of the Board, or of any committee thereof, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.
Section 3.08. Compensation . Unless otherwise restricted by the Certificate of Incorporation, the Board may determine the compensation of directors. In addition, as determined by the Board, directors may be reimbursed by the Corporation for their expenses, if any, in the performance of their duties as directors. No such compensation or reimbursement shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
Section 4.01. Officers . The officers of the Corporation shall be the Chairman, the Chief Executive Officer, the President, the Secretary and the Treasurer. Officers of the Corporation may include one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers (each as defined below) and such other officers as the Board may establish. Any two or more offices may be held by the same person.
Section 4.02. Authority and Duties . All officers shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws or, to the extent not so provided, by resolution of the Board.
Section 4.03. Term of Office, Resignation and Removal . (a) Each officer shall be appointed by the Board and shall hold office for such term as may be determined by the Board. Each officer shall hold office until such officers successor has been appointed and qualified or such officers earlier death or resignation or removal in the manner hereinafter provided. The Board may require any officer to give security for the faithful performance of such officers duties.
(b) Any officer may resign at any time by giving written notice to the Board, the Chairman, the Chief Executive Officer or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chairman, the Chief Executive Officer or the Secretary, as the case may be.
(c) All officers and agents appointed by the Board shall be subject to removal, with or without cause, at any time by the Board.
Section 4.04. Vacancies . Any vacancy occurring in any office of the Corporation, for any reason, shall be filled by action of the Board. Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed
by the Board to fill any such vacancy shall serve only until such time as the unexpired term of such officers predecessor expires unless reappointed by the Board.
Section 4.05. The Chairman . The Chairman shall have the power to call special meetings of stockholders, to call special meetings of the Board and, if present, to preside at all meetings of stockholders and all meetings of the Board. The Chairman shall perform all duties incident to the office of Chairman of the Board and all such other duties as may from time to time be assigned to the Chairman by the Board or these Bylaws.
Section 4.06. The Chief Executive Officer . The Chief Executive Officer shall have general and active management and control of the business and affairs of the Corporation, subject to the control of the Board, and shall see that all orders and resolutions of the Board are carried into effect. The Chief Executive Officer shall perform all duties incident to the office of the Chief Executive Officer and all such other duties as may from time to time be assigned to the Chief Executive Officer by the Board or these Bylaws.
Section 4.07. The President . The President, subject to the authority of the Chief Executive Officer, shall have primary responsibility for, and authority with respect to, the management of the day-to-day business affairs of the Corporation, to the extent prescribed by the Chief Executive Officer. The President shall perform all duties incident to the office of President and all such other duties as may from time to time be assigned to the President by the Board, the Chief Executive Officer or these Bylaws.
Section 4.08. Vice Presidents . Vice Presidents of the Corporation ( Vice Presidents ), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the President and perform such other duties as the Board, the Chief Executive Officer or the President shall prescribe, and in the absence or disability of the President, shall perform the duties and exercise the powers of the President.
Section 4.09. The Secretary . The Secretary of the Corporation ( Secretary ) shall, to the extent practicable, attend all meetings of the Board and all meetings of stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform the same duties for any committee of the Board when so requested by such committee. The Secretary shall give or cause to be given notice of all meetings of stockholders and of the Board, shall perform such other duties as may be prescribed by the Board, the Chairman and the Chief Executive Officer, and shall act under the supervision of the Chairman. The Secretary shall keep in safe custody the seal of the Corporation and affix the same to any instrument that requires that the seal be affixed to it and which shall have been duly authorized for signature in the name of the Corporation and, when so affixed, the seal shall be attested by the Secretarys signature or by the signature of the Treasurer of the Corporation (the Treasurer ) or an Assistant Secretary or Assistant Treasurer of the Corporation. The Secretary shall keep in safe custody the certificate books and stockholder records and such other books and records of the Corporation as the Board, the Chairman, or the Chief Executive Officer may direct and shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Board, the Chairman, or the Chief Executive Officer.
Section 4.10. Assistant Secretaries . Assistant Secretaries of the Corporation ( Assistant Secretaries ), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Secretary and perform such other duties as the Board or the Secretary shall prescribe, and, in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary.
Section 4.11. The Treasurer . The Treasurer shall have the care and custody of all the funds of the Corporation and shall deposit such funds in such banks or other depositories as the Board, or any officer or officers, or any officer and agent jointly, duly authorized by the Board, shall, from time to time, direct or approve. The Treasurer shall disburse the funds of the Corporation under the direction of the Board and the Chief Executive Officer. The Treasurer shall keep a full and accurate account of all moneys received and paid on account of the Corporation and shall render a statement of the Treasurers accounts whenever the Board, the Chairman, or the Chief Executive Officer shall so request. The Treasurer shall perform all other necessary actions and duties in connection with the administration of the financial affairs of the Corporation and shall generally perform all the duties usually appertaining to the office of treasurer of a corporation. When required by the Board, the Treasurer shall give bonds for the faithful discharge of the Treasurers duties in such sums and with such sureties as the Board shall approve.
Section 4.12. Assistant Treasurers . Assistant Treasurers of the Corporation ( Assistant Treasurers ), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Treasurer and perform such other duties as the Board or the Treasurer shall prescribe, and, in the absence or disability of the Treasurer, shall perform the duties and exercise the powers of the Treasurer.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
Section 5.01. Checks, Drafts and Notes . All checks, drafts and other orders for the payment of money, notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall be determined, from time to time, by resolution of the Board.
Section 5.02. Execution of Proxies . The Chairman, the Chief Executive Officer, the President or any Vice President may authorize, from time to time, the execution and issuance of proxies to vote shares of stock or other securities of other corporations held of record by the Corporation and the execution of consents to action taken or to be taken by any such corporation. All such proxies and consents, unless otherwise authorized by the Board, shall be signed in the name of the Corporation by the Chairman, the Chief Executive Officer, the President or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
Section 6.01. Certificates Evidencing Shares . Shares may be evidenced by certificates in such form or forms as shall be approved by the Board. Certificates shall be issued in consecutive order and shall be numbered in the order of their issue, and shall be signed by the Chairman, the President or any Vice President and by the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. If such a certificate is manually signed by one such officer, any other signature on the certificate may be a facsimile. In the event any such officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to hold such office or to be employed by the Corporation before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such officer had held such office on the date of issue.
Section 6.02. Stock Ledger . A stock ledger in one or more counterparts shall be kept by the Secretary, in which shall be recorded the name and address of each person, corporation or other entity owning the shares evidenced by each certificate evidencing shares issued by the Corporation, the number of shares evidenced by each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name shares stand on the stock ledger of the Corporation shall be deemed the owner and recordholder of such shares for all purposes.
Section 6.03. Transfers of Shares . Registration of transfers of shares shall be made only in the stock ledger of the Corporation upon request of the registered holder of such shares, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, and upon the surrender of the certificate or certificates evidencing such shares properly endorsed or accompanied by a stock power duly executed, together with such proof of the authenticity of signatures as the Corporation may reasonably require.
Section 6.04. Addresses of Stockholders . Each stockholder shall designate to the Secretary an address at which notices of meetings and all other corporate notices may be served or mailed to such stockholder, and, if any stockholder shall fail to so designate such an address, corporate notices may be served upon such stockholder by mail directed to the mailing address, if any, as the same appears in the stock ledger of the Corporation or at the last known mailing address of such stockholder.
Section 6.05. Lost, Destroyed and Mutilated Certificates . Each recordholder of shares shall promptly notify the Corporation of any loss, destruction or mutilation of any certificate or certificates evidencing any share or shares of which such recordholder is the recordholder. The Board may, in its discretion, cause the Corporation to issue a new certificate in place of any certificate theretofore issued by it and alleged to have been
mutilated, lost, stolen or destroyed, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction, and the Board may, in its discretion, require the recordholder of the shares evidenced by the lost, stolen or destroyed certificate or such recordholders legal representative to give the Corporation a bond sufficient to indemnify the Corporation against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 6.06. Regulations . The Board may make such other rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates evidencing shares.
Section 6.07. Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to, or to dissent from, corporate action in writing without a meeting, 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 may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action. A determination of the stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any postponement or adjournment of such meeting; provided , however , that the Board may fix a new record date for the postponed or adjourned meeting.
ARTICLE VII
SEAL
Section 7.01. Seal . The Board may approve and adopt a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation, the year of its incorporation and the words Corporate Seal Delaware.
