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Exhibit 10.2
NEUROTECH PHARMACEUTICALS, INC.
2006 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 2006 Non-Employee Directors Stock Option Plan (the "Plan") is
intended as an incentive to enable Marco Hi-Tech JV Ltd., a Delaware corporation
(the "Company"), to attract and retain the services of experienced and
highly-qualified individuals as directors of the Company and to encourage stock
ownership by such directors so that their interests are aligned with the
interests of the Company and its shareholders. It is intended that participants
in the Plan may acquire or increase their proprietary interests in the Company
and be encouraged to remain in the directorship of the Company. For purposes of
the Plan, a parent corporation and a subsidiary corporation shall be as defined
in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code").
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board of Directors of the
Company (the "Board") and/or by a duly appointed committee of the Board having
such powers as shall be specified by the Board. Any subsequent references herein
to the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted herein, including,
without limitation, the power to terminate or amend the Plan at any time subject
to the terms of the Plan and any applicable limitations imposed by law. Except
as may be otherwise provided herein, the Board shall have authority to
administer the Plan subject to the provisions of the Plan but shall have no
authority, discretion or power to select the non-employee directors of the
Company who will receive options under the Plan, to set the exercise price of
the options granted under the Plan, to determine the number of shares of common
stock to be granted upon exercise of options or the time at which such options
are to be granted, to establish the duration of option grants, or to alter other
terms or conditions specified in the Plan. All questions of interpretation of
the Plan or of any options granted under the Plan (an "Option") shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan and/or any Option. Any officer of the
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
3. ELIGIBILITY AND TYPE OF OPTION.
Options may be granted only to directors of the Company who, at the
time of such grant, are not employees of the Company or of any parent or
subsidiary corporation of the Company ("Non-Employee Directors"). Options
granted to Non-Employee Directors shall be nonqualified stock options; that is,
options that are not treated as having been granted under Section 422(b) of the
Code. A person granted an Option is hereinafter referred to as an "Optionee."
4. SHARES SUBJECT TO OPTION.
Subject to adjustment as provided in Section 8 hereof, a total of
400,000 shares of the Company's common stock, $0.001 par value per share (the
"Stock"), shall be subject to the Plan. The shares of Stock subject to the Plan
shall consist of unissued shares or treasury shares, and such amount of shares
of Stock shall be and is hereby reserved for such purpose. Any of such shares of
Stock that may remain unsold and that are not subject to outstanding Options at
the termination of the Plan shall cease to be reserved for the purposes of the
Plan, but until termination of the Plan the Company shall at all times reserve a
sufficient number of shares of Stock to meet the requirements of the Plan. If an
Option expires or becomes unexercisable without having been exercised in full,
or is forfeited, the unpurchased shares which were subject thereto shall become
available for future grant or sale under the Plan. Stock used to pay the
exercise price of an Option shall not become available for future grant or sale
under the Plan.
5. TIME FOR GRANTING OPTIONS.
All Options shall be granted, if at all, within ten years from the
Effective Date.
6. TERMS, CONDITIONS AND FORM OF OPTIONS.
Options granted pursuant to the Plan shall be evidenced by written
agreements specifying the number of shares of Stock covered thereby, which
written agreement may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
(a) AUTOMATIC GRANT OF OPTIONS. Subject to execution by a
Non-Employee Director of an appropriate Option Agreement, Options shall be
granted automatically and without further action of the Board, as follows:
(i) Each person who is newly elected or appointed as an
Non-Employee Director on or after the Effective Date shall be granted an Option
on the day of such initial election or appointment (and not upon any future
re-election or appointment) to purchase shares of Stock in such amounts as
determined by the Board of Directors, with all such amounts not to exceed 50,000
in the aggregate.
(ii) The initial person who is newly elected or appointed as
Chairman of the Board of Directors and is a Non-Employee Director on or after
the Effective Date shall be granted an Option on the day of such initial
election or appointment (and not upon any future re-election or appointment) to
purchase Three Hundred Thousand (300,000) shares of Stock.
(iii) Notwithstanding the foregoing, any person may elect not to
receive an Option to be granted pursuant to this Section 6(a) by delivering
written notice of such election to the Board no later than the day prior to the
date on which such Option would otherwise be granted. A person so declining an
Option shall receive no payment or other consideration in lieu of such declined
Option. A person who has declined an Option may revoke such election by
delivering written notice of such revocation to the Board no later than the day
prior to the date on which such Option would be granted pursuant to this Section
6(a).
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(iv) Notwithstanding any other provision of the Plan to the
contrary, no Option shall be granted to any individual on a day when he or she
is no longer serving as a Non-Employee Director of the Company.
(b) OPTION EXERCISE PRICE. The purchase price of each share of Stock
purchasable under an Option shall be the Fair Market Value (as defined below) of
such share of Stock on the date the Option is granted. "Fair Market Value" means
the average of the high and low prices of publicly traded shares of Stock on the
date of grant, rounded to the nearest cent, on the principal national securities
exchange on which shares of Stock are listed (if the shares of Stock are so
listed), or on the Nasdaq Stock Market (if the shares of Stock are regularly
quoted on the Nasdaq Stock Market), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded shares of
Stock in the over-the-counter market, or, if such bid and asked prices shall not
be available, as reported by any nationally recognized quotation service
selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code. Anything in this Section 6(b) to the
contrary notwithstanding, in no event shall the purchase price of a share of
Stock be less than the minimum price permitted under the rules and policies of
any national securities exchange on which the shares of Stock are listed. Prior
to the commencement of trading the Fair Market Value shall be $2.50 per share.
(c) EXERCISE PERIOD AND EXERCISABILITY OF OPTIONS. An Option granted
pursuant to the Plan shall be exercisable for a term of ten (10) years. Options
granted pursuant to the Plan shall be exercisable as follows: one-third of the
aggregate shares of Stock purchasable under an Option shall be exercisable on
the date of grant of such Option, and one-third of the aggregate shares of Stock
purchasable under an Option shall be exercisable on each of the second and third
anniversaries of the date of grant, or by such other schedule as determined by
the Board; provided, however, no option shall be exercisable until such time as
any vesting limitation required by Section 16 of the Securities Exchange Act of
1934, as amended, and related rules shall be satisfied if such limitation shall
be required for continued availability of the exemption provided under Rule
16b-3(d)(3).
(d) TERMINATION OF OPTIONS.
(i) In the event that an Optionee ceases to be a director of the
Company on account of fraud, dishonesty or other acts detrimental to the
interests of the Company or any direct or indirect subsidiary of the Company
("Cause"), the Option granted to such Optionee shall terminate on the date such
Optionee ceases to be a director of the Company.
(ii) In the event that an Optionee ceases to be a director of the
Company for any reason other than Cause, the Option granted to such Optionee may
be exercised by him or her (or his or her representative or executor), but only
to the extent the Option was exercisable on the date such Optionee ceases to be
a director. Such Option may be exercised at any time within one (1) year after
the date such Optionee ceases to be a director of the Company (or, if later, the
date the Option becomes exercisable pursuant to Section 13 hereof), or prior to
the date on which the option expires by its terms, whichever is earlier, at
which time the Option shall terminate.
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(e) PAYMENT OF OPTION EXERCISE. Payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option shall be made
in cash, by check or such other instrument as may be acceptable to the
Committee.
(f) CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:
(i) a tender offer (or series of related offers) shall be made
and consummated for the ownership of 50% or more of the outstanding voting
securities of the Company, unless as a result of such tender offer more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to the commencement of such offer), any employee benefit
plan of the Company or its subsidiaries, and their affiliates;
(ii) the Company shall be merged or consolidated with another
corporation, unless as a result of such merger or consolidation more than 50% of
the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to such transaction), any employee benefit plan of the
Company or its subsidiaries, and their affiliates;
(iii) the Company shall sell substantially all of its assets to
another corporation that is not wholly owned by the Company, unless as a result
of such sale more than 50% of such assets shall be owned in the aggregate by the
shareholders of the Company (as of the time immediately prior to such
transaction), any employee benefit plan of the Company or its subsidiaries, and
their affiliates; or
(iv) a Person (as defined below) shall acquire 50% or more of the
outstanding voting securities of the Company (whether directly, indirectly,
beneficially or of record), unless as a result of such acquisition more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to the first acquisition of such securities by such
Person), any employee benefit plan of the Company or its subsidiaries, and their
affiliates.
For purposes of this Section 6(f), ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
addition, for such purposes, "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (A) the Company or any of its
subsidiaries; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
In the event of a Change of Control, any unexercisable or unvested
portion of the outstanding Options shall be immediately exercisable and vested
in full as of the date ten (10) days prior to the expected date of the Change of
Control. The exercise or vesting of any Option that was permissible solely by
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reason of this Section 6(f) shall be conditioned upon the consummation of the
Change of Control. In addition, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), may either assume the Company's rights and obligations
under outstanding Options or substitute outstanding Options for substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
Section 6(f), an Option shall be deemed assumed if, following the Change of
Control, the Option confers the right to acquire in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Change of Control, the consideration (whether stock, cash, other
securities or property) to which a holder of a share of Stock on the effective
date of the Change of Control was entitled. Any Options which are neither
assumed nor substituted for by the Acquiring Corporation in connection with the
Change of Control nor exercised as of the date of the Change of Control shall
terminate (if not exercised) and cease to be outstanding effective as of the
date of the Change of Control.
(g) STOCKHOLDER APPROVAL. Notwithstanding any provision to the
contrary, no Option granted pursuant to the Plan may be exercised prior to
obtaining shareholder approval of the Plan.
7. TERMINATION OR AMENDMENT OF PLAN.
(a) The Board may amend, suspend, or terminate the Plan, except that
no amendment shall be made that would impair the rights of any Optionee under
any Option theretofore granted without the Optionee's consent, and except that
no amendment shall be made without the approval of the shareholders of the
Company that would
(i) materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 8;
(ii) materially increase the benefits accruing to the Optionees
under the Plan;
(iii) materially modify the requirements as to eligibility for
participation in the Plan;
(iv) decrease the exercise price of an Option to less than 100%
of the Fair Market Value per share of Stock on the date of grant thereof; or
(v) extend the term of any Option beyond that provided for in
Section 6(c).
The Board may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without the Optionee's consent.
(b) It is the intention of the Board that the Plan comply strictly
with the provisions of Section 409A of the Code and Treasury Regulations and
other Internal Revenue Service guidance promulgated thereunder (the "Section
409A Rules") and the Board shall exercise its discretion in granting Options
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hereunder (and the terms of such Options) accordingly. The Plan and any grant of
an Option hereunder may be amended from time to time (without, in the case of an
Option, the consent of the Optionee) as may be necessary or appropriate to
comply with the Section 409A Rules.
8. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN.
Appropriate adjustments shall be made in the number and class of
shares of Stock subject to the Plan, the number of shares to be granted under
the Plan and to any outstanding Options and in the Option exercise price of any
outstanding Options in the event of a stock dividend, stock split,
recapitalization, reverse stock split, combination, reclassification or like
change in the capital structure of the Company.
9. TRANSFERABILITY OF OPTIONS.
(a) Except as provided in Section 9(b) hereof, an Option may be
exercised during the lifetime of the Optionee only by the Optionee or the
Optionee's guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution; PROVIDED, HOWEVER, that Options may be transferred under a
qualified domestic relations order (as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules promulgated thereunder).
(b) Notwithstanding the foregoing, with the consent of the Board, in
its sole discretion, an Optionee may transfer all or a portion of the Option to:
(i) an Immediate Family Member (as hereinafter defined), (ii) a trust for the
exclusive benefit of the Optionee and/or one or more Immediate Family Members,
(iii) a partnership in which the Optionee and/or one or more Immediate Family
Members are the only partners, or (iv) such other person or entity as the Board
may permit (individually, a "Permitted Transferee"). For purposes of this
Section 9(b), "Immediate Family Members" shall mean the Optionee's spouse,
former spouse, children or grandchildren, whether natural or adopted. As a
condition to such transfer, each Permitted Transferee to whom the Option or any
interest therein is transferred shall agree in writing (in a form satisfactory
to the Company) to be bound by all of the terms and conditions of the Option
Agreement evidencing such Option and any additional restrictions or conditions
as the Company may require. Following the transfer of an Option, the term
"Optionee" shall refer to the Permitted Transferee, except that, with respect to
any provision for the Company's tax withholding obligations, if any, such term
shall refer to the original Optionee. The Company shall have no obligation to
notify a Permitted Transferee of any termination of the transferred Option,
including an early termination pursuant to Section 6(d) hereof. A Permitted
Transferee shall be prohibited from making a subsequent transfer of a
transferred Option except to the original Optionee or to another Permitted
Transferee or as provided in Section 9(a) hereof.
10. RE-PRICING OF OPTIONS/REPLACEMENT OPTIONS.
The Company shall not re-price any Options or issue any replacement
Options unless the Option re-pricing or Option replacement shall have been
approved by the holders of a majority of the outstanding shares of the voting
stock of the Company.
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11. GOVERNMENT REGULATIONS.
(a) The Plan, and the grant and exercise of Options hereunder, and
the obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies, national securities exchanges and
interdealer quotation systems as may be required.
(b) It is the Company's intent that the Plan comply in all respects
with Rule 16b-3 of the Exchange Act and any regulations promulgated thereunder.
If any provision of this Plan is later found not to be in compliance with such
Rule, the provision shall be deemed null and void. All grants and exercises of
Options under this Plan shall be executed in accordance with the requirements of
Section 16 of the Exchange Act and any regulations promulgated thereunder.
12. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Board may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Board may cause a legend or legends
to be placed on any such certificates to make appropriate reference to such
restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer
upon any Optionee of the Company or any subsidiary any right to continued
service as a director with the Company, nor shall it interfere in any way with
the right of the Company may have to terminate the service of any of its
directors at any time.
(c) LIMITATION OF LIABILITY. No member of the Board, or any officer
or employee of the Company acting on behalf of the Board, shall be personally
liable for any action, determination or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board and each and any
officer or employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
13. REGISTRATION OF STOCK.
Notwithstanding any other provision in the Plan, no Option may be
exercised unless and until the Stock to be issued upon the exercise thereof has
been registered under the Securities Act and applicable state securities laws,
or are, in the opinion of counsel to the Company, exempt from such registration
in the United States. The Company shall not be under any obligation to register
under applicable federal or state securities laws any Stock to be issued upon
the exercise of an Option granted hereunder in order to permit the exercise of
an Option and the issuance and sale of the Stock subject to such Option,
although the Company may in its sole discretion register such Stock at such time
as the Company shall determine. If the Company chooses to comply with such an
exemption from registration, the Stock issued under the Plan may, at the
direction of the Committee, bear an appropriate restrictive legend restricting
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the transfer or pledge of the Stock represented thereby, and the Committee may
also give appropriate stop transfer instructions with respect to such Stock to
the Company's transfer agent.
14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on January 24, 2006; provided, however,
that the Plan shall be approved by the shareholders not later than January 23,
2007.
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Exhibit 10.55
First Amendment to Lease Agreement
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is made
effective as of January 27, 2006 (the “Effective Date”), by and between MOFFET
OFFICE PARK INVESTORS LLC, a Delaware limited liability company (“Landlord”) and
MOLECULAR DEVICES CORPORATION, a California corporation (“Tenant”).
RECITALS
A. Aetna Life Insurance Company, Landlord’s predecessor-in-interest, and
Tenant entered into that certain Lease Agreement, dated as of May 26, 2000 (the
“Lease”), which Lease covers certain premises containing approximately Sixty
Thousand Sixty-One (60,061) rentable square feet, located at 1311 Orleans Drive,
Sunnyvale, California (the “Premises”).
B. Landlord and Tenant now desire to amend the Lease to modify the Monthly
Base Rent schedule and extend the Term, subject to each of the terms,
conditions, and provisions set forth herein. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Lease.
AGREEMENT
NOW THEREFORE, in consideration of the agreements of the Landlord and
Tenant herein contained and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:
1. RECITALS Landlord and Tenant agree the above recitals are true
and correct and are hereby incorporated herein as though set forth in full.
2. EXTENDED TERM The Term of the Lease is hereby extended by a term
of approximately sixty-four months, and the Expiration Date is hereby modified
to be February 28, 2013. 3. OPTION TO RENEW The first sentence of
Paragraph 48 of the Lease is hereby modified to read as follows:
“The Tenant shall have one (1) option (the “Renewal Option”) to extend the Term
for a period of three (3) years beyond the Expiration date (the “Renewal Term”).
The Renewal Option is personal to Tenant and may not be exercised by any
sublessee or assignee, or by any other successor or assign of Tenant.” 4.
BASE RENT The Monthly Base Rent payable by Tenant to Landlord, in
accordance with Paragraph 4 of the Lease, is hereby modified to be payable in
accordance with the following schedule:
Monthly Base Rent Period Sq.Ft. Monthly Base Rate
Monthly Base Rent
3/1/06-2/28/07 60,061 x $2.18 =$130,932.98
3/1/07-2/29/08 60,061 x $2.24 =$134,536.64
3/1/08-2/28/09 60,061 x $2.31 =$138,740.91
3/1/09-2/28/10 60,061 x $2.38 =$142,945.18
3/1/10-2/28/11 60.061 x $2.45 =$147,149.45
3/1/11-2/28/12 60,061 x $2.53 =$151,954.33
3/1/12-2/28/13 60,061 x $2.60 =$156,158.60
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5. REFURBISHMENT ALLOWANCE Tenant accepts the Premises as suitable
for Tenant’s intended use and as being in good and sanitary operating order,
condition, use or occupancy which may be made thereof and without any
improvements or alterations by Landlord. Landlord agrees to contribute an amount
not to exceed $3.00 per square ($180,183.00) (“Landlord’s Contribution”) toward
the cost of any Alterations made to the Premises to refurbish the same
(“Tenant’s Refurbishment Work”). Landlord shall pay Landlord’s Contribution to
Tenant as reimbursement for actual and reasonable costs incurred by Tenant in
performing Tenant’s Refurbishment Work within thirty (30) days following the
later to occur of (i) Landlord’s receipt of a Certificate of Occupancy for the
Premises, if such is required in connection with Tenant’s Refurbishment Work;
(ii) Landlord’s receipt of a certificate from Tenant’s licensed contractor
certifying completion of Tenant’s Refurbishment Work in accordance with the
construction plans and specifications therefore, which plans and specifications
have previously been approved by Landlord; (iii) Landlord’s receipt of
documentary evidence reasonably satisfactory to Landlord of all of Tenant’s
expenditures for work performed and materials used in completing Tenant’s
Refurbishment Work; and (iv) Landlord’s receipt of final, unconditional lien
releases in form and content satisfactory to Landlord from all persons or
entities providing labor and/or materials in connection with Tenant’s
Refurbishment Work. Notwithstanding anything herein to the contrary, if any
portion of the Landlord’s Contribution remains unused by Tenant as on March 1,
2007, then Landlord shall have no further obligation to reimburse Tenant for any
costs of Tenant’s Refurbishment Work and any such unused portion of Landlord’s
Contribution shall belong to Landlord. If the cost of Tenant’s Refurbishment
Work exceeds Landlord’s Contribution, then such excess amount shall be borne
solely by Tenant. 6. GENERAL PROVISIONS
(a) Ratification and Entire Agreement. Except as expressly amended by this
Amendment, the Lease shall remain unmodified and in full force and effect. As
modified by this Amendment, the Lease is hereby ratified and confirmed in all
respects. In the event of any inconsistencies between the terms of this
Amendment and the Lease, the terms of this Amendment shall prevail. The Lease as
mended by this Amendment constitutes the entire understanding and agreement of
Landlord and Tenant with respect to the subject matter hereof, and all prior
agreements, representations, and understandings between Landlord and Tenant with
respect to the subject matter hereof, whether oral or written, are or should be
deemed to be null and void, all of the foregoing having been merged into this
Amendment. Landlord and Tenant do each hereby acknowledge that it and/or its
counsel have reviewed and revised this Amendment, and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Amendment. This
Amendment may be amended or modified only by an instrument in writing signed by
each of the Landlord and Tenant. (b) Brokerage. Tenant hereby represents
and warrants to Landlord that it has not retained the services of any real
estate broker, finder or any other person whose services would for the basis for
any claim for any commission or fee in connection with this Amendment or the
transactions contemplated hereby, other than Cresa Partners. Tenant hereby
agrees to save, defend, indemnify and hold Landlord free and harmless from all
losses, liabilities, damages, and costs and expenses arising from any breach of
its warranty and representation as set forth in the preceding sentence,
including Landlord’s reasonable attorneys’ fees. (c) Authority; Applicable
Law; Successors Bound. Landlord and Tenant do each hereby represent and warrant
to the other that this Amendment has been duly authorized by all necessary
action on the part of such party and that such party has full power and
authority to execute, deliver and perform its obligations under this Amendment.
This Amendment shall be governed by and construed under the laws of the State of
California, without giving effect to any principles of conflicts of law that
would result in the application of the laws of any other jurisdiction. This
Amendment shall inure to the benefit of and be
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binding upon Landlord and Tenant and their respective successors and
permitted assigns with respect to the Lease. (d) Counterparts. This
Amendment may be executed in counterparts each of which shall be deemed an
original but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the
date first above written.
LANDLORD:
MOFFET OFFICE PARK INVESTORS LLC,
A Delaware limited liability company
By: UBS Realty Investors LLC,
A Massachusetts limited liability company,
Its Manager
By: /s/ Thomas Enger
Thomas Enger
Director
TENANT:
MOLECULAR DEVICES CORPORATION,
A California Corporation
By: /s/ Tim Harkness
Tim Harkness
Chief Financial Officer and Senior Vice President Finance and Operations
By: /s/ Patricia Sharp
Patricia Sharp
Vice President Human Resources
In Conformance with California Corporations Code §313,
this document is to be signed by (i) the Chairman of the
Board, the president or any vice president, and (ii)
the secretary, any assistant secretary, the chief financial
officer, or any assistant treasurer of the Tenant.
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Exhibit 10.22
SANDERSON FARMS, INC.
FORM OF PERFORMANCE SHARE AGREEMENT
This PERFORMANCE SHARE AGREEMENT (this “Agreement”), made and entered into
as of the ___day of , 2006 (the “Grant Date”), by and
between (the
“Participant”) and Sanderson Farms, Inc. (together with its subsidiaries and
affiliates, the “Company”), sets forth the terms and conditions of a Performance
Share Award issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock
Incentive Plan, adopted on February 17, 2005 (the “Plan”) and this Agreement.
Any capitalized term used but not defined herein shall have the meaning ascribed
to such term in the Plan.
1. Grant and Issuance of Performance Shares.
(a) In consideration of and as an incentive to the Participant’s
performance of future services on behalf of the Company, and for no additional
consideration, the Company hereby grants to the Participant, as of the Grant
Date, the right to receive at the end of the Performance Period (hereinafter
defined) that certain number of shares of the Company’s common stock, par value
$1.00 per share (the “Performance Shares”), determined in accordance with
Section 2 below, subject to the further terms and conditions set forth herein
and in the Plan. The right to receive Performance Shares is subject to
forfeiture as provided herein and may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of by the Participant, other than by
will or by the laws of descent and distribution of the state in which the
Participant resides on the date of his death. The “Performance Period” means the
three fiscal years of the Company commencing November 1, 2006.
(b) Except as otherwise provided in this Agreement or the Plan, the
right to receive Performance Shares shall vest and no longer be subject to
forfeiture or any transfer restrictions hereunder at the end of the Performance
Period, so long as the Participant has remained continuously employed by the
Company from the Grant Date through such date.
(c) In the event of (i) the Participant’s termination of employment
with the Company by reason of death or Disability, (ii) his termination of
employment with the Company after his attainment of eligibility for retirement
(as determined by the Board from time to time), or (iii) a Change of Control
prior to the end of the Performance Period, the Participant shall be entitled to
receive, at the end of the Performance Period, a pro rata portion of the number
of Performance Shares to which he otherwise would have been entitled, determined
in accordance with the ratio that the number of months the Participant was
employed with the Company during the Performance Period bears to the total
number of months in the Performance Period. If the Participant’s employment with
the Company is terminated for any other reason, voluntarily or involuntarily,
prior to the expiration of the Performance Period, then the right to receive
Performance Shares at the end of the Performance Period shall immediately be
forfeited.
--------------------------------------------------------------------------------
(d) If the Board determines in good faith that the Participant has
engaged in any Detrimental Activity during the period that the Participant is
employed by the Company or during the two-year period following the
Participant’s voluntary termination of employment or his termination by the
Company for Cause, then as of the date of the Board determination the
Participant’s right to receive Performance Shares shall be forfeited or, if the
Performance Shares have already been issued, the Participant shall repay to the
Company the fair market value of the Performance Shares as of their issue date.
2. Issuance of Performance Shares.
(a) The Participant’s Performance Share Award is a function of his
“Target ROE Award” and his “Target ROS Award,” calculated as set forth below.
The Participant’s Target ROE Award is Shares. The
Participant’s Target ROS Award is Shares.
(b) At the end of the Performance Period, the Board (or its permitted
delegate) will calculate the Company’s Return on Equity for each of its fiscal
years during the Performance Period and divide the sum by that number of years
(the “Average ROE”). “Return on Equity” means (i) the Company’s net after-tax
income for the fiscal year in question, divided by (ii) the average of the
shareholders’ equity as of the end of the preceding fiscal year and the
shareholders’ equity as of the end of the fiscal year in question, in each case
as shown in the Company’s audited financial statements (provided that if there
is any change in accounting standards used by the Company after the Grant Date,
Return on Equity will be calculated without regard to such change). The
Participant’s “Threshold ROE” is ___ percent; his “Target ROE” is ___ percent;
and his “Maximum ROE” is ___ percent. If, at the end of the Performance Period,
the Company’s Average ROE is equal to the Threshold ROE, the Participant will be
entitled to receive 50 percent of the Target ROE Award; if the Company’s Average
ROE is equal to the Target ROE, the Participant will be entitled to receive
100 percent of the Target ROE Award; and if the Company’s Average ROE is equal
to or greater than the Maximum ROE, the Participant will be entitled to receive
150 percent of the Target ROE Award. If the Company’s Average ROE is otherwise
between the Threshold ROE and the Maximum ROE, the number of Performance Shares
that the Participant is entitled to receive will be calculated using a
straight-line interpolation. If the Company’s Average ROE is less than the
Threshold ROE, the Participant will not be entitled to receive any Shares as
part of his Target ROE Award. In no event will the Participant be entitled to
receive pursuant to this Agreement more than 150 percent of the Target ROE
Award.
(c) Likewise, at the end of the Performance Period, the Board (or its
permitted delegate) will calculate the Company’s Return on Sales for each of its
fiscal years during the Performance Period and divide the sum by that number of
years (the “Average ROS”). “Return on Sales” means the Company’s net after-tax
income for the fiscal year in question divided by its net sales for such fiscal
year, in each case as shown in the Company’s audited financial statements
(provided that if there is any change in accounting standards used by the
Company after the Grant Date, Return on Sales will be calculated without regard
to such change). The Participant’s “Threshold ROS” is ___ percent; his “Target
ROS” is ___ percent; and his “Maximum ROS” is ___ percent. If, at the end of the
Performance Period, the Company’s Average ROS is equal to
--------------------------------------------------------------------------------
the Threshold ROS, the Participant will be entitled to receive 50 percent of the
Target ROS Award; if the Company’s Average ROS is equal to the Target ROS, the
Participant will be entitled to receive 100 percent of the Target ROS Award; and
if the Company’s Average ROS is equal to or greater than the Maximum ROS, the
Participant will be entitled to receive 150 percent of the Target ROS Award. If
the Company’s Average ROS is otherwise between the Threshold ROS and the Maximum
ROS, the number of Performance Shares that the Participant is entitled to
receive will be calculated using a straight-line interpolation. If the Company’s
Average ROS is less than the Threshold ROS, the Participant will not be entitled
to receive any Shares as part of his Target ROS Award. In no event will the
Participant be entitled to receive pursuant to this Agreement more than
150 percent of the Target ROS Award.
(d) Within 60 days of the end of the Performance Period, certificates
representing the Performance Shares that the Participant is entitled to receive
shall be registered in the Participant’s name and be delivered to the
Participant (or an appropriate book entry shall be made), subject to Section 6
pertaining to the withholding of taxes and Section 14 pertaining to the
Securities Act of 1933, as amended (the “Securities Act”); provided, however,
that the Board may cause such legend or legends to be placed on any such
certificates as it may deem advisable under Applicable Law. Fractional shares
will be issued where necessary. Upon issuance, Performance Shares will be fully
vested and transferable, except to the extent that their transfer is restricted
by Applicable Law.
(e) If this Performance Share Award is intended to satisfy the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), then prior to the issuance of the Performance Shares, the
Compensation Committee of the Board shall certify in writing that the
performance goals and any other material terms of the Award were in fact
satisfied.
3. No Rights as a Stockholder.
Except as otherwise provided in this Agreement or the Plan, until the
issuance of Performance Shares to him, the Participant shall have, with respect
to the Performance Shares, none of the rights of a stockholder of the Company,
including the right to vote the Performance Shares and the right to receive any
dividends or other distributions with respect thereto.
4. Adjustments.
If any change in corporate capitalization, such as a stock split, reverse
stock split, stock dividend, or any corporate transaction such as a
reorganization, reclassification, merger or consolidation or separation,
including a spin-off of the Company or sale or other disposition by the Company
of all or a portion of its assets, any other change in the Company’s corporate
structure, or any distribution to stockholders (other than a cash dividend)
results in the outstanding Shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
shares or other securities of the Company, or for shares of stock or other
securities of any other corporation, or new, different or additional shares
--------------------------------------------------------------------------------
or other securities of the Company or of any other corporation being received by
the holders of outstanding Shares, then the number of Performance Shares to
which the Participant is entitled pursuant to this Agreement shall be adjusted
in the same manner as other outstanding Shares of the Company.
5. Validity of Share Issuance.
The Performance Shares have been duly authorized by all necessary corporate
action of the Company and when issued will be validly issued, fully paid and
non-assessable.
6. Taxes and Withholding.
As soon as practicable on or after the date as of which an amount first
becomes includible in the gross income of the Participant for federal income tax
purposes with respect to this Award of Performance Shares, the Participant shall
pay to the Company, or make arrangements satisfactory to the Company regarding
the payment of, or the Company may deduct or withhold from any cash or property
payable to the Participant, an amount equal to all federal, state, local and
foreign taxes that are required by Applicable Law to be withheld with respect to
such includible amount. Notwithstanding anything to the contrary contained
herein, the Participant may, if the Company consents, discharge this withholding
obligation by directing the Company to withhold Performance Shares having a Fair
Market Value on the date that the withholding obligation is incurred equal to
the amount of tax required to be withheld in connection therewith, as determined
by the Board.
7. Notices.
Any notice to the Company provided for in this Agreement shall be in
writing and shall be addressed to it in care of its Secretary at its principal
executive offices, and any notice to the Participant shall be addressed to the
Participant at the current address shown on the payroll records of the Company.
Any notice shall be deemed to be duly given if and when properly addressed and
posted by registered or certified mail, postage prepaid.
8. Legal Construction.
(a) Severability. If any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or this Agreement under any law with respect to which the
Plan or this Agreement is intended to qualify, or would cause compensation
deferred under the Plan to be includible in a Plan participant’s gross income
pursuant to Section 409A(a)(1) of the Code, as determined by the Board, such
provision shall be construed or deemed amended to conform to Applicable Law or,
if it cannot be construed or deemed amended without, in the determination of the
Board,
--------------------------------------------------------------------------------
materially altering the intent of the Plan or the Agreement, it shall be
stricken and the remainder of this Agreement shall remain in full force and
effect.
(b) Gender and Number. Where the context admits, words in any gender
shall include the other gender, words in the singular shall include the plural
and words in the plural shall include the singular.
(c) Governing Law. To the extent not preempted by federal law, this
Agreement shall be construed in accordance with and governed by the laws of the
State of Mississippi.
9. Incorporation of Plan.
This Agreement and the Performance Share Award made pursuant hereto are
subject to, and this Agreement hereby incorporates and makes a part hereof, all
terms and conditions of the Plan that are applicable to Agreements and Awards
generally and to Performance Share Awards in particular. The Board has the right
to interpret, construe and administer the Plan, this Agreement and the
Performance Share Award made pursuant hereto. All acts, determinations and
decisions of the Board (including its Compensation Committee) made or taken
pursuant to grants of authority under the Plan or with respect to any questions
arising in connection with the administration and interpretation of the Plan,
including the severability of any and all of the provisions thereof and the
calculation of the Average ROE, Average ROS and the number of Performance Shares
that the Participant is entitled to receive pursuant to this Agreement, shall be
in the Board’s sole discretion and shall be conclusive, final and binding upon
all parties, including the Company, its stockholders, Participants, Eligible
Participants and their estates, beneficiaries and successors. The Participant
acknowledges that he has received a copy of the Plan.
10. No Implied Rights.
Neither this Agreement nor the issuance of any Performance Shares shall
confer on the Participant any right with respect to continuance of employment or
other service with the Company. Except as may otherwise be limited by a written
agreement between the Company and the Participant, and acknowledged by the
Participant, the right of the Company to terminate at will the Participant’s
employment with it at any time (whether by dismissal, discharge, retirement or
otherwise) is specifically reserved by the Company.
11. Integration.
This Agreement and the other documents referred to herein, including the
Plan, or delivered pursuant hereto, contain the entire understanding of the
parties with respect to their subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein and restrictions imposed by the Securities Act and applicable state
securities laws . This
--------------------------------------------------------------------------------
Agreement, including the Plan, supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
12. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but which together constitute one and the same
instrument.
13. Amendments.
The Board may, at any time, without consent of or receiving further
consideration from the Participant, amend this Agreement and the Performance
Share Award made pursuant hereto in response to, or to comply with changes in,
Applicable law. To the extent not inconsistent with the terms of the Plan, the
Board may, at any time, amend this Agreement in a manner that is not unfavorable
to the Participant without the consent of the Participant. The Board may amend
this Agreement and the Performance Share Award made pursuant hereto otherwise
with the written consent of the Participant.
14. Securities Act.
(a) The issuance and delivery of the Performance Share Award to the
Participant have been registered under the Securities Act by a Registration
Statement on Form S-8 that has been filed with the Securities and Exchange
Commission (“SEC”) and has become effective. The Participant acknowledges
receipt from the Company of its Prospectus dated November 28, 2005, relating to
the Performance Share Award.
(b) If the Participant is an “affiliate” of the Company, which
generally means a director, executive officer or holder of 10% or more of its
outstanding shares, at the time certificates representing Performance Shares are
delivered to the Participant, such certificates shall bear the following legend,
or other similar legend then being generally used by the Company for
certificates held by its affiliates:
“THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT
IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM
REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM
REGISTRATION.”
The Company shall remove such legend upon request by the Participant
if, at the time of such request, the shares are eligible for sale under SEC
Rule 144(k), or any provision that has replaced it, in the opinion of the
Company’s counsel.
15. Arbitration.
--------------------------------------------------------------------------------
Any controversy or claim arising out of or relating to this
Performance Share Agreement shall be settled by arbitration administered by the
American Arbitration Association under its Commercial Arbitration Rules and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
IN WITNESS WHEREOF, the Participant has executed this Agreement on his own
behalf, thereby representing that he has carefully read and understands this
Agreement and the Plan as of the day and year first written above, and the
Company has caused this Agreement to be executed in its name and on its behalf,
all as of the day and year first written above.
SANDERSON FARMS, INC.
By:
Name:
Title:
Participant
|
Exhibit 10.1
SUMMARY OF EXECUTIVE OFFICER COMPENSATION FOR 2006
Executive Officer Compensation for 2006—Base Salary and Target Bonus
On March 16, 2006, the Compensation Committee of the Board of Directors of
Sepracor Inc. (the “Company”) approved the annual salaries to be paid to the
Company’s executive officers during 2006. The Compensation Committee of the
Company’s Board of Directors may also grant a discretionary bonus to each of the
Company’s executive officers for work performed by such officer during the year
ended December 31, 2006. Each officer’s bonus for 2006 shall be determined based
on, among other things, the Company’s overall performance, as well as such
officer’s individual performance, during the fiscal year ended December 31,
2006. Each executive officer has a target bonus for 2006 that is based on a
percentage of such executive officer’s 2006 annual base salary. The table below
sets forth the annual base salaries, target bonus percentages and target bonuses
for 2006 for each of the Company’s executive officers:
Executive Officer
Annual Salary
2006 Target Bonus
Percentage
2006 Target Bonus
Timothy J. Barberich
Chief Executive Officer
$
875,000
80
%
$
700,000
William J. O’Shea
President and Chief Operating Officer
$
525,000
60
%
$
315,000
Mark H.N. Corrigan, M.D.
Executive Vice President, Research and Development
$
450,000
50
%
$
225,000
David P. Southwell
Executive Vice President, Chief Financial Officer and Secretary
$
440,000
45
%
$
198,000
Robert F. Scumaci
Executive Vice President, Finance and Administration, Treasurer
$
430,000
45
%
$
193,500
Douglas E. Reedich, Ph.D., J.D.
Senior Vice President, Legal Affairs
$
380,000
40
%
$
152,000
Executive Officer Compensation for 2006—Stock-Based Awards
Each executive officer may also be granted, from time to time, stock options,
restricted stock or other awards pursuant to the Company’s stock incentive
plans. The stock options granted to executive officers typically vest either
(1) upon the achievement of specified corporate objectives or (2) in five equal
annual installments commencing one year from the date of grant.
Other Compensation
The Company has also (1) entered into letter agreements with certain of its
executive officers, (2) entered into retention agreements with each of its
executive officers and (3) agreed to make gross up payments to each of its
executive officers in the event that any payments received by them in connection
with a change of control constitute parachute payments under Section 280G of the
Internal Revenue Code of 1986, as amended. The Company has previously filed
these letter agreements, retention agreements and a summary of the 280G gross up
plan with the Securities and Exchange Commission.
--------------------------------------------------------------------------------
Bonuses Paid to Executive Officers for Service During Fiscal Year 2005
In addition to the foregoing adjustments to executive compensation, the
Compensation Committee of the Company’s Board of Directors approved cash bonus
payments for the Company’s executive officers in consideration of their service
to the Company during the fiscal year ended December 31, 2005. The Company made
the bonus payments pursuant to its previously announced executive officer bonus
program for the fiscal year ended December 31, 2005. The payments were based on,
among other things, the Company’s overall performance, as well as such officer’s
individual performance during 2005. The table below sets forth such bonus
payments.
Executive Officer
Cash Bonus for
2005 Performance
Timothy J. Barberich
Chief Executive Officer
$
330,000
William J. O’Shea
President and Chief Operating Officer
$
382,500
Mark H.N. Corrigan, M.D.
Executive Vice President, Research and Development
$
184,500
David P. Southwell
Executive Vice President, Chief Financial Officer and Secretary
$
147,000
Robert F. Scumaci
Executive Vice President, Finance and Administration, Treasurer
$
169,000
Douglas E. Reedich, Ph.D., J.D.
Senior Vice President, Legal Affairs
$
142,600
-------------------------------------------------------------------------------- |
Exhibit 10.1
[Execution Version]
CREDIT SLEEVE AND REIMBURSEMENT AGREEMENT
dated as of
September 24, 2006
among
RELIANT ENERGY POWER SUPPLY, LLC,
The Other Reliant Retail Obligors referred to herein,
as Reimbursement Guarantors,
MERRILL LYNCH COMMODITIES, INC.,
as Sleeve Provider,
and
MERRILL LYNCH & CO., INC.,
as ML Guarantee Provider
--------------------------------------------------------------------------------
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters
1
1.01
Certain Defined Terms
1
1.02
Terms Generally
32
1.03
Accounting Terms and Determinations
32
Section 2. Credit Sleeve for Reliant Retail Obligors
32
2.01
Credit Sleeve Generally; Exclusivity
32
2.02
Credit Sleeve of OTC Trading and Hedging Activities
35
2.03
Credit Sleeve of Exchange Traded Hedging Activities
40
2.04
Credit Sleeve of C&I and Governmental Contracts
41
2.05
Credit Sleeve of Regulatory Obligations
41
2.06
Term
41
2.07
Posting Collateral to Increase K
41
Section 3. Payments, Fees and Records
42
3.01
Notice of Payment on ML Guarantee or Collateral Foreclosure
42
3.02
Repayment of Draw Reimbursement Obligations
42
3.03
Interest
42
3.04
Monthly Sleeve Fee
44
3.05
Make-whole Payment
44
3.06
Structuring Fee
44
3.07
Payments Generally
44
3.08
Records; Prima Facie Evidence
44
Section 4. Conditions
45
4.01
Initial Conditions for Merrill Parties
45
4.02
Initial Conditions for Reliant Retail Obligors
48
4.03
Conditions to Certain Obligations of the Merrill Parties
49
Section 5. Representations and Warranties
50
5.01
Existence, Qualification and Power; Compliance with Laws
50
5.02
Authorization; No Contravention
50
5.03
Governmental Authorization; Other Consents
51
5.04
Binding Effect
51
5.05
Financial Statements; No Material Adverse Effect
51
5.06
Litigation
52
5.07
No Default
52
5.08
Ownership of Property; Liens
52
5.09
Environmental Matters
52
--------------------------------------------------------------------------------
5.10
Insurance
53
5.11
Taxes
53
5.12
ERISA Compliance
54
5.13
Subsidiaries; Equity Interests
54
5.14
Margin Regulations; Investment Company Act; Public Utility Holding Company Act
55
5.15
Disclosure
55
5.16
Compliance with Laws
55
5.17
Intellectual Property; Licenses, Etc
56
5.18
Solvency
56
5.19
Perfection, Etc
56
5.20
Employees, Etc
56
5.21
Information Technology Systems
56
5.22
Marks
56
Section 6. Affirmative Covenants
57
6.01
Financial Statements
57
6.02
Certificates; Other Information
58
6.03
Notices
59
6.04
Payment of Obligations
59
6.05
Preservation of Existence, Etc
59
6.06
Maintenance of Properties
60
6.07
Maintenance of Insurance
60
6.08
Compliance with Laws
60
6.09
Books and Records
60
6.10
Inspection Rights
60
6.11
Addition and Removal of Transaction Parties; Collateral Matters; Waterfall
61
6.12
Further Assurances
64
6.13
Risk Management Policy
64
6.14
Employees
66
6.15
Information Technology Systems
66
6.16
Marks
66
6.17
Reliant Parent Services Agreement
67
Section 7. Negative Covenants
67
7.01
Liens
67
7.02
Investments and Acquisitions
67
7.03
Indebtedness
68
7.04
Consolidation and Mergers
69
7.05
Asset Sales
70
7.06
Limitation on Issuances and Sales of Certain Equity Interests
70
7.07
Restricted Payments
71
7.08
Line of Business
71
7.09
Transactions with Affiliates
71
7.10
Restrictive Agreements
72
7.11
Modification of Transaction Documents
73
7.12
Fiscal Year
73
ii
--------------------------------------------------------------------------------
7.13
Specified Transaction
73
7.14
Services
73
7.15
Tax Agreements
73
7.16
Posting of Collateral
73
7.17
Accepted Products
73
Section 8. Events of Default
74
8.01
Reliant Events of Default
74
8.02
Sleeve Provider Events of Default
76
Section 9. Remedies and Termination
78
9.01
Remedies of Sleeve Provider
78
9.02
Remedies of REPS
78
9.03
Certain Intercreditor Agreements
80
9.04
Certain Limitations on Remedies
81
Section 10. Unwind
81
10.01
Permitted Activities during Unwind Period
81
Section 11. Reimbursement Guaranty by Other Reliant Retail Parties
83
11.01
Reimbursement Guaranty of the Obligations
83
11.02
Payment by Guarantors
83
11.03
Liability of Reimbursement Guarantors Absolute
83
11.04
Waivers by Reimbursement Guarantors
85
11.05
Reimbursement Guarantors’ Rights of Subrogation, Contribution, etc
86
11.06
Subordination of Other Obligations
86
11.07
Continuing Reimbursement Guaranty
86
11.08
Authority of Reimbursement Guarantors or REPS
87
11.09
Financial Condition of REPS
87
11.10
Bankruptcy, etc
87
Section 12. Miscellaneous
88
12.01
Notices
88
12.02
Confidentiality; Limitation on Use of Information
89
12.03
Reliant Employees
90
12.04
Provisions relating to Collateral Trust Agreement and Reimbursement Guarantee
91
12.05
Waiver
92
12.06
Amendments, Etc
92
12.07
Expenses, Etc
92
12.08
Successors and Assigns
93
12.09
Assignments
93
12.10
Survival
93
12.11
Counterparts
93
12.12
Governing Law; Jurisdiction; Etc
93
12.13
Certain Dispute Resolution Procedures
94
iii
--------------------------------------------------------------------------------
12.14
Captions
95
12.15
Limitation on Interest
95
12.16
Integration
95
iv
--------------------------------------------------------------------------------
Schedules and Exhibits
SCHEDULE 1.01(a)
-
Risk Management Policy Violations
SCHEDULE 1.01(b)
-
Calculations Relating to Exchange Traded Contracts
SCHEDULE 1.01(c)
-
Determination of K and VaR
SCHEDULE 1.01(d)
-
Information Technology Systems
SCHEDULE 1.01(e)
-
Trademarks
SCHEDULE 1.01(f)
-
Delegation of Authority and Credit Limit Approval Guidelines
SCHEDULE 2.02(a)
-
Counterparty Document Negotiation Provisions
SCHEDULE 2.04
C&I Contracts and Governmental Contracts receiving ML Guarantee on Effective
Date
SCHEDULE 3.04
-
Calculation and Settlement of Monthly Sleeve Fee
SCHEDULE 3.05
Calculation of Make-whole Payment
SCHEDULE 3.07(a)
Merrill Account
SCHEDULE 5.13
-
List of Subsidiaries
SCHEDULE 7.13
-
List of Retail Services
SCHEDULE 12.13
-
List of Calculation Agents
EXHIBIT A1
–
Form of ML Guarantee for Accepted Counterparties
EXHIBIT A2
–
Form of ML Guarantee for C&I Customers
EXHIBIT B
–
List of Accepted Counterparties
EXHIBIT C1
–
Form of EEI Power Purchase and Hedging Contract
EXHIBIT C2
–
Form of ISDA Power Purchase and Hedging Contract
EXHIBIT D1
–
Form of EEI Collateral Annex
EXHIBIT D2
–
Form of ISDA Credit Support Annex
EXHIBIT E1
–
Reliant Energy — Retail Risk Policy
EXHIBIT E2
–
Wholesale Risk Control Policy
EXHIBIT F
–
ERCOT Asset List
EXHIBIT G
–
Form of Joinder Agreement
EXHIBIT H
–
Form of Compliance Certificate
EXHIBIT I1
–
Sleeve Provider’s Employees with Access to Certain Reliant Retail Obligor
Information
EXHIBIT I2
–
Reliant Retail Obligors’ Employees with Access to Certain Merrill Party
Information
v
--------------------------------------------------------------------------------
CREDIT SLEEVE AND REIMBURSEMENT AGREEMENT dated as of September 24, 2006 (this
“Agreement”) among RELIANT ENERGY POWER SUPPLY, LLC, a Delaware limited
liability company (“REPS”), the Other Reliant Retail Obligors listed on the
signature pages hereto, MERRILL LYNCH COMMODITIES, INC., a Delaware corporation,
as sleeve provider (the “Sleeve Provider”), and MERRILL LYNCH & CO., INC., a
Delaware corporation, as guarantee provider (the “ML Guarantee Provider”).
The Reliant Retail Obligors have requested that the Sleeve Provider arrange for
the provision of certain guarantees of the ML Guarantee Provider and the posting
of required collateral in connection therewith, in each case, in connection with
the trading and related activities of the Reliant Retail Obligors in the Retail
Energy Business. The Sleeve Provider is prepared to arrange for such guarantees
and other required posting of collateral upon the terms and conditions hereof,
and, accordingly, the Parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following respective meanings:
“Accepted Counterparty” means each Core Accepted Counterparty and Other Accepted
Counterparty.
“Accepted Exchange” means the NYMEX, ICE and, with the prior written consent of
the Sleeve Provider, such consent not to be unreasonably withheld or delayed,
any other public trading exchange commonly used by the natural gas or electric
power industries for commercial transactions in Accepted Products.
“Accepted Product” means, (a) in general, (i) physical and financial power,
power basis, natural gas, natural gas basis and heat rate, (ii) options on the
foregoing, (iii) weather derivatives, ancillary services, transmission
congestion rights, and renewable energy credits, and (iv) other structured
products related to the hedging of retail electricity, as such other structured
products may be approved by the Sleeve Provider, including in such approval such
related changes to the terms and conditions of this Agreement as the Merrill
Parties deem appropriate (including the addition of related Counterparty
Limitations in respect of such products), but with approval of such other
structured products not to be unreasonably withheld, conditioned or delayed
unless the impact thereof on K or VaR are not measurable using the methodology
employed on Schedule 1.01(c) or, in the case of products traded on an Accepted
Exchange, such products are not capable of being assigned to the Sleeve Provider
in connection with the execution of a related over the counter trade between the
Sleeve Provider and REPS in a manner similar to that as provided in Section
2.03, in the Sleeve Provider’s reasonable discretion, and (b) in respect of each
Accepted Counterparty, each of the foregoing with respect to such Accepted
Counterparty set forth on Exhibit B; provided that (x) all Accepted Products
shall be reasonably related to the electricity market regulated in ERCOT and (y)
all Accepted Products shall have transactions thereunder with delivery or
settlement dates, as applicable, which commence within six months of the
consummation of the transaction and end on or before the earlier of (i) the
fifth
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anniversary of the first delivery or settlement date under the transaction or
(ii) the third anniversary of the then current expiry date of the Scheduled
Term.
“Accepted Retail Product” has the meaning ascribed thereto in Schedule 1.01(c).
“Accepted Trades” means each trade, including purchases and sales, relating to
an Accepted Product with an Accepted Counterparty under a Power and Hedging
Contract; provided that wholesale physical power sales shall be limited to sales
within the ERCOT market area.
“Acquisition” means any transaction or any series of related transactions by
which a Person (1) acquires any going business or all or substantially all of
the assets of any other Person, or division thereof, whether through purchase of
assets, merger, or otherwise or (2) directly or indirectly acquires 100% of the
Equity Interests of any other Person.
“Adjusted Volume” means, in respect of the volume under a Mirror OTC Contract,
the volume of the related Exchange Traded Contract(s), adjusted in accordance
with Schedule 1.01(b).
“Affiliate” of any specified Person means any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect common
Control with such specified Person; provided that a Person will be deemed to be
an Affiliate of RERH Holdings if RERH Holdings has knowledge that such Person
beneficially owns 10% or more of the Voting Stock of RERH Holdings or, so long
as Reliant Parent has a direct or indirect beneficial interest in RERH Holdings,
Reliant Parent; provided, further, that RERH Holdings shall only be deemed to
have knowledge of any Person beneficially owning 10% or more of the Reliant
Parent’s Voting Stock if such Person has filed a statement of beneficial
ownership pursuant to Sections 13(d) or 13(g) of the Exchange Act or has
provided written notice thereof to RERH Holdings.
“Allocable State Taxes” means any state or local taxes other than Applicable
State Taxes.
“Applicable State Taxes” means any state or local taxes (i) that are determined
by reference solely to the income, transactions or attributes of the Reliant
Retail Obligors, and (ii) the sole liability for which is imposed on the Reliant
Retail Obligors.
“Agreement” has the meaning ascribed thereto in the title paragraph hereto. The
Agreement is sometimes referred to as the “CSRA”.
“Asset Sale” means the sale, lease, conveyance or other disposition of any
assets. Notwithstanding the foregoing, none of the following items will be
deemed to be an Asset Sale:
(1) any single transaction or series of related transactions that (i)
involves assets with gross cash proceeds of $500,000 or less or (ii) involves
assets with gross cash proceeds of greater than $500,000 and less than
$5,000,000 to the extent the aggregate of such transactions since the Execution
Date does not exceed $25,000,000;
(2) a transfer of assets between or among the Reliant Retail Obligors;
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(3) an issuance of Equity Interests by any Subsidiary of RERH Holdings
to any Reliant Retail Obligor;
(4) the sale or lease of products or services in the ordinary course
of business, the sale or other disposition of damaged, worn out or obsolete
assets or assets no longer used or useful in RERH Holdings’ or any of its
Subsidiaries’ business and the sale or other disposition of accounts receivable
which are more than sixty (60) days past due for collection;
(5) the sale or other disposition of cash or Cash Equivalents in the
ordinary course of the Retail Energy Business;
(6) any Permitted Investment;
(7) a disposition resulting from any Condemnation; and
(8) a disposition of assets in connection with a foreclosure, transfer
or deed in lieu of foreclosure or other exercise of remedial action.
“Attributable Debt” means, on any date, (a) in respect of a sale and leaseback
transaction, the present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended (such present value to
be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with GAAP; provided, that if such
sale and leaseback transaction results in a Capital Lease Obligation, the amount
of Indebtedness represented thereby will be determined in accordance with the
definition of “Capital Lease Obligation”) and (b) in respect of any Synthetic
Lease Obligation or financing lease, the amount of the remaining lease payments
under the relevant lease that would as of such date be required to be
capitalized on a balance sheet in accordance with GAAP if such lease were
accounted for as a Capital Lease Obligation.
“Audited Financial Statements” has the meaning ascribed thereto in Section
4.01(h).
“Audit Committee” means the Audit Committee of the Board of Directors or any
equivalent committee of the Board of Directors having equivalent
responsibilities to the Audit Committee of the Board of Directors of the Reliant
Parent as of the Execution Date.
“Available Cash Flow” means funds available to any Reliant Retail Obligor
pursuant to Section 6.11(c)(ix).
“Available Commitment” has the meaning ascribed thereto in Section 6.11(c).
“Available Contributions” means funds from cash contributions by the Reliant
Parent to RERH Holdings or through RERH Holdings to any Reliant Retail Obligor.
“Available Funds” means any Available Cash Flow or Available Contributions.
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“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as heretofore and
hereafter amended, as codified at 11 U.S.C. Section 101 et seq.
“Bankruptcy Event” means, with respect to any Person, a “Bankruptcy” (as defined
in the 2003 ISDA Credit Derivatives Definitions, published by the International
Swaps and Derivatives Association, Inc., determined as if such Person were a
“Reference Entity”) of such Person.
“Base Rate” means for any day a fluctuating rate per annum equal to the higher
of (a) the Federal Funds Rate in effect for such day plus 1/2 of 1% and (b) the
Prime Rate in effect for such day. Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Rate shall be effective from and
including the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.
“Bcf” means one billion cubic feet.
“Blocked Account Agreement” means collectively, (a) the Blocked Account
Agreement dated as of the Effective Date among certain Reliant Retail Obligors,
Mellon Bank, N.A., and the Collateral Trustee, (b) the Blocked Account Agreement
dated as of the Effective Date among certain Reliant Retail Obligors, Wells
Fargo Bank, NA, and the Collateral Trustee, and (c) the Securities Account
Control Agreement dated as of the Effective Date among certain Reliant Retail
Obligors, Lehman Brothers Inc., and the Collateral Trustee.
“Board of Directors” means the Board of Directors of the Reliant Parent or the
board of directors, board of members, board of managers or similar body having
equivalent responsibilities to the Board of Directors of the Reliant Parent as
of the Execution Date.
“Business Day” means any day other than a Saturday, Sunday or other day (a) on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, Houston, Texas or New York City or (b) if the context relates to the
NYMEX or ICE, on which the NYMEX or ICE is authorized to close or in fact is
closed.
“Business Services Mass Customer” means any commercial, industrial or
governmental customer of the Reliant Retail Obligors that is not a C&I Customer.
“C&I Contract” means a contract for the sale of any retail electric products or
services by any Reliant Retail Obligor to a C&I Customer.
“C&I Customer” means any commercial, industrial or governmental customer of the
Reliant Retail Obligors designated by the Reliant Retail Obligors for treatment
as such or as a successor to such designation in the ordinary course of
business.
“Calculation Agent” has the meaning ascribed thereto in Section 12.13.
“Capital Lease Obligation” means, as applied to any Person, at the time any
determination is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
of such Person in accordance with GAAP in the reasonable judgment of such
Person, and the stated maturity thereof shall be the
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date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be prepaid by the lessee without
payment of a penalty.
“Capital Outlay Date” has the meaning ascribed thereto in Section 3.01.
“Capital Stock” means:
(a) in the case of a corporation, corporate stock;
(b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(c) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and
(d) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, but excluding from all of the foregoing any debt
securities convertible into Capital Stock, whether or not such debt securities
include any right of participation with Capital Stock.
“Cash Collateral” means, with respect to any Collateral Account, Collateral
consisting of the balance of Dollars credited to such Collateral Account.
“Cash Equivalents” means:
(a) Dollars;
(b) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the United
States government (provided that the full faith and credit of the United States
is pledged in support of those securities) having maturities of not more than
one year from the date of acquisition;
(c) deposit accounts with any other bank that has a long-term debt
rating at the time of investment of A+ or better by S&P and A1 or better by
Moody’s (an “Approved Bank”);
(d) time deposits, certificates of deposit, acceptances or prime
commercial paper issued by an Approved Bank at the time acquired or issued (as
applicable and whichever is latest), in each case, having a maturity of not more
than one year from the date of acquisition;
(e) repurchase obligations for underlying securities of the types
described in clause (b) entered into with an Approved Bank at the time acquired,
issued or entered into (as applicable and whichever is latest), in each case,
having a maturity of not more than one year from the date of acquisition and
secured by securities of the type described in
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clause (b), the market value of which (including accrued interest) is not less
than the amount of the applicable repurchase agreement;
(f) commercial paper with a rating at the time of investment of A-1
by S&P and P-1 by Moody’s and, in each case, maturing within one year after the
date of acquisition; and
(g) money market funds which invest primarily in Cash Equivalents of
the kinds described in clauses (a) through (f) of this definition.
“Channelview Services Agreement” means the Channelview Services Agreement dated
as of July 1, 2006, among REPS, RES, RERS and RESC.
“Chief Executive Officer” means the Chief Executive Officer of the Reliant
Parent or the individual with equivalent responsibilities to the Chief Executive
Officer as of the Execution Date.
“Chief Financial Officer” means the Chief Financial Officer of the Reliant
Parent or the individual with equivalent responsibilities to the Chief Financial
Officer as of the Execution Date.
“Chief Risk Officer” means the Chief Risk Officer of the Reliant Parent or the
individual with equivalent responsibilities to the Chief Risk Officer as of the
Execution Date.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” has the meaning ascribed thereto in the Collateral Trust Agreement.
“Collateral Accounts” has the meaning ascribed thereto in the Security
Agreement.
“Collateral Foreclosure” means any setoff, application or foreclosure taken by
an applicable secured party with respect to any Merrill Collateral.
“Collateral Reimbursement Obligations” means, at any time, the obligations of
REPS then outstanding, or that may thereafter arise, in respect of all Merrill
Collateral posted in accordance with this Agreement, to reimburse the Sleeve
Provider for the amount of such Merrill Collateral.
“Collateral Thresholds” means the collateral thresholds for applicable
counterparties determined in accordance with the credit risk policy and
delegation of authority of the Reliant Parent, as the same is set forth on
Schedule 1.01(f), such Schedule to be updated from time at the option of REPS
with the approval of the Sleeve Provider, not to be unreasonably withheld or
delayed.
“Collateral Trust Agreement” means the Collateral Trust Agreement dated as of
the Effective Date, among each Reliant Retail Obligor and the Collateral Trustee
under which the Merrill Parties are Secured Counterparties as therein defined.
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“Collateral Trustee” means the Collateral Trustee under the Collateral Trust
Agreement, including any successors from time to time acting as such thereunder.
“Commitment” means (i) the commitment of the Working Capital Facility Provider
to make Loans to REPS under, and in accordance with, the Working Capital
Facility and (ii) the commitments of Replacement Working Capital Providers to
make Loans to any of the Reliant Retail Obligors under, and in accordance with,
Replacement Working Capital Facilities.
“Compliance Certificate” means a compliance certificate in substantially the
form of Exhibit H.
“Compliance Information” means, with respect to any Compliance Party, the
information customarily requested from similarly situated trading counterparties
by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of
their respective businesses (i) to comply with applicable Laws (including the
USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001))) and (ii) to comply with other internal compliance requirements, in
each case to the extent the same are of general application to, and established
by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of
their respective businesses for, similarly situated trading counterparties.
“Compliance Party” means any Accepted Counterparty, C&I Customer, Governmental
Customer, Governmental Authority or any other Person entitled to benefit from
(i) an ML Guarantee, or (ii) the posting of cash collateral by, or any agreement
to post or provide cash collateral by, the Sleeve Provider.
“Compliance Requirements” means, with respect to any Compliance Party, the
receipt by the Sleeve Provider or the ML Guarantee Provider, as applicable, from
such Compliance Party of applicable Compliance Information that satisfies the
compliance requirements generally established by the Sleeve Provider or the ML
Guarantee Provider for similarly situated trading counterparties in the ordinary
course of their respective businesses.
“Computation Failure Event of Default” has the meaning ascribed thereto in
Schedule 1.01(c).
“Computation Period” means, as of the last day of each month, (i) occurring on
or prior to the last day of the eleventh month after the Effective Date, the
period commencing on the Effective Date and ending on such last day and (ii)
occurring from and after the last day of the eleventh month after the Effective
Date, the last twelve full calendar months ending on such last day.
“Condemnation” shall mean any condemnation or other taking, or temporary or
permanent requisition of, any property, any interest therein or right
appurtenant thereto, or any change of grade affecting any property, in each case
as the result of the exercise of any right of condemnation or eminent domain. A
sale or other transfer to a Governmental Authority in lieu of, or in
anticipation of, condemnation shall be deemed to be a Condemnation.
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“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
“Controller” means the Controller of the Reliant Parent or the individual with
equivalent responsibilities to the Controller as of the Execution Date.
“Contribution Agreement” means the Contribution Agreement dated as of the
Effective Date between Reliant Parent and RERH Holdings.
“Control” means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; and the terms “controlling,” “controlled by” and “under
common control with” have correlative meanings.
“Core Accepted Counterparty” means each “Core Accepted Counterparty” listed in
Exhibit B, as such Exhibit may be updated from time to time in accordance with
Section 2.02.
“Counterparty” means a Person that at any time sells, delivers, purchases and/or
receives, or is or can be required to sell, deliver, purchase and/or receive,
Accepted Products to or from any Reliant Retail Obligor.
“Counterparty Document” means, with respect to each Accepted Counterparty, the
Power and Hedging Contract, Credit Support Agreement and ML Guarantee and any
related certificates, documents and agreements, as applicable, relating to such
Accepted Counterparty.
“Counterparty Limitations” means, in respect of an Accepted Counterparty and an
Accepted Product, each of the limits set forth on Exhibit B.
“Counterparty CDS Fee” has the meaning ascribed thereto in Section 2.02(b).
“CPT” means the prevailing time in Houston, Texas.
“Credit Rating” means, at any time with respect to any Accepted Counterparty:
(a) if Moody’s or S&P has issued a credit rating for long-term senior
unsecured, and non-credit enhanced, Dollar-denominated debt of such Accepted
Counterparty, such credit rating, or, if such credit rating is not available,
the issuer rating of such Accepted Counterparty, issued by each of Moody’s and
S&P, as applicable, as in effect at such time in respect of the Accepted
Counterparty (in the event of a split rating the lower rating shall apply);
(b) if (i) clause (a) above does not apply at such time, (ii) the
obligations of such Accepted Counterparty are guaranteed by any Person,
(iii) the Sleeve Provider has approved in its reasonable discretion the form of
such guarantee and (iv) Moody’s or S&P has issued a credit rating for long-term
senior unsecured, and non-credit enhanced debt of such guarantor, such credit
rating issued by each of Moody’s and S&P, as applicable, as
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in effect at such time in respect of the guarantor (in the event of a split
rating the lower rating shall apply); or
(c) if neither clause (a) nor clause (b) above shall apply at such
time, the credit rating, if any, for such Accepted Counterparty designated in
writing by the Sleeve Provider and in effect at such time for purposes of this
Agreement (which the Sleeve Provider may designate or withhold in its reasonable
discretion after consultation with, and review of any relevant credit
information provided by, the Reliant Retail Obligors).
“Credit Sleeve Obligations” mean the Obligations of the Reliant Retail Obligors
under this Agreement, including the Reimbursement Obligations and the
Obligations in respect of the payment of all Monthly Sleeve Fees required
hereunder.
“Credit Sleeve Termination Date” means the earliest date on which the Credit
Sleeve Obligations have been terminated and satisfied in full and all
collateral, including all ML Guarantees, posted by the Merrill Parties required
to be returned to the Merrill Parties has been so returned or reimbursement has
been made therefor.
“Credit Support Agreement” means a credit support agreement among an Accepted
Counterparty, REPS and the Sleeve Provider, in substantially the form of
Exhibits D1 or D2, or in such other form as REPS and the Sleeve Provider may
otherwise agree, in accordance with Section 2.02, providing for credit support
with respect to a Power and Hedging Contract.
“Daily Meeting” has the meaning ascribed thereto in Section 2.02(a)(ii).
“Data Failure Event of Default” has the meaning ascribed thereto in Schedule
1.01(c).
“Default” means an Event of Default or an event that with notice or lapse of
time or both would, unless cured or waived, become an Event of Default.
“Deferred Cure Reimbursement Obligations” has the meaning ascribed thereto in
Section 12.07(b).
“Deferred Draw Reimbursement Obligations” has the meaning ascribed thereto in
Section 3.02.
“Deferred Reimbursement Obligations” means the Deferred Draw Reimbursement
Obligations and Deferred Cure Reimbursement Obligations.
“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case, at the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
of the Capital Stock, in whole or in part, on or prior to the date that is 91
days after the Credit Sleeve Termination Date. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital
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Stock have the right to require the Borrower to repurchase such Capital Stock
upon the occurrence of a change of control or an asset sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Borrower
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the provisions of Sections
7.06 and 7.07. The amount of Disqualified Stock deemed to be outstanding at any
time for purposes of this Agreement shall be equal to the maximum amount that
the Borrower and its Restricted Subsidiaries may become obligated to pay upon
the maturity of, or pursuant to any mandatory redemption provisions of, such
Disqualified Stock, exclusive of accrued dividends.
“Dollars” and “$” means lawful money of the United States of America.
“Downgrade Event” means, with respect to any Person, the Credit Rating of such
Person in effect on the date of this Agreement or when such Person first becomes
an Accepted Counterparty, as applicable, is downgraded by either of Moody’s or
S&P by two notches or has been downgraded by one notch and put on watch list for
a possible additional downgrade by either of Moody’s or S&P.
“Draw Reimbursement Obligations” means the Guarantee Reimbursement Obligations
and Collateral Reimbursement Obligations, other than any portion thereof that
becomes a Deferred Reimbursement Obligation.
“EEI Master Agreement” means the Edison Electric Institute Master Power Purchase
and Sale Agreement, version 2.1 (modified 04/25/00) as in effect from time to
time.
“Effective Date” means the date the conditions precedent in Section 4.01 have
been satisfied (or waived by the Merrill Parties) and the conditions precedent
in Section 4.02 have been satisfied (or waived by the Reliant Retail Obligors);
provided that such date shall be the first day of a month, unless the Parties
mutually agree otherwise.
“Effectiveness Notices” has the meaning ascribed thereto in Section 2.01(a)(1).
“EFS Transaction” means, in respect of any NYMEX Exchange Traded Contract(s)
held on the Effective Date, or subsequently entered into by REPS, an exchange of
such futures for a swap transaction between REPS and the Sleeve Provider
executed on the NYMEX, in accordance with any applicable rules and procedures,
pursuant to which the Sleeve Provider and REPS exchange (a) the number of NYMEX
Exchange Traded Contract(s) held by REPS at the volume weighted average price at
which REPS entered into such Exchange Traded Contract(s) for (b) related Mirror
NYMEX OTC Contracts.
“Energy” means “Energy” as defined in Schedule P to the EEI Master Agreement.
“Environmental Laws” means any and all Federal, state, local, regional and
foreign statutes, laws, rules of common law, constitutional provisions,
regulations, ordinances, rules judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or Hazardous Materials,
including, those relating to the use analysis, generation, manufacture, storage,
discharge, emission, release, disposal, transportation treatment, investigation,
removal,
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or remediation of Hazardous Materials. Environmental Laws include those acts
commonly referred to as: the Comprehensive Environmental Response, Compensation
and Liability Act of 1980; the Superfund Amendments and Reauthorization Act; the
National Environmental Policy Act; the Hazardous Materials Transportation Act;
the Resource Conservation and Recovery Act, the Solid Waste Disposal Act, the
Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, and the
Occupational Safety and Health Act, and their state counterparts.
“EOO Transaction” means, in respect of any NYMEX Exchange Traded Contract(s)
held on the Effective Date, or subsequently entered into by REPS, an exchange of
such NYMEX options for an over-the-counter option transaction between REPS and
the Sleeve Provider executed on NYMEX, in accordance with any applicable rules
and procedures, pursuant to which the Sleeve Provider and REPS exchange (a) the
number of NYMEX options held by REPS for (b) related Mirror NYMEX OTC Contracts.
“Equity Interests” means Capital Stock and all warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).
“ERCOT” means the Electric Reliability Council of Texas, or any successor
thereto.
“ERCOT Market” means the electric market regulated by ERCOT.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated)
which is a member of the controlled group of RERH Holdings or under common
control with RERH Holdings within the meaning of Section 414(b) or (c) of the
Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code) or Section 4001(a)(14) of ERISA.
“ERISA Event” means (a) a reportable event (within the meaning of Section 4043
of ERISA) with respect to a Pension Plan; (b) a withdrawal by RERH Holdings or
any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during
a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal (within the meaning of Sections 4203 or 4205 of ERISA) by RERH
Holdings or any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Sections
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon RERH
Holdings or any ERISA Affiliate.
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“Estimated Obligations” has the meaning ascribed thereto in Section 6.11(c).
“Estimation Day” has the meaning ascribed thereto in Section 6.11(c).
“Estimation Period” means, for any Estimation Day, the period from such
Estimation Day until the date 30 days after such Estimation Day.
“Event of Default” means a Sleeve Provider Event of Default or a Reliant Event
of Default.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Traded Contract” means each trade of an Accepted Product traded and
cleared on an Accepted Exchange held or obtained by REPS relating to the sale,
purchase, delivery or receipt of any Accepted Product.
“Execution Date” means September 24, 2006.
“Fair Market Value” means the value that would be paid by a willing buyer to a
willing seller in a transaction not involving distress or necessity of either
party, determined in good faith by the chief financial officer of RERH Holdings
or Board of Directors of RERH Holdings or the selling entity (unless otherwise
provided in this Agreement).
“Failure to Pay or Post” means, in respect of any Accepted Counterparty, any
event of default (after any applicable cure period) for failure to make payment
or post collateral (howsoever defined) by such Accepted Counterparty under its
related Power and Hedging Contract with REPS (including, as applicable, its
related Credit Support Agreement).
“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of
America, N.A. on such day on such transactions as determined by the Sleeve
Provider.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System of the United States of America.
“Federal Tax Payable Amount” has the meaning set forth in the Reliant Parent
Services Agreement.
“Financial Officer” means, with respect to any Reliant Retail Obligor, any of
the chief financial officer, principal accounting officer, treasurer or
controller thereof.
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“Fiscal Quarter” means each three month period of a Fiscal Year ending on March
31, June 30, September 30, and December 31.
“Fiscal Year” means any period of twelve consecutive calendar months ending on
December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the “2006 Fiscal Year”) refer to the Fiscal Year ending on
December 31 of such calendar year.
“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
“GLO” means the Texas General Land Office.
“GLO Amount” means, at any time, the aggregate outstanding amount owed to GLO in
respect of the outstanding GLO Payments (as such term is defined in the GLO
Contract).
“GLO Contract” means that certain Energy Supply and Services Agreement dated as
of October 1, 2001, between GLO and REPS.
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state, county, or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank, independent system operator, transmission organization or other
entity to the extent exercising executive, legislative, judicial, taxing,
monetary, regulatory, supervisory or administrative powers or functions of or
pertaining to government or the regulation of the Retail Energy Business,
including ERCOT and the PUCT in such capacities as regulators of their
applicable markets.
“Governmental Contract” means a contract for the purchase or sale of any retail
electric products or services between any Reliant Retail Obligor and a
Governmental Customer.
“Governmental Customer” means (a) any agency, authority, instrumentality,
central bank, independent system operator, transmission organization or other
entity owned or controlled by any Governmental Authority or (b) any Person that
is or could be a Governmental Authority; in either case, to the extent acting in
a commercial capacity under a Governmental Contract, including ERCOT and the GLO
in such capacities.
“Guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including by way of a pledge of assets or through
letters of credit or reimbursement agreements in respect thereof, of all or any
part of any Indebtedness (whether arising by virtue of partnership arrangements,
or by agreements to keep-well, to purchase assets, goods, securities or
services, to take or pay or to maintain financial statement conditions or
otherwise). The term “Guarantee” as a verb has a corresponding meaning.
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“Guarantee Reimbursement Obligations” means, at any time, the obligations of
REPS then outstanding, or that may thereafter arise, in respect of all ML
Guarantees then outstanding, to reimburse amounts paid by the ML Guarantee
Provider in respect of any payments made under an ML Guarantee on behalf of any
Reliant Retail Obligor.
“Guaranteed Obligations” has the meaning ascribed thereto in Section 11.01.
“Hazardous Materials” means all explosive, flammable, corrosive or radioactive
substances or wastes and all hazardous, carcinogenic, mutagenic or toxic
substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes, toxic mold and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.
“ICE” means the Intercontinental Exchange or its successor.
“ICE Block Transaction” means, in respect of any ICE Exchange Traded Contract(s)
held on the Effective Date, or subsequently entered into by REPS, transactions
between REPS and the Sleeve Provider, pursuant to which the Sleeve Provider and
REPS (a) execute a block trade entered into ICE in accordance with any
applicable rules and procedures, whereby Sleeve Provider takes the same net long
or short position as that initially held by REPS for the number of ICE Exchange
Traded Contract(s) held by REPS at the volume weighted average price at which
REPS entered into such ICE Exchange Traded Contract(s) and (b) enter into
related Mirror ICE OTC Contracts.
“Indebtedness” means, with respect to any specified Person, any indebtedness of
such Person (excluding accrued expenses or trade payables), whether or not
contingent (without duplication):
(a) in respect of borrowed money;
(b) evidenced by bonds, notes, debentures or similar instruments or
letters of credit or reimbursement agreements in respect thereof;
(c) in respect of banker’s acceptances;
(d) representing Capital Lease Obligations or Attributable Debt in
respect of sale and leaseback transactions, Synthetic Lease Obligations or
financing leases;
(e) representing the balance deferred and unpaid of the purchase price
of any property or services due more than six months after such property is
acquired or such services are completed;
(f) representing any Interest Hedging Obligations; or
(g) consisting of Disqualified Stock;
whether or not any of the preceding items appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In addition,
the term “Indebtedness”
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includes all Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by the specified
Person) and, to the extent not otherwise included, the Guarantee by the
specified Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date will be:
(i) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount;
(ii) the principal amount of and premium (if any) on the Indebtedness,
in the case of any other Indebtedness;
(iii) in respect of Indebtedness of other Persons secured by a Lien on
the assets of the specified Person, the lesser of:
(A) the Fair Market Value of such asset at such date of determination,
and
(B) the amount of such Indebtedness of such other Persons; and
(iv) in respect of any Guarantee, an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith.
“Indemnity Letter” means that certain letter dated September 20, 2006 from the
Reliant Parent and certain of the Reliant Retail Obligors accepted and agreed to
by MLCI on behalf of the Merrill Parties, relating to the transactions
contemplated hereby.
“Information Technology Systems” means all information technology systems used
in the operation of the Retail Energy Business including hardware, software,
middleware, tools, databases, technical and business information, know-how or
other data or information, related documents, registrations and franchises,
licenses or leases for any of the foregoing and all license rights and all
additions, improvements, enhancements and accessions thereto, and books and
records describing or used in connection with any of the foregoing, including
the information technology systems set forth on Schedule 1.01(d).
“Intercompany Cash Management Agreement” means the Intercompany Cash Management
Agreement dated as of the Effective Date among RERH Holdings and its
Subsidiaries.
“Interest Hedging Obligations” means, with respect to any specified Person, the
net obligations of such Person under:
(a) interest rate swap agreements (whether from fixed to floating or
from floating to fixed), interest rate cap agreements and interest rate collar
agreements;
(b) other agreements or arrangements designed to manage interest rate
risk; and
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(c) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange rates.
“Investment” means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or similar obligations), advances or capital
contributions (excluding payroll, commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. “Investment”
shall exclude extensions of trade credit or posting of cash collateral by RERH
Holdings and its Subsidiaries in the ordinary course of business. The
acquisition by RERH Holdings or any Subsidiary of RERH Holdings of a Person that
holds an Investment in a third Person will be deemed to be an Investment by RERH
Holdings or such Subsidiary in such third Person in an amount equal to the Fair
Market Value of the Investments held by the acquired Person in such third
Person. Except as otherwise provided in this Agreement, the amount of an
Investment shall be its Fair Market Value at the time the Investment is made and
without giving effect to subsequent changes in value.
“Investment Grade Rating” means a Credit Rating equal to or higher than Baa3 (or
the equivalent) by Moody’s and BBB- (or the equivalent) by S&P.
“IP License Agreement” means the IP License Agreement dated as of the Effective
Date between IP Trust and one or more of the Reliant Retail Obligors.
“IP Trust” means the Reliant Energy Trademark Trust, a Delaware statutory trust.
“IP Servicing Agreement” means the IP Servicing Agreement dated as of the
Effective Date between the Reliant Parent and IP Trust.
“IT Service Agreement” means the IT Service Agreement dated as of Effective Date
between IT Trust and one or more of the Reliant Retail Obligors.
“IT Trust” means the Reliant Energy IT Trust, a Delaware statutory trust.
“IT Trust Management Agreement” means the IT Trust Management Agreement dated as
of the Effective Date between the Reliant Parent and IT Trust.
“Joinder Agreement” means a Joinder Agreement in the form of Exhibit G or in
such other form as REPS and the Merrill Parties may agree executed pursuant to
Section 6.11(a)(i) in connection with a Subsidiary of RERH Holdings becoming an
“Other Reliant Retail Obligor” hereunder.
“K” has the meaning ascribed thereto in, and shall be determined in accordance
with, Schedule 1.01(c).
“Laws” means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any
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Governmental Authority charged with the enforcement, interpretation or
administration thereof, and all applicable administrative orders, directed
duties, requests, licenses, authorizations and permits of any Governmental
Authority.
“Level I Violation”, “Level II Violation” or “Level III Violation” means a
violation relating to the Risk Management Policy described as such in Schedule
1.01(a).
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement and any lease that
constitutes a security interest.
“Loans” means (i) the loans made by the Working Capital Facility Provider to
REPS under, and in accordance with, the Working Capital Facility and (ii) the
loans made by Replacement Working Capital Providers to REPS under, and in
accordance with, any Replacement Working Capital Facilities.
“Loss Exposure” means, with respect to any underlying transaction, the
mark-to-market value of such underlying transaction assuming a two standard
deviation move in the underlying variables and assuming a two week liquidation
period.
“Make-whole Payment” has the meaning ascribed thereto in Schedule 3.05.
“Margin Stock” means “margin stock” within the meaning of Regulations T, U and X
of the Federal Reserve Board.
“Marks” means all trade names, trademarks and service marks, logos, trademark
and service mark registrations owned by the Reliant Parent or any of its
Subsidiaries and applicable to the Reliant Retail Obligors, including those set
forth on Schedule 1.01(e), and all related applications for trademark and
service mark registrations, including all renewals of trademark and service mark
registrations, all rights to recover for all past, present and future
infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world.
“Market Information” means market information such as price curves,
volatilities, interest rates and similar information for which quotes are
customarily available from reference market makers.
“Material Adverse Effect” means a material adverse effect upon (a) the business,
operations, property or financial condition of RERH Holdings and its
Subsidiaries taken as a whole; or (b) the validity or enforceability against any
of RERH Holdings or any of its Subsidiaries of any Transaction Document to which
it is a party or the material rights and remedies of the Sleeve Provider
thereunder.
“Merrill Collateral” has the meaning ascribed thereto in Section 3.01.
“Merrill Parties” means the Sleeve Provider and the ML Guarantee Provider
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“Mirror ICE OTC Contract” means, in respect of any ICE Exchange Traded
Contract(s), the over-the-counter swap leg of the related ICE Block Transaction
between REPS and the Sleeve Provider (executed under the MLCI/REPS ISDA), (i) in
which REPS takes the same net long or short position it took in the related ICE
Exchange Traded Contract(s); (ii) that settles on the industry standard
settlement date applicable to such Accepted Product; (iii) that has a price per
unit equal to the price of the ICE Exchange Traded Contract(s) leg of the ICE
Block Transaction; and (iv) that has a volume equal to the related Adjusted
Volume.
“Mirror NYMEX OTC Contract” means, in respect of any NYMEX Exchange Traded
Contracts, the over-the-counter swap leg of the related EFS Transaction or EOO
Transaction between REPS and the Sleeve Provider (executed under the MLCI/REPS
ISDA), (i) in which REPS takes the same net long or short position it held in
the related Exchange Traded Contracts; (ii) that settles on the industry
standard settlement date applicable to such Accepted Product; (iii) that has a
price or strike per unit equal to the price or strike of the futures or option
leg of the EFS Transaction or EOO Transaction; and (iv) that has a volume equal
to the related Adjusted Volume.
“Mirror OTC Contract” means any Mirror ICE OTC Contract or Mirror NYMEX OTC
Contract.
“ML&Co.” means Merrill Lynch & Co., Inc., a Delaware corporation.
“MLCI” means Merrill Lynch Commodities, Inc., a Delaware corporation.
“ML Equivalent Credit Rating” means “A” and “A2” by S&P and Moody’s,
respectively, provided that if the Credit Rating for the ML Guarantee Provider
by S&P or Moody’s, respectively, is lower, then the actual S&P or Moody’s Credit
Rating of the ML Guarantee Provider, respectively, shall apply.
“ML Guarantee” means a guarantee by the ML Guarantee Provider (i) in
substantially the form of Exhibit A1 with respect to Accepted Counterparties or
Exhibit A2 with respect to C&I Customers, (ii) in substantially the form of
Exhibit A2 with respect to Governmental Customers and Governmental Authorities
that do not have requirements with respect to the forms of guarantees received
or in such other form of guarantee as is required by the applicable Governmental
Customer or Governmental Authority and is reasonably acceptable to the Merrill
Parties, and (iii) in such other form as REPS and the Merrill Parties may
agree.
“ML Guarantee Provider” means ML&Co.
“MLCI/REPS ISDA” means the ISDA 2002 Master Agreement dated the Effected Date
between the Sleeve Provider and REPS.
“Moody’s” shall mean Moody’s Investors Service, Inc. or if such company shall
cease to issue ratings, another nationally recognized rating company selected in
good faith by mutual agreement of the Sleeve Provider and REPS.
“Monthly Payment Date” means, in respect of any month, the date two Business
Days after the Sleeve Provider provides REPS with the invoice in respect of such
month
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generated and delivered in accordance with the provisions of Schedule 3.04,
commencing with the Monthly Payment Date first occurring after the Effective
Date.
“Monthly Sleeve Fee” means the Sleeve Fee or Unwind Sleeve Fee, as applicable,
as defined in Schedule 3.04.
“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made, or have been required to be
made, by RERH Holdings or any ERISA Affiliate and that is covered by Title IV of
ERISA.
“MWh” means a megawatt hour of energy.
“MW” means one million watts.
“Non-Guarantor Cutoff Amounts” means, on any date of determination, in respect
of all Subsidiaries of RERH Holdings that are not Reliant Retail Obligors on a
consolidated basis, either (i) $1,000,000 or more of consolidated net income
during the four-fiscal quarter period most recently ended for which financial
statements are available or (ii) assets equal to or exceeding $25,000,000 in
book value at the end of the fiscal quarter most recently ended for which
financial statements are available.
“Notice Date” has the meaning ascribed thereto in Section 3.02.
“NYMEX” means the New York Mercantile Exchange or its successor.
“Obligations” means any amounts, principal, interest, premium, fees,
indemnifications, reimbursements, expenses, damages and other liabilities
payable under the applicable documentation.
“Obligee Guarantor” has the meaning ascribed thereto in Section 11.06.
“Organizational Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
“Other Reliant Retail Obligors” means each of RERH Holdings, RERH, RERS and any
other Wholly Owned Subsidiaries of RERH Holdings that join this Agreement in
accordance with the provisions of this Agreement and, in each case, their
respective successors and assigns.
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“Other Accepted Counterparty” means each “Other Accepted Counterparty” listed in
Exhibit B, as such Exhibit may be updated from time to time in accordance with
Section 2.02.
“Party” means any Reliant Retail Obligor or any Merrill Party, as applicable.
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by RERH Holdings or
any ERISA Affiliate or to which RERH Holdings or any ERISA Affiliate contributes
or has an obligation to contribute or with respect to which RERH Holdings or any
ERISA Affiliate has any direct or contingent liability, or in the case of a
multiple employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.
“Permitted Acquisition” means any Acquisition by any Reliant Retail Obligor made
with Available Funds that satisfies all of the following conditions: (1) no
Default with respect to a Reliant Event of Default shall have occurred and be
continuing or would result therefrom on the date of the closing of such
Acquisition, (2) the acquired Person is in (or the acquired assets, including
books of commercial and industrial and consumer electricity customers and
related contracts, are useful in) the Retail Energy Business and (3) the assets,
including any Equity Interests, acquired pursuant to such Acquisition shall be
pledged as additional collateral for the Credit Sleeve Obligations, in each case
in accordance with Section 6.11.
“Permitted Investments” means:
(a) (1) any Investment by a Reliant Retail Obligor in any other
Reliant Retail Obligor and (2) Investments by the Reliant Retail Obligors in
Wholly Owned Subsidiaries of RERH Holdings that are not Other Reliant Retail
Obligors, in each case, with Available Funds or in accordance with cash
management principles in the ordinary course of business and, to the extent
applicable, in accordance with Section 6.11(c);
(b) any Investment by a Reliant Retail Obligor or its Subsidiaries in
a Person made with Available Funds, if as a result of such Investment:
(i) such Person becomes a Wholly Owned
Subsidiary of RERH Holdings; or
(ii) such Person is merged or consolidated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, RERH Holdings or a Wholly Owned Subsidiary of RERH Holdings;
(c) any Investment in Cash Equivalents, the Collateral Accounts and
under the Intercompany Cash Management Agreement;
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(d) any Investment (other than an Investment in Capital Stock) made as
a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the provisions of Section 7.05;
(e) any Investments received in compromise or resolution of (A)
Obligations of trade creditors or customers that were incurred in the ordinary
course of business of the Reliant Retail Obligors, including pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of any trade creditor or customer; or (B) litigation, arbitration or other
disputes with Persons who are not Affiliates;
(f) loans or advances to employees made in the ordinary course of
business up to an aggregate principal amount not to exceed $2,000,000 at any one
time;
(g) any Investment acquired by any Reliant Retail Obligor on account
of any claim against, or interest in, any other Person (A) acquired in good
faith in connection with or as a result of a bankruptcy, workout, reorganization
or recapitalization of such other Person or (B) as a result of a bona fide
foreclosure by any Reliant Retail Obligor with respect to any claim against any
other Person;
(h) receivables owing to any Reliant Retail Obligor, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided that such trade terms may
include such concessionary trade terms as such Reliant Retail Obligor deems
reasonable under the circumstances; and
(i) other Investments otherwise permitted in accordance with this
Agreement (other than Investments in Capital Stock) made with Available Funds;
provided that the aggregate outstanding amount of Investments under this clause
(i) shall not exceed $25,000,000.
With respect to all of the foregoing Permitted Investments in Subsidiaries of
RERH Holdings that are not Reliant Retail Obligors, such Investments are subject
to Section 6.11(a).
“Permitted Liens” means:
(a) Liens under the Collateral Trust Agreement or otherwise securing
the Credit Sleeve Obligations and Working Capital Obligations;
(b) Liens in favor of the Reliant Retail Obligors;
(c) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided
that any reserve or other appropriate provision as is required in conformity
with GAAP has been made therefore;
(d) Liens imposed by law, such as carriers’, warehousemen’s,
landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course
of business;
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(e) Liens in the form of survey exceptions, encumbrances, easements or
reservations, including those for licenses, rights-of-way, sewers, electric
lines, telegraph and telephone lines, other utilities, mineral reservations and
rights and leases, zoning restrictions and other restrictions as to the use of
real property or other exceptions to title that were not incurred in connection
with Indebtedness and that do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the operation of
the business of such Person;
(f) Liens securing Capital Lease Obligations and purchase money
obligations, in each case permitted to be incurred pursuant to clause (f) of
Section 7.03, covering only the assets acquired with or financed by such
Indebtedness;
(g) Liens in the form of financing statements (including precautionary
statements) filed in connection with a Capital Lease Obligation, financing lease
or an operating lease, in each case, not prohibited hereunder; provided, that no
such financing statement extends to, covers or refers to as collateral, any
property or assets of RERH or its Subsidiaries, other than the property or
assets which are subject to such Capital Lease Obligation, financing lease or
operating lease;
(h) Liens arising out of or in connection with any judgment that does
not constitute a Reliant Event of Default or in connection with any litigation
or other legal proceeding as to which an appeal to contest or review is timely
commenced in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP; provided, that any right
to levy, seizure, attachment, sequestration, foreclosure or garnishment of any
property and assets of a Reliant Retail Obligor arising out of or in connection
with any such Lien has been and continues to be enjoined or effectively stayed;
(i) Liens in the form of inchoate statutory Liens arising under
ERISA;
(j) Liens on cash and short-term investments pledged or deposited as
collateral to a contract counterparty or issuer of surety bonds by RERH Holdings
or any of its Subsidiaries to secure obligations with respect to contracts for
commercial activities in the ordinary course of business;
(k) Liens granted during the Transition Period or an Unwind Period in
favor of a commercial trading counterparty pursuant to a netting agreement,
which Liens encumber rights under agreements that are subject to such netting
agreement and which Liens are granted by a Subsidiary of RERH Holdings to secure
such Subsidiary’s obligations to such counterparty under such netting agreement;
provided that any such agreements and netting agreements are entered into in the
ordinary course of business; and provided, further, that the Liens are incurred
in the ordinary course of business and when granted do not secure obligations
which are past due;
(l) Liens arising by virtue of any statutory or common law provision
relating to banker’s liens, rights of set off or similar rights, contractual
rights of setoff or netting
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arrangements entered into in the ordinary course of business and similar rights
with respect to deposit accounts, commodity accounts and/or securities accounts;
(m) Liens arising under Section 9.343 of the Texas Uniform Commercial
Code or similar statutes of states other than Texas;
(n) pledges and deposits to secure the payment of worker’s
compensation, unemployment insurance, social security benefits or obligations
under similar laws, or to secure the payment or performance of statutory or
public obligations (including environmental, municipal and public utility
commission obligations and requirements), reimbursement or indemnity obligations
arising out of surety, performance, or other similar bonds, and other
obligations of a like nature, in each case incurred in the ordinary course of
business;
(o) Liens incurred in the ordinary course of business of RERH Holdings
or any Subsidiary of RERH Holdings securing obligations that do not exceed
$10,000,000 in the aggregate at any one time outstanding; and
(p) Liens in favor of any Replacement Sleeve Provider or Replacement
Working Capital Provider incurred during the Transition Period or Unwind Period
and subject to the Collateral Trust Agreement.
“Person” means any individual, corporation, firm, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
“PJM” means the PJM Interconnection, L.L.C., or any successor thereto.
“PJM Retail Business” means the Retail Energy Business conducted by RESE in the
ordinary course of business in the PJM market area.
“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by RERH Holdings or its Subsidiaries or with
respect to which RERH Holdings or its Subsidiaries could have any direct or
contingent liability or, with respect to any such plan that is subject to
Section 412 of the Code, Section 4980B of the Code or Title IV of ERISA, any
ERISA Affiliate.
“Post-Default Rate” means a per annum rate equal to the Base Rate (as in effect
from time to time) plus 3.875%.
“Post-Unwind Start Date Transaction” means an Accepted Trade entered prior to
the Unwind Start Date in accordance with this Agreement under which the final
delivery date, payment date, or settlement date is scheduled to occur after the
Unwind Start Date.
“Power and Hedging Contract” means an over-the-counter master agreement between
REPS and an Accepted Counterparty substantially in the form of Exhibits C1 or
C2, or in such other form as REPS and the Sleeve Provider may agree in
accordance with Section 2.02,
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providing for transactions regarding Accepted Products, and including as part
thereof the associated Credit Support Agreement.
“Prime Rate” means a fluctuating rate of interest equal to the rate of interest
most recently announced by the Wall Street Journal as the prime rate for
Dollar-denominated loans.
“Properly Allocable” means with respect to any Allocable State Taxes the
percentage of the total tax (not in excess of 100 percent) which the tax of the
Reliant Retail Obligors if computed on a separate return would bear to the total
amount of the taxes for all members of the group so computed.
“PUCT” means the Public Utility Commission of Texas, or any successor thereto.
“Qualified Institution” means a major U.S. commercial bank or a foreign bank
with a U.S. branch office with a Credit Rating of at least the ML Equivalent
Credit Rating.
“Quarterly Payment Period” means the period beginning on the Effective Date and
ending on December 31, 2006, and each subsequent period beginning on the day
following the close of the preceding Quarterly Payment Period and ending on the
earliest of the next succeeding March 31, June 30, September 30, or December 31.
“QSE” or “Qualified Scheduling Entity” means a market participant qualified by
ERCOT in accordance with the ERCOT protocols to submit schedules and settle
payments with ERCOT.
“Ramp-Up Period” means the period from and including the Execution Date to but
excluding the Effective Date.
“REES” means Reliant Energy Electric Solutions, LLC, a Delaware limited
liability company.
“REES/REPS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006 between REES and REPS, relating solely to the “Upton Wind”
transactions on the Execution Date.
“Reimbursement Guarantors” means each of the Other Reliant Retail Obligors and
their respective successors and assigns.
“Reimbursement Guaranty” means the guarantee of the Reimbursement Guarantors to
repay the Guaranteed Obligations in accordance with Section 11.
“Reimbursement Obligations” means the Draw Reimbursement Obligations and the
Deferred Reimbursement Obligations.
“Reliant Event of Default” has the meaning ascribed thereto in Section 8.01.
“Reliant Parent” means Reliant Energy, Inc., a Delaware Corporation.
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“Reliant Parent Consent and Agreements” means the Consent and Agreements each
dated as of the Effective Date made by the Reliant Parent for the benefit of
the Collateral Trustee and the Secured Counterparties pertaining to the Reliant
Parent Services Agreement and the Transition Agreement.
“Reliant Parent Debt Documents” means (a) the Indenture dated as of July 1, 2003
among Reliant Parent, the guarantors referred to therein, and Wilmington Trust
Company, as trustee, pursuant to which Reliant Parent’s 9.25% Secured Notes due
2010 were issued, (b) the Indenture dated as of July 1, 2003 among Reliant
Parent, the guarantors referred to therein, and Wilmington Trust Company, as
trustee, pursuant to which Reliant Parent’s 9.50% Secured Notes due 2013 were
issued, (c) the Senior Indenture dated as of December 22, 2004 between Reliant
Parent and Wilmington Trust Company, as trustee, as supplemented by the First
Supplemental Indenture thereto dated December 22, 2004 among Reliant Parent, the
guarantors referred to therein, and Wilmington Trust Company, as trustee,
pursuant to which Reliant Parent’s 6.75% Secured Notes due 2014 were issued, (d)
Reliant Parent’s five Guarantee Agreements, each dated as of December 22, 2004,
among Reliant Parent, the guarantors referred to therein, and J.P.Morgan Trust
Company, as trustee, and (e) the Second Amended and Restated Credit and Guaranty
Agreement dated as of December 22, 2004 among Reliant Parent, the guarantors
referred to therein, the lenders referred to therein, and Bank of America, N.A.,
as administrative agent and collateral agent, as each of the foregoing has been
amended through the Effective Date.
“Reliant Parent Lenders” means any one or more financial institutions or groups
of financial institutions providing credit to the Reliant Parent, including
their respective administrative, collateral, and other like agents if
applicable, in each case to the extent designated by REPS as Reliant Parent
Lenders hereunder.
“Reliant Parent Services Agreement” means the Master Services Agreement dated as
of even date herewith among Reliant Parent, RECS and RESE on one hand, and RERH
Holdings and its Subsidiaries, on the other hand.
“Reliant Power Purchase Agreements” means the REES/REPS Power Purchase
Agreement, the REPS/RERS Power Purchase Agreement, and the RES/REPS Power
Purchase Agreement.
“Reliant Retail Obligors” means REPS and the Other Reliant Retail Obligors.
“Remediation Plan” means a written report outlining the sequence of actions that
the Reliant Retail Obligors will take to address a Level III Violation and seek
to prevent similar Level III Violations from occurring in the future.
“Replacement Sleeve Provider” means a counterparty or counterparties with a
Credit Rating that is at least equal to the ML Equivalent Credit Rating and
providing Accepted Products or credit support for the acquisition thereof to
RERH Holdings or any of its Subsidiaries during the Transition Period or Unwind
Period.
“Replacement Working Capital Facility” means a working capital facility or
similar facility provided by a Replacement Working Capital Provider (a) entered
into during the
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Unwind Period after the commitments under the Working Capital Facility shall
have been permanently terminated and the Working Capital Obligations have been
paid in full, (b) having available commitments that, together with all other
Replacement Working Capital Facilities then in effect, do not exceed
$300,000,000 on an aggregate basis, and (c) having terms, taken as a whole, no
less restrictive than the Working Capital Facility on the date of its
termination.
“Replacement Working Capital Provider” means a counterparty or counterparties
with a Credit Rating that is at least equal to the ML Equivalent Credit Rating
and providing working capital to RERH Holdings or any of its Subsidiaries under
a Replacement Working Capital Facility.
