13. Commitments and Contingencies

Self-Insured Health Program

The Company maintains a self-insured health benefits plan, which provides medical benefits to employees selecting coverage under the plan. The Company maintains a reserve for incurred but not reported medical claims. The reserve is an estimate based on historical experience, as well as the number of participants and other assumptions, some of which are subjective. As any of these factors change, the Company will adjust its self insurance medical benefits reserve accordingly. Effective May 1, 2014, we have stop loss insurance for claims in excess of $70 thousand per individual and claims in excess of $2.1 million aggregate group loss. For the period May 1, 2013 through April 30, 2014, we had stop loss coverage for claims in excess of $65 thousand per individual and claims in excess of $2.6 million aggregate group loss. The Company believes its self-insurance reserves are adequate.

Legal Proceedings

On May 6, 2013, Drillmec, Inc. filed a lawsuit in the 281^st Judicial District Court in Harris County, Texas (Drillmec, Inc. v. Integrated Drilling Equipment Company, et. al.) against Integrated Drilling Equipment Company Holdings, Inc., Integrated Drilling Equipment Company Holdings, LLC, Integrated Drilling Equipment, LLC, Integrated Drilling Equipment Company, Stephen D. Cope and SDC Management Services, LLC. Drillmec alleges that the defendants acquired Drillmec’s drawings and technical specifications through an unrelated bidding process for offshore drilling rigs. In the pleadings, Drillmec claims that the defendants used this proprietary information in connection with the Company’s successful bid for certain “PEMEX” contracts and asserts causes of action for misappropriation of Drillmec’s trade secrets, conversion, interference with prospective relations, conspiracy, unjust enrichment and unfair competition. Drillmec is seeking damages in the form of the Company’s actual profits from the PEMEX contracts and the development costs that Drillmec incurred in developing the proprietary information in question. We are defending this litigation vigorously.

The Company produced documents in response to discovery requests on September 30, 2013. This case is in the preliminary stages and it is too early to predict an outcome and therefore no provision has been recorded as of September 30, 2014, for any potential liability arising from this litigation.

On February 28, 2014, Sidewinder Drilling Inc. filed a lawsuit in the 269^th Judicial District Court in Harris County, Texas, against the Company and others (Sidewinder Drilling Inc. v. Oil County Engineering Services, LTD., HYCO Canada U.L.C., and Integrated Drilling Equipment Company Holdings, Inc.). In the lawsuit, Sidewinder is seeking a judicial declaration that the Company is contractually responsible for all of the damages caused by the dropped mast on Rig 103 because “Delivery” of Rig 103 had not occurred at the time of the Rig 103 dropped mast incident. We are defending this litigation vigorously.

This case is in the preliminary stages and it is too early to predict an outcome and therefore no provision has been recorded as of September 30, 2014, for any potential liability arising from this litigation.

From time to time, the Company may be involved in other litigation matters arising in the ordinary course of business. Although the ultimate liability for these matters cannot be determined, based on the information currently available to us, we do not believe that the resolution of these other litigation matters to which we are currently a party would have a material adverse effect on our business, financial condition or results of operation. We maintain liability insurance against certain risks arising out of the normal course of our business.

- Definition

The entire disclosure for commitments and contingencies.

+ References+ Details

Integrated Drilling Equipment Holdings Corp 10-Q