ARTICLE VIII
FISCAL YEAR
Section 8.01. Fiscal Year . The fiscal year of the Corporation shall end on the thirty-first day of December of each year unless changed by resolution of the Board.
ARTICLE IX
FORUM AND VENUE
Section 9.01. Forum and Venue . Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District 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 for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporations stockholders, or (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation or the bylaws of the Corporation, or (iv) any action asserting a claim governed by the internal affairs doctrine; in each case subject to said court having personal jurisdiction over the indispensable parties named as defendants therein. If any action the subject matter of which is within the scope of this Section 9.01 is filed in a court other than a court located within the State of Delaware (a Foreign Action ) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce this Section 9.01 (an Enforcement Action ), and (y) having service of process made upon such stockholder in any such Enforcement Action by service upon such stockholders counsel in the Foreign Action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 9.01.
ARTICLE X
AMENDMENTS
Section 10.01. Amendments . No Bylaw (including these Bylaws) may be altered, amended or repealed except by the requisite vote of the Board or the stockholders pursuant to the Certificate of Incorporation.
ARTICLE XI
CERTAIN DEFINITIONS
Section 11.01. Certain Definitions . As used in these Bylaws, the following terms shall have the meanings indicated in this Section 11.01:
(a) Public announcement shall mean an announcement: (i) made by a press release posted on the Corporations website or reported by the Dow Jones News Service, Associated Press or other national news service, or (ii) in a document publicly filed by the Corporation with the Securities and Exchange Commission;
(b) Business day shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close.
(c) Close of business on any given date shall mean 5:00 p.m., New York City time on such date, or, if such date is not a business day, 5:00 p.m. New York City time on the next succeeding business day.
EXECUTION COPY
TRANSACTION BONUS AND NONCOMPETITION
AGREEMENT
This Transaction Bonus and Noncompetition Agreement (this Agreement ), dated as of the 30th day of April, 2018, is by and between KLX Inc., a Delaware corporation (the Company ), and Amin J. Khoury (the Executive ).
WHEREAS, the Executive is employed as the Companys Chairman of the Board of Directors and Chief Executive Officer pursuant to the terms and conditions of that certain Amended and Restated Employment Agreement, dated as of May 25, 2017 (the Employment Agreement ); and
WHEREAS, in an effort to (i) reward the Executive for his efforts towards the success of the Company and the return to shareholders, (ii) incentivize the Executive to facilitate the successful and satisfactory consummation of the transactions contemplated under that certain Agreement and Plan of Merger, by and among the Company, The Boeing Company and Kelly Merger Sub, Inc., dated as of April 30, 2018 (the Transaction ), and (iii) retain the Executives services as the Companys Chairman of the Board of Directors and Chief Executive Officer through the consummation of the Transaction, the Company wishes to enter into this Agreement and provide for the compensation specified herein to be paid to the Executive in connection with the consummation of the Transaction, subject to all of the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree to the following:
1. Transaction Bonus .
a) Transaction Bonus . Subject to the conditions set forth in this Agreement, upon the consummation of the Transaction, the Executive shall receive a lump sum cash payment in an amount equal to $20,720,000 (the Transaction Bonus ).
b) Tax Withholding . Payment of the Transaction Bonus hereunder shall be subject to all applicable income and employment taxes and any other amounts that the Company is required by any applicable law to deduct and withhold therefrom.
c) Other Benefits . The Transaction Bonus is a special incentive payment to the Executive and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.
d) Conditions .
i) Continued Employment . Unless directed otherwise by the Company in writing, the Executive shall continue to perform the Executives regular and customary duties and responsibilities to the Company and its affiliates through the date of consummation of the Transaction. In the event of the Executives termination of employment prior to the
consummation of the Transaction, the Executive shall forfeit the Executives right to receive the Transaction Bonus hereunder. Notwithstanding the foregoing, if the Executives employment is terminated prior to the consummation of the Transaction by the Company for any reason other than for Cause, by the Executive for Good Reason, or due to the Executives death or Incapacity (in each case, as such term is defined in the Employment Agreement), the Executive shall be entitled to receive the Transaction Bonus, subject to Section 1(d)(ii) of this Agreement.
ii) Consummation of Transaction . In the event that the Transaction is abandoned or is otherwise not consummated for any reason on or prior to December 31, 2019, this Agreement and the Executives rights and obligations hereunder, including, without limitation, the Executives obligations under Section 2(a) of this Agreement, shall be null and void and without any further legal force or effect whatsoever.
e) Code Section 280G . The Executive and the Company each agree that the Accounting Firm (within the meaning of Section 6.6.7 of the Employment Agreement), for purposes of making all calculations and determinations with respect to Sections 280G and 4999 of the United States Internal Revenue Code of 1986, as amended, will be made by Golden Parachute Tax Solutions, LLC, or such other independent public accountant as may be selected by the Executive in the Executives sole discretion, whose determination will be conclusive and binding for all purposes upon the Executive and the Company.
2. Noncompetition .
a) Noncompetition . In consideration of the benefits hereunder, each of the Company and the Executive acknowledges and agrees that the following covenant in this Section 2(a) supersedes in its entirety and replaces Section 5.4 of the Employment Agreement. The Executive agrees that during the Executives employment with the Company and for a period of three (3) years thereafter in the event that the Executives employment is terminated in accordance with Section 6.4.2 of the Employment Agreement, the Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Companys operations and services as of the date of the Executives termination of employment, without the Companys written consent, which consent shall not be unreasonably withheld; provided , however , that nothing in this Section 2(a) shall preclude the Executive from serving as a director of any corporation or a partner or investor in a private equity firm.
b) Reformation . If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.
c) Equitable Relief and Other Remedies . The Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of this Section 2 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or
other security. In the event of a material violation by the Executive of this Section 2 , in addition to any remedies which may then be available under applicable law or any agreement between the Executive and the Company, any then outstanding equity awards granted to the Executive under any equity compensation plan of the Company or otherwise, whether vested or unvested, shall be subject to immediate forfeiture and cancellation by the Company without any consideration being paid therefor.
3. Impact of Termination of Employment . Upon the Executives termination of employment pursuant to Section 6.4.2 of the Employment Agreement, in addition to the payments described in Section 6.4.2 of the Employment Agreement, the Company shall provide the Executive with Company-paid customary and market outplacement services for a period of twelve (12) months or until the Executive obtains substantially comparable employment, whichever is shorter.
4. General .
a) Survival of Provisions . The obligations contained in this Agreement shall survive the termination of the Executives employment with the Company and shall be fully enforceable thereafter.
b) No Right to Continued Employment . Nothing in this Agreement shall confer upon the Executive any right to continued employment with the Company or its affiliates or to interfere in any way with the right of the Company or its affiliates to terminate the Executives employment at any time.
c) Code Section 409A Compliance . Although the Company does not guarantee the tax treatment of any payment hereunder, the intent of the parties is that payments under this Agreement be exempt from, or comply with, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in a manner consistent therewith.
d) Governing Law; Jurisdiction . This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Florida, without giving effect to the choice of law principles thereof. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Florida or the United States District Court for the Southern District of Florida and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or the Executives employment by the Company or any affiliate, or for the recognition and enforcement of any judgment in respect thereof (a Proceeding ), to the exclusive jurisdiction of the courts of the State of Florida, the court of the United States of America for the Southern District of Florida, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Florida State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE EXECUTIVES EMPLOYMENT BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, OR THE EXECUTIVES OR THE COMPANYS PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Florida. Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder.
e) Severability . In the event that any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision never existed.
f) Non-Assignment; Successors . This Agreement is personal to each of the parties hereto. Except as provided in this Section 4(f) , no party may assign or delegate any rights or obligations hereunder without first obtaining the advanced written consent of the other parties hereto. Any purported assignment or delegation by the Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. The Company may assign this Agreement to a person or entity that is an affiliate of the Company or to any successor to all or substantially all of the business and/or assets of the Company, which assumes in writing, or by operation of law, the obligations of the Company hereunder.
g) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
h) No Obligation; Company Discretion . No provision of this Agreement shall be interpreted to impose an obligation on the Company to accept, agree to or otherwise consummate the Transaction. The decision to consummate the Transaction, and all terms and conditions of such transaction, including the amount, timing and form of consideration to be provided in connection therewith, shall be within the sole and absolute discretion of the Company.
i) Entire Agreement; Amendment . Except as specifically contemplated herein, this Agreement constitutes the entire agreement by the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof, whether written or oral. Notwithstanding the foregoing, except to the extent specifically contemplated herein, nothing herein is intended to supersede any employment agreement, or any incentive, equity, compensation or benefit arrangement between the Executive and the Company; provided , however , that to the extent that there is any conflict between any such agreement or arrangement and this Agreement, the terms of this Agreement shall control. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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/s/ Amin J. Khoury |
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Amin J. Khoury |
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KLX INC. |
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Roger Franks |
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General Counsel |
Transaction Bonus Agreement Signature Page
EXECUTION COPY
TRANSACTION BONUS AND NONCOMPETITION
AGREEMENT
This Transaction Bonus and Noncompetition Agreement (this Agreement ), dated as of the 30th day of April, 2018, is by and between KLX Inc., a Delaware corporation (the Company ), and Thomas P. McCaffrey (the Executive ).