“RECS” means Reliant Energy Corporate Services, LLC, a Delaware limited
liability company.
“REPS” has the meaning ascribed thereto in the opening paragraph of this
Agreement.
“REPS/RERS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006 between REPS and RERS.
“RERH” means Reliant Energy Retail Holdings, LLC, a Delaware limited liability
company.
“RERH Holdings” means RERH Holdings, LLC, a Delaware limited liability company.
“RERR” means RE Retail Receivables, LLC, a Delaware limited liability company.
“RERS” means Reliant Energy Retail Services, LLC, a Delaware limited liability
company.
“RES” means Reliant Energy Services, Inc., a Delaware corporation.
“RES/REPS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006, between RES and REPS.
“RESC” means Reliant Energy Services Channelview, LLC, a Delaware limited
liability company.
“RESE” means Reliant Energy Solutions East, LLC, a Delaware limited liability
company.
“Residential Mass Customer” means any residential customer of the Reliant Retail
Obligors.
“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Party and, in addition
with respect to RERH Holdings,
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any officer thereof that is also a vice president or more senior officer of the
Reliant Parent (excluding vice presidents in marketing). Any document delivered
hereunder that is signed by a Responsible Officer of a Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Party and such Responsible
Officer shall be conclusively presumed to have acted on behalf of such Party.
“Restricted Payment” means any of the following:
(a) any declaration or payment of any dividend or the making of any
other payment or distribution on account of RERH Holdings’ or any of its
Subsidiaries’ Equity Interests (including any payment in connection with any
merger or consolidation involving RERH Holdings or any of its Subsidiaries) or
to the direct or indirect holders of RERH Holdings’ or any of its Subsidiaries’
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests of RERH Holdings or to RERH Holdings
or any Other Reliant Retail Obligor);
(b) any purchase, redemption or other acquisition or retirement for
value (including in connection with any merger or consolidation involving RERH
Holdings) of any Equity Interests of RERH Holdings; or
(c) any payment on or with respect to, or purchase, redemption,
defeasance or other acquisition or retirement for value of any Indebtedness of
RERH Holdings and its Subsidiaries that is contractually subordinated to the
Credit Sleeve Obligations (excluding any intercompany Indebtedness, intercompany
receivables or intercompany advances between or among any of the Reliant Retail
Obligors).
“Restricted Period” has the meaning ascribed thereto in Section 9.03(a).
“Retail Energy Business” means the business of providing Accepted Retail
Products in retail electricity markets in the United States and any businesses
incidental or related thereto and performing under the Transaction Documents and
any activities incidental or related thereto.
“Retail Organizational Documents” means the Organizational Documents of each of
the Reliant Retail Obligors.
“Risk Limit” means any of EGD Short Position, EGD Long Position, Gas Hedge,
Natural Gas Basis Position or Power Average Daily Peak Contractual Load, in each
case as such terms are defined in Section 3 of the “Wholesale Risk Control
Policy” set forth in Exhibit E2 comprising part of the Risk Management Policy.
“Risk Management Event of Default” has the meaning ascribed thereto in Section
6.13.
“Risk Management Policy” means the “Reliant Energy — Retail Risk Policy” set
forth in Exhibit E1 and the sections of the “Wholesale Risk Control Policy” set
forth in Exhibit E2, as each of the same may be updated from time to time in
accordance with Section 6.13.
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“S&P” means Standard & Poor’s Ratings Group (presently a division of The
McGraw-Hill Companies, Inc.), together with its successors, or, if such company
shall cease to issue ratings, another nationally recognized rating company
selected in good faith by mutual agreement of the Sleeve Provider and REPS.
“Scheduled Term” means the period from the Execution Date through December 31,
2011; provided that if neither the Sleeve Provider nor REPS objects in writing
prior to the last day of each calendar year (excluding the calendar year ending
December 31, 2006), the referenced expiration date in this clause shall be
automatically extended for an additional calendar year and provided, further,
that the Parties to this Agreement may agree, in their sole discretion, to
extend the referenced expiration date under this clause for greater than one
additional calendar year.
“SEC” means the Securities and Exchange Commission or any Governmental Authority
succeeding to any of its principal functions.
“Secured Obligations” has the meaning ascribed thereto in the Collateral Trust
Agreement.
“Secured Counterparties” has the meaning ascribed thereto in the Collateral
Trust Agreement.
“Securitization Facility” means the transaction governed by (a) the Second
Amended and Restated Receivables Purchase Agreement dated as of September 9,
2005 among RERR as Seller, RERS as Servicer, Falcon Asset Securitization
Corporation, Liberty Street Funding Corporation, and Gemini Securitization
Corp., LLC as Conduit Investors, JPMorgan Chase Bank, N.A., The Bank of Nova
Scotia, and Deutsche Bank AG as Committed Investors and Managing Agents, and
JPMorgan Chase Bank, N.A. as Program Agent, as heretofore amended and otherwise
modified, (b) the Amended and Restated Receivables Sale Agreement dated as of
September 30, 2003 among RERS (for itself and as successor to RES), RESE, and
REES as Originators and RERR as Buyer, and (c) the other agreements related to
the foregoing as each have been amended through the Effective Date.
“Security Agreement” means the Security Agreement dated as of the Effective Date
among the Reliant Retail Obligors, and the Collateral Trustee.
“Security Documents” shall mean (i) the Collateral Trust Agreement, the Security
Agreement, the Reliant Parent Consent and Agreements, the Blocked Account
Agreement, and (ii) each other security agreement, pledge agreement, mortgage,
deed of trust, assignment agreement, consent and agreement and other instrument
being executed concurrently therewith or herewith or from time to time hereafter
pursuant to which a Lien has been granted by the Reliant Retail Obligors in
favor of the Collateral Trustee (for the benefit of the Secured Counterparties)
on any of their respective assets to secure any of the Secured Obligations.
“Sleeve Provider” has the meaning ascribed thereto in the title paragraph
hereto.
“Sleeve Provider Event of Default” has the meaning ascribed thereto in Section
8.02.
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“Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) such Person is expected to have assets
available of not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability; provided that if the context in which “Solvent” or “Solvency”
is used refers to a Person together with its Subsidiaries, Person as used above
shall be deemed to be a reference to such Person together with its Subsidiaries.
“Specified Transaction” means, with respect to any Person (i) any prepaid
forward sale of energy, oil, gas or minerals by such Person that is intended
primarily as a borrowing of funds, excluding volumetric production payments, and
(ii) any interest rate, currency, commodity or other swap, collar, cap, option
or other derivative that is intended primarily as a borrowing of funds, or any
combination of any of the foregoing, with the amount of the obligations of such
Person thereunder being the net obligations of such Person thereunder.
“State Tax Distribution Amount” means with respect to any Allocable State Taxes,
on any date of determination, the excess of (a) the cumulative amounts, for
periods beginning on or after the Effective Date, of Allocable State Taxes
Properly Allocable to the Reliant Retail Obligors as shown on tax returns
relating thereto (and reflecting any adjustments thereto agreed upon with
applicable Governmental Authorities or as determined by courts of competent
jurisdiction), over (b) amounts previously distributed pursuant to Section
6.11(c)(ii) of this Agreement.
“Stated Maturity” means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness as of the Execution Date, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
“Structuring Fee” has the meaning ascribed thereto in Section 3.06.
“Subordinated Indebtedness” means any Indebtedness of a Person that is
contractually subordinated to the Credit Sleeve Obligations.
“Subordinated Secured Obligations” has the meaning ascribed thereto in the
Collateral Trust Agreement.
“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body
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(other than securities or interests having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person.
“Synthetic Lease Obligation” means the monetary obligation of a Person under a
so-called synthetic, off-balance sheet or tax retention lease.
“Tax Code” means Title 26 of the United States Code (Internal Revenue),
26 U.S.C. Section 1 et seq.
“Tax Subordination Agreement” means the Tax Subordination Agreement dated as of
the Effective Date made by the Reliant Parent and the Reliant Retail Obligors
for the benefit of the Merrill Parties and the Working Capital Facility
Provider.
“Term” has the meaning ascribed thereto in Section 2.06.
“Transaction Documents” means (i) this Agreement, (ii) the Working Capital
Facility, (iii) the Security Documents, (iv) the Contribution Agreement, (v)
Retail Organizational Documents, (vi) the Reliant Parent Services Agreement,
(vii) the REES/REPS Power Purchase Agreement, (viii) the RES/REPS Power Purchase
Agreement, (ix) the REPS/RERS Power Purchase Agreement, (x) the Channelview
Services Agreement, (xi) Mirror OTC Contracts, (xii) the IP License Agreement,
(xiii) the IP Trust, (xiv) the IP Servicing Agreement, (xv) the IT Service
Agreement, (xvi) the IT Trust, (xvii) the IT Trust Management Agreement, (xviii)
the Transition Agreement, (xix) the Indemnity Letter, (xx) the Tax Subordination
Agreement and (xxi) any other contract or agreement (including ISDA Master
Agreements, but excluding any Credit Support Agreements) between any Merrill
Party or its Affiliates, on one hand, and any Reliant Retail Obligor or its
Affiliates, on the other hand, relating to the transactions contemplated hereby.
“Transition Agreement” means the Transition Agreement dated as of the Effective
Date among Reliant Parent, RECS, RESE, the Reliant Retail Obligors, the IP Trust
and the IT Trust, with respect to certain interim employment matters,
intellectual property and information technology matters and other interim
matters related to the ringfencing of the Reliant Retail Obligors.
“Transition Period” means the period from the Transition Start Date through the
Unwind Start Date.
“Transition Start Date” means the date three months prior to the last day of the
Scheduled Term.
“Trigger Event” has the meaning ascribed thereto in, and shall be determined in
accordance with, Schedule 1.01(c).
“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York and (solely with respect to the perfection or priority of any
Lien in personal property or fixtures or control over Collateral that
constitutes personal property or fixtures) the Uniform Commercial Code as in
effect from time to time in the jurisdiction that governs such
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perfection, priority or control, provided that, for purposes of each Security
Document in which the term “UCC” is separately defined, “UCC” has the meaning
assigned to such term in such Security Document.
“Unaudited Financial Statements” has the meaning ascribed thereto in Section
4.01(h).
“Unfunded Pension Liability” means any “accumulated funding deficiency” of a
Pension Plan as determined in accordance with Section 412 of the Code.
“Unwind Conclusion Date” means, with respect to any Unwind Start Date, the
Credit Sleeve Termination Date.
“Unwind Period” means the period from the Unwind Start Date through the Unwind
Conclusion Date.
“Unwind Start Date” means the earlier of (a) the date immediately following the
last day of the Scheduled Term, (b) the date for the beginning of the Unwind
Period declared by the Sleeve Provider in connection with a Reliant Event of
Default in accordance with Section 9.01(a), (c) the date for the beginning of
the Unwind Period declared by REPS in connection with a Sleeve Provider Event of
Default in accordance with Section 9.02(a)(i), or (d) the date for the beginning
of the Unwind Period declared by REPS in accordance with Section 2.06(b).
“VaR” has the meaning ascribed thereto in, and shall be determined in accordance
with, Schedule 1.01(c).
“Voting Stock” of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
“Wholly Owned Subsidiary” of any specified Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors’ qualifying shares) is owned by such Person or by
one or more other Wholly Owned Subsidiaries of such Person.
“Working Capital Facility” means the Working Capital Facility dated as of even
date herewith among Working Capital Facility Provider, as Lender, REPS, as
Borrower, and the Other Reliant Retail Obligors, as Guarantors.
“Working Capital Facility Provider” means Merrill Lynch Capital Corporation, a
Delaware corporation.
“Working Capital Obligations” mean the Obligations of the Reliant Retail
Obligors under the Working Capital Facility.
“Work Plan” means a written report outlining a series of actions that the
Reliant Retail Obligors will take to develop a Remediation Plan.
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1.02 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”. The word
“will” shall be construed to have the same meaning and effect as the word
“shall”. Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, restated, supplemented or otherwise modified, renewed or
replaced (subject to any restrictions on such amendments, restatements,
supplements or modifications, renewals or replacements set forth therein or
herein), (b) references to any law, constitution, statute, treaty, regulation,
rule or ordinance, including any section or other part thereof (each, for
purposes of this Section 1.02, a “law”) shall refer to that law as amended from
time to time and shall include any successor law, (c) any reference herein to
any Person shall be construed to include such Person’s successors and permitted
assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof and (e) all references herein to Sections,
Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits
and Schedules to, this Agreement.
1.03 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Sleeve Provider hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent with that used in the financial
statements referred to in Section 5.05.
Section 2. Credit Sleeve for Reliant Retail Obligors
2.01 Credit Sleeve Generally; Exclusivity (a) Commitment of Merrill
Parties. During the Term, and otherwise subject to and in accordance with the
terms and conditions of this Agreement (including Sections 2.04 and 2.05), at
the request of REPS from time to time, subject to the proviso below, the Merrill
Parties shall:
(i) cause the ML Guarantee Provider to execute and deliver to
Accepted Counterparties and perform under ML Guarantees in respect of REPS’
obligations under Power and Hedging Contracts, including Credit Support
Agreements, and prevent any events of default or termination events relating
solely to the ML Guarantee Provider as a credit support provider under the Power
and Hedging Contracts, including the related Credit Support Agreements;
(ii) cause the Sleeve Provider to execute and deliver to Accepted
Counterparties and REPS and perform under Credit Support Agreements providing
credit support for the obligations under Power and Hedging Contracts, and
prevent any events of default or termination events relating solely to the
Sleeve Provider as a credit support provider under the Credit Support Agreements
related to the Power and Hedging Contracts;
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(iii) cause the Sleeve Provider to execute and deliver and perform
under EFS Transactions, EOO Transactions and ICE Block Transactions in
connection with Exchange Traded Contracts held on the Effective Date, or
subsequently obtained by REPS, in each case, in accordance with the provisions
of Section 2.03;
(iv) cause the ML Guarantee Provider to execute and deliver to C&I
Customers and Governmental Customers and perform under ML Guarantees in
connection with C&I Contracts and Governmental Contracts;
(v) subject to Section 2.05, cause the ML Guarantee Provider and the
Sleeve Provider to, in the case of the ML Guarantee Provider, execute and
deliver to Governmental Authorities, to the Reliant Retail Obligors for the
benefit of Persons making customer deposits and advance payments and to Persons
constituting transmission and distribution service providers (for this
paragraph, the “regulatory beneficiaries”) and perform under ML Guarantees for
and, in the case of the Sleeve Provider, directly or enter into agreements to
post or provide cash collateral to regulatory beneficiaries for, in each case,
the obligations of the Reliant Retail Obligors to such regulatory beneficiaries
regarding (A) regulatory requirements with respect to the conduct of the Retail
Energy Business in the ERCOT market area under or with Governmental Authorities,
(B) the obligations of the Reliant Retail Obligors with respect to customer
deposits and advance payments relating to the ERCOT market area as required by
Governmental Authorities (including under PUCT Subst. Reg. 25.107, or any
successor thereto), provided that the same are for the benefit of Persons making
customer deposits and advance payments and are payable or made at the direction
of the Reliant Retail Obligors, and (C) the obligations of the Reliant Retail
Obligors with respect to transmission and distribution service in the ERCOT
market area required by Governmental Authorities (including posting requirements
under PUCT Subst. Reg. 25.108, or any successor thereto).
(vi) in connection with RESE executing a Joinder Agreement and becoming
an “Other Reliant Retail Obligor” hereunder, make or consent to commercially
reasonable modifications to the Transaction Documents (including modifications
to the Accepted Counterparties and Counterparty Limitations to include
counterparties and limits relating to the PJM Retail Business) as may be
necessary to reflect the inclusion of the PJM Retail Business hereunder, subject
to receipt of all applicable approvals of Governmental Authorities necessary to
permit the PJM Retail Business to be included under this Agreement in accordance
with the general requirements of this Agreement, and receipt of legal opinions
reasonably satisfactory to the Sleeve Provider to such effect; and
(vii) execute and deliver such further certificates, documents and
agreements, and take such further actions, as REPS may reasonably request to
fully implement the intent of the foregoing;
Provided, however, that the foregoing commitments of the Merrill Parties are
subject to the following:
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(1) during the Ramp-up Period, the commitments of the Merrill Parties
under clauses (i) through (v) above shall not require the effectiveness of any
ML Guarantees and Credit Support Agreements, the effectiveness of any
commitments to enter into EFS Transactions, EOO Transactions, Mirror OTC
Contracts and ICE Block Transactions, or the effectiveness of any agreement to
post or provide cash collateral to Governmental Authorities (or any posting or
provision of the same), but only the execution and delivery of applicable
documents and agreements the effectiveness of which is subject to receipt of
notice of effectiveness (the “Effectiveness Notices”) from the applicable
Merrill Parties; provided that upon the Effective Date the Merrill Parties shall
provide such Effectiveness Notices as are necessary to cause all outstanding ML
Guarantees and Credit Support Agreements, all commitments to enter into EFS
Transactions, EOO Transactions, Mirror OTC Contracts and ICE Block Transactions
and all agreements to post or provide cash collateral to Governmental
Authorities to become effective.
(2) on and after the Effective Date, the commitments to enter into any
ML Guarantees or Credit Support Agreements, any EFS Transactions, EOO
Transactions, Mirror OTC Contracts or ICE Block Transactions or any agreement to
post or provide cash collateral to Governmental Authorities, are subject to the
satisfaction of the conditions precedent set forth in Section 4.03; and
(3) following the Unwind Start Date, (A) commitments with respect to
any ML Guarantees and Credit Support Agreements, and EFS Transactions, EOO
Transactions, Mirror OTC Contracts and ICE Block Transactions, other than those
described in clause (B) below shall be limited to the maintenance and
modification of hedges in Accepted Products where those hedges are in place to
support contracts with Residential Mass Customers, Business Service Mass
Customers and C&I Customers existing on the Unwind Start Date, (B) ninety (90)
days after the Unwind Start Date, the commitments of the Merrill Parties with
respect to providing ML Guaranties or the posting or provision of collateral to
Governmental Authorities or with respect to customer deposits shall be
terminated, and (C) to the extent of any commitments that have terminated, the
Merrill Parties shall have the right to deliver to the applicable Persons
notices that such commitments have terminated and the right to the return of any
collateral theretofore posted under such commitments.
The Merrill Parties shall take all actions reasonably requested under this
Section 2.01(a) by REPS reasonably promptly upon receipt of such request unless
another time period is expressly provided for such actions under this Agreement.
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(b) Exclusivity.
(i) Subject to Section 2.01(b)(ii), the Reliant Retail Obligors shall
conduct all power, gas and other commodity purchases or sales and all hedging
transactions after the Effective Date (A) using Accepted Products under Power
and Hedging Contracts and the Reliant Power Purchase Agreements, as applicable,
with Accepted Counterparties and within each applicable Counterparty Limitation,
(B) on an Accepted Exchange in accordance with Section 2.03, or (C) with
Governmental Customers, and, in each case, such transactions shall be solely for
the Retail Energy Business; provided that this paragraph (b)(i) shall not
restrict sales of electricity in the ordinary course of the Retail Energy
Business to Residential Mass Customers, Business Services Mass Customers and C&I
Customers using Accepted Retail Products.
(ii) During the Transition Period and the Unwind Period, the Reliant
Retail Obligors shall have the right to conduct power, gas and other commodity
purchases or sales and hedging transactions other than under Section 2.01(b)(i)
so long as such transactions (A) are either (1) with Accepted Counterparties
and, taken together with the transactions under this Agreement, are within
applicable Counterparty Limitations and applicable Collateral Thresholds, or (2)
on an Accepted Exchange, (B) do not impose setoff rights against transactions
under Credit Support Agreements, and (C) use Accepted Products measurable in K
and VaR; provided that this paragraph (b)(ii) shall not restrict sales of
electricity in the ordinary course of the Retail Energy Business to Residential
Mass Customers, Business Services Mass Customers and C&I Customers using
Accepted Retail Products.
(iii) Until the commitments under the Working Capital Facility have
been terminated, the Working Capital Obligations have been repaid, and the
Unwind Start Date has occurred, the Reliant Retail Obligors the shall not enter
into any agreement with any Person for the provision of working capital
facilities and, thereafter, shall not enter into any agreement for the provision
of working capital facilities other than Replacement Working Capital Facilities.
2.02 Credit Sleeve of OTC Trading and Hedging Activities.
(a) Negotiation and Documentation of Power and Hedging Contracts. In
connection with the obligations of the Merrill Parties under Section 2.01(a),
REPS and the Sleeve Provider shall negotiate in good faith the terms and
conditions of each Counterparty Document, and document, execute and deliver,
with each Accepted Counterparty in according with the following procedures:
(i) General. REPS shall communicate directly with each Accepted Counterparty
and, unless requested by REPS, the Sleeve Provider may not communicate directly
with any Accepted Counterparty in connection with such negotiation. REPS shall
promptly provide the Sleeve Provider with each draft of or comments to a
Counterparty Document that is distributed or received by REPS. Modifications
from the form Power and Hedging Contract, Credit Support Agreement and ML
Guarantee attached to this Agreement (as Exhibits C, D and A, respectively)
shall require the consent of the Merrill Parties, not to be unreasonably
withheld or delayed; provided that consent shall be deemed given with respect to
the items provided on Schedule 2.02(a) if not objected to by the Sleeve Provider
within one (1) Business Day of the receipt of the related proposed
modification.
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No consent of the Merrill Parties shall be required with respect to
confirmations reflecting Accepted Trades under the Power and Hedging Contracts;
provided that consent of the Merrill Parties shall be required to execute any
confirmation for an Accepted Trade that (i) modifies the underlying terms of any
Power and Hedging Contract, to the same extent consent would have been required
had such modification been proposed at the time such Power and Hedging Contract
was originally executed or (ii) modifies or supplements in any manner (including
any supplement providing for posting of additional collateral or any independent
amount) the terms of any Credit Support Agreement, but in each case such consent
shall not be unreasonably withheld or delayed.
(ii) Ramp-Up Period. During the Ramp-Up Period, on each Business Day, REPS and
the Sleeve Provider shall meet daily (each, a “Daily Meeting”) at an agreed time
(3:00 p.m. Houston time unless otherwise agreed, which meetings may occur
telephonically) to discuss Counterparty Documents being negotiated with Accepted
Counterparties. At each Daily Meeting, REPS and the Sleeve Provider shall
discuss comments received from each Accepted Counterparty to each applicable
Counterparty Document, and the Sleeve Provider shall make available necessary
resources and, to the extent commercially practicable, respond at such Daily
Meeting to comments and drafts received on or before the Business Day prior to
such Daily Meeting.
(iii) Following the Ramp-Up Period. Following the Ramp-Up Period, during the
Scheduled Term, REPS shall promptly provide the Sleeve Provider with comments
received from each Accepted Counterparty to each applicable Counterparty
Document and the Sleeve Provider shall make available necessary resources and,
to the extent commercially practicable, respond to comments and drafts within
three Business Days of receipt by the Sleeve Provider.
(iv) Execution of Counterparty Documents. Following the completion of the
negotiation of each Counterparty Document with respect to an Accepted
Counterparty (and the agreement by REPS and the Merrill Parties to the terms and
conditions thereof), the Merrill Parties shall as soon as is reasonably
practicable and to the extent applicable, execute and deliver each such
Counterparty Document, but in no event later than three (3) Business Days after
a receipt of a request therefor. Following the execution thereof by all
applicable parties and as soon as is commercially practicable, REPS shall
provide the Sleeve Provider with a complete, fully executed set of Counterparty
Documents with respect to each Accepted Counterparty. Following the execution
of a Counterparty Document, any amendment, supplement or other modification
thereto shall be conducted in accordance with the processes set forth in this
Section 2.02(a)(i) through (iii).
(v) Notice and Demands for Collateral Posting. Following receipt of notice
from any Person, including any Accepted Counterparty or Governmental Customer,
that REPS (or the Sleeve Provider on its behalf) is required to post or return
collateral in connection with any collateral posting obligation that the Sleeve
Provider has undertaken in accordance with this Agreement, REPS shall promptly
(and in no event later than, for collateral to be posted on the same day, 11:00
a.m. CPT on such day of receipt, and for collateral to be posted on the next
day, 2:00 p.m. CPT on such day of receipt) provide
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such notice to the Sleeve Provider. On each day in which REPS is permitted to
value exposure or make any other determination in respect of collateral to be
posted by or to the Sleeve Provider in connection with any posting obligation
that the Sleeve Provide has agreed to undertake in connection with this
Agreement, REPS shall make such valuation or determination in good faith and in
a commercially reasonable manner. To the extent applicable, following any
valuation or determination made pursuant to the prior sentence, REPS shall make
demand to the applicable Person for the posting of collateral by or the return
of collateral to the Sleeve Provider and to the extent the Sleeve Provider
receives such a demand from REPS, the Sleeve Provider shall, subject to the
terms and conditions of this Agreement and the related Credit Support Agreement,
make such posting of Collateral as demanded, whether or not the Sleeve Provider
disputes the valuation, determination or demand (but subject to the Sleeve
Provider’s rights to cause the adjustment thereof below). Each valuation,
determination and demand of REPS specified in this clause (v) shall be made by
REPS without consultation with the Sleeve Provider unless such consultation is
sought by REPS, except that:
(1) if the Sleeve Provider disputes any such valuation, determination or demand,
prior to any action taken under paragraphs (2) or (3) below, and prior to the
commencement of any further remedial action, REPS shall negotiate with the
Sleeve Provider in good faith for one Business Day to resolve any such dispute
and upon resolution of such dispute, the applicable valuation, determination or
demand shall be adjusted accordingly, with corresponding adjustments to the
subsequent requests to the Persons to whom such valuations, determinations or
demands apply;
(2) if the Sleeve Provider disputes any such valuation based on Market
Information, prior to any action taken under paragraph (3) below, the Market
Information and resulting calculation shall be determined in accordance with
Section 12.13 and upon such determination, the applicable valuation shall be
adjusted accordingly, with corresponding adjustments to the subsequent requests
to the Persons to whom such valuations apply; provided that, until such
determination in accordance with Section 12.13, the valuation determined by REPS
shall apply;
(3) to the extent applicable, if after the application of clauses (1) and (2)
above, the Sleeve Provider in its reasonable discretion determines that (x) more
than $30,000,000 in outstanding value of Merrill Collateral remains at any time
posted or is requested to be posted in excess of the amount that is required to
be posted as determined by REPS (determined, in each case, on aggregate basis
across all Persons to whom the Sleeve Provider has such excess posted or has
requested posting of Merrill Collateral in an outstanding value of $2,000,000 or
more in connection with this Agreement), or (y) more than $10,000,000 in
outstanding value of Merrill Collateral remains at any time posted or is
requested to be posted to any single Person in excess of the amount that is
required to be posted as determined by REPS, then, in either case, if REPS
disputes such determination, such determination shall be referred by the parties
to the Calculation Agent for resolution, and upon resolution of such dispute the
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applicable valuation shall apply and REPS shall use its best efforts to
negotiate with, and to the extent applicable, dispute valuations of, or provide
updated valuations to each such Person holding excess Merrill Collateral that
the Sleeve Provider may direct in accordance with the resolution; provided that
in lieu thereof REPS may instead authorize the Sleeve Provider to do so; and
provided further that, until resolution of this dispute by the Calculation
Agent, the valuation determined by REPS shall apply; and
(4) to the extent applicable, if after application of clause (1) and (2) above
the Sleeve Provider in its reasonable discretion determines that the outstanding
value of any single Counterparty’s cash collateral posted or requested to be
posted to any Reliant Retail Obligor as determined by REPS is more than
$10,000,000 in deficiency of the amount that is required to be posted as
determined by Sleeve Provider, then, if REPS disputes such determination, such
determination shall be referred by the parties to the Calculation Agent for
resolution, and upon resolution of such dispute the applicable valuation shall
apply and REPS shall use its best efforts to negotiate with, and to the extent
applicable, dispute valuations of, or provide updated valuations to each such
Counterparty that the Sleeve Provider may direct in accordance with the
resolution; provided that in lieu thereof REPS may instead authorize the Sleeve
Provider to do so; and provided further that, until resolution of this dispute
by the Calculation Agent, the valuation determined by REPS shall apply.
(b) Core Accepted Counterparties and Counterparty Limitations. Each
counterparty listed on Exhibit B and designated as a Core Accepted Counterparty
shall constitute a Core Accepted Counterparty and the limitations set forth
therein shall constitute such Core Accepted Counterparty’s “Counterparty
Limitations” (in respect of each Accepted Product set forth therein). Following
a Failure to Pay or Post or a Bankruptcy Event in respect of a Core Accepted
Counterparty, the Sleeve Provider shall have the right by written notice to REPS
to make adjustments to the Counterparty Limitations applicable to such Core
Accepted Counterparty, as determined by the Sleeve Provider in its commercially
reasonable discretion. In addition, at any time, REPS may (i) (a) use Available
Funds to pay to the Sleeve Provider an additional fee (each, a “Counterparty CDS
Fee”), determined by the Sleeve Provider in its commercially reasonable
discretion based on the then-market price for credit default swaps on such Core
Accepted Counterparty, to increase the Counterparty Limitations applicable to
such Core Accepted Counterparty or (b) deliver to the Sleeve Provider a credit
default swap or swaps purchased with Available Funds and written by a Qualified
Institution or Qualified Institutions with such Core Accepted Counterparty as
the “Reference Entity” thereunder, in each case in which the applicable
Counterparty Limitations shall be increased, as determined by the Sleeve
Provider in its commercially reasonable discretion, for the term of the related
credit default swap(s) or (ii) use Available Funds to post cash Collateral to
the Sleeve Provider, in an amount determined by the Sleeve Provider in its
commercially reasonable discretion, to increase the Counterparty Limitations
applicable to such Core Accepted Counterparty in which case the applicable
Counterparty Limitations shall be increased, as determined by the Sleeve
Provider in its commercially reasonable discretion, during the period until REPS
requests the return of such posted cash Collateral at which time, so long as the
trading activities under such Power and Hedging Contract are within the
Counterparty Limitations without giving effect to such increase,
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such posted cash Collateral shall be promptly returned to REPS and such increase
shall no longer be applicable. In connection with each adjustment to the
Counterparty Limitations described in this paragraph, the Sleeve Provider shall
promptly provide an updated Exhibit B reflecting such adjustment to REPS.
(c) Other Accepted Counterparties. Each counterparty listed on
Exhibit B shall constitute an Other Accepted Counterparty and the limitations
set forth therein shall constitute such Other Accepted Counterparty’s
“Counterparty Limitations” (in respect of each Accepted Product set forth
therein). Following a Failure to Pay or Post or other material event of default
(howsoever defined), a Bankruptcy Event or a Downgrade Event in respect of such
Other Accepted Counterparty, the Sleeve Provider shall have the right by written
notice to REPS to adjust the Counterparty Limitations applicable to such Other
Accepted Counterparty, as determined by the Sleeve Provider in its commercially
reasonable discretion. In addition, at any time, REPS may (i) (a) use Available
Funds to pay to the Sleeve Provider a Counterparty CDS Fee on such Other
Accepted Counterparty to increase the Counterparty Limitations applicable to
such Other Accepted Counterparty or (b) deliver to the Sleeve Provider a credit
default swap or swaps purchased with Available Funds and written by a Qualified
Institution or Qualified Institutions with such Other Accepted Counterparty as
the “Reference Entity” thereunder, and in each case the applicable Counterparty
Limitations shall be increased, as determined by the Sleeve Provider in its
commercially reasonable discretion, for the term of the related credit default
swap(s) or (ii) use Available Funds to post cash Collateral to the Sleeve
Provider, in an amount determined by the Sleeve Provider in its commercially
reasonable discretion, to increase the Counterparty Limitations applicable to
such Other Accepted Counterparty in which case the applicable Counterparty
Limitations shall be increased, as determined by the Sleeve Provider in its
commercially reasonable discretion, during the period until REPS requests the
return of such posted cash Collateral at which time so long as the trading
activities under such Power and Hedging Contract are within the Counterparty
Limitations without giving effect to such increase, such posted cash Collateral
shall be promptly returned to REPS and such increase shall no longer be
applicable. In connection with each adjustment to the Counterparty Limitations
described in this paragraph, the Sleeve Provider shall promptly provide an
updated Exhibit B reflecting such adjustment to REPS.
(d) Additional Counterparties. REPS shall have the right to add
additional Core Accepted Counterparties and Other Accepted Counterparties to
Exhibit B with the approval of the Sleeve Provider, which shall not be
unreasonably withheld or delayed. When any Accepted Counterparty is added such
Accepted Counterparty shall be added with commercially reasonable Counterparty
Limitations as the Sleeve Provider may reasonably determine; provided that, at
all times after the Effective Date, the Sleeve Provider shall grant approvals
referred to above to the extent necessary such that (i) the Core Accepted
Counterparties shall own at least the percentages of the aggregate generating
capacity for the asset classes and zones set forth on Exhibit F and (ii) at all
times there shall be at least 30 Other Accepted Counterparties; and provided
further, that, if the Sleeve Provider shall reject any additional Accepted
Counterparty proposed by REPS and such rejection would cause a violation of the
foregoing requirements, then Sleeve Provider shall suggest an alternative
Accepted Counterparty meeting such requirements. In connection with each
additional Accepted Counterparty added as described in this paragraph, the
Sleeve Provider shall promptly provide an updated Exhibit B reflecting such
adjustment to REPS.
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(e) Compliance Requirements. Each Compliance Party shall be subject
to the Compliance Requirements. The obligation of the Merrill Parties under (i)
Section 2.01(a) with respect to any Compliance Party or (ii) paragraphs (c) and
(d) of this Section 2.02 to (A) designate any Other Accepted Counterparty or (B)
add any additional Accepted Counterparty, shall in each case be subject to the
satisfaction of the Compliance Requirements with respect to such Compliance
Party or such Other Accepted Counterparty or additional Accepted Counterparty,
as the case may be. To the extent the Sleeve Provider or the ML Guarantee
Provider is not already in possession of applicable Compliance Information
satisfying the applicable Compliance Requirements with respect to any such
Person, REPS hereby permits, and the Merrill Parties hereby agree, that the
Sleeve Provider or the ML Guarantee Provider shall use commercially reasonable
efforts to endeavor to obtain the same from such Person and, in the event the
Sleeve Provider or the ML Guarantee Provider, as the case may be, has not timely
received applicable Compliance Information with respect to such Person, the
Sleeve Provider shall promptly notify REPS of the same by written notice, and
REPS may request the required Compliance Information for such Person and forward
the same to Sleeve Provider upon receipt, provided that REPS shall not be deemed
to have made any representation or warranty, express or implied, with respect to
the accuracy thereof. The Merrill Parties shall provide to REPS upon request
from time to time a description of the applicable Compliance Information and
Compliance Requirements at such time with respect to any Compliance Party or
generally with respect to any category of Compliance Parties as to which similar
requirements apply.
(f) Sleeve Provider Commitment for Initial Transactions. From the
Effective Date and the five Business Days thereafter, the Sleeve Provide shall,
subject to the terms of this Agreement, enter into transactions, at prices
consistent with market prices at the time such transactions are consummated, for
Accepted Products with REPS under the MLCI/REPS ISDA without volume or credit
restrictions (applicable during such period or thereafter for such transactions)
provided that such transactions are limited in scope to (i) hedging obligations
to existing C&I Customers that exercise a contractual right to fix their
pricing, (ii) purchases and sales of fixed price power on a day ahead basis not
to exceed 500 MWs, and (iii) purchasing natural gas to hedge new C&I Customers,
new Business Service Mass Customers or marketing campaigns for Residential Mass
Customers, not to exceed 15 Bcf in the aggregate.
2.03 Credit Sleeve of Exchange Traded Hedging Activities.
(a) Effective Date Transactions. On the Effective Date, REPS and the
Sleeve Provider shall execute (i) one EFS Transaction or EOO Transaction per
Accepted Product per delivery month, for all of the NYMEX Exchanged Traded
Contracts held by REPS as of the Business Day prior to the Effective Date, and
(ii) one ICE Block Transaction per Accepted Product per delivery month, for all
of the ICE Cleared Swap Contracts held by REPS as of the Business Day prior to
the Effective Date. With respect to all EFS Transactions, EOO Transactions and
ICE Block Transactions, each party shall pay its own broker’s fees and FCM fees.
(b) Ongoing Transactions. On each Business Day, on and after the
Effective Date, REPS and the Sleeve Provider shall execute (i) one EFS
Transaction or EOO Transaction per Accepted Product, for all of the NYMEX
Exchanged Traded Contracts held by REPS as of the mutually agreed upon time on
such Business Day, by the close of the Business Day such
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NYMEX Exchanged Traded Contracts were entered into, and (ii) one ICE Block
Transaction per Accepted Product, for all of the ICE Cleared Swap Contracts held
by REPS as of the mutually agreed upon time on such Business Day, by the close
of the Business Day such ICE Cleared Swap Contracts were entered into. With
respect to all EFS Transactions, EOO Transactions and ICE Block Transactions,
each Party shall pay its own broker’s fees and FCM fees.
2.04 Credit Sleeve of C&I and Governmental Contracts On the Effective
Date, subject to the terms and conditions of this Agreement, the ML Guarantee
Provider shall provide an ML Guarantee in respect of each of the C&I Contracts
and Governmental Contracts set forth Schedule 2.04. The obligations of the
Merrill Parties under Section 2.01(a)(iv) to provide ML Guarantees in respect of
additional C&I Contracts and Governmental Contracts shall be subject to the
following restrictions: (i) no more than 20 such ML Guarantees shall be issued
per 12 month period and (ii) such additional C&I Contracts and Governmental
Contracts shall be in respect of Accepted Retail Products.
2.05 Credit Sleeve of Regulatory Obligations. In connection with the
obligation of the Merrill Parties under Section 2.01(a)(v), REPS shall endeavor
with the Merrill Parties to cause the applicable beneficiaries to accept ML
Guarantees instead of the posting or provision of cash collateral when possible
to satisfy the requirements of the Merrill Parties thereunder; provided that the
foregoing shall not imply any waiver of the obligation to post or provide cash
collateral. In providing such ML Guarantee or cash collateral, neither the
Sleeve Provider nor any of its Affiliates shall be responsible for or otherwise
guarantee or assure, any other regulatory requirements or compliance provisions
applicable to the Reliant Retail Obligors, other than those pertaining to
required financial criteria, the required posting of deposits or collateral, or
the provision of ML Guarantees with respect to the applicable regulatory
beneficiaries identified in, and as defined in, Section 2.01(a)(v).
2.06 Term
(a) The term of this Agreement (the “Term”) shall be the period from
the Execution Date through the Credit Sleeve Termination Date.
(b) REPS shall have the right to declare an Unwind Start Date on the
last day of any month to effect the beginning of the Unwind Period at any time
upon not less than 60 days prior written notice provided by REPS to the Sleeve
Provider. The declaration of an Unwind Start Date in accordance with this
Section 2.06(b) may result in an obligation of REPS with respect to a Make-whole
Payment under Section 3.05.
2.07 Posting Collateral to Increase K. At any time REPS shall have the
right to use Available Funds to post cash Collateral to the Sleeve Provider, in
an amount determined by REPS, to increase the value of clause (y) of the
definition of “Trigger Event”, in which case such clause (y) shall be increased
by the amount of such posted cash Collateral as contemplated by clause (y)(2) of
the definition of “Trigger Event” until such time as REPS requests the return of
such posted cash Collateral, at which time, so long as the return of such cash
Collateral would not cause a Trigger Event, such posted cash Collateral shall be
promptly returned to REPS and such increase shall no longer be applicable.
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Section 3. Payments, Fees and Records.
3.01 Notice of Payment on ML Guarantee or Collateral Foreclosure. The
Sleeve Provider shall notify REPS, promptly upon receipt from any beneficiary or
recipient of an ML Guarantee or any secured party to which the Sleeve Provider
has provided collateral pursuant to Article II (“Merrill Collateral”) of any
demand for payment under such ML Guarantee or any Collateral Foreclosure
thereon. The Sleeve Provider shall notify REPS of the Dollar amount paid by the
Merrill Parties as a result of such demand or the Dollar amount of Merrill
Collateral relating to such Collateral Foreclosure, as applicable, and the date
on which payment was made by a Merrill Party in respect of such demand or the
date on which such Collateral Foreclosure occurred, as applicable (any such
date, a “Capital Outlay Date”).
3.02 Repayment of Draw Reimbursement Obligations. REPS hereby
unconditionally and irrevocably promises to pay to the Sleeve Provider, on
behalf of the applicable Merrill Party, the entire outstanding Dollar amount of
each Draw Reimbursement Obligation arising from each demand for payment under a
ML Guarantee or a Collateral Foreclosure of Merrill Collateral described in
Section 3.01 (each, a “Payment Event”), notwithstanding the identity of the
beneficiary or recipient of any ML Guarantee or Merrill Collateral, and without
presentment, demand, protest or other formalities of any kind. Each such Draw
Reimbursement Obligation shall mature on the Business Day following the date the
Sleeve Provider delivers notice to REPS of the related Capital Outlay Date as
provided in Section 3.01 (the “Notice Date”); provided that, in the event that,
on or prior to the Business Day following the Notice Date, REPS delivers to the
Sleeve Provider in good faith a written notice referred to in Section 8.02(b) or
(c) predicated upon (i) failure to pay under any ML Guarantee after demand by
the beneficiary complying with the terms and conditions of the ML Guarantee or
(ii) the breach of a Merrill Party of its obligations under Section 2.01 or any
Credit Support Agreement, such Draw Reimbursement Obligation shall mature and be
payable on the earliest of (A) the date that the notice to the Sleeve Provider
is withdrawn, (B) the date the underlying failure related to the Payment Event
is cured, (C) the date that the remedies under Section 9.02 with respect to such
failure have been resolved, mutually concluded, or finally determined by a court
of competent jurisdiction, or (D) the date that the Working Capital Facility
matures (whether on the Maturity Date under, and as defined in, the Working
Capital Facility, by acceleration or otherwise) (any Reimbursement Obligation
subject to the foregoing proviso, a “Deferred Draw Reimbursement Obligation”).
Notwithstanding any payment of a Draw Reimbursement Obligation REPS makes as
required in this Section 3.02, REPS does not by making such payment waive any
rights under Sections 8.02 and 9.02 against a Merrill Party related to Payment
Event, subject to the limitations in Section 9.04.
3.03 Interest.
(a) (i) REPS hereby unconditionally promises to pay to the Sleeve
Provider, when due and payable in accordance with Section 3.03(d):
(A) interest accruing at a rate per annum equal to the Base Rate (as in effect
from time to time) plus 0.45% on the unpaid Dollar amount of each Draw
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Reimbursement Obligation for the period from and including the Business Day
following the related Notice Date to but excluding the date the Dollar amount of
such Draw Reimbursement Obligation shall be paid in full; and
(B) interest accruing at a rate per annum equal to the LIBO Rate (as defined in
the Working Capital Facility and incorporated by reference in accordance with
Section 3.03(a)(ii)) plus 0.45% on the unpaid Dollar amount of each Deferred
Reimbursement Obligation for the period from and including the Business Day
following the related Notice Date to but excluding the date the Dollar amount of
such Deferred Reimbursement Obligation shall be paid in full.
(ii) REPS agrees, for the benefit of the Sleeve Provider, to perform, comply
with and be bound by each of its covenants, agreements and obligations contained
in Sections 2.10, 2.13, 2.14 of the Working Capital Facility with respect to
Deferred Reimbursement Obligations, as modified and supplemented and in effect
from time to time, or as last in effect in the event the Working Capital
Facility shall be terminated. Without limiting the generality of the foregoing,
the above-mentioned provisions of Working Capital Facility, together with
related definitions (including the definition of “LIBO Rate” and “Interest
Payment Date”) and ancillary provisions, are hereby incorporated herein by
reference, as if set forth herein in full, mutatis mutandis.
(b) Notwithstanding Section 3.03(a), REPS hereby unconditionally
promises to pay to the Sleeve Provider, when due and payable in accordance with
Section 3.03(d), interest accruing at a rate per annum equal to the Post-Default
Rate (as in effect from time to time) on (i) the Dollar amount of each
Reimbursement Obligation that is not paid in full within one Business Day after
becoming due and (ii) any other overdue amount payable by REPS under any
Transaction Documents with any Merrill Party, in each case for the period from
and including the due date thereof to but excluding the date the same is paid in
full.
(c) Interest on any amount, including interest on Reimbursement
Obligations, shall be computed on the basis of actual days elapsed (including
the first day but excluding the last day) occurring during the period such
interest accrues and a year of 365 or 366 days, as applicable (if computed by
reference to the Prime Rate) or 360 days (if computed by reference to the
Federal Funds Rate or the LIBO Rate).
(d) (i) Subject to clause (iii) below, accrued interest on each Draw
Reimbursement Obligation shall be payable monthly on the last Business Day of
each month and on the date that such Draw Reimbursement Obligation shall be paid
in full; (ii) subject to clause (iii) below, accrued interest on each Deferred
Reimbursement Obligation shall be payable on each Interest Payment Date (as
defined in the Working Capital Facility and incorporated by reference in
accordance with Section 3.03(a)(ii)) for such Deferred Reimbursement Obligation
and on the date that such Deferred Reimbursement Obligation shall be paid in
full; provided that interest payable on each Interest Payment Date prior to the
date that such Deferred Reimbursement Obligation is payable shall be reserved in
accordance with Section 6.11(c)(vi) in lieu of being paid on such Interest
Payment Date; and (iii) accrued interest on any amount (including Draw
Reimbursement Obligations and Deferred Reimbursement Obligations) payable in
accordance with Section 3.03(b) shall be payable on demand from time to time, on
the last
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Business Day of each month and on the date that such amount is paid in full.
3.04 Monthly Sleeve Fee. The Monthly Sleeve Fee shall accrue on each
day from the Effective Date to and including the Unwind Conclusion Date and be
payable in arrears by REPS to the Sleeve Provider in monthly installments on
each Monthly Payment Date, in each case, as determined in accordance with
Schedule 3.04.
3.05 Make-whole Payment. In the event that an Unwind Start Date is
declared by the Sleeve Provider in connection with a Reliant Event of Default or
is declared by REPS in accordance with Section 2.06(b), in either case, within
two years of the Effective Date, REPS shall pay to the Sleeve Provider the
Make-whole Payment.
3.06 Structuring Fee. On the Effective Date, REPS shall pay to the
Sleeve Provider a one-time structuring fee (the “Structuring Fee”) in an amount
equal to $12,750,000.
3.07 Payments Generally.
(a) Payments by Reliant Retail Obligors. Except to the extent
otherwise provided herein, all payments in respect of Reimbursement Obligations,
interest, Monthly Sleeve Fees and other amounts to be made by the Reliant Energy
Obligors under this Agreement, and, except to the extent otherwise provided
therein, all payments to be made by the Reliant Energy Obligors under any other
Transaction Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim to the Sleeve Provider at the account
designated on Schedule 3.07(a) or any other account designated in writing by the
Sleeve Provider to REPS not less than five Business Days before any payment is
made, not later than 3:00 p.m., New York City time, on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
(b) Extensions to Next Business Day. If the due date of any payment
under this Agreement would otherwise fall on a day that is not a Business Day,
such date shall be extended to the immediately succeeding Business Day and
interest shall be payable for any amount so extended for the period of such
extension (except in the case of the Monthly Sleeve Fee).
3.08 Records; Prima Facie Evidence.
(a) Maintenance of Records by the Sleeve Provider. The Sleeve
Provider shall maintain records in which it shall record (i) each ML Guarantee
issued hereunder, (ii) the amount of each Reimbursement Obligation,
(iii) interest due and payable or to become due and payable from REPS to the
Sleeve Provider hereunder and (iv) the amount of any sum received by the Sleeve
Provider hereunder.
(b) Effect of Entries. The entries made in the records maintained
pursuant to paragraph (a) above shall be prima facie evidence of the existence
and amounts of the obligations recorded therein; provided that the failure of
the Sleeve Provider to maintain such
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records or any error therein shall not in any manner affect the obligation of
REPS to repay the Reimbursement Obligations in accordance with the terms of this
Agreement.
Section 4. Conditions.
4.01 Initial Conditions for Merrill Parties. The obligation of the
Merrill Parties to issue the Effectiveness Notices in Section 2.01(a)(1) and to
otherwise enter into the initial ML Guarantees or Credit Support Agreements,
initial EFS Transactions, EOO Transactions, Mirror OTC Contracts or ICE Block
Transactions or initial agreements to post or provide cash collateral to
Governmental Authorities or other Persons, shall be subject to the conditions
that each of the conditions in Section 4.02 are satisfied (or waived by the
Reliant Retail Obligors), each of the conditions below in this Section 4.01 and
in Section 4.03 has been satisfied (or waived by the Merrill Parties) and the
Sleeve Provider has received each below agreement, instrument, certificate,
opinion and other document in form and substance reasonably satisfactory to it
(unless a different standard is expressed below) and in full force and effect:
(a) Certain Information, CD ROM, Schedules and Exhibits. (i) The
Sleeve Provider shall have timely received prior to the Effective Date all
information required to be received from REPS as contemplated by Schedule
1.01(c), (ii) the CD ROM referred to in Schedule 1.01(c) shall have been
approved by REPS and the Original Sample Results and General Principles referred
to in Schedule 1.01(c) shall have been agreed by the Sleeve Provider and REPS,
in each case at least 7 Business Days prior to the Effective Date as
contemplated by Schedule 1.01(c) and (iii) Annex 1.01(a) to Schedule 1.01(a),
Schedule 1.01(c).23, Schedule 1.01(d), Schedule 1.01(e), Schedule 2.02(a),
Schedule 2.04, Schedule 3.07(a), Exhibit G, Exhibit H, Exhibit I1 and Exhibit I2
shall have been completed and attached in a manner satisfactory to Sleeve
Provider, after consultation with REPS.
(b) Transaction Documents. This Agreement shall have been duly
executed by each of the Parties (and a Joinder Agreement shall have been duly
executed and delivered by RERR in a form reasonably satisfactory to the Sleeve
Provider pursuant to which RERR shall become an Other Reliant Retail Obligor
under this Agreement) and each of the Transaction Documents described in clauses
(ii) through (xx) of the definition thereof, and the MLCI/REPS ISDA, shall be
executed and delivered in a form reasonably satisfactory to the Sleeve Provider.
(c) Ringfence. Evidence satisfactory to the Sleeve Provider that the
Transition Agreement, employment arrangements with respect to management of the
Reliant Retail Obligors, transfer of retail supply and hedging contracts, and
office space leasing arrangements each have been completed on documentation or
conditions reasonable satisfactory to the Sleeve Provider and the remaining
elements of the ring fence restructuring of RERH Holdings and its Subsidiaries
have otherwise been completed on documentation or conditions reasonably
satisfactory to the Sleeve Provider; provided, however that (i) the contribution
of RERH and its Subsidiaries to RERH Holdings shall occur prior to the Merrill
Parties receiving any interest in RERH Holdings, (ii) employees that are being
transferred to RERH Holdings or any of its Subsidiaries and whose services are
provided for in the Transition Agreement shall not be required to
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transfer until January 1, 2007, and (iii) the ISDA confirmations under the
REES/REPS Power Purchase Agreement relating to “Upton Wind” and under the
RES/REPS Power Purchase Agreement relating to the Channelview Services Agreement
shall or shall be amended to have delivery or settlement dates, as applicable,
ending on or before the third anniversary of the then current expiry date of the
Scheduled Term.
(d) Secretary’s Certificates. A certificate, dated the Effective
Date, of the secretary or assistant secretary or (if none) any comparable
officer of each Reliant Retail Obligor as to (i) its Retail Organizational
Documents, (ii) resolutions of its board of directors, members, managers or
comparable governing body, as applicable, authorizing the transactions
contemplated by the Transaction Documents and (iii) incumbency of officers
authorized to execute and deliver its Transaction Documents on its behalf and
authenticity of the signatures of such officers.
(e) Good Standing Certificates.
(i) A (long form) certificate, without exhibits, dated within one
week prior to the Effective Date, of the Secretary of State of Delaware, as to
the existence and good standing of each Reliant Retail Obligor and the title and
date of filing of each Retail Organizational Document of such Person filed with
such Secretary of State.
(ii) A certificate, dated within one week prior to the Effective Date,
of the Secretary of State and the taxing authority of the State in which the
principal place of business and chief executive office of each Reliant Retail
Obligor, are located, as to (A) the good standing and (B) the authority or
qualification to do business in such jurisdiction of such Person and (C) no tax
delinquencies (to the extent that such certificate is generally available in
such State).
(f) Opinions of Counsel to Reliant, et al. Written opinions
addressed to the Merrill Parties of Bracewell & Giuliani LLP, special counsel to
the Reliant Retail Obligors (including customary opinions as to “true
contribution”, “non-consolidation”, non-contravention of the Reliant Parent Debt
Documents and the creation and perfection of Liens on Collateral), and of
in-house counsel to Reliant Parent, in each case, dated the Effective Date, and
in a form reasonably satisfactory to the Merrill Parties.
(g) Officer Certificates. A certificate, dated the Effective Date, of
a Financial Officer of RERH Holdings, to the effect that (A) (i) each of the
representations and warranties made by the Reliant Retail Obligors in Section 5
and in the other Transaction Documents which is qualified by materiality is true
and correct, (ii) each of the other representations and warranties made by the
Reliant Retail Obligors in Section 5 and in the other Transaction Documents is
true and correct in all material respects, in each case, on and as of the
Effective Date with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date); and (B) no Default with
respect to a Reliant Event of Default or Trigger Event has occurred and is
continuing on and as of the Effective Date.
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(h) Financial Statements. The audited consolidated balance sheet of
RERH and its consolidated Subsidiaries for the Fiscal Year ended December 31,
2005, and the related consolidated statements of income or operations,
stockholders’ equity, comprehensive income (loss) and cash flows for such Fiscal
Year (the “Audited Financial Statements”), setting forth in each case in
comparative form the figures as of the end of, and for, the previous Fiscal
Year, all in reasonable detail and prepared in accordance with GAAP, (B) the
unaudited consolidated balance sheet of RERH and its consolidated Subsidiaries
as at the end of the Fiscal Quarter ended June 30, 2006, and the related
unaudited consolidated statements of income or operations for such Fiscal
Quarter and for the portion of RERH’s Fiscal Year then ended and cash flows for
the portion of RERH’s Fiscal Year then ended (the “Unaudited Financial
Statements”), without comparisons to prior periods and subject to normal
year-end audit adjustments and the absence of footnotes; and (C) a projected
unaudited consolidated balance sheet of RERH Holdings and its consolidated
Subsidiaries based on the unaudited consolidated balance sheet of RERH and its
consolidated Subsidiaries as at the end of the Fiscal Quarter ended June 30,
2006, and giving effect to the transfer of RERH to RERH Holdings and the other
contributions of the assets and liabilities of the Retail Energy Business
contemplated by this Agreement as at the Effective Date, certified by a
Responsible Officer of RERH Holdings as being accurate and complete in all
material respects with respect to the subject matter thereof.
(i) Lender Consents. The Reliant Parent Debt Documents shall have
been amended in a form reasonably satisfactory to the Sleeve Provider in order
to permit the transactions contemplated by this Agreement (it being understood
that provisions relating to the consent fee and other amounts payable for any
such amendments shall not be subject to the Sleeve Provider’s satisfaction, and
that the form of consent provided to the bondholders as of July 25, 2006, as
amended by the supplement dated August 28, 2006, is satisfactory).
(j) Repayment of Securitization Facility. Evidence satisfactory to
the Sleeve Provider that the Securitization Facility shall be permanently repaid
in full and the collateral trust arrangement holding subordinated notes related
to the Securitization Facility in favor of secured trading counterparties has
been terminated.
(k) Lien Search Reports, Etc. (i) A lien search report, certified by
the Secretary of State or other applicable Governmental Authority for each
jurisdiction the filing in which could perfect a Lien in any Collateral, for all
UCC, judgment lien, tax lien and equivalent lien filings made against each
Reliant Retail Obligor; and (ii) evidence that the Liens indicated by such
financing statements and similar filings (A) have been or will be on the
Effective Date terminated, released or otherwise discharged in full prior to or
concurrently with the Effective Date or (B) are Permitted Liens.
(l) Collateral Accounts. Evidence that Reliant Retail Obligors have
established or transferred to the Collateral Trustee the Collateral Accounts
required by the Security Documents.
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(m) Accepted Products. Evidence that, upon the occurrence of the
Effective Date (and the delivery of Effectiveness Notices, if applicable, and
the consummation of the transactions under Section 2.01, contemplated to occur
on the Effective Date), 90% of (i) purchases of financial gas and gas options
(as measured by total net notional volume), (ii) sales of financial gas and gas
options (as measured by total net notional volume), (iii) purchases of heat rate
capacity (as measured by average peak MW’s) and (iv) sales of heat rate capacity
(as measured by average peak MW’s) is coming directly from the Sleeve Provider
or other third parties (and not from Affiliates of the Reliant Retail
Obligors). For the avoidance of doubt, (x) for heat rate transactions that
involve purchasing fixed-priced power and selling financial gas to the same
counterparty, the financial gas volume shall be included in clause (ii) above
and the fixed-priced power volume shall be included in clause (iii) above and
(y) volumes relating to the obligation of REPS to purchase output priced at the
Market Clearing Price of Energy pursuant to the Channelview Services Agreement
and related ISDA confirm shall be excluded in calculating the foregoing 90%
threshold.
(n) Other Conditions. Such other information, diligence, documents,
opinions, certificates, approvals and conditions as the Sleeve Provider may
reasonably request.
4.02 Initial Conditions for Reliant Retail Obligors. The obligation of
the Reliant Retail Obligors to pay any Monthly Sleeve Fees or any Make-whole
Payment, to secure the Merrill Parties under the Collateral Trust Agreement, to
enter into any further Transaction Documents or to proceed with the Transactions
contemplated thereunder shall not become effective until the date the each of
the conditions in Section 4.01 and Section 4.03 are satisfied (or waived by the
Merrill Parties) and each of the conditions below in this Section 4.02 has been
satisfied (or waived by the Reliant Retail Obligors) and the REPS has received
each below agreement, instrument, certificate, opinion and other document in
form and substance reasonably satisfactory to it (unless a different standard is
expressed below) and in full force and effect:
(a) Certain Information, CD ROM, Schedules and Exhibits. (i) REPS
shall have timely received prior to the Effective Date all information required
to be received from the Sleeve Provider as contemplated by Schedule 1.01(c),
(ii) the CD ROM referred to in Schedule 1.01(c) shall have been approved by the
Sleeve Provider and the Original Sample Results and General Principles referred
to in Schedule 1.01(c) shall have been agreed by the Sleeve Provider and REPS,
in each case at least 7 Business Days prior to the Effective Date as
contemplated by Schedule 1.01(c) and (iii) Annex 1.01(a) to Schedule 1.01(a),
Schedule 1.01(c).23, Schedule 1.01(d), Schedule 1.01(e), Schedule 2.02(a),
Schedule 2.04, Schedule 3.07(a), Exhibit G, Exhibit H, Exhibit I1 and Exhibit I2
shall have been completed and attached in a manner satisfactory to REPS, after
consultation with the Sleeve Provider.
(b) Transaction Documents. This Agreement shall have been duly
executed by each of the Parties (and a Joinder Agreement shall have been duly
executed and delivered by RERR in a form reasonably satisfactory to REPS
pursuant to which RERR shall become an Other Reliant Retail Obligor under this
Agreement) and each of the Transaction Documents described in clauses (ii)
through (xx) of the definition thereof,
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and the MLCI/REPS ISDA, shall be executed and delivered in a form reasonably
satisfactory to REPS.
(c) Ringfence. Evidence satisfactory to REPS that the Transition
Agreement, employment arrangements with respect to management of the Reliant
Retail Obligors, transfer of retail supply and hedging contracts, and office
space leasing arrangements each have been completed on documentation or
conditions reasonably satisfactory to REPS and the remaining elements of the
ring fence restructuring of RERH Holdings and its Subsidiaries have otherwise
been completed on documentation or conditions reasonably satisfactory to REPS;
provided, however that (i) the contribution of RERH and its Subsidiaries to RERH
Holdings shall occur prior to the Merrill Parties receiving any interest in RERH
Holdings, (ii) employees that are being transferred to RERH Holdings or any of
its Subsidiaries and whose services are provided for in the Transition Agreement
shall not be required to transfer until January 1, 2007, and (iii) the ISDA
confirmations under the REES/REPS Power Purchase Agreement relating to “Upton
Wind” and under the RES/REPS Power Purchase Agreement relating to the
Channelview Services Agreement shall or shall be amended to have delivery or
settlement dates, as applicable, ending on or before the third anniversary of
the then current expiry date of the Scheduled Term
(d) Trading Contracts. (i) Power and Hedging Contracts, including
Credit Support Agreements, and ML Guarantees each executed and delivered by the
parties thereto with respect to all Core Counterparties, with the obligations of
the parties thereunder being subject only to the delivery of the Effectiveness
Notices, and (ii) evidence satisfactory to REPS of the delivery of the
Effectiveness Notices.
(e) Lender Consents and Funding. The Reliant Parent Debt Documents
shall have been amended in order to permit the transactions contemplated by the
Transaction Documents and any new facilities thereunder have been funded.
(f) No Default or Trigger Event. No Default with respect to a
Reliant Event of Default, Default with respect to a Sleeve Provider Event of
Default or Trigger Event shall have occurred and be continuing or would occur
upon the Effective Date (and in connection therewith, the Sleeve Provider has
run sample calculations with respect to Trigger Events during the period prior
to the Effective Date at the request of and subject to receipt of applicable
data from REPS).
(g) Other Conditions. Such other information, diligence, documents,
opinions, certificates, approvals and conditions as REPS may reasonably request.
4.03 Conditions to Certain Obligations of the Merrill Parties. The
obligation of the Merrill Parties to issue the Effectiveness Notices in Section
2.01(a)(1) and to enter into any ML Guarantees or Credit Support Agreements, any
EFS Transactions, EOO Transactions, Mirror OTC Contracts or ICE Block
Transactions, any agreement to post or provide cash collateral to Governmental
Authorities or other Persons or any transaction contemplated by Section 2.02(e)
is subject to the following conditions precedent that, both immediately prior to
and after giving effect thereto and to the intended use thereof:
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(a) As of the Effective Date and thereafter, (i) each of the
representations and warranties of the Reliant Retail Obligors made in Section 5
and in the other Transaction Documents which is qualified by materiality shall
be true and correct and (ii) each of the other representations and warranties of
the Reliant Retail Obligors made in Section 5 and in the other Transaction
Documents shall be true and correct in all material respects, in each case of
clause (i) and (ii) on and as of the date of request for issuance of an ML
Guarantee or execution of a Credit Support Agreement with the same force and
effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date); and
(b) no Default relating to a Reliant Event of Default or Trigger Event
shall have occurred and be continuing.
Each request by REPS for the issuance of an ML Guarantee or the execution of a
Credit Support Agreement shall constitute a certification to the effect that the
above conditions have been satisfied.
Section 5. Representations and Warranties. Each of the Reliant
Retail Obligors hereby represents and warrants that as of the Effective Date and
thereafter:
5.01 Existence, Qualification and Power; Compliance with Laws. Such
Person (a) is duly organized or formed, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or organization, (b) has
all requisite power and authority and all requisite governmental licenses,
authorizations, consents and approvals to (i) own its assets and carry on its
business and (ii) execute, deliver and perform its obligations under the
Transaction Documents to which it is a party, (c) is duly qualified and is
licensed and in good standing under the Laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification or license, and (d) is in compliance with all Laws;
except in each case referred to in clause (b)(i), (c) or (d), to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.02 Authorization; No Contravention. The execution, delivery and
performance by such Person of each Transaction Document to which such Person is
party, have been duly authorized by all necessary corporate or other
organizational action, and do not and will not (a) contravene the terms of any
of such Person’s Organizational Documents; (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, or require any
payment to be made under (i) any Contractual Obligation to which such Person is
a party or affecting such Person or the properties of such Person or any of its
Subsidiaries, except as could not reasonably be expected to have a Material
Adverse Effect, or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject that could reasonably be expected to have a Material Adverse
Effect; (c) violate any Law that could reasonably be expected to have a Material
Adverse Effect; or (d) result in the creation of any Lien other than a Permitted
Lien. The Reliant Retail Obligors are in compliance with all Contractual
Obligations referred to in clause (b)(i), except to the extent that failure to
do so could not reasonably be expected to have a Material Adverse Effect.
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5.03 Governmental Authorization; Other Consents. Except as to those
which have been duly obtained, taken, given or made and are in full force and
effect and except as noted below, no approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with (i) the execution, delivery or performance by any Reliant Retail
Obligors of this Agreement or any other Transaction Document, (ii) the grant by
any Reliant Retail Obligors of the Liens granted by it pursuant to the
Transaction Documents, or (iii) the perfection or maintenance of the Liens
created under the Transaction Documents (including the first priority (subject
to Permitted Liens) nature thereof), other than the filing of UCC-1 Financing
Statements and applicable filings with respect to patents, trademarks and
material copyrights. The Parties recognize that in connection with transaction
contemplated hereby, (i) REPS will be required to notify FERC of a change in its
ownership as a result of the Sleeve Provider’s acquisition of an ownership
interest in RERH Holdings and (ii) one or more of the Reliant Retail Obligors
may be required to seek approval and/or provide notice to a Governmental
Authority prior to or in order to undertake one or more of the transactions not
prohibited by Article 7.
5.04 Binding Effect. This Agreement has been, and each other
Transaction Document, when executed and delivered hereunder, will have been,
duly executed and delivered by each Reliant Retail Obligor that is party
thereto. This Agreement constitutes, and each other Transaction Document when
so executed and delivered will constitute, a legal, valid and binding obligation
of each Reliant Retail Obligor, enforceable against each Reliant Retail Obligor
that is party thereto in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors’ rights generally and by general principles of equity,
whether such enforceability is considered in a proceeding at law or in equity.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and (ii) fairly present in all material
respects the consolidated financial condition of RERH and its consolidated
Subsidiaries as of the date thereof and their results of operations and cash
flows for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein.
(b) The Unaudited Financial Statements (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and (ii) fairly present in all material
respects the consolidated financial condition of RERH and its consolidated
Subsidiaries as of the date thereof and their results of operations and cash
flows for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein, subject, in the case of clauses (i) and (ii), to the absence of
footnotes and to normal year-end audit adjustments.
(c) From the date of the Audited Financial Statements through the
Effective Date, except as disclosed in public filings or in writing to the
Sleeve Provider on or before five
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Business Days before the Execution Date, there has been no event or
circumstance, either individually or in the aggregate that has had or could
reasonably be expected to have a Material Adverse Effect.
5.06 Litigation. There are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of each Reliant Retail Obligor, threatened
or contemplated, at law, in equity, in arbitration or before any Governmental
Authority, by or against the Reliant Retail Obligors or against any of their
properties or revenues that (a) purport to affect or pertain to this Agreement
or any other Transaction Document, or any of the transactions contemplated
hereby or (b) except as disclosed in public filings or in writing to the Sleeve
Provider on or before five Business Days before the Execution Date, exist on or
prior to the Effective Date and either individually or in the aggregate, if
determined adversely, could reasonably be expected to have a Material Adverse
Effect.
5.07 No Default. No Default with respect to a Reliant Event of Default
has occurred and is continuing or would result from the consummation of the
transactions contemplated by this Agreement or any other Transaction Document.
5.08 Ownership of Property; Liens.
(a) Each of the Reliant Retail Obligors has good and marketable title
in fee simple to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of its business, except for Permitted Liens and
such defects in title as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) The property of the Reliant Retail Obligors is subject to no
Liens, other than Permitted Liens.
(c) As of the Effective Date, the Reliant Retail Obligors have no fee
interests in real property.
5.09 Environmental Matters.
(a) The Reliant Retail Obligors have been and are in compliance with
all Environmental Laws, including obtaining and complying with all required
environmental permits, other than non-compliances that could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(b) None of the Reliant Retail Obligors nor any property currently or,
to the knowledge of the Reliant Retail Obligors, previously owned, operated or
leased by or for Reliant Retail Obligors is subject to any pending or, to the
knowledge of the Reliant Retail Obligors, threatened, claim, order, agreement,
notice of violation, notice of potential liability or is the subject of any
pending or threatened proceeding or governmental investigation under or pursuant
to Environmental Laws other than those that could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
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(c) As of the Effective Date none of the Reliant Retail Obligors has a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the regulations
thereunder or any state analog.
(d) There are no facts, circumstances or conditions known to the
Reliant Retail Obligors arising out of or relating to the operations or
ownership of the Reliant Retail Obligors or of the property owned, operated or
leased by the Reliant Retail Obligors that are not specifically included in the
financial information furnished to the Sleeve Provider that could be reasonably
expected to result in any Environmental Liabilities that could reasonably be
expected to have a Material Adverse Effect, unless such liabilities are (i)
covered by environmental liability insurance, (ii) subject to an indemnity from
any Governmental Authority, or (iii) subject to an indemnity satisfactory to
REPS from a Person that is not an Affiliate of REPS that REPS has determined in
good faith is appropriately credit worthy in relation to the potential amount of
such liabilities.
(e) As of the Effective Date, no environmental Lien has attached to
any property of the Reliant Retail Obligors and, to the knowledge of the Reliant
Retail Obligors, no facts, circumstance or conditions exist that could,
individually or in the aggregate, reasonably be expected to result in an
environmental Lien that would have a Material Adverse Effect.
(f) None of the Reliant Retail Obligors is undertaking, and has not
completed, either individually or together with other potentially responsible
parties, any investigation or assessment or remedial action relating to any
actual or threatened release of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law that could reasonably be
expected to have a Material Adverse Effect; and all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from, any
property currently or formerly owned or operated by the Reliant Retail Obligors
have been disposed of in a manner that could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
5.10 Insurance. The properties of the Reliant Retail Obligors are
insured with financially sound and reputable insurance companies not Affiliates
of REPS, in such amounts (after giving effect to any self-insurance compatible
with the following standards), with such deductibles and covering such risks as
are customarily carried by companies of the same or similar size engaged in
similar businesses and owning similar properties in localities where each
Reliant Retail Obligor operates, which insurance may be under policies obtained
by the Reliant Parent.
5.11 Taxes. The Reliant Retail Obligors have filed all Federal, state
and other material tax returns and reports required to be filed after giving
effect to applicable extensions, except for tax returns or reports the failure
of which to timely file could not reasonably be expected to have a Material
Adverse Effect, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those which
are being contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves have been provided in accordance with
GAAP. There is no proposed tax assessment against any Reliant Retail Obligor
that would, if made, have a Material Adverse Effect. Except for the
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provisions of the Reliant Parent Services Agreement or any replacement thereof
with respect to tax matters entered into in accordance with Section 7.15,
neither RERH Holdings nor any Subsidiary thereof is party to any tax sharing
agreement that would create any liability for taxes (for any period either
before or after the Effective Date), after taking into account the provisions of
the Reliant Parent Services Agreement or any such replacement.
5.12 ERISA Compliance.
(a) Each Plan has been established, operated and administered in
compliance in all material respects with its terms and the applicable provisions
of ERISA, the Code and other Federal or state Laws. Each Plan that is intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the best
knowledge of the Reliant Retail Obligors, nothing has occurred which would
prevent, or cause the loss of, such qualification. RERH Holdings and each ERISA
Affiliate have made all required contributions (both quarterly and annually) to
each Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Reliant
Retail Obligors, threatened claims, actions or lawsuits or investigations, or
action by any Governmental Authority, with respect to any Plan that could
reasonably be expected to have a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has resulted or could reasonably be expected to result
in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur
that could reasonably be expected to have a Material Adverse Effect; (ii) no
Pension Plan has any Unfunded Pension Liability, whether or not waived, that
could reasonably be expected to have a Material Adverse Effect, and no
application for a waiver of the minimum funding standard has been filed or is
expected to be filed with respect to any Pension Plan; (iii) none of the Reliant
Retail Obligors and any of their ERISA Affiliates has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan or Multiemployer Plan (other than premiums due and not delinquent
under Section 4007 of ERISA) that could reasonably be expected to have a
Material Adverse Effect; (iv) none of the Reliant Retail Obligors and any of
their ERISA Affiliates has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Sections 4201 or
4243 of ERISA with respect to a Multiemployer Plan that could reasonably be
expected to have a Material Adverse Effect; and (v) none of the Reliant Retail
Obligors and any of their ERISA Affiliates has engaged in a transaction that
could be subject to Sections 4069 or 4212(c) of ERISA.
5.13 Subsidiaries; Equity Interests. On the Effective Date and after
giving effect to the contribution under the Contribution Agreement, (a) RERH
Holdings has no Subsidiaries other than RERH, REPS, RERS, and RERR, and each
such Subsidiary is a Wholly Owned Subsidiary of RERH Holdings, and all of the
outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and nonassessable and are free and clear of
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all Liens except those created under the Transaction Documents and the Permitted
Liens, (b) RERH Holdings and its Subsidiaries have no equity investments in any
other Persons, and (c) set forth in Schedule 5.13 is a complete and accurate
list of the jurisdiction of incorporation, the address of principal place of
business and U.S. taxpayer identification number for RERH Holdings and its
Subsidiaries.
5.14 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act.
(a) None of the Reliant Retail Obligors is engaged or will engage,
principally or as one of its important activities, in the business of purchasing
or carrying Margin Stock, or extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) None of the Reliant Retail Obligors or any Person Controlling the
Reliant Retail Obligors (i) is in violation of any regulation under the Public
Utility Holding Company Act of 2005, the Federal Power Act or any foreign,
federal or local statute or any other Law of the United States of America or any
other jurisdiction, in each case limiting its ability to incur indebtedness for
money borrowed as contemplated by any Transaction Document, or (ii) is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940. Neither the issuing of any ML Guarantee nor the provision
of collateral by the Merrill Parties in accordance with this Agreement, nor the
consummation of the other transactions contemplated by the Transaction
Documents, will violate any provision of such Act or any rule, regulation or
order of the SEC thereunder.
5.15 Disclosure. The Reliant Retail Obligors have disclosed to the
Sleeve Provider all agreements, instruments and corporate or other restrictions
to which the Reliant Retail Obligors are subject, and all other matters known to
it (other than general industry, political, and economic conditions), that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. No report, financial statement, certificate or other
information furnished (whether in writing or orally) by or on behalf of any
Reliant Retail Obligor to the Sleeve Provider in connection with the
transactions contemplated hereby and the negotiation of this Agreement or
delivered to the Sleeve Provider hereunder or under any other Transaction
Document (in each case, as modified or supplemented by other information so
furnished), at the time furnished or delivered, contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, taken as a whole, in the light of the circumstances under
which they were made, not misleading; provided that with respect to projected
financial information, the Reliant Retail Obligors represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time made; and provided further, that the Reliant Retail
Obligors make no representation or warranty, express or implied, with respect to
the Compliance Information delivered to Sleeve Provider in accordance with
Section 2.02(e).
5.16 Compliance with Laws. Each of the Reliant Retail Obligors is in
compliance in all material respects with the requirements of all Laws and all
orders, writs, injunctions and decrees applicable to it or to its properties,
except in such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate proceedings
diligently conducted or (b) the failure to comply therewith, either
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individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.17 Intellectual Property; Licenses, Etc. The Reliant Retail Obligors
own, or possess the right to use, all of the trademarks, service marks, trade
names, copyrights, patents, patent rights, franchises, licenses and other
intellectual property rights (collectively, “IP Rights”) that are necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person, unless the failure to so own or possess the right to use
could not reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Reliant Retail Obligors, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Reliant Retail Obligors infringes upon any
rights held by any other Person in a manner that could reasonably be expected to
have a Material Adverse Effect. No claim or litigation regarding any of the
foregoing is pending or, to the best knowledge of the Reliant Retail Obligors,
threatened, which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.18 Solvency. RERH Holdings is, together with its Subsidiaries on a
consolidated basis, Solvent.
5.19 Perfection, Etc.. The Security Documents, together with (i) the
filing of appropriate UCC-1 and, if applicable, UCC-3, financing statements with
the filing offices required under the Security Agreement, and (ii) the
possession of certificated Pledged Securities (together with blank executed
stock powers with respect thereto), if any, create and grant to the Collateral
Trustee for the benefit of the holders of Secured Obligations, including the
Merrill Parties, a valid, first priority (subject to Permitted Liens), perfected
security interest in the Collateral, subject to the terms and provisions of the
Security Agreement.
5.20 Employees, Etc. On the Effective Date, RERH Holdings and its
Subsidiaries have a chief executive officer, a principal risk officer, an
in-house attorney (or have the same provided for in the Transition Agreement)
and sufficient employees that, taken together with the services provided under
arm’s length service contracts (including the Transition Agreement and Reliant
Parent Service Agreement), they can run the Retail Energy Business in a manner
consistent with the business operations of the Retail Energy Business as of the
Effective Date (taking into account the Transition Agreement if then in effect).
5.21 Information Technology Systems. On the Effective Date, RERH
Holdings and its Subsidiaries own or have access to (through arm’s length
service contracts including the IT Service Agreement and the Reliant Parent
Services Agreement if then in effect) the Information Technology Systems
necessary to run the Retail Energy Business, including Information Technology
Systems providing capabilities consistent with the arrangements in place for the
Retail Energy Business as of the Effective Date (taking into account the
Transition Agreement if then in effect).
5.22 Marks. On the Effective Date, RERH Holdings and its Subsidiaries
own or have access to (through arm’s length licenses and other arrangements
including the IP License
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Agreement and the Reliant Parent Services Agreement if then in effect) the Marks
necessary to run the Retail Energy Business using the “Reliant” name consistent
with the arrangements in place for the Retail Energy Business as of the
Effective Date (taking into account the Transition Agreement if then in effect).
Section 6. Affirmative Covenants. From the Effective Date until
the Credit Sleeve Termination Date, the Reliant Retail Obligors shall, and shall
cause each of their Subsidiaries, to:
6.01 Financial Statements. Deliver to the Sleeve Provider, in form and
detail satisfactory to the Sleeve Provider:
(a) as soon as available, but in any event within 90 days after the
end of each Fiscal Year of RERH Holdings, an audited consolidated balance sheet
of RERH Holdings and its consolidated Subsidiaries as at the end of such Fiscal
Year, and the related consolidated statements of income or operations,
stockholders’ equity, comprehensive income (loss) and cash flows for such Fiscal
Year, setting forth in each case (beginning with Fiscal Year 2006, and in
addition with respect to such Fiscal Year, the unaudited opening balance sheet
used to prepare such audited balance sheet as at the end of Fiscal Year 2006),
the figures as of the end of, and for, the previous Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, such consolidated
statements to be audited and accompanied by a report and opinion of an
independent registered public accounting firm of nationally recognized standing,
which report and opinion shall be prepared in accordance with the standards of
the Public Company Accounting Oversight Board or its successor and shall not be
subject to any “going concern” or like qualification or exception;
(b) as soon as available, but in any event within 50 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of RERH
Holdings, an unaudited consolidated balance sheet of RERH Holdings and its
consolidated Subsidiaries as at the end of such Fiscal Quarter, and the related
unaudited consolidated statements of income or operations for such Fiscal
Quarter and for the portion of RERH Holdings’ Fiscal Year then ended and cash
flows for the portion of RERH Holdings’ Fiscal Year then ended, setting forth in
each case (beginning with Fiscal Year 2007) in comparative form the figures for
the corresponding Fiscal Quarter of the previous Fiscal Year and the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
certified by a Responsible Officer of RERH Holdings as fairly presenting in all
material respects the financial condition, results of operations and cash flows
of RERH Holdings and its consolidated Subsidiaries in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes;
(c) as soon as available, but in any event within 30 days after the
end of the first and second calendar months of each Fiscal Quarter (beginning
with the first Fiscal Quarter of 2007), a copy of RERH Holdings’ internal
monthly consolidated corporate reporting package (i.e., flash reports) in form
reasonably acceptable to Sleeve Provider; and
(d) as soon as available, but in any event within 55 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, and 95 days
after the end of the fourth
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Fiscal Quarter of each Fiscal Year, a financial forecast (for each quarter
remaining in the then current calendar year and each of the two following
calendar years) for the Retail Energy Business of RERH Holdings and its
Subsidiaries in form reasonably acceptable to the Sleeve Provider (which form
shall include a summary balance sheet and statement of income and cash analysis
in a format similar to those prepared for Reliant Parent prior to the Execution
Date).
6.02 Certificates; Other Information. Deliver to the Sleeve Provider,
in form and detail satisfactory to the Sleeve Provider:
(a) concurrently with the delivery of the financial statements
referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate
signed by a Responsible Officer of RERH Holdings;
(b) promptly after any request by the Sleeve Provider, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of RERH
Holdings by independent accountants in connection with the accounts or books of
RERH Holdings or any Subsidiary or any audit of any of them;
(c) promptly after the furnishing or receiving thereof, copies of any
notice of default furnished to, or received from, any holder of debt securities
of RERH Holdings or any Subsidiary thereof pursuant to the terms of any
indenture, guarantee or credit or similar agreement and not otherwise required
to be furnished to the Sleeve Provider pursuant to Section 6.01 or any other
clause of this Section;
(d) as soon as available, but in any event within 15 days after the
end of month, a report regarding compliance and non-compliance with the Risk
Management Policy having substantially the same form, scope and level of detail
as the monthly risk management report or reports presented to senior management
of the Reliant Parent with respect to such month; and
(f) promptly, such additional information regarding the business,
financial or corporate affairs of RERH Holdings or any Subsidiary, or compliance
with the terms of the Transaction Documents, as the Sleeve Provider may from
time to time reasonably request.
Documents required to be delivered pursuant to Section 6.01(a) or (b) (to the
extent any such documents are included in materials otherwise filed with the
SEC) shall be delivered electronically and when so delivered, shall be deemed to
have been delivered on the date on which RERH Holdings provides such documents
electronically, including by email or electronic posting; provided that: (i)
RERH Holdings shall at the request of the Sleeve Provider deliver paper copies
of such documents to the Sleeve Provider and (ii) if documents are
electronically posted, RERH Holdings shall notify the Sleeve Provider (by
telecopier or electronic mail) of the posting. Notwithstanding anything
contained herein, in every instance RERH Holdings shall be required to provide
paper copies of the Compliance Certificates required by Section 6.02(a) to the
Sleeve Provider. Except for such Compliance Certificates, the Sleeve Provider
shall have no obligation to request the delivery or to maintain copies of the
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documents referred to above, and in any event shall have no responsibility to
monitor compliance by RERH Holdings with any such request for delivery.
6.03 Notices. Promptly notify the Sleeve Provider:
(a) after any Responsible Officer’s obtaining knowledge of (i) the
occurrence of any Default with respect to a Reliant Event of Default and the
intended actions of the Reliant Retail Obligors with respect thereto and (ii)
any Level 3 Violation under, and as defined in, the Risk Management Policy (as
opposed to a Level III Violation as defined herein);
(b) of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect (including as a result of (i) breach or
non-performance of, or any default under, a Contractual Obligation of any
Reliant Retail Obligor; (ii) any dispute, litigation, investigation, proceeding
or suspension between any Reliant Retail Obligor and any Governmental Authority;
or (iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Reliant Retail Obligor, including pursuant to any
applicable Environmental Laws);
(c) after any Responsible Officer’s obtaining knowledge of the
occurrence of any ERISA Event or of any actual or reasonably likely contribution
failure under Code Section 412, or ERISA Section 302 with respect to any Pension
Plan or the filing of an application seeking waiver of any potential
contribution failure; and
(d) of the occurrence of any Asset Sale.
Each notice pursuant to this Section (other than subsection (d)) shall be
accompanied by a statement of a Responsible Officer of the applicable Reliant
Retail Obligor setting forth details of the occurrence referred to therein and
stating what action the applicable Reliant Retail Obligor has taken and
proposes to take with respect thereto. Each notice pursuant to Section 6.03(a)
shall describe with particularity any and all provisions of this Agreement and
any other Transaction Document that have been breached.
6.04 Payment of Obligations. Pay and discharge as the same shall become
due and payable (a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings diligently conducted and adequate
reserves in accordance with GAAP are being maintained by each Reliant Retail
Obligor; and (b) all lawful claims which, if unpaid, would by law become a Lien
upon its property that is not a Permitted Lien.
6.05 Preservation of Existence, Etc.. Preserve, renew and maintain in
full force and effect its legal existence and good standing under the Laws of
the jurisdiction of its organization except in a transaction permitted by
Section 7.04, 7.05 or 7.06, (b) take all reasonable action to maintain all
rights, privileges, permits, licenses and franchises necessary or desirable in
the normal conduct of its business, except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (c)
preserve or renew all of its
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registered patents, trademarks, trade names and service marks, the
non-preservation of which could reasonably be expected to have a Material
Adverse Effect.
6.06 Maintenance of Properties. (a) Maintain, preserve and protect all
of its material properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted;
(b) make all necessary repairs thereto and renewals and replacements thereof;
and (c) use the standard of care typical in the industry in the operation and
maintenance of its facilities, in each of cases (a), (b) and (c), except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.07 Maintenance of Insurance. Maintain with financially sound and
reputable insurance companies, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons of same or similar size engaged in the same or similar business, of such
types and in such amounts (after giving effect to any self-insurance compatible
with the following standards) as are customarily carried under similar
circumstances by such other Persons and providing for not less than 30 days’ (or
such other period as required by law) prior notice to the Sleeve Provider and
Collateral Trustee of termination, lapse or cancellation of such insurance;
provided that such insurance may be under policies obtained by Reliant Parent.
6.08 Compliance with Laws. Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or (b)
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.
6.09 Books and Records. (a) Maintain proper books of record and
account, in which entries in conformity with GAAP consistently applied shall be
made of all financial transactions and matters involving the assets and business
of the Reliant Retail Obligors and (b) maintain such books of record and account
in material conformity with all applicable requirements of any Governmental
Authority having regulatory jurisdiction over the Reliant Retail Obligors.
6.10 Inspection Rights. Permit representatives and independent
contractors of the Sleeve Provider to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its officers, and independent public accountants at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to REPS, all at the expense of the
Reliant Retail Obligors, and the Reliant Retail Obligors will pay up to $100,000
during any contract year to the extent of the third party expenses of the Sleeve
Provider incurred in connection therewith (but the Reliant Retail Obligors shall
pay no further expenses in connection therewith); provided that, the foregoing
shall include permitting one representative of the Sleeve Provider to retain an
office in the retail office space of the Reliant Retail Obligors with access to
the information set forth in Schedule 1.01(c) and to appropriate personnel of
the Reliant Retail Obligors and the Reliant Parent and the administrative floor
on which such representative’s office is located (but not access to the trading
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floor) during each Business Day; provided further that when a Reliant Event of
Default exists the Sleeve Provider (or any of their respective representatives
or independent contractors) may do any of the foregoing at the expense of the
Reliant Retail Obligors, to the extent reasonable under the circumstances,
without being subject to the expense limit described above, and at any time
during normal business hours and without advance notice.
6.11 Addition and Removal of Transaction Parties; Collateral Matters;
Waterfall.
(a) (i) Promptly and in any event within thirty (30)
Business Days after any Subsidiaries of RERH Holdings that are not Reliant
Retail Obligors have, on an aggregate basis, net income or book values exceeding
the corresponding Non-Guarantor Cutoff Amounts, and, in the case of RESE, upon
the PJM Retail Business becoming subject to this Agreement, deliver to the
Sleeve Provider and Collateral Trustee the following with respect to one or more
such Subsidiaries (as to each such delivery, each a “Designated Subsidiary”) to
the extent necessary to cause the Subsidiaries of RERH Holdings that are not
Reliant Retail Obligors to have on an aggregate basis, net income or book values
less than the corresponding the Non-Guarantor Cutoff Amounts: (A) Joinder
Agreements under this Agreement and Joinder Agreements under, and as such term
is defined in, the Collateral Trust Agreement pursuant to which, among other
things, the Designated Subsidiary shall become a party to this Agreement and the
Collateral Trust Agreement and the Security Agreement, (B) appropriate UCC-1
financing statements with respect to the collateral under the Security
Agreement, (C) all applicable Lien searches, (D) Organizational Documents and
other documents of the type described in Section 4.01(d), (E) a written opinion
of counsel covering those matters addressed in the opinion delivered on the
Effective Date but limited to the Designated Subsidiary, (F) such other security
documents as may be reasonably requested by the Sleeve Provider or its counsel
and all of the foregoing in form and substance reasonably satisfactory to the
Sleeve Provider and its counsel, and (G) certificates or other instruments (if
any) representing all of the Equity Interests in the Designated Subsidiary owned
by RERH Holdings or its Subsidiaries together with an undated stock power (or
other appropriate document) executed in blank for each such certificate or other
instrument.
(ii) If any Subsidiary of RERH Holdings is, or will be, sold or
otherwise transferred or disposed of in connection with any transaction
permitted under this Agreement, the Merrill Parties shall take the actions
described in Section 12.04(d) with respect thereto and shall release such
Subsidiary from this Agreement and any obligations with respect to the Credit
Sleeve Obligations and make or approve any conforming changes reasonably
requested by REPS in the Transaction Documents necessary to implement such
release in the reasonable discretion of the Merrill Parties.
(b) At any time and from time to time, promptly execute and deliver
any and all further instruments and documents and take all such other action as
the Sleeve Provider and the Collateral Trustee may reasonably deem necessary or
desirable in obtaining the full benefits of, or in perfecting and preserving,
the Reimbursement Guarantees and the Liens under the Security Documents.
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(c) Have all revenues of the Reliant Retail Obligors, all working
capital facility proceeds, all proceeds of asset sales other than Asset Sales
and all other amounts from time to time received by the Reliant Retail Obligors
paid directly to or promptly deposited to the Collateral Accounts (except for
proceeds of Asset Sales applied in accordance with Section 7.05 and proceeds of
Available Contributions applied in any manner not prohibited by this Agreement),
and distribute or instruct the Collateral Trustee to distribute funds in the
Collateral Accounts on each Business Day in the following manner and priority:
(i) (A) to the extent the same are held on behalf of third parties,
or owed to third parties for amounts collected or billed on behalf of third
parties, to the application intended for such funds, including application to
RES and RESC for amounts collected for such entities under the Channelview
Services Agreement (to the extent the same becomes applicable as a result of
change in ERCOT rules and regulations), to third parties for third party refunds
or deposits, transmission and distribution service providers for their charges
collected on their behalf, Governmental Authorities for sales or usage taxes
which are required to be or have been agreed to be collected and paid to them
and to the GLO for payment of the GLO Amount, (B) to Governmental Authorities
for taxes and other amounts due and payable by the Reliant Retail Obligors and
their Subsidiaries to such Governmental Authorities in their capacities as such
(and not in their capacities as Governmental Customers) excluding for this
purpose (x) U.S. federal income taxes, and (y) any state or local taxes other
than Applicable State Taxes, (C) to the directors, officers and employees of the
Reliant Retail Obligors for salary, bonus and other compensation and amounts
then due and payable to such Persons and (D) to the IP Trust and the IT Trust
for payment of all amounts due from the Reliant Retail Obligors under the IP
License Agreement and the IT Service Agreement;
(ii) on each date not later than 10 Business Days following the filing
of any state or local tax return that relates to Allocable State Taxes, the
State Tax Distribution Amount;
(iii) to the Collateral Trustee for the payment of all amounts due to
the Collateral Trustee under the terms of the Security Documents, including
reasonable legal fees, costs, and other liabilities of any kind incurred by the
Collateral Trustee in connection with the Security Documents, Collateral
Trustee’s Fees (as defined in the Collateral Trust Agreement), and payments to
or incurred by any Agent (as defined in the Collateral Trust Agreement), and
including reimbursement obligations to Secured Counterparties that have made
advance payments to the Collateral Trustee for payment of the foregoing;
(iv) (A) to the Accepted Counterparties for payment of all amounts then
due and payable under the Power and Hedging Contracts (including the MLCI/REPS
ISDA), (B) to third party service and goods providers (other than any
Replacement Sleeve Provider or Replacement Working Capital Facility Provider),
(C) to other holders of Permitted Debt for payment of all amounts then due and
payable with respect thereto (other than any Replacement Sleeve Provider or
Replacement Working Capital Facility Provider), (D) to Governmental Customers,
including ERCOT and the GLO, for all amounts due and payable to Governmental
Customers in connection with the Retail
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Energy Business, (E) to energy brokers engaged for all amounts due and payable
to such brokers in the ordinary course of the Retail Energy Business, (F) to
REES under the REES/REPS Power Purchase Agreement, (G) to RES under the RES/REPS
Power Purchase Agreement , (H) to RES and RESC for payment of all amounts then
due and payable under the Channelview Services Agreement not paid under
paragraph (i) above and (I) to Accepted Exchanges for payments of amounts then
due and payable in connection with EFS Transactions, EOO Transactions and ICE
Block Transactions, together with retention in the Collateral Accounts in an
amount equal to all funds received from transactions on an Accepted Exchange
which will be required to be returned to the Accepted Exchange to complete
transactions contemplated in Section 2.03 until such transactions are complete;
(v) (A) to the ML Guarantee Provider and Sleeve Provider for payment
of interest and principal and other Working Capital Obligations then due and
payable under the Working Capital Facility and (B) to the extent applicable, to
any Replacement Working Capital Provider for payment of interest and principal
and other obligations under the related Replacement Working Capital Facility in
accordance with the terms hereof then due and payable;
(vi) (A) to the ML Guarantee Provider and Sleeve Provider for payment
of the Reimbursement Obligations and other Credit Sleeve Obligations then due
and payable under this Agreement, including, on each Monthly Payment Date, the
Monthly Sleeve Fees, (B) to the extent applicable, to any Replacement Sleeve
Provider for payment of any credit support, reimbursement, or related
obligations provided by such Replacement Sleeve Provider in accordance with the
terms hereof then due and payable, and (C) to retention in the Collateral
Accounts in an amount equal to all Deferred Reimbursement Obligations and
interest related thereto; provided that, in the event that funds in the
Collateral Accounts are insufficient to completely satisfy the payment
obligations described in this clause to Sleeve Provider and any Replacement
Sleeve Provider, such funds shall be applied equally and ratably between the
Sleeve Provider and any Replacement Sleeve Provider in proportion to the
respective amounts then due and payable to them;
(vii) to Reliant Parent for payment of all amounts due under the Reliant
Parent Services Agreement;
(viii) (A) to the ML Guarantee Provider for pre-payment of all amounts
outstanding under the Working Capital Facility and (B) to the extent applicable,
to any Replacement Working Capital Facility Provider for pre-payment of all
amounts outstanding under the related Replacement Working Capital Facility; and
(ix) if all amounts owing under clauses (i) through (viii) above have
been paid, no Default with respect to a Reliant Event of Default has occurred
and is continuing and no Default with respect to a Reliant Event of Default
would occur as a result of such payment, any remainder, to the Reliant Retail
Obligors, for application to any purpose determined by the Reliant Retail
Obligors that is not prohibited hereunder, including the making of Restricted
Payments to the extent not restricted hereunder;
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provided, however, that during the existence of any Reliant Event of Default,
the Reliant Retail Obligors shall distribute, or shall instruct the Collateral
Trustee to distribute, funds in the Collateral Accounts from time to time as
directed by the Sleeve Provider.
In addition, in the event that, on any Business Day (each such Business Day, an
“Estimation Day”), after giving effect to the application of funds in the
Collateral Accounts in accordance with Sections 6.11(c)(i) through 6.11(c)(viii)
on such Estimation Day, (a) no Loans are outstanding and (b) RERH Holdings
reasonably anticipates that any physical power settlement payments and financial
settlement payments under Power and Hedging Contracts that will be due and owing
during the Estimation Period beginning on such Estimation Day (such amounts
being referred to as the “Estimated Obligations”) will exceed the sum of (i)
funds in the Collateral Accounts on such Estimation Day and (ii) the amount of
the Commitment reasonably expected to be available to RERH Holdings on each date
on which such Estimated Obligations are due and payable (“Available
Commitment”), then, on such Estimation Day, RERH Holdings and its Subsidiaries
shall retain in the Collateral Accounts to the extent available an amount of
Available Cash Flow that, when taken together with the funds already in the
Collateral Accounts on such Estimation Day, the Available Cash Flow that RERH
Holdings reasonably expects will be retained in the Collateral Accounts later in
such Estimation Period, and the Available Commitment, would be sufficient to pay
such Estimated Obligations on the day they are due, before otherwise applying
Available Cash Flow in accordance with Section 6.11(c)(ix).
6.12 Further Assurances. Promptly upon request by the Sleeve Provider,
(a) correct any material defect or error that may be discovered in any
Transaction Document or in the execution, acknowledgment, filing or recordation
thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds,
certificates, assurances and other instruments as the Sleeve Provider may
reasonably require from time to time in order to (i) carry out more effectively
the purposes of the Transaction Documents, (ii) to the fullest extent permitted
by applicable law, subject any Reliant Retail Obligors’ properties, assets,
rights or interests to the Liens now or hereafter intended to be covered by any
of the Transaction Documents, (iii) perfect and maintain the validity,
effectiveness and priority of any of the Transaction Documents and any of the
Liens intended to be created thereunder and (iv) assure, convey, grant, assign,
transfer, preserve, protect and confirm more effectively unto the Merrill
Parties the rights granted or now or hereafter intended to be granted to the
Merrill Parties under any Transaction Document or under any other instrument
executed in connection with any Transaction Document to which RERH Holdings or
any of its Subsidiaries is or is to be a party.
6.13 Risk Management Policy
Shall take the following actions with respect to the Risk Management Policy:
(a) The Reliant Retail Obligors shall maintain in effect the Risk
Management Policy. The Reliant Retail Obligors may waive the Risk Management
Policy with respect to individual actions, provided that any waiver of the Risk
Management Policy in respect of a particular action requiring the approval of
the Chief Risk Officer, the Chief Executive Officer or the Board of Directors or
any committee thereof shall require prior written approval of the Sleeve
Provider, which shall not be unreasonably withheld or delayed, and shall be
responded to
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in any event within three Business Days. The Reliant Retail Obligors may amend
or otherwise modify in general the Risk Management Policy, provided that REPS
shall promptly provide to the Sleeve Provider copies of final requests for
general amendments or modifications to the Risk Management Policy promptly after
providing such final requests to senior management, and before becoming
effective such amendments or modifications shall be approved by the Sleeve
Provider, which approval shall not be unreasonably withheld or delayed, and
shall be responded to in any event within three Business Days.