WHEREAS, the Executive is employed as the Companys President and Chief Operating Officer pursuant to the terms and conditions of that certain Amended and Restated Employment Agreement, dated as of February 27, 2015 (the Employment Agreement ); and
WHEREAS, in an effort to (i) reward the Executive for his efforts towards the success of the Company and the return to shareholders, (ii) incentivize the Executive to facilitate the successful and satisfactory consummation of the transactions contemplated under that certain Agreement and Plan of Merger, by and among the Company, The Boeing Company and Kelly Merger Sub, Inc., dated as of April 30, 2018 (the Transaction ), and (iii) retain the Executives services as the Companys President and Chief Operating Officer through the consummation of the Transaction, the Company wishes to enter into this Agreement and provide for the compensation specified herein to be paid to the Executive in connection with the consummation of the Transaction, subject to all of the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree to the following:
1. Transaction Bonus .
a) Transaction Bonus . Subject to the conditions set forth in this Agreement, upon the consummation of the Transaction, the Executive shall receive a lump sum cash payment in an amount equal to $9,620,000 (the Transaction Bonus ).
b) Tax Withholding . Payment of the Transaction Bonus hereunder shall be subject to all applicable income and employment taxes and any other amounts that the Company is required by any applicable law to deduct and withhold therefrom.
c) Other Benefits . The Transaction Bonus is a special incentive payment to the Executive and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.
d) Conditions .
i) Continued Employment . Unless directed otherwise by the Company in writing, the Executive shall continue to perform the Executives regular and customary duties and responsibilities to the Company and its affiliates through the date of consummation of the Transaction. In the event of the Executives termination of employment prior to the consummation of the Transaction, the Executive shall forfeit the Executives right to
receive the Transaction Bonus hereunder. Notwithstanding the foregoing, if the Executives employment is terminated prior to the consummation of the Transaction by the Company for any reason other than for Cause, by the Executive for Good Reason, or due to the Executives death or Incapacity (in each case, as such term is defined in the Employment Agreement), the Executive shall be entitled to receive the Transaction Bonus, subject to Section 1(d)(ii) of this Agreement.
ii) Consummation of Transaction . In the event that the Transaction is abandoned or is otherwise not consummated for any reason on or prior to December 31, 2019, this Agreement and the Executives rights and obligations hereunder, including, without limitation, the Executives obligations under Section 2(a) of this Agreement, shall be null and void and without any further legal force or effect whatsoever.
e) Code Section 280G . The Executive and the Company each agree that the Accounting Firm (within the meaning of Section 4(f)(vi)(A) of the Employment Agreement), for purposes of making all calculations and determinations with respect to Sections 280G and 4999 of the United States Internal Revenue Code of 1986, as amended, will be made by Golden Parachute Tax Solutions, LLC, or such other independent public accountant as may be selected by the Executive in the Executives sole discretion, whose determination will be conclusive and binding for all purposes upon the Executive and the Company.
2. Noncompetition .
a) Noncompetition . In consideration of the benefits hereunder, the Executive agrees that during the Executives employment with the Company and for a period of three (3) years thereafter in the event that the Executives employment is terminated in accordance with Section 4(e) of the Employment Agreement, the Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Companys operations and services as of the date of the Executives termination of employment, without the Companys written consent, which consent shall not be unreasonably withheld; provided , however , that nothing in this Section 2(a) shall preclude the Executive from serving as a director of any corporation or a partner or investor in a private equity firm.
b) Reformation . If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.
c) Equitable Relief and Other Remedies . The Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of this Section 2 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security. In the event of a material violation by the Executive of this Section 2 , in addition to any remedies which may then be available under applicable law or any agreement between the
Executive and the Company, any then outstanding equity awards granted to the Executive under any equity compensation plan of the Company or otherwise, whether vested or unvested, shall be subject to immediate forfeiture and cancellation by the Company without any consideration being paid therefor.
3. Impact of Termination of Employment . Upon the Executives termination of employment pursuant to Section 4(e) of the Employment Agreement, in addition to the payments described in Section 4(e) of the Employment Agreement, the Company shall provide the Executive with Company-paid customary and market outplacement services for a period of twelve (12) months or until the Executive obtains substantially comparable employment, whichever is shorter.
4. General .
a) Survival of Provisions . The obligations contained in this Agreement shall survive the termination of the Executives employment with the Company and shall be fully enforceable thereafter.
b) No Right to Continued Employment . Nothing in this Agreement shall confer upon the Executive any right to continued employment with the Company or its affiliates or to interfere in any way with the right of the Company or its affiliates to terminate the Executives employment at any time.
c) Code Section 409A Compliance . Although the Company does not guarantee the tax treatment of any payment hereunder, the intent of the parties is that payments under this Agreement be exempt from, or comply with, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in a manner consistent therewith.
d) Governing Law; Jurisdiction . This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Florida, without giving effect to the choice of law principles thereof. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Florida or the United States District Court for the Southern District of Florida and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or the Executives employment by the Company or any affiliate, or for the recognition and enforcement of any judgment in respect thereof (a Proceeding ), to the exclusive jurisdiction of the courts of the State of Florida, the court of the United States of America for the Southern District of Florida, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Florida State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE EXECUTIVES EMPLOYMENT
BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, OR THE EXECUTIVES OR THE COMPANYS PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Florida. Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder.
e) Severability . In the event that any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision never existed.
f) Non-Assignment; Successors . This Agreement is personal to each of the parties hereto. Except as provided in this Section 4(f) , no party may assign or delegate any rights or obligations hereunder without first obtaining the advanced written consent of the other parties hereto. Any purported assignment or delegation by the Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. The Company may assign this Agreement to a person or entity that is an affiliate of the Company or to any successor to all or substantially all of the business and/or assets of the Company, which assumes in writing, or by operation of law, the obligations of the Company hereunder.
g) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
h) No Obligation; Company Discretion . No provision of this Agreement shall be interpreted to impose an obligation on the Company to accept, agree to or otherwise consummate the Transaction. The decision to consummate the Transaction, and all terms and conditions of such transaction, including the amount, timing and form of consideration to be provided in connection therewith, shall be within the sole and absolute discretion of the Company.
i) Entire Agreement; Amendment . Except as specifically contemplated herein, this Agreement constitutes the entire agreement by the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof, whether written or oral. Notwithstanding the foregoing, except to the extent specifically contemplated herein, nothing herein is intended to supersede any employment agreement, or any incentive, equity, compensation or benefit arrangement between the Executive and the Company; provided , however , that to the extent that there is any conflict between any such agreement or arrangement and this Agreement, the terms of this Agreement shall control. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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/s/ Thomas P. McCaffrey |
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Thomas P. McCaffrey |
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KLX INC. |
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/s/ Roger Franks |
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Roger Franks |
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Title: |
General Counsel |
Transaction Bonus Agreement Signature Page
EXECUTION COPY
TRANSACTION BONUS AND NONCOMPETITION
AGREEMENT
This Transaction Bonus and Noncompetition Agreement (this Agreement ), dated as of the 30th day of April, 2018, is by and between KLX Inc., a Delaware corporation (the Company ), and Michael F. Senft (the Executive ).
WHEREAS, the Executive is employed as the Companys Vice President, Chief Financial Officer and Treasurer pursuant to the terms and conditions of that certain Amended and Restated Employment Agreement, dated as of February 27, 2015 (the Employment Agreement ); and
WHEREAS, in an effort to (i) reward the Executive for his efforts towards the success of the Company and the return to shareholders, (ii) incentivize the Executive to facilitate the successful and satisfactory consummation of the transactions contemplated under that certain Agreement and Plan of Merger, by and among the Company, The Boeing Company and Kelly Merger Sub, Inc., dated as of April 30, 2018 (the Transaction ), and (iii) retain the Executives services as the Companys Vice President, Chief Financial Officer and Treasurer through the consummation of the Transaction, the Company wishes to enter into this Agreement and provide for the compensation specified herein to be paid to the Executive in connection with the consummation of the Transaction, subject to all of the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree to the following:
1. Transaction Bonus .
a) Transaction Bonus . Subject to the conditions set forth in this Agreement, upon the consummation of the Transaction, the Executive shall receive a lump sum cash payment in an amount equal to $3,330,000 (the Transaction Bonus ).
b) Tax Withholding . Payment of the Transaction Bonus hereunder shall be subject to all applicable income and employment taxes and any other amounts that the Company is required by any applicable law to deduct and withhold therefrom.
c) Other Benefits . The Transaction Bonus is a special incentive payment to the Executive and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.
d) Conditions .
i) Continued Employment . Unless directed otherwise by the Company in writing, the Executive shall continue to perform the Executives regular and customary duties and responsibilities to the Company and its affiliates through the date of consummation of the Transaction. In the event of the Executives termination of employment prior to the
consummation of the Transaction, the Executive shall forfeit the Executives right to receive the Transaction Bonus hereunder. Notwithstanding the foregoing, if the Executives employment is terminated prior to the consummation of the Transaction by the Company for any reason other than for Cause, by the Executive for Good Reason, or due to the Executives death or Incapacity (in each case, as such term is defined in the Employment Agreement), the Executive shall be entitled to receive the Transaction Bonus, subject to Section 1(d)(ii) of this Agreement.
ii) Consummation of Transaction . In the event that the Transaction is abandoned or is otherwise not consummated for any reason on or prior to December 31, 2019, this Agreement and the Executives rights and obligations hereunder, including, without limitation, the Executives obligations under Section 2(a) of this Agreement, shall be null and void and without any further legal force or effect whatsoever.
e) Code Section 280G . The Executive and the Company each agree that the Accounting Firm (within the meaning of Section 4(f)(vi)(A) of the Employment Agreement), for purposes of making all calculations and determinations with respect to Sections 280G and 4999 of the United States Internal Revenue Code of 1986, as amended, will be made by Golden Parachute Tax Solutions, LLC, or such other independent public accountant as may be selected by the Executive in the Executives sole discretion, whose determination will be conclusive and binding for all purposes upon the Executive and the Company.
2. Noncompetition .
a) Noncompetition . In consideration of the benefits hereunder, the Executive agrees that during the Executives employment with the Company and for a period of three (3) years thereafter in the event that the Executives employment is terminated in accordance with Section 4(e) of the Employment Agreement, the Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Companys operations and services as of the date of the Executives termination of employment, without the Companys written consent, which consent shall not be unreasonably withheld; provided , however , that nothing in this Section 2(a) shall preclude the Executive from serving as a director of any corporation or a partner or investor in a private equity firm.
b) Reformation . If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.
c) Equitable Relief and Other Remedies . The Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of this Section 2 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security. In the event of a material violation by the Executive of this Section 2 , in addition to any remedies which may then be available under applicable law or any agreement between the
Executive and the Company, any then outstanding equity awards granted to the Executive under any equity compensation plan of the Company or otherwise, whether vested or unvested, shall be subject to immediate forfeiture and cancellation by the Company without any consideration being paid therefor.
3. Impact of Termination of Employment . Upon the Executives termination of employment pursuant to Section 4(e) of the Employment Agreement, in addition to the payments described in Section 4(e) of the Employment Agreement, the Company shall provide the Executive with Company-paid customary and market outplacement services for a period of twelve (12) months or until the Executive obtains substantially comparable employment, whichever is shorter.
4. General .
a) Survival of Provisions . The obligations contained in this Agreement shall survive the termination of the Executives employment with the Company and shall be fully enforceable thereafter.
b) No Right to Continued Employment . Nothing in this Agreement shall confer upon the Executive any right to continued employment with the Company or its affiliates or to interfere in any way with the right of the Company or its affiliates to terminate the Executives employment at any time.
c) Code Section 409A Compliance . Although the Company does not guarantee the tax treatment of any payment hereunder, the intent of the parties is that payments under this Agreement be exempt from, or comply with, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in a manner consistent therewith.
d) Governing Law; Jurisdiction . This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Florida, without giving effect to the choice of law principles thereof. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Florida or the United States District Court for the Southern District of Florida and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or the Executives employment by the Company or any affiliate, or for the recognition and enforcement of any judgment in respect thereof (a Proceeding ), to the exclusive jurisdiction of the courts of the State of Florida, the court of the United States of America for the Southern District of Florida, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Florida State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE EXECUTIVES EMPLOYMENT
BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, OR THE EXECUTIVES OR THE COMPANYS PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Florida. Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder.
e) Severability . In the event that any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision never existed.
f) Non-Assignment; Successors . This Agreement is personal to each of the parties hereto. Except as provided in this Section 4(f) , no party may assign or delegate any rights or obligations hereunder without first obtaining the advanced written consent of the other parties hereto. Any purported assignment or delegation by the Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. The Company may assign this Agreement to a person or entity that is an affiliate of the Company or to any successor to all or substantially all of the business and/or assets of the Company, which assumes in writing, or by operation of law, the obligations of the Company hereunder.
g) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
h) No Obligation; Company Discretion . No provision of this Agreement shall be interpreted to impose an obligation on the Company to accept, agree to or otherwise consummate the Transaction. The decision to consummate the Transaction, and all terms and conditions of such transaction, including the amount, timing and form of consideration to be provided in connection therewith, shall be within the sole and absolute discretion of the Company.
i) Entire Agreement; Amendment . Except as specifically contemplated herein, this Agreement constitutes the entire agreement by the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof, whether written or oral. Notwithstanding the foregoing, except to the extent specifically contemplated herein, nothing herein is intended to supersede any employment agreement, or any incentive, equity, compensation or benefit arrangement between the Executive and the Company; provided , however , that to the extent that there is any conflict between any such agreement or arrangement and this Agreement, the terms of this Agreement shall control. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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/s/ Michael F. Senft |
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Michael F. Senft |
Transaction Bonus Agreement Signature Page
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KLX INC. |
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/s/ Roger Franks |
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Roger Franks |
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General Counsel |
Transaction Bonus Agreement Signature Page
EXECUTION COPY
TRANSACTION BONUS AND NONCOMPETITION
AGREEMENT
This Transaction Bonus and Noncompetition Agreement (this Agreement ), dated as of the 30th day of April, 2018, is by and between KLX Inc., a Delaware corporation (the Company ), and Roger M. Franks (the Executive ).
WHEREAS, the Executive is employed as the Companys General Counsel, Vice President Law and Human Resources pursuant to the terms and conditions of that certain Amended and Restated Employment Agreement, dated as of December 22, 2015 (the Employment Agreement ); and
WHEREAS, in an effort to (i) reward the Executive for his efforts towards the success of the Company and the return to shareholders, (ii) incentivize the Executive to facilitate the successful and satisfactory consummation of the transactions contemplated under that certain Agreement and Plan of Merger, by and among the Company, The Boeing Company and Kelly Merger Sub, Inc., dated as of April 30, 2018 (the Transaction ), and (iii) retain the Executives services as the Companys General Counsel, Vice President Law and Human Resources through the consummation of the Transaction, the Company wishes to enter into this Agreement and provide for the compensation specified herein to be paid to the Executive in connection with the consummation of the Transaction, subject to all of the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree to the following:
1. Transaction Bonus .
a) Transaction Bonus . Subject to the conditions set forth in this Agreement, upon the consummation of the Transaction, the Executive shall receive a lump sum cash payment in an amount equal to $3,330,000 (the Transaction Bonus ).
b) Tax Withholding . Payment of the Transaction Bonus hereunder shall be subject to all applicable income and employment taxes and any other amounts that the Company is required by any applicable law to deduct and withhold therefrom.
c) Other Benefits . The Transaction Bonus is a special incentive payment to the Executive and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.
d) Conditions .