(b) The Reliant Retail Obligors shall comply with the Risk Management
Policy to the extent required by the following:
(i) If there shall occur any violation of any Risk Limit under, and
as defined in, the Risk Management Policy, the Reliant Retail Obligors shall
have three Business Days to cure the same after notice thereof from the Sleeve
Provider or any Responsible Officer or other executive officer of REPS obtaining
knowledge of such occurrence; provided that if at any time the mark-to-market
loss on position(s) in violation of the Risk Limits exceeds $25,000,000, the
Reliant Retail Obligors shall have only one Business Day after the date of the
notice or knowledge to cure the same such that the position(s) in violation do
not exceed such threshold (however, if such threshold is exceeded during the
last day of any three Business Day cure period, such three Business Day cure
period shall be extended through the following Business Day such that the
Reliant Retail Obligors shall have the fourth Business Day to cure such
violation). If cure is not effected within such three (or four) Business Day
period, then as the Sleeve Provider’s sole remedy with respect to such
violation, other than under Section 6.13(b)(ii), the Sleeve Provider shall have
the right to enter into hedges with REPS to effect the cure at prices consistent
with the prices the Sleeve Provider would use in transactions with third parties
at the applicable times and in the applicable volumes. In exercising such
right, Sleeve Provider will use the same standard of care as Sleeve Provider
uses in conducting transactions to correct risk policy violations under Sleeve
Provider’s risk policies.
(ii) In addition to the rights of Sleeve Provider under Section
6.13(b)(i), if there shall occur any Level III Violation, after providing notice
thereof to Sleeve Provider in accordance with Section 6.13(a), at the Sleeve
Provider’s request the Reliant Retail Obligors will take the following actions:
(A) Notify immediately the Chief Executive Officer, Chief Financial
Officer, Chief Risk Officer and Controller of the Level III Violation;
(B) Present to the Merrill Parties within five Business Days a Working
Plan that has been approved by the Chief Executive Officer;
(C) Present to Merrill Parties within 30 Business Days a Remediation
Plan that has been approved by the Chief Executive Officer. The Merrill Parties
shall have two Business Days after receipt of such Remediation Plan to consult
with the Reliant Parties and review and agree upon the same. If the Merrill
Parties and the Reliant Retail Obligors do not mutually agree on the Remediation
Plan at the end of such two
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Business Day period, then a third-party evaluator chosen from the list set forth
in Schedule 1.01(a) shall be engaged to mediate promptly the matters in dispute;
and
(D) Submit the Remediation Plan to the Audit Committee promptly after
its determination in accordance with paragraph (C) above. If the Audit
Committee does not approve the Remediation Plan within six Business Days after
submission, the Reliant Retail Obligors shall consult with the Merrill Parties
and make reasonable modifications to the Remediation Plan based upon comments
from the Audit Committee, and resubmit the same within ten Business Days after
the end of such six Business Day period.
It shall be a Reliant Event of Default (a “Risk Management Event of Default”) if
the Reliant Retail Obligors (1) do not comply with the process provided for in
Section 6.13(b)(ii)(A) through (D), and the same is not cured within two
Business Days, or (2) if the resubmitted Remediation Plan described in Section
6.13(b)(ii)(D) above is not implemented by the Reliant Retail Obligors in all
material respects. A Risk Management Event of Default shall be the sole Reliant
Events of Default or Defaults with respect thereto for any non-compliance with
the Risk Management Policy or breach of Section 6.13(b).
6.14 Employees.
(a) Have, a chief executive officer, a principal risk officer, an
in-house attorney (or have the same provided for in the Transition Agreement if
then in effect), such positions to be filled when vacant in accordance with
paragraph (b) below, and sufficient employees that, taken together with the
services provided under arm’s length service contracts (including the Transition
Agreement and Reliant Parent Service Agreement, each if then in effect), RERH
Holdings and its Subsidiaries can run the Retail Energy Business in a manner
consistent with the business operations of the Retail Energy Business as of the
Effective Date (taking into account the Transition Agreement if then in effect).
(b) Consult with the Merrill Parties prior to appointing any
replacement of the chief executive officer, principal risk officer or in-house
attorney of the Reliant Retail Obligors.
6.15 Information Technology Systems.. Own or have access to (through
arm’s length service contracts including the IT Service Agreement and the
Reliant Parent Services Agreement if the same are then in effect), at all times,
the Information Technology Systems necessary to run the Retail Energy Business,
including Information Technology Systems providing capabilities consistent with
the arrangements in place for the Retail Energy Business as of the Effective
Date (taking into account the Transition Agreement if then in effect).
6.16 Marks. Own or have access to (through arm’s length licenses and
other arrangements including the IP License Agreement and the Reliant Parent
Services Agreement if the same are then in effect), at all times, the Marks
necessary to run the Retail Energy Business using the “Reliant” name consistent
with the arrangements in place for the Retail Energy Business as of the
Effective Date (taking into account the Transition Agreement if then in effect),
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subject to limitations on the use of such Marks and such name set forth in the
IP License Agreement.
6.17 Reliant Parent Services Agreement.
(a) Promptly upon receipt, furnish to the Sleeve Provider the
Corporate Cost Center Allocation under the Reliant Parent Services Agreement for
each Fiscal Quarter contemplated by Section 5.1(b) of the Reliant Parent
Services Agreement, including the cost center basis for such Corporate Cost
Center Allocation as between the cost centers referred to on Exhibit C to the
Reliant Parent Services Agreement; provided that at the option of REPS, certain
of the cost centers may be reported on a consolidated basis. The Reliant Retail
Obligors shall not approve any change in the methodology for allocation of the
costs and expenses giving rise to the Corporate Cost Center Allocation referred
to on Exhibit B to the Reliant Parent Services Agreement proposed by RECS
without giving 30 days prior written notice to the Sleeve Provider and, in the
event RECS proposes to change the methodology for allocation of such costs and
expenses in a manner materially adverse to the Reliant Retail Obligors (it being
expressly understood that an increase is not in and of itself “materially
adverse”), the Reliant Retail Obligors shall not approve such change without the
approval of the Sleeve Provider, such approval not to be unreasonably withheld
or delayed.
(b) Consult with the Sleeve Provider in the event that the Corporate
Cost Center Allocation for any Fiscal Year reflects an increase of more than 5%
over the prior Fiscal Year. In such case, and to the extent that third-party
suppliers could reasonably be expected to provide all or certain of the
Administrative Services provided under the Reliant Parent Services Agreement on
a more cost effective basis than under the Reliant Parent Service Agreement
(taking into account all relevant factors including demobilization and
transition costs), REPS shall solicit as promptly as practicable, through an
industry standard request for proposals, bids for comparable administrative
services from recognized third-party service providers for those Administrative
Services determined not to be cost effective under the Reliant Parent Services
Agreement. Upon receipt and review of the bids procured, REPS shall choose the
service provider best able to provide the administrative services required (and
shall furnish a written assessment of the bids provided to the Sleeve Provider,
together with written support for any bids proposed to be accepted that are not
the lowest cost bids). REPS shall promptly deliver the notice required under
Section 3.4(b) of the Reliant Parent Services Agreement with respect to any
Administrative Services that are to be performed by third-party service
providers in accordance with the foregoing.
Section 7. Negative Covenants. From the Effective Date until the
Credit Sleeve Termination Date, the Reliant Retail Obligors shall not, and shall
cause their Subsidiaries not to:
7.01 Liens. Create, incur, assume or otherwise cause or suffer to exist
or become effective any Lien of any kind on any asset now owned or hereafter
acquired, except Permitted Liens.
7.02 Investments and Acquisitions. Make or hold any Investments, except
for Permitted Investments or make any Acquisition, except for a Permitted
Acquisition.
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7.03 Indebtedness. Create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to any Indebtedness, and RERH Holdings shall not permit
any of its Subsidiaries to issue any shares of preferred stock, in each case,
other than the following (collectively, “Permitted Debt”):
(a) Indebtedness of RERH Holdings and the Reliant Retail Obligors
under this Agreement, if any, and the Working Capital Facility;
(b) intercompany Indebtedness (i) between or among Reliant Retail
Obligors and (ii) Indebtedness of Subsidiaries of RERH Holdings that are not
Reliant Retail Obligors to Reliant Retail Obligors; provided that (A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than RERH or any Subsidiary, and (B)
any sale or other transfer of any such Indebtedness to a Person that is not RERH
or any Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by RERH or such Subsidiary, as the case may be, that was not
permitted by this clause;
(c) Indebtedness of RERH Holdings or any of its Subsidiaries in
respect of workers’ compensation claims, self-insurance obligations, performance
and surety bonds provided by RERH Holdings or a Subsidiary in the ordinary
course of business;
(d) Indebtedness of RERH Holdings or any of its Subsidiaries arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds, so long as
such Indebtedness is covered within five business days;
(e) Indebtedness arising from agreements of RERH Holdings or a
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or Equity Interests of a Subsidiary of RERH
Holdings; provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds (including non-cash
proceeds) actually received by RERH Holdings and/or such Subsidiary in
connection with such disposition;
(f) Additional Indebtedness of Subsidiaries of RERH Holdings or
purchase money obligations in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, not to exceed $10,000,000, the proceeds
of which are used for, or assumed in connection with, general corporate purposes
of RERH or any of its Subsidiaries;
(g) the Guarantee by (A) Reliant Retail Obligors of Indebtedness of
Reliant Retail Obligors that is otherwise permitted by this Section 7.03 and (B)
Reliant Retail Obligors of Indebtedness of Subsidiaries of RERH Holdings that
are not Reliant Retail Obligors that is otherwise permitted by this Section
7.03; and
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(h) Indebtedness of Reliant Retail Obligors under Replacement Working
Capital Facilities or in favor of Replacement Sleeve Provider.
7.04 Consolidation and Mergers
(a) Consolidate or merge with or into another Person, or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of RERH Holdings and its Subsidiaries taken as a whole, in
one or more related transactions, to another Person, except that:
(i) so long as no Default with respect to a Reliant Event of Default
exists or would result therefrom, (A) any Subsidiary of RERH Holdings may
consolidate or merge with or into any one or more other Subsidiaries of RERH
Holdings; provided that in the event that a Subsidiary of RERH Holdings is a
Reliant Retail Obligor, such Subsidiary may only consolidate or merge with or
into another Subsidiary of RERH Holdings that is a Reliant Retail Obligor, and
(B) any Person may be merged with or into any Subsidiary of RERH Holdings if the
resulting entity is a Wholly Owned Subsidiary of RERH Holdings, provided that
the provisions of Section 6.11(a) are complied with in connection with any such
transaction involving a Subsidiary of RERH Holdings that is not a Reliant Retail
Obligor;
(ii) so long as no Default with respect to a Reliant Event of Default
exists or would result therefrom, any Subsidiary of RERH Holdings may sell,
transfer, assign, convey, lease or otherwise dispose of any or all of its assets
to any one or more other Subsidiaries of RERH Holdings, provided that the
provisions of Section 6.11(a) are complied with in connection with any such
transaction involving a Subsidiary of RERH Holdings that is not a Reliant Retail
Obligor;
(b) In addition, the Reliant Retail Obligors shall not, nor shall they
permit any of their Subsidiaries to, directly or indirectly, lease all or
substantially all of their properties or assets, in one or more related
transactions, to any Person that is not a Reliant Retail Obligor.
(c) For the avoidance of doubt, nothing in this Section 7.04 is
intended to restrict the ability of the Reliant Parent to sell, assign,
transfer, convey or otherwise dispose of its interests in RERH Holdings or
prohibit any Asset Sale permitted by Section 7.05.
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7.05 Asset Sales.
(a) Consummate an Asset Sale unless (i) it receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
assets or Equity Interests issued or sold or otherwise disposed of (as
reasonably determined by such Reliant Retail Obligor), (ii) at least 90% of the
consideration therefor received in the Asset Sale by RERH Holdings or such
Subsidiary is in the form of cash or Cash Equivalents (which, except for cash
used to close out existing Power and Hedging Contracts related to the supply for
the assets sold, shall be applied to the repayment of any outstanding principal
and interest on the Working Capital Facility and payment of outstanding
Reimbursement Obligations then due, with surplus being deemed and available for
application as Available Cash Flow) and (iii) it has entered into new or closed
out existing Power and Hedging Contracts necessary to close out substantially
all of the supply for the assets sold. For purposes of this provision, each of
the following shall be deemed to be cash:
(A) any liabilities, as shown on RERH Holdings’ most recent
consolidated balance sheet, of the Reliant Retail Obligors (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Credit Sleeve Obligations) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases such Reliant
Retail Obligor from further liability;
(B) any securities, notes or other Obligations received by a Reliant
Retail Obligor from such transferee that are converted (by sale or other
disposition) by such Reliant Retail Obligor into cash, to the extent of the cash
received in that conversion within 60 days; and
(C) reasonable reserves for indemnity obligations and purchase price
adjustments funded in cash or held back by the purchaser;
(b) Consummate any Asset Sale (i) comprised of Residential Mass
Customers, (ii) comprised of beneficial interests in the IP Trust or the IT
Trust, (iii) comprised of the Equity Interests in REPS or all or substantially
all of the assets of REPS or any other Subsidiary of RERH Holdings party to any
Power and Hedging Contracts, or (iv) to the extent a Default with respect to a
Reliant Event of Default would result therefrom.
7.06 Limitation on Issuances and Sales of Certain Equity Interests.
Transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any Wholly Owned Subsidiary of RERH Holdings to any Person (other than RERH or a
Wholly Owned Subsidiary of RERH), unless:
(a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Subsidiary; and
(b) such transfer, conveyance, sale, lease or other
disposition is made in accordance with Section 7.05.
In addition, the Reliant Retail Obligors will not permit any Wholly Owned
Subsidiary of RERH Holdings to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock
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constituting directors’ qualifying shares) to any Person other than to RERH
Holdings or a Wholly Owned Subsidiary of RERH Holdings.
7.07 Restricted Payments. Make any Restricted Payment by way of the
payment of any dividend or distribution in cash or Cash Equivalents on any
Equity Interests of RERH Holdings; or otherwise, make any Restricted Payment
except for the following:
(a) the payment of any dividend (or, in the case of any partnership or
limited liability company, any similar distribution) by a Subsidiary of RERH
Holdings to RERH Holdings or another Subsidiary of RERH Holdings;
(b) so long as no Default with respect to a Reliant Event of Default
has occurred and is continuing or would be caused thereby, Restricted Payments
from Available Cash Flow; and
(c) the transactions with any Person (including any Affiliate of RERH
Holdings) set forth in clauses (b)(i) and (b)(iv) of Section 7.09 and the
funding of any obligations in connection therewith.
7.08 Line of Business. Engage, or permit any Subsidiary to engage, in
any business other than the Retail Energy Business, except to such extent as
would not be material to the Reliant Retail Obligors taken as a whole.
7.09 Transactions with Affiliates.
(a) Not, and not permit any of its Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of RERH Holdings (each, an
“Affiliate Transaction”), in each case without the approval of the Sleeve
Provider, which shall not be unreasonably withheld or delayed.
(b) The following items shall not be deemed to be Affiliate
Transactions and, therefore, shall not be subject to the provisions of Section
7.09(a):
(i) any employment agreement or director’s engagement agreement,
employee benefit plan, officer and director indemnification agreement or any
similar arrangement entered into by RERH Holdings or any of its Subsidiaries in
the ordinary course of business or approved by its Board of Directors;
(ii) transactions between or among the Reliant Retail Obligors;
(iii) payment of reasonable directors’ fees to Persons who are not
otherwise Affiliates of RERH Holdings;
(iv) any issuance of Equity Interests of RERH Holdings to Reliant
Parent;
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(v) Restricted Payments that do not violate the provisions of
Section 7.07;
(vi) loans or advances to employees in the ordinary course of business
not to exceed $2,000,000 in the aggregate outstanding at any one time;
(vii) the Reliant Parent Services Agreement;
(viii) the REES/REPS Power Purchase Agreement;
(ix) the RES/REPS Power Purchase Agreement;
(x) the Channelview Services Agreement;
(xi) the IP License Agreement, IP Trust, IP Servicing Agreement, IT
Service Agreement, IT Trust, and IT Trust Management Agreement;
(xii) the Intercompany Cash Management Agreement;
(xiii) any other Transaction Documents, and
(xiv) subject to Section 7.05(b), any payments to, dispositions of
properties or assets to, purchases of property or assets from, or entering into
or making or amending any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, an Affiliate of RERH Holdings
to the extent any one such transaction or group of related transactions (A) is
on terms that are no less favorable (as reasonably determined by RERH Holdings)
to RERH Holdings or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by RERH Holdings or such Subsidiary with an
unrelated Person and (B) does not involve consideration in excess of $5,000,000
when taken together with all other transactions pursuant to this clause (xiv).
7.10 Restrictive Agreements. Enter into, incur or permit to exist any
agreement or other arrangement that prohibits, restricts or imposes any
condition upon (a) the ability of any of its Subsidiaries to create, incur or
permit to exist any Lien upon any of its property or assets; or (b) the ability
of any of its Subsidiaries to pay dividends or make any other distributions with
respect to any shares of its capital stock or any other Equity Interest or
participation in its profits owned by any Subsidiaries; or (c) the ability of
any of its Subsidiaries to make or repay loans or advances to it or any of its
Subsidiaries or to Guarantee Indebtedness of it or any of its Subsidiaries or to
transfer any of its properties or assets to RERH Holdings or any other
Subsidiary; provided that the foregoing shall not apply to (i) restrictions and
conditions imposed by Laws or by any Transaction Document, (ii) customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary or asset pending such sale; provided that such restrictions and
conditions apply only to the Subsidiary or asset that is to be sold and such
sale is permitted hereunder, (iii) restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness, (iv) customary non-assignment provisions in any
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contract, easement or lease, and other customary encumbrances and restrictions
entered into in the ordinary course of business, and (v) restrictions or
conditions contained in any trading, netting, operating, construction, service,
supply, purchase, sale or similar agreement to which any Subsidiary is a party
and which is entered into in the ordinary course of business; provided that such
agreement prohibits the encumbrance of solely the property or assets of such
Subsidiary that are the subject of such agreement, the payment rights arising
thereunder and/or the proceeds thereof and not to any other asset or property of
such Subsidiary or the assets or property of any other Subsidiary.
7.11 Modification of Transaction Documents. Consent to any amendment,
restatement, supplement, modification, renewal or replacement of, or enter into
any forbearance from exercising any rights with respect to the terms or
provisions contained in, or initiate or acquiesce to the cancellation,
termination or suspension of performance under, any Transaction Document, in
each case, without the prior written consent of the Sleeve Provider, such
consent not to be unreasonably withheld or delayed.
7.12 Fiscal Year. Change, permit any of its Subsidiaries to, directly
or indirectly change, its Fiscal Year from a Fiscal Year ending December 31.
7.13 Specified Transaction. Enter into, or permit any of its
Subsidiaries to, directly or indirectly enter into, any Specified Transaction.
7.14 Services. Provide, or permit any of its Subsidiaries to provide,
services in retail electric markets except for services described in Schedule
7.13 and services consented to by the Sleeve Provider, which consent will not be
unreasonably withheld or delayed.
7.15 Tax Agreements. Enter into, or permit any of its Subsidiaries to
enter into, directly or indirectly, any tax sharing agreement (a) under which
cash payments by any Reliant Retail Obligor with respect to federal income tax
shall be made other than from Available Cash Flow or other payments permitted by
the Tax Subordination Agreement, (b) under which any Reliant Retail Obligor
accrues liabilities that are not subject to subordination terms substantially
similar to the subordination provisions of the Tax Subordination Agreement, or
(c) that does not contain non-petition language in substantially the form set
forth in the Tax Subordination Agreement.
7.16 Posting of Collateral. From and after the Effective Date, post
directly or indirectly any collateral with respect to any power, gas or other
commodity purchases of sales or any hedging transactions with any Person other
than (a) in accordance with Section 2.07 and (b) during the Transition Period
and the Unwind Period, in connection with power, gas or other commodity
purchases of sales or any hedging transactions entered into in accordance with
Section 2.01(b) and, in which event, only with Available Funds.
7.17 Accepted Products. Shall not permit the aggregate amount of
Accepted Products (measured in Dollars expended) purchased by RERH Holdings and
its Subsidiaries directly or indirectly from Affiliates of RERH Holdings during
any Computation Period to
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exceed 10% of the aggregate amount of all Accepted Products (measured in Dollars
expended) purchased by RERH Holdings and its Subsidiaries during such
Computation Period.
Section 8. Events of Default.
8.01 Reliant Events of Default. Each of the following shall constitute
a “Reliant Event of Default”:
(a) Non-Payment. Any Reliant Retail Obligor fails to pay within three
Business Days after the same becomes due, any amount payable to any Merrill
Party hereunder or under any other Transaction Document; or
(b) Specific Covenants. Any Reliant Retail Obligor fails to perform
or observe any term, covenant or agreement contained in Section 6.11 or the
separateness covenants in any Retail Organizational Documents, and such failure
continues for five Business Days after the earlier to occur of (i) such Reliant
Retail Obligor’s receiving notice thereof from Sleeve Provider, or (ii) a
Responsible Officer or other executive officer of a Reliant Retail Obligor
obtains knowledge of such occurrence; or
(c) Other Defaults. Any Reliant Retail Obligor fails to perform or
observe any other covenant or agreement (not specified in clauses (a) or (b)
above or not addressed by clauses (l) or (m) below) contained in any Transaction
Document on its part to be performed or observed and such failure continues for
15 days after the earlier to occur of (i) such Reliant Retail Obligor’s
receiving notice thereof from Sleeve Provider, or (ii) a Responsible Officer or
other executive officer of such Reliant Retail Obligor obtains knowledge of such
occurrence; or
(d) Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Reliant Retail Obligor herein, in any other Transaction Document, or in any
document delivered in connection herewith or therewith shall be incorrect or
misleading in any material respect when made or deemed made; or
(e) Cross-Default. Any Reliant Retail Obligor, except with respect to
payments described in paragraph (a) above, (i) fails to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder) having an aggregate principal amount (including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than $1,000,000, or (ii) fails to observe or perform any other agreement or
condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its Stated
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Maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or
(f) Insolvency Proceedings, Etc. Any Reliant Retail Obligor
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of their respective property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without
the application or consent of such Person and the appointment continues
undischarged or unstayed for 60 calendar days; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material part of
their respective property is instituted without the consent of such Person and
continues undismissed or unstayed for 60 calendar days, or an order for relief
is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. Any Reliant Retail Obligor
becomes unable or admits in writing its inability or fails generally to pay its
debts as they become due; or
(h) Judgments. There is entered against any Reliant Retail Obligor a
final judgment or order for the payment of money in an aggregate amount
exceeding $100,000,000 (to the extent not covered by independent third-party
insurance or that has not been paid), and (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) within thirty (30)
days from the later of (X) the entry of any such judgment or the date of any
such order (as applicable) and (Y) the date any payment is required to be made
on or with respect to any such judgment or order pursuant to the terms thereof,
the same shall not have been paid, discharged or vacated or, in the case of a
judgment, stayed pending appeal, or shall not have been discharged or vacated
within thirty (30) days from the entry of a final order of affirmance on appeal;
or
(i) Invalidity of Documents. (i) Any Security Document shall for any
reason (other than pursuant to the terms thereof or as expressly permitted
thereby) cease to create a valid and perfected first priority Lien (subject to
Permitted Liens) on and security interest in the Collateral purported to be
covered thereby; provided that no such defects pursuant to this clause with
respect to a Lien granted or purported to be granted by any of the Transaction
Documents shall give rise to a Reliant Event of Default under this clause unless
such defects shall adversely affect the aggregate value of the Collateral by an
aggregate amount of $50,000,000 or more; or (ii) any Reliant Retail Obligor
shall so assert such invalidity or lack of perfection or priority; or (iii) at
any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder or satisfaction in full of all the
Credit Sleeve Obligations thereunder, any other Transaction Document ceases to
be in full force and effect; or any Reliant Retail Obligor or any other Person
contests in any manner the validity or enforceability of any provision of any
other Transaction Document; or any Reliant Retail Obligor denies that it has any
or further liability or obligation under any other Transaction Document, or
purports to revoke, terminate or rescind any provision of any other Transaction
Document; or
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(j) Trigger Event. After the Effective Date, a Trigger Event occurs and shall
remain uncured until the latest of the following dates: (a) five Business Days
after the occurrence of the Trigger Event, (b) two Business Days after delivery
by the Sleeve Provider to REPS of the Test Results, and (c) two Business Days
after the Sleeve Provider has cured any Computation Failure Event by delivery by
the Sleeve Provider to REPS of the applicable K and VaR computations (for the
purposes of this paragraph, the terms “Computation Failure Event” and “Test
Results” shall have the meanings given to such terms in Schedule 1.01(c)); or
(k) Breach or Termination of Indemnity. Following the receipt by the Merrill
Parties of the indemnity described in Section 9.03(a), (i) the failure by the
Person providing such indemnity to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with the
agreement providing such indemnity, (ii) the expiration or termination of such
indemnity or the failing or ceasing of the agreement providing such indemnity to
be in full force and effect or (iii) the Person providing such indemnity
disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges
the validity of, the agreement providing such indemnity; or
(l) Data Failure Event of Default. A Data Failure Event of Default shall
occur; or
(m) Risk Management Event of Default. A Risk Management Event of Default shall
occur.
8.02 Sleeve Provider Events of Default. Any of the following shall
constitute a “Sleeve Provider Event of Default”:
(a) Non-Payment. Any Merrill Party or the Working Capital Facility
Provider fails to pay within three Business Days after the same becomes due, any
amount payable to a Reliant Retail Obligor hereunder or under any other
Transaction Document, including any failure to fund when due under the Working
Capital Facility; or
(b) Willful Defaults. Any Merrill Party fails to perform or observe
any covenant or agreement set forth in Sections 2.01 through 2.05 and such
failure continues for ten Business Days after such Merrill Party receiving
written notice thereof from any Reliant Retail Obligor, which notice makes
specific reference to this Section 8.02(b) and provides reasonably detailed
information regarding the facts constituting such failure; provided that any
such failure shall not fall within the provisions of this Section 8.02(b) in the
event that both: (i) the covenant or agreement the Merrill Party failed to
perform or observe is a covenant or agreement that necessarily involves a
consent, determination or judgment required to be made by any Merrill Party or
Reliant Retail Obligor in a “reasonable” or “commercially reasonable” manner, or
in “good faith” or with “reasonable discretion” or without unreasonably
withholding any such consent (each, a “Decision”); and (ii) there is a good
faith dispute among the parties as to such Decision; provided further, however,
that the foregoing proviso shall not apply at any time that (1) any Merrill
Party is in breach of its obligations to provide or maintain ML Guarantees or
Credit Support Agreements with two or more Core Accepted Counterparties when
required by this Agreement, or (2) any Merrill Party is in breach of its
obligations to post
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collateral to any two or more Accepted Counterparties when required by the
applicable Credit Support Agreement; or
(c) Other Defaults. Any Merrill Party or the Working Capital Facility
Provider fails to perform or observe any other covenant or agreement (excluding
those specified in clause (a) above or addressed by clause (i) below, but
including those specified under clause (b) above) contained in any Transaction
Document on its part to be performed or observed and such failure continues for
30 days after the earlier to occur of (i) the Sleeve Provider receiving notice
thereof from any Reliant Retail Obligor or (ii) a Responsible Officer or other
executive officer of Sleeve Provider obtains knowledge of such occurrence; or
(d) Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Merrill Party or the Working Capital Facility Provider herein, in any other
Transaction Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading in any material respect when made or
deemed made; or
(e) Cross-Default. ML&Co. (i) shall default (after giving effect to
all applicable grace periods) in the payment of any Indebtedness or Guarantee
having an aggregate principal amount (including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $100,000,000
and (ii) either (A) at the time of such default (after giving effect to all
applicable grace periods), the final scheduled maturity of such Indebtedness
shall have occurred or (B) the final scheduled maturity of such Indebtedness
shall have been accelerated by the lenders thereunder or the holders thereof; or
(f) Credit Downgrade. Any senior unsecured, non-credit enhanced debt
of the ML Guarantee Provider shall fail to have an Investment Grade Rating; or
(g) Insolvency Proceedings, Etc. Either Merrill Party or the Working
Capital Facility Provider institutes or consents to the institution of any
proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of their respective property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of their respective property is instituted without the consent
of such Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or
(h) Inability to Pay Debts; Attachment. Either Merrill Party or the
Working Capital Facility Provider becomes unable or admits in writing its
inability or fails generally to pay its debts as they become due; or
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(i) Computation Failure Event of Default. A Computation Failure
Event of Default shall occur.
Section 9. Remedies and Termination.
9.01 Remedies of Sleeve Provider. If any Reliant Event of Default shall
have occurred and be continuing, the Sleeve Provider shall have each of the
following rights and remedies:
(a) the right to declare an Unwind Start Date;
(b) the right to deliver to each Accepted Counterparty notice that all
future trades under an existing Power and Hedging Contract shall not have the
benefit of an ML Guarantee or any Merrill Collateral under such Accepted
Counterparty’s Power and Hedging Contract and related Credit Support Agreement;
(c) the right to cause REPS to enter into additional power purchase
and hedging activities that reduce the VaR (and REPS may not enter into any
other power purchase and hedging activities without the Sleeve Provider’s prior
written consent); provided that in exercising such right, Sleeve Provider will
use the same standard of care as Sleeve Provider uses in conducting transactions
to correct risk policy violations under Sleeve Provider’s risk policies;
(d) the right to setoff any amounts owed by any Merrill Party to any
Reliant Retail Obligor under the Transaction Documents, whether such amounts or
obligations are direct or indirect, absolute or contingent, or matured or
unmatured, against any amounts owed by any Reliant Retail Obligor, including
Credit Sleeve Obligations, whether such obligations are direct or indirect,
absolute or contingent, or matured or unmatured;
(e) the right of specific performance and injunctive relief to give
effect to the terms and conditions of the Transaction Documents, to the extent
permitted by applicable law, and in connection therewith the Parties acknowledge
that the monetary remedies provided to the Merrill Parties under the Transaction
Documents are insufficient to cover all damages that could be incurred by the
Merrill Parties in connection with such a Reliant Event of Default; and
(f) any other rights and remedies available at law or in equity with
respect to breach of contract, subject to the provisions of Section 9.04.
9.02 Remedies of REPS.
(a) If any Sleeve Provider Event of Default shall have occurred and be
continuing, REPS shall have each of the following rights and remedies:
(i) the right to declare an Unwind Start Date, without paying any
Make-whole Payment under Section 3.05; and
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(ii) the right, without declaring an Unwind Start Date or terminating
any commitments of the Merrill Parties under the Transaction Documents, to cure
or cure the effects of such Sleeve Provider Event of Default.
(b) If a Sleeve Provider Event of Default described in Sections 8.02
(b), (g) or (h) shall have occurred and be continuing, REPS shall have each of
the following additional rights and remedies:
(i) the right to suspend all obligations of the Reliant Retail
Obligors with respect to the Monthly Sleeve Fees during the period of such
Sleeve Provider Event of Default, on any ratable basis selected by the Reliant
Retail Obligors reflecting Sleeve Provider failures to comply with Sections 2.01
through 2.05;
(ii) in the event that the Unwind Start Date has been declared in
accordance with Section 9.02(a)(i) or the Unwind Period has otherwise commenced,
the right to indemnification by the Merrill Parties upon demand for all direct
losses, costs, expenses and damages incurred by the Reliant Retail Obligors in
connection with locating and obtaining a Replacement Sleeve Provider, including
reasonable legal fees and expenses and the excess, if any, of the overall cost
to the Reliant Retail Obligors of the sleeve fees, interest, and other similar
costs of obtaining credit support for the acquisition of Accepted Products and
working capital for the Retail Energy Business from Replacement Sleeve
Providers, over the same costs under the Transaction Documents;
(iii) in the event that the Unwind Start Date has been declared in
accordance with Section 9.02(a)(i) or the Unwind Period has otherwise commenced,
the right to cause all Secured Obligations of the Merrill Parties under the
Collateral Trust Agreement to become Subordinated Secured Obligations under the
Collateral Trust Agreement;
(iv) the right to setoff any amounts owed by any Reliant Retail Obligor
to any Merrill Party under the Transaction Documents, whether such amounts or
obligations are direct or indirect, absolute or contingent, or matured or
unmatured, against any Credit Sleeve Obligations or Reimbursement Obligations,
whether such obligations are direct or indirect, absolute or contingent, or
matured or unmatured;
(v) the right of specific performance and injunctive relief to give
effect to the terms and conditions of the Transaction Documents, to the extent
permitted by applicable law, and not to exceed 180 days in duration, and in
connection therewith the Parties acknowledge that the monetary remedies provided
to the Reliant Retail Obligors under the Transaction Documents are insufficient
to cover all damages that could be incurred by the Reliant Retail Obligors in
connection with such a Sleeve Provider Event of Default; and
(vi) any other rights and remedies available at law or in equity with
respect to breach of contract, subject to the provisions of Section 9.04.
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9.03 Certain Intercreditor Agreements.
(a) Standstill. Following a Reliant Event of Default, the Sleeve
Provider shall not exercise any of its remedies under Section 9.01 for a 10
Business Day period (the “Restricted Period”) commencing on the date of such
Reliant Event of Default, other than the Sleeve Provider’s rights under Section
9.01(c). If the Merrill Parties receive a full indemnity of their entire
exposure under the Transaction Documents from a Person with a Credit Rating of
at least the ML Equivalent Credit Rating prior to the last day of the Restricted
Period, the Sleeve Provider shall not exercise any of its remedies under Section
9.01 for a period of 90 days (the “Standstill Period”) commencing the date such
indemnity is received, other than the Sleeve Provider’s rights under Section
9.01(c). For the avoidance of doubt, the Sleeve Provider may exercise all of
its remedies under Section 9.01 if such Default or Event of Default, as
applicable, is not cured on or prior to the last day of either (i) if no
indemnity is received on or prior to the last day of the Restricted Period, the
Restricted Period, or (ii) if an indemnity is received on or prior to the last
day of the Restricted Period in accordance with the prior sentence, the
Standstill Period.
(b) Bank Cure or Takeout. If a Standstill Period shall occur, on or
prior to the last day of such Standstill Period, the Sleeve Provider shall:
(i) upon request from the Bank Agent on behalf of the Reliant Parent Lenders and
as soon as is reasonably practicable thereafter, provide the Bank Agent with the
information described in clauses (i) through (iii) of Section 7.01(a) of the
Collateral Trust Agreement, solely related to the Merrill Parties;
(ii) permit any Reliant Parent Lender to cure, in a manner reasonably
satisfactory to the Merrill Parties, the related Default or Event of Default, as
applicable, on behalf of the Reliant Retail Obligors (a “Bank Cure”); and
(iii) permit any Reliant Parent Lender to cause, in a manner reasonably
satisfactory to the Merrill Parties, the Credit Sleeve Obligations owing to the
Merrill Parties to be terminated and satisfied in full (a “Bank Takeout”),
which, for the avoidance of doubt, may include: the satisfaction, cancellation,
return and reimbursement, as applicable, of all ML Guarantees, all Merrill
Collateral and the Reimbursement Obligations; the termination of all further
obligations of the Merrill Parties in respect of each of the Power and Hedging
Contracts, Credit Support Agreements, the Mirror OTC Contracts; the termination
of the commitment under and the repayment of the Working Capital Obligations; if
applicable, the payment of the Make-whole Payment and any outstanding Monthly
Sleeve Fees; and the repayment of any other amounts owing hereunder to the
Merrill Parties.
(c) Result of Bank Cure or Takeout. Following a Bank Cure and so long
as the indemnity described in paragraph (a) above remains in full force and
effect, the terms of this Agreement shall continue in full force effect, except
that the Monthly Sleeve Fees shall be as set forth on Schedule 3.04. Following
the completion of a Bank Takeout and upon written confirmation from the Merrill
Parties that the Credit Sleeve Obligations owing to the Merrill
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Parties have been terminated and satisfied in full, the Liens of the Merrill
Parties under the Transaction Documents shall be released.
9.04 Certain Limitations on Remedies. FOR BREACH OF ANY PROVISION OF
THIS AGREEMENT FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED,
SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION
AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY
OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR’S LIABILITY
SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE
UNDER THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, INCLUDING CONSEQUENTIAL LOST PROFITS OR OTHER CONSEQUENTIAL
BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT OR OTHERWISE. IT
IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID
HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.
Section 10. Unwind
10.01 Permitted Activities during Unwind Period.
(a) During the Unwind Period, REPS may exercise one or more of the
following rights with respect to any Post-Unwind Start Date Transactions:
(i) REPS may terminate Post-Unwind Start Date Transactions and pay, to the
extent such payments do not require application of funds in violation of this
Agreement, applicable settlement payments for the Post-Unwind Start Date
Transactions (in which case, the Liens of the Merrill Parties under the
Collateral Trust Agreement securing the Credit Sleeve Obligations shall be
released on the Credit Sleeve Termination Date, and the Merrill Parties shall
take action under Section 12.04(c) in connection therewith);
(ii) REPS may, to the extent such postings do not require application of funds
in violation of this Agreement, post collateral to cover credit risk for
Post-Unwind Start Date Transactions to the Sleeve Provider or Accepted
Counterparties (in which case when such postings have either replaced or covered
all collateral postings by the Merrill Parties under this Agreement and
arrangements acceptable to the Sleeve Provider in its commercially reasonably
discretion for all potential future collateral postings have been
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made in respect of such Post-Unwind Start Date Transactions, the liens of the
Merrill Parties under the Collateral Trust Agreement securing the Credit Sleeve
Obligations shall be released, and the Merrill Parties shall take action under
Section 12.04(c) in connection therewith); provided that for such purposes the
Sleeve Provider will be deemed to be commercially reasonable to the extent that
it applies standards for collateral postings comparable to the standards it
applies generally in its business to counterparties with similar credit ratings
in comparable transactions;
(iii) the Reliant Retail Obligors may provide shared Liens on a pari passu
basis (or senior basis to the extent Section 9.02(b)(iii) applies) to any
Replacement Sleeve Providers under the terms, including the sharing provisions,
of the Collateral Trust Agreement (in which case the Merrill Parties shall take
action under Section 12.04(b) (or (e), as applicable), in connection therewith)
and the Merrill Parties agree to negotiate in good faith at the request of REPS
with any Replacement Sleeve Providers to make reasonable adjustments to the
terms of the Collateral Trust Agreement or any requested intercreditor terms in
connection therewith;
(iv) REPS may provide the Sleeve Provider with a counterparty or counterparties
with a ML Equivalent Credit Rating who agree to take assignment of and assume
Reliant Retail’s positions under Post-Unwind Start Date Transactions, and the
Sleeve Provider agrees to negotiate in good faith with such counterparty or
counterparties to establish credit terms under which REPS positions can be
assumed by such counterparties under the standard credit policies of the Sleeve
Provider (in which case, the Liens of the Merrill Parties under the Collateral
Trust Agreement securing the Credit Sleeve Obligations shall be released
following such assumption, and the Merrill Parties shall take action under
Section 12.04(c) in connection therewith); provided that for such purposes the
Sleeve Provider will be deemed to be acting in good faith to the extent that it
applies standards for credit terms comparable to the standards it applies
generally in its business to counterparties with similar credit ratings in
comparable transactions; and
(v) REPS may provide the Sleeve Provider with a counterparty or counterparties
with a ML Equivalent Credit Rating, who agree to take assignment of and assume
or replace the ML Guarantees and Credit Support Agreements with respect to the
Post-Unwind Start Date Transactions, and the Sleeve Provider agrees to negotiate
in good faith with such counterparty or counterparties to effect such an
assignment and assumption or replacement (in which case, the Liens of the
Merrill Parties under the Collateral Trust Agreement securing the Credit Sleeve
Obligations shall be released following such assignment and assumption or
replacement, and the Merrill Parties shall take action under Section 12.04(c) in
connection therewith); provided that for such purposes the Sleeve Provider will
be deemed to be acting in good faith to the extent that it applies standards for
assignments and assumptions comparable to the standards it applies generally in
its business to counterparties with similar credit ratings in comparable
transactions.
(b) At any time and from time to time in connection with such process,
the Merrill Parties and shall promptly execute and deliver any and all further
agreements and documents and take such other actions as REPS may reasonably
request to fully implement the intent of the foregoing provisions in this
Section 10.01.
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Section 11. Reimbursement Guaranty by Other Reliant Retail Parties
11.01 Reimbursement Guaranty of the Obligations. Subject to the
provisions of Section 11.02, the Reimbursement Guarantors jointly and severally
hereby irrevocably and unconditionally guaranty to the Merrill Parties (i) the
due and punctual payment in full of all Reimbursement Obligations and all other
amounts payable by REPS to the Merrill Parties under the Transaction Documents
when the same shall become due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) and (ii) the
performance of all other obligations of REPS hereunder (collectively, the
“Guaranteed Obligations”).
11.02 Payment by Guarantors. The Reimbursement Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Merrill Party may have at law or in equity against any
Reimbursement Guarantor by virtue hereof, that upon the failure of REPS to pay
any of the Guaranteed Obligations when and as the same shall become due, whether
at stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section
362(a)), the Reimbursement Guarantors will upon demand pay, or cause to be paid,
in accordance with the terms of this Agreement, to the Merrill Parties, an
amount equal to the sum of the unpaid principal amount of all Guaranteed
Obligations then due as aforesaid, accrued and unpaid interest on such
Guaranteed Obligations (including interest which, but for REPS’s becoming the
subject of a case under the Bankruptcy Code, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against REPS for such
interest in the related bankruptcy case) and all other Guaranteed Obligations
then owed to the Merrill Parties as aforesaid.
11.03 Liability of Reimbursement Guarantors Absolute. Each Reimbursement
Guarantor agrees that its obligations hereunder are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance
which constitutes a legal or equitable discharge of a guarantor or surety other
than payment in full of the Guaranteed Obligations. In furtherance of the
foregoing and without limiting the generality thereof, each Reimbursement
Guarantor agrees as follows:
(a) this Reimbursement Guaranty is a guaranty of payment when due and not of
collectability. This Reimbursement Guaranty is a primary obligation of each
Reimbursement Guarantor and not merely a contract of surety;
(b) the obligations of each Reimbursement Guarantor hereunder are independent
of the obligations of REPS and the obligations of any other guarantor (including
any other Reimbursement Guarantor) of the obligations of REPS, and a separate
action or actions may be brought and prosecuted against such Reimbursement
Guarantor whether or not any action is brought against REPS or any of such other
guarantors and whether or not REPS is joined in any such action or actions;
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(c) payment by any Reimbursement Guarantor of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge any
Reimbursement Guarantor’s liability for any portion of the Guaranteed
Obligations which has not been paid; and without limiting the generality of the
foregoing, if the Merrill Parties is awarded a judgment in any suit brought to
enforce any Reimbursement Guarantor’s covenant to pay a portion of the
Guaranteed Obligations, such judgment shall not be deemed to release such
Reimbursement Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Reimbursement Guarantor, limit, affect,
modify or abridge any other Reimbursement Guarantor’s liability hereunder in
respect of the Guaranteed Obligations;
(d) any Merrill Party, upon such terms as it deems appropriate, without notice
or demand and without affecting the validity or enforceability hereof or giving
rise to any reduction, limitation, impairment, discharge or termination of any
Reimbursement Guarantor’s liability hereunder, from time to time may (i) renew,
extend, accelerate, increase the rate of interest on, or otherwise change the
time, place, manner or terms of payment of the Guaranteed Obligations; (ii)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guaranteed Obligations or
any agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept other guaranties of
the Guaranteed Obligations and take and hold security for the payment hereof or
the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guaranteed Obligations,
any other guaranties of the Guaranteed Obligations, or any other obligation of
any Person (including any other Reimbursement Guarantor) with respect to the
Guaranteed Obligations; (v) enforce and apply any security now or hereafter held
by or for the benefit of such Merrill Party in respect hereof or the Guaranteed
Obligations and direct the order or manner of sale thereof, or exercise any
other right or remedy that such Merrill Party may have against any such
security, in each case as such Merrill Party in its discretion may determine
consistent herewith or any applicable security agreement, including foreclosure
on any such security pursuant to one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable, and
even though such action operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of any Reimbursement
Guarantor against REPS or any security for the Guaranteed Obligations; and (vi)
exercise any other rights available to it under the Transaction Documents; and
(e) this Reimbursement Guaranty and the obligations of the Reimbursement
Guarantors hereunder shall be valid and enforceable and shall not be subject to
any reduction, limitation, impairment, discharge or termination for any reason
(other than payment in full of the Guaranteed Obligations), including the
occurrence of any of the following, whether or not any Reimbursement Guarantor
shall have had notice or knowledge of any of them: (i) any failure or omission
to assert or enforce or agreement or election not to assert or enforce, or the
stay or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right,
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power or remedy (whether arising under the Transaction Documents, at law, in
equity or otherwise) with respect to the Guaranteed Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) hereof, any of
the other Transaction Documents or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guaranteed Obligations, in
each case whether or not in accordance with the terms hereof or such Transaction
Document or any agreement relating to such other guaranty or security; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) any Merrill
Party’s consent to the change, reorganization or termination of the corporate
structure or existence of REPS or any of its Subsidiaries and to any
corresponding restructuring of the Guaranteed Obligations; (v) any failure to
perfect or continue perfection of a security interest in any collateral which
secures any of the Guaranteed Obligations; and (vi) any other act or thing or
omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of any Reimbursement Guarantor as an
obligor in respect of the Guaranteed Obligations.
11.04 Waivers by Reimbursement Guarantors. Each Reimbursement Guarantor
hereby waives, for the benefit of the Merrill Parties: (a) any right to require
any Merrill Party, as a condition of payment or performance by such
Reimbursement Guarantor, to (i) proceed against REPS, any other guarantor
(including any other Reimbursement Guarantor) of the Guaranteed Obligations or
any other Person, (ii) proceed against or exhaust any security held from REPS,
any such other guarantor or any other Person, (iii) proceed against or have
resort to any balance of any Collateral Account or credit on the books of any
Merrill Party in favor of REPS or any other Person, or (iv) pursue any other
remedy in the power of any Merrill Party whatsoever; (b) any defense arising by
reason of the incapacity, lack of authority or any disability of REPS or any
other Reimbursement Guarantor including any defense based on or arising out of
the lack of validity or the unenforceability of the Guaranteed Obligations or
any agreement or instrument relating thereto; (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms hereof, to the extent the same
may be waived, (ii) the benefit of any statute of limitations affecting such
Reimbursement Guarantor’s liability hereunder or the enforcement hereof, and
(iii) promptness, diligence and any requirement that any Merrill Party protect,
secure, perfect or insure any security interest or lien or any property subject
thereto; (e) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
hereof, notices of default hereunder or under any agreement or instrument
related thereto, notices of any renewal, extension or modification of the
Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to REPS and notices of any of the matters referred to in
Section 11.04; and (f) any other defenses or benefits that may be derived from
or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms hereof.
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11.05 Reimbursement Guarantors’ Rights of Subrogation, Contribution, etc.
Until the Guaranteed Obligations shall have been indefeasibly paid in full, each
Reimbursement Guarantor hereby agrees not to exercise any claim, right or
remedy, direct or indirect, that such Reimbursement Guarantor now has or may
hereafter have against REPS or any other Reimbursement Guarantor or any of its
assets in connection with this Reimbursement Guaranty or the performance by such
Reimbursement Guarantor of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including (a) any right of subrogation,
reimbursement or indemnification that such Reimbursement Guarantor now has or
may hereafter have against REPS with respect to the Guaranteed Obligations, (b)
any right to enforce, or to participate in, any claim, right or remedy that any
Merrill Party now has or may hereafter have against REPS, and (c) any benefit
of, and any right to participate in, any collateral or security now or hereafter
held by any Merrill Party. In addition, until the Guaranteed Obligations shall
have been indefeasibly paid in full, each Reimbursement Guarantor shall withhold
exercise of any right of contribution such Reimbursement Guarantor may have
against any other guarantor (including any other Reimbursement Guarantor) of the
Guaranteed Obligations, including any such right of contribution as contemplated
by Section 11.02. Each Reimbursement Guarantor further agrees that, to the
extent the agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Reimbursement
Guarantor may have against REPS or against any collateral or security, and any
rights of contribution such Reimbursement Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights any Merrill Party
may have against REPS, to all right, title and interest any Merrill Party may
have in any such collateral or security, and to any right any Merrill Party may
have against such other guarantor. If any amount shall be paid to any
Reimbursement Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guaranteed
Obligations shall not have been finally and indefeasibly paid in full, such
amount shall be held in trust for the Merrill Parties and shall forthwith be
paid over to the Merrill Parties to be credited and applied against the
Guaranteed Obligations, whether matured or unmatured, in accordance with the
terms hereof.
11.06 Subordination of Other Obligations. Any Indebtedness of REPS or any
Reimbursement Guarantor now or hereafter held by any Reimbursement Guarantor
(the “Obligee Guarantor”) is hereby subordinated in right of payment to the
Guaranteed Obligations during the existence of a Reliant Event of Default, and
any such indebtedness collected or received by the Obligee Guarantor during the
existence of a Reliant Event of Default shall be held in trust for the Merrill
Parties and shall forthwith be paid over to the Merrill Parties to be credited
and applied against the Guaranteed Obligations but without affecting, impairing
or limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.
11.07 Continuing Reimbursement Guaranty. This Reimbursement Guaranty is a
continuing guaranty and shall remain in effect until all of the Guaranteed
Obligations shall have been indefeasibly paid in full. Each Reimbursement
Guarantor hereby irrevocably waives any right to revoke this Reimbursement
Guaranty as to future transactions giving rise to any Guaranteed Obligations.
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11.08 Authority of Reimbursement Guarantors or REPS. It is not necessary
for any Merrill Party to inquire into the capacity or powers of any
Reimbursement Guarantor or REPS or the officers, directors or any agents acting
or purporting to act on behalf of any of them.
11.09 Financial Condition of REPS. Any Reimbursement Guarantee may be
made to REPS or continued from time to time, without notice to or authorization
from any Reimbursement Guarantor regardless of the financial or other condition
of REPS at the time of any such grant or continuation. No Merrill Party shall
have any obligation to disclose or discuss with any Reimbursement Guarantor its
assessment, or any Reimbursement Guarantor’s assessment, of the financial
condition of REPS. Each Reimbursement Guarantor has adequate means to obtain
information from REPS on a continuing basis concerning the financial condition
of REPS and its ability to perform its obligations under the Transaction
Documents, and each Reimbursement Guarantor assumes the responsibility for being
and keeping informed of the financial condition of REPS and of all circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations. Each
Reimbursement Guarantor hereby waives and relinquishes any duty on the part of
any Merrill Party to disclose any matter, fact or thing relating to the
business, operations or conditions of REPS now known or hereafter known by any
Merrill Party.
11.10 Bankruptcy, etc.
(a) So long as any Guaranteed Obligations remain outstanding, no Reimbursement
Guarantor shall, without the prior written consent of Merrill Parties acting
pursuant to the instructions of Requisite Lenders, commence or join with any
other Person in commencing any bankruptcy, reorganization or insolvency case or
proceeding of or against REPS or any other Reimbursement Guarantor or admit in
writing or in any legal proceeding that it is unable to pay its debts as they
become due. The obligations of Reimbursement Guarantors hereunder shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
case or proceeding, voluntary or involuntary, involving the bankruptcy,
insolvency, receivership, reorganization, liquidation or arrangement of REPS or
any other Reimbursement Guarantor or by any defense which REPS or any other
Reimbursement Guarantor may have by reason of the order, decree or decision of
any court or administrative body resulting from any such proceeding.
(b) Each Reimbursement Guarantor acknowledges and agrees that any interest on
any portion of the Guaranteed Obligations which accrues after the commencement
of any case or proceeding referred to in clause (a) above (or, if interest on
any portion of the Guaranteed Obligations ceases to accrue by operation of law
by reason of the commencement of such case or proceeding, such interest as would
have accrued on such portion of the Guaranteed Obligations if such case or
proceeding had not been commenced) shall be included in the Guaranteed
Obligations because it is the intention of Reimbursement Guarantors and Merrill
Parties that the Guaranteed Obligations which are guaranteed by Reimbursement
Guarantors pursuant hereto should be determined without regard to any rule of
law or order which may relieve REPS of any portion of such Guaranteed
Obligations. Reimbursement Guarantors will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or similar
person to pay the Merrill Parties, or allow the claim of the Merrill Parties in
respect of, any such interest accruing after the date on which such case or
proceeding is commenced.
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(c) In the event that all or any portion of the Guaranteed Obligations are paid
by REPS, the obligations of Reimbursement Guarantors hereunder shall continue
and remain full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Merrill Party as a preference, fraudulent
transfer or otherwise, and any such payments which are so rescinded or recovered
shall constitute Guaranteed Obligations for all purposes hereunder.
Section 12. Miscellaneous.
12.01 Notices. All notices and other communications provided for herein
shall be in writing, including telecopy and electronic mail, and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy or other means of electronic transmission
approved in advance by the recipient party, as follows:
(a) if to the REPS:
RELIANT ENERGY POWER SUPPLY, LLC
1000 Main Street
Houston, Texas 77002
Attention: Daniel N. Hannon
Telephone No.: (713) 497-6149
Telecopy No.: (713) 497-0881
E-Mail: DHannon@reliant.com
With a copy to
RELIANT ENERGY POWER SUPPLY, LLC
1000 Main Street
Houston, Texas 77002
Attention: Andrew C. Johannesen
Telephone No.: (713) 497-6417
Telecopy No.: (713) 497-9289
E-Mail: AJohannesen@reliant.com
and
RELIANT ENERGY POWER SUPPLY, LLC
1000 Main Street
Houston, Texas 77002
Attention: Michael L. Jines
Telephone No.: (713) 497-7465
Telecopy No.: (713)-497-0140
E-Mail: MJines@reliant.com
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(b) if to the Sleeve Provider:
MERRILL LYNCH COMMODITIES, INC.
20 East Greenway Plaza
Suite 700
Houston, Texas 77046
Attention: Legal Department
Telephone No.: (713) 544-5263
Telecopy No.: (713) 544-5551
E-Mail: steve_ballard@ml.com
(c) if to the ML Guarantee Provider:
MERRILL LYNCH & CO., INC.
222 Broadway
17th Floor
New York, New York 10038
Attention: Office of General Counsel
Telephone No.: (212) 670-0434
Telecopy No.: (212) 670-4703
E-Mail: cara_londin@ml.com
Any Party hereto may change its address, telecopy number or e-mail address for
notices and other communications hereunder by notice to the other Party hereto.
All notices and other communications given to any Party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt.
12.02 Confidentiality; Limitation on Use of Information.
(a) Any information made available by one Party to another Party with
respect to this Agreement is confidential and shall not be discussed with or
disclosed to any third party, except for such information (i) as may become
generally available to the public other than as a result of a violation of this
Agreement, (ii) as may be required or appropriate in response to any summons,
subpoena, or otherwise in connection with any litigation or to comply with any
applicable law, order, regulation, or ruling or to the extent requested by any
regulatory authority, (iii) which becomes available to a Party on a
non-confidential basis from a source other than the other Party, (iv) as may be
furnished to any person or entity (including that Party’s auditors, attorneys,
advisors, or financial institutions) with which the Party has a written
agreement or which are otherwise required to keep the information that is
disclosed in confidence, (v) relating to the U.S. Federal income tax treatment
and tax structure of the transactions contemplated by this Agreement, including
all relevant materials relating to such tax treatment and tax structure (except
where confidentiality is reasonably necessary to comply with the securities
laws) or (vi) to the extent required by Section 7.01 of the Collateral Trust
Agreement.
(b) In addition to the confidentiality restrictions with respect to
third parties in paragraph (a) above, the Merrill Parties agree that:
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(i) the confidential information of the Reliant Retail Obligors will
not be used by the Merrill Parties except for determining compliance with, and
performance under, the Transaction Documents; and
(ii) With respect to the information provided to the Merrill Parties
pursuant to Schedule 1.01(c) or otherwise relating to the transactions or market
positions of the Reliant Retail Obligors, access to such information will be
limited to the management and credit personnel listed on Exhibit I1 and their
successors in function with respect to this Agreement and the management and
credit personnel of the Merrill Parties that are described in any updates to
such Exhibit provided by the Sleeve Provider from time to time for such
purposes, subject to the approval of REPS, which shall not be unreasonably
withheld or delayed; provided that no such personnel shall be engaged in placing
trades in the wholesale electricity or natural gas markets except under the
Transaction Documents.
(c) In addition to the confidentiality restrictions with respect to
third parties in paragraph (a) above, the Reliant Retail Obligors agree that:
(i) the confidential information of the Merrill Parties will not be
used by the Reliant Retail Obligors except for determining compliance with, and
performance under, the Transaction Documents; and
(ii) With respect to the information provided to the Reliant Retail
Obligors pursuant to Schedule 1.01(c) or otherwise relating to the transactions,
market positions or proprietary commodity curves of the Merrill Parties, access
to such information will be limited to the management and credit personnel
listed on Exhibit I2 and their successors in function with respect to this
Agreement and the management and credit personnel of Reliant Retail Obligors
that are described in any updates to such Exhibit provided by the Sleeve
Provider from time to time for such purposes, subject to the approval of the
Sleeve Provider, which shall not be unreasonably withheld or delayed.
(d) In connection with the foregoing provisions of this Section 12.02,
(A) the Parties recognize that the Parties are both engaged in wholesale trading
activities in the gas and electricity markets that may from time to time be
adverse, (B) the possession by the Merrill Parties of the confidential
information of the Reliant Retail Obligors, or the possession by the Reliant
Retail Obligors of the confidential information of the Merrill Parties, in
compliance with the foregoing does not constitute a reason for one Party to
limit the ability of the other Party to engage in such adverse trading
activities, and (C) the Parties may in compliance with the foregoing and for the
purposes of the Transaction Documents discuss the confidential information of
the other Parties internally.
12.03 Reliant Employees. For a period of three years from the Execution
Date, the Merrill Parties shall not solicit or otherwise induce any director,
officer or key employee of the Reliant Retail Obligors, or any officer or key
employee of the Reliant Parent or its Subsidiaries that is actively involved in
the negotiation or administration of this Agreement to leave the employ of the
Reliant Retail Obligors, the Reliant Parent or its Subsidiaries; provided
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that (a) this prohibition shall not apply to (i) directors, officers or key
employees of the Reliant Retail Obligors or officers or key employees of the
Reliant Parent or its Subsidiaries who are not full time employees or who are
not actively involved with the Merrill Parties in negotiating on or
administering this Agreement or (ii) officers, directors or key employees of the
Reliant Retail Obligors, the Reliant Parent or its Subsidiaries who respond to
general solicitations or who otherwise independently seek employment without
inducement by any Merrill Party and (b) in the event that (i) the Reliant Parent
or any Subsidiary of the Reliant Parent that provides services to the Reliant
Retail Obligors under the Reliant Parent Services Agreement becomes subject of a
bankruptcy, insolvency or similar proceeding or (ii) the Reliant Parent Services
Agreement is terminated, this prohibition shall not apply with respect to any
such officer or employee of the Reliant Parent or any of its Subsidiaries who
provided services to the Reliant Retail Obligors under the Reliant Parent
Services Agreement.
12.04 Provisions relating to Collateral Trust Agreement and Reimbursement
Guarantee. The Merrill Parties hereby agree that at the direction of REPS from
time to time and to the extent no Default with respect to a Reliant Event of
Default or Reliant Event of Default exists and no such Default or Reliant Event
of Default would be caused thereby, the Merrill Parties shall or shall direct
the Collateral Trustee, as applicable, to:
(a) accept additional Collateral in accordance with Section 2.03 of
the Collateral Trust Agreement;
(b) accept Replacement Sleeve Providers and Replacement Working
Capital Providers and their respective agreements as additional secured
counterparties and secured agreements in accordance with Section 3.01 and 3.03
of the Collateral Trust Agreement;
(c) remove the Merrill Parties as secured counterparties with respect
to the Credit Sleeve Obligations in accordance with Section 3.02 and 3.03 of the
Collateral Trust Agreement (A) upon the occurrence of the Credit Sleeve
Termination Date (or, if any Merrill Party is the sole secured counterparty
under the Collateral Trust Agreement upon the occurrence of the Credit Sleeve
Termination Date, at the direction of REPS release all of the Collateral in
accordance with Section 2.07 of the Collateral Trust Agreement); (B) under the
circumstances expressly contemplated by Section 10.01(a)(i), 10.01(a)(ii),
10.01(a)(iv) and 10.01(a)(v) (or, if any Merrill Party is the sole secured
counterparty under the Collateral Trust Agreement at the time of the occurrence
of the events and circumstances set forth in such Sections, at the direction of
REPS release all of the Collateral in accordance with Section 2.07 of the
Collateral Trust Agreement);
(d) with respect to, and to the extent of, property constituting
Collateral that is, or will be, sold or otherwise transferred or disposed of in
connection with any transaction permitted under this Agreement, release or
confirm the release of such Collateral under Sections 2.04, 2.05 or 2.06 of the
Collateral Trust Agreement, as applicable; provided that (i) to the extent that
such sale, transfer or other disposition is of all of the Equity Interests in a
Subsidiary, the Merrill Parties shall also instruct the Collateral Trustee to
release all of the assets of such Subsidiary that constitute Collateral, (ii) to
the extent that such sale, transfer or other disposition is of all or
substantially all of the assets of a Subsidiary, the Merrill Parties shall also
instruct the Collateral
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Trustee to release all of the Equity Interests in such Subsidiary that
constitute Collateral and (iii) make or approve any conforming changes
reasonably requested by REPS in the Security Documents necessary to implement
such release in the reasonable discretion of the Merrill Parties;
(e) to the extent expressly contemplated by Section 9.02(b)(iii),
cause all Secured Obligations of the Merrill Parties under the Collateral Trust
Agreement to become Subordinated Secured Obligations under the Collateral Trust
Agreement;
(f) enter into intercreditor agreements with respect to the Credit
Sleeve Obligations in accordance with, and to the extent, expressly contemplated
by Section 10.01(a)(iii) and Article IX of the Collateral Trust Agreement; and
(g) amend, restate, supplement, modify, renew or replace, or forbear
from exercising any rights with respect to the terms or provisions contained in,
or cancel, terminate or suspend performance under, any Security Document, or
consent to the taking of any of the foregoing actions with respect to any other
Transaction Document, in each case to the extent such foregoing action is
approved by the Sleeve Provider in accordance with Section 7.11 hereof.
The Merrill Parties shall timely execute and deliver, provide, return or
otherwise make available or direct the execution and delivery, provision, return
or otherwise making available of all filings, recordings, notices, and other
related documents and agreements, including releases and notices, directions and
other communications to the Collateral Trustee, reasonably required to implement
the foregoing in accordance with the terms of the foregoing.
12.05 Waiver. No failure on the part of any Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
12.06 Amendments, Etc.. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement or in any other Transaction Document
between or among any of the Merrill Parties, on one hand, and any of the Reliant
Retail Obligors, on the other hand, may be modified or supplemented only by an
instrument in writing signed by the applicable Parties thereto.
12.07 Expenses, Etc.
(a) REPS agrees to pay or reimburse the Sleeve Provider for: (a) all
reasonable out-of-pocket costs and expenses of the Sleeve Provider (including
the reasonable fees and expenses of legal counsel) in connection with (1) any
Default by the Reliant Retail Obligors and any enforcement or collection
proceedings resulting therefrom, including all manner of participation in or
other involvement with (i) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (ii) judicial or regulatory proceedings
and (iii) workout, restructuring or other negotiations or proceedings (whether
or not the workout, restructuring or transaction
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contemplated thereby is consummated) and (2) the enforcement of this
Section 12.07; and (b) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Transaction Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein.
(b) REPS agrees to reimburse the Merrill Parties for any amounts paid
by the Merrill Parties to cure defaults by REPS or any Other Reliant Retail
Obligor under any Transaction Document or any other document, contract or
agreement to which REPS or such Other Reliant Retail Obligor is a party (such
amounts “Deferred Cure Reimbursement Obligations”). Deferred Cure Reimbursement
Obligations shall mature and be payable on the date that the Working Capital
Facility matures (whether on the Maturity Date under, and as defined in, the
Working Capital Facility, by acceleration or otherwise).
12.08 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns.
12.09 Assignments. Neither the Reliant Retail Obligors nor the Merrill
Parties may assign any of their rights or obligations hereunder without the
prior written consent of the other Parties hereto.
12.10 Survival. The obligations of REPS under Section 12.07 and any other
provision that expressly provides for survival after termination shall survive
the Credit Sleeve Termination Date.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the Parties hereto may execute this Agreement by signing
any such counterpart.
12.12 Governing Law; Jurisdiction; Etc.
(a) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.
(b) Submission to Jurisdiction. The Parties hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York (the “New York Courts”), for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Notwithstanding the nonexclusive
submission above:
(A) With respect to any proceeding initiated by or on behalf of any
Reliant Retail Obligor arising out of or relating to this Agreement or the
transactions contemplated hereby, the Reliant Retail Obligors agree to bring
such proceeding exclusively in the United States District Court for the Southern
District of New York or if
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such court does not have subject matter jurisdiction in any of the other New
York Courts located in New York, New York, and in such case EACH PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING;
(B) With respect to any proceeding initiated by or on behalf of any
Merrill Party arising out of or relating to this Agreement or the transactions
contemplated hereby, which the Merrill Parties elect to bring in the United
States District Court for the Southern District of New York or if such court
does not have subject matter jurisdiction in any of the other New York Courts
located in New York, New York, EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY SUCH LEGAL PROCEEDING; and
(C) With respect to any proceeding initiated by or on behalf of any
Merrill Party arising out of or relating to this Agreement or the transactions
contemplated hereby, which the Merrill Parties elect to bring in the United
States District Court for the Southern District of Texas (Houston Division) or
if such court does not have subject matter jurisdiction in any of the other
Texas Courts located in Houston, Texas, the Reliant Retail Obligors expressly
reserve their rights to trial by jury.
(c) Waiver of Venue. Each Party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
(d) Service of Process. Each Party to this Agreement irrevocably
consents to service of process in the manner provided for notices in
Section 12.01. Nothing in this Agreement will affect the right of any Party to
this Agreement to serve process in any other manner permitted by law.
12.13 Certain Dispute Resolution Procedures. If a Party (a “Disputing
Party”) disputes any Market Information forming a component used in a
calculation under Sections 2.02(a)(v)(2), (3), and (4), then (i) the Disputing
Party will notify the other Party not later than the close of business on the
Business Day following the date that Disputing Party received the other Party’s
calculation and such Disputing Party will also provide its calculation of such
amount and the applicable Market Information used to make such calculation, (ii)
the Parties will in good faith consult with each other in an attempt to resolve
the dispute and (iii) if the Parties fail to resolve the dispute by the third
(3rd) Business Day following the date the notice of dispute was delivered, then
the Calculation Agent will recalculate the applicable calculation by: (A)
utilizing any Market Information that the Parties have agreed are not in
dispute; and (B) calculating the component that is in dispute by seeking four
actual quotations at mid market from reference market makers, and taking the
arithmetic average of those obtained; provided that if such number of quotations
are not available for a particular component, then fewer than such number of
quotations may be used for such component; and if no quotations are available
for a particular component, then the Calculation Agent shall use its own
calculations for that
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component. Following a recalculation pursuant to this Section, the Calculation
Agent will notify the Parties of the recalculation of such amount not later than
12:00 noon CPT on the fifth Business Day following the date of the notice of
dispute was delivered, and the same shall be binding for the purposes of this
Agreement. The “Calculation Agent” shall be a third party agreed to by both
REPS and the Sleeve Provider from the list of third parties in Schedule 12.13;
provided that if the Parties are unable to promptly agree on such third party,
then the next third party listed on such Schedule who has not yet served as
Calculation Agent shall be the Calculation Agent for such dispute.
12.14 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
12.15 Limitation on Interest. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Reimbursement
Obligation, together with all fees, charges and other amounts which are treated
as interest on such Reimbursement Obligation under applicable law (collectively
the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which
may be contracted for, charged, taken, received or reserved by the Sleeve
Provider in accordance with applicable law, the rate of interest payable in
respect of such Reimbursement Obligations hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Reimbursement Obligation but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to the Sleeve Provider in respect of other Reimbursement Obligations or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Rate to
the date of repayment, shall have been received by the Sleeve Provider.
12.16 Integration. This Agreement and the other Transaction Documents
constitute the entire contract among the Parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof.
[signatures follow]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
RELIANT ENERGY POWER SUPPLY, LLC
By:
/s/ Lloyd A. Whittington
Lloyd A. Whittington
Vice President and Treasurer
Signature Page to Credit Sleeve and Reimbursement Agreement
--------------------------------------------------------------------------------
MERRILL PARTIES
MERRILL LYNCH COMMODITIES, INC.,
as Sleeve Provider
By:
/s/ Dennis Albrecht
Name:
Dennis Albrecht
Title:
Managing Director, COO
MERRILL LYNCH & CO., INC.,
as ML Guarantee Provider
By:
/s/ Allen G. Braithwaite III
Name:
Allen G. Braithwaite III
Title:
Assistant Treasurer
Signature Page to Credit Sleeve and Reimbursement Agreement
--------------------------------------------------------------------------------
OTHER RELIANT RETAIL OBLIGORS
RERH HOLDINGS, LLC
By:
/s/ Daniel N. Hannon
Daniel N. Hannon
Vice President and Treasurer
RELIANT ENERGY RETAIL HOLDINGS, LLC
By:
/s/ Daniel N. Hannon
Daniel N. Hannon
Vice President and Treasurer
RELIANT ENERGY RETAIL SERVICES, LLC
By:
/s/ Lloyd A. Whittington
Lloyd A. Whittington
Vice President and Treasurer
Signature Page to Credit Sleeve and Reimbursement Agreement
-------------------------------------------------------------------------------- |
Exhibit 10.2
SEVERANCE COMPENSATION AGREEMENT
This Agreement is effective as of the date it is signed by both AQUILA, INC., a
Delaware corporation (the "Company"), and Beth A. Armstrong ("Executive").
WHEREAS, the Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from the possibility
of a Change of Control; and
WHEREAS, this Agreement sets forth the severance compensation to which Executive
will be entitled upon certain conditions if Executive's employment with the
Company terminates following a Change of Control.
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of: (i) two (2) years from the date hereof if a Change in Control has
not occurred within such 2-year period; provided that the term of this Agreement
shall be automatically extended for an additional month upon each monthly
anniversary of the date hereof until a party provides notice to the other party
prior to the end of any month that such automatic extension shall cease, in
which case this Agreement shall terminate at the end of the then existing 2-year
term; (ii) the termination of Executive's employment for any reason, including
by reason of death, Disability or Retirement, prior to a Change of Control;
(iii) the termination of Executive's employment for Cause following a Change of
Control; (iv) the termination of Executive's employment for any reason other
than for Good Reason following a Change of Control; or (v) two (2) years from
the date of a Change in Control.
2.
Severance upon Termination of Employment.
(a) Events Giving Rise to Benefits. Executive shall be entitled to
payments and other benefits as set forth in Sections 2(b) and 2(c) if within two
(2) years following a Change in Control, the Company shall terminate Executive's
employment other than for Disability, Retirement, or Cause, or, within such
2-year period, Executive shall terminate his or her employment for Good Reason.
Except as specifically provided in this Section 2, Executive shall have no right
to receive compensation under this Agreement. Termination of employment due to
death shall not give rise to any rights to compensation under this Agreement.
(b) Severance Pay. The Company shall pay a lump sum cash amount, no
later than the fifth (5th) business day following Executive’s Date of
Termination, equal 2 times the sum of A plus B, where
“A” equals Executive’s annual base salary (including all amounts of such salary
that are deferred under any qualified and non-qualified plans of the Company)
determined at the greater of the rate in effect as of the date of such
termination or the highest rate in effect at any time during the 90 day period
prior to the Change of Control; and
“B” equals Executive’s target annual incentive opportunity for the calendar year
in which such Change in Control occurs, or if greater, the average (50th
percentile) target annual incentive opportunity for a select group of comparable
companies as determined by an independent consulting firm selected by the Board
of Directors of the Company.
(c)
Other Benefits. In addition to compensation set forth in Section 2(b) hereof,
and subject to the provisions and limitations set forth below, Executive shall
be entitled to the following benefits:
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(i) Commencing on the Date of Termination and continuing for a period of
three (3) months thereafter, Executive may exercise all stock options granted to
Executive pursuant to the Company's equity incentive plan(s). Such stock options
shall be exercisable whether or not: (i) a period of one year has elapsed from
the date of grant to the date of exercise; or (ii) any installment exercise
terms as stipulated in any agreement issued under such plan(s) have been
satisfied. However, in no event shall Executive exercise any stock option after
the expiration of the option period as stipulated in an agreement issued under
such plan(s).
(ii) Effective as of the Date of Termination, any restrictions relating to
stock awards granted under the Company's equity incentive plan(s) shall lapse.
(iii) No later than the fifth (5th) business day following Executive’s
Date of Termination, Executive shall receive a lump sum cash amount equal to
Executive’s target annual and long-term incentive opportunity for the incentive
period in which Executive’s employment terminates times a fraction, the
numerator of which is the number of days in such incentive period ending on the
Date of Termination and the denominator of which is the total number of days in
such incentive period.
(iv) Effective as of the Date of Termination and continuing for a period of
three years after the Date of Termination, the Company will provide Executive
with health insurance coverage at the same cost to Executive and at materially
the same level of coverage for Executive as the coverage in effect immediately
prior to the Date of Termination. The Company shall, at its option, contribute
amounts it is required to contribute on behalf of Executive pursuant to this
paragraph either to: (A) plans maintained for the Company's employees; or (B)
private insurance plans. The health insurance continuation benefits paid for
hereunder shall be deemed to be a part of Executive’s COBRA coverage. All such
health benefits shall be in addition to any other benefits relating to health or
medical care benefits that are available under the Company's policies to
Executive following termination of employment; provided, however, that in the
event Executive becomes covered under substitute health plans of another
employer with materially the same level of coverage as that provided by the
Company during this period, subject to the applicable requirement of COBRA, the
Company will no longer provide health coverage under this paragraph.
(v) Effective as of the Date of Termination, Executive shall be
entitled to the services of a national executive outplacement firm, the
aggregate cost to the Company of which shall not exceed the outplacement
benefits comparable to the Aquila Workforce Transition Plan that is in effect as
of the date of termination.
(vi) Effective as of the Date of Termination, Executive shall be entitled
to three (3) years of additional credit for both age and service under the
Company’s tax-qualified and non-qualified pension plans (specifically excluding
any account-based plan such as a 401(k) or profit sharing plan); provided that
if applicable provisions of the Internal Revenue Code prevent payment in respect
of such credit under the Company’s tax-qualified pension plan, such payments
shall be made under the Company’s non-qualified pension plan.
3.
Tax Reimbursement.
(a) Gross-Up Payment. Notwithstanding Anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
to or for the benefit of Executive whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement (other than any payment
under this Section 3) or otherwise would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986 (the “Code”) or a similar
section (such payment, a “Change in Control Payment” and such excise tax on all
such Change in Control Payments, together with any interest and penalties
thereon, collectively the “Excise Tax”), then Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount determined by
the Accounting Firm such that after payment by Executive of any tax thereon,
Executive retains an amount of the Gross-Up Payment equal to
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the amount of the Excise Tax; provided, however, that if the aggregate value (as
determined under Section 280G of the Code) of such Change in Control Payments is
less than 110% of the product of “3 times” the Executive’s “base amount” (as
defined in Section 280G(b)(3) of the Code) (such product, the “Golden Parachute
Threshold”), then Executive shall not be entitled to any Gross-Up Payment and,
instead, the Change in Control Payments shall be reduced so that their aggregate
value (as so determined) is equal to $1.00 less than the Golden Parachute
Threshold.
For purposes of this Section 3, Executive’s applicable Federal, state and local
taxes shall be computed at the maximum marginal rates, taking into account the
effect of any loss of personal exemptions resulting from receipt of the Gross-Up
Payment.
(b) Determinations. All determinations required to be made under this
Section 3, including whether a Gross-Up Payment is required under Section 3(a),
and the assumptions to be used in determining the Gross-Up Payment, shall be
made by such accounting firm as the Company may designate in writing prior to a
Change in Control (the “Accounting Firm”), which shall provide detailed
supporting calculations both to the Company and Executive within thirty (30)
business days of the receipt of notice from Executive that there has been a
Change in Control, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
Person effecting the Change in Control or is otherwise unavailable, Executive
may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
(c) Subsequent Redeterminations. Unless requested otherwise by the Company,
Executive agrees to use reasonable efforts to contest in good faith any
subsequent determination by the Internal Revenue Service that Executive owes an
amount of Excise Tax greater than the amount determined pursuant to
Section 3(b), provided that Executive shall be entitled to reimbursement by the
Company of all fees and expenses reasonably incurred by Executive in contesting
such determination. In the event the Internal Revenue Service or any court of
competent jurisdiction determines that Executive owes an amount of Excise Tax
that is either greater or less than the amount previously taken into account and
paid under this Section 3, the Company shall promptly reimburse Executive, or
Executive shall promptly reimburse the Company, as the case may be, the amount
of such excess or shortfall. In the case of any payment that the Company is
required to make to Executive pursuant to the preceding sentence (a “Later
Payment”), the Company shall also reimburse Executive an additional amount such
that after payment by Executive of all of Executive’s applicable Federal, state
and local taxes, including any interest and penalties assessed by any taxing
authority, on such additional amount, Executive will retain an amount equal to
the total of Executive’s applicable Federal, state and local taxes, including
any interest and penalties assessed by any taxing authority, arising due to the
Later Payment. In the case of any reimbursement of Excise Tax that Executive is
required to make to the Company pursuant to the second sentence of this Section
3(c), Executive shall also reimburse the Company at the amount of any additional
payment received by Executive from the Company in respect of applicable Federal,
state and local taxes on such repaid Excise Tax, to the extent Executive is
entitled to a refund of (or has not yet paid) such Federal, state or local
taxes.
4. Definitions. As used in this Agreement, the following capitalized
terms shall have the meaning set forth below:
(a) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(b) “Benefit Plans” means any employee benefit plan or arrangement
providing retirement benefits or any health, life, disability or similar welfare
insurance. Executive perquisites are specifically excluded from this definition.
(c)
"Cause" means:
(i) The willful and continued failure by Executive to substantially
perform his or her duties of employment with Company other than any such failure
resulting from Executive's
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incapacity due to physical or mental illness, unless Executive uses reasonable
efforts to correct such failure within a reasonable time after demand for
substantial performance is delivered by the Company that specifically identifies
the manner in which the Company believes Executive has not substantially
performed his or her duties;
(ii) The willful misconduct by Executive which materially injures the
Company monetarily or otherwise; or
(iii) Conviction of, or entry of a plea of nolo contendere with regard
to, any felony or any crime involving moral turpitude or dishonesty of or by
Executive. For purposes of this paragraph, no act, or failure to act, on
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him or her not in good faith and without reasonable belief that his or
her action or omission was in, or not opposed to, the best interests of the
Company.
(d) “Change in Control” means and shall be deemed to have occurred
upon the occurrence of any of the following events:
(i) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of 20% or more of the Voting Securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates, other than in connection
with the acquisition by the Company or its affiliates of a business) unless such
Person becomes a Beneficial Owner of 20% or more of the Voting Securities of the
Company as a result of an acquisition of Voting Securities by the Company which,
after reducing the Voting Securities outstanding, increases the proportionate
Voting Securities of the Company beneficially owned by such Person to 20% or
more by reason of such Voting Securities acquisition by the Company; provided,
however, if a Person shall become the Beneficial Owner of 20% or more of the
combined voting power of the Voting Securities of the Company then outstanding
by reason of such Voting Securities acquisition by the Company and shall
thereafter become the Beneficial Owner of any additional Voting Securities of
the Company which causes the proportionate voting power of Voting Securities
beneficially owned by such Person to increase to more than 20% of the combined
voting power of the Voting Securities of the Company then outstanding, such
Person shall, upon becoming the Beneficial Owner of such additional Voting
Securities, be deemed to have become the Beneficial Owner of 20% or more of the
combined voting power of the Voting Securities of the Company then outstanding
other than solely as a result of such Voting Securities acquisition by the
Company;
(ii) During any period of 36 consecutive months (not including any
period prior to the effective date of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the Company (and
any new director, whose election by the board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was so approved), cease for
any reason to constitute a majority of directors then constituting the Board of
Directors of the Company;
(iii) A reorganization, merger or consolidation of the Company is
consummated, in each case, unless, immediately following such reorganization,
merger or consolidation, (i) more than 50% of, respectively, the then
outstanding shares of Voting Securities of the corporation resulting from such
reorganization, merger or consolidation is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the Beneficial Owners of the Voting Securities of the Company outstanding
immediately prior to such reorganization, merger or consolidation, (ii) no
Person (but excluding for this purpose any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the voting power of the outstanding Voting Securities
of the Company) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of Voting Securities of the
corporation resulting from such reorganization, merger or consolidation, and
(iii) at least a majority of the members of the board of directors of the
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corporation resulting from such reorganization, merger or consolidation were
members of the Board of Directors of the Company at the time of the execution of
the initial agreement providing for such reorganization, merger or
consolidation; or
(iv) The stockholders of the Company approve (i) a complete liquidation
or dissolution of the Company or (ii) the sale or other disposition of more than
50% of all of the assets of the Company, other than to any corporation with
respect to which, immediately following such sale or other disposition, (A) more
than 50% of, respectively, the then outstanding shares of Voting Securities of
such corporation is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the Beneficial Owners
of the Voting Securities of the Company outstanding immediately prior to such
sale or other disposition of assets, (B) no Person (but excluding for this
purpose any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the voting power of the
outstanding Voting Securities of the Company) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of Voting
Securities of such corporation and (C) at least a majority of the members of the
board of directors of such corporation were members of the Board of Directors of
the Company at the time of the execution of the initial agreement or action of
the board providing for such sale or other disposition of assets of the Company.
Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed
to have occurred if: (1) there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
Voting Securities of the Company immediately prior to such transaction or series
of transactions continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions; or (2)
Executive is part of a “group,” within the meaning of Section 13(d)(3) of the
Exchange Act as in effect of the effective date of this Agreement, which
consummates the Change in Control transaction; or (3) any required regulatory
approval of a transaction giving rise to a Change in Control has not been
obtained. In addition, for purposes of the definition of “Change in Control,” a
Person engaged in business as an underwriter of securities shall not be deemed
to be the Beneficial Owner of any securities acquired through such Person’s
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Company" means Aquila, Inc. and any successor or assign to its
business and/or assets which executes and delivers the agreement provided by
this Agreement or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(f) "Date of Termination" means (i) if this Agreement is terminated
by Executive for Good Reason, the date Executive delivers notice of such
termination to the Company; (ii) if Executive's employment is terminated by the
Company for Disability, 30 days after Notice of Termination is given to
Executive (provided that Executive shall not have offered to return and is able
to return to the performance of Executive's duties on a full-time basis during
such 30-day period); or (iii) if Executive's employment is terminated by the
Company for any other reason, the date on which a Notice of Termination is
given.
(g) "Disability" means Executive's incapacity due to physical or
mental illness which shall have caused Executive to have been absent from his or
her duties with the Company on a full-time basis for six months and Executive
shall not have returned to the full-time performance of Executive's duties
within 30 days after written Notice of Termination has been given by the
Company.
(h)
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(i) "Good Reason” means any of the following if the same shall occur,
without Executive's express written consent, within two (2) years after a Change
in Control:
(i) the assignment to Executive of duties materially inconsistent with
Executive's position, duties, responsibilities and status with the Company
immediately prior to the Change in
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Control, or a material adverse change in Executive's titles or reporting
relationships as in effect immediately prior to the Change in Control, or any
removal of Executive from or any failure to reelect Executive to any of such
positions;
(ii) a reduction in Executive's base salary as in effect on the date
hereof or as the same may be increased from time to time during the term of this
Agreement;
(iii) any failure by the Company to continue in effect any Benefit Plan
enjoyed by Executive at the time of the Change in Control (or plans or
arrangements or other benefits providing him or her with substantially similar
or better benefits, taken in the aggregate), or the taking of any action by the
Company, which would adversely affect Executive's participation in or materially
reduce Executive's benefits under any such Benefit Plans, taken in the
aggregate;
(iv) any failure by the Company to continue in effect any Incentive Plan in
which Executive was participating at the time of the Change in Control (or plans
or arrangements providing him or her with substantially similar or better
benefits, taken in the aggregate), or the taking of any action by the Company
which would adversely affect Executive's participation in any such Incentive
Plan or reduce Executive's benefits under any such Incentive Plan, expressed as
a percentage of his or her base salary, by more than 10 percentage points in any
fiscal year as compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any Securities Plan in
which Executive was participating at the time of the Change in Control (or plans
or arrangements providing him or her with substantially similar or better
benefits, taken in the aggregate) or the taking of any action by the Company
which would adversely affect Executive's participation in or materially reduce
Executive's benefits under any such Securities Plan;
(vi) any requirement that Executive relocate more than 50 miles from the area
in which Executive performed Executive's duties prior to the Change in Control,
except for required travel by Executive on the Company's business to an extent
substantially consistent with Executive's business travel obligations at the
time of the Change in Control;
(vi)
any material breach by the Company of any provision of this Agreement;
(vii) any failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company; or
(viii) any purported termination of Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of this
Agreement.
(l) “Incentive Plan” means any annual or long term incentive plan or
arrangement, such as a bonus or performance plan.
(m) “Notice of Termination" means a written notice which indicates the
specific termination provisions in this Agreement relied upon and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment. For purposes of this Agreement,
no such purported termination shall be effective without such Notice of
Termination.
(n) “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Section 13(d) and 14(d) thereof, except
that such terms shall not include (i) the Company or any of its affiliates (as
defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
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(o) "Retirement" means the termination by the Company or Executive of
Executive's employment based on Executive having retired pursuant to the then
existing retirement plan of the Company at or after age 65 or by any agreement
between the Company and Executive, or by any generally applicable retirement
policy of the Company.
(p) “Securities Plan” means any plan or arrangement providing
participants the opportunity to receive securities of the Company, including
without limitation stock options, stock appreciation rights, restricted stock.
(q) “Voting Securities” means with respect to any corporation, the
common stock and other securities of the corporation entitled to vote generally
in the election of the board of directors of the corporation.
5. Notice of Termination. Any termination of Executive's employment
for any reason shall be effected pursuant to a Notice of Termination conforming
to the requirements of this section.
6.
No Obligation to Mitigate Damages; No Effect on Other Contractual Rights.
(a) Executive shall not be required to mitigate damages or the amount
of any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this Agreement
be reduced by any compensation earned by Executive as the result of employment
by another employer after the Date of Termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish Executive's existing rights, or rights which would accrue solely as a
result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
7.
Successor to the Company.
(a) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to Executive, expressly, absolutely
and unconditionally to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place. Any failure of the Company
to obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle
Executive to terminate Executive's employment for Good Reason.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him or her hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee, or if there
be no such designee, to Executive's estate. The services to be provided by
Executive to the Company under this Agreement are personal and are not delegable
or assignable.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
Aquila, Inc..
20 West Ninth Street
Kansas City, Missouri 64105
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ATTN: Corporate Secretary
If to Executive to the address of
Executive on the books of the Company.
Another address may be used if a party has furnished a different address to the
other party in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
9. Sole Agreement. This Agreement represents the entire agreement
between the parties with respect to the matters contemplated herein. Any earlier
agreement relating to severance compensation between the parties or between
Executive and any affiliate of the Company is hereby terminated and superseded,
and all obligations by either party thereunder shall cease immediately preceding
the commencement of the term of this Agreement and are hereby agreed to be
satisfied in full. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The parties
acknowledge and agree that the severance benefits hereunder are in lieu of the
benefits offered under the Company’s Workforce Transition Program (or any
successor severance plan or arrangement) and that Executive shall not be
eligible for any benefits under such program.
10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. 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 will constitute one and the same instrument.
12. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses which Executive reasonably may incur as a result of the Company's
contesting the validity, enforceability or Executive's interpretation of, or
determinations under, this Agreement.
13. Confidential Information. Executive agrees not to disclose during
the term hereof or thereafter any of the Company's confidential or trade secret
information, except as required by law. Executive recognizes that Executive
shall be employed in a sensitive position in which, as a result of a
relationship of trust and confidence, Executive will have access to trade
secrets and other highly confidential and sensitive information. Executive
further recognizes that the knowledge and informed acquired by Executive
concerning the Company's materials regarding employer/employee contracts,
customers, pricing schedules, advertising and interviewing techniques, manuals,
systems, procedures and forms represent the most vital part of the Company's
business and constitute by their very nature, trade secrets and confidential
knowledge and information. Executive hereby stipulates and agrees that all such
information and materials shall be considered trade secrets and confidential
information. If it is at any time determined that any of the information or
materials identified in this Section are, in whole or in part, not entitled to
protection as trade secrets, they shall nevertheless be considered and treated
as confidential information in the same manner as trade secrets, to the maximum
extent permitted by law. Executive further agrees that all such trade secrets or
other confidential information, and any copy, extract or summary thereof,
whether originated or prepared by or for Executive or otherwise coming into
Executive's knowledge, possession, custody, or control, shall be and remain the
exclusive property of the Company.
14. Withholding. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
15. Arbitration. Any claim or controversy arising out of or relating
to this Agreement or any breach thereof shall be settled by arbitration. Any
such arbitration shall take place in Kansas City, Missouri, in accordance with
the rules of the American Arbitration Association. Any award rendered shall be
final and conclusive upon the parties and judgment therein may be entered in the
highest court of the forum, state or federal, having jurisdiction.
16. Attachment. Except as required by law, the right to receive
payments under this Agreement shall not be subject to anticipation, sale,
encumbrance, charge, levy, or similar process or assignment by operation of law.
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17. Waivers. Any waiver by a party or any breach of this Agreement by
another party shall not be construed as a continuing waiver or as a consent to
any subsequent breach by the other party. Except as otherwise expressly set
forth herein, no failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder shall operate s a
waiver thereof, nor shall any single or partial exercise of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
18. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
19. Governing Law. This Agreement shall be governed and construed and
the legal relationships of the parties determined in accordance with the laws of
the State of Missouri.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
AQUILA, INC.
By:
/s/ Richard C. Green
Date:
August 22, 2006
EXECUTIVE
By:
/s/ Beth A. Armstrong
Date
August 22, 2006
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|
Exhibit 10.41
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO SHARES OF COMMUNITY
VALLEY BANCORP’S COMMON STOCK SHALL BE ISSUED PURSUANT HERETO UNLESS THE
COMMUNITY VALLEY BANCORP 2000 STOCK OPTION PLAN SHALL HAVE FIRST BEEN APPROVED
BY THE SHAREHOLDERS OF COMMUNITY VALLEY BANCORP.
COMMUNITY VALLEY BANCORP
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the “Agreement”) is made and entered
into as of the 10th of March , 2005 , by and between COMMUNITY VALLEY BANCORP, a
California corporation (the “Company”), and Luther McLaughlin (“Optionee”);
WHEREAS, pursuant to the COMMUNITY VALLEY BANCORP 2000 Stock Option Plan, as
amended (the “Plan”), a copy of which is attached hereto, the Board of Directors
of the Company has authorized granting to Optionee, a nonqualified stock option
to purchase all or any part of Two thousand ( 2,000 ) authorized but unissued
shares of the Company’s common stock for cash at the price of Twenty-six Dollars
and 50 Cents ($ 26.50 ) per share, such option to be for the term and upon the
terms and conditions hereinafter stated;
NOW, THEREFORE, it is hereby agreed:
1. Grant of Option. Pursuant to said action of the Board of
Directors and pursuant to authorizations granted by all appropriate regulatory
and governmental agencies, the Company hereby grants to Optionee the option to
purchase, upon and subject to the terms and conditions of the Plan, which is
incorporated in full herein by this reference, all or any part of Two thousand (
2,000 ) shares of the Company’s common stock (hereinafter called “stock”) at the
price of Twenty-six Dollars and 50 Cents ($ 26.50 ) per share, which price is
not less than one hundred percent (100%) of the fair market value of the stock
as of the date of action of the Board of Directors granting this option.
2. Exercisability. This option shall be exercisable as to up to, but
not including, 20% of the options shares granted per year for a five year
period, at which time options will be exercisable at 100% of grant. The first
20% vesting will be available for exercise 12 months from the date of grant.
Upon death or disability of optionee, this grant will be deemed to be 100%
vested. This option shall remain exercisable as to all of such shares until
March 9, 2015, (but not later than ten (10) years from the date this option is
granted) unless this option has expired or terminated earlier in accordance with
the provisions hereof. Shares as to which this option becomes exercisable
pursuant to the foregoing provision may be purchased at any time prior to
expiration of this option.
3. Exercise of Option. This option may be exercised by written
notice delivered to the Company stating the number of shares with respect to
which this option is being exercised, together with cash in the amount of the
purchase price of such shares. Not fewer than ten (10) shares may be purchased
at any one time unless the number of shares purchased is the total number of
shares which is exercisable at such time, and in no event may the option be
exercised with respect to fractional shares. Upon exercise, Optionee shall make
appropriate arrangements and shall be responsible for the withholding of any
federal and state taxes then due.
4. Cessation of Directorship or Employment. Except as provided in
Paragraphs 2 and 5 hereof, if Optionee shall cease to be a director or an
employee of the Company or a subsidiary corporation for any reason other than
Optionee’s death or disability [as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended from time to time (the “Code”)], this option
shall expire three (3) months thereafter. During the three (3) month period this
option shall be exercisable only as to those installments, if any, which had
accrued as of the date when Optionee ceased to be a director or an employee of
the Company or a subsidiary corporation.
5. Termination of Employment for Cause. If Optionee’s employment
with the Company or a subsidiary corporation is terminated for cause, this
option shall expire immediately, unless reinstated by the Board of Directors
within thirty days (30) days of such termination by giving written notice of
such reinstatement to Optionee at his or her last known address. In the event of
such reinstatement, Optionee may exercise this option only to such extent, for
such time, and upon such terms and conditions as if Optionee had ceased to be an
employee of the Company or a subsidiary corporation upon the date of such
termination for a reason other than cause, death or disability. Termination for
cause shall include, but not be limited to, termination for malfeasance or gross
misfeasance in the performance of duties or conviction of a crime involving
moral turpitude, and, in any event, the determination of the Board of Directors
with respect thereto shall be final and conclusive.
--------------------------------------------------------------------------------
6. Nontransferability; Death or Disability of Optionee. This option
shall not be transferable except by will or by the applicable laws of descent
and distribution and shall be exercisable during Optionee’s lifetime only by
Optionee. If Optionee dies while serving as a director or an employee of the
Company or a subsidiary corporation, or during the three (3) month period
referred to in Paragraph 4 hereof, this option shall expire one (1) year after
the date of Optionee’s death or on the day specified in Paragraph 2 hereof,
whichever is earlier. After Optionee’s death but before such expiration, the
persons to whom Optionee’s rights under this option shall have passed by will or
by the applicable laws of descent and distribution or the executor or
administrator of Optionee’s estate shall have the right to exercise this option
as to those shares for which installments had accrued under Paragraph 2 hereof
as of the date on which Optionee ceased to be a director or an employee of the
Company or a subsidiary corporation.
If Optionee terminates his or her directorship or employment because of
disability, Optionee may exercise this option to the extent he or she is
entitled to do so at the date of termination, at any time within one (1) year of
the date of termination, or before the expiration date specified in Paragraph 2
hereof, whichever is earlier.
7. Employment. This Agreement shall not obligate the Company or a
subsidiary corporation to employ Optionee for any period, nor shall it interfere
in any way with the right of the Company or a subsidiary corporation to reduce
Optionee’s compensation.
8. Privileges of Stock Ownership. Optionee shall have no rights as a
shareholder with respect to the Company’s stock subject to this option until the
date of issuance of stock certificates to Optionee. Except as provided in the
Plan, no adjustment will be made for dividends or other rights for which the
record date is prior to the date such stock certificates are issued.
9. Modification and Termination. The rights of Optionee are subject
to modification and termination upon the occurrence of certain events as
provided in Sections 13 and 14 of the Plan.
10. Notification of Sale. Optionee agrees that Optionee, or any person
acquiring shares upon exercise of this option, will notify the Company not more
than five (5) days after any sale or other disposition of such shares. No shares
issuable upon the exercise of this option shall be issued and delivered unless
and until the Company has fully complied with all applicable requirements of any
regulatory agency having jurisdiction over the Company, and all applicable
requirements of any exchange upon which stock of the Company may be listed.
11. Notices. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its President or Chief Financial Officer at
its main office and any notice to Optionee shall be addressed to Optionee’s
address on file with the Company or a subsidiary corporation, or to such other
address as either may designate to the other in writing. Any notice shall be
deemed to be duly given if and when enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage prepaid, with the United States
Postal Service. In lieu of giving notice by mail as aforesaid, any written
notice under this Agreement may be given to Optionee in person, and to the
Company by personal delivery to its President or Chief Financial Officer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
OPTIONEE
COMMUNITY VALLEY BANCORP
//s// Luther W. McLaughlin
By
//s// Keith C. Robbins
By
-------------------------------------------------------------------------------- |
Exhibit F.3.1
Form of Change Order
Reference is made to the Wind Turbine Supply Agreement, dated as of September
29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a
California corporation (“Supplier”). Capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement. In accordance with
Article 11 of the Agreement, each of Supplier and Buyer agrees to the following
changes to the Agreement:
1)
[Insert description of requested change in the Equipment Supply Obligations, if
any, including detailed supporting information;]
2)
The Contract Price shall be [increased][decreased] by the amount of $______, and
the Payment Schedule shall be adjusted as follows:
[insert adjustments to Payment Schedule, if any];
3)
The Project Schedule shall be adjusted as follows:
[insert adjustments to Project Schedule, if any];
In all other respects the Agreement shall remain unmodified and in full force
and effect.