i) Continued Employment . Unless directed otherwise by the Company in writing, the Executive shall continue to perform the Executives regular and customary duties and responsibilities to the Company and its affiliates through the date of consummation of the
Transaction. In the event of the Executives termination of employment prior to the consummation of the Transaction, the Executive shall forfeit the Executives right to receive the Transaction Bonus hereunder. Notwithstanding the foregoing, if the Executives employment is terminated prior to the consummation of the Transaction by the Company for any reason other than for Cause, by the Executive for Good Reason, or due to the Executives death or Incapacity (in each case, as such term is defined in the Employment Agreement), the Executive shall be entitled to receive the Transaction Bonus, subject to Section 1(d)(ii) of this Agreement.
ii) Consummation of Transaction . In the event that the Transaction is abandoned or is otherwise not consummated for any reason on or prior to December 31, 2019, this Agreement and the Executives rights and obligations hereunder, including, without limitation, the Executives obligations under Section 2(a) of this Agreement, shall be null and void and without any further legal force or effect whatsoever.
e) Code Section 280G . The Executive and the Company each agree that the Accounting Firm (within the meaning of Section 4(h)(vi)(A) of the Employment Agreement), for purposes of making all calculations and determinations with respect to Sections 280G and 4999 of the United States Internal Revenue Code of 1986, as amended, will be made by Golden Parachute Tax Solutions, LLC, or such other independent public accountant as may be selected by the Executive in the Executives sole discretion, whose determination will be conclusive and binding for all purposes upon the Executive and the Company.
2. Noncompetition .
a) Noncompetition . In consideration of the benefits hereunder, the Executive agrees that during the Executives employment with the Company and for a period of three (3) years thereafter in the event that the Executives employment is terminated in accordance with Section 4(f) of the Employment Agreement, the Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Companys operations and services as of the date of the Executives termination of employment, without the Companys written consent, which consent shall not be unreasonably withheld; provided , however , that nothing in this Section 2(a) shall preclude the Executive from serving as a director of any corporation or a partner or investor in a private equity firm.
b) Reformation . If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.
c) Equitable Relief and Other Remedies . The Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of this Section 2 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security. In the event of a material violation by the Executive of this Section 2 , in addition
to any remedies which may then be available under applicable law or any agreement between the Executive and the Company, any then outstanding equity awards granted to the Executive under any equity compensation plan of the Company or otherwise, whether vested or unvested, shall be subject to immediate forfeiture and cancellation by the Company without any consideration being paid therefor.
3. Impact of Termination of Employment . Upon the Executives termination of employment pursuant to Section 4(f) of the Employment Agreement, in addition to the payments described in Section 4(f) of the Employment Agreement, the Company shall provide the Executive with Company-paid customary and market outplacement services for a period of twelve (12) months or until the Executive obtains substantially comparable employment, whichever is shorter.
4. General .
a) Survival of Provisions . The obligations contained in this Agreement shall survive the termination of the Executives employment with the Company and shall be fully enforceable thereafter.
b) No Right to Continued Employment . Nothing in this Agreement shall confer upon the Executive any right to continued employment with the Company or its affiliates or to interfere in any way with the right of the Company or its affiliates to terminate the Executives employment at any time.
c) Code Section 409A Compliance . Although the Company does not guarantee the tax treatment of any payment hereunder, the intent of the parties is that payments under this Agreement be exempt from, or comply with, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in a manner consistent therewith.
d) Governing Law; Jurisdiction . This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Florida, without giving effect to the choice of law principles thereof. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Florida or the United States District Court for the Southern District of Florida and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or the Executives employment by the Company or any affiliate, or for the recognition and enforcement of any judgment in respect thereof (a Proceeding ), to the exclusive jurisdiction of the courts of the State of Florida, the court of the United States of America for the Southern District of Florida, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Florida State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE EXECUTIVES EMPLOYMENT BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, OR THE EXECUTIVES OR THE COMPANYS PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Florida. Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder.
e) Severability . In the event that any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision never existed.
f) Non-Assignment; Successors . This Agreement is personal to each of the parties hereto. Except as provided in this Section 4(f) , no party may assign or delegate any rights or obligations hereunder without first obtaining the advanced written consent of the other parties hereto. Any purported assignment or delegation by the Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. The Company may assign this Agreement to a person or entity that is an affiliate of the Company or to any successor to all or substantially all of the business and/or assets of the Company, which assumes in writing, or by operation of law, the obligations of the Company hereunder.
g) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
h) No Obligation; Company Discretion . No provision of this Agreement shall be interpreted to impose an obligation on the Company to accept, agree to or otherwise consummate the Transaction. The decision to consummate the Transaction, and all terms and conditions of such transaction, including the amount, timing and form of consideration to be provided in connection therewith, shall be within the sole and absolute discretion of the Company.
i) Entire Agreement; Amendment . Except as specifically contemplated herein, this Agreement constitutes the entire agreement by the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof, whether written or oral. Notwithstanding the foregoing, except to the extent specifically contemplated herein, nothing herein is intended to supersede any employment agreement, or any incentive, equity, compensation or benefit arrangement between the Executive and the Company; provided , however , that to the extent that there is any conflict between any such agreement or arrangement and this Agreement, the terms of this Agreement shall control. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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EXECUTIVE |
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/s/ Roger M. Franks |
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Roger M. Franks |
Transaction Bonus Agreement Signature Page
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KLX INC. |
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/s/ Thomas P. McCaffrey |
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Name: |
Thomas P. McCaffrey |
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Title: |
President and Chief Operating Officer |
Transaction Bonus Agreement Signature Page
Employment Agreement Amendment
WHEREAS, KLX, Inc., a Delaware corporation (the Company ), and Amin J. Khoury ( Executive ) (collectively, the Parties ) have previously entered into that certain Amended and Restated Employment Agreement, dated as of May 25, 2017 (the Agreement );
WHEREAS, the parties desire to amend the Agreement pursuant to the terms of this Employment Agreement Amendment (this Amendment ) for the primary purposes of (i) conditioned upon the Closing (as defined below), eliminating the Consulting Agreement in all respects, including the Executives obligations thereunder to provide substantial services and the Companys obligations thereunder to provide compensation and benefits, (ii) reflecting the transactions contemplated by the Agreement and Plan of Merger dated as of April 30, 2018, by and among The Boeing Company, a Delaware corporation ( Parent ), Kelly Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company (the Merger Agreement ), which, if consummated, will result in the Closing , and (iii) reflecting the spin-off of a portion of the Company, as contemplated in the Merger Agreement, into a corporation organized under the laws of the State of Delaware ( ESG SpinCo ), which, if consummated, will result in the Spin-off .
WHEREAS, the parties desire that capitalized terms used but not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, commitments and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties intending to be legally bound hereby agree to amend the Agreement as follows:
1. Amended Provisions . The Agreement is hereby amended as follows:
(a) Effective immediately prior to the Spin-Off, Section 3.3 of the Agreement is hereby amended and replaced in its entirety with the following:
Performance . During the Employment Term, Executive shall use his business judgment, skill and knowledge to the advance of the Companys interests and to the discharge of his duties and responsibilities hereunder; provided, however, that Executive shall be required only to devote so much time as Executive determines is reasonably necessary to discharge his duties as Chairman of the Board and Chief Executive Officer, and, subject to the provisions of Section 5 below, Executive may engage in other business activities during the employment Term, including, without limitation, serving as an employee, director or consultant of B/E aerospace, Inc., a Delaware corporation, or its successor ( B/E ), or of ESG SpinCo, an entity the Company plans to create under a Distribution Agreement dated as of [ · ] by and between KLX Inc., a corporation formed under the laws of the State of Delaware and KLX Energy Services Holdings, Inc. a corporation formed under the laws of the State of Delaware.
(b) Effective immediately prior to the Closing, Section 4.7 of the Agreement is hereby amended by removing the phrase and during the Consulting Period (as defined in Section 6.5 hereof). The remaining portions of Section 4.7 shall remain unchanged.
(c) Effective immediately prior to the Spin-Off, Section 5.4 shall is hereby amended by inserting the phrase , or ESG SpinCo. at the end of the last sentence therein. The remaining portions of Section 5.4 shall remain unchanged.
(d) Effective immediately prior to the Spin-Off, Section 6.1.1 of the Agreement is hereby amended and replaced in its entirety with the following:
Termination Date. The term Termination Date shall mean the date on which Executives employment with the Company and its subsidiaries and affiliates terminates for any reason.
(e) Effective immediately prior to the Closing, Section 6.4.2 of the Agreement is hereby amended by replacing clause (iii) in its entirety with the following:
(iii) a lump-sum equal to the sum of (A) the Termination Amount calculated using rates in effect on the Change of Control Date, plus (B) seven million, five hundred thousand dollars ($7,500,000.00);.
(f) Effective immediately prior to the Closing, Section 6.5 of the Agreement and Exhibit B to the Agreement are hereby deleted in their entireties and replaced with [RESERVED].
(g) Effective immediately prior to the Closing, the following new provisions are added as Sections 18 through 20 immediately following Section 17 of the Agreement:
18. Post-Separation Cooperation . Executive shall cooperate with the Company and its subsidiaries and affiliates in any disputes with third parties, internal investigation or administrative, regulatory or judicial proceeding (excluding any such proceeding in which Executive is an adverse party) as reasonably requested by the Company (including Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Companys request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Executives possession, all at times and on schedules that are reasonably consistent with Executives other permitted activities and commitments). Executive shall not be entitled to any compensation with respect to the services contemplated by this Section 18 (though the Company shall reimburse Executive for reasonable travel expenses (including lodging and meals, upon submission of receipts)) and, for the avoidance of doubt, such services shall not constitute employment by Company or any of its affiliates.
19.
Trade Secrets
. Nothing in this Agreement is intended to conflict with the
whistleblower provisions of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act of 1934 or § 1833(b) of the Defend Trade Secrets Act of 2016. Accordingly, nothing in this Agreement prohibits Executive from reporting possible violations of United States federal, state or local law or regulation to any United States federal, state or local governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or to an attorney, or from making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or from disclosing trade secrets and other confidential information in the course of such reporting; provided, however, that Executive uses his reasonable best efforts to (a) disclose only information that is reasonably related to such possible violations or that is requested by such agency or entity, and (b) request that such agency or entity treat such information as confidential. Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that he has made such reports or disclosures. In addition, Executive has the right to disclose trade secrets and other confidential information in a document filed in a lawsuit or other proceeding, provided that the filing is made under seal and protected from public disclosure.
20. Third Party Beneficiaries . The Releasees (as defined in Exhibit C ) are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Releases. Executives heirs or assigns also are intended third-party beneficiaries with respect to the separation benefits set forth in Section 6 in the event of Executives death. Except and to the extent set forth in the preceding two sentences, this Agreement is not intended for the benefit of any person or entity other than the Company and Executive, and no such other person or entity will be deemed to be a third party beneficiary hereof.
(h) Effective immediately prior to the Spin-Off, the reference to the employment agreement in Exhibit C shall be replaced with that certain Employment Agreement, dated as of May 25, 2017, as amended from time to time, by and between Employee and the Company (the Employment Agreement ).
2. Effect on Agreement . All other provisions of the Agreement not addressed in this Amendment shall remain in full force and effect. To the extent there is any conflict between the provisions in the Agreement and the provisions in this Amendment, this Amendment shall prevail and control. In the event either the Spin-off or Closing does not occur, the provisions of this Amendment otherwise effective upon the Spin-off or Closing, as applicable, shall have no force or effect.
3. Reaffirmation of Restrictive Covenants . Executive expressly acknowledges and reaffirms his understanding of, and agreement to comply with, all of his post-employment obligations under the Agreement, including, without limitation, the restrictive covenants and confidentiality provisions of Section 5 of the Employment Agreement, as amended herein (the Restrictive Covenants ). Nothing set forth in this Agreement shall in any way limit Executives obligations to comply with the Restrictive Covenants.
4. Counterparts . This Amendment may be executed in separate counterparts, each of which will be deemed to be an original and all of which taken together will constitute one and the same agreement.
* * * * *
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the dates set forth herein.
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KLX INC. |
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/s/ Thomas P. McCaffrey |
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Thomas P. McCaffrey |
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President and Chief Operating Officer |
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/s/ Amin J. Khoury |
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Amin J. Khoury |
[ Signature Page to Amendment of Employment Agreement ]
KLX AGREES TO SELL ITS ASG BUSINESS TO BOEING IN AN ALL CASH TRANSACTION AND TO SPIN-OFF ITS ESG BUSINESS TO KLX SHAREHOLDERS
WELLINGTON, FL, May 1, 2018 KLX Inc. (KLX or the Company) (NASDAQ: KLXI), a leading distributor and value added service provider of aerospace fasteners and consumables, and a provider of services and products to the oil and gas exploration and production industry, today announced its intention to sell its Aerospace Solutions Group business to The Boeing Company and to spin-off to KLX shareholders its Energy Services Group business.
KLX announced today that the Company has entered into a definitive agreement to sell the Aerospace Solutions Group (ASG) to The Boeing Company (Boeing) for $63.00 per share in cash. The transaction with Boeing is valued at approximately $4.25 billion, including the assumption of approximately $995 million in net debt. The transaction values the Aerospace Solutions Group at a multiple of 15.7x trailing EBITDA for fiscal year 2017 and a multiple of 14.3x 2018 estimated Adjusted EBITDA. Upon closing of the transaction, ASG will become part of the Boeing Global Services business. Boeings acquisition of KLX Inc. is conditioned upon the successful divestment and separation of KLX Inc.s Energy Services Group (ESG). The transaction is also subject to customary closing conditions, including KLX shareholder approval and receipt of applicable regulatory approvals.
This acquisition is the next step in Boeings services growth strategy, with a clear opportunity to profitably grow our business and better serve our customers in a $2.6 trillion, 10-year services market, said Stan Deal, president and CEO of Boeing Global Services. By combining the talent and product offerings of Aviall and KLX Inc., we will provide a one-stop-shop that will benefit our supply chain, and our various customers in a meaningful way.
The ESG business that will be spun-off to KLX shareholders has a presence across all major U.S. onshore basins, including the Southwest (Permian Basin and Eagle Ford), Rocky Mountains (Williston and Piceance Basins), Mid-Continent and the Northeast (Marcellus and Utica Shale). ESGs strategic focus is on providing superior quality of service to oil and gas exploration and production companies. ESGs differentiated proprietary products and services are supported by
a rich intellectual property portfolio, which is reflected in its superior profit margins. ESGs strong brand will be retained by KLX Energy Services Holdings, Inc. (KLXE) post spin-off.
KLX Chairman and CEO Amin Khoury said, KLX Energy Services is well positioned to participate in the ongoing oilfield services market recovery. We are seeing very strong demand for our services and products. We now expect KLX Energy Services fiscal year 2018 estimated revenues, Adjusted operating earnings and Adjusted EBITDA of approximately $500 million, $65 million and $110 million, respectively. This represents an approximate 55 percent increase in revenue, and an approximate 300 percent increase in Adjusted EBITDA, as compared to the prior year. KLX Energy Services peer-leading growth, superior margins and ability to generate significant free cash flow backed by a strong balance sheet, position it well as an independent company to deliver peer leading returns to our shareholders.
The two transformative transactions announced today conclude a comprehensive review of strategic alternatives to maximize shareholder value, which the Company announced on December 22, 2017.
Mr. Khoury concluded, To our shareholders, many of whom have backed our management team for many years, we are pleased to be able to deliver $63.00 in immediate cash per share and ownership in a dynamic and well-capitalized oilfield services company. KLX Energy Services is a leader in its markets and will continue to be deeply committed to maximizing shareholder value and to providing the very best level of service to its customers.
Additional Transaction Details
KLXE will be initially capitalized through a $50 million cash contribution from KLX to provide KLXE with a strong balance sheet and ample operating liquidity at separation. Additional KLXE liquidity is expected to be provided through a new undrawn credit facility to be put in place before the separation. KLXE is expected to be spun-off free of any debt.
Amin Khoury, currently KLXs Chairman and CEO, will become Chairman, President and CEO of KLXE upon separation. Tom McCaffrey will become Senior Vice President and Chief Financial Officer. Gary Roberts will remain Vice President and General Manager of KLXEs operations. Mr. Khoury and Mr. McCaffrey will continue in their current roles with KLX through the consummation of the sale of ASG to Boeing and intend to enter into employment contracts with KLXE prior to the spin-off.
Both the sale of KLX/ASG to Boeing for cash and the spin-off of ESG are expected to be taxable transactions to KLX shareholders. If KLXEs market value at the time of separation is greater than
its tax basis at such time, KLX would incur a tax liability. Boeing and KLX have agreed that any such liability would be borne by KLXE.