Agreed pursuant to the Agreement by:
SUPPLIER:
BUYER:
Vestas-American Wind Technology, Inc.,
Madison Gas and Electric Company,
a California corporation
a Wisconsin corporation
By: _______________________________
By: __________________________
Name: _____________________________
Name: ________________________
Title: ______________________________
Title: _________________________
Date: ______________________________
Date: _________________________
Exhibit F.3.2
Form of Shipping Certificate
DATE:
1.
Supplier has delivered this completed Shipping Certificate to Buyer on the above
date. Capitalized terms used but not defined herein shall have the meanings set
forth in that certain Wind Turbine Supply Agreement, dated as of September 29,
2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a
California corporation (“Supplier”).
2.
[For use with Turbine Nacelles] Pursuant to Section 4.2.2 of the Agreement,
Supplier hereby notifies Buyer that on _________, 200_, [insert number] Turbine
Nacelles have been shipped.
3.
[For use with Blades] Pursuant to Section 4.2.2 of the Agreement, Supplier
hereby notifies Buyer that on _________, 200_, [insert number] blades have been
shipped.
4.
[For use with Hubs] Pursuant to Section 4.2.2 of the Agreement, Supplier hereby
notifies Buyer that on _________, 200_, [insert number] Hubs have been shipped.
5.
[For use with Tower Sections] Pursuant to Section 4.2.2 of the Agreement,
Supplier hereby notifies Buyer that on _________, 200_, [insert number] Tower
sections have been shipped.
6.
The person signing below is authorized to submit this Shipping Certificate to
Buyer for and on behalf of Supplier.
SUPPLIER:
Vestas–American Wind Technology, Inc.,
a California corporation
By: ____________________________
Name: __________________________
Title: ___________________________
MG&E Turbine Supply Agreement, Exhibit F.3.3
Exhibit F.3.3
Form of Delivery Certificate
SF#1091522
[ex102f303doc002.gif] [ex102f303doc002.gif] [ex102f303doc004.gif]
[ex102f303doc004.gif] [ex102f303doc006.gif]
[ex102f303doc006.gif] [ex102f303doc008.gif]
[ex102f303doc008.gif] [ex102f303doc010.gif]
[ex102f303doc010.gif] [ex102f303doc012.gif]
[ex102f303doc012.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.3
Document No..__________________________
Class: 1
Transport Control Form
Site Name:
Port Railhead
Job Site
TRUCK/CONTAINER ID.
DESCRIPTION OF GOODS
EXPECTED ARRIVAL Date &TIME
ACTUAL ARRIVAL DATE
ACTUAL TIME OF ARRIVAL
TIME UNLOADING STARTED
TIME UNLOADING FINISHED
TOTAL TIME UNLOADING
COMMENTS
If any damage parts have been discovered
or if any parts are missing fill in the
Transport Claim Form
All the goods received on/in the above referred to truck /container has been
received on the transporters final des-
tination point. The goods has been inspected and found to be in good order
(excluding possible remark under
Comments)
SIGNATURE OF VESTAS
SIGNATURE OF OWNER OR REPRESENTATIVE OF OWNER
DATE AND SIGNATURE OF DRIVER
NAME OF DRIVER (BLOCK LETTERS)
Form PROJ004 R0 5-JUL-2005
CONFIDENTIAL AND PROPRIETARY TO VESTAS
SF#1091522
[ex102f303doc014.gif] [ex102f303doc014.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.3
SF#1091522
[ex102f303doc016.gif] [ex102f303doc016.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.3
SF#1091522
[ex102f303doc018.gif] [ex102f303doc018.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.3
SF#1091522
Exhibit F.3.4
Form of Delayed Delivery Certificate
DATE:
1.
Supplier has delivered this completed Delayed Delivery Certificate to Buyer on
the above date. Capitalized terms used but not defined herein shall have the
meanings set forth in that certain Wind Turbine Supply Agreement, dated as of
September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric
Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology,
Inc., a California corporation (“Supplier”).
2.
Pursuant to Section 4.2.3 of the Agreement, Supplier hereby certifies that
[insert number] [Turbine Nacelles] [blades] [Hubs] [Tower sections] could not be
delivered to the Delivery Point within thirty (30) days following its scheduled
arrival at the Delivery Point due to an Excusable Event.
3.
The person signing below is authorized to submit this Delayed Delivery
Certificate to Buyer for and on behalf of Supplier.
Vestas-American Wind Technology, Inc.,
a California corporation
By:
Name:
Title:
Date:
MG&E Turbine Supply Agreement, Exhibit F.3.5
Exhibit F.3.5
Mechanical Completion Checklist
SF# 1091526
[ex102f305doc002.gif] [ex102f305doc002.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc004.gif] [ex102f305doc004.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
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MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc008.gif] [ex102f305doc008.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc010.gif] [ex102f305doc010.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc012.gif] [ex102f305doc012.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc014.gif] [ex102f305doc014.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc016.gif] [ex102f305doc016.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc018.gif] [ex102f305doc018.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc020.gif] [ex102f305doc020.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc022.gif] [ex102f305doc022.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc024.gif] [ex102f305doc024.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc026.gif] [ex102f305doc026.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc028.gif] [ex102f305doc028.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc030.gif] [ex102f305doc030.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc032.gif] [ex102f305doc032.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc034.gif] [ex102f305doc034.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc036.gif] [ex102f305doc036.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc038.gif] [ex102f305doc038.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc040.gif] [ex102f305doc040.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc042.gif] [ex102f305doc042.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc044.gif] [ex102f305doc044.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc046.gif] [ex102f305doc046.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc048.gif] [ex102f305doc048.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
[ex102f305doc050.gif] [ex102f305doc050.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.5
SF# 1091526
Exhibit F.3.6
Form of Mechanical Completion Certificate
Date of Mechanical Completion: _________________
1.
Reference is made to the Wind Turbine Supply Agreement, dated as of September
29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a
California corporation (“Supplier”). Capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement.
2.
The undersigned, Buyer, does hereby certify and represent to Supplier with
respect to Wind Turbine No. _____ that (i) such Wind Turbine and associated
Tower has been assembled, erected, installed and connected to the
Interconnecting Utility’s grid in accordance with the Applicable Laws and the
Agreement; (ii) all necessary materials and equipment with respect to such Wind
Turbine and associated Tower has been installed substantially in accordance with
the Technical Specifications and applicable quality assurance procedures and
checked for adjustment, rotation and lubrication; (iii) each item on the
Mechanical Completion Checklist, a completed copy of which is attached hereto,
has been satisfied in accordance with the Agreement; and (iv) such Wind Turbine
is ready to commence Commissioning.
3.
The person signing below is authorized to submit this Mechanical Completion
Certificate to Supplier for and on behalf of Buyer.
BUYER:
Madison Gas and Electric Company,
a Wisconsin corporation
By: ________________________________
Name: _____________________________
Title: ______________________________
Date: _______________________________
Supplier to cross through one (1) of the following statements:
A. Supplier agrees that Mechanical Completion has been achieved with respect to
the enumerated Wind Turbine(s) and associated Tower(s) as set forth herein.
B. Supplier does not agree that Mechanical Completion has been achieved with
respect to the enumerated Wind Turbine(s) and associated Tower(s) as set forth
therein due to the omissions or defects listed below and/ or the incomplete
nature of the specified obligations listed below:
The person signing below is authorized to submit this form to Buyer for and on
behalf of Supplier.
ACCEPTED BY SUPPLIER:
Vestas-American Wind Technology, Inc.,
a California corporation
By: __________________________
Name: ________________________
Title: _________________________
Date: _________________________
MG&E Turbine Supply Agreement, Exhibit F.3.7
Exhibit F.3.7
Commissioning Completion Checklist
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc004.gif] [ex102f307doc004.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc014.gif] [ex102f307doc014.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc016.gif] [ex102f307doc016.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
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MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc020.gif] [ex102f307doc020.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc022.gif] [ex102f307doc022.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc024.gif] [ex102f307doc024.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc026.gif] [ex102f307doc026.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc028.gif] [ex102f307doc028.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc030.gif] [ex102f307doc030.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc032.gif] [ex102f307doc032.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc034.gif] [ex102f307doc034.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc036.gif] [ex102f307doc036.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc038.gif] [ex102f307doc038.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc040.gif] [ex102f307doc040.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
[ex102f307doc042.gif] [ex102f307doc042.gif]
MG&E Turbine Supply Agreement, Exhibit F.3.7
SF# 1091529
Exhibit F.3.8
Form of Commissioning Completion Certificate
Date of Commissioning Completion: _________________
1.
Reference is made to the Wind Turbine Supply Agreement, dated as of September
29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc.
(“Supplier”). Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement.
2.
The undersigned, Supplier, does hereby certify and represent with respect to
Wind Turbine No. ___ and its related components that each item on the
Commissioning Completion Checklist, a completed copy of which is attached as
Exhibit A, has been satisfied in accordance with the Agreement.
3.
Attached hereto as Exhibit B is the completed Commissioning Data Sheet for each
Wind Turbine that has achieved Commissioning Completion.
4.
The person signing below is authorized to submit this form to Buyer for and on
behalf of Supplier.
SUPPLIER:
Vestas-American Wind Technology, Inc.,
a California corporation
By:
____________________________
Name:
____________________________
Title:
____________________________
Date:
____________________________
Buyer to cross through one (1) of the following statements:
A.
Buyer agrees that Commissioning Completion has been achieved with respect to the
enumerated Wind Turbine(s) and related components as set forth herein.
B.
Buyer does not agree that Commissioning Completion has been achieved with
respect to the enumerated Wind Turbine(s) and related components as set forth
herein due to the omissions, liens or defects listed below and/or the incomplete
nature of the specified portions of the Equipment Supply Obligations listed
below:
.
The person signing below is authorized to submit this form to Supplier and on
behalf of Buyer.
ACCEPTED BY BUYER:
Madison Gas and Electric Company,
a Wisconsin corporation
By:
____________________________
Name:
____________________________
Title:
____________________________
Date:
____________________________
Exhibit A
Completed Commissioning Completion Checklist
Exhibit B
Commissioning Data Sheet
WTG Model:
Serial No.:
WTG address:
Pad No.:
Buyer:
Address:
City/Country:
Telephone No.:
Operation Manager:
Address:
Telephone No.:
Vestas Service Site
Representative:
Address:
Telephone No.:
MAIN SPECIFICATIONS
Rotor diameter, m:
Tower height, m:
Rated output, main generator, kW:
IDENTIFICATION NUMBERS
Serial No.:
Year of Manufacture:
Nacelle No.:
Tower No.:
CONTROLLER
Transformer.:
Switch Gear Manufacture:
Switch Gear Serial:
Phase Compensation.:
Controller (CPU) unit:
UPS.:
BLADES
Manufacturer:
Type:
Serial Nos.:
Weight, kg per blade:
Blade bolt type :
Lot\Batch No.:
HUB
Serial No:
Hub bolt type:
Lot\Batch No.:
GEAR
Manufacturer:
Type:
Serial No.:
Interchange Ratio:
Quantity of oil, ltr.:
Weight incl. oil, kg:
GENERATOR
Manufacturer:
Type:
Serial No.:
Rotational speed:
Rated output, MW:
Protection class:
Thermal protection:
Weight, kg:
READING OF METERS AND HOUR COUNTER AT COMMISSIONING
Hour counter, turbine OK / run, hours:
Hour counter, gen. 1, hours:
DATES OF PERFORMANCES
Installation start, date:
Turbine connected to grid, date:
Exhibit F.3.9
Form of Delayed Commissioning Completion Certificate
DATE:
1.
Supplier has delivered this completed Delayed Commissioning Completion
Certificate to Buyer on the above date. Capitalized terms used but not defined
herein shall have the meanings set forth in that certain Wind Turbine Supply
Agreement, dated as of September 29, 2006 (the “Agreement”), by and between
Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and
Vestas-American Wind Technology, Inc., a California corporation (“Supplier”).
2.
Pursuant to Section 4.2.4 of the Agreement, Supplier hereby certifies and
represents that [insert number] Wind Turbine(s) have not been Commissioned
within sixty (60) days following the date of the Delivery Certificate or Delayed
Delivery Certificate, as applicable, due to an Excusable Event.
3.
The person signing below is authorized to submit this Delayed Commissioning
Completion Certificate to Buyer for and on behalf of Supplier.
Vestas-American Wind Technology, Inc.,
a California corporation
By:
Name:
Title:
Date:
Exhibit F.3.10
Form of Final Completion Certificate
Date of Final Completion: _____________________
1.
Reference is made to the Wind Turbine Supply Agreement, dated as of September
29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a
California corporation (“Supplier”). Capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement.
2.
The undersigned, Supplier, does hereby certify and represent as follows to
Buyer:
a.
All of the Wind Turbines have achieved Commissioning Completion or, in the event
this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the
Agreement, (a) Commissioning Completion of Wind Turbine No. ______ has not been
achieved within ninety (90) days following the applicable anticipated
Commissioning Completion Date set forth on the Project Schedule, and (b) all of
the other conditions to Final Completion set forth in Section 7.3 of the
Agreement have been satisfied with respect to the Wind Turbines that have
achieved Commissioning Completion;
b.
A Punch List for the Equipment Supply Obligations (or, in the event this Final
Completion Certificate is submitted pursuant to Section 4.2.5 of the Agreement,
the Wind Turbines that have achieved Commissioning Completion) has been prepared
and agreed upon between Buyer and Supplier; and
c.
All Supplier Documents and Deliverables required to be delivered under the
Agreement to Buyer by Supplier on or before Final Completion have been delivered
to Buyer.
3.
The person signing below is authorized to submit this Final Completion
Certificate to Buyer for and on behalf of Supplier.
SUPPLIER:
Vestas – American Wind Technology, Inc.,
a California corporation
By: _______________________
Name: _____________________
Title: ______________________
Date: ______________________
Buyer to cross through one (1) of the following statements:
A.
Buyer agrees that (i) Final Completion has been achieved or (ii) in the event
this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the
Agreement, Supplier is entitled to the pro rata portion of the Final Completion
payment allocable to the Wind Turbines that have achieved Commissioning
Completion.
B.
Buyer does not agree that (i) Final Completion has been achieved or (ii) in the
event this Final Completion Certificate is submitted pursuant to Section 4.2.5
of the Agreement, Supplier is not entitled to the pro rata portion of the Final
Completion payment allocable to the Wind Turbines that have achieved
Commissioning Completion, in either case due to the omissions, liens or defects
listed below and/or the incomplete nature of the specified portions of the
Equipment Supply Obligations listed below:
.
The person signing below is authorized to submit this form to Supplier for and
on behalf Buyer.
ACCEPTED BY BUYER:
Madison Gas and Electric Company,
a Wisconsin corporation
By:
____________________________
Name:
____________________________
Title:
____________________________
Date:
____________________________
Exhibit F.3.11
Form of Delayed Final Completion Certificate
DATE:
1.
Supplier has delivered this completed Delayed Final Completion Certificate to
Buyer on the above date. Capitalized terms used but not defined herein have the
meanings set forth in that certain Wind Turbine Supply Agreement, dated as of
September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric
Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology,
Inc., a California corporation (“Supplier”).
2.
Pursuant to Section 4.2.5 of the Agreement, Supplier hereby certifies and
represents that Final Completion could not be achieved within sixty (60) days
following the date of the final Commissioning Completion Certificate or Delayed
Commissioning Completion Certificate, as applicable, due to an Excusable Event.
3.
The person signing below is authorized to submit this Delayed Final Completion
Certificate to Buyer for and on behalf of Supplier.
Vestas-American Wind Technology, Inc.,
a California corporation
By:
Name:
Title:
Date:
Exhibit F.3.12
SCADA Substantial Completion Checklist
________________________________________________________________________________
Contents
OBJECTIVES
SCADA DATA PATH TEST
CHECK AND VERIFICATION OF THE SCADA SYSTEM CONFIGURATION
Objective
Methodology
SCADA DATA PATH TEST SUMMARY
CHECK OF THE FUNCTIONALITY OF THE FIBRE OPTIC INFRASTRUCTURE
Objective
Methodology
FIBRE OPTIC INFRASTRUCTURE TEST SUMMARY
SCADA FUNCTIONALITY TEST
Objective and methodology
TEST AND COMMISSIONING CERTIFICATE
Operational data presentation
Operational commands
Presentation of instant data from other park units
Calculations and presentations based on collected data
User management
Additional checks
Test comments
Objectives
The SCADA system consists of standard units and equipment combined in a project
specific layout and fibre optic infrastructure. All standard units and equipment
will be factory tested and inspected prior to delivery and commissioning on site
in accordance with Vestas quality assurance system. The site specific supplies,
systems and functions that are not tested prior to installation and
commissioning is subject to a project specific SCADA test on site.
The overall objectives for testing the SCADA system are the following:
SCADA Data Path Test:
·
To demonstrate that the SCADA system configuration as supplied on site is
correct
·
To demonstrate the functionality of the fibre optic infrastructure
SCADA Functionality Test:
·
To demonstrate the functionality of the SCADA system
SCADA Data Path Test
The SCADA Data Path Test consists of two parts:
·
Check and verification of the SCADA system configuration
·
Check of the functionality of the fibre optic infrastructure
Check and verification of the SCADA system configuration
Objective
Correct project specific label and identification (ID) of each unit i.e.
turbine, meteorology station, grid station etc. in the SCADA system is checked
and verified.
Methodology
The correct system configuration of the project is demonstrated by simulating an
event in a turbine and subsequently check that the event is recorded correctly
in the correct unit.
Wind turbines
·
An event is initiated in the turbine in question, e.g.: manual stop/start by
e.g. activating the service key
·
The SCADA error log is checked for correct error identification and turbine
identification
·
A temperature signal such as the tower base temperature is disconnected
resulting in an invalid temperature value being entered into the 10-minute
database
·
The invalid temperature is maintained for a complete 10-minute period
·
In the SCADA 10-minute database the turbine identification in question and the
presence of invalid temperature data are checked and verified.
Meteorology stations and grid stations
·
The connection between the unit and the SCADA network or the connection between
sensors and the meteorology station controller is interrupted
·
The disconnection is maintained for a complete 10-minute period
·
In the SCADA 10-minute database the unit identification and the presence of
invalid data are checked and verified.
Scope of tests
One turbine on each loop and all Meteorology and Grid stations units of the wind
power plant must be checked and verified for correct labelling and ID.
SCADA data path test summary
WTG identifier………………………………
Initiated event…………………………….…
Initiated signal………………………….…..
Yes
No
Correct turbine/error identification in error log
Correct turbine/signal identification in 10-minute database
Met Station identifier…………………………….
Initiated signal………………………….…..
Yes
No
Correct met. Station/signal identification in 10-minute database
Grid Station identifier…………………………..
Initiated signal………………………….…..
Yes
No
Correct grid station identification in 10-minute database
Test results recorded by:
Test results approved by:
________________________________
________________________________
Supplier
Customer
Date:
_____________________
Date:
_____________________
Check of the functionality of the fibre optic infrastructure
Objective
High-quality workmanship when the SCADA installed on site is a prerequisite for
a correct and accurate function of the SCADA communication system. When the
SCADA system is installed, focus is on correct connection of each turbine,
meteorology station, grid station etc. to the SCADA system via the fibre optic
communication loops
The objective of the fibre optic infrastructure test is to verify the
functionality of the signal path from all turbines and other SCADA units
supplied by the Supplier, as follows:
·
Fibre optic connections in each turbine
·
Fibre optic communication loops
·
Connections at the SCADA server switch
Methodology
The fibre optic infrastructure is checked by monitoring each unit in the SCADA
Vestas Online Business program.
To verify that communication with e.g. a turbine in the wind power plant takes
place, the "Park Event Overview" window in Vestas Online Business is started.
The turbine is monitored over a period of time enabling values such as wind
speed to show variation. Wind speed data should be available and changing for
all turbines.
In order to verify variation and thus communication to each unit, the wind speed
data are chosen as the sample value for wind turbines and meteorology stations.
For grid stations, the active power value should be chosen.
Fibre optic infrastructure test summary
WTG identifier………………………………
Yes
No
Communication to wind turbine
Met Station identifier…………………………….
Yes
No
Communication to meteorology station
Grid Station identifier…………………………….
Yes
No
Communication to grid station
Test results recorded by:
Test results approved by:
________________________________
________________________________
Supplier
Customer
Date:
_____________________
Date:
_____________________
SCADA Functionality Test
Objective and methodology
The objective of the SCADA Site Acceptance Test procedure is to verify the
functionalities of the SCADA system when it has been installed and commissioned
on site. This includes presentation of online data from a turbine, grid and
meteorology station, remote operation of a turbine and presentation of reports
based on collected data from the database.
The following document is the Test and Commissioning Certificate for the Vestas
Online Business Server SCADA system.
Each line in the checklists with test-numbers is checked off in the ‘Check’
column after completion of each test. Each sheet is signed by the person who has
made the records on the sheet and by a customer representative assisting the
test and commissioning of the SCADA system.
If there are any comments during the test, these can be listed on the last page
with a reference to the test in question.
A summary of the test result is written on the cover page - this will indicate
if any particular observations or interpretations were made during the test.
The commissioning certificate is the output of the test - and is signed by the
Supplier and/or his representatives and the Customer and/or his representatives
participating in the test.
Test and Commissioning Certificate
Project:
____________________________
System under Test:
Vestas Online Business Server System
Date of Test:
____________________________
The undersigned hereby accept being participants in the functionality test of
the SCADA system.
The main functions of the SCADA were tested according to attached pages, and no
deficiencies or malfunctions other than mentioned in the list below were
detected or observed.
Date
Signature
Position
Company
Comments:
Recorded by:
Approved by:
Date:
Date:
Operational data presentation
The objective is to verify that online operational data are being transferred
from different parts of the wind turbine.
Select a reference turbine to conduct the reference measurements.
Location: Control building and selected reference turbine.
Selected reference turbine
In the “Menu item” columns below, the procedure to access the menu item is
described.
One person should be in the Control building and another one located in the
turbine. Using mobile phones or walkie-talkies, they should verify that the
readings from the turbine display in the turbine match the readings in the SCADA
system.
RCOT = Use the mouse to Right-Click On the selected reference turbine.
Test
Description
Menu item
Check
WTG Instant data
RCOT ® Present
1-1
Status information
® Status
1-2
Temperatures
® Temperature
1-3
Grid information
® Grid
1-4
Production figures
® Production
1-5
Operation counters
® Counters
WTG Logbooks
RCOT ® Logbooks
1-7
Alarm logbook
® Alarm logbook
1-8
Warning logbook *
® Warning logbook
Recorded by:
Approved by:
Date:
Date:
*Note: Logbooks do not apply to TAC-II turbines.
Operational commands
The objective is to verify that commands are being transferred to the wind
turbine.
Location: Control building
Be aware that the following test will interact with the operation of the
turbine.
Test
Description
Menu item
Check
WTG Commands
RCOT ® Commands
2-1
Start turbine
® Start turbine
2-2
Stop turbine
® Stop turbine
2-3
Reset alarm-code in turbine
® Reset alarm in turbine
Recorded by:
Approved by:
Date:
Date:
Presentation of instant data from other park units
The objective is to verify that communication with grid and meteorology stations
is taking place.
Location: Control building and at the selected park units.
Selected reference grid station
Selected reference meteorology station
RCOG = Use the mouse to Right-Click On the selected reference Grid station
RCOM = Use the mouse to Right-Click On the selected reference meteorology
station
Test
Description
Menu item
Check
Grid station instant data
RCOG ® Present
3-1
Status information
® Analogue
Met station instant data
RCOM ® Present
3-2
Status information
® Analogue
Recorded by:
Approved by:
Date:
Date:
The above-mentioned park units may not be applicable in all wind power plants.
Calculations and presentations based on collected data
The objective is to verify different reports generated on the basis of collected
data.
Location: Control building
RCOPC = Use the mouse to Right-Click On the site PC
Test
Description
Menu item
Check
Database
RCOPC ® Database
4-1
Power curve presentation;
-
Power curve with no corrections.
-
Using meteorology station data correction.
-
Using correction of temperature & pressure.
-
Using meteorology station data and temperature & pressure.
Scatter curve
-
Scatter curve with 10 min dots from turbine
Wind curve presentation
-
Present turbine wind data
-
Present Met station wind data
® Power curve / Wind curve
4-2
Wind / Energy rose
-
Present a wind rose
-
Present a energy rose
® Wind / Energy rose
4-3
Present 10 min. data
-
Check that collected 10min data are available from the Vestas Online Business
client connected to the Vestas Online Business Server database system.
-
Verify that data are collected from turbines, met- and grid-stations.
® Collected data viewer
Logbooks
RCOPC ® Logbooks
4-4
Park log
® Park log
4-5
Statistics
® Statistics
Recorded by:
Approved by:
Date:
Date:
User management
The objective is to verify that new users can be created and their rights can be
secured.
Location: Control building and selected reference turbine.
Test
Description
Menu item
Check
User management
RCOPC ® Misc
5-1
Create a new user with access level 1 and verify that the user can only access
online information (instant values) from the turbines.
Verify that the user cannot send commands to the turbines.
User management
5-2
Create a new user with access level 3 and verify that the user can access online
information (instant values) and send commands to the turbines.
User management
Recorded by:
Approved by:
Date:
Date:
Additional checks
The objective is to verify that the system is running satisfactorily.
Location: Control building
Test
Description
Check
UPS (Uninterruptible Power Supply)
6-1
Disconnect the power to the UPS unit - simulating loss of power to the SCADA
system.
-
Check that the power loss is logged in the system log.
-
Check that the system reboots again and return to normal operation after the
power has been re-connected.
Check the data integrity of collected data
6-2
Verify that 10-min data are being collected and that no losses have occurred.
The 10-min data can be viewed from the Data Collection Viewer.
The data integrity should be verified over a specified period of at least 14
days of normal operation.
Vestas Online Business dial-in verification
6-3
Verify that it is possible to dial in with Vestas Online Business and operate
the wind power plant remotely via a regular modem connection.
Recorded by:
Approved by:
Date:
Date:
The above tests are subject to changes, as the Vestas Online Business product is
developed with further enhancements.
Test comments
If one or more test needs further explanation (e.g. not possible, not accessible
or similar) write down the test number and a description of the issue.
Test
Description
Init
Recorded by:
Approved by:
Date:
Date:
Exhibit F.3.13
Form of SCADA Completion Certificate
Date of SCADA Completion: ________________
1.
Reference is made to the Wind Turbine Supply Agreement, dated as of September
29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a
Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a
California corporation (“Supplier”). Capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement.
2.
The undersigned, Supplier, does hereby certify and represent to Buyer that each
item on the SCADA Completion Checklist has been satisfied in accordance with the
Agreement.
3.
The person signing below is authorized to submit this SCADA Completion
Certificate to Buyer for and on behalf of Supplier.
SUPPLIER:
Vestas–American Wind Technology, Inc.,
a California corporation
By: ______________________________
Name: ___________________________
Title: ____________________________
Date: ____________________________
Buyer to cross through one (1) of the following statements:
A.
Buyer agrees that SCADA Completion has been achieved.
B.
Buyer does not agree that SCADA Completion has been achieved due to the
omissions, liens or defects listed below and/or the incomplete nature of the
specified portions of the Equipment Supply Obligations listed below:
The person signing below is authorized to submit this form to Supplier for and
on behalf Buyer.
ACCEPTED BY BUYER:
Madison Gas and Electric Company,
a Wisconsin corporation
By:
____________________________
Name:
____________________________
Title:
____________________________
Date:
____________________________
|
Exhibit 10.8
LOGO [g27112img001.jpg]
LIMITED LIABILITY PARTNERSHIP
EXECUTION VERSION
ACE EUROPEAN HOLDINGS NO.2 LIMITED
as Borrower
ACE LIMITED
as Guarantor
THE ROYAL BANK OF SCOTLAND plc
and
HSBC SECURITIES (USA) INC.
as Lead Arrangers
THE ROYAL BANK OF SCOTLAND plc
as Agent
and
OTHERS
--------------------------------------------------------------------------------
£100,000,000
CREDIT AGREEMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONTENTS
Clause
--------------------------------------------------------------------------------
Page
--------------------------------------------------------------------------------
1. Definitions And Interpretation 1 2. The Facility 15 3.
Utilisation Of The Facility 16 4. Repayment 17 5. Prepayment And
Cancellation 17 6. Interest 18 7. Interest Periods 18 8. Taxes
19 9. Tax Receipts 19 10. Increased Costs 21 11. Illegality
22 12. Mitigation 22 13. Borrower Representations 23 14.
Guarantor Representations 26 15. Affirmative Covenants 32 16.
Negative Covenants 35 17. Information Covenants 39 18. Financial
Covenants 42 19. Events Of Default 43 20. Fees 46 21. Costs
And Expenses 47 22. Default Interest And Break Costs 49 23.
Indemnities 49 24. Currency Of Account And Payment 49 25. Payments
50 26. Set-Off 51 27. Sharing 51 28. The Agent, The Lead
Arrangers And The Banks 52 29. Assignments And Transfers 59 30.
Calculations And Evidence Of Debt 61 31. Guarantee And Indemnity 62
--------------------------------------------------------------------------------
32. Remedies And Waivers, Partial Invalidity 65 33. Notices 65 34.
Counterparts 67 35. Amendments 67 36. Governing Law 68 37.
Jurisdiction 68 Schedule 1 THE BANKS 70 Schedule 2 CONDITIONS PRECEDENT
71 Schedule 3 UTILISATION REQUEST 72 Schedule 4 MARGIN SCHEDULE 73
Schedule 5 MANDATORY COST FORMULAE 75 Schedule 6 FORM OF TRANSFER CERTIFICATE
77 Schedule 7 FORM OF CONFIDENTIALITY UNDERTAKING 80 Schedule 8 FORM OF
COMPLIANCE CERTIFICATE 83 Schedule 9 EXISTING LIENS 84
--------------------------------------------------------------------------------
THIS AGREEMENT dated 2005 is made between:
(1) ACE EUROPEAN HOLDINGS NO.2 LIMITED as borrower (the “Borrower”);
(2) ACE LIMITED as guarantor (the “Guarantor”);
(3) THE ROYAL BANK OF SCOTLAND plc and HSBC SECURITIES (USA) INC. as mandated
lead arrangers of the Facility (the “Lead Arrangers”);
(4) THE ROYAL BANK OF SCOTLAND plc as agent for the Banks (the “Agent”); and
(5) THE BANKS as defined below.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
“ACE INA” means ACE INA Holdings, Inc.
“Adjusted Consolidated Debt” means, at any time, an amount equal to (a) the then
outstanding Consolidated Debt of the Guarantor and its Subsidiaries plus (b) to
the extent exceeding an amount equal to 15 per cent. of Total Capitalisation,
the then issued and outstanding amount of Preferred Securities (other than any
Mandatorily Convertible Preferred Securities).
“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For the purposes of this
definition, the term “control” (including the terms “controlling”, “controlled
by” and “under common control with”) of a Person means the possession, direct or
indirect, of the power to vote 5 per cent. or more of the Voting Interests of
such Person or to direct or cause the direction of the management and policies
of such Person, whether through the ownership of Voting Interests, by contract
or otherwise.
“Approved Investment” means any Investment that was made by the Guarantor or any
of its Subsidiaries pursuant to investment guidelines set forth by the board of
directors of the Guarantor which are consistent with past practices.
“Authorised Signatory” means, in relation to an Obligor, any person who is duly
authorised (in such manner as may be reasonably acceptable to the Agent) and in
respect of whom the Agent has received a certificate signed by a director or
another Authorised Signatory of such Obligor setting out the name and signature
of such person and confirming such person’s authority to act.
“Availability Period” means the period from the Commencement Date to 31 December
2005.
- 1 -
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“Bank” means any financial institution:
(a) named in Schedule 1 (The Banks); or
(b) which has become a party hereto in accordance with Clause 29.3
(Assignments and Transfers by Banks), Clause 29.4 (Assignments by Banks) or
Clause 29.5 (Transfers by Banks),
and which has not ceased to be a party hereto in accordance with the terms
hereof.
“Base Amount” shall have the meaning given to that term in sub-clause 18.2.2 of
Clause 18.2 (Consolidated Net Worth).
“Business Day” means a day (other than a Saturday or Sunday) on which banks
generally are open for business in London.
“Capitalised Leases” means all leases that have been or should be, in accordance
with GAAP, recorded as capitalised leases.
“Change of Control” means the occurrence of any of the following: (a) any Person
or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or indirectly,
of Voting Interests of the Guarantor (or other securities convertible into such
Voting Interests) representing 30 per cent. or more of the combined voting power
of all Voting Interests of the Guarantor or (b) a majority of the board of
directors of the Guarantor shall not be Continuing Members.
“Commencement Date” means the date of this Agreement.
“Commitment” means, in relation to a Bank at any time and save as otherwise
provided herein, the amount set opposite its name under the heading “Commitment”
in Schedule 1 (The Banks) or in relation to any Bank not party to this Agreement
on the date hereof, the amount of any Commitment transferred to it under this
Agreement.
“Compliance Certificate” means a certificate substantially in the form set out
in Schedule 8 (Form of Compliance Certificate).
“Consolidated” refers to the consolidation of accounts in accordance with GAAP.
“Consolidated Debt” means at any date the Debt of the Guarantor and its
Consolidated Subsidiaries, determined on a Consolidated basis as of such date.
“Consolidated Net Income” means, for any period, the net income of the Guarantor
and its Consolidated Subsidiaries, determined on a Consolidated basis for such
period.
“Consolidated Net Worth” means at any date the Consolidated stockholder’s equity
of the Guarantor and its Consolidated Subsidiaries determined as of such date,
provided that such determination for the purposes of Clause 18.1 (Adjusted
Consolidated Debt to Total Capitalisation Ratio), Clause 18.2 (Consolidated Net
Worth) and Clause 16.1 (Liens) shall be made without giving effect to
adjustments pursuant to Statement No. 115 of the Financial Accounting Standards
Board of the United States of America.
- 2 -
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“Consolidated Subsidiary” means at any date any Subsidiary or other entity the
accounts of which would be consolidated with those of the Guarantor in its
consolidated financial statements if such statements were prepared as of such
date.
“Contingent Obligation” means, with respect to any Person, any obligation or
arrangement of such Person to guarantee or indemnify or intended to guarantee or
indemnify any Debt, leases, dividends or other payment obligations (“primary
obligations”) of any other Person (the “primary obligor”) in any manner, whether
directly or indirectly, including, without limitation:
(a) the direct or indirect guarantee, endorsement (other than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of a primary
obligor;
(b) the obligation to make take-or-pay or similar payments, if required,
regardless of non-performance by any other party or parties to an agreement; or
(c) any obligation of such Person, whether or not contingent:
(i) to purchase any such primary obligation or any property constituting
direct or indirect security therefor;
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor;
(iii) to purchase property, assets, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation; or
(iv) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof,
provided, however, that Contingent Obligations shall not include any obligations
of any such Person arising under insurance contracts entered into in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (or, if less,
the maximum amount of such primary obligation for which such Person may be
liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such person is required to
perform thereunder), as determined by such Person in good faith.
- 3 -
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“Continuing Member” means a member of the Board of Directors of the Guarantor
who either (i) was a member of the Guarantor’s Board of Directors on the date of
execution and delivery of this Agreement by the Guarantor and has been such
continuously thereafter or (ii) became a member of such Board of Directors after
such date and whose election or nomination for election was approved by a vote
of the majority of the Continuing Members then members of the Guarantor’s Board
of Directors.
“Debenture” means debt securities issued by the Guarantor or ACE INA to a
Special Purpose Trust in exchange for proceeds of Preferred Securities and
common securities of such Special Purpose Trust.
“Debt” of any Person means, without duplication for purposes of calculating
financial ratios:
(a) all indebtedness of such Person for borrowed money;
(b) all obligations of such Person for the deferred purchase price of property
or services (other than trade payables incurred in the ordinary course of such
Person’s business);
(c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments;
(d) all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property);
(e) all obligations of such Person as lessee under Capitalised Leases
(excluding imputed interest);
(f) all obligations of such Person under acceptance, letter of credit or
similar facilities;
(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interests (except for
obligations to pay for Equity Interests within customary settlement periods) in
such Person or any other Person or any warrants, rights or options to acquire
such capital stock (excluding payments under a contract for the forward sale of
ordinary shares of such Person issued in a public offering), valued, in the case
of Redeemable Preferred Interests, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends;
(h) all Contingent Obligations of such Person in respect of Debt (of the types
described above) of any other Person; and
- 4 -
--------------------------------------------------------------------------------
(i) all indebtedness and other payment obligations referred to in paragraphs
(a) through (h) above of another Person secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such indebtedness or other payment obligations,
provided, however, that the amount of any Debt of such Person under paragraph
(i) above shall, if such Person has not assumed or otherwise become liable for
such Debt, be limited to the lesser of the principal amount of such Debt or the
fair market value of all property of such Person securing such Debt; provided
further that “Debt” shall not include obligations in respect of insurance or
reinsurance contracts entered into in the ordinary course of business or any
obligation of such Person (1) to purchase securities (or other property) which
arises out of or in connection with the sale of the same or substantially
similar securities (or other property) or (2) to return collateral consisting of
securities arising out of or in connection with the loan of the same or
substantially similar securities, provided further that, solely for the purposes
of Clause 18.1 (Adjusted Consolidated Debt to Total Capitalisation Ratio) and
Clause 18.1 (Consolidated Net Worth) and the definitions of “Adjusted
Consolidated Debt” and “Total Capitalisation”, “Debt” shall not include (x) any
contingent obligations of any Person under or in connection with acceptance,
letter of credit or similar facilities or (y) obligations of the Guarantor or
ACE INA under any Debentures or under any subordinated guarantee or any
Preferred Securities or obligations of a Special Purpose Trust under any
Preferred Securities.
“Default” means an Event of Default or a Potential Event of Default.
“Environmental Action” means any action, suit, demand, demand letter, claim,
notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to health, safety or
the environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory authority or
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
“Environmental Law” means any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or
judicial or agency interpretation, policy or guidance relating to pollution or
protection of the environment, health, safety or natural resources, including,
without limitation, those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval, identification number,
license or other authorisation required under any Environmental Law.
- 5 -
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“Equity Interests” means, with respect to any Person, shares of capital stock of
(or other ownership or profit interests in) such Person, warrants, options or
other rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are authorised or otherwise existing on any
date of determination.
“ERISA (U.S.)” means the United States Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
“ERISA Affiliate” means any person that for purposes of Title IV of ERISA (U.S.)
is a member of the controlled group of any Obligor or under common control of
any Obligor, within the meaning of section 414 of the Internal Revenue Code
(U.S.) or Section 4001 of ERISA (U.S.).
“Event of Default” means any circumstance described as such in Clause 19 (Events
of Default).
“Facility” means the term loan facility in an aggregate amount of the Total
Commitments made available to the Borrower under this Agreement, to the extent
not cancelled, reduced or transferred under this Agreement.
“Facility Office” means, in relation to the Agent, the office identified with
its signature below or such other office as it may select by notice and, in
relation to any Bank, the office notified by it to the Agent in writing prior to
the date hereof (or, in the case of a Transferee, at the end of the Transfer
Certificate to which it is a party as Transferee) or such other office as it may
from time to time select by notice to the Agent.
“Finance Documents” means this Agreement and any fee letter or letters dated on
or about the date of this Agreement between the Agent and the Guarantor setting
out any of the fees referred to in Clause 20 (Fees).
“Finance Parties” means the Agent, the Lead Arrangers and the Banks.
“Fiscal Year” means a fiscal year of the Guarantor and its Consolidated
Subsidiaries ending on 31 December in any calendar year.
“Fixed Rate” means the interest rate agreed by the Banks and the Borrower in
writing.
“GAAP” has the meaning specified in Clause 1.7 (Accounting Terms and
Determinations).
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“Group” means the Guarantor and its Subsidiaries from time to time.
“Hazardous Materials” means (a) petroleum or petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials,
polychlorinated biphenyls and radon gas and (b) any other chemicals, materials
or substances designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or
option contracts and other hedging agreements.
“Interest Period” means, in relation to a Loan, each period determined in
accordance with Clause 7 (Interest Periods) and in relation to an Unpaid Sum,
each period determined in accordance with Clause 22.1 (Default Interest and
Break Costs).
“Internal Revenue Code (U.S.)” means the United States Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
“Investment” in any Person means any loan or advance to such Person, any
purchase or other acquisition of any Equity Interests or Debt or the assets
comprising a division or business unit or a substantial part or all of the
business of such Person, any capital contribution to such Person or any other
direct or indirect investment in such Person, including, without limitation, any
acquisition by way of a merger or consolidation and any arrangement pursuant to
which the investor incurs Debt of the types referred to in paragraph (h) or
(j) of the definition of “Debt” in respect of such Person; provided, however,
that any purchase by any Obligor or any Subsidiary of any catastrophe-linked
instruments which are (x) issued for the purpose of transferring traditional
reinsurance risk to the capital markets and (y) purchased by such Obligor or any
Subsidiary in accordance with its customary reinsurance underwriting procedures,
or the entry by any Obligor or any Subsidiary into swap transactions relating to
such instruments in accordance with such procedures, shall be deemed to be the
entry by such Person into a reinsurance contract and shall not be deemed to be
an Investment by such Person. In this definition, “Obligor” means any of the
Borrower and the Guarantor.
“Lien” means any lien, security interest or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
“Loan” means the loan made or to be made under the Facility or the principal
amount outstanding for the time being of that loan.
“Majority Banks” means, save as otherwise provided herein:
(a) whilst the Loan is not outstanding, a Bank or Banks whose Commitments
amount (or, if each Bank’s Commitment has been reduced to zero, did immediately
before such reduction to zero, amount) in aggregate to fifty per cent. or more
of the Total Commitments; and
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(b) whilst the Loans is outstanding, a Bank or Banks to whom in aggregate more
than fifty per cent. of the outstanding Loans is owed.
“Mandatorily Convertible Preferred Securities” means units comprised of
(i) Preferred Securities or preferred shares of the Guarantor and (ii) a
contract for the sale of ordinary shares of the Guarantor.
“Mandatory Cost “ means the percentage rate per annum calculated by the Agent in
accordance with Schedule 5 (Mandatory Cost Formulae).
“Margin” means the rate per annum determined from time to time in accordance
with Schedule 4 (Margin Schedule).
“Margin Stock” has the meaning specified in Regulation U.
“Material Adverse Change” means any material adverse change in the business
financial condition, operations or properties of the Guarantor and its
Subsidiaries taken as a whole.
“Material Adverse Effect” means a material adverse effect on (a) the business,
condition, operations or properties of the Guarantor and its Subsidiaries, taken
as a whole, (b) the rights and remedies of the Agent or any Bank under any
Finance Document or (c) the ability of the Obligors, taken as a whole, to
perform their obligations under the Finance Documents.
“Material Financial Obligation” means a principal amount of Debt and/or payment
obligations in respect of any Hedge Agreement of the Guarantor and/or one or
more of its Subsidiaries arising in one or more related or unrelated
transactions exceeding in the aggregate US$50,000,000 or its equivalent.
“Material Subsidiary” means:
(a) any Subsidiary of the Guarantor that has more than US$10,000,000 or its
equivalent in assets or that had more than US$10,000,000 or its equivalent of
revenue during the most recent period of four fiscal quarters for which
financial statements are available; and
(b) any Subsidiary that is the direct or indirect parent company of any
Subsidiary that qualified as a “Material Subsidiary” under paragraph (a) above.
“Maturity Date” means the date which is 60 months from the Utilisation Date.
“Minimum Amount” shall have the meaning given to that term in sub-clause 18.2.2
of Clause 18.2 (Consolidated Net Worth).
“Multiemployer Plan” means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA (U.S.), to which any Obligor or any ERISA Affiliate
is making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions.
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“Net Proceeds” means, with respect to any issuance of Equity Interests by any
Person, the amount of cash received by such Person in connection with such
transaction after deducting therefrom the aggregate, without duplication, of the
following amounts to the extent properly attributable to such transaction:
(a) reasonable brokerage commissions, attorney’s fees, financial advisory
fees, accounting fees, underwriting fees, investment banking fees, and other
similar commissions, and reasonable fees and expenses and disbursements of any
of the foregoing, in each case to the extent paid or payable by such Person;
(b) reasonable printing and related expenses of filing and recording or
registration fees or charges or similar fees or charges paid by such Person; and
(c) taxes paid or payable by such Person to any governmental authority or
regulatory body as a result of such transaction.
“Obligors” means the Borrower and the Guarantor.
“PBGC” means the Pension Benefit Guarantee Corporation (or any successor).
“Pension Plan” means a “pension plan”, as such term is defined in section 3(2)
of ERISA (U.S.), which is subject to title IV of ERISA (U.S.) (other than any
“multiemployer plan” as such term is defined in section 4001(a)(3) of ERISA
(U.S.)), and to which any Obligor or any ERISA (U.S.) Affiliate may have any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA (U.S.) at any time during
the preceding five years, or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA (U.S.).
“Permitted Liens” means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced
or which are being contested in good faith by appropriate proceedings:
(a) Liens for taxes, assessments and governmental charges or levies not yet
due and payable;
(b) Liens imposed by law, such as materialsmen’s, mechanics’, carriers’,
workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary
course of business securing obligations that are not overdue for a period of
more than 90 days;
(c) pledges or deposits to secure obligations under workers’ compensation laws
or similar legislation or to secure public or statutory obligations; and
(d) easements, rights of way and other encumbrances on title to real property
that do not render title to the property encumbered thereby unmarketable or
materially adversely affect the use of such property for its present purposes.
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“Person” means an individual, a company, a corporation, a partnership, an
association, a trust or any other entity or organisation, including a government
or political subdivision or an agency or instrumentality thereof.
“Potential Event of Default” means any event which would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
“Preferred Interests” means, with respect to any Person, Equity Interests issued
by such Person that are entitled to a preference or priority over any other
Equity Interests issued by such Person upon any distribution of such Person’s
property and assets, whether by dividend or upon liquidation.
“Preferred Securities” means:
(a) preferred securities issued by a Special Purpose Trust which shall
provide, among other things, that dividends shall be payable only out of
proceeds of interest payments on the applicable Debentures; or
(b) other instruments that may be treated in whole or in part as equity for
rating agency purposes while being treated as debt for tax purposes.
“Proportion” means, in relation to a Bank the proportion borne by its Commitment
to the Total Commitments (or, if the Total Commitments are then zero, by its
Commitment to the Total Commitments immediately prior to their reduction to
zero).
“Redeemable” means, with respect to any Equity Interest, any Debt or any other
right or obligation, any such Equity Interest, Debt, right or obligation that:
(a) the issuer has undertaken to redeem at a fixed or determinable date or
dates, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer; or
(b) is redeemable at the option of the holder.
“Reference Banks” means Barclays Bank PLC, HSBC Bank USA, National Association
and The Royal Bank of Scotland plc.
“Reference Swap Transaction” means the interest rate swap agreements entered
into or to be entered into between the Banks and the Swap Provider in relation
to this Facility.
“Reference Swap Transaction Value” means, as of any day, (i) an amount (which
may be payable to, or payable from, the Swap Provider) determined in good faith
on such day by the Swap Provider to be the present mark-to-market value of the
Reference Swap Transaction, based on the Swap Provider’s bid quotation for
transactions on substantially the same terms as the Reference Swap Transaction.
“Regulation U” means Regulation U of the Board of Directors of the Federal
Reserve System, as in effect from time to time.
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“Representations” means each of the representations set out in Clause 14
(Representations).
“Responsible Officer” means the Chairman, Chief Executive Officer, President,
Chief Financial Officer, Chief Accounting Officer, Chief Compliance Officer,
Treasurer or General Counsel of the Guarantor.
“Securitisation Transaction” means any sale, assignment or other transfer by the
Guarantor or any Subsidiary of any accounts receivable, premium finance loan
receivables, lease receivables or other payment obligations owing to the
Guarantor or such Subsidiary or any interest in any of the foregoing, together
in each case with any collections and other proceeds thereof, any collection or
deposit accounts related thereto, and any collateral, guarantees or other
property or claims in favour of the Guarantor or such Subsidiary supporting or
securing payment by the obligor thereon of, or otherwise related to, any such
receivables.
“Significant Subsidiary” means a Subsidiary of the Guarantor that is a
“significant subsidiary” of the Guarantor under Regulation S-X promulgated by
the U.S. Securities and Exchange Commission.
“Solvent” and “Solvency” mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature, (d) such Person is able to pay its debts as and when
they become due and payable, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capita. The amount
of contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
“Special Purpose Trust” means a special purpose business trust established by
the Guarantor of which the Guarantor or ACE INA will hold all the common
securities, which will be the issuer of Preferred Securities, and which will
loan to the Guarantor or ACE INA (such loan being evidenced by Debentures) the
net proceeds of the issuance and sale of the Preferred Securities and common
securities of such Special Purpose Trust.
“Subsidiary” of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than
50 per cent. of (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or
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profits of such partnership, joint venture or limited liability company or
(c) the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Swap Provider” means The Royal Bank of Scotland plc in its capacity as hedge
counterparty under the Reference Swap Transaction.
“Total Capitalisation” means, at any time, an amount (without duplication) equal
to:
(a) the then outstanding Consolidated Debt of the Guarantor and its
Subsidiaries
plus
(b) Consolidated stockholders’ equity of the Guarantor and its Subsidiaries
plus (without duplication)
(c) the then issued and outstanding amount of Preferred Securities (including
Mandatorily Convertible Preferred Securities) and (without duplication)
Debentures.
“Total Commitments” means the aggregate of the Banks’ Commitments being
£100,000,000 at the Commencement Date.
“Transfer Certificate” means a certificate substantially in the form set out in
Schedule 6 (Form of Transfer Certificate) signed by a Bank and a Transferee
under which:
(a) such Bank seeks to procure the transfer to such Transferee of all or a
part of such Bank’s rights, benefits and obligations under the Finance Documents
upon and subject to the terms and conditions set out in Clause 29.3 (Assignments
and Transfers by Banks); and
(b) such Transferee undertakes to perform the obligations it will assume as a
result of delivery of such certificate to the Agent as contemplated in
Clause 29.5 (Transfers by Banks).
“Transfer Date” means, in relation to any Transfer Certificate, the date for the
making of the transfer as specified in such Transfer Certificate.
“Transferee” means a person to which a Bank seeks to transfer by novation all or
part of such Bank’s rights, benefits and obligations under the Finance
Documents.
“Unpaid Sum” means the unpaid balance of any of the sums referred to in
Clause 22.1 (Default Interest).
“U.S.” and “United States” means the United States of America
“U.S. Person” means any Person:
(a) organised under the laws of the United States or any jurisdiction within
the United States (including foreign branches thereof); or
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(b) located in the United States.
“Utilisation” means the utilisation of the Facility pursuant to Clause 3
(Utilisation of the Facility).
“Utilisation Date” means the date on which the Utilisation occurs.
“Utilisation Request” means a notice substantially in the form set out in
Schedule 3 (Utilisation Request).
“Voting Interests” means shares of capital stock issued by a corporation, or
equivalent Equity Interest in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such Person, even if
the right so to vote has been suspended by the happening of such a contingency.
“Welfare Plan” means a welfare plan, as defined in Section 3(1) of ERISA (U.S.),
that is maintained for employees of any Obligor or in respect of which any
Obligor could have liability.
“Wholly-Owned Consolidated Subsidiary” means any Consolidated Subsidiary all of
the shares of capital stock or other ownership interests of which (except
directors’ qualifying shares) are at the time directly or indirectly owned by
the Guarantor.
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of
Title IV of ERISA (U.S.).
1.2 Interpretation
Any reference in this Agreement to:
the “Agent”, any “Obligor” or any “Bank” shall be construed so as to include its
and any subsequent successors and permitted transferees in accordance with their
respective interests;
“continuing”, in the context of an Event of Default shall be construed as a
reference to an Event of Default which has not been remedied or waived in
accordance with the terms hereof and in relation to a Potential Event of
Default, one which has not been remedied within the relevant grace period or
waived in accordance with the terms hereof;
a “holding company” of a company or corporation shall be construed as a
reference to any company or corporation of which the first-mentioned company or
corporation is a Subsidiary;
a “law” shall be construed as any law (including common or customary law),
statute, constitution, decree, judgment, treaty, regulation, directive, bye-law,
order or any other legislative measure of any government, supranational, local
government, statutory or regulatory body or court;
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a “month” is a reference to a period starting on one day in a calendar month and
ending on the numerically corresponding day in the next succeeding calendar
month save that, where any such period would otherwise end on a day which is not
a Business Day, it shall end on the next succeeding Business Day, unless that
day falls in the calendar month succeeding that in which it would otherwise have
ended, in which case it shall end on the immediately preceding Business Day,
provided that, if a period starts on the last Business Day in a calendar month
or if there is no numerically corresponding day in the month in which that
period ends, that period shall end on the last Business Day in that later month
(and references to “months” shall be construed accordingly);
a Bank’s “participation”, in relation to the Loan, shall be construed as a
reference to the rights and obligations of such Bank in relation to the Loan as
are expressly set out in this Agreement;
a “successor” shall be construed so as to include an assignee or successor in
title of such party and any person who under the laws of its jurisdiction of
incorporation or domicile has assumed the rights and obligations of such party
under this Agreement or to which, under such laws, such rights and obligations
have been transferred;
“tax” shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any of the same);
“VAT” shall be construed as a reference to value added tax, goods and services
tax or any similar tax which may be imposed in place thereof from time to time;
the “winding-up”, “dissolution” or “administration” of a company or corporation
shall be construed so as to include any equivalent or analogous proceedings
under the law of the jurisdiction in which such company or corporation is
incorporated or any jurisdiction in which such company or corporation carries on
business including the seeking of liquidation, winding-up, reorganisation,
dissolution, administration, arrangement, adjustment, protection or relief of
debtors.
1.3 Currency Symbols
1.3.1 “US$” denotes the lawful currency of the United States for the time
being.
1.3.2 “£” and “Sterling” denotes the lawful currency of the United Kingdom for
the time being.
1.4 Agreements and Statutes
Any reference in this Agreement to:
1.4.1 this Agreement or any other agreement or document shall be construed as
a reference to this Agreement or, as the case may be, such other agreement or
document as the same may have been, or may from time to time be, amended,
varied, novated or supplemented; and
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1.4.2 a statute or treaty shall be construed as a reference to such statute or
treaty as the same may have been, or may from time to time be, amended or, in
the case of a statute, re-enacted.
1.5 Headings
Clause and Schedule headings are for ease of reference only.
1.6 Time
Any reference in this Agreement to a time of day shall, unless a contrary
indication appears, be a reference to London time.
1.7 Accounting Terms and Determinations
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time (“GAAP”), and accounting practices and financial reference periods
applied consistent (except for changes concurred in by the Guarantor’s
independent public accountants) with the most recent audited consolidated
financial statements of the Guarantor and its Consolidated Subsidiaries
delivered to the Banks; provided that, if the Guarantor notifies the Agent that
the Guarantor wishes to amend any covenant in Clause 16 (Negative Covenants), 17
(Information Covenants) or 18 (Financial Covenants) to eliminate the effect of
any change in generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Guarantor that the Majority Banks wish to
amend Clause 16 (Negative Covenants), 17 (Information Covenants) or 18
(Financial Covenants) for such purpose), then the Guarantor’s compliance with
such covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted account principals became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Guarantor
and the Majority Banks.
1.8 Third party rights
A person who is not a party to this Agreement has no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
2. THE FACILITY
2.1 Grant of the Facility
Subject to the terms of this Agreement, the Banks make available to the Borrower
a Sterling term loan facility in an aggregate amount equal to the Total
Commitments.
2.2 Purpose and Application
The Borrower shall apply all amounts borrowed by it under the Facility towards
its general corporate purposes.
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2.3 Conditions Precedent
Save as the Banks may otherwise agree, the Borrower may not deliver any
Utilisation Request unless the Agent has confirmed to the Banks that it has
received all of the documents and other evidence listed in Part I of Schedule 2
(Conditions Precedent) and that each is, in form and substance, satisfactory to
the Agent.
2.4 Several Obligations
The obligations of each Bank are several and the failure by a Bank to perform
its obligations hereunder shall not affect the obligations of any Obligor
towards any other party hereto nor shall any other party be liable for the
failure by such Bank to perform its obligations hereunder.
2.5 Several Rights
The rights of each Finance Party are several and any debt arising hereunder at
any time from an Obligor to any Finance Party shall be a separate and
independent debt. Each such party shall be entitled to protect and enforce its
individual rights arising out of this Agreement independently of any other party
(so that it shall not be necessary for any party hereto to be joined as an
additional party in any proceedings for this purpose).
3. UTILISATION OF THE FACILITY
3.1 Delivery of a Utilisation Request
The Borrower may utilise the Facility by delivery to the Agent of the duly
completed Utilisation Request.
3.2 Utilisation Conditions for the Facility
3.2.1 Save as otherwise provided herein, the Utilisation Request is
irrevocable and will not be regarded as having been duly completed unless:
(a) no later than 10.00 a.m. two Business Days before the proposed Utilisation
Date, the Agent has received a duly completed Utilisation Request from the
Borrower;
(b) the proposed Utilisation Date is a Business Day falling within the
Availability Period;
(c) on and as of the proposed Utilisation Date:
(i) no Default is continuing or would result from the proposed Loan; and
(ii) the Representations are true in all material respects; and
(d) the currency and amount of the Utilisation comply with Clause 3.4
(Currency and Amount).
3.2.2 The Banks will not be obliged to satisfy the Utilisation Request unless
the Fixed Rate has been agreed hereunder.
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3.3 Request for Loan
Only one Loan may be requested hereunder.
3.4 Currency and amount
3.4.1 The currency specified in a Utilisation Request must be in Sterling.
3.4.2 The amount of the proposed Loan must be for the amount of the Total
Commitments.
3.5 Cancellation of Commitments
On the expiry of the Availability Period the Total Commitments, if undrawn, and
each Bank’s Commitment shall be reduced to zero.
4. REPAYMENT
The Borrower shall repay the Loan made to it in full on the Maturity Date.
5. PREPAYMENT AND CANCELLATION
5.1 Voluntary cancellation
The Borrower may at any time prior to Utilisation, if it gives the Agent not
less than 3 Business Days’ (or such shorter period as the Agent may agree) prior
written notice, cancel the whole or any part (being a minimum amount and
integral multiple of £5,000,000) of the Total Commitments.
5.2 Voluntary prepayment of the Loan
The Borrower may at any time, if it gives the Agent not less than 3 Business
Days’ (or such shorter period as the Agent may agree) prior written notice,
prepay the whole or any part of the Loan (but, if in part, being an amount that
reduces the amount of the Loan by a minimum amount and integral multiple of
£5,000,000).
5.3 Restrictions
5.3.1 Any notice of cancellation or prepayment given by any Party under this
Clause 5 (Prepayment and Cancellation) shall be irrevocable and, unless a
contrary indication appears in this Agreement, shall specify the date or dates
upon which the relevant cancellation or prepayment is to be made and the amount
of that cancellation or prepayment.
5.3.2 Any prepayment under this Agreement shall be made together with accrued
interest on the amount prepaid and, subject to payment of any break costs
pursuant to Clause 22.4 (Break Costs) or refund of any break gains pursuant to
Clause 22.5 (Break Gains) or payment of reference swap transaction value break
pursuant to Clause 22.6 (Reference Swap Transaction Value Break), without
premium or penalty.
5.3.3 The Borrower may not reborrow any part of the Facility which is prepaid.
5.3.4 The Borrower shall not repay or prepay all or any part of the Loan
except at the times and in the manner expressly provided for in this Agreement.
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5.3.5 No amount of the Facility cancelled under this Agreement may be
subsequently reinstated.
5.4 Right of repayment and cancellation in relation to a single Bank
5.4.1 If:
(a) any sum payable to any Bank by an Obligor is required to be increased
pursuant to Clause 8.1 (Tax Gross-up); or
(b) any Bank claims indemnification pursuant to Clause 8.2 (Tax Indemnity) or
Clause 10.1 (Increased Costs),
the Borrower may, whilst the circumstance giving rise to the requirement for
indemnification continues:
(c) give the Agent notice of cancellation of the Commitment of that Bank and
its intention to procure the repayment of that Bank’s participation in the Loan;
or
(d) give the Agent notice requiring that Bank to transfer its Commitment to
one or more other financial institutions.
5.4.2 On receipt of a notice referred to in Clause 5.4.1 above, the Commitment
of that Bank shall immediately be reduced to zero.
5.4.3 On the last day of each Interest Period which ends after the Borrower
has given notice under Clause 5.4.1(c) above (or, if earlier, the date specified
by the Borrower in that notice), the Borrower shall repay that Bank’s
participation in the Loan.
6. INTEREST
6.1 Calculation of interest
The rate of interest on the Loan is the percentage rate per annum which is the
aggregate of:
6.1.1 the Fixed Rate;
6.1.2 the applicable Margin; and
6.1.3 the applicable Mandatory Cost, if any.
6.2 Payment of interest
On the last day of each Interest Period the Borrower shall pay accrued interest
on the Loan.
7. INTEREST PERIODS
7.1 The duration of each Interest Period shall, save as otherwise provided
herein, be 6 months with the first Interest Period commencing on the Utilisation
Date.
7.2 An Interest Period for the Loan shall not extend beyond the Maturity Date.
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7.3 If an Interest Period would otherwise end on a day which is not a Business
Day, that Interest Period will instead end on the next Business Day in that
calendar month (if there is one) or the preceding Business Day (if there is
not).
8. TAXES
8.1 Tax Gross-up
All payments to be made by an Obligor to any Finance Party hereunder shall be
made free and clear of and without deduction for or on account of tax unless
such Obligor is required to make such a payment subject to the deduction or
withholding of tax, in which case the sum payable by such Obligor (in respect of
which such deduction or withholding is required to be made) shall be increased
to the extent necessary to ensure that such Finance Party receives a sum net of
any deduction or withholding equal to the sum which it would have received had
no such deduction or withholding been made or required to be made.
8.2 Tax Indemnity
Without prejudice to Clause 8.1 (Tax Gross-up), if any Finance Party is required
to make any payment of or on account of tax on or in relation to any sum
received or receivable hereunder (including any sum deemed for purposes of tax
to be received or receivable by such Finance Party whether or not actually
received or receivable) or if any liability in respect of any such payment is
asserted, imposed, levied or assessed against any Finance Party, the Borrower
shall, upon demand of the Agent, promptly indemnify the Finance Party which
suffers a loss or liability as a result against such payment or liability,
together with any interest, penalties, costs and expenses payable or incurred in
connection therewith, provided that this Clause 8.2 (Tax Indemnity) shall not
apply to:
8.2.1 any tax imposed on and calculated by reference to the net income
actually received or receivable by such Finance Party by the jurisdiction in
which such Finance Party is incorporated; or
8.2.2 any tax imposed on and calculated by reference to the net income of the
Facility Office of such Finance Party actually received or receivable by such
Finance Party by the jurisdiction in which its Facility Office is located.
8.3 Claims by Banks
A Bank intending to make a claim pursuant to Clause 8.2 (Tax Indemnity) shall
notify the Agent of the event giving rise to the claim, whereupon the Agent
shall notify the Guarantor thereof.
9. TAX RECEIPTS
9.1 Notification of Requirement to Deduct Tax
If, at any time, an Obligor is required by law to make any deduction or
withholding from any sum payable by it hereunder (or if thereafter there is any
change in the rates at which or the manner in which such deductions or
withholdings are calculated), such Obligor shall promptly, upon becoming aware
of the same, notify the Agent.
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9.2 Evidence of Payment of Tax
If an Obligor makes any payment hereunder in respect of which it is required to
make any deduction or withholding, it shall pay the full amount required to be
deducted or withheld to the relevant taxation or other authority within the time
allowed for such payment under applicable law and shall deliver to the Agent for
each Bank, within thirty days after it has made such payment to the applicable
authority, an original receipt (or a certified copy thereof) issued by such
authority evidencing the payment to such authority of all amounts so required to
be deducted or withheld in respect of that Bank’s share of such payment.
9.3 Tax Credit Payment
If an additional payment is made under Clause 8 (Taxes) by an Obligor for the
benefit of any Finance Party and such Finance Party, in its sole discretion,
determines that it has obtained (and has derived full use and benefit from) a
credit against, a relief or remission for, or repayment of, any tax, then, if
and to the extent that such Finance Party, in its sole opinion, determines that:
9.3.1 such credit, relief, remission or repayment is in respect of or
calculated with reference to the additional payment made pursuant to Clause 8
(Taxes); and
9.3.2 its tax affairs for its tax year in respect of which such credit,
relief, remission or repayment was obtained have been finally settled,
such Finance Party shall, to the extent that it can do so without prejudice to
the retention of the amount of such credit, relief, remission or repayment, pay
to such Obligor such amount as such Finance Party shall, in its sole opinion,
determine to be the amount which will leave such Finance Party (after such
payment) in no worse after-tax position than it would have been in had the
additional payment in question not been required to be made by such Obligor.
9.4 Tax Credit Clawback
If any Finance Party makes any payment to an Obligor pursuant to Clause 9.3 (Tax
Credit Payment) and such Finance Party subsequently determines, in its sole
opinion, that the credit, relief, remission or repayment in respect of which
such payment was made was not available or has been withdrawn or that it was
unable to use such credit, relief, remission or repayment in full, the Obligor
shall reimburse such Finance Party such amount as such Finance Party determines,
in its sole opinion, is necessary to place it in the same after-tax position as
it would have been in if such credit, relief, remission or repayment had been
obtained and fully used and retained by such Finance Party.
9.5 Tax and Other Affairs
No provision of this Agreement shall interfere with the right of any Finance
Party to arrange its tax or any other affairs in whatever manner it thinks fit,
oblige any Finance Party to claim any credit, relief, remission or repayment in
respect of any payment under Clause 8.1 (Tax Gross-up) in priority to any other
credit, relief, remission or repayment available to it nor oblige any Finance
Party to disclose any information relating to its tax or other affairs or any
computations in respect thereof.
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10. INCREASED COSTS
10.1 Increased Costs
If, by reason of (a) any change in law or in its interpretation or
administration and/or (b) compliance with any request or requirement relating to
the maintenance of capital or any other request from or requirement of any
central bank or other fiscal, monetary or other authority (being a request or
requirement with which banks are accustomed to comply), in each case occurring
after the date of this Agreement:
10.1.1 a Bank or any holding company of such Bank is unable to obtain the rate
of return on its capital which it would have been able to obtain but for such
Bank’s entering into or assuming or maintaining a commitment, issuing or
performing its obligations under this Agreement;
10.1.2 a Bank or any holding company of such Bank incurs a cost as a result of
such Bank’s entering into or assuming or maintaining a commitment, issuing or
performing its obligations under this Agreement; or
10.1.3 there is any increase in the cost to a Bank or any holding company of
such Bank of funding or maintaining such Bank’s share of any Unpaid Sum or the
Loan,
then the Borrower shall, from time to time on demand of the Agent, promptly pay
to the Agent for the account of that Bank amounts sufficient to indemnify that
Bank or to enable that Bank to indemnify its holding company from and against,
as the case may be, (a) such reduction in the rate of return of capital,
(b) such cost or (c) such increased cost.
10.2 Increased Costs Claims
A Bank intending to make a claim pursuant to Clause 10.1 (Increased Costs) shall
notify the Agent as soon as reasonably practicable of the event giving rise to
such claim and the amount of such claim and the basis for calculation of such
amount in reasonable detail whereupon the Agent shall notify the Borrower
thereof. Prior to making any such claim, such Bank will use reasonable
commercial efforts available to it (and not, in such Bank’s good faith judgment,
otherwise disadvantageous to such Bank) to mitigate or avoid any obligation by
the Borrower to pay any amount pursuant to 10.1 (Increased Costs). If any Bank
has made a claim pursuant to 10.1 (Increased Costs) and thereafter the event or
circumstance giving rise to such claim ceases to exist, such Bank shall promptly
so notify the Borrower and the Agent. Without limiting the foregoing, each Bank
will designate a different lending office if such designation will avoid (or
reduce the cost to the Borrower of) any claim pursuant to 10.1 (Increased Costs)
and such designation will not, in such Bank’s good faith judgment, be otherwise
disadvantageous to such Bank.
10.3 Exclusions
Notwithstanding the foregoing provisions of this Clause 10 (Increased Costs), no
Bank shall be entitled to make any claim under this Clause 10 (Increased Costs)
in respect of:
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10.3.1 any cost, increased cost or liability as referred to in Clause 10.1
(Increased Costs) to the extent the same is compensated by the Mandatory Costs;
or
10.3.2 any cost, increased cost or liability compensated by (or the recovery
of which is precluded under) Clause 8 (Taxes).
Without limiting the foregoing, if any Bank fails to notify the Borrower of any
event or circumstance that will entitle such Bank to compensation pursuant to
this Clause 10 (Increased Costs) within 120 days after such Bank obtains actual
knowledge of such event or circumstance, then such Bank shall not be entitled to
compensation from the Borrower for any amount arising prior to the date which is
120 days before the date on which such Bank notifies the Borrower of such event
or circumstance.
11. ILLEGALITY
If, at any time, it is or will become unlawful or prohibited pursuant to any
request from or requirement of any central bank or other fiscal, monetary or
other authority (being a request or requirement with which banks are accustomed
to comply) for a Bank to fund, issue, participate in or allow to remain
outstanding all or part of its share of the outstanding Loan, then that Bank
shall, promptly after becoming aware of the same, deliver to the Borrower
through the Agent a notice to that effect and:
11.1.1 such Bank shall not thereafter be obliged to participate in the
Facility and the amount of its Commitment shall be immediately reduced to
zero; and
11.1.2 if the Agent on behalf of such Bank so requires, the Borrower shall on
such date as the Agent shall have specified ensure that the liabilities of such
Bank under or in respect of the outstanding Loan are reduced to zero.
12. MITIGATION
If, in respect of any Bank, circumstances arise which would or would upon the
giving of notice result in:
12.1.1 an increase in any sum payable to it or for its account pursuant to
Clause 8.1 (Tax Gross-up); or
12.1.2 a claim for indemnification pursuant to Clause 8.2 (Tax Indemnity) or
Clause 10.1 (Increased Costs),
then, without in any way limiting, reducing or otherwise qualifying the rights
of such Bank or the obligations of the Obligors under any of the Clauses
referred to in sub-clauses 12.1.1 and 12.1.2, such Bank shall promptly upon
becoming aware of such circumstances notify the Agent thereof and at the request
of the Borrower transfer all of its rights and obligations under this Agreement
to a bank or financial institution identified by the Borrower as willing to
enter into such a transfer for a purchase price equal to the outstanding
principal amount owed to such Bank hereunder plus all accrued interest, fees and
other amounts accrued to that Bank hereunder.
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13. BORROWER REPRESENTATIONS
The Borrower represents and warrants on the date of this Agreement as follows:
13.1 Corporate Existence and Power
The Borrower and each of its Material Subsidiaries:
13.1.1 is duly organised or formed, validly existing and, to the extent such
concept applies, in good standing under the laws of the jurisdiction of its
incorporation or formation;
13.1.2 is duly qualified or licensed and, to the extent such concept applies,
in good standing as a foreign corporation or other entity in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not be reasonably likely to have a Material Adverse
Effect; and
13.1.3 has all requisite power and authority (including, without limitation,
all licences, permits and other approvals from any governmental authority or
regulatory body) to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, except where the
failure to have any license, permit or other approval would not be reasonably
likely to have a Material Adverse Effect.
All of the outstanding Equity Interests in the Borrower have been validly issued
and are fully paid.
13.2 Corporate Authorisation
The execution, delivery and performance by the Borrower of this Agreement are
within the Borrower’s corporate powers, have been duly authorised by all
necessary corporate action, and do not:
13.2.1 contravene the Borrower’s constitutional documents;
13.2.2 violate any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award, except where such violation would not be
reasonably likely to have a Material Adverse Effect;
13.2.3 conflict with or result in the breach of, or constitute a default
under, any contract, loan agreement, indenture, mortgage, deed of trust, lease
or other instrument binding on or affecting the Borrower, any of its
Subsidiaries or any of their properties except where such conflict, breach or
default would not be reasonably likely to have a Material Adverse Effect; or
13.2.4 result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of the Borrower or any of its
Subsidiaries.
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13.3 Governmental Authorisation
No authorisation or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for:
13.3.1 the due execution, delivery, recordation, filing or performance by the
Borrower of this Agreement; or
13.3.2 the exercise by the Agent or any Bank of its rights under this
Agreement,
except for the authorisations, approvals, actions, notices and filings which
have been duly obtained, taken, given or made and are in full force and effect.
13.4 Binding Effect
This Agreement has been duly executed and delivered by the Borrower. This
Agreement is the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, subject to
bankruptcy, insolvency and similar laws of general applicable relating to
creditors’ rights and to general principles of equity.
13.5 Litigation
There is no action, suit, investigation, litigation or proceeding affecting the
Borrower or any of its Subsidiaries, including any Environmental Action, pending
or, to the Borrower’s knowledge, threatened before any court, governmental
agency or arbitrator that:
13.5.1 would be reasonably likely to have a Material Adverse Effect; or
13.5.2 would reasonably be expected to affect the legality, validity or
enforceability of any Finance Document or the transactions contemplated by the
Finance Documents.
13.6 Written Information
13.6.1 No written information exhibit or report furnished by or on behalf of
the Borrower to the Agent or any Bank in connection with the negotiation and
syndication of this Agreement contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements made
therein not misleading as at the date it was dated (or if not dated, so
delivered).
13.6.2 The Borrower is, individually and together with its Subsidiaries,
Solvent.
13.6.3
In the ordinary course of its business, the Borrower reviews the effect of
Environmental Laws on the operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related
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constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat, and any actual or potential liabilities to third
parties and any related costs and expenses). On the basis of this review, the
Borrower has reasonably concluded that such associated liabilities and costs,
including the costs of compliance with Environmental Laws, are unlikely to have
a Material Adverse Effect. The operations and properties of the Borrower and
each of its Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, except for non-compliances which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; Hazardous Materials have not been released, discharged
or disposed of on any property currently or formerly owned or operated by the
Borrower or any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect; and there are no Environmental Actions pending or
threatened against the Borrower or its Subsidiaries, and no circumstances exist
that could be reasonably likely to form the basis of any such Environmental
Action, which (in either case), individually or in the aggregate with all other
such pending or threatened actions and circumstances, would reasonably be
expected to have a Material Adverse Effect.
13.7 Taxes
The Borrower and each of its Subsidiaries has filed, has caused to be filed or
has been included in all material federal tax returns and all other material tax
returns (including any stamp, registration or similar tax to be paid on or in
relation to this Agreement) required to be filed and has paid all taxes shown
thereon to be due, together with applicable interest and penalties, except to
the extent contested in good faith and by appropriate proceedings.
13.8 Compliance with Laws
The Borrower and its Subsidiaries are in compliance, in all material respects,
with all applicable laws, ordinances, rules, regulations, guidelines and other
requirements of governmental authorities and regulatory bodies except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings and any reserves required under generally accepted accounting
principles with respect thereto have been established and except where any such
failure could not reasonably be expected to materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
13.9 Governing law and enforcement
13.9.1 The choice of English law as the governing law of this Agreement will
be recognised and enforced in its jurisdiction of incorporation.
13.9.2 Any judgment obtained in England in relation to this Agreement will be
recognised and enforced in its jurisdiction of incorporation.
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13.10 Validity and Admissibility in Evidence
All acts, conditions and things required to be done, fulfilled and performed in
order:
13.10.1 to enable the Borrower lawfully to enter into, exercise its rights
under and perform and comply with the obligations expressed to be assumed by it
in this Agreement;
13.10.2 to ensure that the obligations expressed to be assumed by it in this
Agreement are legal, valid, binding and enforceable; and
13.10.3 to make this Agreement admissible in evidence in its jurisdiction of
incorporation,
have been done, fulfilled and performed (subject to any exception contained in
the legal opinions provided as conditions precedent).
13.11 Claims Pari Passu
Under the laws of its jurisdiction of incorporation in force at the date of this
Agreement, the claims of the Finance Parties against the Borrower under this
Agreement will rank at least pari passu with the claims of all its other
unsecured and unsubordinated creditors save those claims which are preferred
solely by any bankruptcy, insolvency, liquidation or other similar laws of
general application or are mandatorily preferred by law applying to insurance
companies generally.
13.12 No Winding up
The Borrower has not taken any corporate action nor have any other steps been
taken or legal proceedings been started or (to the best of its knowledge and
belief) threatened against the Borrower for its winding up, dissolution,
administration or re organisation (whether by voluntary arrangement, scheme of
arrangement or otherwise) or for the appointment of a liquidator receiver,
administrator, administrative receiver, conservator, compulsory manager,
custodian, trustee or similar officer of it or of any or all of its assets or
revenues.
13.13 No Event of Default
No Event of Default in respect of the Borrower has occurred and is continuing.
14. GUARANTOR REPRESENTATIONS
The Guarantor in respect of itself and of the Borrower represents and warrants
on the date of this Agreement as follows:
14.1 Corporate Existence and Power
Each Obligor and each of its Material Subsidiaries:
14.1.1 is duly organised or formed, validly existing and, to the extent such
concept applies, in good standing under the laws of the jurisdiction of its
incorporation or formation;
14.1.2 is duly qualified or licensed and in good standing as a foreign
corporation or other entity in each other jurisdiction in which it owns or
leases property or in
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which the conduct of its business requires it to so qualify or be licensed
except where the failure to so qualify or be licensed would not be reasonably
likely to have a Material Adverse Effect; and
14.1.3 has all requisite power and authority (including, without limitation,
all licences, permits and other approvals from any governmental authority) to
own or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted, except where the failure to have any
license, permit or other approval would not be reasonably likely to have a
Material Adverse Effect.
All of the outstanding Equity Interests in each Obligor (other than the
Guarantor) have been validly issued, are fully paid and non-assessable and
(except for any Preferred Securities issued after the Commencement Date) are
owned, directly or indirectly, by the Guarantor free and clear of all Liens.
14.2 Corporate Authorisation
The execution, delivery and performance by each Obligor of each Finance Document
to which it is or is to be a party and the consummation of the transactions
contemplated by the Finance Documents, are within such Obligor’s corporate
powers, have been duly authorised by all necessary corporate action, and do not:
14.2.1 contravene such Obligor’s constitutional documents;
14.2.2 violate any law, rule, regulation, order, writ, judgement, injunction,
decree, determination or award, except where such violation would not be
reasonably likely to have a Material Adverse Effect;
14.2.3 conflict with or result in the breach of, or constitute a default
under, any contract, loan agreement, indenture, mortgage, deed of trust, lease
or other instrument binding on or affecting any Obligor, any of its Subsidiaries
or any of their properties, except where such conflict, breach or default would
not be reasonably likely to have a Material Adverse Effect; or
14.2.4 except for the Liens created under the Finance Documents, result in or
require the creation or imposition of any Lien upon or with respect to any of
the properties of any Obligor or any of its Subsidiaries.
14.3 Governmental Authorisation
No authorisation or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for:
14.3.1 the due execution, delivery, recordation, filing or performance by an
Obligor of any Finance Document to which it is or is to be a party or the other
transactions contemplated by the Finance Documents; or
14.3.2 the exercise by the Agent or any Bank of its rights under the Finance
Documents,
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except for the authorisations, approvals, actions, notices and filings which
have been duly obtained, taken, given or made and are in full force and effect,
subject to bankruptcy, insolvency and similar laws of general applicable
relating to creditors’ rights and to general principles of equity.
14.4 Binding Effect
This Agreement has been, and each other Finance Document when delivered
hereunder will have been, duly executed and delivered by each Obligor party
thereto. This Agreement is, and each other Finance Document when delivered
hereunder will be, the legal, valid and binding obligation of each Obligor party
thereto, enforceable against such Obligor in accordance with its terms.
14.5 Litigation
There is no action, suit, investigation, litigation or proceeding affecting any
Obligor or any of its Subsidiaries, including any Environmental Action, pending
or, to such Obligor’s knowledge, threatened before any court, governmental
agency or arbitrator that:
14.5.1 would be reasonably likely to have a Material Adverse Effect; or
14.5.2 would reasonably be expected to affect the legality, validity or
enforceability of any Finance Document or the transactions contemplated by the
Finance Documents.
14.6 Financial Information Guarantor
The Consolidated balance sheet of the Guarantor and its Subsidiaries as at
31 December 2004, and the related Consolidated statements of income and of cash
flows of the Guarantor and its Subsidiaries for the fiscal year then ended,
accompanied by an unqualified opinion of PricewaterhouseCoopers LLP, independent
public accountants, and the Consolidated balance sheet of the Guarantor and its
Subsidiaries as at 30 September 2005, and the related Consolidated statements of
income and cash flows of the Guarantor and its Subsidiaries for the nine months
then ended, duly certified by the Chief Financial Officer of the Guarantor,
copies of which have been furnished to each Bank, fairly present, subject, in
the case of said balance sheet as at 30 September 2005, and said statements of
income and cash flows for the nine months then ended, to year-end audit
adjustments, the Consolidated financial condition of the Guarantor and its
Subsidiaries as at such dates and the Consolidated results of operations of the
Guarantor and its Subsidiaries for the periods ended on such dates, all in
accordance with GAAP applied on a consistent basis (subject, in the case of
30 September 2005 balance sheet and statements of income and cash flows, to the
absence of footnotes). Since 31 December 2004 there has been no Material Adverse
Change.
14.7 Written Information
14.7.1 No written information exhibit or report furnished by or on behalf of
any Obligor to the Agent or any Bank in connection with the negotiation and
syndication of the Finance Documents or pursuant to the terms of the Finance
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein not misleading as
at the date it was dated (or if not dated, so delivered).
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14.7.2 Margin Stock constitutes less than 25 per cent. of the value of those
assets of any Obligor which are subject to any limitation on sale, pledge or
other disposition hereunder.
14.7.3 Neither any Obligor nor any of its Subsidiaries is an “investment
company”, or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company”, as such terms are defined in the Investment
Guarantor Act of 1940, as amended. Neither the making of the Loan, nor the
application of the proceeds or repayment thereof by any Obligor, nor the
consummation of the other transactions contemplated by the Finance Documents,
will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
14.7.4 Each Obligor is, individually and together with its Subsidiaries,
Solvent.
14.7.5 Except to the extent that any and all events and conditions under
clauses (a) through (e) below of this Clause 14.7.5 in the aggregate are not
reasonably expected to have a Material Adverse Effect:
(a) neither any Obligor nor any ERISA Affiliate has incurred or is reasonably
expected to incur any Withdrawal Liability to any Multiemployer Plan;
(b) with respect to each scheme or arrangement mandated by a government other
than the United States (a “Foreign Government Scheme or Arrangement”) and with
respect to each employee benefit plan that is not subject to United States law
maintained or contributed to by any Obligor or with respect to which any
Subsidiary of any Obligor may have liability under applicable local law (a
“Foreign Plan”):
(i) any employer and employee contributions required by law or by the terms of
any Foreign Government Scheme or Arrangement or any Foreign Plan have been made,
or, if applicable, accrued, in accordance with normal accounting practices;
(ii) the fair market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the date hereof, with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and
valuations most recently used to account for such obligations in accordance with
applicable generally accepted accounting principles; and
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(iii) each Foreign Plan required to be registered has been registered and has
been maintained in good standing with applicable regulatory authorities;
(c) during the twelve-consecutive-month period to the date of the execution
and delivery of this Agreement and prior to the Utilisation Request hereunder,
no steps have been taken to terminate any Pension Plan, no contribution failure
has occurred with respect to any Pension Plan sufficient to give rise to a lien
under section 302(f) of ERISA (U.S.) and no minimum funding waiver has been
applied for or is in effect with respect to any Pension Plan. No condition
exists or event or transaction has occurred or is reasonably expected to occur
with respect to any Pension Plan which could result in any Obligor or any ERISA
(U.S.) Affiliate incurring any material liability, fine or penalty;
(d) each Pension Plan is in compliance in all respects with the applicable
provisions of ERISA (U.S.), the Internal Revenue Code (U.S.) and other federal
or state laws; and
(e) no assets of any Obligor are or are deemed under applicable law to be
“plan assets” within the meaning of United States Department of Labor Regulation
2510-101.
14.7.6 In the ordinary course of its business, each Obligor reviews the effect
of Environmental Laws on the operations and properties of such Obligor and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, and any actual or potential liabilities to third parties and
any related costs and expenses). On the basis of this review, each Obligor has
reasonably concluded that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, are unlikely to have a Material
Adverse Effect. The operations and properties of each Obligor and each of its
Subsidiaries comply in all material respects with all applicable Environmental
Laws and Environmental Permits, except for non-compliances which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; Hazardous Materials have not been released, discharged or
disposed of on any property currently or formerly owned or operated by any
Obligor or any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect; and there are no Environmental Actions pending or
threatened against any Obligor or its Subsidiaries, and no circumstances exist
that could be reasonably likely to
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form the basis of any such Environmental Action, which (in either case),
individually or in the aggregate with all other such pending or threatened
actions and circumstances, would reasonably be expected to have a Material
Adverse Effect.
14.8 Taxes
Each Obligor and each of its Subsidiaries has filed, has caused to be filed or
has been included in all material federal tax returns and all other material tax
returns (including any stamp, registration or similar tax to be paid on or in
relation to the Finance Documents to which it is a party) required to be filed
and has paid all taxes shown thereon to be due, together with applicable
interest and penalties, except to the extent contested in good faith and by
appropriate proceedings (in which case adequate reserves have been established
therefore in accordance with GAAP).
14.9 Compliance with Laws
Each Obligor and its Subsidiaries are in compliance, in all material respects,
with all applicable laws, ordinances, rules, regulations, guidelines and other
requirements of governmental authorities and regulatory bodies except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings and any reserves required under generally accepted accounting
principles with respect thereto have been established and except where any such
failure could not reasonably be expected to materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Guarantor and its Consolidated Subsidiaries, considered as a whole.
14.10 Governing law and enforcement
14.10.1 The choice of English law as the governing law of the Finance
Documents will be recognised and enforced in its jurisdiction of incorporation.
14.10.2 Any judgment obtained in England in relation to a Finance Document
will be recognised and enforced in its jurisdiction of incorporation.
14.11 Validity and Admissibility in Evidence
All acts, conditions and things required to be done, fulfilled and performed in
order:
14.11.1 to enable each Obligor lawfully to enter into, exercise its rights
under and perform and comply with the obligations expressed to be assumed by it
in the Finance Documents to which it is a party;
14.11.2 to ensure that the obligations expressed to be assumed by it in the
Finance Documents to which it is a party are legal, valid, binding and
enforceable; and
14.11.3 to make the Finance Documents to which it is a party admissible in
evidence in its jurisdiction of incorporation,
have been done, fulfilled and performed (subject to any exception contained in
the legal opinions provided as conditions precedent).
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14.12 Claims Pari Passu
Under the laws of its jurisdiction of incorporation in force at the date of this
Agreement, the claims of the Finance Parties against each Obligor under this
Agreement will rank at least pari passu with the claims of all its other
unsecured and unsubordinated creditors save those claims which are preferred
solely by any bankruptcy, insolvency, liquidation or other similar laws of
general application or are mandatorily preferred by law applying to insurance
companies generally.
14.13 No Winding-up
No Obligor has taken any corporate action nor have any other steps been taken or
legal proceedings been started or (to the best of its knowledge and belief)
threatened against any Obligor for its winding-up, dissolution, administration
or re-organisation (whether by voluntary arrangement, scheme of arrangement or
otherwise) or for the appointment of a liquidator, receiver, administrator,
administrative receiver, conservator, compulsory manager, custodian, trustee or
similar officer of it or of any or all of its assets or revenues.
14.14 No Event of Default
No Event of Default has occurred and is continuing.
15. AFFIRMATIVE COVENANTS
So long as the Loan or any other obligation of any Obligor under any Finance
Document shall remain unpaid, each Obligor will:
15.1 Compliance with laws
Comply and cause each of its Subsidiaries to comply with all applicable laws,
rules, regulations and orders, such compliance to include without limitation,
compliance with the Environmental Laws, Environmental Permits, ERISA (U.S.) and
the Racketeer Influenced and Corrupt Organizations Chapter of the Organized
Crime Control Act of 1970, except where the failure to do so, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect.
15.2 Payment of Taxes
Pay and discharge, and cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, all material taxes, assessments and
governmental charges or levies imposed upon it or upon its property; provided,
however, that neither any Obligor nor any of its Subsidiaries shall be required
to pay or discharge any such tax, assessment, charge or levy that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained.
15.3 Maintenance of Insurance
Maintain, and cause each of its Material Subsidiaries to maintain, insurance
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Guarantor or such Material Subsidiary operates (it being understood
that the foregoing shall not apply to maintenance of reinsurance or similar
matters which shall be solely within the reasonable business judgment of the
Guarantor and its Subsidiaries).
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15.4 Preservation of Corporate Existence
Preserve and maintain, and cause each of its Material Subsidiaries to preserve
and maintain, its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises; provided,
however, that:
15.4.1 the Guarantor and its Subsidiaries may consummate any merger or
amalgamation or consolidation permitted under Clause 16.3 (Mergers);
15.4.2 no Subsidiary (other than an Obligor) shall be required to preserve and
maintain its existence, legal structure, legal names or other rights (charter
and statutory) if the management of a direct or indirect parent of such
Subsidiary has determined that such action is not disadvantageous in any
material respect to the Guarantor, such parent or the Banks; and
15.4.3 neither the Guarantor nor any of its Subsidiaries shall be required to
preserve any right, permit, license, approval, privilege or franchise if the
management of the Guarantor or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Guarantor or such Subsidiary, as the case may be, and that the loss thereof
is not disadvantageous in any material respect to the Guarantor, such Subsidiary
or the Banks.
15.5 Visitation Rights
At any reasonable time and from time to time upon not less than three Business
Days prior notice, permit the Agent (upon request made by the Agent or any
Bank), or any agents or representatives thereof, at the expense (so long as no
Default has occurred and is continuing) of the Agent or such Bank, as the case
may be, to examine and make copies of and abstracts from the records and books
of account of, and visit the properties of, the Guarantor and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the Guarantor
and any of its Subsidiaries with any of their officers or directors and with, so
long as a representative of the Guarantor is present, their independent
certified public accountants; provided that neither the Guarantor nor any of its
Subsidiaries shall be required to disclose any information that it reasonably
determines is entitled to the protection of attorney-client privilege.
15.6 Keeping of Books
Keep, and cause each of its Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Guarantor and each such
Subsidiary sufficient to permit the preparation of financial statements in
accordance with GAAP.
15.7 Maintenance of Properties
Maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, all of its properties that are used or useful in the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
except where the failure to do so would not reasonably be expected to result in
a Material Adverse Effect.
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15.8 Transactions with Affiliates
Conduct, and cause each of its Subsidiaries to conduct, all transactions
otherwise permitted under the Finance Documents with any of their Affiliates
(other than any such transactions between Obligors or wholly owned Subsidiaries
of Obligors) on terms that are fair and reasonable and no less favourable than
it would obtain in a comparable arm’s-length transaction with a Person not an
Affiliate.
15.9 Pari Passu Ranking
Ensure that at all times the claims of the Banks and the Agent against it under
the Finance Documents will rank at least pari passu with the claims of all its
other unsecured and unsubordinated creditors, except for claims which are
preferred by any bankruptcy, insolvency, liquidation or other similar laws of
general application or are mandatorily preferred by law applying to insurance
companies generally.
15.10 “Know your customer” checks
15.10.1 If:
(a) the introduction of or any change in (or in the interpretation,
administration or application of) any law or regulation made after the date of
this Agreement;
(b) any change in the status of an Obligor or the composition of the
shareholders of an Obligor after the date of this Agreement; or
(c) a proposed assignment or transfer by a Bank of any of its rights and/or
obligations under this Agreement to a party that is not a Bank prior to such
assignment or transfer,
obliges the Agent or any Bank (or, in the case of paragraph (c) above, any
prospective new Bank) to comply with “know your customer” or similar
identification procedures in circumstances where the necessary information is
not already available to it, each Obligor shall promptly upon the request of the
Agent or any Bank supply, or procure the supply of, such documentation and other
evidence as is reasonably requested by the Agent (for itself or on behalf of any
Bank) or any Bank (for itself or, in the case of the event described in
paragraph (c) above, on behalf of any prospective new Bank) in order for the
Agent, such Bank or, in the case of the event described in paragraph (c) above,
any prospective new Bank to carry out and be satisfied with the results of all
necessary “know your customer” or other similar checks under all applicable laws
and regulations pursuant to the transactions contemplated in the Finance
Documents.
15.10.2 Each Bank shall promptly upon the request of the Agent supply, or
procure the supply of, such documentation and other evidence as is reasonably
requested by the Agent (for itself) in order for the Agent to carry out and be
satisfied with the results of all necessary “know your customer” or other
similar checks under all applicable laws and regulations pursuant to the
transactions contemplated in the Finance Documents.
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15.10.3 If any Obligor assigns or transfers all or any of its rights, benefits
and obligations under the Finance Documents pursuant to Clause 29.2 (No
Assignments and Transfers by the Obligors) and the accession of such new Obligor
obliges the Agent or any Bank to comply with “know your customer” or similar
identification procedures in circumstances where the necessary information is
not already available to it, the Guarantor shall promptly upon the request of
the Agent or any Bank supply, or procure the supply of, such documentation and
other evidence as is reasonably requested by the Agent (for itself or on behalf
of any Bank) in order for the Agent or such Bank or any prospective new Bank to
carry out and be satisfied with the results of all necessary “know your
customer” or other similar checks under all applicable laws and regulations
pursuant to the accession of such new Obligor to this Agreement.
16. NEGATIVE COVENANTS
So long as the Loan or any other obligation of any Obligors under any Finance
Document shall remain unpaid, each of the Obligors will not, at any time:
16.1 Liens
Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to
create, incur, assume or suffer to exist, any Lien on or with respect to any of
its properties of any character (including, without limitation, accounts)
whether now owned or hereafter acquired, or assign or permit any of its
Subsidiaries to assign, any accounts or other right to receive income, except:
16.1.1 Permitted Liens;
16.1.2 Liens described in Schedule 9 hereto;
16.1.3 purchase money Liens upon any property acquired or held by the
Guarantor or any of its Subsidiaries in the ordinary course of business to
secure the purchase price of such property or to secure Debt incurred solely for
the purpose of financing the acquisition, construction or improvement of any
property to be subject to such Liens, or Liens existing on any property at the
time of acquisition or within 180 days following such acquisition (other than
any such Liens created in contemplation of such acquisition that do not secure
the purchase price), or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount; provided, however, that no such Lien
shall extend to or cover any property other than the property being acquired,
constructed or improved, and no such extension, renewal or replacement shall
extend to or cover any property not theretofore subject to the Lien being
extended, renewed or replaced;
16.1.4 Liens arising in connection with Capitalised Leases; provided that no
such Lien shall extend to or cover any assets other than the assets subject to
such Capitalised Leases;
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16.1.5 (a) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event,
(b) any Lien on any asset of any Person existing at the time such Person is
merged or consolidated with or into the Guarantor or any of it Subsidiaries in
accordance with Clause 16.3 (Mergers) and not created in contemplation of such
event; and (c) any Lien existing on any asset prior to the acquisition thereof
by the Guarantor or any of its Subsidiaries and not created in contemplation of
such acquisition;
16.1.6 Liens securing obligations under credit default swap transactions
determined by reference to, or Contingent Obligations in respect of, Debt issued
by the Guarantor or one of its Subsidiaries; such Debt not to exceed an
aggregate principal amount of US$550,000,000 or its equivalent;
16.1.7 Liens arising in the ordinary course of its business which:
(a) do not secure Debt; and
(b) do not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
16.1.8 Liens on cash and Approved Investments securing Hedge Agreements
arising in the ordinary course of business;
16.1.9 other Liens securing Debt or other obligations outstanding in an
aggregate principal or face amount not to exceed at any time 5 per cent. of
Consolidated Net Worth;
16.1.10 Liens consisting of deposits made by the Guarantor or any insurance
Subsidiary with any insurance regulatory authority or other statutory Liens or
Liens or claims imposed or required by applicable insurance law or regulation
against the assets of the Guarantor or any insurance Subsidiary, in each case in
favour of policyholders of the Guarantor or such insurance Subsidiary or an
insurance regulatory authority and in the ordinary course of the Guarantor’s or
such insurance Subsidiary’s business;
16.1.11 Liens on Investments and cash balances of the Guarantor or any
insurance Subsidiary (other than capital stock of any Subsidiary) securing
obligations of the Guarantor or any insurance Subsidiary in respect of:
(a) letters of credit obtained in the ordinary course of business; and/or
(b) trust arrangements formed in the ordinary course of business for the
benefit of cedents to secure reinsurance recoverables owed to them by the
Guarantor or any insurance Subsidiary;
16.1.12 the replacement, extension or renewal of any Lien permitted by clause
16.1.2 or 16.1.6 above upon or in the same property theretofore subject thereto
or the replacement, extension or renewal (without increase in the amount (other
than in respect of fees, expenses and premiums, if any) or change in any direct
or contingent obligor) of the Debt secured thereby;
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16.1.13 Liens securing obligations owed by any Obligor to any other Obligor or
owed by any Subsidiary of the Guarantor (other than an Obligor) to the Guarantor
or any other Subsidiary;
16.1.14 Liens incurred in the ordinary course of business in favour of
financial intermediaries and clearing agents pending clearance of payments for
investment or in the nature of set-off, banker’s lien or similar rights as to
deposit accounts or other funds;
16.1.15 judgment or judicial attachment Liens, provided that the enforcement
of such Liens is effectively stayed;
16.1.16 Liens arising in connection with Securitisation Transactions; provided
that the aggregate principal amount of the investment or claim held at any time
by all purchasers, assignees or other transferees of (or of interests in)
receivables and other rights to payment in all Securitisation Transactions
(together with the aggregate principal amount of any other obligations secured
by such Liens) shall not exceed US$750,000,000 or its equivalent;
16.1.17 Liens on securities arising out of repurchase agreements with a term
of not more than three months entered into with “Lenders” (as such term is
defined in the JPMorgan Credit Agreement) or their Affiliates or with securities
dealers of recognised standing; provided that the aggregate amount of all assets
of the Guarantor and its Subsidiaries subject to such agreements shall not at
any time exceed US$1,000,000,000 or its equivalent. For purposes of this clause
16.1.17, “JPMorgan Credit Agreement” shall mean the Three-Year Credit Agreement
dated as of 2 April 2004 among the Guarantor, ACE Bermuda Insurance Ltd, ACE
Tempest Reinsurance Ltd, and ACE INA Holdings Inc., as borrowers, various
financial institutions, and JPMorgan Chase Bank, N.A., as Agent, as amended,
modified, supplemented or restated from time to time; and
16.1.18 Liens securing up to an aggregate amount of US$200,000,000 or its
equivalent of obligations of the Guarantor or any wholly owned Subsidiary,
arising out of catastrophe bond financing.