KLXE will have intangible assets with a substantial basis for tax purposes, which will be recoverable through amortization deductions, and are expected to shelter approximately $32 million per year in taxable income through January 31, 2029.
The completion of the spin-off transaction is subject to certain customary conditions, including but not limited to implementation of intercompany agreements and the effectiveness of filings with the Securities and Exchange Commission. The Company currently expects that the separation of its businesses will occur in the third quarter of 2018.
Advisors
Goldman Sachs & Co. LLC served as exclusive financial advisor to KLX and Freshfields Bruckhaus Deringer LLP served as legal counsel.
Conference Call
KLX executives will host a conference call today, May 1, 2018 at 8:00 a.m. (Eastern time) to discuss the creation of KLX Energy Services Holdings, Inc. and the sale of Aerospace Solutions Group to Boeing for analysts and investors. Reporters are invited to join the call on a listen-only basis. A link to the webcast and an investor presentation will be available on the Investor Relations section of the KLX website at http://www.KLX.com. To access the call, please dial 800-239-9838 (domestic) or +1 323-794-2551 (international). The conference ID for the call is 1846506. Please dial into the call several minutes prior to the start of the call to allow sufficient time for the operator to connect participants.
About KLX
KLX Inc., through its two operating segments, provides mission critical products and complex logistical solutions to support its customers high value assets. KLX serves its customers in demanding environments that face high cost of downtime and require dependable, high quality just-in-time customer support. The Aerospace Solutions Group is a leading distributor and value added service provider of aerospace fasteners and consumables offering the broadest range of aerospace hardware and consumables and inventory management services worldwide. The Energy Services Group provides vital services and products to oil and gas exploration and production companies on an episodic, 24/7 basis. For more information, visit the KLX website at www.KLX.com.
Cautionary Statement on Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forward-looking statements, including those regarding the timing and consummation of the transactions described herein, involve risks and uncertainties. The Companys actual experience and results may differ materially from the experience and results anticipated in such statements. Factors that might cause such a difference include those discussed in the Companys filings with the Securities and Exchange Commission (SEC), which include its Annual Report on Form 10-K and Current Reports on Form 8-K. For more information, see the section entitled Forward-Looking Statements contained in the Companys Annual Report on Form 10-K and in other filings. The forward-looking statements included in this news release are made only as of the date of this news release and, except as required by federal securities laws and rules and regulations of the SEC, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Reconciliation of Non-GAAP Financial Measures
This release includes Adjusted operating earnings, which excludes initial one-time costs related to the review of strategic alternatives and ESG spin-off. This release also includes Adjusted EBITDA, which excludes the aforementioned initial one-time costs and non-cash compensation expense.
KLX ENERGY SERVICES
RECONCILIATION OF 2018 OUTLOOK; CONSOLIDATED OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
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2018 Outlook |
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(Approximate Amounts) |
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Operating earnings |
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$ |
62 |
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Initial costs and expenses related to review of strategic alternatives and ESG spin-off |
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3 |
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Adjusted operating earnings |
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65 |
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Depreciation and amortization |
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35 |
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Non-cash compensation |
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10 |
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Adjusted EBITDA |
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$ |
110 |
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Contact Information
Michael Perlman
Director, Investor Relations
KLX Inc.
(561) 791-5435
Additional Information
In connection with the proposed transaction between KLX Inc. (KLX) and The Boeing Company (Boeing), KLX will file with the Securities and Exchange Commission (the SEC) a proxy statement. KLX will also file with the SEC a registration statement with respect to the spin-off of the Energy Services Group. KLX SHAREHOLDERS ARE ENCOURAGED TO READ THE PROXY STATEMENT AND THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS AND RELATED MATTERS. Investors and security holders will be able to obtain the documents free of charge at the SECs website, www.sec.gov, or from KLX at its website, www.KLX.com, or by contacting KLX Investor Relations at (561) 791-5435.
Participants in Solicitation
KLX and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information concerning KLXs directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is set forth in KLXs Annual Report on Form 10-K for the fiscal year ended January 31, 2018 and its proxy statement filed on May 26, 2017, which are filed with the SEC. A more complete description will be available in the proxy statement with respect to the merger and the registration statement with respect to the spin-off.
# # #
Exhibit 99.2
Sale of Aerospace Solutions Group Spin-Off of Energy Services Group May 1, 2018
Transaction Structure Sale of 100% of the stock of KLX to The Boeing Company in an all cash merger Boeing to acquire Aerospace Solutions Group (ASG) Business which will be integrated into Boeing Global Services Business Energy Services Group (ESG) business to be spun-off to KLX shareholders, creating a new standalone leading U.S. onshore completion, production and interventional oilfield services provider Cash Sale of ASG Business ASG to be sold to The Boeing Company for $63.00 per share in cash Represents a purchase price of $4.25 billion, including the assumption of $945 million in net debt Values ASG at a multiple of 15.7x 2017A EBITDA and 14.3x 2018E Adjusted EBITDA Taxable Spin-off of ESG Business Taxable spin-off of KLXs ESG business to existing KLX shareholders KLX Energy Services initially capitalized through a $50mm cash contribution from KLX Additional liquidity to be provided through a new undrawn credit facility to be put in place Provides KLX Energy Services with a strong balance sheet, ample liquidity and no funded debt at time of spin-off KLX Energy Services intangible assets will have a substantial basis for tax purposes, which will be recoverable through amortization deductions, and are expected to shelter ~$32 million per year in taxable income through January 31, 2029 Approvals and Closing The completion of the ASG sale to Boeing is subject to KLX shareholder and regulatory approval The completion of the spin-off transaction is subject to certain customary conditions, including the SEC declaring a registration statement effective and implementation of intercompany agreements The completion of the ASG sale to Boeing is conditioned on the spin-off having occurred The Company currently expects the spin-off of its ESG business to occur during Q3 2018
Acquisition Price Per Share $63.00 KLX Shares Outstanding (Fully Diluted)1 51.76 Equity Purchase Price $3,261 (+) Debt (as of 1/31/2018) $1,200 (-) Cash (as of 1/31/2018) (255) (+) Cash Dividend to KLX Energy Services Balance Sheet2 50 Net Debt $995 Implied Transaction Multiples $270MM 14.3 x $298MM FY 2017A EBITDAFY 2018E Adj. EBITDA3 Implied Enterprise Value $4,256 Sale of KLX ASG Delivers $63.00 per Share in Immediate Cash to KLX Shareholders Source: Management 1 Share count as of 3/31/2018. 2 Enterprise Value calculation is inclusive of a $50 million cash contribution to KLX Energy Services to provide strong balance sheet and ample balance operating liquidity.
Review of Strategic Alternatives Conducted Over the Past Four Months ESG Business Performance Continues to Accelerate Spin-off Maximizes Value to KLX Shareholders KLX Provides Shareholders with Opportunity to Participate in the Ongoing Oilfield Services Market Recovery and to Benefit from Strong Business Momentum Driven by ESGs Superior Profit Margins, Differentiated Services and Market Position Creates a Pure-Play Oilfield Services Company Well-Positioned to Participate in Sector Consolidation Provides a Public Currency to Incentivize Talent, and Further Invest and Grow the Business
Amin Khoury Chairman, Chief Executive Officer Founded B/E Aerospace in 1987 Spun-off KLX in 2014 Serves as Chairman, President and CEO of KLX since 2014 Previously founder, Chairman and CEO (One year as Executive Chairman) of B/E Aerospace until its acquisition by Rockwell Collins in April 2017 Tom McCaffrey Senior Vice President and Chief Financial Officer President and COO of KLX since 2014 Previously Senior Vice President and Chief Financial Officer of B/E Aerospace from 1993 to 2014 Prior to joining B/E in 1993, practiced as a CPA for 17 years Gary Roberts Vice President and General Manager Vice President and General Manager of Energy Services business of KLX since 2014 Over 30 years of experience in Oilfield Services industry, including 6 years at Baker Hughes and 16 years at Weatherford Previously CEO of Vision Oil Tools from 2010 until its acquisition by B/E Aerospace in 2014 Mr. Khoury and Mr. McCaffrey will continue in their current roles with KLX through the consummation of The Boeing/KLX Transaction and intend to enter into employment contracts with KLX Energy Services prior to the spin-off. KLX Energy Services Holdings, Inc.s Board of Directors will be decided at a later date.