16.2 Change in Nature of Business
Make any material change in the nature of the business of the Guarantor and its
Material Subsidiaries, taken as a whole, as carried on at the date hereof.
16.3 Mergers
Merge into or amalgamate or consolidate with any Person or permit any Person to
merge into it, or permit any of its Subsidiaries to do so, except that:
16.3.1 any Subsidiary of the Guarantor may merge into or amalgamate or
consolidate with any other Subsidiary of the Guarantor, provided that, in the
case of any
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such merger, amalgamation or consolidation, the Person formed by such merger,
amalgamation or consolidation shall be a wholly owned Subsidiary of the
Guarantor, provided further that, in the case of any such merger, amalgamation
or consolidation to which the Borrower is a party, the Person formed by such
merger, amalgamation or consolidation shall be the Borrower;
16.3.2 any Subsidiary of any Borrower may merge into or amalgamate or
consolidate with any other Person or permit any other Person to merge into,
amalgamate or consolidate with it; provided that the Person surviving such
merger, amalgamation or consolidation shall be a wholly owned Subsidiary of the
Guarantor;
16.3.3 in connection with any sale or other disposition permitted under Clause
16.4 (Sales of Assets), any Subsidiary of the Guarantor may merge into or
amalgamate or consolidate with any other Person or permit any other Person to
merge into or amalgamate or consolidate with it; and
16.3.4 the Guarantor or the Borrower may merge into or amalgamate or
consolidate with any other Person; provided that, in the case of any such
merger, amalgamation or consolidation, the Person formed by such merger,
amalgamation or consolidation shall be the Guarantor or the Borrower, as the
case may be;
provided, however, that in each case, immediately after giving effect thereto,
no event shall occur and be continuing that constitutes a Default.
16.4 Sales of Assets
Sell, lease, transfer or otherwise dispose of, or permit any other Obligor to
sell, lease, transfer or otherwise dispose of, all or substantially all of its
assets (excluding sales of investment securities in the ordinary course of
business).
16.5 Restricted Payments
Declare or pay any dividends, purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Interests now or hereafter outstanding,
return any capital to its stockholders, partners or members (or the equivalent
Persons thereof) as such, make any distribution of assets, Equity Interests,
obligations or securities to its stockholders, partners or members (or the
equivalent Persons thereof) as such or issue or sell any Equity Interests or
accept any capital contributions, or permit any of its Subsidiaries to do any of
the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any Equity Interests in the Guarantor or
to issue or sell any Equity Interests therein, if in any case referred to above,
a Default shall have occurred and be continuing at the time of such action or
would result therefrom.
16.6 Accounting Changes
Make or permit, or permit any of its Subsidiaries to make or permit, any change
in accounting policies or reporting practices, except as permitted by GAAP.
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17. INFORMATION COVENANTS
So long as the Loan or any other obligation of any Obligor under any Finance
Document shall remain unpaid, the Guarantor will furnish to the Agent and the
Banks:
17.1 Default notice
As soon as possible and in any event within five days after the occurrence of
each Default or any event, development or occurrence reasonably likely to have a
Material Adverse Effect continuing on the date of such statement, a statement of
the Chief Financial Officer, Chief Accounting Officer or Chief Compliance
Officer of the Guarantor setting forth details of such Default, event,
development or occurrence and the action that the Guarantor or the applicable
Subsidiary has taken and proposes to take with respect thereto.
17.2 Annual Financials
17.2.1 As soon as available and in any event within 90 days after the end of
each Fiscal Year (or, if earlier, within five Business Days after such date as
the Guarantor is required to file its annual report on Form 10-K for such Fiscal
Year with the Securities and Exchange Commission), a copy of the annual
Consolidated audit report for such year for the Guarantor and its Subsidiaries,
including therein a Consolidated balance sheet of the Guarantor and its
Subsidiaries as of the end of such Fiscal Year and Consolidated statements of
income and cash flows of the Guarantor and its Subsidiaries for such Fiscal
Year, all reported on in a manner reasonably acceptable to the Securities and
Exchange Commission in each case and accompanied by an opinion of
PricewaterhouseCoopers LLP or other independent public accountants of recognised
standing reasonably acceptable to the Majority Banks, together with (i) a
Compliance Certificate of the Chief Financial Officer, Chief Accounting Officer
or Chief Compliance Officer of the Guarantor stating that no Default has
occurred and is continuing, or if a Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Guarantor has taken a
proposes to take with respect thereto, and (ii) a schedule in form reasonably
satisfactory to the Agent of the computations used by the Guarantor in
determining, as of the end of such Fiscal Year, compliance with the covenants
contained in Section 17 (Financial Covenants).
17.2.2 As soon as available and in any event within 120 days after the end of
each Fiscal Year, a copy of the annual audited financial report for such year
for the Borrower, including therein a balance sheet of the Borrower as of the
end of such Fiscal Year and a statement of income and a Consolidated statement
of cash flows of the Borrower for such Fiscal Year, all in reasonable detail and
in each case accompanied by an opinion of PricewaterhouseCoopers LLP or other
independent public accountants of recognised standing acceptable to the Majority
Banks.
17.2.3 As soon as available and in any event within 120 days after the end of
each Fiscal Year, a copy of the annual audited financial report for such year
for ACE European Group Limited, including therein a balance sheet of ACE
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European Group Limited as of the end of such Fiscal Year and a statement of
income and a statement of cash flows of ACE European Group Limited for such
Fiscal Year, all in reasonable detail and in each case accompanied by an opinion
of PricewaterhouseCoopers LLP or other independent public accountants of
recognised standing acceptable to the Majority Banks.
17.2.4 As soon as available and in any event within 20 days after submission,
each statutory statement of the Obligors (or any of them) in the form submitted
to the Supervisor of Insurance, the Insurance Division of the Bermuda Monetary
Authority.
17.3 Quarterly financials
As soon as available and in any event within 45 days after the end of each of
the first three quarters of each Fiscal Year (or, if earlier, within five
Business Days after such date as the Guarantor is required to file its quarterly
report on Form 10-Q for such fiscal quarter with the Securities and Exchange
Commission), Consolidated balance sheets of the Guarantor and its Subsidiaries
as of the end of such quarter and Consolidated statements of income and a
Consolidated statement of cash flows of the Guarantor and its Subsidiaries for
the period commencing at the end of the previous fiscal quarter and ending with
the end of such fiscal quarter and Consolidated statements of income and a
Consolidated statement of cash flows of the Guarantor and its Subsidiaries for
the period commencing at the end of the previous Fiscal Year and ending with the
end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding date or period of the preceding
Fiscal year, all in reasonable detail and duly certified (subject to the absence
of footnotes and normal year-end audit adjustments) by the Chief Financial
Officer, Chief Accounting Officer or Chief Compliance Officer of the Guarantor
as having been prepared in accordance with GAAP, together with (i) a Compliance
Certificate of said officer stating that no Default has occurred and is
continuing or, if a Default has occurred and its continuing, a statement as to
the nature thereof and the action that the Guarantor has taken and proposes to
take with respect thereto and (ii) a schedule in form reasonably satisfactory to
the Agent of the computations used by the Guarantor in determining compliance
with the covenants contained in Clause 18 (Financial Covenants).
17.4 Litigation
Promptly after the commencement thereof, notice of all actions, suits,
investigations, litigation and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting any or any of its Subsidiaries of the type described in
Clause 13.5 (Litigation).
17.5 Securities Reports
Promptly after the sending or filing thereof, copies of all proxy statements,
financial statements and reports that the Guarantor sends to its stockholders
generally, copies of all regular, periodic and special reports, and all
registration statements, that any Obligor or any of its Subsidiaries files with
the Securities and Exchange Commission or any governmental authority that may be
substituted therefor, or with any national securities exchange.
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17.6 Regulatory Notices
Promptly after any Responsible Officer of the Guarantor obtains knowledge
thereof:
17.6.1 a copy of any notice from the Bermuda Minister of Finance or the
Registrar of Companies or any other person of the revocation, the suspension or
the placing of any restriction or condition on the registration as an insurer of
any Obligor under the Bermuda Insurance Act 1978 (and related regulations) or of
the institution of any proceeding or investigation which could result in any
such revocation, suspension or placing of such a restriction or condition;
17.6.2 copies of any correspondence by, to or concerning any Obligor relating
to an investigation conducted by the Bermuda Minister of Finance, whether
pursuant to Section 132 of the Bermuda Companies Act 1981 (and related
regulations) or otherwise; and
17.6.3 a copy of any notice of or requesting or otherwise relating to the
winding-up or any similar proceeding of or with respect to any Obligor.
17.7 Other Information
From time to time such additional information regarding the financial position,
results of operations or business of any Obligor or any of its Subsidiaries as
the Agent, at the request of any Bank, may reasonably request from time to time
except where the furnishing of such information is restricted or prohibited by
applicable law or regulation including, but not limited to, a certificate of
compliance in relation to compliance with:
17.7.1 all current regulatory requirements applicable to any Obligor or any of
its Subsidiaries; and
17.7.2 any directions given by any governmental authority or regulatory body.
17.8 ERISA (U.S.)
17.8.1 ERISA Events. Promptly and in any event within 10 days after any
Obligor or any ERISA Affiliate institutes any steps to terminate any Pension
Plan or becomes aware of the institution of any steps or any threat by the PBGC
to terminate any Pension Plan, or the failure to make a required contribution to
any Pension Plan if such failure is sufficient to give rise to a lien under
section 302(f) of ERISA (U.S.), or the taking of any action with respect to a
Pension Plan which could reasonably be expected to result in the requirement
that any Obligor or any ERISA Affiliate furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to any
Pension Plan which could reasonably be expected to result in any Obligor or any
ERISA Affiliate incurring any material liability, fine or penalty, or any
material increase in the contingent liability of any Obligor or any ERISA
Affiliate with respect to any post-retirement Welfare Plan benefit, notice
thereof and copies of all documentation relating thereto.
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17.8.2 Plan Annual Reports. Promptly upon request of any Agent or any Bank,
copies of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Pension Plan.
17.8.3 Multiemployer Plan Notices. Promptly and in any event within 15
Business Days after receipt thereof by any Obligor or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, copies of each notice concerning:
(a) the imposition of Withdrawal Liability by any such Multiemployer Plan;
(b) the reorganisation or termination, within the meaning of Title IV of ERISA
(U.S.), of any such Multiemployer Plan; or
(c) the amount of liability incurred, or that may be incurred, by such Obligor
or any ERISA Affiliate in connection with any event described in clause (a) or
(b); provided, however, that such notice and documentation shall not be required
to be provided (except at the specific request of any Agent or any Bank, in
which case such notice and documentation shall be promptly provided following
such request) if such condition or event is not reasonably expected to result in
any Obligor or any ERISA Affiliate incurring any material liability, fine, or
penalty.
17.9 Delivery of Information
Information required to be delivered pursuant to Clauses 17.2, 17.3 and 17.5
shall be deemed to have been delivered on the date on which the Guarantor
provides notice to the Agent that such information has been posted on the
Guarantor’s website on the Internet at the website address listed on the
signature pages hereof, at sec.gov/edaux.searches.htm or at another website
identified in such notice and accessible by the Banks without charge; provided
that (x) such notice may be included in a certificate delivered pursuant to
Clauses 17.2.1 or 17.3 and (y), the Guarantor shall deliver paper copies of the
information referred to in Clauses 17.2, 17.3 and 17.5 to any Bank which
requests such delivery.
18. FINANCIAL COVENANTS
18.1 Adjusted Consolidated Debt to Total Capitalisation Ratio
The Guarantor shall maintain at all times a ratio of Adjusted Consolidated Debt
to Total Capitalisation of not more than 0.35 to 1.
18.2 Consolidated Net Worth
18.2.1 The Guarantor shall maintain at all times Consolidated Net Worth in an
amount not less than the Minimum Amount.
18.2.2 For the purposes of Clause 18.2.1:
(a) “Base Amount” shall be US$6,447,000,000 as at 30 March 2005, and shall be
reset on the earlier of:
(i) the date of delivery of the financial statements for the immediately
preceding Fiscal Year pursuant to Clause 17.2; and
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(ii) 30 March of each year,
in an amount equal to the greater of (x) 70 per cent. of the Consolidated Net
Worth as of the last day of the immediately preceding Fiscal Year and (y) the
Minimum Amount in effect as of the last day of the immediately preceding Fiscal
Year; and
(b) “Minimum Amount” is an amount equal to the sum of:
(i) the then current Base Amount;
plus
(ii) 25 per cent. of Consolidated Net Income for each completed fiscal quarter
of the Guarantor for which such Consolidated Net Income is positive and that
ends after the date on which the then current Base Amount become effective and
on or before the last day of the then current Fiscal Year;
plus
(iii) 50 per cent. of any increase in Consolidated Net Worth during such
period attributable to the issuance of ordinary or preferred shares.
19. EVENTS OF DEFAULT
Each event described in Clauses 19 (Failure to Pay) to 19.13 (Finance Documents)
which shall occur and be continuing will constitute an Event of Default for the
purposes of this Agreement.
19.1 Failure to Pay
Any Obligor shall fail to make any payment of interest on the Loan or of any
other amount payable by such Obligor under any Finance Document, within five
Business Days after the same becomes due and payable.
19.2 Misrepresentation
Any representation or warranty made by any Obligor (or any of its officers)
under or in connection with any Finance Document shall prove to have been
incorrect in any material respect when made.
19.3 Specific Covenants
Any Obligor shall fail to perform or observe any term, covenant or agreement
contained in Clause 15.4 (Preservation of Corporate Existence), (solely with
respect to the existence of the Guarantor), Clause 16 (Negative Covenants),
Clause 17.1 (Default Notice) or Clause 18 (Financial Covenants).
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19.4 Other Obligations
19.4.1 Any Obligor shall fail to perform or observe any term, covenant or
agreement contained in Clause 15.5 (Visitation Rights) if such failure shall
remain unremedied for five Business Days after written notice thereof shall have
been given to such Obligor by the Agent or any Bank; or
19.4.2 any Obligor shall fail to perform or observe any other term, covenant
or agreement contained in any Finance Document on its part to be performed or
observed if such failure shall remain unremedied for 30 days after the earlier
of the date on which (i) a Responsible Officer becomes aware of such failure or
(ii) written notice thereof shall have been given to such Obligor by any Agent
or any Bank.
19.5 Cross-default
The Guarantor or any of its Subsidiaries shall fail to pay any Material
Financial Obligation (but excluding Debt outstanding hereunder) of the Guarantor
or such Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Material
Financial Obligation; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Material Financial
Obligation and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Material Financial Obligation or otherwise to cause, or to permit the
holder thereof to cause, such Material Financial Obligation to mature; or any
such Material Financial Obligation shall be declared to be due and payable or
required to be prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Material Financial Obligation shall be required to be
made, in each case prior to the stated maturity thereof.
19.6 Insolvency
Any Obligor or any Significant Subsidiary shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any Obligor or any Significant
Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganisation, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of 60 days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any
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substantial part of its property) shall occur; or any Obligor or any Significant
Subsidiary shall take any corporate action to authorise any of the actions set
forth above in this Clause 19.6.
19.7 Failure to comply with judgment
Any final judgment or order for the payment of money in excess of US$100,000,000
or its equivalent shall be rendered against any Obligor or any of its
Subsidiaries and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect.
19.8 Judgment causing Material Adverse Effect
Any non-monetary judgment or order shall be rendered against or any direction or
notice of any governmental authority or regulatory body any Obligor or any of
its Subsidiaries that would be reasonably likely to have a Material Adverse
Effect, and, in the case of a judgment or order, there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect.
19.9 Binding and enforceable
Any provision in Clause 31 (Guarantee and Indemnity) of this Agreement shall for
any reason cease to be valid and binding on or enforceable against the Guarantor
(other than as a result of a transaction permitted hereunder), or the Guarantor
shall so state in writing.
19.10 Change of Control
A Change of Control shall occur.
19.11 ERISA (U.S.)
19.11.1 Any Obligor or any ERISA Affiliate shall incur or shall be reasonably
expected to incur liability in excess of US$25,000,000 or its equivalent in the
aggregate with respect to any Pension Plan or any Multiemployer Plan in
connection with the occurrence of any of the following events or existence of
any of the following conditions:
(a) institution of any steps by any Obligor, any ERISA Affiliate or any other
Person, including, without limitation, the PBGC to terminate a Pension Plan if
as a result of such termination an Obligor or any ERISA Affiliate would
reasonably expect to be required to make a contribution to such Pension Plan, or
would reasonably be expected to incur a liability or obligation; or
(b) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a lien under section 302(f) of ERISA (U.S.); or
(c) any condition shall exist or event shall occur with respect to a Pension
Plan that is reasonably expected to result in any Obligor or any ERISA
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Affiliate being required to furnish a bond or security to the PBGC or such
Pension Plan, or incurring a liability or obligation in excess of US$25,000,000;
or
19.11.2 any Obligor or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability or a
default, within the meaning of Section 4219(c)(5) of ERISA (U.S.), has occurred
with respect to such Multiemployer Plan which, in each case, could reasonably be
expected to cause any Obligor or any ERISA Affiliate to incur a payment
obligation in excess of US$25,000,000 or its equivalent.
19.12 Ownership of the Borrower
The Borrower ceases to be a Wholly Owned Consolidated Subsidiary of the
Guarantor.
19.13 Finance Documents
Any provision of any Finance Document is repudiated by any Obligor, without the
written consent of the Agent and the Majority Banks.
19.14 Acceleration and Cancellation
Upon the occurrence of an Event of Default at any time thereafter while that
Event of Default is continuing, the Agent may (and, if so instructed by the
Majority Banks, shall) by notice to the Borrower:
19.14.1 cancel the Facility whereupon the Facility shall immediately be
cancelled; and
19.14.2 declare that all or part of the Loan, together with accrued interest,
and all other amounts accrued or outstanding under the Finance Documents be
immediately due and payable, whereupon they shall become immediately due and
payable.
20. FEES
20.1 Arrangement Fees
On the Commencement Date, the Guarantor shall pay to the Lead Arrangers the fees
specified in the letter dated on or about the date of this Agreement from the
Lead Arrangers to the Guarantor at the times and in the amounts specified in
such letter.
20.2 Agency Fee
The Guarantor shall pay to the Agent for its own account the agency fee
specified in the letter dated on or about the date of this Agreement from the
Agent to the Guarantor at the times and in the amounts specified in such letter.
21. COSTS AND EXPENSES
21.1 Transaction Expenses
The Guarantor shall, from time to time within thirty days of demand of the
Agent, reimburse the Agent and the Lead Arrangers for all reasonable costs and
expenses (including legal fees) together with any VAT thereon incurred by them
in connection with the negotiation, preparation, printing, execution and
syndication of the Finance Documents, any other document referred to in the
Finance Documents and the completion of the transactions therein contemplated.
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21.2 Preservation and Enforcement of Rights
The Borrower shall, from time to time on demand of the Agent, reimburse the
Finance Parties for all costs and expenses (including legal fees) properly
incurred on a full indemnity basis together with any VAT thereon incurred in or
in connection with the preservation and/or enforcement of any of the rights of
the Finance Parties under the Finance Documents and any document referred to in
the Finance Documents (including, without limitation, any costs and expenses
relating to any investigation as to whether or not an Event of Default has
occurred or any steps necessary or desirable in connection with any proposal for
remedying or otherwise resolving a Default).
21.3 Stamp Taxes
The Borrower shall pay all stamp, registration and other taxes to which the
Finance Documents, any document related to the Finance Documents or any judgment
given in connection therewith is or at any time may be subject and to which it
is a party and shall, from time to time on demand of the Agent, indemnify the
Finance Parties against any liabilities, costs, claims and expenses resulting
from any failure to pay or any delay in paying any such tax.
21.4 Amendment Costs
If an Obligor requests any amendment, waiver or consent to any Finance Document
then the Borrower shall, within thirty days of demand by the Agent, reimburse
the Finance Parties for all reasonable costs and expenses (including legal fees)
together with any VAT thereon incurred by such persons in responding to or
complying with such request.
21.5 Banks’ Liabilities for Costs
If the Guarantor fails to perform any of its obligations under this Clause 21
each Bank shall, in its Proportion, indemnify each of the Agent and the Lead
Arrangers against any loss incurred by any of them as a result of such failure.
22. DEFAULT INTEREST AND BREAK COSTS
22.1 Default Interest
If any sum due and payable by an Obligor hereunder is not paid on the due date
therefor in accordance with Clause 25 (Payments) or if any sum due and payable
by an Obligor under any judgment of any court in connection herewith is not paid
on the date of such judgment, the period beginning on such due date or, as the
case may be, the date of such judgment and ending on the date upon which the
obligation of such Obligor to pay such sum is discharged shall be divided into
successive periods, each of which (other than the first) shall start on the last
day of the preceding such period and the duration of each of which shall (except
as otherwise provided in this Clause 22) be selected by the Agent.
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22.2 Default Interest Rate
An Unpaid Sum shall bear interest during each Interest Period in respect thereof
at the rate per annum which is the one per cent. higher than the rate which
would have been payable if the overdue amount had, during the period of
non-payment, constituted the Loan in the currency of the overdue amount for
successive Interest Periods, each of duration selected by the Agent (acting
reasonably).
22.3 Payment of Default Interest
Any interest which shall have accrued under Clause 22.1 (Default Interest) in
respect of an Unpaid Sum shall be due and payable and shall be paid by the
relevant Obligor, together with any Mandatory Costs in respect thereof on the
last day of each Interest Period in respect thereof or on such other dates as
the Agent may specify by notice to the relevant Obligor.
22.4 Break Costs
If any Bank or the Agent on its behalf receives or recovers all or any part of
an Unpaid Sum or the Loan otherwise than on the last day of a Interest Period
relating thereto, the Borrower shall pay to the Agent on demand for the account
of such Bank an amount equal to the amount (if any) by which:
22.4.1 the additional interest which would have been payable on the amount so
received or recovered had it been received or recovered on the last day of that
Interest Period
exceeds
22.4.2 the amount of interest which in the opinion of the Agent (acting
reasonably) would have been payable to the Agent on the last day of that
Interest Period in respect of a deposit in the currency of the amount so
received or recovered equal to the amount so received or recovered placed by it
with a prime bank in London for a period starting on the first Business Day
following the date of such receipt or recovery and ending on the last day of
that Interest Period.
22.5 Break Gains
If:
22.5.1 any Bank or the Agent on its behalf receives or recovers all or any
part of the Loan otherwise than on the last day of an Interest Period relating
thereto; and
22.5.2 the amount calculated under sub-clause 22.4.2 of Clause 22.4 (Break
Costs) in respect of that Loan exceeds the corresponding amount calculated under
sub-clause 22.4.1 of Clause 22.4 (Break Costs) in respect that Loan,
the Agent shall pay to the Borrower for the account of the Borrower an amount
equal to the amount (if any).
22.6 Reference Swap Transaction Value Break
If any Bank or the Agent on its behalf receives or recovers all or any part of
an Unpaid Sum or the Loan otherwise than on the Maturity Date, the Agent will
ask the Swap
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Provider to calculate the Reference Swap Transaction Value on the date of such
receipt or recovery. If the Reference Swap Transaction Value is determined to be
an amount payable by the Swap Provider, the Swap Provider shall pay such amount
to the Agent for the account of the Borrower. If the Reference Swap Transaction
Value is determined to be an amount payable to the Swap Provider, the Borrower
shall pay such amount to the Agent on demand for the account of the Swap
Provider.
23. INDEMNITIES
23.1 Borrower’s Indemnity
The Borrower undertakes to indemnify:
23.1.1 each Finance Party against any reasonable cost, claim, loss, expense
(including legal fees) or liability together with any VAT thereon, whether or
not reasonably foreseeable, which it may sustain or incur as a consequence of
the occurrence of any Event of Default or any default by an Obligor in the
performance of any of the obligations expressed to be assumed by it in the
Finance Documents;
23.1.2 the Agent against any reasonable cost or loss it may suffer or incur as
a result of its entering into, or performing, any foreign exchange contract for
the purposes of Clause 25 (Payments); and
23.1.3 each Bank against any reasonable cost or loss it may suffer under
Clause 21.5 (Banks’ Liabilities for Costs) or Clause 28.5 (Indemnification).
23.2 Currency Indemnity
If any sum (a “Sum”) due from an Obligor under the Finance Documents or any
order or judgment given or made in relation thereto has to be converted from the
currency (the “First Currency”) in which such Sum is payable into another
currency (the “Second Currency”) for the purpose of:
23.2.1 making or filing a claim or proof against such Obligor;
23.2.2 obtaining an order or judgment in any court or other tribunal; or
23.2.3 enforcing any order or judgment given or made in relation thereto,
that Obligor shall indemnify each person to whom such Sum is due from and
against any loss suffered or incurred as a result of any discrepancy between
(a) the rate of exchange used for such purpose to convert such Sum from the
First Currency into the Second Currency and (b) the rate or rates of exchange
available to such person at its prevailing spot rate at the time of receipt of
such Sum.
24. CURRENCY OF ACCOUNT AND PAYMENT
24.1 Currency of Account
Sterling is the currency of account and payment for each and every sum at any
time due from an Obligor hereunder, provided that:
24.1.1 each sum falling due by an Obligor hereunder in relation to any demand
made under the Loan or in relation to any reimbursement of the Banks pursuant to
a demand made under the Loan shall be made in the currency of the demand;
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24.1.2 each payment of interest shall be made in the currency in which the sum
in respect of which such interest is payable is denominated;
24.1.3 each payment in respect of costs and expenses shall be made in the
currency in which the same were incurred;
24.1.4 each payment pursuant to Clause 8.2 (Tax Indemnity) or Clause 10.1
(Increased Costs) shall be made in the currency specified by the party claiming
thereunder; and
24.1.5 any amount expressed to be payable in a currency other than Sterling
shall be paid in that other currency.
25. PAYMENTS
25.1 Payments to the Agent
On each date on which this Agreement requires an amount to be paid by an
Obligor, such Obligor shall make the same available to the Agent for value on
the due date at such time and in such funds and to such account with such bank
as the Agent shall specify from time to time upon reasonable advance notice to
such Obligor.
25.2 Payments by the Agent
Save as otherwise provided herein, each payment received by the Agent pursuant
to Clause 25.1 (Payments to the Agent) shall be made available by the Agent to
the person entitled to receive such payment in accordance with this Agreement
(in the case of a Bank, for the account of its Facility Office) for value the
same day by transfer to such account of such person with such bank in the
principal financial centre of the country of the currency of such payment as
such person shall have previously notified to the Agent.
25.3 No Set-off
All payments required to be made by an Obligor hereunder shall be calculated
without reference to any set-off or counterclaim and shall be made free and
clear of and without any deduction for or on account of any set-off or
counterclaim.
25.4 Clawback
Where a sum is to be paid hereunder to the Agent for the account of another
person, the Agent shall not be obliged to make the same available to that other
person or to enter into or perform any exchange contract in connection therewith
until it has been able to establish to its satisfaction that it has actually
received such sum, but if it does so and it proves to be the case that it had
not actually received such sum, then the person to whom such sum or the proceeds
of such exchange contract was so made available shall on request refund the same
to the Agent together with an amount sufficient to indemnify the Agent against
any cost or loss it may have suffered or incurred by reason of its having paid
out such sum or the proceeds of such exchange contract prior to its having
received such sum.
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25.5 Partial Payments
If an Event of Default exists and a payment is made by an Obligor hereunder and
the Agent receives an amount less than the due amount of such payment the Agent
may apply the amount received towards the obligations of that Obligor under this
Agreement in the following order:
25.5.1 first, in or towards payment of any unpaid costs and expenses of each
of the Agent and the Lead Arrangers;
25.5.2 second, in or towards payment pro rata of any accrued interest,
commission or fees payable to any Bank hereunder due but unpaid;
25.5.3 third, in or towards payment pro rata of the outstanding Loan due but
unpaid; and
25.5.4 fourth, in or towards payment pro rata of any other sum due but unpaid.
25.6 Variation of Partial Payments
The order of partial payments set out in Clause 25.5 (Partial Payments) shall
override any appropriation made by the Obligors to which the partial payment
relates but the order set out in sub-clauses 25.5.2, 25.5.3 and 25.5.4 of
Clause 25.5 (Partial Payments) may be varied if agreed by all the Banks.
26. SET-OFF
26.1 Contractual Set-off
Each Obligor authorises each Bank at any time after an Event of Default has
occurred which is continuing to apply any credit balance to which such Obligor
is entitled on any account of such Obligor with such Bank in satisfaction of any
sum due and payable from such Obligor to such Bank hereunder (whether by way of
collateralisation or otherwise) but unpaid. For this purpose, each Bank is
authorised to purchase with the moneys standing to the credit of any such
account such other currencies as may be necessary to effect such application.
26.2 Set-off not Mandatory
No Bank shall be obliged to exercise any right given to it by Clause 26.1
(Contractual Set-off).
27. SHARING
27.1 Payments to Banks
If a Bank (a “Recovering Bank”) applies any receipt or recovery from an Obligor
to a payment due under this Agreement and such amount is received or recovered
other than in accordance with Clause 25 (Payments), then such Recovering Bank
shall:
27.1.1 notify the Agent of such receipt or recovery;
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27.1.2 at the request of the Agent, promptly pay to the Agent an amount (the
“Sharing Payment”) equal to such receipt or recovery less any amount which the
Agent determines may be retained by such Recovering Bank as its share of any
payment to be made in accordance with Clause 25.5 (Partial Payments).
27.2 Redistribution of Payments
The Agent shall treat the Sharing Payment as if it had been paid by the relevant
Obligor and distribute it between the Finance Parties (other than the Recovering
Bank) in accordance with Clause 25.5 (Partial Payments).
27.3 Recovering Bank’s Rights
The Recovering Bank will be subrogated to the rights of the parties which have
shared in a redistribution pursuant to Clause 27.2 (Redistribution of Payments)
in respect of the Sharing Payment (and the relevant Obligor shall be liable to
the Recovering Bank in an amount equal to the Sharing Payment) in place of any
corresponding liability to the parties which have shared in the redistribution.
27.4 Repayable Recoveries
If any part of the Sharing Payment received or recovered by a Recovering Bank
becomes repayable and is repaid by such Recovering Bank, then:
27.4.1 each party which has received a share of such Sharing Payment pursuant
to Clause 27.2 (Redistribution of Payments) shall, upon request of the Agent,
pay to the Agent for account of such Recovering Bank an amount equal to its
share of such Sharing Payment; and
27.4.2 such Recovering Bank’s rights of subrogation in respect of any
reimbursement shall be cancelled and the relevant Obligor will be liable to the
reimbursing party for the amount so reimbursed.
27.5 Exception
This Clause 27 shall not apply if the Recovering Bank would not, after making
any payment pursuant hereto, have a valid and enforceable claim against the
relevant Obligor.
27.6 Recoveries Through Legal Proceedings
If any Bank intends to commence any action in any court it shall give prior
notice to the Agent and the other Banks. If any Bank shall commence any action
in any court to enforce its rights hereunder and, as a result thereof or in
connection therewith, receives any amount, then such Bank shall not be required
to share any portion of such amount with any Bank which has the legal right to,
but does not, join in such action or commence and diligently prosecute a
separate action to enforce its rights in another court.
28. THE AGENT, THE LEAD ARRANGERS AND THE BANKS
28.1 Appointment of the Agent
The Lead Arrangers and each of the Banks hereby appoints the Agent to act as its
agent in connection herewith and authorises the Agent to exercise such rights,
powers,
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authorities and discretions as are specifically delegated to the Agent by the
terms hereof together with all such rights, powers, authorities and discretions
as are reasonably incidental thereto.
28.2 Agent’s Discretions
The Agent may:
28.2.1 assume, unless it has, in its capacity as agent for the Banks, received
notice to the contrary from any other party hereto, that (a) any representation
made or deemed to be made by an Obligor in connection with the Finance Documents
is true, (b) no Event of Default or Potential Event of Default has occurred,
(c) no Obligor is in breach of or default under its obligations under the
Finance Documents and (d) any right, power, authority or discretion vested
therein upon the Majority Banks, the Banks or any other person or group of
persons has not been exercised;
28.2.2 assume that the Facility Office of each Bank is that notified to it by
such Bank in writing prior to the date hereof (or, in the case of a Transferee,
at the end of the Transfer Certificate to which it is a party as Transferee)
until it has received from such Bank a notice designating some other office of
such Bank to replace its Facility Office and act upon any such notice until the
same is superseded by a further such notice;
28.2.3 engage and pay for the advice or services of any lawyers, accountants,
surveyors or other experts whose advice or services may to it seem necessary,
expedient or desirable and rely upon any advice so obtained;
28.2.4 rely as to any matters of fact which might reasonably be expected to be
within the knowledge of an Obligor upon a certificate signed by or on behalf of
such Obligor;
28.2.5 rely upon any communication or document believed by it to be genuine;
28.2.6 refrain from exercising any right, power or discretion vested in it as
agent hereunder unless and until instructed by the Majority Banks as to whether
or not such right, power or discretion is to be exercised and, if it is to be
exercised, as to the manner in which it should be exercised;
28.2.7 refrain from acting in accordance with any instructions of the Majority
Banks to begin any legal action or proceeding arising out of or in connection
with the Finance Documents until it shall have received such security as it may
require (whether by way of payment in advance or otherwise) for all costs,
claims, losses, expenses (including legal fees) and liabilities together with
any VAT thereon which it will or may expend or incur in complying with such
instructions; and
28.2.8 assume (unless it has specific notice to the contrary) that any notice
or request made by the Guarantor is made on behalf of both Obligors.
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28.3 Agent’s Obligations
The Agent shall:
28.3.1 promptly inform each Bank of the contents of any notice or document
received by it in its capacity as Agent from an Obligor under the Finance
Documents;
28.3.2 promptly notify each Bank of the occurrence of any Event of Default or
any default by an Obligor in the due performance of or compliance with its
obligations under the Finance Documents of which the Agent has notice from any
other party hereto;
28.3.3 save as otherwise provided herein, act as agent under the Finance
Documents in accordance with any instructions given to it by an Majority Banks,
which instructions shall be binding on the Lead Arrangers and the Banks; and
28.3.4 if so instructed by the Majority Banks, refrain from exercising any
right, power or discretion vested in it as agent under the Finance Documents.
The Agent’s duties under the Finance Documents are solely mechanical and
administrative in nature.
28.4 Excluded Obligations
Notwithstanding anything to the contrary expressed or implied herein, neither
the Agent nor the Lead Arrangers shall:
28.4.1 be bound to enquire as to (a) whether or not any representation made or
deemed to be made by an Obligor in connection with the Finance Documents is
true, (b) the occurrence or otherwise of any Default, (c) the performance by an
Obligor of its obligations under the Finance Documents or (d) any breach of or
default by an Obligor of or under its obligations under the Finance Documents;
28.4.2 be bound to account to any Bank for any sum or the profit element of
any sum received by it for its own account;
28.4.3 be bound to disclose to any other person any information relating to
any member of the Group if (a) such person, on providing such information,
expressly stated to the Agent or, as the case may be, the Lead Arrangers, that
such information was confidential or (b) such disclosure would or might in its
opinion constitute a breach of any law or be otherwise actionable at the suit of
any person;
28.4.4 be under any obligations other than those for which express provision
is made herein; or
28.4.5 be or be deemed to be a fiduciary for any other party hereto.
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28.5 Indemnification
Each Bank shall, in its Proportion, from time to time on demand by the Agent,
indemnify the Agent against any and all costs, claims, losses, expenses
(including legal fees) and liabilities together with any VAT thereon which the
Agent may incur, otherwise than by reason of its own gross negligence or wilful
misconduct, in acting in its capacity as agent hereunder (other than any which
have been reimbursed by the Borrower pursuant to Clause 23.1 (Borrower’s
Indemnity)).
28.6 Exclusion of Liabilities
28.6.1 Except in the case of gross negligence or wilful default, neither the
Agent nor the Lead Arrangers accept any responsibility:
(a) for the adequacy, accuracy and/or completeness of any information supplied
by the Agent or the Lead Arrangers, by an Obligor or by any other person in
connection with the Finance Documents or any other agreement, arrangement or
document entered into, made or executed in anticipation of, pursuant to or in
connection with the Finance Documents;
(b) for the legality, validity, effectiveness, adequacy or enforceability of
the Finance Documents or any other agreement, arrangement or document entered
into, made or executed in anticipation of, pursuant to or in connection with the
Finance Documents; or
(c) for the exercise of, or the failure to exercise, any judgement, discretion
or power given to any of them by or in connection with the Finance Documents or
any other agreement, arrangement or document entered into, made or executed in
anticipation of, pursuant to or in connection with the Finance Documents.
Accordingly, neither the Agent nor the Lead Arrangers shall be under any
liability (whether in negligence or otherwise) in respect of such matters, save
in the case of gross negligence or wilful misconduct.
28.6.2 Nothing in this Agreement shall oblige the Agent or the Lead Arrangers
to carry out any “know your customer” or other checks in relation to any person
on behalf of any Bank and each Bank confirms to the Agent and the Lead Arrangers
that it is solely responsible for any such checks it is required to carry out
and that it may not rely on any statement in relation to such checks made by the
Agent or the Lead Arrangers.
28.7 No Actions
Each of the Banks agree that it will not assert or seek to assert against any
director, officer or employee of the Agent or the Lead Arrangers any claim it
might have against any of them in respect of the matters referred to in
Clause 28.6 (Exclusion of Liabilities).
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28.8 Business with the Group
The Agent and the Lead Arrangers may accept deposits from, lend money to and
generally engage in any kind of banking or other business with any member of the
Group.
28.9 Resignation
The Agent may resign its appointment hereunder at any time without assigning any
reason therefor by giving not less than thirty days’ prior notice to that effect
to each of the other parties hereto, provided that no such resignation shall be
effective until a successor for the Agent is appointed in accordance with the
succeeding provisions of this Clause 28.
28.10 Removal of Agent
The Majority Banks may remove the Agent from its role as agent hereunder after
consultation with the Guarantor by giving notice to that effect to each of the
other parties hereto. Such removal shall take effect only when a successor to
the Agent is appointed in accordance with the terms hereof.
28.11 Successor Agent
If the Agent gives notice of its resignation pursuant to Clause 28.9
(Resignation) or it is removed pursuant to Clause 28.10 (Removal of Agent) then
any reputable and experienced bank or other financial institution may be
appointed as a successor to the Agent by the Majority Banks (after consultation
with the Guarantor if the successor is a Bank or otherwise with the Guarantor’s
prior written consent) during the period of such notice (with the co-operation
of the Agent), subject to such entity executing and delivering a confidentiality
undertaking substantially in the form set out in Schedule 8 (Form of
Confidentiality Undertaking) but, if no such successor is so appointed, the
Agent may appoint such a successor itself.
28.12 Rights and Obligations
If a successor to the Agent is appointed under the provisions of Clause 28.11
(Successor Agent), then (a) the retiring Agent shall be discharged from any
further obligation hereunder but shall remain entitled to the benefit of the
provisions of this Clause 28 and (b) its successor and each of the other parties
hereto shall have the same rights and obligations amongst themselves as they
would have had if such successor had been a party hereto.
28.13 Own Responsibility
It is understood and agreed by each Bank that at all times it has itself been,
and will continue to be, solely responsible for making its own independent
appraisal of and investigation into all risks arising under or in connection
with this Agreement including, but not limited to:
28.13.1 the financial condition, creditworthiness, condition, affairs, status
and nature of each member of the Group;
28.13.2 the legality, validity, effectiveness, adequacy and enforceability of
the Finance Documents and any other agreement, arrangement or document entered
into, made or executed in anticipation of, pursuant to or in connection with the
Finance Documents;
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28.13.3 whether such Bank has recourse, and the nature and extent of that
recourse, against an Obligor or any other person or any of its assets under or
in connection with the Finance Documents, the transactions therein contemplated
or any other agreement, arrangement or document entered into, made or executed
in anticipation of, pursuant to or in connection with the Finance Documents; and
28.13.4 the adequacy, accuracy and/or completeness of any information provided
by the Agent or the Lead Arrangers, an Obligor or by any other person in
connection with the Finance Documents, the transactions contemplated therein or
any other agreement, arrangement or document entered into, made or executed in
anticipation of, pursuant to or in connection with the Finance Documents.
Accordingly, each Bank acknowledges to the Agent and the Lead Arrangers that it
has not relied on and will not hereafter rely on the Agent and the Lead
Arrangers or either of them in respect of any of these matters.
28.14 Agency Division Separate
In acting as agent hereunder for the Banks, the Agent shall be regarded as
acting through its agency division which shall be treated as a separate entity
from any other of its divisions or departments and, notwithstanding the
foregoing provisions of this Clause 28, any information received by some other
division or department of the Agent may be treated as confidential and shall not
be regarded as having been given to the Agent’s agency division.
28.15 Powers and Discretions
The Agent shall have all the powers and discretions conferred upon trustees by
the Trustee Act 1925 (to the extent not inconsistent herewith) and by way of
supplement it is expressly declared as follows:
28.15.1 the Agent shall be at liberty to place any of the Finance Documents
and any other instruments, documents or deeds delivered to it pursuant thereto
or in connection therewith for the time being in its possession in any safe
deposit, safe or receptacle selected by the Agent or with any bank, any
Guarantor whose business includes undertaking the safe custody of documents or
any firm of lawyers of good repute;
28.15.2 the Agent may, whenever it thinks fit, delegate by power of attorney
or otherwise to any person or persons or fluctuating body of persons all or any
of the rights, trusts, powers, authorities and discretions vested in it by any
of the Finance Documents and such delegation may be made upon such terms and
subject to such conditions (including the power to sub-delegate) and subject to
such regulations as the Agent may think fit and the Agent shall not be bound to
supervise, or be in any way responsible for any loss incurred by reason of any
misconduct or default on the part of, any such delegate (or sub-delegate);
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28.15.3 notwithstanding anything else herein contained, the Agent may refrain
from doing anything which would or might in its opinion be contrary to any law
of any jurisdiction or any directive or regulation of any agency of any state or
which would or might otherwise render it liable to any person and may do
anything which is, in its opinion, necessary to comply with any such law,
directive or regulation;
28.15.4 save in the case of gross negligence or wilful misconduct, the Agent
and every attorney, agent, delegate, sub-delegate and any other person appointed
by any of them under any of the Finance Documents may indemnify itself or
himself out of the security held by the Agent against all liabilities, costs,
fees, charges, losses and expenses incurred by any of them in relation to or
arising out of the taking or holding of any of the security constituted by, or
any of the benefits provided by, any of the Finance Documents, in the exercise
or purported exercise of the rights, trusts, powers and discretions vested in
any of them or in respect of any other matter or thing done or omitted to be
done in any way relating to any of the Finance Documents or pursuant to any law
or regulation; and
28.15.5 without prejudice to the provisions of any of the Finance Documents,
the Agent shall not be under any obligation to insure any property or to require
any other person to maintain any such insurance and shall not be responsible for
any loss which may be suffered by any person as a result of the lack of or
inadequacy or insufficiency of any such insurance.
28.16 Liability
The Agent shall not be liable for any failure:
28.16.1 to require the deposit with it of any deed or document certifying,
representing or constituting the title of the Obligors to any of the property
mortgaged, charged, assigned or otherwise encumbered by or pursuant to any of
the Finance Documents;
28.16.2 to obtain any licence, consent or other authority for the execution,
delivery, validity, legality, adequacy, performance, enforceability or
admissibility in evidence of any of the Finance Documents;
28.16.3 to register or notify any deed or document mentioned at sub-clause
28.16.1 in accordance with the provisions of any of the documents of title of
the Obligors;
28.16.4 to effect or procure registration of or otherwise protect any of the
security created by any of the Finance Documents by registering the same under
any applicable registration laws in any territory or otherwise by registering
any notice, caution or other entry prescribed by or pursuant to the provisions
of the said Act or laws;
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28.16.5 to take or to require the Obligors to take any steps to render the
security without limitation, any floating charge) created or purported to be
created by or pursuant to any of the Finance Documents effective or to secure
the creation of any ancillary charge under the laws of any jurisdiction; or
28.16.6 to require any further assurances in relation to any of the Finance
Documents.
29. ASSIGNMENTS AND TRANSFERS
29.1 Binding Agreement
The Finance Documents shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors and Transferees.
29.2 No Assignments and Transfers by the Obligors
No Obligor shall be entitled to assign or transfer all or any of its rights,
benefits and obligations under the Finance Documents without the prior written
consent of all the Banks.
29.3 Assignments and Transfers by Banks
Subject to Clause 29.6 (Conditions of assignment or transfer) and obtaining the
prior written consent of the Borrower (such consent not to be unreasonably
withheld or delayed), any Bank may, at any time, assign all or any of its rights
and benefits under the Finance Documents or transfer in accordance with
Clause 29.5 (Transfers by Banks) all or any of its rights, benefits and
obligations under the Finance Documents to a bank or financial institution or to
a trust fund or other entity which is regularly engaged in or established for
the purpose of making, purchasing or investing in loans, securities or other
financial assets, provided that:
29.3.1 the Borrower’s consent is not required if such assignment or transfer
is:
(a) to any subsidiary, holding company or Affiliate of such Bank; or
(b) to any other Bank;
29.3.2 no assignment shall be effective until the performance by the Agent of
all “know your customer” or other checks relating to any person that it is
required to carry out in relation to such assignment to a new Bank has been
completed. The Agent shall promptly notify the Banks and the new Bank of the
completion of such “know your customer” checks; and
29.3.3 the Agent shall only be obliged to execute a Transfer Certificate
delivered to it by any Bank and a Transferee once it is satisfied it has
complied with all necessary “know your customer” or similar other checks under
all applicable laws and regulations in relation to the transfer to such
Transferee.
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29.4 Assignments by Banks
If any Bank assigns all or any of its rights and benefits under the Finance
Documents in accordance with Clause 29.3 (Assignments and Transfers by Banks),
then, unless and until the assignee has delivered a notice to the Agent
confirming in favour of the Agent, the Lead Arrangers and the Banks that it
shall be under the same obligations towards each of them as it would have been
under if it had been an original party hereto as a Bank (whereupon such assignee
shall become a party hereto as a “Bank”), the Agent, the Lead Arrangers, and the
Banks shall not be obliged to recognise such assignee as having the rights
against each of them which it would have had if it had been such a party hereto.
29.5 Transfers by Banks
If any Bank wishes to transfer all or any of its rights, benefits and/or
obligations under the Finance Documents as contemplated in Clause 29.3
(Assignments and Transfers by Banks), then such transfer may be effected by the
delivery to the Agent of a duly completed Transfer Certificate executed by such
Bank and the relevant Transferee in which event, on the later of the Transfer
Date specified in such Transfer Certificate and the fifth Business Day after (or
such earlier Business Day endorsed by the Agent on such Transfer Certificate
falling on or after) the date of delivery of such Transfer Certificate to the
Agent:
29.5.1 to the extent that in such Transfer Certificate the Bank party thereto
seeks to transfer by novation its rights, benefits and obligations under the
Finance Documents, each of the Obligors and such Bank shall be released from
further obligations towards one another under the Finance Documents and their
respective rights against one another shall be cancelled (such rights and
obligations being referred to in this Clause 29.5 as “discharged rights and
obligations”);
29.5.2 each of the Obligors and the Transferee party thereto shall assume
obligations towards one another and/or acquire rights against one another which
differ from such discharged rights and obligations only insofar as such Obligor
and such Transferee have assumed and/or acquired the same in place of such
Obligor and such Bank;
29.5.3 the Agent, the Lead Arrangers, such Transferee and the other Banks
shall acquire the same rights and benefits and assume the same obligations
between themselves as they would have acquired and assumed had such Transferee
been an original party hereto as a Bank with the rights, benefits and/or
obligations acquired or assumed by it as a result of such transfer and to that
extent the Agent, the Lead Arrangers and the relevant Bank shall each be
released from further obligations to each other under the Finance Documents; and
29.5.4 such Transferee shall become a party hereto as a “Bank”.
29.6 Conditions of assignment or transfer
If:
29.6.1 a Bank assigns or transfers any of its rights or obligations under the
Finance Documents or changes its Facility Office; and
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29.6.2 as a result of circumstances existing at the date the assignment,
transfer or change occurs, an Obligor would be obliged to make a payment to the
new Bank or Bank acting through its new Facility Office under Clause 8.1 (Tax
Gross-up), Clause 8.2 (Tax Indemnity) or Clause 10.1 (Increased Costs),
then the new Bank or Bank acting through its new Facility Office is only
entitled to receive payment under those Clauses to the same extent as an
existing Bank or Bank acting through its previous Facility Office would have
been if the assignment, transfer or change had not occurred.
29.7 Agency Fee
On the date upon which a transfer takes effect pursuant to Clause 29.5
(Transfers by Banks) the relevant Transferee shall pay to the Agent for its own
account a fee of £1,000.
29.8 Disclosure of Information
Any Bank may disclose to any person:
29.8.1 to (or through) whom such Bank assigns or transfers (or may potentially
assign or transfer) all or any of its rights, benefits and obligations under the
Finance Documents;
29.8.2 with (or through) whom such Bank enters into (or may potentially enter
into) any sub-participation in relation to, or any other transaction under which
payments are to be made by reference to, this Agreement or any Obligor; or
29.8.3 to whom information may be required to be disclosed by any applicable
law,
such information about any Obligor or the Group and the Finance Documents as
such Bank shall consider appropriate and in the case of sub-clause 29.8.1 and
29.8.2, subject to requiring and receiving a confidentiality undertaking
substantially in the form set out in Schedule 8 (Form of Confidentiality
Undertaking).
30. CALCULATIONS AND EVIDENCE OF DEBT
30.1 Basis of Accrual
Interest shall accrue from day to day and shall be calculated on the basis of a
year of 365 days and the actual number of days elapsed.
30.2 Evidence of Debt
Each Bank shall maintain in accordance with its usual practice accounts
evidencing the face amount of its participations in the Loan and the amounts
from time to time owing to it hereunder.
30.3 Control Accounts
The Agent shall maintain on its books a control account or accounts in which
shall be recorded (a) the amount of any Unpaid Sum and each Bank’s share in the
Loan, (b) the
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amount of all fees, interest and other sums due or to become due from an Obligor
and each Bank’s share therein and (c) the amount of any sum received or
recovered by the Agent hereunder and each Bank’s share therein.
30.4 Prima Facie Evidence
In any legal action or proceeding arising out of or in connection with this
Agreement, the entries made in the accounts maintained pursuant to Clause 30.2
(Evidence of Debt) and Clause 30.3 (Control Accounts) shall be prima facie
evidence of the existence and amounts of the specified obligations of the
Obligors.
30.5 Certificates of Banks
A certificate of a Bank as to:
30.5.1 the amount by which a sum payable to it hereunder is to be increased
under Clause 8.1 (Tax Gross-up);
30.5.2 the amount for the time being required to indemnify it against any such
cost, payment or liability as is mentioned in Clause 8.2 (Tax Indemnity) or
Clause 10.1 (Increased Costs); or
30.5.3 the amount of any credit, relief, remission or repayment as is
mentioned in Clause 9.3 (Tax Credit Payment) or Clause 9.4 (Tax Credit
Clawback),
shall, in the absence of manifest error, be prima facie evidence of the
existence and amounts of the specified obligations of the Obligors.
30.6 Agent’s Certificates
A certificate of the Agent as to the amount at any time due from the Borrower
hereunder or the amount which, but for any of the obligations of the Borrower
hereunder being or becoming void, voidable, unenforceable or ineffective, at any
time would have been due from the Borrower hereunder shall, in the absence of
manifest error, be conclusive for the purposes of Clause 31 (Guarantee and
Indemnity).
31. GUARANTEE AND INDEMNITY
31.1 Guarantee and Indemnity
The Guarantor irrevocably and unconditionally:
31.1.1 guarantees to each Finance Party the due and punctual observance and
performance of all the terms, conditions and covenants on the part of the
Borrower contained in the Finance Documents and agrees to pay from time to time
on demand any and every sum or sums of money which the Borrower is at any time
liable to pay to any Finance Party under or pursuant to the Finance Documents
and which has become due and payable but has not been paid at the time such
demand is made; and
31.1.2 agrees as a primary obligation to indemnify each Finance Party from
time to time on demand from and against any loss incurred by any Finance Party
as a result of any of the obligations of the Borrower under or pursuant to the
Finance Documents being or becoming void, voidable, unenforceable or
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ineffective as against the Borrower for any reason whatsoever, whether or not
known to any Finance Party or any other person, the amount of such loss being
the amount which the person or persons suffering it would otherwise have been
entitled to recover from the Borrower.
31.2 Additional Security
The obligations of the Guarantor herein contained shall be in addition to and
independent of every other security which any Finance Party may at any time hold
in respect of any of the Borrower’s obligations under the Finance Documents.
31.3 Continuing Obligations
The obligations of the Guarantor herein contained shall constitute and be
continuing obligations notwithstanding any settlement of account or other matter
or thing whatsoever and shall not be considered satisfied by any intermediate
payment or satisfaction of all or any of the obligations of the Borrower under
the Finance Documents and shall continue in full force and effect until final
payment in full of all amounts owing by the Borrower under the Finance Documents
and total satisfaction of all the Borrower’s actual and contingent obligations
under the Finance Documents.
31.4 Obligations not Discharged
Neither the obligations of the Guarantor herein contained nor the rights, powers
and remedies conferred in respect of the Guarantor upon any Finance Party by the
Finance Documents or by law shall be discharged, impaired or otherwise affected
by:
31.4.1 the winding-up, dissolution, administration or re-organisation of the
Borrower or any other person or any change in its status, function, control or
ownership;
31.4.2 any of the obligations of the Borrower or any other person under the
Finance Documents or under any other security taken in respect of any of its
obligations under the Finance Documents being or becoming illegal, invalid,
unenforceable or ineffective in any respect;
31.4.3 time, waiver, consent or other indulgence being granted or agreed to be
granted to the Borrower in respect of its obligations under the Finance
Documents or under any such other security;
31.4.4 any amendment to, or any variation, waiver or release of, any
obligation of the Borrower under the Finance Documents or under any such other
security;
31.4.5 any failure to take, or fully to take, any security contemplated hereby
or otherwise agreed to be taken in respect of the Borrower’s obligations under
the Finance Documents;
31.4.6 any failure to realise or fully to realise the value of, or any
release, discharge, exchange or substitution of, any security taken in respect
of the Borrower’s obligations under the Finance Documents;
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31.4.7 the release of the Borrower or any other person under the terms of any
composition or arrangement with any creditor of any member of the Group;
31.4.8 any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of the Borrower or any other
person; or
31.4.9 any other act, event or omission which, but for this Clause 31.4, might
operate to discharge, impair or otherwise affect any of the obligations of the
Guarantor herein contained or any of the rights, powers or remedies conferred
upon any of the Finance Parties by the Finance Documents or by law.
31.5 Settlement Conditional
Any settlement or discharge between the Borrower and any of the Finance Parties
shall be conditional upon no security or payment to any Finance Party by the
Borrower or any other person on behalf of the Borrower being avoided or reduced
by virtue of any laws relating to bankruptcy, insolvency, liquidation or similar
laws of general application and, if any such security or payment is so avoided
or reduced, each Finance Party shall be entitled to recover the value or amount
of such security or payment from the Borrower subsequently as if such settlement
or discharge had not occurred.
31.6 Exercise of Rights
No Finance Party shall be obliged before exercising any of the rights, powers or
remedies conferred upon them in respect of each Guarantor by the Finance
Documents or by law to:
31.6.1 make any demand of the Borrower;
31.6.2 take any action or obtain judgment in any court against the Borrower;
31.6.3 make or file any claim or proof in a winding-up or dissolution of the
Borrower; or
31.6.4 enforce or seek to enforce any other security taken in respect of any
of the obligations of the Borrower under the Finance Documents.
31.7 Deferral of Guarantors’ Rights
The Guarantor agrees that, so long as any amounts are or may be owed by the
Borrower under the Finance Documents or the Borrower is under any actual or
contingent obligations under the Finance Documents, it shall not exercise any
rights which it may at any time have by reason of performance by it of its
obligations under the Finance Documents:
31.7.1 to be indemnified by the Borrower; and/or
31.7.2 to claim any contribution from any other guarantor of the Borrower’s
obligations under the Finance Documents; and/or
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31.7.3 to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Finance Parties under the Finance
Documents or of any other security taken pursuant to, or in connection with, the
Finance Documents by all or any of the Finance Parties.
31.8 Suspense Accounts
All moneys received, recovered or realised by a Bank by virtue of Clause 31.1
(Guarantee and Indemnity) may, in that Bank’s discretion, be credited to an
interest bearing suspense or impersonal account and may be held in such account
for so long as such Bank thinks fit pending the application from time to time
(as such Bank may think fit) of such moneys in or towards the payment and
discharge of any amounts owing by the Borrower to such Bank under the Finance
Documents.
32. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
32.1 Remedies and Waivers
No failure to exercise, nor any delay in exercising, on the part of any Finance
Party, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right or remedy prevent any further
or other exercise thereof or the exercise of any other right or remedy. The
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
32.2 Partial Invalidity
If, at any time, any provision of the Finance Documents is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
neither the legality, validity or enforceability of the remaining provisions
thereof nor the legality, validity or enforceability of such provision under the
law of any other jurisdiction shall in any way be affected or impaired thereby.
33. NOTICES
33.1 Communications in writing
33.1.1 Any communication to be made under or in connection with the Finance
Documents shall be made in writing and, unless otherwise stated, may be made by
fax, letter or telex or (to the extent that the relevant party hereto has
specified such address pursuant to Clause 33.2 (Addresses)) by e-mail.
33.1.2 The Agent may additionally (if the parties hereto agree and the
Guarantor has specifically approved in writing), in the case of any document to
be forwarded by the Agent pursuant to this Agreement where such document has
been supplied to such Agent pursuant to Clause 17 (Information Covenants), refer
the relevant party or parties hereto (by fax, letter, telex or (if so specified)
e-mail) to a web site considered by the Guarantor as secure and confidential and
to the location of the relevant information on such web site in discharge of
such notification or delivery obligation.
33.2 Addresses
The address, fax number, e-mail address, telex number and, where appropriate,
web site (and the department or officer, if any, for whose attention the
communication is to
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be made) of each party hereto for any communication or document to be made or
delivered under or in connection with the Finance Documents is:
33.2.1 in the case of an Obligor, that identified with its name below;
33.2.2 in the case of each Bank, that notified in writing to the Agent on or
prior to the date on which it becomes a party hereto; and
33.2.3 in the case of the Agent, that identified with its name below,
or any substitute address, fax number, e-mail address, telex number, web site,
department or officer as the party hereto may notify to the Agent (or the Agent
may notify to the other parties hereto, if a change is made by the Agent or a
web site carrying relevant information has been set up by the Agent) by not less
than five Business Days’ notice.
33.3 Delivery
33.3.1 Any communication or document made or delivered by one person to
another under or in connection with the Finance Documents will only be
effective:
(a) if by way of fax, when received in legible form; or
(b) if by way of letter, when it has been left at the relevant address or five
Business Days after being deposited in the post postage prepaid in an envelope
addressed to it at that address; or
(c) if by way of telex, when dispatched, but only if, at the time of
transmission, the correct answerback appears at the start and at the end of the
sender’s copy of the notice; or
(d) if by way of e-mail, when sent in legible form, but only if, following
transmission, the sender does not receive a non-delivery message; or
(e) where reference in such communication is to a web site, when the delivery
of the letter, fax, telex or, as the case may be, e-mail referring the addressee
to such web site is effective,
and, if a particular department or officer is specified as part of its address
details provided under Clause 33.2 (Addresses), if addressed to that department
or officer.
33.3.2 Any communication or document to be made or delivered to the Agent will
be effective only when actually received by the Agent and then only if it is
expressly marked for the attention of the department or officer identified with
the Agent’s signature below (or any substitute department or officer as the
agent shall specify for this purpose).
33.3.3 All notices from or to any Obligor shall be sent through the Agent.
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33.4 Notification of address, fax number and telex number
Promptly upon receipt of notification of an address, fax number, telex number or
e-mail address or change of such pursuant to Clause 33.2 (Addresses) or changing
its own address, fax number, telex number or e-mail address, the Agent shall
notify the other parties hereto.
33.5 English language
33.5.1 Any notice given under or in connection with any Finance Document must
be in English.
33.5.2 All other documents provided under or in connection with any Finance
Document must be:
(a) in English; or
(b) if not in English, accompanied (if so required by the Agent) by an English
translation thereof certified (by an officer of the person making or delivering
the same) as being a true and accurate translation thereof.
33.6 Deemed receipt by the Obligors
Any communication or document made or delivered to the Borrower in accordance
with Clause 33.3 (Delivery) shall be deemed to have been made or delivered to
both Obligors.
34. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.
35. AMENDMENTS
35.1 Amendments
The Agent, if it has the prior consent of the Majority Banks, and the Obligors
may from time to time agree in writing to amend this Agreement or to waive,
prospectively or retrospectively, any of the requirements of this Agreement and
any amendments or waivers so agreed shall be binding on all the Finance Parties,
provided that no such waiver or amendment shall subject any Finance Party hereto
to any new or additional obligations without the consent of such Finance Party.
35.2 Amendments Requiring the Consent of all the Banks
An amendment or waiver which relates to:
35.2.1 Clause 27 (Sharing) or this Clause 35;
35.2.2 a change in the currency or amount of the Total Commitment or any
payment of interest, fees or any other amount payable hereunder to any Finance
Party or deferral of the date for payment thereof;
35.2.3 a release of a Guarantor from any of its obligations set out in Clause
31 (Guarantee and Indemnity);
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35.2.4 the definition of Majority Banks; or
35.2.5 any provision which contemplates the need for the consent or approval
of all the Banks,
shall not be made without the prior consent of all the Banks.
35.3 Exceptions
Notwithstanding any other provisions hereof, the Agent shall not be obliged to
agree to any such amendment or waiver if the same would:
35.3.1 amend or waive this Clause 35, Clause 21 (Costs and Expenses) or Clause
28 (The Agent, the Lead Arrangers and the Banks); or
35.3.2 otherwise amend or waive any of the Agent’s rights hereunder or subject
the Agent or the Lead Arrangers to any additional obligations hereunder.
36. GOVERNING LAW
This Agreement is governed by English law.
37. JURISDICTION
37.1 English Courts
Each of the parties hereto irrevocably agrees for the benefit of each of the
Agent, the Lead Arrangers and the Banks that the courts of England shall have
jurisdiction to hear and determine any suit, action or proceeding, and to settle
any disputes, which may arise out of or in connection with this Agreement and
the other Finance Documents and, for such purposes, irrevocably submits to the
jurisdiction of such courts.
37.2 Convenient Forum
The Obligors irrevocably waive any objection which either of them might now or
hereafter have to the courts referred to in Clause 37.1 being nominated as the
forum to hear and determine any suit, action or proceeding, and to settle any
disputes, which may arise out of or in connection with this Agreement and agree
not to claim that any such court is not a convenient or appropriate forum.
37.3 Service of Process
The Guarantor agrees that the process by which any suit, action or proceeding is
begun may be served on it by being delivered in connection with any suit, action
or proceeding in England, to ACE INA Services UK Ltd at ACE Building, 100
Leadenhall Street, London EC3A 3BP or its other principal place of business for
the time being.
37.4 Non-Exclusive Jurisdiction
The submission to the jurisdiction of the courts referred to in Clause 37.1
shall not (and shall not be construed so as to) limit the right of the Agent,
the Lead Arrangers and the Banks or any of them to take proceedings against the
Borrower in any other court of competent jurisdiction nor shall the taking of
proceedings in any one or more
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jurisdictions preclude the taking of proceedings in any other jurisdiction,
whether concurrently or not.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
- 69 -
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SCHEDULE 1
THE BANKS
Bank
--------------------------------------------------------------------------------
Commitment (£)
--------------------------------------------------------------------------------
HSBC Bank USA, National Association
26,000,000
The Royal Bank of Scotland plc
26,000,000
ABN AMRO Bank N.V.
16,000,000
Barclays Bank PLC
16,000,000
National Australia Bank Limited
16,000,000
--------------------------------------------------------------------------------
Total
100,000,000
--------------------------------------------------------------------------------
- 70 -
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SCHEDULE 2
CONDITIONS PRECEDENT
1. A copy of the constitutional documents of each Obligor.
2. A copy of a resolution of the board of directors of each Obligor:
(a) approving the terms of, and the transactions contemplated by, the Finance
Documents to which it is a party and resolving that it execute the Finance
Documents to which it is a party;
(b) authorising a specified person or persons to execute the Finance Documents
to which it is a party on its behalf; and
(c) authorising a specified person or persons, on its behalf, to sign and/or
despatch all documents and notices (including, if relevant, any Utilisation
Request) to be signed and/or despatched by it under or in connection with the
Finance Documents to which it is a party.
3. A specimen of the signature of each person authorised by the resolution
referred to in paragraph (b) above.
4. A certificate of the Guarantor (signed by an officer of the Guarantor)
confirming that borrowing or guaranteeing, as appropriate, the Facility would
not cause any borrowing, guaranteeing or similar limit binding on any Obligor to
be exceeded.
5. A certificate of an authorised signatory of the relevant Obligor certifying
that each copy document relating to it specified in this Schedule 2 is correct,
complete and in full force and effect as at a date no earlier than the date of
this Agreement.
6. A legal opinion of Clifford Chance, legal advisers to the Agent in England.
7. If an Obligor is incorporated in a jurisdiction other than England and Wales,
a legal opinion of the legal advisers to that Obligor in the relevant
jurisdiction, substantially in the form distributed to the Agent prior to
signing this Agreement.
8. Evidence that any agent for service of process referred to in Clause 37.3
(Service of process), if not an Obligor, has accepted its appointment.
9. A copy of any other authorisation or other document, opinion or assurance
which the Agent considers to be necessary or desirable (if it has notified the
Guarantor accordingly) in connection with the entry into and performance of the
transactions contemplated by any Finance Document or for the validity and
enforceability of any Finance Document.
10. The original financial statements of the Guarantor.
11. Evidence that the fees, costs and expenses then due from the Borrower
pursuant to Clause 20 (Fees) and Clause 21 (Costs and Expenses) have been paid
or will be paid by the first Utilisation Date.
- 71 -
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SCHEDULE 3
UTILISATION REQUEST
From: [Borrower] To: [Agent] Dated:
Dear Sirs,
ACE European Holdings No.2 Limited – £100,000,000 Credit Agreement
dated [ ] (the “Agreement”)
1. We refer to the Agreement. This is a Utilisation Request. Terms defined in
the Agreement have the same meaning in this Utilisation Request unless given a
different meaning in this Utilisation Request.
2. We wish to borrow a Loan on the following terms:
Proposed Utilisation Date:
[ ] (or, if that is not a Business Day, the next Business Day)
Amount: £100,000,000
3. We confirm that each condition specified in Clause 3.2 (Utilisation
Conditions for the Facility) is satisfied on the date of this Utilisation
Request.
4. The proceeds of this Loan should be credited to [account].
5. This Utilisation Request is irrevocable.
Yours faithfully
--------------------------------------------------------------------------------
authorised signatory for
[name of Borrower]
- 72 -
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SCHEDULE 4
MARGIN SCHEDULE
“Margin “ means, for any date, the margin in respect of each Pricing Level set
forth below (except where the Pricing Level is split, in which case the higher
margin applies):
Pricing Level
--------------------------------------------------------------------------------
Level I
--------------------------------------------------------------------------------
Level II
--------------------------------------------------------------------------------
Level III
--------------------------------------------------------------------------------
Level IV
--------------------------------------------------------------------------------
Level V
--------------------------------------------------------------------------------
Margin
0.35 per cent.
per annum
0.40 per cent.
per annum
0.45 per cent.
per annum
0.50 per cent.
per annum
0.60 per cent.
per annum
For purposes of this Schedule 4, the following Pricing Levels have the following
meanings:
“Level I” applies at any date if, at such date, the Guarantor’s Public Debt
Rating is rated A+/A1 or higher by S&P or Moody’s.
“Level II” applies at any date if, at such date, the Guarantor’s Public Debt
Rating is rated A/A2 by S&P or Moody’s.
“Level III” applies at any date if, at such date, the Guarantor’s Public Debt
Rating is rated A-/A3 by S&P or Moody’s.
“Level IV” applies at any date if, at such date, the Guarantor’s Public Debt
Rating is rated BBB+/Baa1 by S&P or Moody’s.
“Level V” applies at any date if, at such date, the Guarantor’s Public Debt
Rating is rated less than BBB+/Baa1 by S&P or the Guarantor does not receive a
Public Debt Rating from S&P or Moody’s.
“Moody’s” means Moody’s Investors Service, Inc.
“Public Debt Rating” means, as of any date, the higher rating that has been most
recently announced by either S&P or Moody’s, as the case may be, for any class
of non-credit enhanced long-term senior unsecured debt issued by the Guarantor;
provided that if at any time the difference between the ratings of such type
most recently announced by S&P and Moody’s is more than one rating grade, the
Public Debt Rating shall be the rating that is one grade below the higher of
such two ratings. For purposes of the foregoing, (a) if only one of S&P and
Moody’s shall have in effect a rating for any class of non-credit enhanced
long-term senior unsecured debt issued by the Parent, the Public Debt Rating
shall be the available rating; (b) if neither S&P nor Moody’s shall have in
effect a rating for any class of non-credit enhanced long-term senior unsecured
debt issued by the Guarantor, the Public Debt Rating shall be the rating which
is three rating levels below the Guarantor’s S&P financial strength rating at
such time, provided that, in the event that the Guarantor’s S&P financial
strength rating is affirmed at (i) A+, the applicable Level will be Level II and
(ii) A+ and on credit watch/review with negative implications, the applicable
Level will be Level III; (c) if any rating established by S&P or Moody’s shall
be changed, such change shall be effective as of
- 73 -
--------------------------------------------------------------------------------
the date on which such change is first announced publicly by the rating agency
making such change, and (d) if S&P or Moody’s shall change the basis on which
ratings are established, each reference herein to ratings announced by S&P or
Moody’s as the case may be, shall refer to the then equivalent rating by S&P or
Moody’s, as the case may be.
“Pricing Level” refers to the determination of which of Level I, Level II, Level
III, Level IV or Level V applies at any date.
“S&P” means Standard & Poor’s Rating Services (a division of The McGraw-Hill
Companies, Inc.).
The credit ratings to be utilised for the purposes of this Schedule 4 are those
ratings assigned to the Public Debt Rating of the Group. The rating in effect at
any date is that in effect at the close of business on such date.
- 74 -
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SCHEDULE 5
MANDATORY COST FORMULAE
1. The Mandatory Cost is an addition to the interest rate to compensate Banks
for the cost of compliance with (a) the requirements of the Bank of England
and/or the Financial Services Authority (or, in either case, any other authority
which replaces all or any of its functions) or (b) the requirements of the
European Central Bank.
2. On the first day of each Interest Period (or as soon as possible thereafter)
the Agent shall calculate, as a percentage rate, a rate (the “Additional Cost
Rate”) for each Bank, in accordance with the paragraphs set out below. The
Mandatory Cost will be calculated by the Agent as a weighted average of the
Banks’ Additional Cost Rates (weighted in proportion to the percentage
participation of each Bank in the Loan) and will be expressed as a percentage
rate per annum.
3. The Additional Cost Rate for any Lender lending from a Facility Office in the
United Kingdom will be calculated by the Agent as follows:
E x 0.01
--------------------------------------------------------------------------------
per cent. per annum.
300
Where:
E is designed to compensate Banks for amounts payable under the Fees Rules and
is calculated by the Agent as being the average of the most recent rates of
charge supplied by the Reference Banks to the Agent pursuant to paragraph 7
below and expressed in pounds per £1,000,000.
4. For the purposes of this Schedule:
(a) “Fees Rules” means the rules on periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force from time
to time in respect of the payment of fees for the acceptance of deposits;
(b) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the
activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required pursuant to the Fees Rules but taking into account any applicable
discount rate); and
(c) “Tariff Base” has the meaning given to it in, and will be calculated in
accordance with, the Fees Rules.
- 75 -
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5. If requested by the Agent, each Reference Bank shall, as soon as practicable
after publication by the Financial Services Authority, supply to the Agent, the
rate of charge payable by that Reference Bank to the Financial Services
Authority pursuant to the Fees Rules in respect of the relevant financial year
of the Financial Services Authority (calculated for this purpose by that
Reference Bank as being the average of the Fee Tariffs applicable to that
Reference Bank for that financial year) and expressed in pounds per £1,000,000
of the Tariff Base of that Reference Bank.
6. Each Bank shall supply any information required by the Agent for the purpose
of calculating its Additional Cost Rate. In particular, but without limitation,
each Lender shall supply the following information on or prior to the date on
which it becomes a Lender:
(a) the jurisdiction of its Facility Office; and
(b) any other information that the Agent may reasonably require for such
purpose.
Each Bank shall promptly notify the Agent of any change to the information
provided by it pursuant to this paragraph.
7. The rates of charge of each Reference Bank for the purpose of E above shall
be determined by the Agent based upon the information supplied to it pursuant to
paragraphs 5 and 6 above and on the assumption that, unless a Bank notifies the
Agent to the contrary, each Bank’s obligations in relation to cash ratio
deposits and Special Deposits are the same as those of a typical bank from its
jurisdiction of incorporation with a Facility Office in the same jurisdiction as
its Facility Office.
8. The Agent shall have no liability to any person if such determination results
in an Additional Cost Rate which over or under compensates any Bank and shall be
entitled to assume that the information provided by any Bank or Reference Bank
pursuant to paragraphs 5 and 6 above is true and correct in all respects.
9. The Agent shall distribute the additional amounts received as a result of the
Mandatory Cost to the Banks on the basis of the Additional Cost Rate for each
Bank based on the information provided by each Bank and each Reference Bank
pursuant to paragraphs 5 and 6 above.
10. Any determination by the Agent pursuant to this Schedule in relation to a
formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a
Bank shall, in the absence of manifest error, be conclusive and binding on all
Parties.
11. The Agent may from time to time, after consultation with the Borrower and
the Banks, determine and notify to all Parties any amendments which are required
to be made to this Schedule in order to comply with any change in law,
regulation or any requirements from time to time imposed by the Bank of England,
the Financial Services Authority or the European Central Bank (or, in any case,
any other authority which replaces all or any of its functions) and any such
determination shall, in the absence of manifest error, be conclusive and binding
on all Parties.
- 76 -
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SCHEDULE 6
FORM OF TRANSFER CERTIFICATE
Form of Transfer Certificate
To: The Royal Bank of Scotland plc
TRANSFER CERTIFICATE
relating to the agreement dated [ ] (the “Credit Agreement”) whereby
a £100,000,000 term loan facility was made available to ACE European Holdings
No.2 Limited by a group of banks on whose behalf The Royal Bank of Scotland plc
acted as agent in connection therewith.
1. Terms defined in the Credit Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms Bank, Transferee and
Portion Transferred are defined in the schedule hereto.
2. The Bank (a) confirms that the details in the schedule hereto summarises its
Commitment in the Credit Agreement and (b) requests the Transferee to accept and
procure the transfer by novation to the Transferee of the Portion Transferred
(specified in the schedule hereto) of its Commitment by counter-signing and
delivering this Transfer Certificate to the Agent at its address for the service
of notices specified in the Credit Agreement.
3. The Transferee hereby requests the Agent to accept this Transfer Certificate
as being delivered to the Agent pursuant to and for the purposes of Clause 29.5
(Transfers by Banks) of the Credit Agreement so as to take effect in accordance
with the terms thereof on the Transfer Date or on such later date as may be
determined in accordance with the terms thereof.
4. The Transferee confirms that it has received a copy of the Credit Agreement
together with such other information as it has required in connection with this
transaction and that it has not relied and will not hereafter rely on the Bank
to check or enquire on its behalf into the legality, validity, effectiveness,
adequacy, accuracy or completeness of any such information and further agrees
that it has not relied and will not rely on the Bank to assess or keep under
review on its behalf the financial condition, creditworthiness, condition,
affairs, status or nature of the Obligors.
5. The Transferee hereby undertakes with the Bank and each of the other parties
to the Credit Agreement that it will perform in accordance with their terms all
those obligations which by the terms of the Finance Documents will be assumed by
it after delivery of this Transfer Certificate to the Agent and satisfaction of
the conditions (if any) subject to which this Transfer Certificate is expressed
to take effect.
6. The Bank makes no representation or warranty and assumes no responsibility
with respect to the legality, validity, effectiveness, adequacy or
enforceability of the Finance Documents or any document relating thereto and
assumes no responsibility for
- 77 -
--------------------------------------------------------------------------------
the financial condition of the Obligors or for the performance and observance by
the Obligors of any of their respective obligations under the Finance Documents
or any document relating thereto and any and all such conditions and warranties,
whether express or implied by law or otherwise, are hereby excluded.
7. The Bank hereby gives notice that nothing herein or in the Finance Documents
(or any document relating thereto) shall oblige the Bank to (a) accept a
re-transfer from the Transferee of the whole or any part of its rights, benefits
and/or obligations under the Finance Documents transferred pursuant hereto or
(b) support any losses directly or indirectly sustained or incurred by the
Transferee for any reason whatsoever including the non-performance by an Obligor
or any other party to the Finance Documents (or any document relating thereto)
of its obligations under any such document. The Transferee hereby acknowledges
the absence of any such obligation as is referred to in (a) or (b) above.
8. This Transfer Certificate and the rights, benefits and obligations of the
parties hereunder shall be governed by and construed in accordance with English
law.
THE SCHEDULE
9. Bank:
10. Transferee:
11. Transfer Date:
12. Bank’s Commitment
Portion Transferred
[Transferor Bank]
[Transferee Bank] By: By: Date: Date:
- 78 -
--------------------------------------------------------------------------------
ADMINISTRATIVE DETAILS OF TRANSFEREE
Address
Contact Name:
Account for Payments in sterling:
Fax:
Telephone:
- 79 -
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SCHEDULE 7
FORM OF CONFIDENTIALITY UNDERTAKING
[Letterhead of Transferor]
[Date]
To: [Transferee]
Dear Sirs,
ACE European Holdings No.2 Limited – £100,000,000 Credit Agreement
dated [ ] (the “Agreement”)
Confidentiality Agreement
In connection with your possible interest in becoming a bank in the
above-captioned facility (the “Transaction”) for ACE European Holdings No.2
Limited (the “Borrower”), we will be providing you with information that is not
in the public domain but that is confidential or proprietary in nature. Such
information and any other information concerning the Borrower or the Transaction
furnished to you by [Transferor], or by or on behalf of the Borrower (whether
before, on or after the date of this Agreement), together with analyses,
compilations or other materials prepared by you or your directors, officers,
employees or advisors (collectively, “Representatives”) which contain or
otherwise reflect such information, are hereinafter collectively referred to as
the “Information”. In consideration of your receipt of the Information, you
agree that:
1. Except as otherwise expressly provided herein, you will not (a) use the
Information except in connection with the Transaction or (b) disclose to any
person any terms or conditions of the Transaction or any portion of the
Information.
2. Notwithstanding the foregoing, you may disclose the Information: (a) to your
Representatives who need to know the Information for purposes of evaluating the
Transaction and who are informed by you of the confidential nature of the
Information and who agree to be bound by the terms of this Agreement; (b) as may
be required by applicable law or at the request of any regulatory or supervisory
authority having jurisdiction over you or at the request of any rating agency
for purposes of establishing or maintaining your debt ratings, provided that you
request confidential treatment thereof to the extent permitted by law; or
(c) with the prior written consent of the Borrower and [Transferor].
3. The reference to the term “Information” contained in paragraphs 1 and 2 shall
not include such portions thereof which (a) are or become available to the
public through no fault or action by you or your Representatives or (b) are or
hereafter become available to you on a non-confidential basis from a source
other than the Borrower, [Transferor] or their respective Representatives, which
source, to the best of your knowledge, is not prohibited from disclosing such
Information to you by a contractual, legal or fiduciary obligation to the
Borrower or [Transferor].
- 80 -
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4. In the event that you or any of your Representatives becomes legally
compelled to disclose any of the Information or the existence of the
Transaction, you will, to the extent permitted by law provide the Borrower and
[Transferor] with prompt notice so that they may seek a protective order or
other appropriate remedy. In the event that such protective order or remedy is
not obtained, you shall furnish only that portion of the Information that is
legally required and shall disclose such Information in a manner reasonably
designed to preserve its confidential nature.
5. In the event that discussions with you concerning the Transaction are
discontinued or your participation in the Transaction is otherwise terminated,
you shall redeliver to [Transferor] any Information that was furnished to you by
or on behalf of the Borrower or the Transferor or shall certify to the Borrower
and [Transferor] that you have destroyed all such Information.
6. You agree to be responsible for any breach of this Agreement by you or your
Representatives.
7. You acknowledge that money damages and other remedies at law may be
inadequate to protect against breach of this Agreement and you hereby agree to
the granting of injunctive or other equitable relief without proof of actual
damages.
8. It is further understood and agreed that no failure or delay by the Borrower
or [Transferor] in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof.
9. This Agreement shall be governed by and construed in accordance with the laws
of England and Wales.
If you are prepared to accept the Information on the foregoing terms, please
countersign this Agreement in the space provided below and deliver it via
telecopier (with the executed original to follow by next-day courier) to:
[Transferor]
[address]
Attention:
Telecopier:
Your acceptance of this Agreement shall be effective upon our receipt of such
fax from you.
Yours faithfully,
- 81 -
--------------------------------------------------------------------------------
[TRANSFEROR]
By: [ ]
[ACCEPTED AND AGREED]
Title: [
] As at the date hereof
[Name of Transferee]
By: [ ]
Title: [ ]
- 82 -
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SCHEDULE 8
FORM OF COMPLIANCE CERTIFICATE
To: [Agent]
From: [Guarantor]
Dated:
Dear Sirs
ACE European Holdings No.2 Limited – £100,000,000 Credit Agreement
dated [ ] (the “Agreement”)
1. We refer to the Agreement. This is a Compliance Certificate. Terms defined in
the Agreement have the same meaning in this Compliance Certificate unless given
a different meaning in this Compliance Certificate.
2. [We confirm that no Default is continuing].
3. We confirm that attached is a true and correct computation as at [date] of
the covenants contained in Clause 18 (Financial Covenants) of the Agreement as
required under [Clause 17.2.1 (Annual Financials)]/[Clause 17.3 (Quarterly
financials)] of the Agreement.
Signed:
--------------------------------------------------------------------------------
Director Of [Guarantor]
- 83 -
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SCHEDULE 9
EXISTING LIENS
1. Lien arising under a Subordination Agreement dated as of October 27, 1998
among ACE US Holdings, Inc., the Guarantor and The Chase Manhattan Bank (now
JPMorgan Chase Bank, N.A.) encumbering ACE US Holdings, Inc.’s rights under the
Subordinated Loan Agreement dated as of October 27, 1998 among ACE US Holdings,
Inc., ACE Bermuda Insurance Ltd. and United States Trust Company of New York, as
trustee under the Indenture dated October 27, 1998 of ACE US Holdings, Inc.
2. Liens securing the Fourth Amendment and Restatement of Letter of Credit
Facility Agreement dated November 15, 2004 among the Guarantor, ACE Bermuda
Insurance Ltd., ACE Tempest Reinsurance Ltd., certain other financial
institutions and Citibank International plc, as Agent and Security Trustee.
- 84 -
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SIGNATURES
THE BORROWER ACE EUROPEAN HOLDINGS NO.2 LIMITED By: Address: 100
Leadenhall Street London EC3A 3BP Fax: 0207 173 7533 THE GUARANTOR ACE
LIMITED By: Address: 17 Woodbourne Avenue Hamilton HM 08 Fax: 441
295 5221 THE MANDATED LEAD ARRANGERS HSBC SECURITIES (USA) INC., By:
Address: 452 Fifth Avenue Tower 5 New York, NY 10018 THE ROYAL BANK OF
SCOTLAND PLC By: Address: 135 Bishopsgate London EC2M 3UR Fax:
0207 085 5143
- 85 -
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THE AGENT THE ROYAL BANK OF SCOTLAND PLC By: Address: 135 Bishopsgate
London EC2M 3UR Fax: 0207 085 4564 THE BANKS HSBC BANK USA, NATIONAL
ASSOCIATION By: THE ROYAL BANK OF SCOTLAND PLC By: ABN AMRO BANK N.V.
By: BARCLAYS BANK PLC By: NATIONAL AUSTRALIA BANK LIMITED By:
- 86 - |
EXHIBIT 10.3
LCOS SUPPLY AGREEMENT
("Agreement")
Dated as of: July 1, 2004 (the "Effective Date")
THE SELLER: SPATIALIGHT, INC., a New York corporation
(hereinafter referred to as
"SpatiaLight")
Address: 5 Hamilton Landing, Suite 100,
Novato, CA 94949, U.S.A.
Tel: (415) 883-1693 Fax: (415)
883-3363
THE PURCHASER: LG ELECTRONICS INC., an enterprise of the Republic of Korea
(hereinafter referred to as "LGE")
Address: 20 Youido-Dong Yeongdeungpo-Gu,
Seoul, Republic of Korea
Tel: 82-2-3777-1114 Fax:
82-2-3777-5150
WHEREAS, SpatiaLight is the creator, developer and manufacturer and the owner of
all right, title and interest in and to SpatiaLight’s active matrix liquid
crystal on silicon (“LCoS”) microdisplay device having an active matrix of 1920
pixels by 1080 pixels ("LCoS Chip"), and when three (3) LCoS Chips are fitted
onto a light engine, they may be used in display application products such as
high definition televisions and home screen projection systems.
WHEREAS, LGE is a leading Korean electronics manufacturer that intends to enter
the global market for LCoS televisions (“LCoS Televisions”) using SpatiaLight
LCoS Sets (as hereinafter defined) fitted onto a light engine of LGE’s design
and manufacture (“LG Light Engine”).
WHEREAS, SpatiaLight specially developed its LCoS Sets for use in LGE’s LCoS
televisions (16 by 9 aspect ratio) pursuant to a Memorandum of Understanding
entered into on May 12, 2003, between the parties hereto, providing for the
parties to work jointly in developing the LCoS Sets.
WHEREAS, LGE and SpatiaLight entered into a mutual Non-Disclosure Agreement
dated May 12, 2003 (“Non-Disclosure Agreement”) and the parties agree to
continue to be fully bound by the terms and conditions set forth in that
Non-Disclosure Agreement.
WHEREAS, LGE desires to purchase LCoS Sets from SpatiaLight pursuant to and
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. REPRESENTATIONS
Each of SpatiaLight and LGE hereby warrants and represents to the other as
follows:
1.1. That it is a legal person validly existing in its jurisdiction of
establishment; and
[***] -- Confidential portion omitted and filed separately with SEC.
--------------------------------------------------------------------------------
1.2. That it has the full power and authority to enter into this Agreement and
perform its contractual obligations; that its representative who is signing this
Agreement has been duly authorized to do so pursuant to a valid power of
attorney, board of directors' resolution or other valid corporate action
effecting the same.
2. PRODUCT PURCHASES
LGE agrees to purchase from SpatiaLight, in accordance with the prices,
quantities, dates and other terms and conditions set forth herein, sets of three
(3) SpatiaLight LCoS Chips combined with necessary SpatiaLight Analog ASICs and
a Flex and Mount Set (as hereinafter defined), which form a SpatiaLight LCoS Set
("LCoS Set").
3. DELIVERY DATES OF PRODUCTS
3.1. Initial Deliveries
SpatiaLight shall deliver a total of one hundred twenty (120) sets of three (3)
trial production LCoS Chips (which shall not include a SpatiaLight Analog ASIC)
(the “Qualification Sets”) to LGE by September 30, 2004 (the "Qualification
Date") and one hundred (100) sets of three (3) trial production LCoS Chips
(which shall include a SpatiaLight Analog ASIC) (“Pre-Production Sets”) by
November 30, 2004, according to the following delivery schedule; provided,
however, that either party may, in its sole discretion, elect to change any or
all of the delivery dates set forth in this Section 3.1 by not greater than
thirty (30) days sooner or later than such delivery dates as set forth in this
Section 3.1.
Month
Quantity
July 2004
20 Qualification Sets
September 2004
100 Qualification Sets
November 2004
100 Pre-Production Sets
3.2. Subsequent Deliveries of LCoS Sets
Subsequent deliveries of SpatiaLight LCoS Sets shall be made in accordance with
the rolling commitment schedule set forth in Section 6 of this Agreement for
each month of January 2005 through December 2006.
3.3. Trial Light Engine Deliveries
LGE shall deliver to SpatiaLight twenty-five (25) trial Fitted LGE Light Engines
(as hereinafter defined) in November 2004. The LCoS Sets to be incorporated into
such trial Fitted LGE Light Engines shall be delivered by SpatiaLight to LGE in
October 2004 and shall be in addition to the Qualification Sets and
Pre-Production Sets. The purchase price for each trial Fitted LGE Light Engine
shall be determined by the parties at a later date; provided, however, that such
purchase price shall not exceed [***] (not including the cost of the LCoS Sets).
It is hereby agreed that such twenty-five (25) trial Fitted LGE Light Engines
are pre-production products and therefore may not meet the exact technical
specifications that SpatiaLight would require for commercial sale products.
-2-
[***] -- Confidential portion omitted and filed separately with SEC.
--------------------------------------------------------------------------------
4. TERM
The term of this Agreement shall commence on the Effective Date and terminate on
December 31, 2006, subject to LGE’s right to cancel set forth in Section 5
hereof and subject further to early termination by mutual written consent and
agreement as set forth in Section 11.1 hereof.
5. QUALIFICATION AND RIGHT OF CANCELLATION
5.1. LGE’s obligations to purchase LCoS Sets under this Agreement shall be
expressly conditioned upon the Qualification Sets meeting LGE’s Final
Specifications set forth in Exhibit 1 hereto. LGE shall have until October 31,
2004 (the “Determination Date”; and the Effective Date through the Determination
Date, the “Qualification Period”) to perform final qualification tests on the
Qualification Sets. In the event that the Qualification Sets meet the Final
Specifications, LGE shall give written notice thereof to SpatiaLight and LGE
shall be required to purchase from SpatiaLight the LCoS Sets in accordance with
all of the provisions of this Agreement. In the event that the Qualification
Sets do not meet the agreed upon Final Specifications, LGE may cancel this
Agreement by providing written notice to SpatiaLight not later than October 31,
2004 ("Notice of Cancellation"). If LGE does not provide a Notice of
Cancellation, the Qualification Sets shall be considered to meet the Final
Specifications and LGE shall be required to purchase and SpatiaLight shall be
required to sell the LCoS Sets in accordance with all of the provisions of this
Agreement. SpatiaLight and LGE agree to work together to the extent necessary
during the Qualification Period to assure that the Qualification Sets meet LGE’s
Final Specifications. LGE may elect, in its sole discretion, to change the
Determination Date by not greater than thirty (30) days sooner or later than the
Determination Date set forth in this Section 5.1.
5.2. LGE shall remain fully responsible for all of its obligations to
SpatiaLight under this Agreement through the end of the Qualification Period
regardless of whether it gives Notice of Cancellation.
6. CONTRACTUAL OBLIGATIONS
Following the Qualification Period and in the event that there is no Notice of
Cancellation, LGE hereby covenants and agrees to purchase SpatiaLight LCoS Sets
pursuant to this Agreement as follows:
6.1. From January 2005 through June 2005, LGE shall purchase SpatiaLight LCoS
Sets according to the following schedule (the “Commitment Schedule”), and such
Commitment Schedule shall be updated for each of the months of July 2005 through
December 2006 according to the terms and conditions of Section 6.3 and Section
6.4 (if applicable) below:
Month
Minimum Monthly
Commitment
(Quantity of LCoS Sets)
Price Per LCoS Set
(United States Dollars)
Monthly Purchase Price Commitment
(United States Dollars)
January 2005
2,000
[***]
[***]
February 2005
2,000
[***]
[***]
March 2005
2,000
[***]
[***]
April 2005
5,000
[***]
[***]
May 2005
5,000
[***]
[***]
June 2005
5,000
[***]
[***]
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6.2. From July 2005 through December 2005, LGE forecasts that it will purchase
SpatiaLight LCoS Sets at the agreed upon purchase price and quantities set forth
in the following schedule (the “Forecast Schedule”). LGE is not bound to
purchase and SpatiaLight is not bound to sell the quantities of LCoS Sets set
forth in the Forecast Schedule:
Month
Monthly Forecast
(Quantity of LCoS Sets)
Price Per LCoS Set
(United States Dollars)
Monthly Forecast Purchase Price
(United States Dollars)
July 2005
10,000
[***]
[***]
August 2005
10,000
[***]
[***]
September 2005
10,000
[***]
[***]
October 2005
10,000
[***]
[***]
November 2005
10,000
[***]
[***]
December 2005
10,000
[***]
[***]
6.3. Commencing on January 1, 2005, on the first day of each month of delivery
set forth in this Section 6, LGE shall be required to update the Commitment
Schedule for the calendar month six months in advance of such month and LGE
shall be required to update the non-binding Forecast Schedule for the calendar
month twelve months in advance of such month (i.e., on January 1, 2005, LGE
shall provide its monthly LCoS Set quantity commitment for July 2005 and shall
provide its monthly non-binding demand forecast for January 2006). All such
updated commitments required under this Section 6.3 shall be fully binding upon
LGE. All updated commitments required under this Section 6.3 and Section 6.4 (if
applicable) hereof shall be sent by LGE to SpatiaLight via facsimile or email.
6.4. Commencing on June 20, 2005, the parties shall use their mutual best
efforts and cooperation to negotiate and agree upon the purchase prices of the
LCoS Sets scheduled for delivery pursuant to this Agreement between January 2006
and December 2006. In the event that the parties shall not have agreed in
writing with respect to the second delivery year purchase prices for LCoS Sets
by September 20, 2005, by the terms of this Agreement the terms and conditions
of Section 11 hereof shall then take effect. In such event, commencing on
October 1, 2005, on the first day of each month of delivery set forth in this
Section 6, LGE shall continue to be required to update the Commitment Schedule
for the calendar month six (6) months in advance of such month (i.e., on October
1, 2005, LGE shall provide its monthly LCoS Set quantity commitment for April
2006); provided, that LGE’s commitment for each such delivery month shall be in
accordance with the terms and conditions of Section 11 and the other terms and
conditions of this Agreement. All such updated commitments required under this
Section 6.4 shall be fully binding upon LGE.
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7. PRICE PER SPATIALIGHT LCOS SET
7.1. LGE agrees to pay SpatiaLight the purchase price of $[***] for each
Qualification Set and Pre-Production Set sold prior to LGE commencing to
manufacture LCoS Televisions for the quantities as set forth in Section 3.1
hereof.
7.2. Following the Qualification Period, for the months of January 2005 to June
2005, LGE agrees to purchase and SpatiaLight agrees to sell LCoS Sets for
manufacturing LCoS Televisions at the purchase prices set forth in Section 6.1
hereof.
7.3. For the months of July 2005 to December 2005, LGE agrees to purchase and
SpatiaLight agrees to sell LCoS Sets for manufacturing LCoS Televisions at the
purchase price set forth in Section 6.2 hereof; provided, however, it is
expressly agreed that in the event that LGE purchases a quantity of LCoS Sets
that is less than its monthly forecast for any of such months, then the purchase
price of $[***] per LCoS Set shall apply to a monthly order of up to 3,999 LCoS
Sets and the purchase price of $[***] per LCoS Set shall apply to a monthly
order of between 4,000 and 9,999 LCoS Sets in such months.
7.4. The purchase prices of the LCoS Sets scheduled for delivery pursuant to
this Agreement for the months of January 2006 through December 2006 shall be
determined in accordance with Section 6.4 and Section 11 of this Agreement.
8. PURCHASE ORDERS
8.1. Within two weeks following the Effective Date, LGE shall issue a purchase
order (the “Qualification Purchase Order”) to SpatiaLight for LGE’s purchase and
SpatiaLight’s sale of the Qualification Sets and Pre-Production Sets.
8.2. In the event that LGE does not provide Notice of Cancellation pursuant to
Section 5.1 hereof, LGE shall issue, no later than December 15, 2004, a purchase
order (the “Rolling Purchase Order”; and together with the Qualification
Purchase Order, the “Purchase Orders”) to SpatiaLight for LGE's purchase and
SpatiaLight’s sale of the entire quantity of LCoS Sets set forth in Section 6.1
hereof.
8.3. Commencing on January 15, 2005, on the fifteenth (15th) day of each month
of delivery set forth in this Agreement, LGE shall be required to reissue the
Rolling Purchase Order to reflect LGE’s additional commitment made pursuant to
and in accordance with Section 6.3 and Section 6.4 (if applicable) hereof.
8.4. The parties shall use their mutual best efforts to negotiate and agree
upon the terms and conditions of the Purchase Orders. Such terms and conditions
shall include, without limitation, terms and means of payment, packing, shipping
terms, insurance, taxes, destination and inspection.
9. ADDITIONAL LIGHT ENGINES
The parties acknowledge and agree that the right of SpatiaLight to purchase
Fitted LGE Light Engines (as defined below) from LGE set forth in this Section 9
constitutes a consideration for the agreed upon purchase prices set forth in
Section 6 hereof.
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9.1. The parties hereby acknowledge and agree that SpatiaLight desires to
purchase from LGE quantities of LGE Light Engines fitted with sets of three (3)
SpatiaLight LCoS Chips (may be LCoS Chips with active matrix of 1920 pixels by
1080 pixels or 1280 pixels by 720 pixels, at SpatiaLight’s sole discretion) and
a UHP lamp and ballast (“Fitted LGE Light Engines”) for the purpose of sale of
such product to other customers and potential customers of SpatiaLight in only
the following territories: China, Taiwan and Hong Kong. The parties covenant and
agree to provide LGE’s current bill of materials cost for producing one (1)
Fitted LGE Light Engine (the “Fitted Engine BOM Cost”) and SpatiaLight’s current
bill of materials cost for producing one (1) LCoS Set (the “LCoS Set BOM Cost”)
to the other party on December 1, 2004; provided, however, that the Fitted
Engine BOM Cost does not include the cost of the LCoS Set incorporated into such
Fitted LGE Light Engine.
9.2. LGE hereby covenants and agrees to sell a maximum of 5,000 Fitted LGE
Light Engines to SpatiaLight during each month in 2005 and a minimum of 10,000
Fitted LGE Light Engines to SpatiaLight during each month in 2006, provided,
however, that the parties shall not have any rights or obligations under this
Section 9 in the event that LGE gives Notice of Cancellation. It is expressly
agreed and understood that SpatiaLight is under no immediate obligation and is
not immediately committed in any way to acquire any Fitted LGE Light Engines
(other than the trial Fitted LGE Light Engines) from LGE throughout the term of
this Agreement; provided, however, that SpatiaLight shall be required, no later
than December 1, 2004, to provide LGE with a six (6) month rolling commitment
schedule and twelve (12) month rolling forecast schedule for Fitted LGE Light
Engines. Such rolling commitment and forecast shall commence in January 2005 and
shall be thereafter updated by SpatiaLight on a monthly basis throughout the
term of this Agreement and shall be fully binding upon the parties hereto.
9.3. LGE agrees to sell all of such Fitted LGE Light Engines to SpatiaLight at
a purchase price not greater than the same percentage in excess of the Fitted
Engine BOM Cost as the percentage in excess of the LCoS Set BOM Cost that
SpatiaLight sells LCoS Sets to LGE under this Agreement. The parties acknowledge
and agree that the bill of materials cost may change over time, and therefore
agree to review and reset the bill of materials costs of the Fitted LGE Light
Engines and the LCoS Sets in light of then prevailing market conditions on each
six (6) month anniversary date of the Effective Date throughout the term of this
Agreement.
10. EXCLUSIVITY
10.1. The parties covenant and agree that LGE shall have the exclusive right in
the Republic of Korea to purchase SpatiaLight LCoS Sets (applies only to
SpatiaLight LCoS Chips with active matrix of 1920 pixels by 1080 pixels)
commencing on the Effective Date and terminating on June 30, 2005 (“LGE’s Right
of Exclusivity”), unless extended pursuant to the provisions of Section 10.2
hereof.
10.2. In the event that LGE fulfills its commitment to purchase an aggregate of
21,000 LCoS Sets during the first six months of delivery as set forth in Section
6 hereof, then LGE’s Right of Exclusivity shall be extended through December 31,
2005. In the event that LGE’s aggregate commitment to purchase LCoS Sets for the
months of July 2005 to December 2005 is equal to or greater than its aggregate
monthly forecast for such months (60,000 LCoS Sets) and in the further event
that LGE fulfills its commitment for such months, then LGE’s Right of
Exclusivity shall be extended through June 30, 2006. In the event that LGE’s
aggregate commitment to purchase LCoS Sets for the months of January 2006 to
June 2006 is equal to or greater than its aggregate monthly forecast for such
months, as will be provided pursuant to Section 6.3 hereof, and in the further
event that LGE fulfills its commitment for such months, then LGE’s Right of
Exclusivity shall be extended through December 31, 2006.
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10.3. The parties covenant and agree that SpatiaLight shall be the exclusive
provider of LCoS products, limited to a three (3) panel type, to LGE throughout
the entire term of this Agreement (“SpatiaLight Exclusivity”); provided,
however, that in the event that LGE’s Right of Exclusivity shall terminate
during the term of this Agreement, the terms of Section 10.4 shall then take
effect; provided, further, however, that in the event that the parties shall not
have agreed in writing with respect to the second delivery year purchase prices
for LCoS Sets by September 20, 2005 pursuant to the terms and conditions of
Section 6.4 hereof, then the terms and conditions of Section 11 shall supercede
the terms and conditions of this Section 10 only with respect to the delivery
months of January 2006 through December 2006.
10.4. In the event that LGE’s Right of Exclusivity shall terminate during the
term of this Agreement pursuant to the terms of this Section 10, SpatiaLight
shall then have the right, in its sole discretion, to elect to continue
SpatiaLight Exclusivity throughout the remaining term of this Agreement by
notifying LGE in writing within fifteen (15) days following such termination.
(a) In the event that SpatiaLight so elects to extend SpatiaLight Exclusivity,
LGE shall then have the first priority right to purchase from SpatiaLight: (i)
all of the quantities of LCoS Sets that LGE has committed to purchase from
SpatiaLight as of the date that LGE’s Right of Exclusivity was terminated, and
(ii) fifty percent (50%) of the quantities of LCoS Sets that LGE has forecast to
purchase from SpatiaLight as of such termination date.
(b) In the event that SpatiaLight does not so elect to extend SpatiaLight
Exclusivity, then SpatiaLight Exclusivity shall terminate as of the date that
LGE’s Right of Exclusivity terminated and LGE shall not have any priority rights
with respect to purchasing LCoS Sets.
10.5. The parties covenant and agree that SpatiaLight shall not contract to
sell LCoS Sets to Samsung Electronics Co., Ltd. and/or any or all of its
domestic or foreign subsidiaries or affiliates at any time during which LGE’s
Right of Exclusivity is in effect pursuant to this Agreement.
11. ALTERNATIVE RIGHTS AND OBLIGATIONS IN THE SECOND DELIVERY YEAR
Solely in the event that the parties shall not have agreed in writing with
respect to the second delivery year purchase prices for LCoS Sets by September
20, 2005 pursuant to the terms and conditions of Section 6.4 hereof, then,
notwithstanding the provisions of Section 10 hereof, for the delivery months
January 2006 through December 2006, the parties covenant and agree that:
11.1. The matter of the pricing of LCoS Sets to be sold and purchased under and
in accordance with this Section 11 and the other provisions of this Agreement
shall immediately be submitted to binding arbitration, in accordance with
Section 21 hereof; provided, however, that the parties shall have the right to
mutually agree in writing to terminate this Agreement with respect to all of the
rights and obligations of the parties hereunder scheduled to occur after
December 31, 2005. Such termination shall only be effective in the event that
LGE and SpatiaLight mutually agree to it in writing between the dates of June
20, 2005 and September 19, 2005.
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11.2. LGE’s Right of Exclusivity and SpatiaLight Exclusivity shall terminate on
December 31, 2005 (provided that such rights of exclusivity had not previously
terminated pursuant to the terms and conditions of Section 10 hereof).
11.3. LGE shall be obligated to purchase from SpatiaLight a minimum of fifty
percent (50%) of the LCoS products, limited to a three (3) panel type, that LGE
may purchase from any LCoS supplier in each such delivery month and SpatiaLight
commits to sell such LCoS Sets to LGE in each such delivery month in accordance
with the terms and conditions of this Agreement and at such prices as shall be
determined by arbitration in accordance with Section 11.1 and Section 21 hereof.
LGE shall have the right to fill the remaining fifty percent (50%) of its demand
for LCoS products from any second sources that it so elects.
11.4. SpatiaLight shall be obligated to grant LGE the first priority right,
with respect to SpatiaLight’s LCoS production output, to purchase from
SpatiaLight all of the quantities of LCoS Sets that LGE commits to purchase from
SpatiaLight in accordance with Section 6.4 hereof.
11.5. The parties shall have the right, in their respective discretion, to
agree to sell and purchase to and from each other any additional LCoS Sets and
Fitted LGE Light Engines that the parties are not obligated to sell and purchase
to and from each other according to the terms and conditions of this Section 11
and Section 9 hereof.
12. [Intentionally Omitted]
13. DIGITAL ASICS
SpatiaLight covenants and agrees to provide LGE with the codes for the required
Digital ASICs and Digital FPGA and updates to such codes, as they become
available, throughout the term of this Agreement. It is expressly agreed that
SpatiaLight’s agreement to provide such codes to LGE constitutes a consideration
for the agreed upon purchase prices set forth in Section 6 hereof.
14. LCOS SET COMPONENT COSTS
The parties covenant and agree to use their mutual best efforts throughout the
term of this Agreement, following the Qualification Period, to assist
SpatiaLight to obtain and procure LCoS Set components to be used by SpatiaLight
in connection with this Agreement at lower costs than SpatiaLight currently
incurs and to obtain other favorable procurement terms and conditions for
SpatiaLight. Such best efforts assistance shall include, without limitation,
leveraging of LGE’s purchasing power for SpatiaLight’s and LGE’s benefit. The
parties covenant and agree to form a joint task force with representatives from
both of the parties hereto for the purpose of furthering the objectives set
forth in this Section 14.
15. PATENT INDEMNIFICATION
SpatiaLight shall defend and fully indemnify LGE from any suit, cause of action,
judgment, demand, liability, loss, damage, cost, expense (including reasonable
attorneys' fees and court costs) or other actual or alleged claim of any kind,
whether direct or indirect, that arises out of a claim by a third party against
LGE alleging that the LCoS Sets delivered to LGE under this Agreement infringes
any United States of America, European Union, China and/or Republic of Korea
patent of a third party. The indemnity applies whether or not legal proceedings
are instituted, irrespective of the means, manner or nature of any settlement,
compromise or determination. This indemnity obligation does not apply to any
claims based on the use of the LCoS Sets in violation of this Agreement, or in
combination with any software, hardware, network or system not recommended for
use by SpatiaLight with the LCoS Sets, or in connection with SpatiaLight’s
compliance with LGE’s instructions, designs or specifications.
-8-
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16. SHARING OF INFORMATION
The parties agree that they will continue to work jointly throughout the term of
this Agreement to achieve its business objectives. The parties agree to remain
in regular contact with the other and to meet and share information as
appropriate. Such sharing of information shall include, without limitation,
information that SpatiaLight has concerning the digital ASIC which LGE intends
to incorporate into its LCoS high definition television sets.
17. WARRANTIES
17.1. SpatiaLight shall warrant that LCoS Sets will be: (i) in accordance with
the Final Specifications; (ii) free from any material defect or failure of a
material kind or nature in design, materials and workmanship; and (iii)
merchantable, fit and sufficient for the purpose intended.
17.2. The warranties made by SpatiaLight with respect to the LCoS Sets set
forth in this Section 17 shall commence on the date of the consumer sale by LGE
of the LCoS Televisions containing such LCoS Sets and shall remain in effect for
the shorter of (i) the same period of time that LGE warrants such LCoS
Televisions to the consumer; or (ii) a period of two years following the
consumer sale by LGE of LCoS Televisions containing such LCoS Sets.
17.3. In case that any of the LCoS Sets delivered under this Agreement are not
in material compliance with the above warranties, SpatiaLight shall either, at
LGE's option, (i) repair or replace such LCoS Set; or (ii) refund to LGE the
amount paid for such LCoS Set by LGE.
17.4. Except as set forth in this Section 17, SpatiaLight makes no other
warranties to LGE, express or implied.
18. FORCE MAJEURE
18.1. Neither Party shall be liable to the other for any delay or
non-performance of its obligations hereunder in the event and to the extent that
such delay or non-performance is due to an event of Force Majeure ("Force
Majeure Events").
18.2. Force Majeure Events are events beyond the control of the party which
occur after the date of signing of this Agreement and which were not reasonably
foreseeable at the time of signing of this Agreement and whose effects are not
capable of being overcome without unreasonable expense and/or loss of time to
the party concerned. Force Majeure Events shall include (without being limited
to) war, civil unrest, acts of government, natural disasters, exceptional
weather conditions, breakdown or general unavailability of transport facilities,
accidents, fire, explosions, terrorist acts, political risks and general
shortages of energy.
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19. CONFIDENTIALITY
Either party (“Recipient”) acknowledges that it has had and may continue to have
access to certain Confidential Information of the other party (“Discloser”). For
purposes of this Agreement, "Confidential Information" shall include, but not be
limited to, information concerning Discloser 's business, plans, designs,
customers, potential customers, sales, marketing, the terms of this Agreement
including, but not limited to pricing, quantities and dates, and other related
information. Recipient shall not use or appropriate in any way, for its own
account or the account of any third party, nor disclose to any third party, any
of the Confidential Information and shall take all necessary precautions to
protect the confidentiality of such Confidential Information. Recipient hereby
acknowledges that misappropriation or disclosure to any third party of any
Confidential Information would cause irreparable harm to Discloser.
Notwithstanding the provisions of this Section 18, the parties shall, if
required by applicable securities laws and Nasdaq rules and regulations,
publicly disclose such information as shall be in compliance with such laws and
regulations.
20. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York in the
United States, as if the Agreement were wholly executed and performed in the
State of New York, without giving effect to the conflicts of law statutes and
conflicts of law doctrines of New York (except for Section 5-1401 of the New
York General Obligations Law, which shall be applicable and binding on the
parties) or of any other jurisdiction.
21. ARBITRATION OF ALL CLAIMS AND DISPUTES AS SOLE REMEDY
The sole remedy for disposing of any claim, dispute or controversy arising out
of or in connection with this Agreement, if not resolved by the parties within
thirty (30) days of written notice of such claim or dispute, including any
question regarding the existence, validity or termination of this Agreement,
shall be referred to and finally resolved by arbitration under the applicable
rules of the International Chamber of Commerce, which rules are deemed to be
incorporated by reference into this clause. There shall be a total of three
arbitrators and the place where the arbitration shall take place shall be New
York City, in the United States. The language to be used in the arbitral
proceedings shall be the English language.
22. CURRENCY
Purchase price and all monies paid to SpatiaLight shall be paid in United States
Dollars without regard to any currency fluctuation.
23. PRESS RELEASE
23.1. The parties agree that SpatiaLight shall, on July 1, 2004, or within
thirty (30) days thereafter, issue a press release with respect to this
Agreement, which press release SpatiaLight has undertaken to draft and LGE has
reviewed and LGE hereby consents to the contents thereto. LGE agrees to
participate in such press release, without limitation, by making members of
LGE’s senior management available to make statements with respect to this
Agreement that may be used as quotations in such press release. During the term
of this Agreement, the parties shall, if required by applicable securities laws
and Nasdaq rules and regulations, file such reports at such dates and containing
such information as shall be in compliance with such laws and regulations.
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23.2. The parties covenant and agree that the parties shall issue a joint press
release and shall hold a joint press conference with respect to this Agreement
by not later than the scheduled date of commencement of the Consumer Electronics
Show in Las Vegas, Nevada in January 2005, and SpatiaLight shall undertake to
draft such press release and shall submit such draft to LGE for review and
approval before its public release.
24. INTEGRATION OF ACTIONS
This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes any and all prior oral or written
agreements and negotiations between them. Notwithstanding the foregoing, the
Non-Disclosure Agreement by and between SpatiaLight and LGE shall remain in full
force and effect and the parties shall be fully bound thereby for the term set
forth therein.
25. AMENDMENTS AND MODIFICATIONS
No amendment or modification of this Agreement shall be valid unless set forth
in writing and signed by both of the parties hereto.
26. NOTICES
All notices required or permitted under this Agreement shall be in writing and
personally delivered or mailed, by certified mail, return receipt requested, and
addressed as follows:
(a) If to LGE:
Young Woon Kim
Digital Display Research Lab, LG Electronics Inc.
16 Woomyeon-dong Seocho-gu, Seoul 137-724, Republic of Korea
Tel: 82-2-526-4612 Fax: 82-2-572-3086
(b) If to SpatiaLight:
Robert A. Olins
5 Hamilton Landing, Suite 100
Novato, CA 94949, U.S.A.
Tel: (415) 883-1693 Fax: (415) 883-1125
27. NON-ASSIGNABILITY; BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement, nor any of the rights or obligations of the parties hereto shall
be assignable by either party hereto without the prior written consent of the
other party.
28. SEVERABILITY
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall, to the extent practicable, be modified in such manner
as to be valid, legal and enforceable, subject to the condition that, as so
modified, there shall be no material alteration in or to this Agreement with
respect to the business terms or objectives of the parties hereto.
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IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have caused
this LCoS Supply Agreement to be duly executed by their officers thereunto duly
authorized, on the date first above written.
LG ELECTRONICS INC.
By: /s/ Eunho Yoo
--------------------------------------------------------------------------------
Name: Eunho Yoo
Title: Director Digital Display Research Laboratory
By: /s/ Robert A. Olins
--------------------------------------------------------------------------------
Name: Robert A. Olins
Title: Chief Executive Officer
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[ex10-3x5x1.jpg] |
Exhibit 10.31
SUPERVALU INC.
2002 STOCK PLAN
STOCK OPTION AGREEMENT
This agreement is made and entered into as of the Grant Date indicated below, by
and between SUPERVALU INC. and the individual whose name and signature appears
below (“Optionee”).
The Company has established the 2002 Stock Plan (the “Plan”), under which key
employees of the Company and its Affiliates may be granted options to purchase
shares of the Company’s common stock. Optionee has been selected by the Company
to receive an Option subject to the provisions of this agreement. Capitalized
terms that are used in this agreement, that are not defined, shall have the
meanings ascribed to them in the Plan.
The Company and Optionee hereby agree as follows:
1. Option Grant. The Company hereby grants to Optionee, subject to Optionee’s
acceptance hereof, the right and option to purchase the number of Shares
indicated below at the exercise price per Share indicated below. The Option has
been designated as a Non-Qualified Stock Option (“NQ”) or Incentive Stock Option
(“ISO”) for tax purposes, the consequences of which are set forth in the
prospectus that describes the Plan.
2. Acceptance of Option and Stock Option Terms and Conditions. The Option is
subject to and governed by the Stock Option Terms and Conditions attached hereto
as Exhibit A, and the Plan. To accept the Option, Optionee must sign and return
a copy of this agreement to the Company within ninety (90) days after the Grant
Date. By so doing, Optionee agrees to be bound by the Stock Option Terms and
Conditions and the provisions of the Plan.
3. Vesting, Exercise Rights and Expiration. Twenty percent (20%) of the Option
shall vest on the Grant Date and the remaining portion shall vest in four
(4) equal annual installments commencing on each anniversary of the Grant Date.
The vested portion of the Option may be exercised in whole or part, subject to
the Stock Option Terms and Conditions. Except as otherwise provided in the Stock
Option Terms and Conditions, the Option will expire on the Expiration Date
indicated below.
Grant Number
Grant Date
Number of Shares
Type of Option
NQ or ISO
Exercise Price
Expiration Date
SUPERVALU INC. OPTIONEE By: [Insert Name]
SS# [Insert SSN]
1
--------------------------------------------------------------------------------
SUPERVALU INC.
2002 STOCK PLAN
STOCK OPTION TERMS AND CONDITIONS
(KEY EXECUTIVES), as amended
These Stock Option Terms and Conditions (“Terms and Conditions”) apply to the
Option granted to you under the 2002 Stock Plan, pursuant to the Stock Option
Agreement to which this document is attached. Capitalized terms that are used in
this document, but are not defined, shall have the meanings ascribed to them in
the Plan or the Stock Option Agreement.
1. Vesting and Exercisability. The Option shall vest in cumulative installments
as follows:
a) As of the Grant Date, twenty percent (20%) of the Option shall immediately
vest and twenty percent (20%) of the Shares subject to the Option shall then be
available for purchase, provided you have signed and returned your Stock Option
Agreement within the time period specified.
b) On each anniversary of the Grant Date, an additional twenty percent
(20%) of the Option shall vest and an additional twenty percent (20%) of the
Shares subject to the Option shall then be available for purchase.
The vested portion of the Option may be exercised at any time, or from time to
time, to purchase Shares. If in any year the full amount of Shares that may be
purchased pursuant to the vested portion of the Option is not purchased, the
remaining amount of such Shares shall be available for purchase during the
remainder of the term of the Option.
2. Manner of Exercise. Except as provided in Section 8 below, you cannot
exercise the Option unless at the time of exercise you are an employee of the
Company or an Affiliate. Prior to your death, only you may exercise the Option.
You may exercise the Option as follows:
a) By delivering a “Notice of Exercise of Stock Option” to the Company at its
principal office, attention: Corporate Secretary, stating the number of Shares
being purchased and accompanied by payment of the full purchase price for such
Shares (determined by multiplying the Exercise Price by the number of Shares to
be purchased). [Note: In the event the Option is exercised by any person other
than you pursuant to any of the provisions of Section 8 below, the Notice must
be accompanied by appropriate proof of such person’s right to exercise the
Option.]; or
b) By entering an order to exercise the Option using E*TRADE’s OptionsLink
website.
3. Method of Payment. The full purchase price for the Shares to be purchased
upon exercise of the Option must be paid as follows:
a) By delivering directly to the Company, cash or its equivalent payable to
the Company;
b) By delivering indirectly to the Company, cash or its equivalent payable to
the Company through E*TRADE’s OptionsLink website; or
c) By delivering Shares having a Fair Market Value as of the Exercise Date
equal to the purchase price (commonly known as a “Stock Swap”); or
d) By delivering the full purchase price in a combination of cash and shares.
4. Delivery of Shares. You shall not have any of the rights of a stockholder
with respect to any Shares subject to the Option until such Shares are purchased
by you upon exercise of the Option. Such Shares shall then be issued and
delivered to you by the Company as follows:
a) In the form of a stock certificate registered in your name or your name and
the name of another adult person (21 years of age or older) as joint tenants,
and mailed to your address; or
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b) In “book entry” form, i.e. registered with the Company’s stock transfer
agent, in your name or your name and the name of another adult person (21 years
of age or older) as joint tenants, and sent by electronic delivery to your
brokerage account.
5. Withholding Taxes. You are responsible for the payment of any federal, state,
local or other taxes that are required to be withheld by the Company upon
exercise of the Option and you must promptly remit such taxes to the Company.
You may elect to remit these taxes by:
a) Delivering directly to the Company, cash or its equivalent payable to the
Company;
b) Delivering indirectly to the Company, cash or its equivalent payable to the
Company through E*TRADE’s OptionsLink website;
c) Having the Company withhold a portion of the Shares to be issued upon
exercise of the Option having a Fair Market Value equal to the amount of federal
and state income tax required to be withheld upon such exercise (commonly
referred to as a “Tax Swap” or “Stock for Tax”); or
d) Delivering Shares to the Company, other than the Shares issuable upon
exercise of the Option, having a Fair Market Value equal to such taxes. [Note:
In addition to delivering Shares to satisfy required tax withholding
obligations, you may also elect to deliver additional Shares to the Company,
other than the Shares issuable upon exercise of the Option, having a Fair Market
Value equal to the amount of any additional federal or state income taxes
imposed on you in connection with the exercise of the Option, provided such
Shares have been held by you for a minimum of six (6) months.]
6. Change of Control. In the event of the occurrence of a Change of Control of
the Company, the unvested portion of the Option shall immediately vest and the
Option shall become immediately exercisable in full. The term “Change of
Control”, means any of the following events:
a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of either
(A) the then outstanding shares of common stock of the Company or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; provided, however, that
for purposes of this subsection (a), the following share acquisitions shall not
constitute a Change of Control; (A) any acquisition directly from the Company or
(B) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or
b) The consummation of any merger or other business combination of the
Company, the sale or lease of all or substantially all the Company’s assets or
any combination of the foregoing transactions (each a “Transaction”) other than
a Transaction immediately following which the stockholders of the Company and
any trustee or fiduciary of any Company employee benefit plan immediately prior
to the Transaction own at least sixty percent (60%) of the voting power,
directly or indirectly, of (A) the surviving corporation in any such merger or
other business combination; (B) the purchaser or lessee of the Company’s assets;
or (C) both the surviving corporation and the purchaser or lessee in the event
of any combination of Transactions; or
c)
Within any 24-month period, the persons who were directors immediately before
the beginning of such period (the “Incumbent Directors”) shall cease (for any
reason other than death) to constitute at least a majority of the Board of
Directors of the Company or the board of directors of a successor to the
Company.
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For this purpose, any director who was not a director at the beginning of such
period shall be deemed to be an Incumbent Director if such director was elected
to the Board of Directors of the Company by, or on the recommendation of or with
the approval of, at least three-fourths of the directors who then qualified as
Incumbent Directors (so long as such director was not nominated by a person who
has expressed an intent to effect a Change of Control or engage in a proxy or
other control contest); or.
d) Such other event or transaction as the Board of Directors of the Company
shall determine constitutes a Change of Control.
You acknowledge that as a result of the foregoing acceleration of vesting and
exercisability, to the extent that the aggregate Fair Market Value of all Shares
subject to stock options that are Incentive Stock Options which are exercisable
for the first time by you during any calendar year (under all plans of the
Company and its subsidiaries, if any) exceeds $100,000, all or any portion of
the Option, as well as any other stock option held by you, may become a stock
option which is not an Incentive Stock Option.
7. Transferability. Unless otherwise determined by the Committee, the Option
shall not be transferable other than by will or the laws of descent and
distribution. More particularly, the Option may not be assigned, transferred,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to these provisions, or the levy of an execution, attachment
or similar process upon the Option, shall be void.
You may designate a beneficiary or beneficiaries to exercise your rights with
respect to the Option upon your death. In the absence of any such designation,
benefits remaining unpaid at your death shall be paid to your estate.
8. Effect of Termination of Employment. Following the termination of your
employment with the Company or an Affiliate for any of the reasons set forth
below, your right to exercise the Option, as well as that of your beneficiary or
beneficiaries, shall be as follows:
a) Voluntary or Involuntary. In the event your employment is terminated
voluntarily or involuntarily for any reason other than retirement, death or
permanent disability, you may exercise the Option prior to its Expiration Date,
at any time within a period of up to two (2) years after such termination of
employment, to the full extent of the number of Shares you were entitled to
purchase under that portion of the Option which was vested as of the date of
termination of your employment. However, the Committee may, in its sole and
absolute discretion, except in the case of the termination of your employment
following the occurrence of a Change of Control, during a period of seventy-five
(75) days after such termination of employment and following ten (10) days’
written notice to you, reduce the period of time during which the Option may be
exercised to any period of time designated by the Committee, provided such
period is not less than ninety (90) days following termination of your
employment.
b) Retirement. You shall be deemed to have retired, solely for purposes of
this Agreement, in the event that your employment terminates for any reason
other than death or disability and you are at least 55 years of age.
(i) In the event you retire and you have completed ten (10) or more years of
service with the Company or an Affiliate, the unvested portion of the Option
shall immediately vest in full. Thereafter, you may exercise the Option at any
time prior to its Expiration Date, to the full extent of the Shares covered by
the Option that were not previously purchased.
(ii) In the event you retire and you have completed less than ten (10) years
of service with the Company or an Affiliate, you may exercise the Option prior
to its Expiration Date, at any time within a period of up to two (2) years after
the date of your retirement, to the full extent of the number of Shares you were
entitled to purchase under that portion of the Option which was vested as of the
date of your retirement.
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c) Death Prior to Age 55. In the event your death occurs before you attain the
age of fifty-five (55), while you are employed by the Company or an Affiliate,
or within three (3) months after the termination of your employment, the
unvested portion of the Option shall immediately vest in full. Thereafter, the
Option may be exercised prior to its Expiration Date, by your beneficiary(ies),
or a legatee(s) under your last will, or your personal representative(s) or the
distributee(s) of your estate, to the full extent of the Shares covered by the
Option that were not previously purchased:
(i) At any time within a period of up to two (2) years after your death if
such occurs while you are employed, or
(ii) At any time within a period of up to two (2) years following the
termination of your employment if your death occurs within three (3) months
thereafter.
d) Death After Age 55. In the event your death occurs after you attain the age
of fifty-five (55), while you are employed by the Company or an Affiliate, or
within three (3) months after the termination of your employment, the unvested
portion of the Option shall immediately vest in full. Thereafter, the Option may
be exercised prior to its Expiration Date, by your beneficiary(ies), or a
legatee(s) under your last will, or your personal representative(s) or the
distributee(s) of your estate, to the full extent of the Shares covered by the
Option that were not previously purchased:
(i) At any time, if you have completed ten (10) or more years of service with
the Company or an Affiliate; or
(ii) If you have completed less than ten (10) years of service with the
Company or an Affiliate, then at any time within a period of up to two (2) years
after the date of your death if such occurs while you are employed, or within a
period of up to two (2) years after the date of termination of your employment
if your death occurs within three (3) months thereafter.
e) Disability Prior to Age 55. In the event your employment terminates before
you attain the age of fifty-five (55), as a result of a permanent disability,
the unvested portion of the Option shall immediately vest in full. Thereafter,
the Option may be exercised prior to its Expiration Date, by you or by your
personal representative(s), at any time within a period of up to two (2) years
after your employment terminates due to such permanent disability, to the full
extent of the Shares covered by the Option that were not previously purchased.
You shall be considered permanently disabled if you suffer from a medically
determinable physical or mental impairment that renders you incapable of
performing any substantial gainful employment, and is evidenced by a
certification to such effect by a doctor of medicine approved by the Company. In
lieu of such certification, the Company shall accept, as proof of permanent
disability, your eligibility for long-term disability payments under the
applicable Long-Term Disability Plan of the Company.
f) Disability After Age 55. In the event your employment terminates as a
result of a permanent disability after you attain the age of fifty-five (55),
the unvested portion of the Option shall immediately vest in full. Thereafter,
the Option may be exercised prior to its Expiration Date, by you or by your
personal representative(s), to the full extent of the Shares covered by the
Option that were not previously purchased:
(i) At any time, if you have completed ten (10) or more years of service with
the Company or an Affiliate; or
(ii) If you have completed less than ten (10) years of service with the
Company or an Affiliate, then at any time within a period of two (2) years after
your employment terminates due to such permanent disability.
You shall be considered permanently disabled if you suffer from a medically
determinable physical or mental impairment that renders you incapable of
performing any substantial gainful employment, and is evidenced by
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a certification to such effect by a doctor of medicine approved by the Company.
In lieu of such certification, the Company shall accept, as proof of permanent
disability, your eligibility for long-term disability payments under the
applicable Long-Term Disability Plan of the Company.
g) Change in Duties/Leave of Absence. The Option shall not be affected by any
change of your duties or position or by a temporary leave of absence approved by
the Company, so long as you continue to be an employee of the Company or of an
Affiliate.
9. Repurchase Rights. If you exercise the Option within six (6) months prior to
or three (3) months after the date your employment with the Company or an
Affiliate terminates for any reason, whether voluntary or involuntary, with or
without cause (except as a result of death, permanent disability or retirement
pursuant to the Company’s retirement plans then in effect), the Company shall
have the right and option to repurchase from you, that number of Shares which is
equal to the number you purchased upon such exercise(s) within such time
periods, and you agree to sell such Shares to the Company.
The Company may exercise its repurchase rights by depositing in the United
States mail a written notice addressed to you at the latest mailing address for
you on the records of the Company (i) within thirty (30) days following the
termination of your employment for the repurchase of Shares purchased prior to
such termination, or (ii) within thirty (30) days after any exercise of the
Option for the repurchase of Shares purchased after your termination of
employment. Within thirty (30) days after the mailing of such notice, you shall
deliver to the Company the number of Shares the Company has elected to
repurchase and the Company shall pay to you in cash, as the repurchase price for
such Shares upon their delivery, an amount which shall be equal to the purchase
price paid by you for the Shares. If you have disposed of the Shares, then in
lieu of delivering an equivalent number of Shares to the Company, you must pay
to the Company the amount of gain realized by you from the disposition of the
Shares exclusive of any taxes due and payable or commissions or fees arising
from such disposition.
The Company may exercise its repurchase rights described above only in the event
you are terminated for cause, or if you breach any of the covenants contained in
Section 10 below.
If the Company exercises its repurchase option prior to the actual issuance and
delivery to you of any Shares pursuant to the exercise of the Option, no Shares
need be issued or delivered. In lieu thereof, the Company shall return to you
the purchase price you tendered upon the exercise of the Option to the extent
that it was actually received from you by the Company.
Following the occurrence of a Change of Control, the Company shall have no right
to exercise the repurchase rights set forth in this Section.
10. Employee Covenants. In consideration of benefits described elsewhere in
these Terms and Conditions and the Stock Option Agreement to which they apply,
and in recognition of the fact that, as a result of your employment with the
Company or any of its Affiliates, you have had or will have access to and gain
knowledge of highly confidential or proprietary information or trade secrets
pertaining to the Company or its Affiliates, as well as the customers,
suppliers, joint ventures, licensors, licensees, distributors, or other persons
and entities with whom the Company or any of its Affiliates does business
(“Confidential Information”), which the Company or its Affiliates have expended
time, resources, and money to obtain or develop and which have significant value
to the Company and its Affiliates, you agree for the benefit of the Company and
its Affiliates, and as a material condition to your receipt of benefits
described elsewhere in these Terms and Conditions and accompanying the Stock
Option Agreement, as follows:
a)
Non-Disclosure of Confidential Information. You acknowledge that you will
receive access or have received access to Confidential Information about the
Company or its Affiliates, that this information was obtained or developed by
the Company or its Affiliates at great expense and is zealously guarded by the
Company and its Affiliates from unauthorized disclosure, and that your
possession of this special knowledge is due solely to your employment with the
Company or one or more of its Affiliates. In recognition of the foregoing, you
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will not at any time during employment or following termination of employment
for any reason, disclose, use or otherwise make available to any third party,
any Confidential Information relating to the Company’s or any Affiliate’s
business, products, services, customers, vendors, or suppliers; trade secrets,
data, specifications, developments, inventions, and research activity; marketing
and sales strategies, information, and techniques; long and short term plans;
existing and prospective client, vendor, supplier, and employee lists, contacts,
and information; financial, personnel, and information system information and
applications; and any other information concerning the business of the Company
or its Affiliates which is not disclosed to the general public or known in the
industry, except for disclosure necessary in the course of your duties or with
the express written consent of the Company. All Confidential Information,
including all copies, notes regarding, and replications of such Confidential
Information will remain the sole property of the Company or its Affiliate, as
applicable, and must be returned to the Company or such Affiliate immediately
upon termination of your employment.
b) Return of Property. Upon termination of employment with the Company or any
of its Affiliates, or at any other time at the request of the Company, you shall
deliver to a designated Company representative all records, documents, hardware,
software, and all other property of the Company or its Affiliates and all copies
of such property in your possession. You acknowledge and agree that all such
materials are the sole property of the Company or its Affiliates and that you
will certify in writing to the Company at the time of delivery, whether upon
termination or otherwise, that you have complied with this obligation.
c) Non-Solicitation of Existing or Prospective Customers, Vendors, and
Suppliers. You specifically acknowledge that the Confidential Information
described in Section 10(a) includes confidential data pertaining to existing and
prospective customers, vendors, and suppliers of the Company or its Affiliates;
that such data is a valuable and unique asset of the business of the Company or
its Affiliates; and that the success or failure of the their businesses depends
upon the their ability to establish and maintain close and continuing personal
contacts and working relationships with such existing and prospective customers,
vendors, and suppliers and to develop proposals which are specific to such
existing and prospective customers, vendors, and suppliers. Therefore, during
your employment with the Company or any of its Affiliates and for the twelve
(12) months following termination of employment for any reason, you agree that
you will not, except on behalf of the Company or its Affiliates, or with the
Company’s express written consent, solicit, approach, contact or attempt to
solicit, approach, or contact, either directly or indirectly, on your own behalf
or on behalf of any other person or entity, any existing or prospective
customers, vendors, or suppliers of the Company or its Affiliates with whom you
had contact or about whom you gained Confidential Information during your
employment with the Company or its Affiliates for the purpose of obtaining
business or engaging in any commercial relationship that would be competitive
with the “Business of the Company” (as defined below in Section 10(e)(i)) or
cause such customer, supplier, or vendor to materially change or terminate its
business or commercial relationship with the Company or its Affiliates.
d) Non-Solicitation of Employees. You specifically acknowledge that the
Confidential Information described in Section 10(a) also includes confidential
data pertaining to employees and agents of the Company or its Affiliates, and
you further agree that during your employment with the Company or its Affiliates
and for the twelve (12) months following termination of employment for any
reason, you will not, directly or indirectly, on your own behalf or on behalf of
any other person or entity, solicit, contact, approach, encourage, induce or
attempt to solicit, contact, approach, encourage, or induce any of the employees
or agents of the Company or its Affiliates to terminate their employment or
agency with the Company or any of its Affiliates.
e) Non-Competition. You covenant and agree that during your employment with
the Company or any of its Affiliates and for the twelve (12) months following
termination of employment for any reason, you will not, in any geographic market
in which you worked on behalf of the Company or any of its Affiliates, or for
which you had any sales, marketing, operational, logistical, or other management
or oversight responsibility, engage in or carry on, directly or indirectly, as
an owner, employee, agent, associate, consultant, partner, or in any other
capacity, a business competitive with the Business of the Company. This
Section 10(e) shall not apply in the event of a Change in Control as described
in Section 6 above.
i) The “Business of the Company” shall mean any business or activity involved
in grocery or general merchandise retailing and supply chain logistics,
including but not limited to grocery distribution, business-to-business portal,
retail support services, and third-party logistics, of the type provided by the
Company or its Affiliates, or presented in concept to you by the Company or its
Affiliates at any time during your employment with the Company or any of its
Affiliates.
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ii) To “engage in or carry on” shall mean to have ownership in such business
(excluding ownership of up to 1% of the outstanding shares of a publicly-traded
company) or to consult, work in, direct, or have responsibility for any area of
such business, including but not limited to operations, logistics, sales,
marketing, finance, recruiting, sourcing, purchasing, information technology, or
customer service.
f) No Disparaging Statements. You agree that you will not make any disparaging
statements about the Company, its Affiliates, directors, officers, agents,
employees, products, pricing policies or services.
g) Remedies for Breach of These Covenants. Any breach of the covenants in this
Section 10 likely will cause irreparable harm to the Company or its Affiliates
for which money damages could not reasonably or adequately compensate the
Company or its Affiliates. Accordingly, the Company or any of its Affiliates
shall be entitled to all forms of injunctive relief (whether temporary,
emergency, preliminary, prospective, or permanent) to enforce such covenants, in
addition to damages and other available remedies, and you consent to the
issuance of such an injunction without the necessity of the Company or any such
Affiliate posting a bond or, if a court requires a bond to be posted, with a
bond of no greater than $500 in principal amount. In the event that injunctive
relief or damages are awarded to Company or any of its Affiliates for any breach
by you of this Section 10, you further agree that the Company or such Affiliate
shall be entitled to recover its costs and attorneys’ fees necessary to obtain
such recovery. In addition, you agree that upon your breach of any covenant in
this Section, the Option, and any other unexercised options issued under the
Plan or any other stock option plans of the Company will immediately terminate.
h) Enforceability of These Covenants. It is further agreed and understood by
you and the Company that if any part, term, or provision of these Terms and
Conditions should be held to be unenforceable, invalid, or illegal under any
applicable law or rule, the offending term or provision shall be applied to the
fullest extent enforceable, valid, or lawful under such law or rule, or, if that
is not possible, the offending term or provision shall be struck and the
remaining provisions of these Terms and Conditions shall not be affected or
impaired in any way.
11. Arbitration. You and the Company agree that any controversy, claim, or
dispute arising out of or relating to the Stock Option Agreement or the breach
of any of these Stock Option Terms and Conditions, or arising out of or relating
to your employment relationship with the Company or any of its Affiliates, or
the termination of such relationship, shall be resolved by binding arbitration
before a neutral arbitrator under rules set forth in the Federal Arbitration
Act, except for claims by the Company relating to your breach of any of the
employee covenants set forth in Section 10 above. By way of example only, claims
subject to this agreement to arbitrate include claims litigated under federal,
state and local statutory or common law, such as the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including
the Civil Rights Act of 1994, the Americans with Disabilities Act, the law of
contract and the law of tort. You and the Company agree that such claims may be
brought in an appropriate administrative forum, but at the point at which you or
the Company seek a judicial forum to resolve the matter, this agreement for
binding arbitration becomes effective, and you and the Company hereby knowingly
and voluntarily waive any right to have any such dispute tried and adjudicated
by a judge or jury. The foregoing not to the contrary, the Company may seek to
enforce the employee covenants set forth in Section 10 above, in any court of
competent jurisdiction.
This agreement to arbitrate shall continue in full force and effect despite the
expiration or termination of your Option or your employment relationship with
the Company or any of its Affiliates. You and the Company agree that any award
rendered by the arbitrator shall be final and binding and that judgment upon the
final award may be entered in any court having jurisdiction thereof. The
arbitrator may grant any remedy or relief that the arbitrator deems just and
equitable, including any remedy or relief that would have been available to you,
the
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Company or any of its Affiliates had the matter been heard in court. All
expenses of the arbitration, including the required travel and other expenses of
the arbitrator and any witnesses, and the costs relating to any proof produced
at the direction of the arbitrator, shall be borne equally by you and the
Company unless otherwise mutually agreed or unless the arbitrator directs
otherwise in the award. The arbitrator’s compensation shall be borne equally by
you and the Company unless otherwise mutually agreed or unless the law provides
otherwise.
12. Severability. In the event that any portion of these Terms and Conditions
shall be held to be invalid, the same shall not affect in any respect whatsoever
the validity and enforceability of the remainder of these Terms and Conditions.
9 |
Exhibit 10.2
LIMITED WAIVER AND AMENDMENT
Dated as of March 3, 2006
Citicorp North America, Inc.,
as Administrative Agent and Collateral Agent
Two Penns Way, Suite 200
New Castle, Delaware 19720
Re: Sunstone Hotel Partnership, LLC Term Credit Facility
Ladies and Gentlemen:
Reference is made to that certain Term Credit Agreement dated as of October 26,
2004, as amended, among Sunstone Hotel Partnership, LLC (“Borrower”); Sunstone
Hotel Investors, Inc. (“Parent Guarantor”) and the subsidiaries of the Borrower
listed therein as subsidiary guarantors, as guarantors; Citicorp North America,
Inc. (“CNAI”), as administrative agent and collateral agent (“Agent”); the
financial institutions identified therein as lenders (the “Lenders”) or lender
parties (the “Lender Parties”); Calyon New York Branch and Deutsche Bank
Securities Inc., as co-documentation agents, and Citigroup Global Markets Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley Senior
Funding, Inc., as joint lead arrangers and joint book running managers (as
amended prior to the date hereof, the “Credit Agreement”). Capitalized terms not
otherwise defined herein shall have their respective meanings set forth in the
Credit Agreement.
On or about December 22, 2005, SHP Ogden, LLC (the “Ogden Subsidiary”) ceased to
be bound by its applicable Excluded Subsidiary Agreement. Borrower desires that
the Ogden Subsidiary continue to be an Excluded Subsidiary for all purposes
under the Credit Agreement and the other Loan Documents, such that the Ogden
Subsidiary shall not be required to execute and deliver a Guaranty Supplement or
otherwise become a Guarantor, whether or not the Ogden Subsidiary incurs
Non-Recourse Debt not prohibited by the Credit Agreement within the 90 day
period set forth in Section 5.01(j)(i) of the Credit Agreement. Subject to the
terms and conditions of this Limited Waiver and Amendment (this “Agreement”),
Agent and the Lenders are willing to waive such compliance to such extent.
Furthermore, Borrower desires that the schedule amendment and document delivery
requirements set forth in the last clause of Section 5.01(j)(i) and in the
proviso of Section 5.01(j)(ii) be modified, effective as of October 26, 2004,
such that (i) to the extent necessary to make such Schedule 4.01(y) to the
Credit Agreement accurate and complete, Borrower shall provide an amended
Schedule 4.01(y) to the Administrative Agent within 15 Business Days after the
end of each calendar quarter, beginning with the calendar quarter ending
March 31, 2006 and (ii) Borrower shall provide copies of any new agreements in
respect of Non-Recourse Debt identified in such amended Schedule 4.01(y) to the
Administrative Agent promptly following any request by the Administrative Agent
therefor. Subject to the terms and conditions of this Agreement, Agent and the
Lenders are willing to agree to the foregoing.
At the request of Borrower, and in consideration of the mutual undertakings
herein expressed, Agent and the Lenders hereby (x) agree that the Ogden
Subsidiary shall continue to be an Excluded Subsidiary for all purposes under
the Credit Agreement and the other Loan Documents, such that, among other
things, the Ogden Subsidiary shall not be required to execute and deliver a
Guaranty Supplement or otherwise become a Guarantor, whether or not the Ogden
Subsidiary incurs Non-Recourse Debt not prohibited by the Credit Agreement
within the 90 day period set forth in Section 5.01(j)(i) of the Credit
Agreement; provided, however, that if the Ogden Subsidiary does not incur
Non-Recourse Debt not prohibited by the Credit Agreement by December 31, 2006,
the Ogden Subsidiary shall cease to be an
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Excluded Subsidiary on January 1, 2007 and shall be required to comply with the
provisions of Section 5.01(j)(i) (without reference to the provisions of this
Agreement) within ten (10) Business Days thereafter, and (y) waive
(i) compliance with all contrary provisions of the Credit Agreement solely to
the extent necessary to effect the agreement set forth in clause (x) above, and
(ii) any Default or Event of Default that would occur under the Credit Agreement
in the absence of the amendment set forth in clause (x) above and the waiver set
forth in clause (y)(i) above.
Agent and the Lenders also hereby (a) agree that the Schedule amendment and
document delivery requirements set forth in the last clause of
Section 5.01(j)(i) and in the proviso of Section 5.01(j)(ii) are hereby
modified, effective as of October 26, 2004, such that (i) to the extent
necessary to make Schedule 4.01(y) to the Credit Agreement accurate and
complete, Borrower shall provide an amended Schedule 4.01(y) to the
Administrative Agent within 15 Business Days after the end of each calendar
quarter, beginning with the calendar quarter ending March 31, 2006 and
(ii) Borrower shall provide copies of any new agreements in respect of
Non-Recourse Debt identified in such amended Schedule 4.01(y) to the
Administrative Agent promptly following any request by the Administrative Agent
therefor and (b) waive (i) compliance with all contrary provisions of the Credit
Agreement solely to the extent necessary to effect such amendments set forth in
clause (a) above, and (ii) any Default or Event of Default that would occur
under the Credit Agreement in the absence of the amendments set forth in clause
(a) above and the waiver set forth in clause (b)(i) above.
Borrower and Parent Guarantor represent and warrant that the factual matters
described herein are true and correct in all material respects as of the date
hereof.
The waivers, agreements and amendments set forth herein shall be limited
precisely as written, and nothing in this Agreement shall be deemed to
(x) constitute (i) a waiver of any other Default or Event of Default or (ii) a
waiver or amendment of any other term, provision or condition of the Credit
Agreement, any of the other Loan Documents or any other instrument or agreement
referred to therein, or (y) except as set forth herein, prejudice any right or
remedy that Agent or any Lender Party may now have or may have in the future
under or in connection with the Credit Agreement, the other Loan Documents or
any other instrument or agreement referred to in any of them or in equity or at
law.
This Agreement shall become effective as of the date first above written when,
and only when, Agent shall have received (i) counterparts of this Agreement
executed by Borrower, Parent Guarantor, Agent and the Required Lenders or, as to
any of the Lenders, advice satisfactory to Agent that such Lender has executed
this Agreement, and (ii) the Consent attached hereto executed by each Guarantor.
Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses
of Agent in connection with the preparation, execution, delivery and
administration, modification and amendment of this Agreement and any instruments
and documents to be delivered hereunder (including, without limitation, the
reasonable fees and expenses of counsel for Agent) in accordance with the terms
of Section 9.04 of the Credit Agreement.
On and after the effectiveness of this Agreement, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended by this Agreement.
The Credit Agreement (as modified to the extent specifically provided above),
the Notes and each of the other Loan Documents, except to the extent of the
limited waivers specifically provided
2
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above, are and shall continue to be in full force and effect and are hereby in
all respects ratified and confirmed. The execution, delivery and effectiveness
of this Agreement shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender or of Agent under the Credit
Agreement or any of the Loan Documents, nor constitute a waiver of any provision
of the Credit Agreement or any of the Loan Documents. This Agreement shall
constitute a Loan Document.
If you agree to the terms and provisions hereof, please evidence such agreement
by executing and returning a counterpart of this Agreement to Malcolm K.
Montgomery of Shearman & Sterling LLP by facsimile (646-848-7587), with four
duplicate originals by overnight courier.
[Balance of page intentionally left blank.]
3
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This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York.
Very truly yours, SUNSTONE HOTEL PARTNERSHIP, LLC
By
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
(Signatures continued on next page)
S-1
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Agreed as of the date first above written:
CITICORP NORTH AMERICA, INC.,
as Administrative Agent and Collateral Agent and as a Lender
By /s/ Jeanne M. Craig
Name: Jeanne M. Craig
Title: Vice President
[Lender signatures continued on the following pages.]
S-2
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[Lender signature page] Merrill Lynch Capital Corporation,
as a Lender
By /s/ John C. Rowland
Name: John C. Rowland
Title: Vice President
[Signatures continued on next page]
S-3
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[Lender signature page] MORGAN STANLEY SENIOR FUNDING, INC.
as a Lender
By /s/ Eugene F. Martin
Name: Eugene F. Martin
Title: Vice President
Morgan Stanley Senior Funding, Inc.
By
Name:
Title:
[Signatures continued on next page]
S-3
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[Lender signature page] BARCLAYS BANK PLC
as a Lender
By /s/ Haejin Baek
Name: Haejin Baek
Title: Vice President
By
Name:
Title:
[Signatures continued on next page]
S-3
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[Lender signature page] Wachovia Bank, National Association,
as a Lender
By /s/ Dean R. Whitehill
Name: Dean R. Whitehill
Title: Vice President
By
Name:
Title:
[Signatures continued on next page]
S-3
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[Lender signature page] Bank of America, N.A.
as a Lender
By /s/ Lesa J. Butler
Name: Lesa J. Butler
Title: Senior Vice President
[Signatures continued on next page]
S-3
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[Lender signature page]
GRAYSON & CO
BY: BOSTON MANAGEMENT AND RESEARCH
AS INVESTMENT ADVISOR,
as a Lender
By /s/ Michael B. Botthof
Name: Michael B. Botthof
Title: Vice President
By
Name:
Title:
[Signatures continued on next page]
S-3
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[Lender signature page]
SENIOR DEBT PORTFOLIO
BY: BOSTON MANAGEMENT AND RESEARCH
AS INVESTMENT ADVISOR,
as a Lender
By /s/ Michael B. Botthof
Name: Michael B. Botthof
Title: Vice President
By
Name:
Title:
[Signatures continued on next page]
S-3
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[Lender signature page] BEAR STEARNS CORPORATE LENDING INC.
as a Lender
By /s/ Victor Bulvacchelli
Name: Victor Bulvacchelli
Title: Vice President
S-3
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CONSENT
Dated as of March 3, 2006
Each of the undersigned, as Guarantor under the Guaranty set forth in Article
VII of the Term Credit Agreement dated as of October 26, 2004, in favor of Agent
and the other Secured Parties identified in the Credit Agreement referred to in
the foregoing Limited Waiver and Amendment (the “Guaranty”), hereby consents to
such Limited Waiver and Amendment and hereby confirms and agrees that
notwithstanding the effectiveness of such Limited Waiver and Amendment, the
Guaranty is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects.
SUNSTONE HOTEL INVESTORS, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
BUY EFFICIENT, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
ROCHESTER BEVFLOW, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
ROCHESTER RIBM LESSEE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
RTS LESSEE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
[Signatures continued on next page]
C-1
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SHP DT BEVFLOW, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE HOTEL TRS LESSEE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE HOTELS, LLC
By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE NAPA MERLOT LESSEE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE NAPA, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE HOTELS ROCHESTER, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE OUTPARCEL, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
[Signatures continued on next page]
C-2
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SUNSTONE PLEDGECO, LLC
By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE ROCHESTER OUTPARCEL, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE WINDY HILL, L.L.C. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE WINDY HILLS LESSEE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
TTS FACILITIES, LLC By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-BOISE, INC. By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-BOISE, LLC
By: /s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
[Signatures continued on next page]
C-3
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SUNSTONE JAMBOREE, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
SUNSTONE JAMBOREE LESSEE, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-LAKE OSWEGO, INC. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-LAKE OSWEGO, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-PORTLAND, INC. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-PORTLAND, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WB SUNSTONE-RIVERSIDE, INC. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
[Signatures continued on next page]
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WB SUNSTONE-RIVERSIDE, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title:Vice President
WESTBROOK HOTEL CO-INVESTMENT PARTNERS IV, L.L.C. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WESTBROOK HOTEL PARTNERS IV, L.L.C. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WHP BEVFLOW, LLC
By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WHP TEXAS BEVERAGE-1, INC. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
WHP TEXAS BEVERAGE-2, INC. By:
/s/ Jon D. Kline
Name: Jon D. Kline
Title: Vice President
C-5 |
Exhibit 10.2
ANNEX I to
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
(GOLDMAN SACHS MORTGAGE COMPANY)
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1.
APPLICABILITY; OTHER APPLICABLE ANNEXES
1
2.
ADDITIONAL AND SUBSTITUTE DEFINITIONS
1
3.
INITIATION; CONFIRMATION; TERMINATION; FEES
19
4.
MANDATORY PAYMENT OR DELIVERY OF ADDITIONAL ASSETS
27
5.
INCOME PAYMENTS AND PRINCIPAL PAYMENTS
27
6.
CAUTIONARY SECURITY INTEREST
29
7.
PAYMENT, TRANSFER AND CUSTODY
30
8.
CERTAIN RIGHTS OF BUYER WITH RESPECT TO THE PURCHASED LOANS
37
9.
RESERVED
37
10.
REPRESENTATIONS
37
11.
NEGATIVE COVENANTS OF SELLER
40
12.
AFFIRMATIVE COVENANTS OF SELLER
41
13.
SINGLE-PURPOSE ENTITY
45
14.
EVENTS OF DEFAULT; REMEDIES
46
15.
SINGLE AGREEMENT
50
16.
NOTICES AND OTHER COMMUNICATIONS
51
17.
NON-ASSIGNABILITY
51
18.
GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
52
19.
NO RELIANCE; DISCLAIMERS
52
20.
INDEMNITY AND EXPENSES
54
21.
DUE DILIGENCE
55
22.
SERVICING
55
23.
TREATMENT FOR TAX PURPOSES
56
24.
INTENT
56
25.
MISCELLANEOUS
57
i
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SCHEDULE 1
Purchase Percentages and Applicable Spreads
1-1
SCHEDULE 2
Purchased Loan Information
2-1
EXHIBITS
EXHIBIT I
Form of Confirmation
EXHIBIT II
Authorized Representatives of Seller
EXHIBIT III
Form of Custodial Delivery Certificate
EXHIBIT IV-1
Form of Power of Attorney to Buyer
EXHIBIT IV-2
Form of Power of Attorney to Seller
EXHIBIT V
Representations and Warranties Regarding Purchased Loans
EXHIBIT VI
Form of Blocked Account Agreement
EXHIBIT VII
Form of Bailee Agreement
ii
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Supplemental Terms and Conditions
This Annex I forms a part of the Amended and Restated Master Repurchase
Agreement dated as of October 13, 2006 between Gramercy Warehouse Funding II LLC
and GKK Trading Warehouse II LLC, each as seller, and Goldman Sachs Mortgage
Company, as buyer (together with Annex I, the “Agreement”) and amends and
restates that certain Master Repurchase Agreement dated January 3, 2005 between
Gramercy Warehouse Funding II LLC and Buyer (as such agreement may have been
amended from time to time, the “Original Agreement”). Capitalized terms used in
this Annex I without definition shall have the respective meanings assigned to
such terms in the Agreement. This Annex I is intended to supplement the
Agreement and shall, wherever possible, be interpreted so as to be consistent
with the Agreement; however, in the event of any conflict or inconsistency
between the provisions of this Annex I, on the one hand, and the provisions of
the Agreement, on the other, the provisions of this Annex I shall govern and
control. All references in the Agreement and in this Annex I to “the Agreement”
shall be deemed to mean and refer to the Agreement, as supplemented and modified
by this Annex I or as otherwise modified after the date hereof.
1. APPLICABILITY; OTHER APPLICABLE ANNEXES
(a) Paragraph 1 of the Agreement (“Applicability”) is hereby deleted
and replaced with the following:
From time to time the parties hereto may enter into transactions in which Seller
agrees to transfer to Buyer one or more Eligible Loans against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Eligible Loans at a date certain (or such earlier date, in accordance with
the terms hereof), against the transfer of funds by Seller. Each such
transaction shall be referred to herein as a “Transaction” and, unless otherwise
agreed in writing, shall be governed by the Agreement, including any
supplemental terms or conditions contained in this Annex I and in any other
annexes identified herein or therein as applicable hereunder.
(b) In addition to this Annex I and the Schedules hereto, the
following Annexes and any Schedules thereto shall form a part of the Agreement
and shall be applicable thereunder:
Annex II — Names and Addresses for Communications Between Parties.
2. ADDITIONAL AND SUBSTITUTE DEFINITIONS
(a) The following capitalized terms in Paragraph 2 of the Agreement
(“Definitions”) are hereby deleted in their entirety:
(i) “Additional Purchased Securities”;
(ii) “Buyer’s Margin Amount”;
(iii) “Buyer’s Margin Percentage”;
(iv) “Margin Notice Deadline”;
(v) “Prime Rate”;
(vi) “Seller’s Margin Amount”; and
--------------------------------------------------------------------------------
(vii) “Seller’s Margin Percentage”.
(b) The following capitalized terms shall have the respective meanings
set forth below, in lieu of the meanings for such terms set forth in Paragraph 2
of the Agreement (“Definitions”):
“Act of Insolvency” shall mean, with respect to any party, (i) the commencement
by such party as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or
similar law, or such party seeking the appointment or election of a receiver,
conservator, trustee, custodian or similar official for such party or any
substantial part of its property, or the convening of any meeting of creditors
for purposes of commencing any such case or proceeding or seeking such an
appointment or election, (ii) the making by such party of a general assignment
for the benefit of creditors, or (iii) the admission in writing by such party of
such party’s inability to pay such party’s debts as they become due.
“Confirmation” shall have the meaning specified in Section 3(d) of this Annex I.
“Income” shall mean, with respect to any Purchased Loan at any time, any payment
or other cash distribution thereon of principal, interest, dividends, fees,
reimbursements or proceeds or other cash distributions thereon (including
casualty or condemnation proceeds).
“Margin Deficit” shall have the meaning specified in Section 4(a) of this Annex
I.
“Margin Excess” shall have the meaning specified in Section 4(b) of this Annex
I.
“Market Value” shall mean, with respect to any Purchased Loan as of any relevant
date, the lesser of (x) market value of such Purchased Loan on such date, as
determined by Buyer in its good faith but sole discretion, and (y) the par
amount of such Purchased Loan.
For purposes of Buyer’s determination, (i) the Market Value may be determined by
reference to an Appraisal, discounted cash flow analysis or other method (which
method shall be selected by Buyer in good faith), (ii) any amounts or claims
secured by related Eligible Property or Properties ranking senior to or pari
passu with the lien of the Purchased Loan may be deducted from the Market Value
of the Purchased Loan, (iii) the Market Value of any Defaulted Loan or
Delinquent Loan shall be zero (unless Buyer otherwise specifies), (iv) Buyer may
consider the representations and warranties set forth in Exhibit V (including a
breach thereof), and exceptions thereto in its determination of the Market Value
of the Purchased Loans and (iv) for the avoidance of doubt, Buyer may reduce
Market Value for any actual or potential risks (including risk of delay) posed
by any liens or claims on the related Eligible Property or Properties. Seller
shall cooperate in good faith with Buyer in its in good faith determination of
the market value of each item of underlying collateral (including, without
limitation, providing all information and documentation in the possession of
Seller regarding such item of underlying collateral or otherwise required by
Buyer).
“Pricing Rate” shall mean, for any Purchased Loan and any Pricing Rate Period,
an annual rate equal to the LIBOR Rate for such Pricing Rate Period plus the
Applicable Spread for the applicable Loan Type and shall be subject to
adjustment and/or conversion as provided in Sections 3(j), 3(k) and 3(s) of this
Annex I. The Pricing Rate shall be computed on the basis of a 360-day year and
the actual number of days elapsed.
“Purchase Price” shall mean, with respect to any Purchased Loan the price at
which such Purchased Loan is transferred by Seller to Buyer on the applicable
Purchase Date. The Purchase Price as of any Purchase Date for any Purchased
Loan of a particular Loan Type shall be an amount (expressed in
2
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dollars) equal to the product obtained by multiplying (i) the Market Value of
such Purchased Loan by (ii) the Purchase Percentage for the related Loan Type.
“Purchase Date” shall mean, with respect to any Purchased Loan, the date on
which such Purchased Loan is transferred by Seller to Buyer.
“Purchased Securities” shall mean, the “Purchased Securities” as defined in the
Securities Repurchase Agreement.
“Repurchase Date” with respect to any Purchased Loan shall mean the Facility
Termination Date or such earlier date specified in the related Confirmation, or
if applicable, the related Early Repurchase Date or Accelerated Repurchase Date.
“Repurchase Price” shall mean, with respect to any Purchased Loan as of any
date, the price at which such Purchased Loan is to be transferred from Buyer to
Seller upon termination of the related Transaction; in each case, such price
shall equal the sum of the Purchase Price of such Purchased Loan and the accrued
Price Differential with respect to such Purchased Loan as of the date of such
determination, minus all Income and cash actually received by Buyer in respect
of such Transaction and applied towards the Repurchase Price and/or Price
Differential pursuant to this Annex I.
(c) In addition to the terms defined in Paragraph 2 of the Agreement
(“Definitions”) not otherwise deleted pursuant to Section 2(a) of this Annex I
and the terms defined in Section 2(b) of this Annex I, the following capitalized
terms shall have the respective meanings set forth below:
“Accelerated Repurchase Date” shall have the meaning specified in Section
14(b)(i) of this Annex I.
“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, in
conformity with those accepted and prudent servicing practices in the industry
for loans of the same type and in a manner at least equal in quality to the
servicing the applicable servicer provides for assets similar to such Purchased
Loans that it owns.
“Affiliate” shall mean, when used with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person. Control shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise and “controlling” and “controlled” shall have meanings
correlative thereto.
“Aggregate Repurchase Price” shall mean, as of any date of determination, the
aggregate Repurchase Price (excluding any accrued and unpaid Price Differential)
of all Transactions outstanding as of such date.
“Agreement” shall have the meaning specified in the introductory paragraph of
this Annex I.
“Alternative Rate” shall have the meaning specified in Section 3(k) of this
Annex I.
“Alternative Rate Transaction” shall mean, with respect to any Pricing Rate
Period, any Transaction with respect to which the Pricing Rate for such Pricing
Rate Period is determined with reference to the Alternative Rate.
3
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“Applicable Spread” shall mean, (i) with respect to a Purchased Loan, so long as
no Event of Default shall have occurred and be continuing, the per annum rate
specified in Schedule 1 attached hereto as being the “Applicable Spread” for the
Purchased Loans in such Loan Type, and (ii) in each case, after the occurrence
and during the continuance of an Event of Default, the applicable per annum rate
described in clause (i) of this definition, plus 400 basis points (4.0%).
“Appraisal” shall mean an appraisal of any Eligible Property prepared by a
licensed appraiser approved by Buyer in its reasonable discretion, in accordance
with the Uniform Standards of Professional Appraisal Practice of the Appraisal
Foundation, in compliance with the requirements of Title 11 of the Financial
Institution Reform, Recovery and Enforcement Act and utilizing customary
valuation methods such as the income, sales/market or cost approaches, as any of
the same may be updated by recertification from time to time by the appraiser
performing such Appraisal.
“Asset Base” shall mean, as of any date of determination, the aggregate Asset
Base Components of all Purchased Loans transferred by the Seller to the Buyer
hereunder as of such date.
“Asset Base Component” shall mean, as of any date of determination, with respect
to each Purchased Loan, the product of its Market Value multiplied by the
Purchase Percentage applicable to such Purchased Loan as of such date.
“Assignment of Leases” shall mean, with respect to any Purchased Loan which is a
mortgage loan, any assignment of leases, rents and profits or equivalent
instrument, whether contained in the related Mortgage or executed separately,
assigning to the holder or holders of such Mortgage all of the related
Mortgagor’s interest in the leases, rents and profits derived from the
ownership, operation, leasing or disposition of all or a portion of the related
Mortgaged Property as security for repayment of such Purchased Loan.
“Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment
of the mortgage, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related property is
located to reflect the assignment and pledge of the Mortgage.
“Bailee” shall mean such third party as Buyer and Seller shall mutually approve
in their sole discretion.
“Bailee Agreement” shall mean the Bailee Agreement among Seller, Buyer and
Bailee in the form of Exhibit VII hereto.
“Bankruptcy Code” shall mean the United State Bankruptcy Code of 1978, as
amended from time to time.
“Blocked Account” shall have the meaning specified in Section 5 of this Annex
I.
“Blocked Account Agreement” shall mean the Blocked Account Agreement, in the
form attached hereto as Exhibit VI (or such other form as shall have been
approved by Buyer, such approval not to be unreasonably withheld, delayed or
conditioned), executed by Buyer, Seller and the Depository Bank (and any
amendment thereto or any successor thereto or replacement thereof executed by
Buyer, Seller and the Depository Bank).
“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a
day on which the New York Stock Exchange, the Federal Reserve Bank of New York
or the Custodian is authorized or obligated by law or executive order to be
closed.
4
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“Buyer” shall mean Goldman Sachs Mortgage Company, and any successor or assign.
“Capital Lease Obligations” shall mean, for any Person, all obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of the Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
“Change of Control” shall mean the occurrence of any of the following with
respect to any Person:
(i) a Transfer of all or substantially all of such Person’s assets
(excluding any such Transfer in connection with any securitization transaction
involving, or the sale of, Repurchased Loans or Repurchased Securities or other
assets of Seller used in other repurchase or other similar transactions in the
ordinary course of such Person’s business); or
(ii) a merger, consolidation or other transaction in which more than
50% of the voting common equity of such Person or the surviving entity
immediately after such merger, consolidation or such other transaction is not
owned, directly or indirectly, by persons who were, directly or indirectly,
equityholders of such Person immediately prior thereto; or
(iii) a majority of the members of the board of directors of such
Person changes during any twelve (12) month period after the date hereof.
“Collection Period” shall mean with respect to the Remittance Date in any month,
the period beginning on but excluding the Cut-off Date in the month preceding
the month in which such Remittance Date occurs and continuing to and including
the Cut-off Date immediately preceding such Remittance Date.
“Costs” shall mean, with respect to any Purchased Loan, all out-of-pocket
obligations, costs, fees, indemnities and expenses in respect of such Purchased
Loan actually incurred by Buyer.
“Custodial Agreement” shall mean the Custodial Agreement entered into by and
among Custodian, Seller and Buyer.
“Custodial Delivery Certificate” shall mean the delivery certificate, a form of
which is attached hereto as Exhibit III, executed by Seller in connection with
its delivery of a Purchased Loan File to Buyer or its designee (including the
Custodian) pursuant to Section 7 of this Annex I.
“Custodian” shall mean Wells Fargo Bank, N.A. or any successor Custodian
appointed by Buyer.
“Cut-off Date” shall mean the last Business Day of the calendar month preceding
each Remittance Date.
“Debt to Equity Ratio” shall mean the ratio of Total Indebtedness to Tangible
Net Worth without regard to the application of FAS 140 or FIN 46).
“Default” shall mean any event that, with the giving of notice, the passage of
time, or both, would constitute an Event of Default.
5
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“Defaulted Loan” shall mean any Purchased Loan as to which (A) there is a
material breach beyond any applicable cure period of a material representation,
warranty or covenant by the related borrower or obligor under the applicable
Purchased Loan Documents or by Seller under Exhibit V, (B) there is a material
default beyond any applicable cure period under the related Purchased Loan
Documents in the payment when due of interest, principal or any other amounts
which material default continues, (C) any other material “Event of Default”
under the related Purchased Loan Document, (D) to the extent that the related
Transaction is deemed a loan under federal, state or local law Buyer ceases to
have a first priority perfected security interest or (E) the related Purchased
Loan File or any portion thereof has been released from the possession of the
Custodian under the Custodial Agreement to anyone other than Buyer or any
Affiliate of Buyer except in accordance with the terms of the Custodial
Agreement.
“Delinquent Loan” shall mean any Purchased Loan as to which the payment of
principal and/or interest owed thereunder by the underlying obligor is 30 days
or more past due.
“Depository Bank” shall mean such depository bank appointed by Seller with the
prior written consent of Buyer which delivers a deposit account agreement in the
form of the Blocked Account Agreement or another form reasonably acceptable to
Buyer.
“Diligence Fee” shall mean fees (so long as no Event of Default is continuing,
not to exceed $50,000 annually with respect to this Agreement and the Securities
Repurchase Agreement) payable by Seller to Buyer in respect of Buyer’s
out-of-pocket expenses (other than legal expenses) incurred in connection with
its review of the Diligence Materials hereunder and under the Securities
Repurchase Agreement.
“Diligence Materials” shall mean the Preliminary Due Diligence Package together
with the Supplemental Due Diligence List.
“Draft Appraisal” shall mean a short form appraisal, “letter opinion of value,”
or any other form of draft appraisal reasonably acceptable to Buyer.
“Early Repurchase Date” shall have the meaning specified in Section 3(g) of this
Annex I.
“Early Repurchase Deposit” shall have the meaning specified in Section 3(j) of
this Annex I.
“Early Repurchase Deposit Application Date” shall have the meaning specified in
Section 3(j) of this Annex I.
“Early Repurchase Deposit Funding Date” shall have the meaning specified in
Section 3(j) of this Annex I.
“EBITDA” shall mean, for each fiscal quarter, with respect to Guarantor and its
consolidated Subsidiaries, an amount equal to (a) Net Income for such period
(excluding the effect of any extraordinary gains or losses resulting from the
sale of property or non-cash gains or losses outside the ordinary course of
business) plus (b), without duplication, an amount which, in the determination
of Net Income for such period, has been deducted for (i) interest expense for
such period, (ii) total federal, state, foreign or other income or franchise
taxes for such period, and (iii) all depreciation and amortization for such
period, all as determined with respect to any consolidated Subsidiary in
accordance with the methodology specified in the definition of Net Income, plus
(c) any nonrecurring fees and expenses incurred on or prior to the date of the
execution and delivery of the Agreement, less (d) any non-cash reserve activity.
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“Eligible Loans” shall mean any of the following types of transitional or
stabilized loans listed in (i) through (iv) below, (v) acceptable to Buyer in
the exercise of its sole and absolute discretion, (w) secured directly or
indirectly by an Eligible Property, (x) which has a loan term equal to or less
than 10 years (assuming exercise of all extension options), (y) as to which the
applicable representations and warranties set forth in Exhibit V are true and
correct in all material respects as of the applicable Purchase Date, and (z) has
a maximum LTV specified in Schedule 1 for the related Loan Type:
(i) performing Mezzanine Loans (or participation interests therein).
(ii) performing Mortgage Loans secured by first liens on Eligible
Properties (“First Mortgage Loans”).
(iii) senior subordinate participation interests (or a senior
subordinate promissory note that is, in effect, similar in nature to a senior
subordinate participation interest) in performing First Mortgage Loans that also
secures a senior promissory note (or senior interest) in such loan and may also
secure a junior subordinate promissory note (or junior subordinate interest) in
such loan (“Senior First Mortgage B Notes”).
(iv) junior participation interests (or a junior promissory note that
is, in effect, similar in nature to a junior participation interest) in
performing First Mortgage Loans that also secure a senior (or senior
subordinate) promissory note (or senior (or senior subordinate) interest) in
such loan (“Junior First Mortgage B Notes”).
Buyer may, in its sole and absolute discretion, consider sub-performing and
non-performing loans of the types listed in (i) through (iv) above.
“Eligible Property” shall mean a property that is a multifamily, retail, office,
industrial, warehouse, condominium or hospitality property or such other
property type acceptable to Buyer in the exercise of its good faith business
judgment; provided, however, that healthcare related properties, such as
assisted living, nursing homes, acute care, rehabilitation centers, diagnostic
centers and psychiatric centers, shall not qualify as an Eligible Property.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Annex I and,
as of the relevant date, any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
“ERISA Affiliate” means any corporation or trade or business (whether or not
incorporated) that is a member of any group of organizations described in
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA of which
Seller is a member at any relevant time.
“Event of Default” shall have the meaning specified in Section 14(a) of this
Annex I.
“Extended Repurchase Monthly Amount” means the quotient of (i) the aggregate
Repurchase Price of the Purchased Loans as of the Facility Termination Date,
divided by (ii) 6; provided, that to the extent Seller pays the aggregate
Repurchase Price in an amount in excess of the Extended Repurchase Monthly
Amount in any month, Seller shall receive a credit against the next month’s
required payment amount (and any subsequent months’ payments, if applicable) in
an aggregate amount equal to such excess.
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“Facility Amount” shall mean, as of any date of determination, the sum of (i)
$300,000,000 less the Securities Aggregate Repurchase Price outstanding under
the Securities Repurchase Agreement as of such date and (ii) all or any portion
of the Future Advance Facility Amount with respect to which the conversion
option set forth in Section 3(s) of this Annex I has been exercised by Seller.
“Facility Termination Date” shall mean September 13, 2009 unless extended
pursuant to Section 3(q) of this Annex I.
“Federal Funds Rate” shall mean, for any day, an interest rate per annum equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published for such day, (or, if such day is not a Business Day, for
the immediately preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 10 a.m. (New York time) on such day
or such transactions received by the Buyer from three Federal funds brokers of
recognized standing selected by the Buyer in its sole discretion.
“Fee Letter” shall mean that certain amended and restated letter agreement,
dated the date hereof between Buyer, Goldman, Sachs & Co. and Seller, as the
same may be amended, supplemented or otherwise modified from time to time.
“Filings” shall have the meaning specified in Section 6(b) of this Annex I.
“Financial Covenant Compliance Certificate” shall mean an Officer’s Certificate
to be delivered by Guarantor within 45 days after the end of each fiscal quarter
confirming that: (i) as of the fiscal quarter most recently ended, (w)
Guarantor’s Debt to Equity Ratio is less than or equal to 5:1; (x) Guarantor’s
Tangible Net Worth is equal to or greater than the sum of (i) $129,750,000 and
(ii) 75% of the proceeds of any equity issuances after Guarantor’s initial
public offering, (y) Guarantor’s Fixed Charge Coverage Ratio equals or exceeds
1.50:1, and (z) Guarantor’s Minimum Liquidity equals or exceeds, during the
first two years after the date of this Agreement, $10,000,000 and, thereafter,
$15,000,000; and (ii) Guarantor has cumulative positive EBITDA for the three
fiscal quarters most recently ended.
“Financing Transaction” shall mean a repurchase transaction or a financing
transaction between Buyer (or an Affiliate of Buyer) and any counterparty.
“First Mortgage B Note” shall mean any Senior First Mortgage B Note or Junior
First Mortgage B Note.
“Fitch” means Fitch Inc.
“Fixed Charge Coverage Ratio” shall mean, with respect to any Person and any
period of determination, the quotient of (i) EBITDA of such Person for such
period of determination divided by (ii) the Fixed Charges for such period.
“Fixed Charges” shall mean, with respect to any Person and any period of
determination, the sum of (a) debt service (including interest expense and
principal payments), (b) preferred dividends on any preferred securities and all
distributions due to the holders of any preferred limited partnership interests,
(c) the amortized portion of any capital lease obligations paid or accrued
during such period, (d) capital expenditures, and (e) any amounts payable under
any ground lease. Fixed Charges shall include a proportionate share of items
(a), (b), (c), (d) and (e) of all unconsolidated affiliates.
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“Future Advance Facility Amount” shall mean an amount equal to $100,000,000, or,
in the event of a conversion as provided in Section 3(s), such lesser amount
with respect to which Seller has not elected to exercise the option described in
Section 3(s).
“Future Advance Loan” shall mean any Eligible Loan with respect to which there
exists a continuing obligation on the part of the holder of the Eligible Loan
after the related closing date of such Eligible Loan to provide additional
funding to the underlying borrower, upon the terms and conditions of the
underlying loan documents for such Eligible Loan.
“GAAP” shall mean United States generally accepted accounting principles
consistently applied as in effect from time to time.
“Governmental Authority” shall mean any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
“Guarantee” shall mean, as to any Person, any obligation of such Person directly
or indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person or otherwise
protecting the holder of such Indebtedness against loss (whether by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, or to take-or-pay or otherwise); provided that the term
“Guarantee” shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Guarantee of a Person shall be
deemed to be an amount equal to the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith in accordance with
GAAP. The terms “Guarantee” and “Guaranteed” used as verbs shall have
correlative meanings.
“Guarantor” shall mean Gramercy Capital Corp., a Maryland corporation.
“Guaranty” shall mean that certain Guaranty dated as of January 3, 2005, made by
Guarantor in favor of Buyer, as the same may be amended, supplemented or
otherwise modified from time to time.
“Hedging Transactions” shall mean, with respect to any or all of the Purchased
Loans, any short sale of U.S. Treasury Securities or mortgage-related
securities, futures contract (including Eurodollar futures) or options contract
or any interest rate swap, cap or collar agreement or similar arrangements
providing for protection against fluctuations in interest rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies, entered into by Seller or the underlying obligor with respect to
any Purchased Loan and pledged to Seller as collateral for such Purchased Loan,
with one or more counterparties whose unsecured debt is rated at least AA (or
its equivalent) by any Rating Agency or, with respect to any Hedging Transaction
pledged to Seller as additional collateral for a Purchased Loan, such other
rating requirement applicable to such Hedging Transaction set forth in the
related Purchased Loan Documents or which is otherwise reasonably acceptable to
Buyer; provided that Seller shall not grant or permit any liens, security
interests, charges, or encumbrances with respect to any such hedging
arrangements for the benefit of any Person other than Buyer.
“Indebtedness” shall mean, for any Person: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the
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respective services are rendered; (c) Indebtedness of others secured by a lien
on the property of such Person, whether or not the respective Indebtedness so
secured has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such
Person; (e) Capital Lease Obligations of such Person; (f) obligations of such
Person under repurchase agreements or like arrangements; (g) Indebtedness of
others Guaranteed by such Person; (h) all obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person; and
(i) Indebtedness of general partnerships of which such Person is a general
partner.
“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified
in Section 20 of this Annex I.
“Independent Director” of any corporation or limited liability company means an
individual who is duly appointed as a member of the board of directors or board
of managers of such corporation or limited liability company and who is not, and
has never been, and will not while serving as Independent Director, be any of
the following:
(i) a member, partner, equityholder, manager, director, officer or
employee of Seller or any of its equityholders or affiliates (other than as an
independent director or manager of an affiliate of Seller that is not in the
direct chain of ownership of Seller and that is required by a creditor to be a
single purpose bankruptcy remote entity, provided that such independent director
or manager is employed by a company that routinely provides professional
independent directors or managers);
a creditor, supplier or service provider (including provider of professional
services) to Seller or any of its equityholders or affiliates (other than a
company that routinely provides professional independent managers or directors
and which also provides lien search and other similar services to Seller or any
of its equityholders or affiliates in the ordinary course of business);
(iii) a family member of any such member, partner, equityholder,
manager, director, officer, employee, creditor, supplier or service provider; or
(iv) a Person that controls (whether directly, indirectly or otherwise)
any of (i), (ii) or (iii) above.
“Insured Closing Letter and Escrow Instructions” shall mean a letter addressed
to Seller and Buyer from the title insurance underwriter (or any agent thereof)
acting as an agent for each Table Funded Purchased Loan and related escrow
instructions, which letter and instructions shall be in form and substance
reasonably acceptable to Buyer and Seller.
“LIBOR Rate” shall mean, with respect to any Pricing Rate Period pertaining to a
Transaction, a rate per annum determined for such Pricing Rate Period in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
1 - Reserve Requirement
“LIBOR” shall mean the rate per annum calculated as set forth below:
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(i) On each Pricing Rate Determination Date, LIBOR for the next
Pricing Rate Period will be the rate for deposits in United States dollars for a
one-month period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, on such date; or
(ii) On any Pricing Rate Determination Date on which no such rate
appears on Telerate Page 3750 as described above, LIBOR for the next Pricing
Rate Period will be determined on the basis of the arithmetic mean of the rates
at which deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on such date to prime banks in the London
interbank market for a one-month period.
All percentages resulting from any calculations or determinations referred to in
this definition will be rounded upwards, if necessary, to the nearest multiple
of 1/100th of 1% and all U.S. dollar amounts used in or resulting from such
calculations will be rounded to the nearest cent (with one-half cent or more
being rounded upwards).
“LIBOR Transaction” shall mean, with respect to any Pricing Rate Period, any
Transaction with respect to which the Pricing Rate for such Pricing Rate Period
is determined with reference to the LIBOR Rate.
“Loan Type” shall mean, with respect to any Purchased Loan, each of the loan
types listed in Schedule 1 attached hereto.
“LTV” shall mean, with respect to any Eligible Property or Properties, the ratio
of the aggregate outstanding debt (which shall include the related Eligible Loan
and all debt senior to or pari passu with such Eligible Loan) secured, directly
or indirectly, by such Eligible Property or Properties, taking into
consideration, in Buyer’s sole discretion, reserves, letters of credit, and
recourse to third parties acceptable to Buyer, to the aggregate value of such
Eligible Property or Properties as determined by Buyer in its sole and absolute
discretion. For purposes of Buyer’s determination, (i) the value may be
determined by reference to an Appraisal, discounted cash flow analysis or other
commercially reasonable method and (ii) for the avoidance of doubt, Buyer may
reduce value for any actual or potential risks (including risk of delay) posed
by any liens on the related Eligible Property or Properties.
“Material Adverse Effect” shall mean a material adverse effect on (a) the
property, business, operations, financial condition or prospects of Seller or
Guarantor, (b) the ability of Seller or Guarantor to perform its obligations
under any of the Transaction Documents to which it is a party, (c) the validity
or enforceability of any of the Transaction Documents, (d) the rights and
remedies of Buyer under any of the Transaction Documents, (e) the timely payment
of the Repurchase Price of or accrued Price Differential in respect of the
Purchased Loans or other amounts payable in connection therewith, or (f) the
aggregate Market Value of the Purchased Loans.
“Mezzanine Loan” shall mean any loan (including any participation interest
therein) secured by a pledge of the direct or indirect equity ownership
interests in a Person that owns a Mortgaged Property that also secures a
Mortgage Note.
“Mezzanine Note” shall mean a note or other evidence of indebtedness of the
owner or owners of direct or indirect equity ownership interests in an
underlying real property owner secured by a pledge of such ownership interests.
“Minimum Liquidity” shall mean, for any Person and any date of determination,
the sum of such Person’s Cash, Cash Equivalents and actual borrowing
availability under any credit facilities, as of such date of determination.
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“Monthly Statement” shall mean, for each calendar month during which the
Agreement shall be in effect, Seller’s or Servicer’s, as applicable,
reconciliation in arrears of beginning balances, interest and principal paid to
date and ending balances for each Purchased Loan, together with a certified
written report describing (a) any developments or events that are reasonably
likely to have a Material Adverse Effect, (b) any and all written modifications
to any Purchased Loan Documents not previously described in a written report,
(c) loan status, collection performance and any delinquency and loss experience
with respect to any Purchased Loan, (d) an update as to the expected repurchase
for all Purchased Loans in the facility and (e) such other information as
mutually agreed by Seller and Buyer which report shall be delivered to Buyer for
each calendar month during the term of the Agreement within ten (10) days
following the end of each such calendar month.
“Moody’s” shall mean Moody’s Investor Service, Inc.
“Mortgage” shall mean the mortgage, deed of trust, deed to secure debt or other
instruments, creating a valid and enforceable first or second lien, as
applicable, on or a first or second priority ownership interest in a Mortgaged
Property.
“Mortgage Loan” shall mean a commercial mortgage loan secured by a lien on real
property, and includes any First Mortgage Loan, Senior First Mortgage B Note and
Junior First Mortgage B Note.
“Mortgage Note” shall mean a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.
“Mortgaged Property” shall mean the real property or properties securing
repayment of the debt evidenced by a Mortgage Note, or, in the case of any
Mezzanine Loan, owned indirectly by the related obligor.
“Mortgagor” shall mean the obligor on a Mortgage Note, the grantor of the
related Mortgage and the owner of the related Mortgaged Property.
“Net Income” shall mean, with respect to any Person, for any period, the
consolidated net income for such period of such Person as reported in such
Person’s financial statements prepared in accordance with GAAP.
“New Loan” shall mean an Eligible Loan that Seller proposes to be included as a
Purchased Loan.
“Officer’s Certificate” shall mean, as to any Person, a certificate of the chief
executive officer, any vice chairman and the chief financial officer of such
Person or, for the purpose of executing certificates, the president, the vice
president and counsel responsible therefor.
“Originated Loan” shall mean any loan that is an Eligible Loan and whose related
loan documents were prepared by Seller or an Affiliate controlled by Seller.
“Person” shall mean an individual, corporation, limited liability company,
business trust, partnership, joint tenant or tenant-in-common, trust,
unincorporated organization, or other entity, or a federal, state or local
government or any agency or political subdivision thereof.
“Plan” shall mean an employee benefit or other plan established or maintained
during the five year period ended prior to the date of the Agreement or to which
Seller or any ERISA Affiliate makes, is obligated to make or has, within the
five year period ended prior to the date of the Agreement, been
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required to make contributions and that is covered by Title IV of ERISA or
Section 302 of ERISA or Section 412 of the Code.
“Plan Assets” shall mean assets of any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in
Section 4975(e)(l) of the Code) subject to Section 4975 of the Code, or (iii)
governmental plan (as defined in Section 3(32) of ERISA) subject to any other
federal, state or local laws, rules or regulations substantially similar to
Title I of ERISA or Section 4975 of the Code.
“Portfolio Loans” shall mean all of the Purchased Loans.
“Portfolio Securities” has the meaning specified in the Securities Repurchase
Agreement.
“Pre-Existing Loans” shall mean any loan that is an Eligible Loan and is not an
Originated Loan.
“Preliminary Due Diligence Package” shall mean with respect to any New Loan, the
following due diligence information relating to such New Loan to be provided by
Seller to Buyer pursuant to this Annex I:
(i) Seller’s internal investment committee memorandum, among other
things, outlining the proposed transaction, including potential transaction
benefits and all material underwriting risks, and Underwriting Issues,
anticipated exit strategies and all other characteristics of the proposed
transaction that a prudent buyer would consider material;
(ii) current rent roll, if applicable;
(iii) cash flow pro-forma, plus historical information, if available;
(iv) indicative interest coverage ratios;
(v) indicative loan-to-value ratio;
(vi) Seller’s or any Affiliate’s relationship with its potential
underlying borrower or any affiliate;
(vii) third party reports, to the extent available and applicable,
including:
(a) engineering and structural reports;
(b) current Appraisal;
(c) Phase I environmental report (including asbestos and lead paint
report) and, if applicable, Phase II or other follow-up environmental report if
recommended in Phase I;
(d) seismic reports; and
(e) operations and maintenance plan with respect to asbestos
containing materials;
(viii) documents evidencing such New Loan, or current drafts thereof,
including, without limitation, underlying debt and security documents,
guaranties, underlying borrower’s
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organizational documents, warrant agreements, loan and collateral pledge
agreements, and intercreditor agreements, as applicable;
(ix) a list that specifically identifies any Purchased Loan Documents
that relate to such Purchased Loan but are not in Seller’s possession;
(x) in the case of a participation interest, all information
described in this definition which would otherwise be provided for the
underlying Mortgage Loan if it constituted an Eligible Loan except that, as to
items set forth in subparagraphs (vii) and (xii), to the extent Seller possesses
such information or has access to such information because it was provided to
the related lead lender and made available to Seller, and in addition, all
documentation evidencing the participation interest;
(xi) insurance documentation as shall be reasonably satisfactory to
Buyer; and
(xii) analyses and reports with respect to such other matters
concerning the New Loan as Buyer may in its reasonable discretion require.
“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate
Period, the second (2nd) Business Day preceding the first day of the Pricing
Rate Period.
“Pricing Rate Period” shall mean (a) in the case of the first Pricing Rate
Period with respect to any Transaction, the period commencing on and including
the Purchase Date for such Transaction and ending on and including the last day
of the calendar month in which the Purchase Date occurs, (b) in the case of any
subsequent Pricing Rate Period, the period commencing on and including the first
day of a calendar month and ending on and including the last day of such
calendar month, and (c) in the case where the Remittance Date is not the first
day of a calendar month, the period commencing on and excluding the Remittance
Date and ending on (but including) the subsequent Remittance Date; provided,
however, that in no event shall any Pricing Rate Period end subsequent to the
Repurchase Date.
“Principal Payment” shall mean, with respect to any Purchased Loans, any payment
or prepayment of principal received in respect thereof (including casualty or
condemnation proceeds to the extent such proceeds are required under the
applicable Purchase Loan Documents to be applied toward the balance of the
underlying loan, or are not otherwise required under the underlying loan
documents to be reserved, escrowed, readvanced or applied for the benefit of the
obligor or the underlying real property). For purposes of clarification,
prepayment premiums, fees or penalties shall not be deemed principal.
“Purchase Percentage” shall mean, with respect to any Purchased Loan, the
“Purchase Percentage” specified in Schedule 1 for the related Loan Type (or as
otherwise specified in the applicable Confirmation).
“Purchased Loan Documents” shall mean, with respect to a Purchased Loan, the
documents comprising the Purchased Loan File for such Purchased Loan.
“Purchased Loan File” shall mean the documents specified as the “Purchased Loan
File” in Section 7(b) of this Annex I, together with any additional documents
and information required to be delivered to Buyer or its designee (including the
Custodian) pursuant to this Annex I.
“Purchased Loan Information” shall mean, with respect to each Purchased Loan,
the information set forth in Schedule 3 attached hereto.
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“Purchased Loan Schedule” shall mean a schedule of Purchased Loans, together
with the Purchased Loan Information for each such loan attached to each Trust
Receipt and Custodial Delivery Certificate.
“Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible
Loans sold by Seller to Buyer in such Transaction and (ii) with respect to the
Transactions in general, all Eligible Loans sold by Seller to Buyer and any
additional cash and/or other assets delivered by Seller to Buyer pursuant to
Section 4 of this Annex I.
“Quarterly Report” shall mean, for each fiscal quarter during which the
Agreement shall be in effect, Seller’s or Servicer’s, as applicable, certified
written report summarizing, with respect to the Mortgaged Properties securing
each Purchased Loan (or, in the case of a Purchased Loan secured (directly or
indirectly) by a portfolio of Mortgaged Properties, such information on a
consolidated basis), the net operating income, debt service coverage, occupancy,
the revenues per room (for hospitality properties) and sales per square footage
(for retail properties) and such other information as mutually agreed by Seller
and Buyer which report shall be delivered to Buyer for each fiscal quarter
during the term of the Agreement within 60 days following the end of each such
fiscal quarter.
“Rating Agency” shall mean any of Fitch, Moody’s and Standard & Poor’s.
“Reference Banks” shall mean banks each of which shall (i) be a leading bank
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market and (ii) have an established place of business in London. Initially, the
Reference Bank shall be JPMorgan Chase Bank. If any such Reference Bank should
be unwilling or unable to act as such or if Buyer shall terminate the
appointment of any such Reference Bank or if any of the Reference Banks should
be removed from the Reuters Monitor Money Rates Service or in any other way fail
to meet the qualifications of a Reference Bank, Buyer in the exercise of its
good faith business judgment may designate alternative banks meeting the
criteria specified in clauses (i) and (ii) above.
“Regulations T, U and X” shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.
“Remittance Date” shall mean the last calendar day of each month, or the
immediately preceding Business Day, if such calendar day shall not be a Business
Day.
“Repurchased Loan” shall mean any Purchased Loan which has been repurchased by
Seller pursuant to the terms hereof.
“Repurchased Security” shall have the meaning set forth in the Securities
Repurchase Agreement.
“Requirement of Law” shall mean any law, treaty, rule, regulation, code,
directive, policy, order or requirement or determination of an arbitrator or a
court or other governmental authority whether now or hereafter enacted or in
effect.
“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the
aggregate (without duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect during such Pricing Rate Period (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto) dealing with
reserve requirements
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prescribed for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of such Board of Governors) maintained by Buyer.
“Reset Date” shall mean, with respect to any Pricing Rate Period, the second
Business Day preceding the first day of such Pricing Rate Period with respect to
any Transaction.
“Scheduled Purchase Date” shall mean the date agreed between the parties or
specified in the applicable Confirmation as the “Purchase Date” or the
“Scheduled Purchase Date”.
“Securities Aggregate Repurchase Price” shall mean, as of any date of
determination, the “Aggregate Repurchase Price” (as defined in the Securities
Repurchase Agreement) as of such date.
“Securities Repurchase Agreement” shall mean the Master Repurchase Agreement
dated as of the date hereof between Seller and Goldman, Sachs & Co., as amended
supplemented or otherwise modified from time to time.
“Seller” shall mean, individually and collectively, Gramercy Warehouse Funding
II LLC, a Delaware limited liability company and GKK Trading Warehouse II, LLC,
a Delaware limited liability company, together with their permitted successors
and assigns. For the avoidance of doubt, either Seller may act to bind the
other Seller. Any notice, election or act taken by one Seller under this
Agreement or any of the other Transaction Documents shall be deemed to
constitute the action of the other Seller, and Buyer may in all such
circumstances rely on the action taken by either one as the action of both
entities.
“Servicer” shall mean GKK Manager LLC or an affiliate thereof, or such other
servicer mutually acceptable to Buyer and Seller.
“Servicing Agreement” shall mean that certain servicing agreement entered into
by Seller and Servicer or such other servicing agreement in each case approved
by Buyer in its reasonable discretion.
“Servicing Records” has the meaning specified in Section 22(b) of this Annex I.
“Significant Modification” shall mean (a) any modification or amendment of a
Purchased Loan which:
(i) reduces the principal amount of the Purchased Loan in question
other than (1) with respect to a dollar-for-dollar principal payment or (2)
reductions of principal to the extent of deferred, accrued or capitalized
interest added to principal which additional amount was not taken into account
by Buyer in determining the related Purchase Price;
(ii) increases the principal amount of a Purchased Loan other than
increases which are derived from accrual or capitalization of deferred interest
which is added to principal or protective advances;
(iii) modifies the payments of principal and interest when due of the
Purchased Loan in question;
(iv) changes the frequency of scheduled payments of principal and
interest in respect of a Purchased Loan;
(v) subordinates the lien priority of the Purchased Loan or the
payment priority of the Purchased Loan other than subordinations expressly
required under the then existing terms
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and conditions of the Purchased Loan (provided, however, the foregoing shall not
preclude the execution and delivery of subordination, nondisturbance and
attornment agreements with tenants, subordination to tenant leases, easements,
plats of subdivision and condominium declarations and similar instruments which
in the commercially reasonable judgment of Seller do not materially adversely
affect the rights and interest of the holder of the Purchased Loan in question);
(vi) releases (1) any collateral for the Purchased Loan other than
releases required under the then existing Purchased Loan Documents or releases
in connection with eminent domain or under threat of eminent domain or (2) any
underlying obligor with respect to a Purchased Loan;
(vii) waives, amends or modifies any cash management or reserve account
requirements of the Purchased Loan other than changes required under the then
existing Purchased Loan Documents;
(viii) waives any due-on-sale or due-on-encumbrance provisions of the
Purchased Loan other than waivers required to be given under the then existing
Purchased Loan Documents; and
(b) any modification, amendment or other material action with respect
to a Purchased Loan (or the related mortgage loan, if such Purchased Loan is a
Mezzanine Loan) which under the terms of the related intercreditor agreement or
participation agreement, as the case may be, requires the consent of Seller or
its “operating advisor” or the agent (as distinct from consultation rights).
“Single-Purpose Entity” shall mean a Person, other than an individual, which is
formed or organized solely for the purpose of holding, directly or indirectly
and subject to this Agreement and the Securities Repurchase Agreement, the
Purchased Loans and the Portfolio Securities, does not engage in any business
unrelated to the Purchased Loans and the Portfolio Securities, does not have any
assets other than the Purchased Loans and the Portfolio Securities or any
indebtedness other than as permitted by the Agreement and the Securities
Repurchase Agreement, has its own separate books and records and its own
accounts, in each case which are separate and apart from the books and records
and accounts of any other Person, holds itself out as being a Person, separate
and apart from any other Person and provides in its partnership agreement or
limited liability company agreement (as applicable) for the inclusion of at
least one Independent Director. If the foregoing entity is a limited
partnership or limited liability company, its partnership agreement or limited
liability company agreement (as applicable) shall provide that that the
dissolution and winding up or bankruptcy or insolvency filing of such
partnership or limited liability company shall require the unanimous consent of
all partners or members (including the affirmative vote of the independent
directors) and if the foregoing entity is a single-member limited liability
company whose single member is not itself a Single-Purpose Entity, its limited
liability company agreement shall provide that upon the occurrence of any event
that causes its sole member to cease to be a member during the term of this
Agreement, at least one of its independent directors shall automatically be
admitted as the sole member and shall preserve and continue the existence of the
entity without dissolution.
“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, Inc., a
division of the McGraw Hill Companies Inc.
“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or
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other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
“Supplemental Due Diligence List” shall mean, with respect to any New Loan,
information or deliveries concerning such New Loan that Buyer shall request in
addition to the Preliminary Due Diligence Package, including, without
limitation, a credit approval memorandum representing the final terms of the
underlying transaction, a loan-to-value ratio computation and a final debt
service coverage ratio computation for such proposed New Loan.
“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the
state in which a Mortgaged Property is located) survey of a Mortgaged Property
prepared by a registered independent surveyor and in form and content reasonably
satisfactory to Buyer and the company issuing the Title Policy for such
Mortgaged Property.
“Table Funded Purchased Loan” shall mean a Purchased Loan which is sold to Buyer
simultaneously with the origination or acquisition thereof, which origination or
acquisition is financed with the Purchase Price, pursuant to Seller’s request,
paid directly to a title company or other settlement agent, in each case,
approved by Buyer, for disbursement in connection with such origination or
acquisition. A Purchased Loan shall cease to be a Table Funded Purchased Loan
after the Custodian has delivered a Trust Receipt to Buyer certifying its
receipt of the Purchased Loan File therefor.