Business Overview Provides mission critical and value-added services to Exploration & Production (E&P) companies Entered the space in 2013 through a series of acquisitions that have been completely integrated National presence across essentially all major lower 48 states shale basins (excluding California), serving the majority of the regional and independent E&Ps Differentiated service offering through in-house R&D team 7 registered patents and 21 proprietary tools Service quality, technical expertise and 24 / 7 service reduce customers Non-Productive Time (NPT) Revenue derived from completion, production and interventional services ~1,100 non-unionized employees FY 2017A Revenue Breakdown by Region Channel
Executive Management of KLX Energy Services has a proven track record of building industry-leading businesses through platform acquisitions and selective tuck-ins B/E Aerospace Founded in 1987 and with revenues in that year of approximately $3 million, the Company completed over 20 acquisitions over 30 years, to become the world leader in aircraft cabin interior products. The business was sold to Rockwell Collins for $8.6 billion in 2017, a transaction multiple of 13.6x LTM EBITDA KLX Aerospace Solutions Group (ASG) B/E Aerospace acquired M&M Fasteners in 2001 with revenues of $37 million. Over the following 15 years, 8 additional acquisitions were made, creating the world leader in aerospace consumables, with revenues of over $1.4 billion in 2017. On April 30, 2018 KLX announced the sale of ASG to The Boeing Company for $4.25 billion, representing a transaction multiple of 15.7x 2017A EBITDA and 14.3x 2018E Adjusted EBITDA KLX Energy Services Group (ESG) B/E Aerospace entered into the oilfield services market in 2013 with the acquisition of seven businesses over a 10 month period of time. The consolidated and integrated business is expected to generate 2018 revenues of approximately $500 million, a 55 percent growth rate over the prior year, and Adjusted EBITDA of approximately $110 million, representing and increase of approximately 300 percent as compared to the prior year. This performance reflects the peer leading growth rate and superior margins afforded by the differentiation arising from our successful R&D initiatives.
2013 - 2014 ESG Founded 2015 Oil and Gas Prices Collapse 2016 - 2018 Positioned for Growth Expansion into the energy services sector through the acquisition of seven independent private companies Focus on fully integrating businesses Re-aligned separate services, assets and capabilities Established geographic regions with Regional Managers Integrated systems into a unified structure Rationalized corporate structure to align team, reinforce priorities and create a sense of urgency ~50 percent reduction in headcount from peak levels in 2014 Aligned equipment and personnel to provide a complete package of services in each geographic region Continued to invest capital to acquire assets at deeply discounted prices Hired over 100 highly skilled senior technical personnel Continued to invest in the business to support customers and acquire incremental assets in select geographic regions Increased the number of MSAs with customers from 400 in Jan-2016 to 1,000+ in 2018 Invested in an in-house capability to develop proprietary tools 7 Acquisitions ~50% Reduction in headcount 400 MSAs (Jan 2016) 1,000+ MSAs (2018)
1 Presence across all major U.S. onshore energy producing basins (except California) Technology-driven, differentiated proprietary services and products supported by a rich 2 intellectual property portfolio drives peer leading revenue growth rate and superior margins 3 Customer service focus leads to deeply entrenched relationships with blue-chip customers Well positioned to capitalize on end-markets recovery and capture share resulting from 4 investments made in downturn 5 Attractive long-term financial growth prospects with superior margin profile
Full product and service offering focused on well production, completion and intervention with a presence in all major North American onshore energy producing shale basins (excluding California) Bakken Shale Piceance Basin Utica Shale Marcellus Shale Permian Basin Haynesville Shale Eagle Ford Shale ESG Locations ESG Headquarters ESG Sales Office
Completions (47% of revenues) FRAC Stack Services (proprietary) Pump Down Wireline Services Logging Wireline Services Torque and Testing Wireline Tubing Conveyed Perforating Pressure Control Drilling Pumps and Tanks Air Packages Torque and Testing Rental Tubulars Cementation Down Hole Completion Tools (proprietary) Production (23% of revenues) Hydro-Testing Certified Pressure Control Services Power Swivels Machine Shop Rental Tools Slick Line Conventional Wireline Portfolio of Down Hole Tools (proprietary) Intervention (30% of revenues) Fishing Tools (proprietary) Reverse Units Thru Tubing (proprietary) Nitrogen Services Pipe Recovery
Next level readiness brought to every project driven by dedicated 24 / 7 experienced field professionals Exceptional 24 / 7 service quality and technical expertise reduce customers Non-Productive Time (NPT) Full offering suite and consistency of services across all major basins Specialized field expertise with local knowledge and footprint Experienced perspective and technical interface helps customers get ahead of problems and streamline operations Approximately 1,100 employees provide more than 100 mission-critical oilfield services, tools, technologies and equipment Company-wide focus on HSE and R&D
...Leads to Deeply Entrenched Relationships with Regional, National and Global E&P Companies eog resources PIONEER Great Western OIL I. GAS COMPANY y ConocoPhillips evo C ESAPEAKE ENERGY
~15 Years Average Engineer Experience 800 Field Specialists Dedicated R&D Facilities 7 & 27 Registered & Pending Patents 21 Proprietary Tools
Revenue (US$ in millions) Adj. EBITDA¹ (US$ in millions) and % Margin $500 $110 22.0 % $321 $27 8.4 % FY 2017AFY 2018 GuidanceFY 2019 FY 2017AFY 2018 GuidanceFY 2019 Top line growth driven by an increase in demand from existing customers, as well as a substantial increase in demand from new customers ESG particularly well-positioned for growth given focus on completion and interventional services Margin expansion resulting from differentiated services designed to optimize technical talent, client efficiency, along with increased operating leverage and investment in the business through the cycle
KLX ENERGY SERVICES RECONCILIATION OF 2018 OUTLOOK; CONSOLIDATED OPERATING EARNINGS TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA (In Millions) Operating earnings 2018 Outlook (Approximate Amounts) $62 Initial costs and expenses related to review of strategic alternatives and ESG spin-off 3 Adjusted operating earnings 65 Depreciation and amortization 35 Non-cash compensation 10 Adjusted EBITDA $110
KLX AEROSPACE SOLUTIONS GROUP RECONCILIATION OF OPERATING EARNINGS TO EBITDA (In Millions) YEAR ENDED January 31, 2018 ASG Operating earnings 239 Depreciation and amortization 31 EBITDA $ 270 KLX AEROSPACE SOLUTIONS GROUP RECONCILIATION OF OPERATING EARNINGS TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA (In Millions) One-time costs related to strategic review and transitioning ASGs global distribution and operations center 26 ASG Adjusted operating earnings 263 Depreciation and amortization 35 2018 Outlook (Approximate Amounts) $ 237 Adjusted EBITDA $ 298
Cautionary Statement on Forward-Looking Statements This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forward-looking statements, including those regarding the timing and consummation of the transactions described herein, involve risks and uncertainties. The actual experience and results of KLX Inc. (the Company) and of the Energy Services Group (ESG) may differ materially from the experience and results anticipated in such statements. Factors that might cause such a difference include those discussed in the Companys filings with the Securities and Exchange Commission (SEC), which include its Annual Report on Form 10-K and Current Reports on Form 8-K, and in the Form 10 to be filed in connection with the proposed spin-off of ESG. For more information, see the sections entitled Risk Factors and Forward-Looking Statements contained in the Companys Annual Report on Form 10-K and in other filings. The forward-looking statements included in this communication are made only as of the date hereof and , except as required by federal securities laws and rules and regulations of the SEC, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information In connection with the proposed transaction between KLX Inc. (KLX) and The Boeing Company (Boeing), KLX will file with the Securities and Exchange Commission (the SEC) a proxy statement. KLX will also file with the SEC a registration statement with respect to the spin-off of the Energy Services Group. KLX SHAREHOLDERS ARE ENCOURAGED TO READ THE PROXY STATEMENT AND THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS AND RELATED MATTERS. Investors and security holders will be able to obtain the documents free of charge at the SECs website, www.sec.gov, or from KLX at its website, www.KLX.com, or by contacting KLX Investor Relations at (561) 791-5435. Participants in Solicitation KLX and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information concerning KLXs directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is set forth in KLXs Annual Report on Form 10-K for the fiscal year ended January 31, 2018 and its proxy statement filed on May 26, 2017, which are filed with the SEC. A more complete description will be available in the proxy statement with respect to the merger and the registration statement with respect to the spin-off.
Sale of Aerospace Solutions Group Spin-Off of Energy Services Group May 1, 2018