“Tangible Net Worth” shall mean, with respect to any Person, as of any date of
determination, (a) all amounts which would be included under capital on the
balance sheet of such Person at such date, determined in accordance with GAAP as
of such date, less (b)(i) amounts owing to such Person from Affiliates and (ii)
intangible assets of such Person as of such date.
“Telerate Page 3750” shall mean the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
“Title Policy” shall have the meaning specified in paragraph 2(d) of Exhibit V.
“Total Indebtedness” shall mean, with respect to any Person, as of any date of
determination, the aggregate Indebtedness of such Person as of such date less
the amount of any nonspecific balance sheet reserves maintained in accordance
with GAAP as of such date.
“Transaction” shall have the meaning specified in Section 1(a) of this Annex I.
“Transaction Conditions Precedent” shall have the meaning specified in Section
3(e) of this Annex I.
“Transaction Costs” shall mean, with respect to any Purchased Loan, all actual
out-of-pocket reasonable costs and expenses paid or incurred by Buyer and
payable by Seller relating to the purchase of such Purchased Loan (including
legal fees and other fees described in Section 20(b) of this Annex I).
Transaction Costs shall not include costs incurred by Buyer for overhead and
general administrative expenses.
“Transaction Documents” shall mean, collectively, the Agreement (including this
Annex I and any other annexes and schedules attached to the Agreement), the
Blocked Account Agreement, the Custodial Agreement, the Fee Letter, the
Servicing Agreement, all Transfer Documents, all Confirmations
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executed pursuant to this Annex I in connection with specific Transactions and
all other documents executed in connection herewith and therewith.
“Transfer” shall mean, with respect to any Person, any sale or other whole or
partial conveyance of all or any portion of such Person’s assets, or any direct
or indirect interest therein to a third party (other than in connection with the
transfer of a Purchased Loan to Buyer in accordance herewith), including
granting of any purchase options, rights of first refusal, rights of first offer
or similar rights in respect of any portion of such assets or the subjecting of
any portion of such assets to restrictions on transfer.
“Transfer Documents” shall mean, with respect to any Purchased Loan, all
applicable documents described in Section 7(b) of this Annex I necessary to
transfer all of Seller’s right, title and interest in such Purchased Loan to
Buyer in accordance with the terms of this Annex I.
“Trust Receipt” shall mean a trust receipt issued by the Custodian, or the
Bailee, as applicable, to Buyer confirming the Bailee’s or the Custodian’s, as
applicable, possession of certain Purchased Loan Files which are the property of
and held by the Bailee or the Custodian, as applicable, on behalf of Buyer (or
any other holder of such trust receipt) in the form required under the Custodial
Agreement or the Bailee Agreement.
“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of any
security interest is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New York, “Uniform Commercial Code” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions of this Annex I relating to such perfection or effect of
perfection or non-perfection.
“Underwriting Issues” shall mean, with respect to any Eligible Loan as to which
Seller intends to request a Transaction, all material information that has come
to Seller’s attention that, based on the making of commercially reasonable
inquiries and the exercise of reasonable care and diligence by a reasonable
institutional mortgage or mezzanine loan buyer in determining whether to
originate or acquire the Eligible Loan in question under the circumstances,
would, in the context of the totality of the Transaction in question, be
considered a materially “negative” factor (either separately or in the aggregate
with other information), (including, but not limited to, whether any of the
Eligible Loans were repurchased from any warehouse loan facility or a repurchase
transaction due to the breach of a representation and warranty or a material
defect in loan documentation or closing deliveries (such as any absence of any
material Purchased Loan Document(s)).
3. INITIATION; CONFIRMATION; TERMINATION; FEES
The provisions of Paragraph 3 of the Agreement (“Initiation; Confirmation;
Termination”) are hereby deleted and replaced in their respective entireties by
the following provisions of this Section 3:
(a) Seller may, from time to time, prior to the Facility Termination Date,
request that Buyer enter into a Transaction with respect to one or more New
Loans. Seller shall initiate each request by submitting a Preliminary Due
Diligence Package for Buyer’s review and approval. Notwithstanding anything to
the contrary herein, Buyer shall have no obligation to consider for purchase any
proposed Transaction that has an aggregate Repurchase Price (excluding the Price
Differential with respect to the Purchased Loans as of the date of
determination) that when combined with all Purchased Loans which have not been
repurchased by Seller hereunder exceeds the Facility Amount. Buyer shall have
the right to review all New Loans proposed to be sold to Buyer in any
Transaction and to conduct its own due diligence investigation of such New Loans
as Buyer determines is reasonably necessary. Seller agrees to
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promptly reimburse Buyer for its Diligence Fees upon request for payment or
reimbursement thereof. Notwithstanding any provision to the contrary herein or
any other Transaction Document, Buyer shall be entitled to make a determination,
in its sole and absolute discretion, whether a New Loan qualifies as an Eligible
Loan and whether to reject any or all of the New Loans proposed to be sold to
Buyer by Seller. Buyer shall have no obligation to consider for purchase any
New Loans proposed by Seller after the original Facility Termination Date or
during the Facility Extension Period (if applicable).
(b) Upon Buyer’s receipt of a complete Preliminary Due Diligence Package with
respect to a proposed Transaction, Buyer shall have the right within two (2)
Business Days, to request in a Supplemental Due Diligence List such additional
Diligence Materials and deliveries that Buyer deems necessary to properly
evaluate the New Loans. Upon Buyer’s receipt of such additional Diligence
Materials or Buyer’s waiver thereof, Buyer shall within five (5) Business Days
either (i) notify Seller of Buyer’s intent to proceed with the Transaction and
of its determination with respect to the Purchase Price and the Market Value for
the related New Loans (such notice, a “Preliminary Approval”) or (ii) deny, in
Buyer’s sole and absolute discretion, Seller’s request for the applicable
Transaction. Buyer’s failure to respond to Seller within five (5) Business
Days, as applicable, shall be deemed to be a denial of Seller’s request to enter
into the proposed Transaction, unless Buyer and Seller have agreed otherwise in
writing.
(c) Upon Seller’s receipt of Buyer’s Preliminary Approval with respect to a
Transaction, Seller shall, if Seller desires to enter into such Transaction with
respect to the related New Loans upon the terms set forth by Buyer in its
Preliminary Approval, deliver the documents set forth below in this Section 3(c)
with respect to each New Loan and related Eligible Property or Properties (to
the extent not already delivered in the Preliminary Due Diligence Package or
pursuant to a Supplemental Due Diligence List) as a condition precedent to
Buyer’s Final Approval and issuance of a Confirmation (as defined below), all in
a manner reasonably satisfactory to Buyer and pursuant to documentation
reasonably satisfactory to Buyer:
(i) Delivery of Purchased Loan Documents. Seller shall deliver to Buyer: (x)
with respect to any New Loan that is a Pre-Existing Loan, copies of the
Purchased Loan Documents, except for such Purchased Loan Documents that Seller
expressly and specifically disclosed in Seller’s Preliminary Due Diligence
Package were not in Seller’s possession; and (y) with respect to any New Loan
that is an Originated Loan, drafts of the Purchased Loan Documents.
(ii) Environmental and Engineering. Buyer shall have received a “Phase 1”
(and, if necessary, “Phase 2”) environmental report, an asbestos survey, if
applicable, and an engineering report, each in form reasonably satisfactory to
Buyer, by an engineer and an environmental consultant, approved by Buyer in its
reasonable discretion.
(iii) Appraisal. If obtained by Seller, Buyer shall have received either an
Appraisal (from the closing of the financing of the related Eligible Property or
Properties) or a Draft Appraisal of the related Eligible Property or
Properties. If Buyer receives only a Draft Appraisal prior to entering into a
Transaction, Seller shall use its best efforts to deliver an Appraisal on or
before thirty (30) days after the Purchase Date.
(iv) Insurance. Buyer shall have received certificates or other evidence of
insurance detailing insurance coverage in respect of the related Eligible
Property or Properties of types (including but not limited to casualty, general
liability and terrorism insurance coverage (consistent with market standard
requirements)), in amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in the Purchased Loan Documents and
otherwise reasonably satisfactory to Buyer. Such certificates or other evidence
shall indicate that Seller (or as to a New Loan that is a participation
interest, the lead lender on the related
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whole loan in which Seller is a participant) will be named as an additional
insured as its interest may appear and shall contain a loss payee endorsement in
favor of such additional insured with respect to the policies required to be
maintained under the Purchased Loan Documents.
(v) Survey. Buyer shall have received all surveys of the related Eligible
Property or Properties that are in Seller’s possession.
(vi) Lien Search Reports. Buyer or Buyer’s counsel shall have received, as
reasonably requested by Buyer, satisfactory reports of UCC, tax lien, judgment
and litigation searches and any existing Title Policies relating to the New
Loan, Eligible Property or Properties, Seller and related underlying obligor,
such searches to be conducted in each location Buyer shall reasonably designate;
provided that such materials were a part of the closing file for the financing
of such Eligible Property or Properties.
(vii) Opinions of Counsel. Buyer shall have received copies of all legal
opinions with respect to the New Loan which shall be in form and substance
reasonably satisfactory to Buyer.
(viii) Title Policy.
(a) With respect to any New Loan that is a Mortgage Loan, Seller shall have
delivered to Buyer (1) an unconditional commitment to issue a Title Policy or
Policies in favor of Seller and Seller’s successors and/or assigns with respect
to Seller’s interest in the related real property with an amount of insurance
that shall be not less than the related Repurchase Price or such other amount as
Buyer shall require in its reasonable discretion or (2) an endorsement or
confirmatory letter from the existing title company to an existing Title Policy
(in an amount not less than the related Repurchase Price or such other amount as
Buyer shall require in its reasonable discretion) in favor of Seller and
Seller’s successors and/or assigns that adds such parties as an additional
insured.
(b) With respect to any New Loan that is a First Mortgage B-Note, Seller shall
have delivered to Buyer a copy of an unconditional commitment to issue a Title
Policy or endorse an existing Title Policy in favor of the lead lender to whom
the related obligor issued the related Mortgage Note, in an amount not less than
the amount of such Mortgage Note and, if the First Mortgage B-Note is evidenced
by a separate promissory note rather than a participation certificate, in an
amount not less than the amount of all Mortgage Notes secured by the Mortgage
that secures the related promissory notes.
(c) With respect to a Mezzanine Loan, (i) Seller shall have delivered to Buyer
such evidence as Buyer on a case-by-case basis, in its sole discretion, shall
require of the ownership of the real property underlying the New Loan including,
without limitation, a copy of a Title Policy, issued by a title insurer and with
such endorsements (including, without limitation, a “Mezzanine Lender’s
Endorsement”, if obtained by Seller), in each case acceptable to Buyer in its
sole discretion, showing that title is vested in the related obligor or in an
entity in whom such obligor holds an equity interest and (ii) if obtained by
Seller, Seller shall have delivered to Buyer an Eagle 9 UCC Title Policy which
policy shall (x) provide an amount of insurance that shall be not less than the
related Repurchase Price or such other amount as Buyer shall require in its sole
discretion, (y) shall insure Seller’s security interest in the equity interests
pledged and (z) be assignable by its terms with a transfer of the Mezzanine
Loan, as applicable.
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(ix) Additional Real Estate Matters. To the extent obtained by Seller, Seller
shall have delivered to Buyer such other real estate related certificates and
documentation as may have been requested by Buyer, such as: (y) certificates of
occupancy issued by the appropriate Governmental Authority and either letters
certifying that the related Eligible Property or Properties is in compliance
with all applicable zoning laws issued by the appropriate Governmental Authority
or evidence that the related Title Policy includes a zoning endorsement and (z)
abstracts of all leases in effect at the Mortgaged Property delivered in
connection with the New Loan.
(x) First Mortgage B Notes. In the case of a First Mortgage B Note, in
addition to the delivery of the items in clauses (vi), (vii) and (viii), Buyer
shall have received all documentation specified in clauses (i) through (v) and
(ix) as if the underlying Mortgage Loan were the direct collateral to the extent
Seller possesses such documentation or has access to such documentation because
it was provided to the related lead lender and made available to Seller and, to
the extent applicable, all documents evidencing a participation interest,
including, but not limited to, an original participation certificate, if
applicable, and the related participation agreement and/or the related
intercreditor agreement.
(xi) Other Documents. Buyer shall have received such other documents as Buyer
or its counsel shall reasonably deem necessary.
Within five (5) Business Days of Seller’s delivery of the documents and
materials contemplated in clauses (i) through (xi) above, Buyer shall either (A)
if the Purchased Loan Documents with respect to the New Loan are not reasonably
satisfactory in form and substance to Buyer, notify Seller that Buyer has not
approved the New Loan or (B) notify Seller that Buyer agrees to purchase the New
Loan, subject to satisfaction (or waiver by Buyer) of the Transaction Conditions
Precedent (a “Final Approval”) set forth in Section 3(e), below. Buyer’s
failure to respond to Seller within five (5) Business Days shall be deemed to be
a denial of Seller’s request that Buyer purchase the New Loan, unless Buyer and
Seller have agreed otherwise in writing.
(d) Buyer shall promptly deliver to Seller a written confirmation of any Final
Approval in the form of Exhibit I attached hereto of each proposed Transaction
(a “Confirmation”); provided, that unless otherwise agreed by Seller, Buyer
shall deliver a separate Confirmation with respect to each New Loan which will
be the subject of a Transaction. Each Confirmation shall be deemed incorporated
herein by reference with the same effect as if set forth herein at length. With
respect to any Transaction, the Pricing Rate shall be determined initially on
the Pricing Rate Determination Date applicable to the first Pricing Rate Period
for such Transaction, and shall be reset on each Reset Date for the next
succeeding Pricing Rate Period for such Transaction. Buyer or its agent shall
determine in accordance with the terms of the Agreement the Pricing Rate on each
Pricing Rate Determination Date for the related Pricing Rate Period and notify
Seller of such rate for such period on the Reset Date.
(e) Provided each of the Transaction Conditions Precedent set forth in this
Section 3(e) shall have been satisfied (or waived by Buyer), and subject to
Seller’s rights under Section 3(f), Buyer shall transfer the Purchase Price to
Seller with respect to each New Loan for which it has issued a Confirmation on
the Purchase Date specified in such Confirmation (provided Seller has not
objected to such Confirmation within the time frame permitted under Section
3(f)), and the related Purchased Loan shall be concurrently transferred by
Seller to Buyer or its nominee. For purposes of this Section 3(e), the
“Transaction Conditions Precedent” shall be satisfied with respect to any
proposed Transaction if:
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(1) No (A) monetary or material non-monetary Default or (B) Event of Default
under the Agreement shall have occurred and be continuing as of the Purchase
Date for such proposed Transaction;
(2) Guarantor shall have delivered a true and accurate Financial Covenant
Compliance Certificate in a timely manner with respect to the most recently
ended fiscal quarter;
(3) Seller shall have delivered to the Buyer an Officer’s Certificate of the
Seller certifying that (A) the representations and warranties made by Seller in
any of the Transaction Documents are true and correct in all material respects
as of the Purchase Date for such Transaction and unless waived by Buyer (except
such representations which by their terms speak as of a specified date). If
requested by Buyer, Seller shall also deliver an Officer’s Certificate covering
such matters as Buyer may request with respect to matters relating to the
Agreement or the other Transaction Documents;
(4) Buyer shall have (A) determined, in accordance with the applicable
provisions of Section 3(a) of this Annex I that the New Loan proposed to be sold
to Buyer by Seller in such Transaction is an Eligible Loan and (B) obtained
internal credit approval for the inclusion of such New Loan as a Purchased Loan
in a Transaction;
(5) The applicable Purchased Loan File described in Section 7(b) shall have
been delivered to Custodian or Bailee and Buyer shall have received a Trust
Receipt from Custodian or Bailee with respect to such Purchased Loan File;
(6) Seller shall have delivered to each Mortgagor or obligor or related
servicer or lead lender under any Purchased Loan a direction letter in
accordance with Section 5(a) of this Annex I unless such Mortgagor or obligor or
related servicer or lead lender is already remitting payments to the Servicer
whereupon Seller shall direct the Servicer to remit all such amounts into the
Blocked Account in accordance with Section 5(a) of this Annex I and to service
such payments in accordance with the Servicing Agreement and the provisions of
this Annex I;
(7) Seller shall have paid to Buyer (i) any fees then due and payable under
the Fee Letter and (ii) any unpaid Diligence Fees and Transaction Costs in
respect of such Purchased Loan (which amounts, at Seller’s option, may be held
back from funds remitted to Seller by Buyer on the Purchase Date);
(8) No Purchased Loan shall be a Delinquent Loan or a Defaulted Loan;
(9) Buyer shall have received fully executed originals of all Transfer
Documents in form and substance reasonably satisfactory to Buyer, covering the
enforceability, authority, execution, delivery and perfection of the assignment
of the Purchased Loan and all Transfer Documents, and such other matters as
Buyer may reasonably require;
(10) Buyer shall have determined that after giving effect to the proposed
Transaction, (i) the Repurchase Price (exclusive of accrued and unpaid Price
Differential) of no single Purchased Loan exceeds 25% of the Aggregate
Repurchase Price and (ii) the aggregate Repurchase Price (exclusive of accrued
and unpaid Pricing Differential) of Purchased Loans secured directly or
indirectly by Eligible Properties which are hotels, lodging or hospitality
properties does not exceed 35% of the Aggregate Repurchase Price;
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(11) No event shall have occurred or circumstance shall exist which has a
Material Adverse Effect;
(12) There shall not have occurred (i) a material adverse change in the
financial condition of the Buyer which affects (or can reasonably be expected to
affect) materially and adversely the ability of the Buyer to fund its
obligations under this Agreement; (ii) a material change in financial markets,
an outbreak or escalation of hostilities or a material change in national or
international political, financial or economic conditions; (iii) a general
suspension of trading on major stock exchanges or suspension of trading in
Guarantor’s stock; or (iv) a disruption in or moratorium on commercial banking
activities or securities settlement services.
(f) (i) Each Confirmation, together with the Agreement, shall be conclusive
evidence of the terms of the Transaction covered thereby unless objected to in
writing by Seller no more than two (2) Business Days after the date such
Confirmation is received by Seller. An objection sent by Seller with respect to
any Confirmation must state specifically that the writing is an objection, must
specify the provision(s) of such Confirmation being objected to by Seller, must
set forth such provision(s) in the manner that Seller believes such provisions
should be stated, and must be received by Buyer no more than two (2) Business
Days after such Confirmation is received by Seller. Buyer, in its sole
discretion, may issue another Confirmation addressing Seller’s objections or may
elect not to proceed with the proposed Transaction.
(ii) With respect to any Transaction involving an Eligible Loan that is a
Future Advance Loan, the Seller shall indicate in the related Preliminary Due
Diligence Package that such Eligible Loan is a Future Advance Loan and shall
provide Buyer with the information required to complete the Confirmation
regarding such Future Advance Loan, as well as, as the then current total of the
remaining unfunded principal amount of all Purchased Loans that constitute
Future Advance Loans. On the purchase date of a Future Advance Loan, (i) the
amounts designated as the “Remaining Future Advance Amount” on the related
Confirmation shall be allocated to reduce the available amount of the Future
Advance Facility Amount and (ii) the amounts designated as the “Initial Advance
Amount” and the “Funded Future Advance Amount” shall be allocated to reduce the
available amount of the Facility Amount. Amounts allocated to the Future
Advance Facility Amount and subsequently allocated to the Facility Amount in
accordance with clause (ii) shall thereafter, be available to the extent set
forth herein, for subsequent Future Advance Loans. In no event shall the
aggregate unfunded portion of all Future Advance Loans that are Purchased Loans
exceed the Future Advance Facility Amount.
(g) Seller shall be entitled to terminate a Transaction on demand, and
repurchase the related Purchased Loan on any Business Day prior to the
Repurchase Date (an “Early Repurchase Date”); provided, however, that:
(i) No Event of Default shall be continuing or would occur or result from such
early repurchase,
(ii) Seller notifies Buyer in writing of its intent to terminate such
Transaction and repurchase the related Purchased Loan no later than five (5)
Business Days prior to the Early Repurchase Date, and
(iii) Seller shall pay to Buyer on the Early Repurchase Date, an amount equal
to the sum of the Repurchase Price for such Transaction, all Costs and any other
amounts payable by Seller and outstanding under the Agreement (including,
without limitation, Section 3(m) of this
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Annex I) with respect to such Transaction against transfer to Seller or its
agent of the related Purchased Loan.
(h) On the Repurchase Date (or the Early Repurchase Date, as applicable),
termination of the applicable Transactions will be effected by transfer to
Seller or, if requested by Seller, its designee of the related Purchased Loans,
and any Income in respect thereof received by Buyer (and not previously credited
or transferred to, or applied to the obligations of, Seller pursuant to Section
4 or Section 5) against the simultaneous transfer of the Repurchase Price, all
Costs and any other amounts payable and outstanding under the Agreement
(including without limitation, Sections 3(m), 3(n) and 3(o) of this Annex I, if
any) to an account of Buyer.
(i) So long as no Default or Event of Default has occurred and is then
continuing, the Repurchase Price with respect to one or more Purchased Loans may
be paid in part at any time upon two (2) Business Days prior written notice;
provided, however, that any such payment shall be accompanied by an amount
representing accrued Price Differential with respect to such Purchased Loan(s)
on the amount of such payment and all other amounts then due under the
Transaction Documents. Each partial payment of the Repurchase Price that is
voluntary (as opposed to mandatory under the terms of the Agreement) shall be in
an amount of not less than One Hundred Thousand Dollars ($100,000).
(j) In lieu of repaying the Repurchase Price, in whole or in part, with
respect to the Transactions when and as otherwise required or permitted by the
Agreement, Seller may elect to deposit any such amount (the “Early Repurchase
Deposit”) with Buyer (the date of such deposit, the “Early Repurchase Deposit
Funding Date”) until such date as the application of the Early Repurchase
Deposit towards the Repurchase Price would not cause Buyer to incur the costs
described in Section 3(m) hereof (the “Early Repurchase Deposit Application
Date”). The Early Repurchase Deposit shall be held in an interest-bearing
account controlled by Buyer and, at Buyer’s option, shall be accompanied by a
payment (as estimated by Buyer) equal to the difference between the interest
earned on the Early Repurchase Deposit and the Price Differential that will
accrue on a portion of the relevant Transaction equal to the Early Repurchase
Deposit during the period from the Early Repurchase Deposit Funding Date to the
Early Repurchase Deposit Application Date.
(k) If prior to the first day of any Pricing Rate Period with respect to any
Transaction, Buyer shall have reasonably determined (which determination shall
be conclusive and binding upon Seller absent manifest error) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Rate for such Pricing Rate Period. If such
notice is given, the Pricing Rate with respect to such Transaction for such
Pricing Rate Period, and for any subsequent Pricing Rate Periods until such
notice has been withdrawn by Buyer, shall be a per annum rate equal to the sum
of (i) the Federal Funds Rate, (ii) 0.25% and (iii) the Applicable Spread (the
“Alternative Rate”).
(l) Notwithstanding any other provision herein, if after the date of the
Agreement, the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for Buyer to effect
LIBOR Transactions as contemplated by the Transaction Documents, (a) the
commitment of Buyer hereunder to enter into new LIBOR Transactions and to
continue LIBOR Transactions as such shall forthwith be canceled, and (b) the
LIBOR Transactions then outstanding shall be converted automatically to
Alternative Rate Transactions on the last day of the then current Pricing Rate
Period or within such earlier period as may be required by law. If any such
conversion of a LIBOR Transaction occurs on a day that is not the last day of
the then current Pricing Rate Period with respect to such LIBOR Transaction,
Seller shall pay to Buyer such amounts, if any, as may be required pursuant to
Section 3(n).
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(m) Upon demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless
from any net loss or expense (not to include any lost profit or opportunity)
(including, without limitation, reasonable attorneys’ fees and disbursements)
which Buyer actually sustains or incurs as a consequence of (i) default by
Seller in terminating any Transaction after Seller has given a notice in
accordance with Section 3(g) of a termination of a Transaction, (ii) any payment
of all or any portion of the Repurchase Price, as the case may be, on any day
other than a Remittance Date (including, without limitation, any such loss or
expense arising from the reemployment of funds obtained by Buyer to maintain
Transactions hereunder or from fees payable to terminate the deposits from which
such funds were obtained, provided Seller shall not be obligated to reimburse
Buyer for the incremental cost of reemploying funds or terminating deposits
which arise solely as a result of Buyer depositing funds or employing funds at a
rate calculated other than by reference to LIBOR (as defined herein)) or (iii)
default by Seller in selling Eligible Loans after Seller has notified Buyer of a
proposed Transaction and Buyer has agreed to purchase such Eligible Loans in
accordance with the provisions of the Agreement. A certificate as to such
costs, losses, damages and expenses, setting forth the calculations therefor
shall be submitted promptly by Buyer to Seller and shall be conclusive and
binding on Seller in the absence of manifest error.
(n) If (A) the Transactions are characterized by a U.S. Federal, state or
local taxing authority in a manner other than as described in Section 23 of this
Annex I, or (B) after the date of the Agreement, the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof by any
Governmental Authority or compliance by Buyer with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority having jurisdiction over Buyer made subsequent to the
date hereof:
(i) shall subject Buyer to any tax of any kind whatsoever with respect to the
Transaction Documents, any Purchased Loan or any Transaction, or change the
basis of taxation of payments to Buyer in respect thereof (except for changes in
the rate of tax on Buyer’s overall net income);
(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of Buyer which is
not otherwise included in the determination of the LIBOR Rate hereunder; or
(iii) shall impose on Buyer any other condition due to the Agreement or the
Transactions;
and the result of any of the foregoing is to increase the cost to Buyer of
entering into, continuing or maintaining Transactions or to reduce any amount
receivable under the Transaction Documents in respect thereof; then, in any such
case, Seller shall pay Buyer, within ten (10) Business Days after written demand
therefor is received by Seller, any additional amounts necessary to compensate
Buyer for such increased cost payable or reduced amount receivable. If Buyer
becomes aware that it is entitled to claim any additional amounts pursuant to
this Section 3(o), it shall notify Seller in writing of the event by reason of
which it has become so entitled within a reasonable period after Buyer becomes
aware thereof. A certificate as to the calculation of any additional amounts
payable pursuant to this subsection shall be submitted by Buyer to Seller and
shall be conclusive and binding upon Seller in the absence of manifest error.
This covenant shall survive the termination of the Agreement and the repurchase
by Seller of any or all of the Purchased Loans.
(o) If Buyer shall have reasonably determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or
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compliance by Buyer or any corporation controlling Buyer with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof does have the
effect of reducing the rate of return on Buyer’s or such corporation’s capital
as a consequence of its obligations hereunder to a level below that which Buyer
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration Buyer’s or such corporation’s policies
with respect to capital adequacy) by an amount deemed by Buyer to be material,
then from time to time, within five (5) Business Days after submission by Buyer
to Seller of a written request therefor, Seller shall pay to Buyer such
additional amount or amounts as will compensate Buyer for such reduction. A
certificate as to the calculation of any additional amounts payable pursuant to
this subsection shall be submitted by Buyer to Seller and shall be conclusive
and binding upon Seller in the absence of manifest error. This covenant shall
survive the termination of the Agreement and the repurchase by Seller of any or
all of the Purchased Loans.
(p) If any of the events described in Section 3(k), Section 3(l), Section 3(n)
or Section 3(o) result in Buyer’s election to use the Alternative Rate or
Buyer’s request for additional amounts, then Seller shall have the option to
notify Buyer in writing of its intent to terminate the Transactions and
repurchase the Purchased Loans no later than one (1) Business Day after notice
is given to Buyer in accordance with Section 3(g). The election by Seller to
terminate the Transactions in accordance with this Section 3(p) shall not
relieve Seller for liability with respect to any additional amounts or increased
costs actually incurred by Buyer prior to the actual repurchase of the Purchased
Loans.
(q) The facility under the Agreement shall terminate on September 13, 2009,
unless extended as provided herein. Provided that (i) no Event of Default has
occurred and is continuing and (ii) Seller shall have paid to Buyer the
applicable fees in accordance with the Fee Letter, Seller may elect by written
notice not later than 45 days prior to such Facility Termination Date to extend
the Facility Termination Date for a period ending on the Remittance Date that is
six months after the initial Facility Termination Date (such period, the
“Facility Extension Period”). During the Facility Extension Period, the
Applicable Spread with respect to each Transaction shall be increased as set
forth in Schedule 1. On each Remittance Date during the Facility Extension
Period, Seller shall be obligated to pay the Extended Repurchase Monthly Amount,
in addition to payments in respect of the accrued Price Differential and any
other amounts due and payable under this Agreement, which shall be applied to
reduce the Repurchase Price of each Purchased Loan pro rata.
(r) From and after the Facility Termination Date (including during the
Facility Extension Period, if applicable), Buyer shall have no further
obligation to purchase any New Loans. On the Facility Termination Date, Seller
shall be obligated to repurchase all of the Purchased Loans and transfer payment
of the aggregate Repurchase Price for each such Purchased Loan, together with
the accrued and unpaid Price Differential and all Costs and other amounts due
and payable to Buyer hereunder. Following the Facility Termination Date, Buyer
shall not be obligated to transfer any Purchased Loans to Seller until payment
in full to Buyer of all amounts due hereunder; provided, however, upon Seller’s
request, Buyer shall transfer to Seller the Purchased Loans with respect to
which Buyer shall have received the full Repurchase Price and such other amounts
payable to Buyer in respect of such Purchased Loans in accordance with the
requirements of this Annex I, provided an Event of Default is not then
continuing and the transfer of such Purchased Loans would not result in a Margin
Deficit.
(s) Upon written request by the Seller, all or a portion of the Future
Advance Facility Amount may be converted and added
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to the Facility Amount, such that the Future Advance Facility Amount after such
conversion shall be reduced to zero or to such lesser unconverted amount.
4. MANDATORY PAYMENT OR DELIVERY OF
ADDITIONAL ASSETS
Paragraphs 4 (a) through (f) of the Agreement (“Margin Maintenance”) shall be
deleted in their entirety and replaced with the following provisions of this
Section 4:
(a) Buyer may determine and re-determine the Asset Base on any
Business Day and on as many Business Days as it may elect. If at any such time
the aggregate Repurchase Price of the Portfolio Loans is greater than the
aggregate Asset Base as determined by Buyer in its sole discretion and notified
to Seller on any Business Day (a “Margin Deficit”), then Seller shall, no later
than one (1) Business Day after receipt of such notice, either deliver to Buyer
(A) cash (which shall be applied to reduce the Repurchase Price of each
Purchased Loan to be determined by Seller) or (B) additional assets acceptable
to Buyer in its sole and absolute discretion in such amounts that after giving
effect to such delivery of cash or other assets, the aggregate Repurchase Price
of the Portfolio Loans does not exceed the Asset Base as re-determined by Buyer
after giving effect to the delivery of cash (or other assets) by Seller to Buyer
pursuant to this Section 4.
(b) If at any time the aggregate Repurchase Price of the Portfolio
Loans is less than the aggregate Asset Base as determined by Buyer in its sole
discretion and notified to Seller on any Business Day Seller requests such
notification (a “Margin Excess”), then Seller may, upon providing written notice
to Buyer by 3 p.m. on the Business Day prior to the date funds are requested,
request that Buyer advance additional funds (not to exceed such Margin Excess)
(a “Margin Excess Advance”) to Seller in respect of the Purchased Loans. On the
date set forth in such request, Buyer shall transfer cash to Seller in the
amount of such Margin Excess Advance. Each Margin Excess Advance by Buyer to
Seller shall increase the Repurchase Price of one or more Purchased Loans (such
aggregate increase not to exceed such Margin Excess Advance) as Buyer shall
determine in its sole discretion.
5. INCOME PAYMENTS AND PRINCIPAL PAYMENTS
Paragraph 5 of the Agreement (“Income Payments”) is hereby deleted and replaced
in its entirety by the following provisions of this Section 5:
(a) On or before the date hereof, Seller and Buyer shall establish and
maintain with the Depository Bank a deposit account owned by, in the name of and
under the sole control of Buyer with respect to which the Blocked Account
Agreement shall have been executed (such account, together with any replacement
or successor thereof, the “Blocked Account”). Seller shall cause all Income
with respect to the Purchased Loans or other assets (if cash) delivered under
Section 4 to be deposited in the Blocked Account no later than the next Business
Day following its collection and receipt thereof. Simultaneously with the
transfer of any Purchased Loan under Section 3, Seller shall deliver to each
Mortgagor or obligor (or the related collection account bank, as applicable), or
the related lead lender or servicer under a Purchased Loan an irrevocable
direction letter in form and substance satisfactory to Buyer instructing such
Person to remit to the Blocked Account all amounts payable to Seller under the
related Purchased Loan (unless such Mortgagor or obligor or related servicer or
lender is already remitting payments to the Servicer, whereupon Seller shall
direct Servicer to remit all such amounts into the Blocked Account and service
such payments in accordance with the Servicing Agreement and the provisions
hereof) and shall provide to Buyer written proof of such delivery. If a
Mortgagor or obligor (or the related collection account bank) or the related
lead lender or servicer under a Purchased Loan forwards any Income with respect
to such Purchased Loan to Seller rather than directly to the Blocked Account,
Seller shall (i) deliver an additional irrevocable direction letter to the
applicable Person and cause such Person to
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forward such amounts directly to the Blocked Account and (ii) hold such amounts
in trust for Buyer and immediately deposit in the Blocked Account any such
amounts. All Income in respect of the Portfolio Loans, which may include
payments in respect of associated Hedging Transactions, shall be deposited
directly into, or, if applicable, remitted directly from the applicable
underlying collection account to, the Blocked Account.
(b) So long as no Event of Default shall have occurred and be
continuing, all Income on deposit in the Blocked Account in respect of the
Portfolio Loans and the associated Hedging Transactions during each Collection
Period shall be applied by the Buyer on the related Remittance Date as follows:
(i) first, to Buyer an amount equal to the Price Differential which
has accrued and is outstanding in respect of the Transactions as of such
Business Day;
(ii) second, to Buyer an amount equal to all Costs and other amounts
payable by Seller and outstanding hereunder and under the other Transaction
Documents (other than the Repurchase Price);
(iii) third, if a Principal Payment in respect of any Purchased Loan
has been made during such Collection Period, to Buyer in respect of the
Repurchase Price an amount equal to the greater of (i) the product of the amount
of such Principal Payment multiplied by the Purchase Percentage and (ii) such
greater amount, such that after giving effect to such payment of the applicable
Repurchase Price, the aggregate Repurchase Price of the Portfolio Loans is less
than or equal to the Asset Base, as determined by Buyer after giving effect to
such payment;
(iv) fourth, during the Facility Extension Period, to Buyer the
Extended Repurchase Monthly Amount;
(v) fifth, during the Facility Extension Period, to Buyer in respect
of the Aggregate Repurchase Price until the Aggregate Repurchase Price for all
of the Purchased Loans has been reduced to zero; and
(vi) sixth, to remit to Seller the remainder, if any.
If on any Remittance Date, the amounts deposited in the Blocked Account shall be
insufficient to make the payments required under clauses (i) through (iv) of
this Section 5(b), the same shall constitute an Event of Default hereunder.
(c) If an Event of Default shall have occurred and be continuing, all
Income on deposit in the Blocked Account in respect of the Purchased Loans and
the associated Hedging Transactions shall be applied on the Business Day next
following the Business Day on which such funds are deposited in the Blocked
Account as follows:
(i) first, to Buyer, an amount equal to the Price Differential which
has accrued and is outstanding in respect of the Transactions as of such
Business Day;
(ii) second, to Buyer, all Costs and all other amounts payable by
Seller and outstanding hereunder and under the other Transaction Documents
(other than the Repurchase Price);
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(iii) third, to Buyer, an amount equal to the aggregate Repurchase
Price of the Purchased Loans, until the Aggregate Repurchase Price for all of
the Purchased Loans has been reduced to zero; and
(iv) fourth, to Seller, the remainder.
(d) If at any time during the term of any Transaction any Income is
distributed to Seller or Seller has otherwise received such Income and has made
a payment in respect of such Income to Buyer pursuant to this Section 5, and for
any reason such amount is required to be returned by Buyer to an obligor under
such Purchased Loan (either before or after the Repurchase Date), Buyer may
provide Seller with notice of such required return, and Seller shall pay the
amount of such required return to Buyer by 11:00 a.m., New York time, on the
Business Day following Seller’s receipt of such notice.
(e) Subject to the other provisions hereof, Seller shall be
responsible for all Costs in respect of any Purchased Loans to the extent it
would be so obligated if the Purchased Loans had not been sold to Buyer. Buyer
shall provide Seller with notice of any Costs promptly upon receiving such
notice, and Seller shall pay the amount of any Costs to Buyer by 11:00 a.m., New
York time, on the later of (i) five (5) Business Days after Buyer has informed
Seller that such amount is due under the Purchased Loan Documents and (ii) three
(3) Business Days following Seller’s receipt of such notice.
6. CAUTIONARY SECURITY INTEREST
Paragraph 6 of the Agreement (“Security Interest”) is hereby deleted and
replaced in its entirety by the following provisions of this Section 6:
(a) Buyer and Seller intend that all Transactions hereunder be sales
to Buyer of the Purchased Loans for all purposes (other than for U.S. Federal,
state and local income or franchise tax purposes) and not loans from Buyer to
Seller secured by the Purchased Loans. However, in the event any Transaction is
deemed to be a loan, Seller shall be deemed to have pledged to Buyer as security
for the performance by Seller of its obligations under such Transaction and
shall be deemed to have granted to Buyer a security interest in (i) the Blocked
Account, (ii) all of the Purchased Loans, (iii) all “general intangibles,”
“accounts” and “chattel paper” as defined in the UCC relating to or constituting
any and all of the foregoing, (iv) all Income from the Purchased Loans and (v)
all replacements, substitutions or distributions on or proceeds, payments and
profits of, and records and files relating to, any and all of the foregoing
(excluding any Margin Excess Advances).
(b) To the extent Buyer is deemed to have a security interest with
respect to the Purchased Loans as provided in Section 6(a) hereof, and with
respect to the security interests granted in subsection (c) of this Section 6,
Buyer shall have all of the rights and may exercise all of the remedies of a
secured creditor under the UCC and any other applicable law. In furtherance of
the foregoing, (i) Seller, at its sole cost and expense, shall cause to be filed
as a protective filing with respect to the Purchased Loans and as a UCC filing
with respect to the security interests granted in subsection (c)) of this
Section 6 one or more UCC financing statements in form satisfactory to Buyer (to
be filed in the filing office indicated therein), in such locations as may be
necessary to perfect and maintain perfection and priority of the outright
transfer and the security interest granted hereby (including under Section 22 of
this Annex I) and, in each case, continuation statements and any amendments
thereto (collectively, the “Filings”), and shall forward copies of such Filings
to Buyer upon completion thereof, and (ii) Seller shall from time to time, at
its own expense, deliver and cause to be duly filed all such further filings,
instruments and documents and take all such further actions as may be necessary
or desirable or as may be requested by Buyer with respect to the perfection and
priority of the outright transfer of the Purchased Loans and the security
interest deemed granted hereunder and in the Purchased Loans and the rights and
remedies of the Buyer with respect to
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the Purchased Loans (including under Section 22 of this Annex I) (including the
payments of any fees and taxes required in connection with the execution and
delivery of the Agreement).
(c) Seller hereby pledges to Buyer, as security for the performance by
Seller of its obligations under all Transactions, all Hedging Transactions
relating to Purchased Loans entered into by Seller and all proceeds thereof.
Seller shall take all action as is necessary or desirable to obtain consent to
assignment of any such Hedging Transaction to Buyer and shall cause the
counterparty under each such Hedging Transaction to enter into such document or
instrument satisfactory to Buyer, Seller and such counterparty, pursuant to
which such counterparty will covenant and agree to accept notice from Buyer to
redirect payments under such Hedging Transaction as Buyer may direct. So long
as no Event of Default shall be continuing, Buyer agrees that it will not
redirect payments under any Hedging Transaction pledged to Buyer pursuant to the
terms of this Section 6(c).
(d) In connection with the repurchase by Seller of any Purchased Loan
in accordance herewith, upon receipt of the Repurchase Price by Buyer, Buyer
will deliver to Seller, at Seller’s expense, such documents and instruments as
may be reasonably necessary to reconvey such Purchased Loan and any income
related thereto to Seller.
7. PAYMENT, TRANSFER AND CUSTODY
Paragraph 7 of the Agreement (“Payment and Transfer”) is hereby deleted and
replaced in its entirety by the following provisions of this Section 7:
(a) Subject to the terms and conditions of the Agreement, on the
Purchase Date for each Transaction, ownership of the Purchased Loans and all
rights thereunder shall be transferred to Buyer or its designee (including the
Custodian) against the simultaneous transfer of the Purchase Price to an account
of Seller specified in the Confirmation relating to such Transaction. On the
Purchase Date for the first Transaction, Buyer will provide Seller with a power
of attorney, substantially in the form attached as Exhibit IV-2 hereto, in
recordable form, allowing Seller to administer, operate and service such
Purchased Loans. Provided no Event of Default beyond any applicable cure period
shall have occurred and be continuing, the power of attorney shall be binding
upon Buyer and Buyer’s successors and assigns.
(b) With respect to each Table Funded Purchased Loan, Seller shall
cause the Bailee to deliver to the Custodian (with a copy to Buyer) by no later
than 1:00 p.m. (New York time), on the Purchase Date, by facsimile the related
promissory note (or the participation certificate, as applicable), the Insured
Closing Letter and Escrow Instructions, if any, the Bailee Agreement and a Trust
Receipt issued by the Bailee thereunder on or before the related Purchase Date.
In connection with the sale of each Purchased Loan, not later than 1:00 p.m.,
two (2) Business Days prior to the related Purchase Date (or on the related
Purchase Date, as may be agreed by Buyer and Seller on a case by case basis) (or
with respect to a Table Funded Purchased Loan not later than 1:00 p.m. (New York
time) on the third Business Day following the applicable Purchase Date), Seller
shall deliver or cause Bailee to deliver (with a copy to Buyer) and release to
the Custodian (together with the Custodial Delivery Certificate in the form
attached hereto as Exhibit III), and shall cause the Custodian to deliver a
Trust Receipt on the Purchase Date (or in the case of a Table Funded Purchased
Loan, not later than two (2) Business Days following the receipt by the
Custodian) confirming the receipt of the following original documents
(collectively, the “Purchased Loan File”), pertaining to each of the Purchased
Loans identified in the Custodial Delivery Certificate delivered therewith:
(i) With respect to each Purchased Loan that is a Mortgage Loan
(including a First Mortgage B Note), the following documents, as applicable:
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(A) The original Mortgage Note bearing all intervening endorsements,
endorsed “Pay to the order of without recourse” and signed in
the name of the last endorsee (the “Last Endorsee”) by an authorized Person (in
the event that the Purchased Loan was acquired by the Last Endorsee in a merger,
the signature must be in the following form: “[Last Endorsee], successor by
merger to [name of predecessor]”; in the event that the Purchased Loan was
acquired or originated by the Last Endorsee while doing business under another
name, the signature must be in the following form: “[Last Endorsee], formerly
known as [previous name]”) or a lost note affidavit in a form reasonably
approved by Buyer, with a copy of the applicable Mortgage Note attached thereto.
(B) The original or a copy of the loan agreement and the guarantee, if
any, executed in connection with the Purchased Loan.
(C) The original Mortgage with evidence of recording thereon, or a
copy thereof together with an officer’s certificate of Seller certifying that
such represents a true and correct copy of the original and that such original
has been submitted for recordation in the appropriate governmental recording
office of the jurisdiction where the Mortgaged Property is located.
(D) The originals of all assumption, modification, consolidation or
extension agreements with evidence of recording thereon, or copies thereof
together with an officer’s certificate of Seller certifying that such represent
true and correct copies of the originals and that such originals have each been
submitted for recordation in the appropriate governmental recording office of
the jurisdiction where the Mortgaged Property is located.
(E) The original Assignment of Mortgage to Buyer for each Purchased
Loan, in form and substance acceptable for recording and signed in the name of
the Last Endorsee (in the event that the Purchased Loan was acquired by the Last
Endorsee in a merger, the signature must be in the following form: “[Last
Endorsee], successor by merger to [name of predecessor]”; in the event that the
Purchased Loan was acquired or originated while doing business under another
name, the signature must be in the following form: “[Last Endorsee], formerly
known as [previous name]”).
(F) The originals of all intervening assignments of mortgage with
evidence of recording thereon, or copies thereof together with an officer’s
certificate of Seller certifying that such represent true and correct copies of
the originals and that such originals have each been submitted for recordation
in the appropriate governmental recording office of the jurisdiction where the
Mortgaged Property is located.
(G) The original Title Policy, or if the original Title Policy has not
been issued, the original irrevocable marked commitment to issue the same.
(H) The original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Purchased Loan.
(I) The original Assignment of Leases, if any, with evidence of
recording thereon, or a copy thereof together with an officer’s certificate of
Seller, certifying that such copy represents a true and correct copy of the
original that has been submitted for
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recordation in the appropriate governmental recording office of the jurisdiction
where the Mortgaged Property is located.
(J) The originals of all intervening assignments of assignment of
leases and rents, if any, or copies thereof, with evidence of recording thereon,
or copies thereof together with an officer’s certificate of Seller certifying
that such represent true and correct copies of the originals and that such
originals have each been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(K) A copy of the UCC financing statements, certified as true and
correct by Seller, and all necessary UCC continuation statements with evidence
of filing thereon or copies thereof certified by Seller to have been sent for
filing, and UCC assignments to Buyer, which UCC assignments shall be in form and
substance acceptable for filing in the applicable jurisdictions.
(L) The original environmental indemnity agreement or similar guaranty
or indemnity, whether stand-alone or incorporated into the applicable loan
documents (if any).
(M) The original omnibus assignment to Buyer or such other documents
necessary and sufficient to transfer to Buyer all of Seller’s right, title and
interest in and to the Purchased Loan (if any).
(N) A disbursement letter from the Mortgagor to the original mortgagee
or other evidence that the Purchased Loan has been fully disbursed (if
applicable).
(O) Mortgagor’s certificate or title affidavit (if any).
(P) A survey of the Mortgaged Property (if any) as accepted by the
title company for issuance of the Title Policy.
(Q) The original of any participation agreement, intercreditor
agreement and/or servicing agreement executed in connection with such Purchased
Loan.
(R) A copy of all servicing agreements and Servicing Records related
to such Purchased Loan, which Seller shall deliver to Servicer (with a copy to
Buyer).
(S) A copy of the Mortgagor’s opinions of counsel.
(T) An assignment of any management agreements, permits, contracts and
other material agreements (if any).
(U) Reports of UCC, tax lien, judgment and litigation searches as
requested by Buyer, conducted by search firms reasonably acceptable to Buyer
with respect to the Purchased Loan, Seller and the related underlying obligor,
such searches to be conducted in each location Buyer shall reasonably designate
and such reports reasonably satisfactory to Buyer.
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(V) The original or a copy of the intercreditor or loan coordination
agreement (if any) executed in connection with the Purchased Loan to the extent
the subject borrower, or an affiliate thereof, has encumbered its assets with
senior, junior or similar financing, whether mortgage financing or mezzanine
loan financing.
(W) Copies of all documents relating to the formation and organization
of the related obligor under such Purchased Loan, together with all consents and
resolutions delivered in connection with such obligor’s obtaining such Purchased
Loan.
(X) All other material documents and instruments evidencing,
guaranteeing, insuring or otherwise constituting or modifying or otherwise
affecting such Purchased Loan, or otherwise executed or delivered in connection
with, or otherwise relating to, such Purchased Loan, including all documents
establishing or implementing any lockbox pursuant to which Seller is entitled to
receive any payments from cash flow of the underlying real property.
(Y) Evidence that the Purchased Loan has been fully disbursed (if
applicable).
If Seller cannot deliver, or cause to be delivered, any of the documents and/or
instruments required above to be delivered as originals, Seller shall deliver a
photocopy thereof and, unless waived by Buyer, an Officer’s Certificate of
Seller certifying that such copy represents a true and correct copy of the
original. Seller shall then, in the event that Seller has a legitimate and
reasonable opportunity to obtain the original documents in question if the
document in question exists in original form (1) use reasonable efforts to
obtain and deliver the original document within 180 days after the related
Purchase Date (or such longer period after the related Purchase Date as Buyer
may consent to, which consent shall not be unreasonably withheld so long as
Seller is, as certified in writing to Buyer no less often than monthly, in good
faith attempting to obtain the original) and (2) after the expiration of such
reasonable efforts period, deliver to Buyer a certification that states, despite
Seller’s reasonable efforts, Seller was unable to obtain such original document.
(ii) With respect to each Purchased Loan which is a Mezzanine Loan
secured by a pledge of the equity ownership interests in an entity that owns
Eligible Property, the following, as applicable:
(A) The original Mezzanine Note signed in connection with the Purchased
Loan bearing all intervening endorsements, endorsed “Pay to the order of
without recourse” and signed in the name of the Last Endorsee by an
authorized Person (in the event that the Mezzanine Note was acquired by the Last
Endorsee in a merger, the signature must be in the following form: “[Last
Endorsee], successor by merger to [name of predecessor]”; in the event that the
Purchased Loan was acquired or originated by the Last Endorsee while doing
business under another name, the signature must be in the following form:
“[Last Endorsee], formerly known as [previous name]”) or a lost note affidavit
in a form reasonably approved by Buyer with a copy of the applicable Mezzanine
Note attached thereto.
(B) The original or a copy of the loan agreement and the guarantee, if
any, executed in connection with the Purchased Loan.
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(C) The original or a copy of the intercreditor or loan coordination
agreement executed in connection with the Purchased Loan to the extent the
subject borrower, or an affiliate thereof, has encumbered its assets with
senior, junior or similar financing, whether mortgage financing or mezzanine
loan financing.
(D) The original security agreement executed in connection with the
Purchased Loan.
(E) Copies of all documents relating to the formation and organization
of the borrower under such Purchased Loan, together with all consents and
resolutions delivered in connection with such borrower’s obtaining the Purchased
Loan.
(F) All other material documents and instruments evidencing,
guaranteeing, insuring or otherwise constituting or modifying or otherwise
affecting such Purchased Loan, or otherwise executed or delivered in connection
with, or otherwise relating to, such Purchased Loan, including all documents
establishing or implementing any lockbox pursuant to which Seller is entitled to
receive any payments from cash flow of the underlying real property.
(G) An omnibus assignment to Buyer or other documents necessary and
sufficient to transfer to Buyer all of Seller’s right, title and interest in and
to the Purchased Loan.
(H) The original of any participation agreement executed in connection
with such Purchased Loan.
(I) A copy of all servicing agreements and Servicing Records related
to such Purchased Loan, which Seller shall deliver to Servicer (with a copy to
Buyer).
(J) A copy of the borrower’s opinions of counsel.
(K) A copy of the UCC financing statements, certified as true and
correct by Seller, and all necessary UCC continuation statements with evidence
of filing thereon or copies thereof certified by Seller to have been sent for
filing, and UCC assignments to Buyer, which UCC assignments shall be in form and
substance acceptable for filing in the applicable jurisdictions.
(L) The original certificates representing the pledged equity
interests to the extent such interests are in certificated form.
(M) Stock or similar powers relating to each pledged equity interest,
executed in blank, if such equity interests are in certificated form.
(N) Assignment of any management agreements, agreements among equity
interest holders or other material contracts.
(O) If the pledged equity interests are not certificated, evidence
(which may be an Officer’s Certificate confirming such circumstances or in the
form of an executed instruction to register such pledge by the mezzanine
borrower and acknowledgment by the entity in which such pledged equity interests
are held) that the pledged equity
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interests have been transferred to, or otherwise made subject to a first
priority security interest in favor of, Seller.
(P) Copies of all material documents evidencing or securing the
related mortgage loan and any other documents affecting the related mortgaged
property to the extent in possession of Seller.
(Q) If the mezzanine borrower is an Affiliate of Seller, a pledge
agreement and any UCC financing statements, executed by the owner(s) of all the
equity interests of the mezzanine borrower as debtor in favor of Seller as
secured party (which pledge agreement and UCC financing statements shall be
transferred by Seller to Buyer), covering all equity interests in the mezzanine
borrower, if not previously delivered to Buyer, together with any related
original certificates of equity ownership and blank assignments thereof, all to
give Buyer a security interest in such equity as additional collateral for
Seller’s obligations.
(R) Evidence that the Purchased Loan has been fully disbursed (if
applicable).
In connection with the transfer of any Purchased Loan, if Seller cannot deliver,
or cause to be delivered, any of the documents and/or instruments referred to
above, required to be delivered as originals, Seller shall deliver a photocopy
thereof and, unless waived by Buyer, an Officer’s Certificate of Seller
certifying that such copy represents a true and correct copy of the original.
Seller shall then, in the event that Seller has a legitimate and reasonable
opportunity to obtain the original documents in question if the document in
question exists in original form (1) use reasonable efforts to obtain and
deliver the original document within 180 days after the related Purchase Date
(or such longer period after the related Purchase Date as Buyer may consent to,
which consent shall not be unreasonably withheld so long as Seller is, as
certified in writing to Buyer no less often than monthly, in good faith
attempting to obtain the original) and (2) after the expiration of such
reasonable efforts period, deliver to Buyer a certification that states, despite
Seller’s reasonable efforts, Seller was unable to obtain such original document.
(c) From time to time, Seller shall forward to the Custodian
additional original documents or additional documents evidencing any assumption,
modification, consolidation or extension of a Purchased Loan approved in
accordance with the terms of the Agreement, and upon receipt of any such other
documents, the Custodian shall hold such other documents on behalf of Buyer and
as Buyer shall request from time to time. With respect to any documents which
have been delivered or are being delivered to recording offices for recording
and have not been returned to Seller in time to permit their delivery hereunder
at the time required, in lieu of delivering such original documents, Seller
shall deliver to Buyer a true copy thereof with an officer’s certificate
certifying that such copy is a true, correct and complete copy of the original,
which has been transmitted for recordation. Seller shall deliver such original
documents to the Custodian promptly when they are received. With respect to all
of the Purchased Loans delivered by Seller to Buyer or its designee (including
the Custodian), Seller shall execute an omnibus power of attorney substantially
in the form of Exhibit IV-1 attached hereto irrevocably appointing Buyer its
attorney-in-fact with full power to (i) complete and record any Assignment of
Mortgage, (ii) complete the endorsement of any Mortgage Note or Mezzanine Note
and (iii) take such other steps as may be necessary or desirable to enforce
Buyer’s rights against any Purchased Loans and the related Purchased Loan Files
and the Servicing Records. Buyer shall deposit the Purchased Loan Files
representing the Purchased Loans, or cause the Purchased Loan Files to be
deposited directly, with the Custodian to be held by the Custodian on behalf of
Buyer. The Purchased Loan Files shall be maintained in accordance with the
Custodial Agreement. Any Purchased Loan Files not delivered to Buyer or its
designee
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(including the Custodian) are and shall be held in trust by Seller or its
designee for the benefit of Buyer as the owner thereof. Seller or its designee
shall maintain a copy of the Purchased Loan File and the originals of the
Purchased Loan File not delivered to Buyer or its designee. The possession of
the Purchased Loan File by Seller or its designee is at the will of Buyer for
the sole purpose of servicing the related Purchased Loan, and such retention and
possession by Seller or its designee is in a custodial capacity only. The books
and records (including, without limitation, any computer records or tapes) of
Seller or its designee shall be marked appropriately to reflect clearly the
transfer, subject to the terms and conditions of the Agreement, of the related
Purchased Loan to Buyer. Seller or its designee (including the Custodian) shall
release its custody of the Purchased Loan File only in accordance with written
instructions from Buyer, unless such release is required as incidental to the
servicing of the Purchased Loans or is in connection with a repurchase of any
Purchased Loan by Seller or is pursuant to the order of a court of competent
jurisdiction.
(d) In addition to any documents or instruments that are required to
be delivered by Seller to Buyer hereunder in connection with the transfer of
Purchased Loans by Seller to Buyer, on the date of the Agreement, Buyer shall
have received all of the following items and documents either in connection with
this Agreement or the Original Agreement, each of which shall be satisfactory to
Buyer in form and substance:
(i) Transaction Documents.
(A) The Agreement (including this Annex I), duly executed and delivered
by Seller and Buyer;
(B) The Guaranty, duly executed and delivered by the Guarantor;
(C) The Custodial Agreement, duly executed and delivered by Seller,
Buyer and Custodian;
(D) The Blocked Account Agreement, duly executed and delivered by
Seller, Buyer and Depository Bank;
(E) The Servicing Agreement, duly executed and delivered by Seller,
Buyer and Servicer; and
(F) The Fee Letter, duly executed and delivered by Seller, Buyer and
Goldman, Sachs & Co.
(ii) Organizational Documents. Certified copies of the Seller’s and
Guarantor’s organizational documents and resolutions or other documents
evidencing the authority of Seller and Guarantor with respect to the execution,
delivery and performance of the Transaction Documents to which it is a party and
each other document to be delivered by Seller and Guarantor from time to time in
connection with the Transaction Documents (and Buyer may conclusively rely on
such certifications until it receives notice in writing from Seller to the
contrary);
(iii) Legal Opinion. Opinions of counsel to the Seller and Guarantor
in form and substance satisfactory to Buyer as to (i) authority, enforceability
of the Transaction Documents to which it is a party and such other matters as
may be requested by Buyer and (ii) nonconsolidation; and
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(iv) Other Documents. Such other documents as Buyer may reasonably
request.
8. CERTAIN RIGHTS OF BUYER WITH RESPECT TO
THE PURCHASED LOANS
Paragraph 8 of the Agreement (“Segregation of Purchased Securities”) is hereby
deleted and replaced in its entirety by the following provisions of this Section
8:
(a) Subject to the terms and conditions of the Agreement, title to all
Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer
shall have free and unrestricted use of its interest in the Purchased Loans in
accordance with the terms and conditions of the Purchased Loans. Nothing in the
Agreement or any other Transaction Document shall preclude Buyer from engaging
in repurchase transactions with the Purchased Loans with Persons in conformity
with the terms and conditions of the Purchased Loans or otherwise selling,
transferring, pledging, repledging, hypothecating, or rehypothecating all or a
portion of its interest in the Purchased Loans to Persons in conformity with the
terms and conditions to the Purchased Loans, but no such transaction shall
relieve Buyer of its obligations to transfer the Purchased Loans to Seller
pursuant to Section 3 of this Annex I or of Buyer’s obligation to credit or pay
Income to, or apply Income to the obligations of, Seller pursuant to Section 5
of this Annex I or otherwise affect the rights, obligations and remedies of any
party to the Agreement.
(b) Subject to the terms and conditions of the Agreement, any
documents delivered to the Custodian pursuant to Section 7(b) and 7(c) of this
Annex I shall only be released in accordance with the terms and conditions of
the Custodial Agreement.
9. RESERVED.
10. REPRESENTATIONS
Paragraph 10 of the Agreement (“Representations”) is hereby supplemented by the
following:
(a) Seller represents and warrants to Buyer that as of the Purchase
Date for the purchase of any Purchased Loan by Buyer from Seller and any
Transaction thereunder and as of the date of the Agreement and at all times
while the Agreement and any Transaction thereunder is in full force and effect:
(i) Organization. Seller is duly organized, validly existing and in
good standing under the laws and regulations of the state of Seller’s
organization and is duly licensed, qualified, and in good standing in every
state where such licensing or qualification is necessary for the transaction of
Seller’s business, except where lack of such licenses or qualifications would
not be reasonably likely to result in a Material Adverse Effect. Seller has the
power to own and hold the assets it purports to own and hold, and to carry on
its business as now being conducted and proposed to be conducted, and has the
power to execute, deliver, and perform its obligations under the Agreement and
the other Transaction Documents.
(ii) Due Execution; Enforceability. The Transaction Documents have
been duly executed and delivered by Seller, for good and valuable
consideration. The Transaction Documents constitute the legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms subject to bankruptcy, insolvency, and other limitations
on creditors’ rights generally and to equitable principles.
(iii) Non-Contravention; Consents. Neither the execution and delivery
of the Transaction Documents, nor consummation by Seller of the transactions
contemplated by the
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Transaction Documents (or any of them), nor compliance by Seller with the terms,
conditions and provisions of the Transaction Documents (or any of them) will (x)
conflict with or result in a breach or violation of any of the terms, conditions
or provisions of any judgment or order, writ, injunction, decree or demand of
any court applicable to Seller, or (y) result in the creation or imposition of
any lien or any other encumbrance upon any of the assets of Seller, other than
pursuant to the Transaction Documents. Seller has all necessary licenses,
permits and other consents from Governmental Authorities necessary to acquire,
own and sell the Portfolio Loans and for the performance of its obligations
under the Transaction Documents except where the failure to have any such
license, permit or consent would not be reasonably likely to result in a
Material Adverse Effect.
(iv) Litigation; Requirements of Law. There is no action, suit,
proceeding, investigation, or arbitration pending or, to the best knowledge of
Seller, threatened against Seller, or any of its assets which may result in any
Material Adverse Effect, or which may have an adverse effect on the validity of
the Transaction Documents or any action taken or to be taken in connection with
the obligations of Seller under any of the Transaction Documents. Seller is in
compliance in all material respects with all Requirements of Law. Seller is not
in default in any material respect with respect to any judgment, order, writ,
injunction, decree, rule or regulation of any arbitrator or Governmental
Authority.
(v) No Broker. Seller has not dealt with any broker, investment
banker, agent or other Person (other than Buyer or an Affiliate of Buyer) who
may be entitled to any commission or compensation in connection with the sale of
the Purchased Loans pursuant to any Transaction Documents.
(vi) Good Title to Purchased Loans. Immediately prior to the purchase
of any Purchased Loans by Buyer from Seller, such Purchased Loans are free and
clear of any lien, security interest, claim, option, charge, encumbrance or
impediment to transfer (including any “adverse claim” as defined in Section
8-102(a)(1) of the UCC but excluding any liens or encumbrances to be released
simultaneously with the sale to Buyer hereunder), and are not subject to any
rights of setoff, any prior sale, transfer, assignment, or participation by
Seller or any agreement by Seller to assign, convey, transfer or participate, in
whole or in part, and Seller is the sole legal record and beneficial owner of
and owns and has the right to sell and transfer such Purchased Loans to Buyer
and, upon transfer of such Purchased Loans to Buyer, Buyer shall be the owner of
such Purchased Loans (other than for U.S. Federal, state and local income and
franchise tax purposes) free of any adverse claim, subject to Seller’s rights
pursuant to the Agreement. In the event the related Transaction is
recharacterized as a secured financing of the Purchased Loans and with respect
to the security interests granted in Sections 6(a) and 6(c), the provisions of
the Agreement are effective to create in favor of Buyer a valid security
interest in all rights, title and interest of Seller in, to and under the
Purchased Loans and the collateral specified in Sections 6(a) and 6(c), Buyer
shall have a valid, perfected and enforceable first priority security interest
in the Purchased Loans and such other collateral, subject to no lien or rights
of others other than as granted herein.
(vii) No Default. No Default or Event of Default exists under or with
respect to the Transaction Documents.
(viii) Representations and Warranties Regarding Purchased Loans; Delivery
of Purchased Loan File. Seller represents and warrants to Buyer that each
Purchased Loan sold hereunder, as of the applicable Purchase Date for the
Transaction in question conforms to the applicable representations and
warranties set forth in Exhibit V attached hereto, except as have
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been disclosed to Buyer in writing prior to Buyer’s issuance of a Confirmation
with respect to the related Purchased Loan. It is understood and agreed that
the representations and warranties set forth in Exhibit V hereto, if any, shall
survive delivery of the respective Purchased Loan File to Buyer or its designee
(including the Custodian). With respect to each Purchased Loan, the Mortgage
Note or Mezzanine Note, the Mortgage (if any), the Assignment of Mortgage (if
any) and any other documents required to be delivered under the Agreement and
the Custodial Agreement for such Purchased Loan have been delivered (or with
respect to Table Funded Loans shall be delivered in accordance with Section
7(b)) to Buyer or the Custodian on its behalf or such requirement will have been
expressly waived in writing by Buyer. Seller or its designee is in possession
of a complete, true and accurate Purchased Loan File with respect to each
Purchased Loan, except for such documents the originals of which have been
delivered to the Custodian.
(ix) Adequate Capitalization; No Fraudulent Transfer. Seller has, as
of such Purchase Date, adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations. Seller is generally able to pay, and as of
the date hereof is paying, its debts as they come due. Seller has not become,
or is presently, financially insolvent nor will Seller be made insolvent by
virtue of Seller’s execution of or performance under any of the Transaction
Documents within the meaning of the bankruptcy laws or the insolvency laws of
any jurisdiction. Seller has not entered into any Transaction Document or any
Transaction pursuant thereto in contemplation of insolvency or with intent to
hinder, delay or defraud any creditor. Seller has not received any written
notice that any payment or other transfer made to or on account of Seller from
or on account of any Mortgagor or any other person obligated under any Purchased
Loan Documents is or may be void or voidable as an actual or constructive
fraudulent transfer or as a preferential transfer.
(x) Organizational Documents. Seller has delivered to Buyer
certified copies of its organizational documents, together with all amendments
thereto.
(xi) No Encumbrances. There are (i) no outstanding rights, options,
warrants or agreements on the part of Seller for a purchase, sale or issuance,
in connection with the Purchased Loans and (ii) no agreements on the part of
Seller to issue, sell or distribute the Purchased Loan.
(xii) Federal Regulations. Seller is not (A) an “investment company,”
or a company “controlled by an investment company,” within the meaning of the
Investment Company Act of 1940, as amended, or (B) a “holding company,” or a
“subsidiary company of a holding company,” or an “affiliate” of either a
“holding company” or a “subsidiary company of a holding company,” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
(xiii) Taxes. Seller has filed or caused to be filed all tax returns
which would be delinquent if they had not been filed on or before the date
hereof and has paid all taxes due and payable on or before the date hereof and
all other taxes, fees or other charges imposed on it and any of its assets by
any Governmental Authority; no tax liens have been filed against any of Seller’s
assets and, to Seller’s knowledge, no claims are being asserted with respect to
any such taxes, fees or other charges.
(xiv) ERISA. Neither Seller nor any ERISA Affiliate (a) sponsors or
maintains any Plans or (b) makes any contributions to or has any liabilities or
obligations (direct or contingent) with respect to any Plans. Seller does not,
and would not be deemed to, hold Plan Assets and the consummation of the
transactions contemplated by the Agreement will not constitute or result in
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any non-exempt prohibited transaction under Section 406 of ERISA, Section 4975
of the Code or substantially similar provisions under any other federal, state
or local laws, rules or regulations.
(xv) Judgments/Bankruptcy. Except as disclosed in writing to Buyer,
there are no judgments against Seller or unsatisfied of record or docketed in
any court located in the United States of America and no Act of Insolvency has
ever occurred with respect to Seller.
(xvi) Full and Accurate Disclosure. No information contained in the
Transaction Documents, or any written statement furnished by or on behalf of
Seller pursuant to the terms of the Transaction Documents, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made when such statements and omissions are
considered in the totality of the circumstances in question.
(xvii) Financial Information. All financial data concerning Seller and to
Seller’s knowledge after due inquiry, the Purchased Loans that has been
delivered by or on behalf of Seller to Buyer is true, complete and correct in
all material respects and has been prepared in accordance with GAAP. Since the
delivery of such data, except as otherwise disclosed in writing to Buyer, there
has been no change in the financial position of Seller or the Purchased Loans,
or in the results of operations of Seller, which change is reasonably likely to
have in a Material Adverse Effect on Seller.
(xviii) Jurisdiction of Organization. The Seller’s jurisdiction of
organization is the State of Delaware.
(xix) Location of Books and Records. The location where Seller keeps
its books and records, including all computer tapes and records relating to the
Purchased Securities is its chief executive office at 420 Lexington Avenue, New
York, New York 10170.
(xx) Regulation T, U and X. Neither the entering into nor consummation
of any Transaction hereunder, nor the use of the proceeds thereof, will violate
any provisions of Regulation T, U or X. If requested by Buyer, Seller, any
applicable Affiliate of Seller and the recipient of any portion of the proceeds
of, or any portion of, any Transaction shall furnish to Buyer a statement on
Federal Reserve Form G-3 referred to in Regulation U.
(b) On the Purchase Date for any Transaction, Seller shall be deemed
to have made all of the representations set forth in Paragraph 10 of the
Agreement and Section 10(a) of this Annex I as of such Purchase Date.
11. NEGATIVE COVENANTS OF SELLER
On and as of the date hereof and each Purchase Date and until the Agreement is
no longer in force with respect to any Transaction, Seller shall not without the
prior written consent of Buyer:
(a) subject to Seller’s right to repurchase, take any action which
would directly or indirectly impair or adversely affect Buyer’s title to the
Purchased Loans;
(b) transfer, assign, convey, grant, bargain, sell, set over, deliver
or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any
interest in the Purchased Loans (or any of them) to any Person other than Buyer,
or engage in repurchase transactions or similar transactions with respect to the
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Purchased Loans (or any of them) with any Person other than Buyer, except where
the Purchased Loans in question are simultaneously repurchased from Buyer;
(c) create, incur or permit to exist any lien, encumbrance or security
interest in or on the Purchased Loans, except as described in Section 6 of this
Annex I;
(d) create, incur or permit to exist any lien, encumbrance or security
interest in or on any of the other collateral subject to the security interest
granted by Seller pursuant to Section 6 of this Annex I;
(e) create, incur or permit any lien, security interest, charges, or
encumbrances with respect to any Hedging Transaction for the benefit of any
Person other than Buyer;
(f) materially modify or terminate any of the organizational
documents of Seller or take any action which would cause it to cease to be a
Single-Purpose Entity;
(g) consent or assent to a Significant Modification or any extension
or termination of any note, loan agreement, mortgage, pledge agreement or
guaranty relating to the Purchased Loans or other material agreement or
instrument relating to the Purchased Loans without the prior written consent of
Buyer;
(h) take any action or permit such action to be taken which would
result in a Change in Control;
(i) after the occurrence and during the continuation of any Event of
Default or monetary Default, make any distribution, payment on account of, or
set apart assets for, a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of any equity or
ownership interest of Seller, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of Seller; or
(j) sponsor or maintain any Plans or make any contributions to, or
have any liability or obligation (direct or contingent) with respect to any Plan
and shall not permit any ERISA Affiliate to sponsor or maintain any Plans or
make any contributions to, or have any liability or obligation (direct or
contingent) with respect to any Plan;
(k) engage in any transaction that would cause any obligation or
action taken or to be taken hereunder (or the exercise by Buyer of any of its
rights under the Agreement, the Purchased Loans or any Transaction Document) to
be a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975
of the Code or substantially similar provisions under any other federal, state
or local laws, rules or regulations; or
(l) make any future advances under any Purchased Loan to any
underlying obligor which are not permitted by the related Purchased Loan
Documents.
12. AFFIRMATIVE COVENANTS OF SELLER
(a) Seller shall promptly notify Buyer of any event and/or condition
which is likely to have a Material Adverse Effect.
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(b) Seller shall give notice to Buyer of the following (accompanied by
an Officer’s Certificate setting forth details of the occurrence referred to
therein and stating what actions Seller has taken or proposes to take with
respect thereto):
(i) promptly upon receipt of notice or knowledge of the occurrence of
any Default or Event of Default;
(ii) with respect to any Purchased Loan sold to Buyer hereunder,
immediately upon receipt of any Principal Payment (in full or in part);
(iii) with respect to any Purchased Loan sold to Buyer hereunder,
immediately upon receipt of notice or knowledge that the related Mortgaged
Property has been damaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty, or otherwise damaged so as to
affect adversely the value of such Mortgaged Property;
(iv) promptly upon receipt of notice or knowledge of (i) any Purchased
Loan which becomes a Defaulted Loan, (ii) any lien or security interest (other
than security interests created hereby) on, or claim asserted against, any
Purchased Loan or, to Seller’s knowledge, the underlying collateral therefor or
(iii) any event or change in circumstances that has or could reasonably be
expected to have an adverse affect on the Market Value of a Purchased Loan; and
(v) promptly, and in any event within 10 days after service of process
on any of the following, give to Buyer notice of all litigation, actions, suits,
arbitrations, investigations (including, without limitation, any of the
foregoing which are pending or threatened) or other legal or arbitrable
proceedings affecting Seller or affecting any of the assets of Seller before any
Governmental Authority that (i) questions or challenges the validity or
enforceability of any of the Transaction Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $5,000,000, or (iii) which,
individually or in the aggregate, if adversely determined could reasonably be
likely to have a Material Adverse Effect.
(c) Seller shall provide Buyer with copies of such documents as Buyer
may reasonably request evidencing the truthfulness of the representations set
forth in Section 10.
(d) Seller shall defend the right, title and interest of Buyer in and
to the Purchased Loans against, and take such other action as is necessary to
remove, the liens, security interests, claims, encumbrances, charges and demands
of all Persons (other than security interests granted to Buyer hereunder).
(e) Seller will permit Buyer or its designated representative to
inspect any of Seller’s records with respect to all or any portion of the
Purchased Loans and the conduct and operation of its business related thereto,
at such reasonable times and with reasonable frequency requested by Buyer or its
designated representative, and to make copies of extracts of any and all
thereof.
(f) If any amount payable under or in connection with any of the
Purchased Loans shall be or become evidenced by any promissory note, other
instrument or chattel paper (as each of the foregoing is defined under the UCC),
such note, instrument or chattel paper shall be immediately delivered to Buyer
or its designee, duly endorsed in a manner satisfactory to Buyer or if any
collateral or other security shall subsequently be delivered to Seller in
connection with any Purchased Loan, Seller shall immediately
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deliver or forward such item of collateral or other security to Buyer or its
designee, together with such instruments of assignment as Buyer may request.
(g) Seller shall provide (or cause to be provided to) Buyer with the
following financial and reporting information:
(i) the Monthly Statement;
(ii) within 10 days of Seller’s receipt, all operating statements and
occupancy information that Seller or Servicer has received relating to the
Portfolio Loans;
(iii) the Quarterly Report;
(iv) the Financial Covenant Compliance Certificate;
(v) as soon as available and in any event within fifty-five (55) days
after the end of each of the first three quarterly fiscal periods of each fiscal
year of Seller, the unaudited, consolidated balance sheets of Seller, which
shall incorporate its consolidated subsidiaries, as at the end of such period
and the related unaudited, consolidated statements of income and retained
earnings and of cash flows for Seller, which shall incorporate its consolidated
Subsidiaries, for such period and the portion of the fiscal year through the end
of such period, accompanied by an Officer’s Certificate of Seller, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations Seller
and its consolidated Subsidiaries in accordance with GAAP, consistently applied,
as at the end of, and for, such period (subject to normal year-end audit
adjustments);
(vi) within sixty (60) days following the end of each quarter, or
within one hundred twenty (120) days following the end of each fiscal year, as
the case may be, an Officer’s Certificate of Seller in form and substance
reasonably satisfactory to Buyer that Seller during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in the Agreement and the other Transaction
Documents to be observed, performed or satisfied by it, and that there has been
no Event of Default and no event or circumstance has occurred that is reasonably
likely to result in a Material Adverse Effect;
(vii) as soon as available and in any event within one hundred (100)
days after the end of each fiscal year of Seller, the consolidated balance
sheets of Seller, which shall incorporate its consolidated Subsidiaries, if any,
as at the end of such fiscal year and the related consolidated statements of
income and retained earnings and of cash flows for Seller, which shall
incorporate its consolidated Subsidiaries, if any, for such year, accompanied by
an opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall not be qualified as to scope of audit or
going concern and shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of Seller
and its consolidated Subsidiaries as at the end of, and for, such fiscal year in
accordance with GAAP;
(viii) within ten (10) Business Days after Buyer’s reasonable request,
such further information with respect to the operation of any Mortgaged
Property, Purchased Loan, the financial affairs of the Seller and any Plan and
Multiemployer Plan as may be requested by Buyer, including all business plans
prepared by or for Seller; provided, however, that with respect to information
not previously known to, or in the possession of, Seller relating to any
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Multiemployer Plan, Seller shall only be required to provide such information as
may be obtained through good faith efforts;
(ix) within sixty (60) Business Days after the end of each calendar
year, such information as may be reasonably requested by Buyer, its successors
and assigns, and transferees, in connection with the Portfolio Loans, and that
are necessary for the party requesting such information in preparing its tax
return and paying taxes in any country or jurisdiction where such tax return or
taxes are due; and
(x) such other reports as Buyer shall reasonably require.
(h) Seller shall at all times comply in all material respects with all
laws, ordinances, rules and regulations of any federal, state, municipal or
other public authority having jurisdiction over Seller or any of its assets and
Seller shall do or cause to be done all things reasonably necessary to preserve
and maintain in full force and effect its legal existence, and all licenses
material to its business.
(i) Seller shall at all times keep proper books of records and
accounts in which full, true and correct entries shall be made of its
transactions in accordance with GAAP and set aside on its books from its
earnings for each fiscal year all such proper reserves in accordance with GAAP.
(j) Seller shall advise Buyer in writing of the opening of any new
chief executive office or the closing of any such office and of any change in
Seller’s name or the places where the books and records pertaining to the
Purchased Securities are held not less than the later of fifteen (15) Business
Days prior to taking any such action or 90 days before any financial statement
filing will lapse, lose perfection or become materially misleading.
(k) Seller shall observe, perform and satisfy all the terms,
provisions, covenants and conditions required to be observed, performed or
satisfied by it, and shall pay when due all costs, fees and expenses required to
be paid by it, under the Transaction Documents. Seller shall pay and discharge
all taxes, levies, liens and other charges, if any, on its assets and on the
Purchased Loans that, in each case, in any manner would create any lien or
charge upon the Purchased Loans, except for any such taxes as are being
appropriately contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves have been provided in
accordance with GAAP.
(l) Seller shall maintain its existence as a limited liability
company, organized solely and in good standing under the law of the State of
Delaware and shall not dissolve, liquidate, merge with or into any other Person
or otherwise change its organizational structure or identity or incorporate in
any other jurisdiction.
(m) Seller shall maintain all records with respect to the Purchased
Loans and the conduct and operation of its business with no less a degree of
prudence than if the Purchased Loans were held by Seller for its own account and
will furnish Buyer, upon request by Buyer or its designated representative, with
information reasonably obtainable by Seller with respect to the Purchased Loans
and the conduct and operation of its business.
(n) Seller shall provide Buyer with notice of each modification of any
Purchased Loan Documents consented to by Seller (including such modifications
which do not constitute a Significant Modification).
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(o) Seller shall provide Buyer with notice of the occurrence of any
“appraisal reduction event”, “control appraisal period” or similar event under
any participation agreement related to any Purchased Loan.
(p) Seller shall provide Buyer with reasonable access to operating
statements, the occupancy status and other property level information, with
respect to the Mortgaged Properties, plus any such additional reports as Buyer
may reasonably request.
(q) Seller may propose, and Buyer will consider but shall be under no
obligation to approve, strategies for the foreclosure or other realization upon
the security for any Purchased Loan that has become a Defaulted Loan.
(r) Seller shall not cause any Purchased Loan to be serviced by any
servicer other than a servicer expressly approved in writing by Buyer.
13. SINGLE-PURPOSE ENTITY
Seller hereby represents and warrants to Buyer and covenants with Buyer, that as
of the date hereof and so long as any of the Transaction Documents shall remain
in effect:
(a) It is and intends to remain solvent and it has paid and will pay
its debts and liabilities (including employment and overhead expenses) from its
own assets as the same shall become due.
(b) It has complied and will comply with the provisions of its
certificate of formation and its limited liability company agreement.
(c) It has done or caused to be done and will do all things necessary
to observe limited liability company formalities and to preserve its existence.
(d) It has maintained and will maintain all of its books, records,
financial statements and bank accounts separate from those of its affiliates,
its members and any other Person, and it will file its own tax returns (except
to the extent consolidation is required under GAAP or as a matter of law).
(e) It has been, is and will be, and at all times will hold itself out
to the public as, a legal entity separate and distinct from any other entity
(including any Affiliate), shall correct any known misunderstanding regarding
its status as a separate entity, shall conduct business in its own name, shall
not identify itself or any of its Affiliates as a division or part of the other
and shall maintain and utilize separate stationery, invoices and checks.
(f) It has not owned and will not own any property or any other
assets other than the Purchased Loans and Portfolio Securities, cash and its
interest under any associated Hedging Transactions.
(g) It has not engaged and will not engage in any business other than
the origination, acquisition, ownership, financing and disposition of the the
Purchased Loans and Portfolio Securities and the associated Hedging Transactions
in accordance with the applicable provisions of the Transaction Documents and
the Securities Repurchase Agreement.
(h) It has not entered into, and will not enter into, any contract or
agreement with any of its affiliates, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm’s-length basis with Persons other than such affiliate.
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(i) It has not incurred and will not incur any indebtedness or obligation,
secured or unsecured, direct or indirect, absolute or contingent (including
guaranteeing any obligation), other than (A) obligations under the Transaction
Documents and the Securities Repurchase Agreement, (B) obligations under the
documents evidencing the Purchased Loans and Portfolio Securities and
(C) unsecured trade payables, in an aggregate amount not to exceed $100,000 at
any one time outstanding, incurred in the ordinary course of acquiring, owning,
financing and disposing of the the Purchased Loans and Portfolio Securities;
provided, however, that any such trade payables incurred by Seller shall be paid
within 30 days of the date incurred.
(j) It has not made and will not make any loans or advances to any
other Person, and shall not acquire obligations or securities of any member or
affiliate of any member or any other Person (other than in connection with the
origination or acquisition of Purchased Loans and Portfolio Securities).
(k) It will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations.
(l) Neither it nor Guarantor will seek its dissolution, liquidation
or winding up, in whole or in part, or suffer any Change of Control,
consolidation or merger.
(m) It will not commingle its funds and other assets with those of any
of its Affiliates or any other Person.
(n) It has maintained and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any of its Affiliates or any other Person.
(o) It has not held and will not hold itself out to be responsible for
the debts or obligations of any other Person.
(p) It has no liabilities, contingent or otherwise, other than those
normal and incidental to the acquisition, origination, ownership, servicing,
administration, enforcement, financing and disposition of the Purchased Loans
and Portfolio Securities.
(q) It has conducted and shall conduct its business consistent with
the requirements of being a Single-Purpose Entity.
(r) It shall not maintain any employees.
14. EVENTS OF DEFAULT; REMEDIES
Paragraph 11 (“Events of Default”) of the Agreement is hereby amended by the
deletion in their entirety of the first paragraph thereof (other than the
clauses referenced in Section 14(a) below) and Paragraphs 11(a) through (i)
thereof and by the addition of the provisions (a) through (c) of Section 14 of
this Annex I:
(a) Together with clauses (iii) through (v) and (vii) of the first
paragraph of Paragraph 11 of the Agreement, the following shall constitute an
event of default hereunder (each an “Event of Default”):
(i) failure of Seller to repurchase or the failure of Buyer to
transfer the Purchased Loan on the applicable Repurchase Date (except when such
failure to transfer is a result of Buyer’s inability to obtain necessary
consents to, or fulfill restrictions on, such transfer);
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(ii) failure of Seller to apply any Income received by Seller in
accordance with the provisions hereof;
(iii) (A) the Transaction Documents shall for any reason not cause, or
shall cease to cause, Buyer to be the owner or, if recharacterized as a secured
financing, a secured party with respect to any of the Purchased Loans or the
collateral specified in Section 6(a) and 6(c) free of any adverse claim, liens
and other rights of others (other than as granted herein) or (B) if a
Transaction is recharacterized as a secured financing, the Transaction Documents
with respect to any Transaction shall for any reason cease to create a valid
first priority security interest in favor of Buyer in any of the Purchased Loans
or the collateral specified in Sections 6(a) and 6(c) or (C) if the Transaction
Documents shall cease to be in full force and effect or if their enforceability
is challenged by Seller;
(iv) failure of Seller to make the payments required under Section 4 or
Section 5(b) on any Remittance Date which failure is not remedied within one (1)
Business Day;
(v) failure of Seller to make any other payment owing to Buyer which
has become due, whether by acceleration or otherwise, under the terms of the
Agreement which failure is not remedied within the applicable period (in the
case of a failure pursuant to Section 4) or, if no period is specified, five (5)
Business Days after notice thereof to Seller; provided, however, that Buyer
shall not be required to provide notice in the event of a failure by Seller to
repurchase on the Repurchase Date;
(vi) breach by Seller in the due performance or observance of any term,
covenant or agreement contained in Section 11(k) of this Annex I;
(vii) Change of Control shall have occurred with respect to the Seller
or Guarantor;
(viii) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or repeated or deemed to
have been made or repeated; provided that the representations and warranties set
forth in Section 10(a) (vi) or (viii) (in the case of (vi), with respect to the
affected or Purchased Loans only) made by Seller shall not be considered an
Event of Default if incorrect or untrue in any material respect, if Buyer
terminates the related Transaction and Seller repurchases the related Purchased
Loans on an Early Repurchase Date no later than ten (10) Business Days after
receiving written notice of such incorrect or untrue representation; provided,
however, that if Seller shall have made any such representation with knowledge
that it was materially incorrect or untrue at the time made, such
misrepresentation shall constitute an Event of Default;
(viiii) a final judgment by any competent court in the United States of
America for the payment of money (in the case of Seller) or for the payment of
money in an amount greater than $5,000,000 (in the case of Guarantor) shall have
been rendered against Seller or Guarantor, as the case may be, and remained
undischarged or unpaid for a period of forty-five (45) days, during which period
execution of such judgment is not effectively stayed;
(x) Guarantor shall have defaulted or failed to perform under any
note, indenture, loan agreement, guaranty, swap agreement or any other contract,
agreement or transaction to which it is a party, and which default (A) involves
the failure to pay a matured obligation in excess of $10,000,000, or (B)
involving an obligation of at least $10,000,000 is a monetary default or a
material non-monetary default and results in acceleration or permits the
acceleration
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of the obligation by any other party to or beneficiary of such note, indenture,
loan agreement, guaranty, swap agreement or other contract agreement or
transaction; provided, however, that any such default, failure to perform or
breach shall not constitute an Event of Default if Guarantor cures such default,
failure to perform or breach, as the case may be, within the grace period, if
any, provided under the applicable agreement;
(xi) As of the end of any fiscal quarter (A) Guarantor’s (1) Debt to
Equity Ratio is greater than 5:1, (2) Tangible Net Worth is less than the sum of
(x) $129,750,000 and (y) 75% of the proceeds of any equity issuances occurring
after Guarantor’s initial public offering, (3) Fixed Charge Coverage Ratio is
less than 1.50:1, or (4) Minimum Liquidity is less than $10,000,000, for the
first two years after the date of this Agreement, and less than $15,000,000
thereafter; or (B) Guarantor fails to maintain cumulative positive EBITDA for
the three fiscal quarters most recently ended.
(xii) if Seller or Buyer shall breach or fail to perform any of the
terms, covenants, obligations or conditions of the Agreement, other than as
specifically otherwise referred to in this definition of “Event of Default”, and
such breach or failure to perform is not remedied within ten (10) Business Days,
or if such breach is not curable by the payment of a sum of money, thirty (30)
days after notice thereof to Seller or Buyer from the applicable party or its
successors or assigns;
(xiii) an Act of Insolvency shall have occurred with respect to the
Seller or Guarantor;
(xiv) an “event of default” beyond any applicable notice and cure period
shall have occurred under (A) the Securities Repurchase Agreement, (B) any
repurchase facility or loan facility entered into by Seller and Buyer or any
affiliate thereof or (C) any facility with Buyer or any affiliate thereof in
which Seller is a guarantor; or
(xv) (A) any of the representations, warranties and covenants of
Guarantor in the Guaranty or any Financial Covenant Compliance Certificate shall
have been incorrect or untrue in any material respect when made or repeated or
deemed to have been made or repeated and such misrepresentation or breach of
warranty or covenant has not been cured within ten (10) Business Days of after
receiving written notice of such incorrect or untrue representation or such
breach of covenant or (B) Guarantor shall have defaulted or failed to perform
under the Guaranty.
(b) If an Event of Default shall occur and be continuing with respect
to Seller, the following rights and remedies shall be available to Buyer:
(i) At the option of Buyer, exercised by written notice to Seller
(which option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency), the Repurchase
Date for each Transaction hereunder shall, if it has not already occurred, be
deemed immediately to occur (the date on which such option is exercised or
deemed to have been exercised being referred to hereinafter as the “Accelerated
Repurchase Date”) (and any Transaction for which the related Purchase Date has
not yet occurred shall be canceled).
(ii) If Buyer exercises or is deemed to have exercised the option
referred to in Section 14(b)(i):
(A) Seller’s obligations hereunder to repurchase all Purchased Loans
shall become immediately due and payable on and as of the Accelerated Repurchase
Date and
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all Income deposited in the Blocked Account shall be retained by Buyer and
applied to the aggregate unpaid Repurchase Price and any other amounts owing by
Seller hereunder; and
(B) to the extent permitted by applicable law, the Repurchase Price
with respect to each Transaction (determined as of the Accelerated Repurchase
Date) shall be increased by the aggregate amount obtained by daily application
of, on a 360 day per year basis for the actual number of days during the period
from and including the Accelerated Repurchase Date to but excluding the date of
payment of the Repurchase Price (as so increased), (x) the Pricing Rate
applicable upon an Event of Default for such Transaction multiplied by (y) the
Repurchase Price for such Transaction (decreased by (I) any amounts actually
remitted to Buyer by Seller from time to time pursuant to Section 5 and applied
to such Repurchase Price to the extent such amounts are not already included in
the computation of the Repurchase Price and (II) any amounts applied to the
Repurchase Price pursuant Section 14(b)(iii) of this Annex I); and
(C) the Custodian shall, upon the request of Buyer (with simultaneous
copy of such request to Seller), deliver to Buyer all instruments, certificates
and other documents then held by the Custodian relating to the Purchased Loans.
(iii) Buyer may, after ten (10) days notice to Seller of Buyer’s intent
to take such action (provided that no such notice shall be required in the
circumstances set forth in Section 9-611(d) of the UCC), (A) immediately sell,
at a public or private sale in a commercially reasonable manner and at such
price or prices as Buyer may reasonably deem satisfactory any or all of the
Purchased Loans or (B) in its sole discretion elect, in lieu of selling all or a
portion of such Purchased Loans, to give Seller credit for such Purchased Loans
in an amount equal to the Market Value of such Purchased Loans against the
aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts
owing by Seller under the Transaction Documents. The proceeds of any
disposition of Purchased Loans effected pursuant to this Section 14(b)(iii)
shall be applied, (v) first, to the costs and expenses incurred by Buyer in
connection with Seller’s default; (w) second, to costs of cover and/or Hedging
Transactions, if any; (x) third, to the Repurchase Price; (y) fourth, to any
other outstanding obligation of Seller to Buyer or its Affiliates pursuant to
the Transaction Documents, and (z) the balance, if any, to Seller.
(iv) The parties recognize that it may not be possible to purchase or
sell all of the Purchased Loans on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner because the market
for such Purchased Loans may not be liquid. In view of the nature of the
Purchased Loans, the parties agree that, to the extent permitted by applicable
law, liquidation of a Transaction or the Purchased Loans shall not require a
public purchase or sale and that a good faith private purchase or sale shall be
deemed to have been made in a commercially reasonable manner. Accordingly,
Buyer may elect, in its sole discretion, the time and manner of liquidating any
Purchased Loans, and nothing contained herein shall (A) obligate Buyer to
liquidate any Purchased Loans on the occurrence and during the continuance of an
Event of Default or to liquidate all of the Purchased Loans in the same manner
or on the same Business Day or (B) constitute a waiver of any right or remedy of
Buyer.
(v) Seller shall be liable to Buyer for the amount of all reasonable
expenses, including reasonable legal fees and expenses, actually incurred by
Buyer in connection with or as a consequence of an Event of Default with respect
to Seller, (B) all costs incurred in connection with covering transactions or
Hedging Transactions (including short sales) or entering into replacement
transactions (C) all damages, losses, judgment costs and expenses of any kind
which
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may be imposed on, incurred by or asserted against Buyer relating to or arising
out of such Hedging Transactions or covering transactions and (D) any other
loss, damage, cost or expense directly arising or resulting from the occurrence
of an Event of Default with respect to Seller.
(vi) Buyer may exercise any or all of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and at any time during
the continuance thereof. All rights and remedies arising under the Transaction
Documents, as amended from time to time, are cumulative and not exclusive of any
other rights or remedies which Buyer may have.
(vii) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any defenses
Seller might otherwise have to require Buyer to enforce its rights by judicial
process. Seller also waives any defense Seller might otherwise have arising
from the use of nonjudicial process, disposition of any or all of the Purchased
Loans, or from any other election of remedies. Seller recognizes that
nonjudicial remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm’s length.
(viii) Without limiting any other rights or remedies of Buyer, Buyer
shall have the right to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by or for
account of Buyer or Buyer’s Affiliates on behalf of Seller to any obligations of
Seller hereunder to Buyer, irrespective of whether Buyer shall have made any
demand under the Agreement or the other Transaction Documents.
(ix) Buyer shall have, in addition to its rights and remedies under
the Transaction Documents, all of the rights and remedies provided by applicable
federal, state, foreign, and local laws (including, without limitation, if the
Transactions are recharacterized as secured financings, the rights and remedies
of a secured party under the UCC of the State of New York, to the extent that
the UCC is applicable, and the right to offset any mutual debt and claim), in
equity, and under any other agreement between Buyer and Seller, exercisable upon
ten (10) days notice from Buyer to Seller. Without limiting the generality of
the foregoing, Buyer shall be entitled to set off the proceeds of the
liquidation of the Purchased Loans against all of Seller’s obligations to Buyer,
whether or not such obligations are then due, without prejudice to Buyer’s right
to recover any deficiency.
(c) If an Event of Default occurs and is continuing with respect to
Buyer, the following rights and remedies shall be available to Seller:
(i) Upon tender by Seller of payment of the aggregate Repurchase
Price for all Purchased Loans, together with all other amounts due hereunder to
Buyer, Buyer’s right, title and interest in such Purchased Loans shall be deemed
transferred to Seller, and Buyer shall simultaneously deliver such Purchased
Loans to Seller.
(ii) Seller shall have all the rights and remedies provided herein or
provided by applicable federal, state, foreign, local and any other applicable
laws, in equity, and under any other agreement between Buyer and Seller
(including the right to offset any debt or claim).
(iii) If Seller exercises the option referred to in Section 14(c)(i)
hereof and Buyer fails to deliver any Purchased Loans to Seller, after three (3)
Business Days’ notice to Buyer, Seller may purchase loans that are in as similar
an amount and interest rate as is reasonably practicable and in the same Loan
Type as such Purchased Loans.
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15. SINGLE AGREEMENT
Clause (ii) of Paragraph 12 of the Agreement (“Single Agreement”) is hereby
deleted.
16. NOTICES AND OTHER COMMUNICATIONS
Paragraph 13 of the Agreement (“Notices and Other Communications”) is hereby
deleted and replaced in its entirety by the following provisions of this Section
16:
All notices, consents, approvals and requests required or permitted hereunder
shall be given in writing and shall be effective for all purposes if hand
delivered or sent by (a) hand delivery, with proof of attempted delivery, (b)
certified or registered United States mail, postage prepaid, (c) expedited
prepaid delivery service, either commercial or United States Postal Service,
with proof of attempted delivery, or (d) by telecopier (with answerback
acknowledged); provided that such telecopied notice must also be delivered by
one of the means set forth in (a), (b) or (c) above, to the addresses specified
in Annex II hereto or at such other address and person as shall be designated
from time to time by any party hereto, as the case may be, in a written notice
to the other parties hereto in the manner provided for in this Section 16. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery, (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day, (c) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day;
or (d) in the case telecopier, upon receipt of answerback confirmation, provided
that such telecopied notice was also delivered as required in this Section. A
party receiving a notice which does not comply with the technical requirements
for notice under this Section may elect to waive any deficiencies and treat the
notice as having been properly given.
17. NON-ASSIGNABILITY
The provisions of Paragraph 15 of the Agreement (“Nonassignability;
Termination”) are hereby deleted and replaced in their respective entireties by
the following provisions of this Section 17:
(a) The rights and obligations of Seller under the Transaction
Documents, the Hedging Transactions and under any Transaction shall not be
assigned by Seller without the prior written consent of Buyer. Buyer may assign
or participate its rights and obligations under the Transaction Documents and
under any Transaction and its rights and interests in any Hedging Transaction,
in each case, without the prior written consent of Seller. Seller agrees to use
its good faith efforts to include in the participation agreement or
intercreditor agreement, as applicable, relating to each Purchased Loan a
provision expressly recognizing Goldman Sachs Mortgage Company, together with
its successors and assigns, as a permitted transferee of each such Purchased
Loan.
Notwithstanding anything to the contrary contained herein, with respect to
Seller, (A) Buyer shall remain responsible for reviewing and determining the
eligibility of any New Loan for purposes of any Transaction and (B) Seller shall
continue to deal solely and directly with Buyer in connection with any
Transaction. As long as an Event of Default on the part of Seller shall have
occurred and be continuing, Buyer may assign or participate its rights and
obligations under the Transaction Documents and/or any Transaction to any
Person.
(b) The Buyer shall maintain a record of ownership identifying all
assignees. If any assignee is a non-U.S. Person, such assignee shall timely
provide Seller with such forms as may be required to establish the assignee’s
status for U.S. withholding tax purposes.
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(c) With respect to any issuance by Buyer of a participation in any
Transaction, (i) Buyer shall act as agent for all participants in any dealings
with Seller in connection with such Transactions and will maintain, on behalf of
Seller, a record of ownership that identifies all participants, and (ii) Seller
shall not be obligated to deal directly with any party other than Buyer in
connection with such Transactions, or to pay or reimburse Buyer for any costs
that would not have been incurred by Buyer had no participation interests in
such Transactions been issued.
(d) Subject to the foregoing, the Transaction Documents and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and permitted assigns. Nothing in the
Transaction Documents, express or implied, shall give to any Person, other than
the parties to the Transaction Documents and their respective successors, any
benefit or any legal or equitable right, power, remedy or claim under the
Transaction Documents.
18. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL
The language in Paragraph 16 of the Agreement (“Governing Law”) which reads
“without giving effect to the conflict of law principals thereof” is hereby
deleted. Paragraph 18 of the Agreement (“Use of Employee Plan Assets”) is hereby
deleted in its entirety. Paragraph 17 (“No Waivers, Etc.”) is hereby deleted
and replaced in its entirety by the following provisions of this Section 18:
(a) Each party irrevocably and unconditionally submits to the
non-exclusive jurisdiction of any United States Federal or New York State court
sitting in Manhattan, and any appellate court from any such court, solely for
the purpose of any suit, action or proceeding brought to enforce its obligations
under the Agreement or relating in any way to the Agreement or any Transaction
under the Agreement.
(b) To the extent that either party has or hereafter may acquire any
immunity (sovereign or otherwise) from any legal action, suit or proceeding,
from jurisdiction of any court or from set off or any legal process (whether
service or notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) with respect to itself or any
of its property, such party hereby irrevocably waives and agrees not to plead or
claim such immunity in respect of any action brought to enforce its obligations
under the Agreement or relating in any way to the Agreement or any Transaction
under the Agreement.
(c) Each party hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court and any right of jurisdiction on
account of its place of residence or domicile and irrevocably consents to the
service of any summons and complaint and any other process by the mailing of
copies of such process to them at their respective address specified herein.
Each party hereby agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Section 18
shall affect the right of Buyer to serve legal process in any other manner
permitted by law or affect the right of Buyer to bring any action or proceeding
against Seller or its property in the courts of other jurisdictions.
(d) EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT
DELIVERED HEREUNDER OR THEREUNDER.
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19. NO RELIANCE; DISCLAIMERS
(a) Each of Buyer and Seller hereby acknowledges, represents and
warrants to the other that, in connection with the negotiation of, the entering
into, and the performance under, the Transaction Documents and each Transaction
thereunder:
(i) It is not relying (for purposes of making any investment decision
or otherwise) upon any advice, counsel or representations (whether written or
oral) of the other party to the Transaction Documents, other than the
representations expressly set forth in the Transaction Documents;
(ii) It has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent that it has deemed
necessary, and it has made its own investment, hedging and trading decisions
(including decisions regarding the suitability of any Transaction) based upon
its own judgment and upon any advice from such advisors as it has deemed
necessary and not upon any view expressed by the other party;
(iii) It is a sophisticated and informed Person that has a full
understanding of all the terms, conditions and risks (economic and otherwise) of
the Transaction Documents and each Transaction thereunder and is capable of
assuming and willing to assume (financially and otherwise) those risks;
(iv) It is entering into the Transaction Documents and each Transaction
thereunder for the purposes of managing its borrowings or investments or hedging
its underlying assets or liabilities and not for purposes of speculation;
(v) It is not acting as a fiduciary or financial, investment or
commodity trading advisor for the other party and has not given the other party
(directly or indirectly through any other Person) any assurance, guaranty or
representation whatsoever as to the merits (either legal, regulatory, tax,
business, investment, financial accounting or otherwise) of the Transaction
Documents or any Transaction thereunder;
(b) Each determination by Buyer of the Market Value with respect to
each New Loan or Purchased Loan or the communication to Seller of any
information pertaining to Market Value under the Agreement shall be subject to
the following disclaimers:
(i) Buyer has assumed and relied upon, with Seller’s consent and
without independent verification, the accuracy and completeness of the
information provided by Seller and reviewed by Buyer. Buyer has not made any
independent inquiry of any aspect of the New Loans or Purchased Loans or the
underlying collateral. Buyer’s view is based on economic, market and other
conditions as in effect on, and the information made available to Buyer as of,
the date of any such determination or communication of information, and such
view may change at any time without prior notice to Seller.
(ii) Market Value determinations and other information provided to
Seller constitute a statement of Buyer’s view of the value of one or more loans
or other assets at a particular point in time and neither (x) constitute a bid
for a particular trade, (y) indicate a willingness on the part of Buyer or any
Affiliate thereof to make such a bid, nor (z) reflect a valuation for
substantially similar assets at the same or another point in time, or for the
same assets at another point in time.
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(iii) Market Value determinations and other information provided to
Seller may vary significantly from valuation determinations and other
information which may be obtained from other sources.
(iv) Market Value determinations and other information provided to
Seller are communicated to Seller solely for its use and may not be relied upon
by any other person and may not be disclosed or referred to publicly or to any
third party without the prior written consent of Buyer, which consent Buyer may
withhold or delay in its sole and absolute discretion.
(v) Buyer makes no representations or warranties with respect to any
Market Value determinations or other information provided to Seller. Buyer shall
not be liable for any incidental or consequential damages arising out of any
inaccuracy in such valuation determinations and other information provided to
Seller, including as a result of any act of gross negligence or breach of any
warranty.
(vi) Market Value indications and other information provided to Seller
in connection with Section 3(b) are only indicative of the initial Market Value
of the New Loan submitted to Buyer for consideration thereunder, and may change
without notice to Seller prior to, or subsequent to, the transfer by Seller of
the New Loan pursuant to Section 3(e). No indication is provided as to Buyer’s
expectation of the future value of such Purchased Loan or the underlying
collateral.
(vii) Initial Market Value indications and other information provided to
Seller in connection with Section 3(b) are to be used by Seller for the sole
purpose of determining whether to proceed in accordance with Section 3 and for
no other purpose.
20. INDEMNITY AND EXPENSES
(a) Seller hereby agrees to hold Buyer and its Affiliates and each of
their respective officers, directors, employees and agents (“Indemnified
Parties”) harmless from and indemnify the Indemnified Parties against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, taxes (including stamp, excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Purchased Loans or in
connection with any of the transactions contemplated by the Agreement (or the
recharacterization of any Transaction) and the documents delivered in connection
herewith and therewith, other than net income taxes of Buyer), fees, costs,
expenses (including reasonable attorneys fees and disbursements and any and all
servicing and enforcement costs with respect to the Purchased Loans) or
disbursements (all of the foregoing, collectively “Indemnified Amounts”) which
may at any time (including, without limitation, such time as the Agreement shall
no longer be in effect and the Transactions shall have been repaid in full) be
imposed on or asserted against any Indemnified Party in any way whatsoever
arising out of or in connection with, or relating to, the Agreement or any
Transactions thereunder or any action taken or omitted to be taken by any
Indemnified Party under or in connection with any of the foregoing; provided,
that Seller shall not be liable for Indemnified Amounts resulting from the gross
negligence or willful misconduct of any Indemnified Party. Without limiting the
generality of the foregoing, Seller agrees to hold Buyer harmless from and
indemnify Buyer against all Indemnified Amounts with respect to all Purchased
Loans relating to or arising out of any violation or alleged violation of any
environmental law, rule or regulation or any consumer credit laws, including
without limitation ERISA, that, in each case, results from anything other than
Buyer’s gross negligence or willful misconduct. In any suit, proceeding or
action brought by Buyer in connection with any Purchased Loan for any sum owing
thereunder, or to enforce any provisions of any Purchased Loan Documents, Seller
will save, indemnify and hold Buyer harmless from and against all expense, loss
or damage suffered by reason of any defense, set-off, counterclaim, recoupment
or reduction or liability whatsoever
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of the account debtor or obligor thereunder, arising out of a breach by Seller
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such account debtor or obligor
or its successors from Seller. Seller also agrees to reimburse an Indemnified
Party as and when billed by such Indemnified Party for all such Indemnified
Party’s costs and expenses incurred in connection with the enforcement or the
preservation of such Indemnified Party’s rights under the Agreement and any
other Transaction Document or any transaction contemplated hereby or thereby,
including without limitation the reasonable fees and disbursements of its
counsel. Seller hereby acknowledges its obligations hereunder are recourse
obligations of Seller.
(b) Seller agrees to pay as and when billed by Buyer all of the
out-of-pocket costs and expenses incurred by Buyer in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, the Agreement, this Annex I and the other Transaction Documents
or any other documents prepared in connection herewith or therewith. Seller
agrees to pay as and when billed by Buyer all of the out-of-pocket costs and
expenses incurred in connection with the consummation and administration of the
transactions contemplated hereby and thereby including without limitation
(i) all the reasonable fees, disbursements and expenses of counsel to Buyer, not
to exceed $15,000 for each Transaction and (ii) all the Due Diligence Fees,
testing and review costs and expenses incurred by Buyer in connection with the
evaluation of any New Loan and with respect to any Transaction.
21. DUE DILIGENCE
Seller acknowledges that Buyer has the right to perform continuing due diligence
reviews with respect to the Purchased Loans, for purposes of verifying
compliance with the representations, warranties and specifications made
hereunder, or determining or re-determining the Asset Base for purposes of
Section 4 of this Annex I, or otherwise, and Seller agrees that Buyer, at its
option, has the right at any time to conduct a partial or complete due diligence
review on any or all of the Purchased Loans, including, without limitation,
ordering new credit reports and Appraisals on the applicable collateral and
otherwise regenerating the information used to originate such Purchased Loans.
Upon reasonable (but no less than one (1) Business Day) prior notice to Seller,
Buyer or its authorized representatives will be permitted during normal business
hours to examine, inspect, and make copies and extracts of, the Purchased Loan
Files and any and all documents, records, agreements, instruments or information
relating to any Purchased Loan in the possession or under the control of Seller,
any servicer or sub-servicer and/or Custodian. Seller also shall make available
to Buyer a knowledgeable financial or accounting officer for the purpose of
answering questions respecting the Purchased Loan Files and the Purchased Loans.
Seller agrees to cooperate with Buyer and any third party underwriter designated
by Buyer in connection with such underwriting, including, but not limited to,
providing Buyer and any third party underwriter with access to any and all
documents, records, agreements, instruments or information relating to such
Purchased Loans in the possession, or under the control, of such Seller.
22. SERVICING
(a) Notwithstanding the purchase and sale of the Purchased Loans by
Seller to Buyer hereunder, GKK Manager LLC or such other Servicer shall continue
to service the Purchased Loans at Seller’s sole cost and for the benefit of
Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the
Purchased Loans prior to the Repurchase Date pursuant to Section 8 or 17 of this
Annex I, Buyer’s assigns; provided, however, that the obligations of Seller to
service any of the Purchased Loans shall cease automatically upon the earliest
of (i) an Event of Default, (ii) the date on which the aggregate Repurchase
Price for the Portfolio Loans together with all accrued and unpaid Price
Differential, unpaid Costs and other amounts payable by Seller to Buyer
hereunder have been paid in full or (iii) the transfer of servicing approved by
Seller and Buyer, which Buyer’s consent shall not be unreasonably withheld.
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Seller shall service and shall cause the Servicer to service the Purchased Loans
in accordance with Accepted Servicing Practices.
(b) Seller agrees that Buyer is the owner of all servicing records,
including but not limited to any and all servicing agreements (the “Servicing
Agreements”), files, documents, records, data bases, computer tapes, copies of
computer tapes, proof of insurance coverage, insurance policies, appraisals,
other closing documentation, payment history records, and any other records
relating to or evidencing the servicing of Purchased Loans (the “Servicing
Records”) so long as the Purchased Loans are subject to the Agreement. Seller
covenants to safeguard such Servicing Records and to deliver them promptly to
Buyer or its designee (including the Custodian) at Buyer’s request.
(c) Upon the occurrence and continuance of an Event of Default, Buyer
may, in its sole discretion, (i) sell its right to the Purchased Loans on a
servicing released basis or (ii) terminate Servicer or any sub-servicer of the
Purchased Loans with or without cause, in each case without payment of any
termination fee or such other costs or expenses to Buyer, it being agreed that
Seller will pay any and all fees, costs and expenses required to terminate the
Servicing Agreement and to effectuate a transfer of servicing to a designee of
the Buyer; provided, however, that Buyer shall cause any successor servicer to
deliver to Seller reports generated for Buyer relating to the Purchased Loans.
(d) Seller shall not, and shall not permit Servicer to, employ
sub-servicers to service the Purchased Loans without the prior written approval
of Buyer which shall not be unreasonably withheld. If the Purchased Loans are
serviced by a sub-servicer, Seller shall irrevocably assign all rights, title
and interest in the Servicing Agreements with such sub-servicer to Buyer.
(e) Seller shall cause Servicer and any sub-servicers engaged by
Seller to execute a letter agreement with Buyer acknowledging Buyer’s security
interest in the Purchased Loans and the Servicing Agreements and agreeing that
each such sub-servicer shall deposit all Income with respect to the Purchased
Loans in the Blocked Account, all in such manner as shall be reasonably
acceptable to Buyer.
(f) In the event Seller or its Affiliate is servicing any Purchased
Loan, Seller shall permit Buyer to inspect Seller’s or its Affiliate’s servicing
facilities, as the case may be, for the purpose of satisfying Buyer that Seller
or its Affiliate, as the case may be, has the ability to service such Purchased
Loans as provided in the Agreement.
(g) Seller shall cause the Servicer to provide a copy of each report
and notice sent to Seller to be sent to Buyer concurrently therewith.
23. TREATMENT FOR TAX PURPOSES
It is the intention of the parties that, for U.S. Federal, state and local
income and franchise tax purposes, the Transactions constitute a financing, and
that the Seller is, and, so long as no Event of Default shall have occurred and
be continuing, will continue to be, treated as the owner of the Purchased Loans
for such purposes. Unless prohibited by applicable law, Seller and Buyer agree
to treat the Transactions as described in the preceding sentence on any and all
filings with any U.S. Federal, state or local taxing authority.
24. INTENT
The provisions of Paragraph 19 of the Agreement (“Intent”) are hereby deleted
and replaced in their respective entireties by the following provisions of this
Section 24:
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The parties recognize that each Transaction is a “repurchase agreement” as that
term is defined in Section 101 of Title 11 of the United States Code, as amended
(except in so far as the type of asset subject to the Transaction or the term of
that Transaction would render such definition inapplicable). The parties
recognize that each Transaction is a “securities contract” as that term is
defined in Section 741 of Title 11 of the United States Code, as amended.
25. MISCELLANEOUS
The provisions of Paragraph 20 of the Agreement (“Disclosure Relating to Certain
Federal Protections”) are hereby deleted in their entirety and replaced by the
following provisions of this Section 26:
(a) Time is of the essence under the Transaction Documents and all
Transactions thereunder and all references to a time shall mean New York time in
effect on the date of the action unless otherwise expressly stated in the
Transaction Documents.
(b) All rights, remedies and powers of Buyer hereunder and in
connection herewith are irrevocable and cumulative, and not alternative or
exclusive, and shall be in addition to all other rights, remedies and powers of
Buyer whether under law, equity or agreement. In addition to the rights and
remedies granted to it in the Agreement to the extent applicable, Buyer shall
have all rights and remedies of a secured party under the UCC and any other
applicable law.
(c) The Transaction Documents may be executed in counterparts, each of
which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
(d) The headings in the Transaction Documents are for convenience of
reference only and shall not affect the interpretation or construction of the
Transaction Documents.
(e) Each provision of the Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Agreement shall be prohibited by or be invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of the Agreement.
(f) This Annex I, together with the Agreement contain a final and
complete integration of all prior expressions by the parties with respect to the
subject matter hereof and thereof and shall constitute the entire agreement
among the parties with respect to such subject matter, superseding all prior
oral or written understandings.
(g) The parties understand that the Agreement is a legally binding
agreement that may affect such party’s rights. Each party represents to the
other that it has received legal advice from counsel of its choice regarding the
meaning and legal significance of the Agreement and that it is satisfied with
its legal counsel and the advice received from it.
(h) Should any provision of the Agreement require judicial
interpretation, it is agreed that a court interpreting or construing the same
shall not apply a presumption that the terms hereof shall be more strictly
construed against any Person by reason of the rule of construction that a
document is to be construed more strictly against the Person who itself or
through its agent prepared the same, it being agreed that all parties have
participated in the preparation of the Agreement.
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(i) Buyer agrees not to seek before any court or governmental agency
to have any director or officer of the Seller held personally liable for any
action or inactions of the Seller or any obligations of the Seller under the
Agreement or the related Transaction Documents, except if such actions or
inactions are the result of the gross negligence, fraud or willful misconduct of
such director or officer.
(j) Guarantor is executing this Agreement as an acknowledgment and
confirmation that the Guaranty in favor of Buyer continues to be in full force
and effect and that Guarantor continues to guarantee the Guaranteed Obligations
(as defined in the Guaranty) which the Guarantor and the parties hereto agree
include the obligations and indemnities of each Seller under this Agreement and
the other Transaction Documents, as same may be amended, modified or amended and
restated from time to time. All references to the Original Agreement in the
Guaranty shall be deemed to refer to this Agreement (as may be further amended,
modified or amended and restated).
(k) All references to “Seller” in the Custodial Agreement shall be
deemed to refer to both Gramercy Warehouse Funding II LLC (“Gramercy”) and GKK
Trading Warehouse II, LLC (“GKK”). For the avoidance of doubt, any notice,
election or act taken by Seller under the Custodial Agreement shall be deemed to
constitute the action of both GKK and Gramercy, and Buyer, and as applicable,
the Custodian, may in all such circumstances rely on the action taken by either
one as the action of both GKK and Gramercy. All references to the Original
Agreement in the Custodial Agreement shall be deemed to refer to this Agreement
(as may be further amended, modified or amended and restated).
(l) All references to “Company” in the Blocked Account Agreement
shall be deemed to refer to both GKK and Gramercy. For the avoidance of doubt,
any notice, election or act taken by Company under the Blocked Account Agreement
shall be deemed to constitute the action of both GKK and Gramercy, and Buyer,
and as applicable, the Bank (as defined in the Blocked Account Agreement), may
in all such circumstances rely on the action taken by either one as the action
of both GKK and Gramercy. All references to the Original Agreement in the
Blocked Account Agreement shall be deemed to refer to this Agreement (as may be
further amended, modified or amended and restated).
[SIGNATURES COMMENCE ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have executed this Annex I as of the date first
above written.
BUYER:
GOLDMAN SACHS MORTGAGE COMPANY a New York limited partnership
By:
Goldman Sachs Real Estate Funding Corp., its
general partner
By:
Name:
Title:
SELLER:
GRAMERCY WAREHOUSE FUNDING II LLC, a
Delaware limited liability company, as a Seller
BY:
Gramercy Investment Trust, a Maryland real
estate investment trust, its sole member and
manager
By:
Name:
Title:
GKK TRADING WAREHOUSE II LLC, aDelaware limited liability company, as a Seller
BY:
By: GKK Trading Corp., its sole member and
manager
By:
Name:
Title:
Acknowledged and Agreed (as to Paragraph 25(j) hereof only):
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GRAMERCY CAPITAL CORP.,
a Maryland corporation
By:
Name:
Title:
Acknowledged and Agreed (as to Paragraph 25(k) hereof only):
WELLS FARGO BANK, N.A., as Custodian
By:
Name:
Title:
Acknowledged and Agreed (as to Paragraph 25(l) hereof only):
WACHOVIA BANK, NATIONAL ASSOCIATION, as Bank
By:
Name:
Title:
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Exhibit 10.50
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement ("Agreement") is by and between Reliant
Energy, Inc. (the "Company"), Reliant Energy Corporate Services, LLC (the
"Employer") and Michael L. Jines ("Executive").
The Company and the Employer consider it essential to the interests of
the Company's stockholders to secure the continued employment of key management
personnel. The Board of Directors of the Company recognizes that the possibility
of a Change in Control (as defined below) exists and that the uncertainty this
raises may result in the departure or distraction of management personnel to the
detriment of the Company and its stockholders. In order to encourage the
continued attention and dedication of key management personnel, this Agreement
is being entered into by the Company, the Employer and Executive.
The Company, the Employer and Executive agree as follows:
1.DEFINITIONS: Capitalized terms are defined in Exhibit A.
2.SEVERANCE BENEFITS: If Executive (a) experiences a Covered Termination,
(b) executes and returns to the Company a Waiver and Release within the time
period prescribed in the Waiver and Release following the Covered Termination,
and (c) does not revoke such Waiver and Release within the time period
prescribed in the Waiver and Release, then Executive will be entitled to receive
from the Employer the following severance benefits:
(a)Severance Payment Based on Salary. An amount equal to the sum of 2 times
Salary plus 2 times the Executive's target award under the AICP for the year in
which the Covered Termination occurs.
(b)Severance Payment Based on Bonus.
(1)Current Performance Year. An amount equal to the product of (A) the Salary
and (B) the Target Bonus Percentage, with the product of (A) and (B) prorated
based on the number of days Executive was employed during the bonus year in
which Executive's employment terminated.
(2)Prior Performance Year. An Executive whose termination date occurs before the
date on which awards under the AICP are paid out for the prior calendar year, or
the date on which the Company announces that awards under the AICP will not be
paid, will be entitled to an amount equal to the product of (A) the Salary and
(B) the Target Bonus Percentage (or, if greater, the actual amount of the bonus
determined under the AICP for such prior calendar year). Any prepayments of AICP
awards made during the prior calendar year will be deducted from the amount
calculated under the preceding sentence of Section 2(b)(2).
The severance benefits provided for in Sections 2(a) and 2(b) above will be paid
in one lump sum payment as soon as practicable after the expiration of the
Waiver and Release revocation period (subject to any delay required to comply
with the requirements of Section 409A of the Code).
(c)Welfare Benefit Coverage.
(1)Active Coverage. The Employer will provide, or will cause to be provided,
continued Welfare Benefit Coverage (as in effect from time to time for similarly
situated active employees) for Executive and Executive's eligible dependents at
the active employee rate for a period of 2 years following the date of
Executive's Covered Termination.
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(2)Post Retirement Coverage.
If Executive would be entitled to post-retirement medical coverage within
2 years following termination of employment, if Executive had remained employed,
the Company or the Employer will provide the coverage as follows:
(A)the coverage provided will be the coverage in effect immediately before the
Covered Termination; and
(B)coverage will begin on the later of (i) the date on which the post-retirement
coverage would have become available or (ii) the date on which the benefits
under Section 2(c)(1) end.
(3)Reduction for Other Coverage. Benefits otherwise receivable by Executive
pursuant to this Section 2(c) will be reduced to the extent Executive becomes
eligible to receive benefits pursuant to a government-sponsored health insurance
or health care program.
(d)Outplacement. The Employer will provide or cause to be provided outplacement
services for a period of 12 months in connection with Executive's efforts to
obtain new employment. Executive must notify the Employer or the outplacement
firm designated by the Employer, in writing, within 180 days of termination of
employment if the Executive wishes to utilize this outplacement benefit.
(e)Financial Planning: The Employer will provide, or cause to be provided,
continued access, for the remainder of the calendar year in which the Covered
Termination occurs or for 60 days (if greater), to the financial planning
services available to executive employees at the time of the Covered
Termination.
3.CHANGE IN CONTROL EQUITY-BASED BENEFITS: Immediately upon any Change in
Control, Executive will be entitled to receive benefits with respect to any
equity-based compensation in accordance with the applicable plans and
agreements.
4.SPECIAL INTERNAL REVENUE CODE REQUIREMENTS: It is the intent of the Company
that the provisions of this Agreement comply with Section 409A of the Code and
related regulations and Department of the Treasury pronouncements. Accordingly,
notwithstanding any provision in this Agreement to the contrary, this Agreement
will be interpreted, applied and to the minimum extent necessary, unilaterally
amended by the Company in its sole discretion, without the consent of Executive,
as the Company deems appropriate for the Agreement to satisfy the requirements
of Section 409A.
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5.CERTAIN ADDITIONAL PAYMENTS: Whether or not Executive becomes entitled to the
payments or benefits pursuant to Section 2 of this Agreement, if any of the
payments or benefits received or to be received by Executive (including any
payment or benefit received or to be received in connection with a Change in
Control or Executive's termination of employment, whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement) (all such
payments and benefits, excluding the Gross-Up Payment described below, being
hereinafter referred to as the "Total Payments") will be subject to the tax
under Section 4999 of the Code (the "Excise Tax"), the Company will pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment taxes and Excise
Tax upon the Gross-Up Payment, and after taking into account the phase out of
itemized deductions and personal exemptions attributable to the Gross-Up
Payment, is equal to the Total Payments. In the event that the amount of the
Total Payments does not exceed 110% of the largest amount that would result in
no portion of the Total Payments being subject to the Excise Tax (the "Safe
Harbor"), then the preceding provisions of this Section will not apply and any
noncash payments or benefits will first be reduced (if necessary, to zero), and
any cash payments will thereafter be reduced (if necessary, to zero) so that the
amount of the Total Payments is equal to the Safe Harbor; provided, however,
that the Executive may elect to have the cash payments reduced (or eliminated)
before any reduction of the noncash payments or benefits.
For purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments
will be treated as "parachute payments" (within the meaning of
Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax
Counsel") reasonably acceptable to Executive and selected by the accounting firm
which was, immediately prior to the Change in Control, the Company's independent
auditor (the "Auditor"), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of
Section 280G(b)(l) of the Code will be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually rendered
(within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the base
amount allocable to such reasonable compensation (within the meaning of
Section 280G of the Code), or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit will
be determined by the Auditor in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, (1) the Executive will be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the date of the Covered Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes and (2) Executive will be deemed to be subject to the loss of
itemized deductions and personal exemptions to the maximum extent provided by
the Code for each dollar of incremental income.
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In the event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Gross-Up Payment,
Executive must repay to the Company, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by Executive), to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in Executive's
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company will make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) within five (5) business days following the time
that the amount of such excess is finally determined. Executive and the Company
must each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
6.CONFIDENTIALITY: Executive agrees that he will not, while employed by the
Company or the Employer or an Affiliate and thereafter, disclose or make
available to any other person or entity, or use for his own personal gain, any
Confidential Information, except for such disclosures as are required in the
performance of his duties hereunder or as may otherwise be required by law or
legal process (in which case Executive must notify the Company of such legal or
judicial proceeding as soon as practicable, and permit the Company to seek to
protect its interests and information).
7.RETURN OF PROPERTY: Executive agrees that at the time of leaving his or her
employ, he will deliver to the Employer (and will not keep in his possession,
recreate or deliver to anyone else) all Confidential Information as well as all
other devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, customer
or client lists or information, or any other documents or property (including
all reproductions of the aforementioned items) belonging to the Company or any
of its Affiliates, regardless of whether such items were prepared by Executive.
8.NON-SOLICITATION: Executive agrees that while employed by the Company or the
Employer or an Affiliate and for one year following a Covered Termination, he
will not, without the prior written consent of the Company, directly or
indirectly, hire or induce, entice or solicit (or attempt to induce entice or
solicit) any employee of the Company or any of its Affiliates to leave the
employment of the Company or any of its Affiliates.
9.NOTICES: For purposes of this Agreement, notices and all other communications
must be in writing and will be deemed to have been given when personally
delivered or when mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Company or the Employer: Reliant Energy, Inc.
1000 Main Street
Houston, Texas 77002
ATTENTION: General Counsel
If to Executive:
Michael L. Jines
2307 Crimson Valley Court
Kingwood, Texas 77345
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or to such other address as either party may furnish to the other in writing in
accordance with this Section.
10.APPLICABLE LAW: The validity, interpretation, construction and performance of
this Agreement will be governed by and construed in accordance with the
substantive laws of the State of Texas, but without giving effect to the
principles of conflict of laws of such State.
11.SEVERABILITY: If any provision of this Agreement is determined to be invalid
or unenforceable, then the invalidity or unenforceability of that provision will
not affect the validity or enforceability of any other provision of this
Agreement and all other provisions will remain in full force and effect.
12.WITHHOLDING OF TAXES: The Company or the Employer, as applicable, may
withhold from any payments under this Agreement all federal, state, local or
other taxes as may be required pursuant to any law or governmental regulation or
ruling.
13.NO ASSIGNMENT; SUCCESSORS: Executive's right to receive payments or benefits
under this Agreement will not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, whether voluntary, involuntary, by
operation of law or otherwise, other than a transfer by will or by the laws of
descent or distribution, and in the event of any attempted assignment or
transfer contrary to this Section 13 the Company or Employer will have no
liability to pay any amount so attempted to be assigned or transferred. This
Agreement inures to the benefit of and is enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
This Agreement is binding upon and inures to the benefit of the Company and the
Employer and their respective successors and assigns (including, without
limitation, any company into or with which the Company may merge or
consolidate).
14.PAYMENT OBLIGATIONS ABSOLUTE: Except for the requirement of Executive to
execute and return to the Company the Waiver and Release in accordance with
Section 2, the Company's and the Employer's obligation to pay Executive the
amounts and to make the arrangements provided herein are absolute and
unconditional and may not be affected by any circumstances, including, without
limitation, any set-off, counter-claim, recoupment, defense or other right which
the Company or the Employer (including their Affiliates) may have against
Executive or anyone else. All amounts payable or arrangements to be made
hereunder by the Company or the Employer (including their Affiliates) must be
paid or made without notice or demand. Executive may not be obligated to sign an
agreement not to compete with the Company or its Affiliates or to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any other employment will not
effect any reduction of the Company's or the Employer's obligations to make (or
cause to be made) the payments and arrangements required to be made under this
Agreement. In the event that the Employer fails to pay any amount or provide any
benefit required to be made or provided by the terms of this Agreement, the
Company will be required to make such payment or provide such benefit, as the
case may be, under the same terms and conditions that were applicable to the
Employer.
15.NUMBER AND GENDER: Wherever appropriate herein, words used in the singular
will include the plural, the plural will include the singular, and the masculine
gender will include the feminine gender.
16.CONFLICTS: This Agreement constitutes the entire understanding of the parties
with respect to its subject matter and supercedes any other agreement or other
understanding, whether oral or written, express or implied, between them
concerning, related to or otherwise in connection with, the subject matter
hereof.
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17.AMENDMENT AND WAIVER: No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by any party hereto at any time of any breach
by the other party hereto of, or of any lack of compliance with, any condition
or provision of this Agreement to be performed by any other party will be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
18.COUNTERPARTS: This Agreement may be executed in several counterparts, each of
which will be deemed to be an original but all of which together will constitute
one and the same instrument.
19.TERM: The effective date of the Agreement is January 15, 2006. Upon the
occurrence of a Change in Control, the term will be automatically extended to a
date which is two years from the date upon which the Change in Control occurs.
If Executive's employment is terminated before the occurrence of a Change in
Control, this Agreement shall immediately terminate, except that terms of this
Agreement, which must survive the termination this Agreement in order to be
effectuated (including the provisions of Sections 6, 7 and 8) will survive.
RELIANT ENERGY, INC.
By:
/s/ JOEL V. STAFF
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Joel V. Staff
Chairman and Chief Executive Officer
Date:
March 7, 2006
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RELIANT ENERGY CORPORATE SERVICES, LLC
By:
/s/ KAREN D. TAYLOR
--------------------------------------------------------------------------------
Karen D. Taylor
Vice President
Date:
March 7, 2006
--------------------------------------------------------------------------------
EXECUTIVE
/s/ MICHAEL L. JINES
--------------------------------------------------------------------------------
Michael L. Jines
Date:
March 7, 2006
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Exhibit A
DEFINITIONS
The following terms have the meanings set forth below.
"Affiliate" means an Affiliate within the meaning of Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
"AICP" means the Reliant Energy, Inc. Annual Incentive Compensation Plan (or any
successor plan).
"Board" means the Board of Directors of the Company.
"Cause" means Executive's (a) gross negligence in the performance of Executive's
duties, (b) intentional and continued failure to perform Executive's duties,
(c) intentional engagement in conduct that materially injures the Company, the
Employer, or its Affiliates (monetarily or otherwise) or (d) being charged with,
indicted for or convicted of a felony. For purposes of the definition of Cause,
an act or failure to act by Executive is "intentional" only if done or omitted
to be done by Executive in bad faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company and its
Affiliates, and no act or failure to act by Executive is "intentional" if it was
due primarily to an error in judgment or negligence.
A "Change in Control" will be deemed to have occurred upon the occurrence of any
of the following:
(a)30% Ownership Change: Any Person, other than an ERISA-regulated pension plan
established by the Company, the Employer, or an Affiliate, makes an acquisition
of Outstanding Voting Stock and is, immediately thereafter, the beneficial owner
of 30% or more of the then Outstanding Voting Stock, unless such acquisition is
made directly from the Company in a transaction approved by a majority of the
Incumbent Directors; or any group is formed that is the beneficial owner of 30%
or more of the Outstanding Voting Stock; or
(b)Board Majority Change: Individuals who are Incumbent Directors cease for any
reason to constitute a majority of the members of the Board; or
(c)Major Mergers and Acquisitions: Consummation of a Business Combination
unless, immediately following such Business Combination, (i) all or
substantially all of the individuals and entities that were the beneficial
owners of the Outstanding Voting Stock immediately before such Business
Combination beneficially own, directly or indirectly, more than 70% of the then
outstanding shares of voting stock of the parent corporation resulting from such
Business Combination in substantially the same relative proportions as their
ownership, immediately before such Business Combination, of the Outstanding
Voting Stock, (ii) if the Business Combination involves the issuance or payment
by the Company of consideration to another entity or its shareholders, the total
fair market value of such consideration plus the principal amount of the
consolidated long-term debt of the entity or business being acquired (in each
case, determined as of the date of consummation of such Business Combination by
a majority of the Incumbent Directors) does not exceed 50% of the sum of the
fair market value of the Outstanding Voting Stock plus the principal amount of
the Company's consolidated long-term debt (in each case, determined immediately
before such consummation by a majority of the Incumbent Directors), (iii) no
Person (other than any corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of the then outstanding
shares of voting stock of the parent corporation resulting from such Business
Combination and (iv) a majority of the members of the board of directors of the
parent corporation resulting from such Business Combination were Incumbent
Directors of the Company immediately before consummation of such Business
Combination; or
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(d)Major Asset Dispositions: Consummation of a Major Asset Disposition unless,
immediately following such Major Asset Disposition, (i) individuals and entities
that were beneficial owners of the Outstanding Voting Stock immediately before
such Major Asset Disposition beneficially own, directly or indirectly, more than
70% of the then outstanding shares of voting stock of the Company (if it
continues to exist) and of the entity that acquires the largest portion of such
assets (or the entity, if any, that owns a majority of the outstanding voting
stock of such acquiring entity) and (ii) a majority of the members of the Board
(if it continues to exist) and of the entity that acquires the largest portion
of such assets (or the entity, if any, that owns a majority of the outstanding
voting stock of such acquiring entity) were Incumbent Directors of the Company
immediately before consummation of such Major Asset Disposition.
For purposes of the definition of a "Change in Control",
(1)"Person" means an individual, entity or group;
(2)"group" is used as it is defined for purposes of Section 13(d)(3) of the
Exchange Act;
(3)"beneficial owner" is used as it is defined for purposes of Rule 13d-3 under
the Exchange Act;
(4)"Outstanding Voting Stock" means outstanding voting securities of the Company
entitled to vote generally in the election of directors; and any specified
percentage or portion of the Outstanding Voting Stock (or of other voting stock)
is determined based on the combined voting power of such securities;
(5)"Incumbent Director" means a director of the Company (x) who was a director
of the Company on the effective date of this Agreement or (y) who becomes a
director after such date and whose election, or nomination for election by the
Company's shareholders, was approved by a vote of a majority of the Incumbent
Directors at the time of such election or nomination, except that any such
director will not be deemed an Incumbent Director if his or her initial
assumption of office occurs as a result of an actual or threatened election
contest or other actual or threatened solicitation of proxies by or on behalf of
a Person other than the Board;
(6)"election contest" is used as it is defined for purposes of Rule 14a-11 under
the Exchange Act;
(7)"Business Combination" means
(x)a merger or consolidation involving the Company or its stock or
(y)an acquisition by the Company, directly or through one or more subsidiaries,
of another entity or its stock or assets;
(8)"parent corporation resulting from a Business Combination" means the Company
if its stock is not acquired or converted in the Business Combination and
otherwise means the entity which as a result of such Business Combination owns
the Company or all or substantially all the Company's assets either directly or
through one or more subsidiaries; and
(9)"Major Asset Disposition" means the sale or other disposition in one
transaction or a series of related transactions of 70% or more of the assets of
the Company and its subsidiaries on a consolidated basis; and any specified
percentage or portion of the assets of the Company will be based on fair market
value, as determined by a majority of the Incumbent Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company" means Reliant Energy, Inc., and, except for purposes of determining
whether a Change in Control has occurred, any successor thereto.
"Confidential Information" means any and all information, data and knowledge
that has been created, discovered, developed or otherwise become known to the
Company or any of its Affiliates or in which property rights have been assigned
or otherwise conveyed to the Company or any of its Affiliates, which
information, data or knowledge has commercial value in the business in which the
Company or any of its Affiliates or ventures is engaged, except such
information, data or knowledge as is or becomes known to the public without
violation of the terms of this Agreement. By way of illustration, but not
limitation, Confidential Information includes business trade secrets, secrets
concerning the Company's or any of its Affiliate's plans and strategies,
nonpublic information concerning material market opportunities, technical trade
secrets, processes, formulas, know-how, improvements, discoveries, developments,
designs, inventions, techniques, marketing plans, manuals, records of research,
reports, memoranda, computer software, strategies, forecasts, new products,
unpublished financial information, projections, licenses, prices, costs, and
employee, customer and supplier lists.
"Covered Termination" means a termination of Executive's employment (such that
Executive ceases to be employed by the Employer, the Company or an Affiliate)
following a Change in Control during the term of this Agreement as follows:
(a)an involuntary termination that does not result from any of the following:
(1)death;
(2)disability entitling Executive to benefits under the Company's or the
Employer's long-term disability plan; or
(3)termination for Cause;
(b)a termination by the Executive for Good Reason; or
(c)a termination initiated by the Employer, the Company or an Affiliate and
mutually agreed upon by Executive and the Employer.
"Employer" means Reliant Energy Corporate Services, LLC, and any successor
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means any one or more of the following which occurs following a
Change in Control:
(a)a significant reduction in the duties or responsibilities of Executive from
those applicable immediately before the date on which a Change in Control
occurs;
(b)a reduction in Executive's annual base salary as in effect on the effective
date of this Agreement or as the same may be increased from time to time;
(c)the failure by the Company or the Employer to continue in effect any
compensation plan in which Executive participates immediately before the Change
in Control which is material to Executive's total compensation, unless a
comparable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company or the
Employer to continue Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, as existed
immediately before the Change in Control, unless the action by the Company or
the Employer applies to all similarly situated employees;
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(d)the failure by the Company and the Employer to continue to provide Executive
with benefits substantially similar to those enjoyed by Executive under any of
the Company's (or the Employer's or their respective Affiliates') pension,
savings, life insurance, medical, health and accident, or disability plans in
which Executive was participating immediately before the Change in Control, the
taking of any other action by the Company or the Employer which would directly
or indirectly materially reduce any of such benefits or deprive Executive of any
material fringe benefit enjoyed by Executive at the time of the Change in
Control or the failure by the Company or the Employer to provide Executive with
paid vacation on the same basis as was applicable to Executive immediately
before the Change in Control, unless the action by the Company or the Employer
applies to all similarly situated employees; or
(e)a change in the location of Executive's principal place of employment with
the Employer or the Company by more than 50 miles from the location where
Executive was principally employed immediately before the Change in Control or
the Company or the Employer requiring Executive to be based in a location other
than that of the Company's principal executive offices.
"Salary" means Executive's base salary as in effect immediately before the
termination of Executive's employment or, if higher, the base salary in effect
immediately before the first event or circumstance constituting Good Reason.
"Target Bonus Percentage" means Executive's target incentive award opportunity
under the AICP in effect immediately before the termination of Executive's
employment or, if higher, immediately before the first event or circumstance
constituting Good Reason.
"Waiver and Release" means a legal document substantially in the form attached
as Exhibit B.
"Welfare Benefit Coverage" shall mean medical, dental and vision benefits.
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Exhibit B
WAIVER AND RELEASE
In exchange for the payment to me of the severance benefits described in
Section 2 of the Change in Control Agreement between Reliant Energy, Inc. (the
"Company"), Reliant Energy Corporate Services, LLC (the "Employer") and me
effective as of , (the "Agreement") and of other remuneration and
consideration provided for in the Agreement (collectively, the "Benefits"),
which is in addition to any remuneration or benefits to which I am already
entitled, I agree not to sue and to release and forever discharge the Company,
the Employer and all of their respective parents, subsidiaries, affiliates and
unincorporated divisions, and its or their respective officers, directors,
agents, servants, employees, successors, assigns, insurers, employee benefit
plans and fiduciaries, and agents of any of the foregoing (collectively, the
"Corporate Group") from any and all damages, losses, causes of action, expenses,
demands, liabilities, and claims on behalf of myself, my heirs, executors,
administrators, and assigns with respect to all matters relating to or arising
out of my employment with or separation from the Company, under any employee
benefit plan or claims for indemnity arising as a result of my being an officer
or fiduciary of the Corporate Group. The release does not apply to claims or
causes of action accruing after the date hereof.
I acknowledge that signing this Waiver and Release is an important legal
act and that I have been advised in writing to consult an attorney prior to
execution. I also understand that, in order to be eligible for the Benefits, I
must sign and return this Waiver and Release to the Company's General Counsel. I
acknowledge that I have been given at least 21 days to consider whether to
execute this Waiver and Release.
In exchange for the payment to me of the Benefits, which is in addition
to any remuneration or benefits to which I am already entitled, (1) I agree not
to sue in any local, state or federal court regarding or relating in any way to
my employment with or separation from the Company, the Employer or any member of
the Corporate Group, and (2) I knowingly and voluntarily waive all claims and
release the Corporate Group from any and all claims, demands, actions,
liabilities, and damages, whether known or unknown, arising out of or relating
in any way to my employment with or separation from the Company, the Employer or
any member of the Corporate Group, except to the extent that my rights are
vested under the terms of employee benefit plans sponsored by the Corporate
Group, rights described in the Agreement, claims for indemnity from the
Corporate Group arising as a result of being an officer or fiduciary of the
Corporate Group, and except with respect to such rights or claims as may arise
after the date this Waiver and Release is executed. Except for the matters
identified above that are not the subject of this Waiver and Release, this
Waiver and Release includes, but is not limited to, claims and causes of action
under: Title VII of the Civil Rights Act of 1964, as amended; the Age
Discrimination in Employment Act of 1967, as amended, including the Older
Workers Benefit Protection Act of 1990; the Civil Rights Act of 1866, as
amended; the Civil Rights Act of 1991; the Americans with Disabilities Act of
1990; the Energy Reorganization Act, as amended, 42 U.S.C. § 5851; the Workers
Adjustment and Retraining Notification Act of 1988; the Pregnancy Discrimination
Act of 1978; the Employee Retirement Income Security Act of 1974, as amended;
the Family and Medical Leave Act of 1993; the Fair Labor Standards Act; the
Occupational Safety and Health Act; the Texas Labor Code §21.001 et. seq.; the
Texas Labor Code; the Sarbanes-Oxley Act of 2002; claims in connection with
workers' compensation or "whistle blower" statutes; and claims for breach of
contract (whether written or oral, expressed or implied), tort, personal injury,
defamation, negligence or wrongful termination; and any other claims under the
statutory, regulatory, administrative, constitutional or common law of any
nation, state, locality or any other jurisdiction.
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Further, I expressly represent that no promise or agreement which is not
expressed in this Waiver and Release has been made to me in executing this
Waiver and Release, and that I am relying on my own judgment in executing this
Waiver and Release, and that I am not relying on any statement or representation
of any member of the Corporate Group or any of their agents. I agree that this
Waiver and Release is valid, fair, adequate and reasonable, is with my full
knowledge and consent, was not procured through fraud, duress or mistake and has
not had the effect of misleading, misinforming or failing to inform me. I
acknowledge and agree that the Company or the Employer, as applicable, will
withhold any taxes required by federal, state or local law from the Benefits
otherwise payable to me.
I understand that for a period of seven calendar days following the
Company's receipt of this Waiver and Release executed by me, I may revoke my
acceptance of the offer of the Benefits by delivering a written statement to the
Company's General Counsel, by hand or by registered-mail, in which case the
Waiver and Release will not become effective. In the event I revoke my
acceptance of this offer, the Company and the Employer will have no obligation
to provide me the Benefits. I understand that failure to revoke my acceptance of
the offer within seven days after the date I sign this Waiver and Release will
result in this Waiver and Release being permanent and irrevocable.
I agree that the terms of this Waiver and Release are CONFIDENTIAL and
that any disclosure to anyone for any purpose whatsoever except as required by
law by me or my agents, representatives, heirs, spouse, employees or
spokespersons will be a breach of this Waiver and Release.
I agree that this Waiver and Release is valid. I agree that this Waiver
and Release is fair, adequate and reasonable. I agree that my consent to this
Waiver and Release was with my full knowledge and was not procured through
fraud, duress or mistake.
I acknowledge that payment of the Benefits is not an admission by any
member of the Corporate Group that they engaged in any wrongful or unlawful act
or that any member of the Corporate Group violated any law or regulation. I
understand that nothing in this Waiver and Release is intended to prohibit,
restrict or otherwise discourage me from engaging in any activity related to
matters of public or employee health or safety. Similarly, nothing herein is
intended to prohibit, restrict or otherwise discourage me or any other
individual from making reports of unsafe, wrongful or illegal conduct to any
agency or branch of the local, state or federal government, including law
enforcement authorities, public utility commissions, energy regulatory
commissions or any other lawful authority. I agree that if called upon to serve
as a witness or consultant in or with respect to any actual or potential
litigation or administrative proceeding, I will truthfully cooperate with the
Company and the Employer to the full extent permitted by law.
I understand and agree that in the event of any breach or threatened
breach of the provisions of Sections 6, 7 or 8 of the Agreement by me, the
Company or the Employer, in their discretion, may initiate appropriate action as
provided in those Sections and may recover all lawful damages which it or they
may prove by a preponderance of the evidence in accordance with the law
specified in those Sections.
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I acknowledge that this Waiver and Release sets forth the entire
understanding and agreement between me, the Company and the Employer concerning
the subject matter of this Waiver and Release and supersedes any prior or
contemporaneous oral and/or written agreements or representations, if any,
between me, the Company, the Employer or any other member of the Corporate
Group. The invalidity or enforceability of any provisions hereof shall in no way
affect the validity or enforceability of any other provision.
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Name
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Social Security Number
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Signature Date
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QuickLinks
Exhibit 10.50
CHANGE IN CONTROL AGREEMENT (JINES)
|
Exhibit 10.60
WYETH 2005 (409A)
DEFERRED COMPENSATION PLAN
(effective January 1, 2005)
PURPOSE
The Plan is an unfunded deferred compensation plan that provides certain key
Employees with the opportunity to voluntarily defer receipt of a portion of
their compensation. Wyeth adopted the Plan to enable the Company to attract and
retain a select group of management and highly compensated Employees. The Plan
is intended to comply with Section 409A. Wyeth also maintains the Prior Plan,
which governs certain compensation deferred by a select group of management and
highly compensated Employees that is not subject to Section 409A.
Capitalized terms not otherwise defined in the text hereof shall have the
meanings set forth in Section 1.
SECTION 1
DEFINITIONS
1.1 Rules of Construction. Except where the context indicates otherwise, any
masculine terminology used herein shall also include the feminine gender, and
the definition of any term herein in the singular shall also include the plural.
All references to sections and appendices are, unless otherwise indicated, to
sections or appendices of the Plan.
1.2 Terms Defined in the Plan. Whenever used herein, the following terms shall
have the meanings set forth below:
(a) “Administrative Procedures” means the policies and procedures established by
the Committee and/or the Administrative Record Keeper from time to time
governing elections to participate in the Plan, maintenance of Deferral
Accounts, Investment Options, calculation of Investment Earnings/Losses,
required Election Forms, distributions from the Plan and such other matters as
are necessary for the proper administration of the Plan.
(b) “Administrative Record Keeper” means the person or persons designated by the
Committee in accordance with Section 2.
(c) “Affiliate” means any corporation which is included in a controlled group of
corporations (within the meaning of Section 414(b) of the Code) which includes
Wyeth, any trade or business (whether or not incorporated) which is under common
control with Wyeth (within the meaning of Section 414(c) of the Code), any
organization included in the same affiliated service group (within the meaning
of Section 414(m) of the Code) as Wyeth and any
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other entity required to be aggregated with Wyeth pursuant to the regulations
under Section 414(o) of the Code.
(d) “Base Salary” means the annual base compensation to be paid during a Plan
Year by the Company or its Subsidiaries to an Employee for services rendered
during such Plan Year from all sources (i.e., regardless of whether United
States source or foreign source).
(e) “Beneficiary” means one or more persons or entities (including a trust or
estate) designated by a Participant to receive payment of any unpaid balance in
the Participant’s Deferral Account in the event of the Participant’s death. Such
designation shall be made on a form provided by the Administrative Record
Keeper. If no valid Beneficiary designation is in effect at the Participant’s
death, or if no person or persons so designated survives the Participant, or if
each surviving validly designated Beneficiary is legally impaired or prohibited
from receiving payment, Participant’s Beneficiary shall be the Participant’s
Surviving Spouse, if any, or if the Participant has no Surviving Spouse, then
his estate. If the Committee is in doubt as to the right of any person to
receive such amount, it may retain such amount, without liability for any
interest thereon, until the rights thereto are determined, or the Committee may
pay such amount into any court of competent jurisdiction and such payment shall
be a complete discharge of the liability of the Plan.
(f) “Board of Directors” means the Board of Directors of Wyeth (or any committee
of the Board of Directors to whom the Board delegates, from time to time, its
authority hereunder).
(g) “Bonus Compensation” means cash compensation to be paid to an Eligible
Employee by the Company with respect to services rendered during a Plan Year
under any incentive compensation or bonus plan, program or arrangement which is
maintained or which may be adopted by the Company.
(h) “Business Day” means each day that the New York Stock Exchange is open for
business.
(i) “Change in Control” means the first to occur of any of the following events:
(i) any person or persons acting in concert (excluding Wyeth benefit plans)
becomes the beneficial owner of securities of Wyeth having at least 20% of the
voting power of Wyeth’s then outstanding securities (unless the event causing
the 20% threshold to be crossed is an acquisition of voting common securities
directly from Wyeth); or
(ii)
the consummation of any merger or other business combination of Wyeth, sale or
lease of Wyeth’s assets, or combination of the foregoing transactions (the
“Transactions”), other than a Transaction immediately following which the
shareholders of Wyeth who owned shares immediately prior to the Transaction
(including any trustee or fiduciary of any Wyeth employee benefit plan) own, by
virtue of their prior ownership of Wyeth’s shares, at least 65% of the voting
power, directly or indirectly,
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of (a) the surviving corporation in any such merger or other business
combination; (b) the purchaser or lessee of the Wyeth’s assets; or (c) both the
surviving corporation and the purchaser or lessee in the event of any
combination of Transactions; or
(iii) within any 24 month period, the persons who were directors immediately
before the beginning of such period (the “Incumbent Directors”) shall cease (for
any reason other than death) to constitute at least a majority of the Board of
Directors or the board of directors of a successor to Wyeth. For this purpose,
any director who was not a director at the beginning of such period shall be
deemed to be an Incumbent Director if such director was elected to the Board of
Directors by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors (so long
as such director was not nominated by a person who has expressed an intent to
effect a Change in Control or engage in a proxy or other control contest);
provided, however, that no event shall constitute a change in control unless it
is a change in control within the meaning of Section 409A.
(j) “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable rulings and regulations promulgated thereunder.
(k) “Committee” means the Compensation and Benefits Committee of the Board of
Directors.
(l) “Company” means Wyeth and its Affiliates.
(m) “Default Investment Option” means the default investment option specified
from time to time by the Committee for hypothetical investment of a
Participant’s Deferral Account in the event the Participant fails to allocate
all or a portion of his Deferral Account to a particular Investment Option.
(n) “Deferral Account” means a bookkeeping account (including all sub-accounts)
maintained by the Administrative Record Keeper for each Participant to record
(i) the Participant’s Base Salary and/or Bonus Compensation deferrals under the
Plan, (ii) the amount of a Valid Notional Rollover of all or a portion of the
Participant’s (A) ERP 409A Benefit, (B) SERP 409A Benefit, and (C) SESP 409A
Account, plus or minus (iii) Investment Earnings/Losses on those amounts minus
(iv) all distributions or withdrawals made to a Participant or his Beneficiary.
(o) “Deferred Compensation Tax Compliance Committee” means a committee of such
officers and/or employees of the Company as shall be designated from time to
time by the Company.
(p) “Delayed Payment Amount” shall have the meaning set forth in Section 7.7.
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(q) “Disability” means a Participant (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than three months under an accident and health plan covering employees of the
Company, within the meaning of Section 409A.
(r) “Election Form” means the form or forms established from time to time by the
Administrative Record Keeper and/or the Committee, that an Eligible Employee
completes, signs and returns to the Administrative Record Keeper to make an
election under the Plan. Election Forms can be in paper, electronic or such
other media (or combination thereof) as the Administrative Record Keeper shall
specify from time to time.
(s) “Eligible Employee” means an active Employee (i) whose terms and conditions
of employment are not subject to a collective bargaining agreement, (ii) who at
any time during the Plan Year is eligible to receive Base Salary for the Plan
Year on an annualized basis of not less than one hundred fifty-five thousand
dollars ($155,000) or such other amount as may be determined from time to time
by the Committee, and (iii) who is paid in whole or in part through the
Company’s regular U.S. payroll. Notwithstanding the foregoing, an individual
shall not become an “Eligible Employee” until the first day of the month
following the date on which such individual satisfies requirement (ii) of the
previous sentence. Further, the term “Eligible Employees” shall exclude
individuals classified by the Company as leased employees, independent
contractors or consultants or any individuals who are not paid through the
Company’s regular payroll.
(t) “Employee” means an employee of the Company or its Subsidiaries.
(u) “ERP” means the Wyeth Executive Retirement Plan (amended and restated
effective as of January 1, 2005), as amended from time to time.
(v) “ERP 409A Benefit” means the portion of an Eligible Employee’s benefit under
the ERP that is subject to Section 409A.
(w) “ERP Grandfathered Benefit” means the portion of an Eligible Employee’s
benefit under the ERP that, for purposes of Section 409A, was both earned and
vested on December 31, 2004.
(x) “Installment Retirement Benefit” shall have the meaning set forth in
Section 7.2(a).
(y) “Investment Earnings/Losses” means the income, gains and losses that would
have been realized had an amount deferred hereunder actually been invested in
the Investment Option or Options selected by a Participant.
(z) “Investment Options” means the Market Interest Option or such other
investment options as selected from time to time by the Committee that are used
as hypothetical
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investment options among which the Participant may allocate all or a portion of
his Deferral Account.
(aa) “Key Employee” means (i) each “specified employee,” as defined in
Section 409A(a)(2)(B)(i) of the Code, who meets the requirements of
Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with
the regulations thereunder and disregarding Section 416(i)(5) of the Code) any
time during the 12-month period ending on December 31st of a calendar year and
(ii) to the extent not otherwise included in (i) hereof, each of the top-100
paid individuals (based on W-2 compensation for the 12-month period ending on
December 31st of such calendar year) who performed services for the Company at
any time during the 12-month period ending on December 31st of such calendar
year. A Participant shall be treated as a Key Employee for the 12-month period
beginning on April 1st of the calendar year following the calendar year for
which the determination under clause (i) or (ii) of this definition is made.
(bb) Lump Sum Retirement Benefit” shall have the meaning set forth in
Section 7.2(a).
(cc) “Market Interest Option” means the Investment Option that provides for
Investment Earnings/Losses on amounts deferred under the Plan at the Market
Rate.
(dd) “Market Rate” means, for a particular calendar year, (i) 120% of the long
term applicable federal rate, with quarterly compounding, for the month of
January of such calendar year, as published under Section 1274(d) of the Code
for such year or (ii) such other rate as shall be specified from time to time by
the Committee, except that any rate specified under clause (ii) shall only apply
to amounts in a Deferral Account on a prospective basis and following reasonable
notice of such rate to Participants.
(ee) “Normal Retirement Date” shall have the same meaning as set forth in the
Retirement Plan.
(ff) “Participant” means an Employee or Retiree (for so long as he retains a
Deferral Account under the Plan) who participates in the Plan.
(gg) “Plan” means this Wyeth 2005 (409A) Deferred Compensation Plan, as amended
from time to time.
(hh) “Plan Year” means the calendar year.
(ii) “Prior Plan” means the terms of the Wyeth Deferred Compensation Plan (as
amended and restated as of November 20, 2003), as set forth in the Company’s
written documentation, rules, practices and procedures applicable to the Prior
Plan (but without regard to any amendments thereto after October 3, 2004 that
would result in any material modification, within the meaning of Section 409A
and Notice 2005-1, of the Plan).
(jj) “Retiree” means an individual who is Retired.
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(kk) “Retirement”, “Retire(s)” or “Retired” means the first of the month
following Separation from Service with the Company for any reason other than a
leave of absence, death or Disability on or after the Participant becomes
Retirement Eligible.
(ll) “Retirement Benefit” means the type and form of payments available to a
Participant upon Retirement as described in Section 7.2(a).
(mm) “Retirement Benefit Installment Payout Dates” means, with respect to a
deferral made by a Participant, the first day of the calendar quarter elected
(initially or upon redeferral pursuant to Section 8) by the Participant for the
commencement of installment payments and, in the case of annual installments,
the anniversary dates thereof and, in the case of quarterly installments, the
first day of each calendar quarter thereafter, in each case through the final
installment payout date elected by the Participant with respect to such
deferral; provided that the first of such dates shall be:
(i) with respect to a distribution election made by a Participant in accordance
with the SESP, at least 12 months after a Valid Notional Rollover of all or a
portion of the SESP 409A Account;
(ii) with respect to redeferral by a Participant of all or a portion of the ERP
409A Benefit, the SERP 409A Benefit or the SESP 409A Account pursuant to a Valid
Notional Rollover in accordance with the provisions of the ERP, the SERP or the
SESP, as the case may be, not earlier than five years after the date such ERP
409A Benefit, SERP 409A Benefit or SESP 409A Account would otherwise have been
payable;
(iii) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election prior to December 31, 2005 and incurs a Separation
from Service during the calendar year 2006, not earlier than January 1, 2007;
(iv) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election in calendar year 2006 and incurs a Separation from
Service during the calendar year 2007, not earlier than January 1, 2008;
(v) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election in calendar year 2007 and incurs a Separation from
Service during the calendar year 2008, not earlier than January 1, 2009;
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(vi) with respect to all other Retirement Benefit payments (including all or a
portion of the ERP 409A Benefit or the SERP 409A Benefit rolled over to the Plan
in a Valid Notional Rollover not in connection with a redeferral), on or after
the Participant’s Retirement Date; and
provided, further, that the final installment payout date with respect to such
deferral occurs (X) no earlier than the second anniversary of the first
installment payment and (Y) no later than the earlier of (I) the quarter prior
to the fifteenth anniversary of the first installment payment and (II) the
fifteenth anniversary of the Participant’s Normal Retirement Date.
(nn) “Retirement Benefit Lump Sum Payout Date” means, with respect to a deferral
made by a Participant, the first day of the calendar quarter elected (initially
or upon redeferral pursuant to Section 8) by the Participant for a lump sum
payout of a Retirement Benefit; provided that such date shall not be earlier
than:
(i) with respect to a distribution election made by a Participant in accordance
with the SESP, at least 12 months after a Valid Notional Rollover of all or a
portion of the SESP 409A Account;
(ii) with respect to redeferral by a Participant of all or a portion of the ERP
409A Benefit, the SERP 409A Benefit or the SESP 409A Account pursuant to a Valid
Notional Rollover in accordance with the provisions of the ERP, the SERP or the
SESP, as the case may be, not earlier than five years after the date such ERP
409A Benefit, SERP 409A Benefit or SESP 409A Account would otherwise have been
payable;
(iii) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election prior to December 31, 2005 and incurs a Separation
from Service during the calendar year 2006, not earlier than January 1, 2007;
(iv) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election in calendar year 2006 and incurs a Separation from
Service during the calendar year 2007, not earlier than January 1, 2008;
(v) with respect to a deferral of all or a portion of the ERP 409A Benefit or
the SERP 409A Benefit pursuant to a Valid Notional Rollover in accordance with
the provisions of the ERP or the SERP, as the case may be, by a Participant who
makes a distribution election in calendar year 2007 and incurs a Separation from
Service during the calendar year 2008, not earlier than January 1, 2009;
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(vi) with respect to all other Retirement Benefit payments (including all or a
portion of the ERP 409A Benefit or the SERP 409A Benefit rolled over to the Plan
in a Valid Notional Rollover not in connection with a redeferral), on or after
the Participant’s Retirement date; and
provided, further, that such date shall be no later than the fifteenth
anniversary of the Participant’s Normal Retirement Date.
(oo) “Retirement Eligible” means a Participant who is an Employee and who has
attained the earlier of (i) age 65, or (ii) age 55 with at least five Years of
Vesting Service.
(pp) “Retirement Plan” means the Wyeth Retirement Plan – United States, as
amended from time to time.
(qq) “Section 409A” means Section 409A of the Code and the applicable rulings
and regulations promulgated thereunder.
(rr) “Section 409A Compliance” has the meaning set forth in Section 9.2.
(ss) “Separation from Service” means “separation from service”, as defined under
applicable Internal Revenue Service Treasury Regulations for purposes of
Section 409A of a Participant from the Company or its Subsidiaries.
(tt) “SERP” means the Wyeth Supplemental Executive Retirement Plan (amended and
restated effective as of January 1, 2005), as amended from time to time.
(uu) “SERP 409A Benefit” means the portion of an Eligible Employee’s benefit
under the SERP that is subject to Section 409A.
(vv) “SERP Grandfathered Benefit” means the portion of an Eligible Employee’s
Benefit under the SERP that, for purposes of Section 409A, was both earned and
vested on December 31, 2004.
(ww) “SESP” means the Wyeth Supplemental Savings Plan (amended and restated
effective as of January 1, 2005), as amended from time to time.
(xx) “SESP 409A Account” means an Eligible Employee’s 409A Account (as defined
in the SESP) under the SESP.
(yy) “SESP Grandfathered Account” means an Eligible Employee’s Grandfathered
Account (as defined in the SESP) under the SESP.
(zz) “Short-Term Payout” means the type of payout available to a Participant as
described in Section 7.1(a).
(aaa) “Short-Term Payout Date” means, with respect to a deferral of Base Salary
or Bonus Compensation made by a Participant, the first day of the calendar
quarter elected by the Participant for payment of a Short-Term Payout; provided,
however, that such date
8
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shall be in a Plan Year which, in the case of an initial election, is at least
three but no more than 15 years after the end of the Plan Year with respect to
which a deferral occurs and in the case of a redeferral pursuant to Section 8,
is at least five but not more than 15 years after the date on which the
Short-Term Payout, but for the redeferral, would have been paid; and provided,
further, that in each case such date shall be no later than the fifteenth
anniversary of the Participant’s Normal Retirement Date.
(bbb) “Subsidiary(ies)” means, as to any person, any corporation, partnership or
joint venture, of which (or in which) such person, together with one or more of
its subsidiaries, directly or indirectly owns more than fifty percent (50%) of
the interest in the capital or profits of such corporation, partnership or joint
venture.
(ccc) “Unforeseeable Emergency” has the meaning ascribed in Section 409A.
(ddd) “Valid Notional Rollover” means a notional rollover in accordance with the
requirements of the SESP, the SERP or the ERP, as the case may be, of all or a
portion of (i) a Participant’s SESP 409A Account, (ii) SERP 409A Benefit or
(iii) ERP 409A Benefit, to the Plan by a Participant in the SESP, the SERP or
the ERP, as the case may be, who is Retirement Eligible at the time of his
Separation from Service. The effective date of a Valid Notional Rollover shall
be the first of the month following the Participant’s Separation from Service,
even if all or a portion of the SESP 409A Account, SERP 409A Benefit or ERP 409A
Benefit would otherwise have been paid to the Participant at a later date.
(eee) “Wyeth” means Wyeth, a Delaware corporation, and any successor thereto.
(fff) “Yearly or Quarterly Installment Method” means a yearly (or quarterly)
installment payment over the number of years (or quarters) selected by the
Participant in accordance with the Plan, calculated as follows: the Deferral
Account of the Participant shall be calculated as of the close of business on
the date of reference (or, if the date of reference is not a business day, on
the immediately following business day). The date of reference with respect to
the first yearly (or quarterly) installment payment dates shall be as provided
in Section 7.2 and the date of reference with respect to subsequent yearly (or
quarterly) installment payment dates shall be the anniversary date or dates
thereof in the applicable year. The yearly (or quarterly) installment shall be
calculated by multiplying the portion of the Deferral Account not allocated to
the Market Interest Option by a fraction, the numerator of which is one, and the
denominator of which is the remaining number of yearly (or quarterly) payments
due the Participant. The portion of an installment payment attributable to
amounts allocated to the Market Interest Option shall be calculated in
accordance with Section 7.2(c). By way of example, if the Participant elects 10
yearly (or 40 quarterly) installment payments, the first payment shall be
one-tenth (1/10) (or one-fortieth (1/40)) of the Deferral Account, calculated as
described in this definition. For the following payment, the payment shall be
one-ninth (1/9) (or one thirty-ninth (1/39)) of the Deferral Account, calculated
as described in this definition.
(ggg) “Year of Vesting Service” has the meaning ascribed to it in the Retirement
Plan as of January 1, 2006 and, prior to such date, has the meaning ascribed to
“Continuous Service,” as such term was defined in the Retirement Plan prior to
January 1, 2006.
9
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SECTION 2
ADMINISTRATION
2.1 General Authority. The general supervision of the Plan shall be the
responsibility of the Committee, which, in addition to such other powers as it
may have as provided herein, shall have the power, subject to the terms of the
Plan: (i) to determine eligibility to participate in, and the amount of benefit
to be provided to any Participant under, the Plan; (ii) to make and enforce such
rules and regulations as it shall deem necessary or proper for the efficient
administration of the Plan; (iii) to determine all questions arising in
connection with the Plan, to interpret and construe the Plan, to resolve
ambiguities, inconsistencies or omissions in the text of the Plan, to correct
any defects in the text of the Plan and to take such other action as may be
necessary or advisable for the orderly administration of the Plan; (iv) to make
determinations regarding the valuation of Deferral Accounts; (v) to make any and
all legal and factual determinations in connection with the administration and
implementation of the Plan; (vi) to designate the Administrative Record Keeper
and to review actions taken by the Administrative Record Keeper or any other
person to whom authority is delegated under the Plan; and (vii) to employ and
rely on legal counsel, actuaries, accountants and any other agents as may be
deemed to be advisable to assist in the administration of the Plan. All such
actions of the Committee shall be conclusive and binding upon all persons. The
Committee shall be entitled to rely conclusively upon all tables, valuations,
certificates, opinions, and reports furnished by any actuary, accountant,
controller, counsel, or other person employed or engaged by the Company with
respect to the Plan. If any member of the Committee is a Participant, such
member shall not resolve, or participate in the resolution of, any matter
specifically relating to such Committee member’s eligibility to participate in
the Plan or the calculation or determination of such member’s benefit under the
Plan.
2.2 Delegation. The Committee shall have the power to delegate to any person or
persons the authority to carry out such administrative duties, powers and
authority relative to the administration of the Plan as the Committee may from
time to time determine. Any action taken by any person or persons to whom the
Committee makes such a delegation shall, for all purposes of the Plan, have the
same force and effect as if undertaken directly by the Committee.
2.3 Administrative Record Keeper. The Administrative Record Keeper shall be
responsible for the day-to-day operation of the Plan, having the power (except
to the extent such power is reserved to the Committee) to take all action and to
make all decisions necessary or proper in order to carry out his duties and
responsibilities under the provisions of the Plan. If the Administrative Record
Keeper is a Participant, the Administrative Record Keeper shall not resolve, or
participate in the resolution of, any question which relates directly or
indirectly to him and which, if applied to him, would significantly vary his
eligibility for, or the amount of, any benefit to him under the Plan. The
Administrative Record Keeper shall report to the Committee at such times and in
such manner as the Committee shall request concerning the operation of the Plan.
2.4 Actions; Indemnification. The members of the Board of Directors, the
Committee, the Administrative Record Keeper, the members of the Deferred
Compensation Tax
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Compliance Committee, the members of any other committee and any director,
officer or employee of the Company to whom responsibilities are delegated by the
Committee shall not be liable for any actions or failure to act with respect to
the administration or interpretation of the Plan, unless such person acted in
bad faith or engaged in fraud or willful misconduct. The Company shall indemnify
and hold harmless, to the fullest extent permitted by law, the Board of
Directors (and each member thereof), the Committee (and each member thereof),
the Deferred Compensation Tax Compliance Committee (and each member thereof),
the Administrative Record Keeper, the members of any other committee and any
director, officer or employee of the Company to whom responsibilities are
delegated by the Committee from and against any liabilities, damages, costs and
expenses (including attorneys’ fees and amounts paid in settlement of any claims
approved by the Company) incurred by or asserted against it or him by reason of
its or his duties performed in connection with the administration or
interpretation of the Plan, unless such person acted in bad faith or engaged in
fraud or willful misconduct. The indemnification, exculpation and liability
limitations of this Section 2.4 shall apply to the Administrative Record Keeper
only to the extent that the Administrative Record Keeper is or was a director,
officer or employee of the Company.
SECTION 3
GRANDFATHERED BENEFITS
The Company maintains the Prior Plan, which was designed to provide certain
Employees with the opportunity to voluntarily defer receipt of a portion of
their compensation. All amounts deferred under the Prior Plan that, for purposes
of Section 409A, were both earned and vested on December 31, 2004 shall be
subject to the terms of the Prior Plan as in effect on December 31, 2004. The
ERP Grandfathered Benefits, SERP Grandfathered Benefits and the SESP
Grandfathered Account that are rolled over in a Valid Notional Rollover shall be
rolled over into the Prior Plan and be subject to the terms of the Prior Plan as
in effect on December 31, 2004.
SECTION 4
PARTICIPATION IN THE PLAN
4.1 Base Salary and Bonus Deferrals. An Eligible Employee who elects to defer
Base Salary or Bonus Compensation in accordance with Section 5.1 shall commence
participation in the Plan as of the date that amounts elected to be deferred are
first credited to the Eligible Employee’s Deferral Account.
4.2 Rollover from SERP, ERP and SESP. An Eligible Employee who makes a Valid
Notional Rollover of all or a portion of his SERP 409A Benefit, his ERP 409A
Benefit or his SESP 409A Account to the Plan in accordance with the requirements
of the SERP, the ERP or the SESP, as the case may be, and is not already a
Participant, shall become a Participant on the effective date of such Valid
Notional Rollover.
4.3 Exclusions. No Employee who is not an Eligible Employee shall be eligible to
participate in the Plan. In addition, the Committee may, if it determines it to
be
11
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necessary or advisable to comply with ERISA, the Code or other applicable law,
exclude one or more Eligible Employees or one or more classes of Eligible
Employees from Plan participation.
SECTION 5
DEFERRALS AND ELECTIONS
5.1 Elections. All deferrals under the Plan shall be evidenced by the Eligible
Employee properly executing and submitting such Election Forms as may be
required by the Administrative Record Keeper in accordance with the
Administrative Procedures and this Section 5.
5.2 Deferrals of Base Salary and/or Bonus Compensation.
(a) Deferrals of Base Salary and Bonus. Subject to the following sentence, for
each Plan Year, a Participant may designate a percentage of his Base Salary
and/or Bonus Compensation that is payable in a Plan Year to be deferred in
accordance with this Section 5. If an Eligible Employee elects to defer Base
Salary into the Plan, six percent of such Base Salary elected to be deferred for
a particular Plan Year shall automatically be deferred under the SESP for the
same Plan Year.
(b) Minimum/Maximum Amount of Deferral. For each Plan Year, a Participant may
elect to defer Base Salary and Bonus Compensation in increments of at least one
percent of Base Salary or Bonus Compensation, as the case may be (unless the
Committee determines otherwise in its sole discretion), up to a maximum of one
hundred percent (less required or elected payroll deductions such as for medical
and welfare benefits) of a Participant’s Base Salary or Bonus Compensation with
respect to a Plan Year. Notwithstanding the foregoing, Base Salary and Bonus
Compensation may only be deferred to the extent such amounts would otherwise
have been paid to the Participant through the Company’s regular U.S. payroll.
(c) Base Salary Deferral Elections. Except for the first Plan Year in which an
individual becomes an Eligible Employee, an Eligible Employee’s voluntary
election to defer Base Salary must be received by the Administrative Record
Keeper no later than December 31 of the prior Plan Year, or such earlier date as
may be determined by the Administrative Record Keeper in accordance with the
Administrative Procedures. With respect to the first Plan Year in which an
individual becomes an Eligible Employee, elections to voluntarily defer Base
Salary into the Plan must be made no later than 30 days after the date the
Employee first becomes an Eligible Employee and shall only apply to Base Salary
earned after such election becomes irrevocable, as determined in accordance with
the Administrative Procedures.
(d) Bonus Compensation. Except for the first Plan Year in which an individual
becomes an Eligible Employee, an Eligible Employee’s voluntary election to defer
Bonus Compensation must be received by the Administrative Record Keeper no later
than December 31 of the Plan Year prior to the Plan Year with respect to which
the Bonus Compensation will be earned. With respect to the first Plan Year in
which an individual becomes an Eligible Employee, elections to voluntarily defer
Bonus Compensation into the Plan must be made no later than 30 days after the
date the Employee becomes an Eligible Employee
12
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and shall only apply to the percentage of a Participant’s Bonus Compensation
that is no greater than the total amount of the Participant’s Bonus Compensation
for a Plan Year multiplied by the ratio of the number of days remaining in the
Plan Year after such election becomes irrevocable as determined in accordance
with the Administrative Procedures over the total number of days in the Plan
Year.
(e) Distribution Elections. For each Base Salary and/or Bonus Compensation
deferral, a Participant shall make an election at the same time that he makes a
deferral election to receive a Short-Term Payout on a Short-Term Payout Date or
a contingent election to receive a Retirement Benefit in accordance with the
Administrative Procedures and the provisions of Section 7 below.
5.3 Deferrals of Amounts Notionally Rolled Over from the SERP, the ERP and SESP.
(a) Notional Rollover from the ERP, the SERP and the SESP. All or a portion of a
Participant’s ERP 409A Benefit, SERP 409A Benefit and SESP 409A Account may be
transferred to the Plan in a Valid Notional Rollover in accordance with the
terms and conditions of the ERP, the SERP, and the SESP, as the case may be.
(b) Distribution Elections. A Participant shall make an election to receive a
Retirement Benefit upon Retirement at the time he makes either an initial or a
redeferral election to rollover all or a portion of his ERP 409A Benefit, SERP
409A Benefit or SESP 409A Account to the Plan in a Valid Notional Rollover in
accordance with the Administrative Procedures and the provisions of Section 7
below. A Participant shall be permitted to make a separate distribution election
under the Plan in connection with each initial or redeferral election to
rollover all or a portion of the ERP 409A Benefit, the SERP 409A Benefits and
the SESP 409A Account. A Participant’s election to redefer all or a portion of
the ERP 409A Benefit, the SERP 409A Benefit or the SESP 409A Account shall
further comply with the provisions of Sections 8.3 and 8.4.
5.4 Transition Rules.
(a) Year 2005/2006/2007. Appendix A sets forth certain transition elections for
Deferral Accounts made in accordance with Section 409A and Notice 2005-1 which
shall, for affected Participants, supplement and, to the extent required by
Appendix A, replace the corresponding provisions of this Section 5.
SECTION 6
DEFERRAL ACCOUNTS
6.1 Plan Accounts – In General. An individual Deferral Account shall be
established and maintained under the Plan on behalf of each Participant by or on
behalf of whom deferrals have been made. The Deferral Account shall track the
Base Salary and Bonus Compensation deferrals, Valid Notional Rollovers from the
SERP, ERP and SESP, Investment Earnings/Losses, distributions or other elections
applicable to such accounts. The Deferral
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Account shall have sub-accounts established and maintained as appropriate to
reflect the Base Salary deferrals, Bonus Contribution deferrals, Valid Notional
Rollovers from each of the ERP, SERP and SESP, as applicable and Investment
Option(s) selected by the Participant.
6.2 Crediting/Debiting of Deferral Account. Base Salary and Bonus Compensation
deferrals and Valid Notional Rollovers from the SERP, ERP and SESP shall be
credited to a Participant’s Deferral Account in accordance with the
Administrative Procedures. A Participant’s Deferral Account shall be credited or
debited with Investment Earnings/Losses based upon the Investment Options
selected by the Participant pursuant to Section 6.3 and in accordance with the
Administrative Procedures.
6.3 Election of Investment Options. A Participant shall elect, in accordance
with the Administrative Procedures, one or more Investment Option(s) from a menu
of Investment Options provided by the Committee to be used to determine
Investment Earnings/Losses credited or debited to his Deferral Account. A
Participant may reallocate the existing balance of his Deferral Account among
the available Investment Options and change Investment Options with respect to
future deferrals under the Plan in accordance with the Administrative
Procedures. In the event that a Participant fails to select one or more
Investment Options for all or a portion of his Deferral Account (including in
the situation where the Investment Option is discontinued and the Participant
fails to designate an alternative in accordance with the Administrative
Procedures), such amounts shall be deemed invested in the Default Investment
Option. In addition to the blackout periods and other restrictions set forth in
the Company’s Securities Transactions Policy, as amended from time to time, the
Company may impose such additional restrictions on transfers by Participants in
the Company Stock Fund as it deems necessary or advisable in order to comply
with federal or state securities laws (including, but not limited to Rule 16b-3
of the Securities Exchange Act of 1934, as amended). Any Participant subject to
such restrictions shall be notified by the Company.
6.4 Investment Options. The Committee shall select the Investment Options. The
Committee shall be permitted to add, remove or change Investment Options as it
deems appropriate, provided that any such addition, deletion or change shall not
be effective with respect to any period prior to the effective date of the
change. Each Participant, as a condition to his participation in the Plan,
agrees to indemnify and hold harmless the Committee, the Administrative Record
Keeper, and the Company, and their agents and representatives, from any losses
or damages of any kind relating to the Investment Options made available
hereunder.
6.5 Crediting or Debiting Method. The performance of each elected Investment
Option (either positive or negative) will be determined based on the performance
of the actual Investment Option. A Participant’s Deferral Account shall be
credited or debited with Investment Earnings/Losses on each Business Day, or as
otherwise determined by the Administrative Record Keeper in accordance with the
Administrative Procedures. The Administrative Record Keeper shall establish
procedures for valuing the balance of a Participant’s Deferral Account, from
time to time, including upon distribution, in accordance with the Administrative
Procedures.
6.6 No Actual Investment. Notwithstanding any other provision of the Plan, the
Investment Options are to be used for measurement purposes only, and a
Participant’s
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election of any such Investment Options and the crediting or debiting of
Investment Earnings/Losses to a Participant’s Deferral Account shall not be
considered or construed in any manner as an actual investment of his Deferral
Account in any such Investment Options. In the event that the Company decides to
invest funds in any or all of the Investment Options, no Participant shall have
any rights in or to such investments themselves. Without limiting the foregoing,
a Participant’s Deferral Account shall at all times be a bookkeeping entry only
and shall not represent any investment made on his behalf by the Company. The
Participant shall at all times remain an unsecured creditor of the Company.
SECTION 7
DISTRIBUTIONS
7.1 Base Salary and Bonus Compensation Deferrals.
(a) Short-Term Payouts. Each Short-Term Payout shall be a lump-sum payment equal
to the deferred amount, plus or minus Investment Earnings/Losses debited or
credited thereto in the manner provided in Section 6, determined at the time the
Short-Term Payout becomes payable. Each Short-Term Payout elected shall be
payable on the Short-Term Payout Date designated by the Participant on the
Election Form with respect thereto. Short-Term Payouts shall be made as soon as
practicable after the applicable Short-Term Payout Date elected by the
Participant on the applicable Election Form; provided, however, that in no event
shall such payment be made later than 30 days after the relevant elected date.
Notwithstanding the foregoing, in the event that a scheduled Short-Term Payout,
if paid, would (or in the judgment of the Committee, would be reasonably likely
to) result in the loss of deductibility for federal income tax purposes of any
compensation paid by the Company due to the limitations of Section 162(m) of the
Code in any Plan Year, then the scheduled Short-Term Payout shall be delayed to
the earlier of (i) the date the Committee reasonably determines that the
deduction of payment of the Short-Term Payout would not be limited or eliminated
by application of Section 162(m) of the Code or (ii) the calendar year in which
the Participant Separates from Service.
7.2 Retirement Benefit.
(a) Form of Distribution of Retirement Benefit. A Participant’s Retirement
Benefit may be paid in either a lump sum (“Lump Sum Retirement Benefit”) on a
Retirement Benefit Lump Sum Payout Date elected by the Participant or in
quarterly or yearly installment payments (“Installment Retirement Benefit”) on
Retirement Benefit Installment Payout Dates elected by the Participant. The
Participant’s Retirement Benefit payments shall be made in accordance with the
Administrative Procedures as soon as practicable after the applicable Retirement
Benefit Lump Sum Payout Date or Retirement Benefit Installment Payout Dates
elected by the Participant on the applicable Election Form; provided, however,
that in no event shall such payments be made later than 30 days after the
relevant elected dates.
(b) Installment Payments for Retirement Benefits Allocated to Investment Options
(Other than the Market Interest Option). The amount of each installment payment
with respect to the portion of a Deferral Account that is allocated to an
Investment Option (other than the Market Interest Option) shall be determined by
the Yearly Installment Method, if the
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Participant elected to receive annual installments or the Quarterly Installment
Method, if the Participant elected to receive quarterly installments.
(c) Installment Payments for Retirement Benefits Allocated to the Market
Interest Option. The amount of each installment payment with respect to the
portion of a Deferral Account that is allocated to the Market Interest Option
shall be determined by the following annuity methodology. The amount of each
installment payment shall be calculated by the Administrative Record Keeper as
an annuity at the beginning of the installment payout period elected by the
Participant and shall be recalculated each time there is a change in the Market
Rate or the Participant transfers an amount into or out of the Market Interest
Option, based on: (i) the balance of the applicable portion of the Participant’s
Deferral Account that is allocated to the Market Interest Option (adjusted to
reflect interest at the Market Rate then in effect in accordance with clause
(iii)) immediately following the date of the change in the Market Rate or the
Participant’s transfer as applicable, (ii) the number of remaining installments,
(iii) the Market Rate in effect at the time of the calculation (assuming that
the Market Rate will remain unchanged throughout the payout period), and (iv) a
final value of the portion of the Participant’s Deferral Account allocated to
the Market Interest Option of zero dollars ($0).
7.3 Payment Upon Separation from Service. Subject to Section 7.6 below, and
notwithstanding anything in the Plan to the contrary, in the event a Participant
incurs a Separation from Service with the Company for reasons other than
Retirement or death (including a Separation from Service as a result of
Disability by a Participant who is Retirement Eligible), or in the event that
any Subsidiary that employs a Participant ceases to be a wholly-owned Subsidiary
of Wyeth, the entire balance of the Participant’s Deferral Account shall be
distributed to the Participant in a single lump sum within 90 days thereafter.
7.4 Payment Upon Death. Notwithstanding anything in the Plan to the contrary, in
the event a Participant dies prior to the receipt of any or all of his or her
Deferral Account, the balance of such account shall be distributed in a single
lump sum to the Participant’s Beneficiary(ies) as soon as practicable following
the Participant’s death, but in no event later than the later of (x) December 31
of the calendar year in which the death occurs or (y) the 15th day of the third
calendar month following the Participant’s death.
7.5 Distribution on an Unforeseeable Emergency.
(a) In General. A Participant may receive a distribution with respect to his
Deferral Account, at such time as the Committee determines that the Participant
or his Beneficiary has incurred an Unforeseeable Emergency. Distribution because
of an Unforeseeable Emergency must be limited to the amount reasonably necessary
to satisfy the Unforeseeable Emergency and shall be permitted only if the
Unforeseeable Emergency may not be relieved through reimbursement from insurance
or otherwise, by liquidation of the Participant’s assets, to the extent the
liquidation of such assets would not cause severe financial hardship to the
Participant or by cessation of deferrals by the Participant in the Plan and the
SESP. If a Participant demonstrates that an Unforeseeable Emergency has
occurred, the Committee shall first cancel the Participant’s deferral election
for the remainder of the Plan Year under the Plan and the SESP. If the
Participant demonstrates, and the Committee shall determine, that a cancellation
of a Participant’s deferral election under the Plan and the SESP for
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the balance of the Plan Year will not alleviate or remedy the Participant’s or
his Beneficiary’s Unforeseeable Emergency, then, in addition to the cancellation
of the Participant’s deferral election, the Committee may authorize a
distribution from the balance in the Participant’s Deferral Account in the
amount deemed necessary by the Committee to alleviate or remedy the
Participant’s or his Beneficiary’s Unforeseeable Emergency. A distribution under
this Section 7.5 shall be applied proportionately among the sub-accounts
included in the Participant’s Deferral Account.
(b) Cancellation of Deferrals. In the event of a cancellation of deferrals
pursuant to Section 7.5(a), the Participant’s election shall be cancelled, and
not postponed or otherwise delayed, such that any later deferral election will
be subject to the provisions governing deferral elections as provided in
Section 4.
7.6 Six-Month Delay in Commencement of 409A Benefits. Notwithstanding any
distribution election made by a Participant, if, at the time of a Participant’s
Separation from Service, the Participant is a Key Employee, then, solely to the
extent necessary for Section 409A Compliance, any amounts payable to the
Participant under the Plan with respect to his Deferral Account during the
period beginning on the date of the Participant’s Separation from Service and
ending on the six-month anniversary of such date (the “Delayed Payment Amount”)
shall be delayed and not paid to the Participant until the first Business Day
following such six-month anniversary date, at which time such delayed amounts
shall be paid to the Participant in a lump-sum. If payment of an amount is
delayed as a result of this Section 7.6, such amount shall continue to be deemed
invested in the Investment Options selected by the Participant from the date on
which such amount would otherwise have been paid to the Participant but for this
Section 7.6 to the day immediately prior to the date the Delayed Payment Amount
is paid. If a Participant dies on or after the date of the Participant’s
Separation from Service and prior to payment of the Delayed Payment Amount, any
amount delayed pursuant to this Section 7.6 shall be paid to the Participant’s
Beneficiary, together with any interest credited thereon, on the last Business
Day of the month following the date of such Participant’s death or as soon as
administratively practicable thereafter.
SECTION 8
REDEFERRALS
8.1 Redeferrals of the Deferral Account. A Participant shall be permitted to
elect, prior to his Retirement, to redefer all or a portion of the amounts
deferred under the Plan in accordance with the provisions of this Section 8. A
Participant shall be permitted to make separate redeferral elections with
respect to each of his Base Salary or Bonus Compensation deferrals, and each of
his elections to defer or redefer all or a portion of the ERP 409A Benefit, the
SERP 409A Benefit or the SESP 409A Account to be rolled over to the Plan in a
Valid Notional Rollover in accordance with the ERP, the SERP or the SESP, as the
case may be. A Retirement Benefit payable in the form of a Retirement Benefit
Installment Payout shall be treated as a “single” payment and each separately
identified amount to which the Participant is entitled shall be considered a
separate payment.
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8.2 Redeferral of Short-Term Payout Amounts. A Participant who has not yet had a
Separation from Service may elect to redefer each Short-Term Payout payable on a
Short-Term Payout Date to another allowable Short-Term Payout Date or to convert
such Short-Term Payout to a Retirement Benefit and receive payout of such
amounts on a Retirement Benefit Lump Sum Payout Date or a Retirement Benefit
Installment Payout Date, provided, however, that:
(a) The election to redefer must be made and become irrevocable (other than in
the case of the death of the Participant) at least one year prior to the
Short-Term Payout Date;
(b) The election shall not become effective for at least one year after the
election is made; and
(c) The Short-Term Payout Date, the Retirement Benefit Lump Sum Payout Date or
the date of the first Retirement Benefit Installment Payout shall not be earlier
than the fifth anniversary of the Short-Term Payout Date elected by the
Participant pursuant to the election in effect immediately prior to such
redeferral.
8.3 Redeferral of Retirement Benefits. A Participant may, prior to his
Retirement, elect to redefer a Retirement Benefit to another Retirement Benefit
Lump Sum Payout Date or Retirement Benefit Installment Payout Dates, provided,
however, that:
(a) The election to redefer must be made and become irrevocable (other than in
the case of the death of the Participant) at least one year prior to the
original Retirement Benefit Lump Sum Payout Date or the original initial
Retirement Benefit Installment Payout Date;
(b) The election shall not become effective for at least one year after the
election is made; and
(c) The Retirement Benefit Lump Sum Payout Date or the date of the first
Retirement Benefit Installment Payout Date shall not be earlier than the fifth
anniversary of the Retirement Benefit Lump Sum Payout Date or the initial
Retirement Benefit Installment Payout Date, as the case may be, elected by the
Participant pursuant to the election in effect immediately prior to such
redeferral.
8.4 Limitations on Redeferrals. Notwithstanding the foregoing provisions of this
Section 8, no Participant shall be permitted to redefer his Deferral Account
following his Retirement.
SECTION 9
CLAIMS PROCEDURE
9.1 General. If a Participant or his Beneficiary or the authorized
representative of one of the foregoing (hereinafter, the “Claimant”) does not
receive the timely payment of the benefits which he believes are due under the
Plan, the Claimant may make a claim for benefits in the manner hereinafter
provided.
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9.2 Claims. All claims for benefits under the Plan shall be made in writing and
shall be signed by the Claimant. Claims shall be submitted to the Administrative
Record Keeper (or such other person who is delegated the responsibility by the
Committee to review claims). If the Claimant does not furnish sufficient
information with the claim for the Administrative Record Keeper to determine the
validity of the claim, the Administrative Record Keeper shall indicate to the
Claimant any additional information which is necessary for the Administrative
Record Keeper to determine the validity of the claim.
9.3 Review of Claims. Each claim hereunder shall be acted on and approved or
disapproved by the Administrative Record Keeper within 90 days following the
receipt by the Administrative Record Keeper of the information necessary to
process the claim. If special circumstances require an extension of the time
needed to process the claim, this 90-day period may be extended 180 days after
the claim is received. The Claimant shall be notified before the end of the
original period if an extension is necessary, the reason for the extension and
the date by which it is expected that a decision will be made. In the event the
Administrative Record Keeper denies a claim for benefits in whole or in part,
the Administrative Record Keeper shall notify the Claimant in writing of the
denial of the claim and notify the Claimant of his right to a review of the
Administrative Record Keeper’s decision by the Administrative Record Keeper.
Such notice by the Administrative Record Keeper shall also set forth, in a
manner calculated to be understood by the Claimant, the specific reason for such
denial, the specific provisions of the Plan on which the denial is based, and a
description of any additional material or information necessary to perfect the
claim with an explanation of the Plan’s appeals procedure as set forth in this
Section 9.
9.4 Appeals. Any applicant whose claim for benefits is denied in whole or in
part may appeal to the Committee for a review of the decision by the
Administrative Record Keeper. Such appeal must be made within 60 days after the
applicant has received actual or constructive notice of the denial as provided
above. An appeal must be submitted in writing within such period and must:
1. request a review by the Committee of the claim for benefits under the Plan;
2. set forth all of the grounds upon which the Claimant’s request for review
is based and any facts in support thereof; and
3. set forth any issues or comments which the Claimant deems pertinent to the
appeal.
9.5 Review of Appeals. The Committee shall act upon each appeal within 60 days
after receipt thereof unless special circumstances require an extension of the
time for processing, in which case a decision shall be rendered by the Committee
as soon as possible but not later than 120 days after the appeal is received by
it. If such an extension of time for processing is required because of special
circumstances, written notice of the extension shall be furnished prior to the
commencement of the extension describing the reasons an extension is needed and
the date when the determination will be made. The Committee may require the
Claimant to submit such additional facts, documents or other evidence as the
Committee in its
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discretion deems necessary or advisable in making its review. The Claimant shall
be given the opportunity to review pertinent documents or materials upon
submission of a written request to the Committee, provided that the Committee
finds the requested documents or materials are pertinent to the appeal.
9.6 Final Decisions. On the basis of its review, the Committee shall make an
independent determination of the Participant’s eligibility for benefits under
the Plan. The decision of the Committee on any appeal of a claim for benefits
shall be final and conclusive upon all parties thereto.
9.7 Denial of Appeals. In the event the Committee denies an appeal in whole or
in part, it shall give written notice of the decision to the Claimant, which
notice shall set forth, in a manner calculated to be understood by the Claimant,
the specific reasons for such denial and which shall make specific reference to
the pertinent provisions of the Plan on which the Committee’s decision is based.
9.8 Statute of Limitations. A Claimant wishing to seek judicial review of an
adverse benefit determination under the Plan, whether in whole or in part, must
file any suit or legal action, including, without limitation, a civil action
under Section 502(a) of ERISA, within three years of the date the final decision
on the adverse benefit determination on review is issued or should have been
issued under Section 9.6 or lose any rights to bring such an action. If any such
judicial proceeding is undertaken, the evidence presented shall be strictly
limited to the evidence timely presented to the Committee. Notwithstanding
anything in the Plan to the contrary, a Claimant must exhaust all administrative
remedies available to such Claimant under the Plan before such Claimant may seek
judicial review pursuant to Section 502(a) of ERISA.
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SECTION 10
AMENDMENT AND TERMINATION
10.1 Amendment or Termination. The Plan may be amended or terminated at any time
by the Board of Directors or the Committee; provided, however, that no amendment
or termination may reduce the balance of a Participant’s Deferral Account as of
the date of the amendment or termination without the Participant’s written
consent. Except as otherwise permitted by Section 409A, the termination of the
Plan shall not result in any acceleration of the payment of any Deferral Account
under the Plan, unless (i) all arrangements sponsored by the Company that would
be aggregated with the Plan under Section 409A if the same Participant
participated in all such arrangements are terminated, (ii) no payments other
than payments that would be delivered under the terms of such arrangements if
the termination had not occurred are made within 12 months of the termination of
such arrangements, (iii) all payments under the Plan are made within 24 months
of the termination of the arrangements and (iv) the Company does not adopt a new
arrangement that would be aggregated with the Plan under Section 409A if the
same Participant participated in both arrangements, at any time within the five
years following the date of Plan termination. Notwithstanding the foregoing, the
Committee shall have the discretion to terminate the Plan and distribute the
entire balance of each Participant’s Deferral Account in connection with a
Change in Control provided that all amounts attributable to such Deferral
Accounts are distributed within 12 months of such Change in Control.
10.2 409A Benefit Amendments. Notwithstanding any provision in the Plan to the
contrary, the Board of Directors, the Committee or the Deferred Compensation Tax
Compliance Committee shall have the independent right prospectively and/or
retroactively to amend or modify (i) the Plan, (ii) any Participant elections
under the Plan and (iii) the time and manner of any payment of benefits under
the Plan in accordance with Section 409A, in each case, without the consent of
any Participant, to the extent that the Board of Directors, the Committee or the
Deferred Compensation Tax Compliance Committee deems such action to be necessary
or advisable (A) to avoid the imposition on any Participant of adverse or
unintended tax consequences under Section 409A (“Section 409A Compliance”) or
(B) to address regulatory or other changes or developments that affect the terms
of the Plan that were included in the Plan prior to such change or development
with the intent of effecting Section 409A Compliance. Any determinations made by
the Board of Directors, the Committee or the Deferred Compensation Tax
Compliance Committee under this Section 10.2 shall be final, conclusive and
binding on all persons.
SECTION 11
MISCELLANEOUS
11.1 No Effect on Employment Rights. Nothing contained herein shall be construed
as a contract of employment with any person. The Plan and its establishment
shall not confer upon any person the right to be retained in the service of the
Company or limit the right of the Company to discharge or otherwise deal with
any person without regard to the existence of the Plan.
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11.2 Funding. The Plan at all times shall be entirely unfunded, and no provision
shall at any time be made with respect to segregating any assets of the Company
for payment of any benefits hereunder. No Participant, Beneficiary or other
person shall have any interest in any particular assets of the Company by reason
of a right to receive a benefit under the Plan, and any such Participant,
Beneficiary or other person shall have the rights of a general unsecured
creditor of the Company with respect to any rights under the Plan.
Notwithstanding the foregoing, the Committee or the Board of Directors, in its
discretion, may establish a grantor trust to fund benefits payable under the
Plan and administrative costs relating to the Plan. The assets of said trust
shall be held separate and apart from other Company funds and shall be used
exclusively for the purposes set forth in the Plan and the applicable trust
agreement, subject to the following conditions:
1. the creation of said trust shall not cause the Plan to be other than
“unfunded” for purposes of ERISA;
2. the Company shall be treated as the “grantor” of said trust for purposes of
Sections 671 and 677 of the Code; and
3. said trust agreement shall provide that the trust fund assets may be used
to satisfy claims of the Company’s general creditors.
11.3 Anti-assignment. To the maximum extent permitted by law, no benefit payable
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so
shall be void, nor shall any such benefit be in any manner liable for or subject
to garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Participant.
11.4 Taxes. The Company shall have the right to deduct any required taxes from
each payment to be made under the Plan.
11.5 Construction. The Plan is intended to be an unfunded deferred compensation
arrangement for a select group of management or highly compensated employees
within the meaning of ERISA and therefore exempt from the requirements of
Sections 201, 301 and 401 of ERISA. Whenever the terms of the Plan require the
payment of an amount by a specified date, the Company shall use reasonable
efforts to make payment by that date. The Company shall not be (i) liable to the
Participant or any other person if such payment is delayed for administrative or
other reasons to a date that is later than the date so specified by the Plan or
(ii) required to pay interest or any other amount in respect of such delayed
payment except to the extent specifically contemplated by the terms of the Plan.
11.6 Incapacity of Participant. In the event a Participant is declared
incompetent and a conservator or other person legally charged with the care of
his person or his estate is appointed, any benefits under the Plan to which such
Participant is entitled shall be paid to such conservator or other person
legally charged with the care of his person or estate.
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11.7 Severability. In the event that any one or more of the provisions of the
Plan shall be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions of the Plan
shall not be affected thereby.
11.8 Governing Law. The Plan is established under and shall be governed and
construed in accordance with the laws of the State of New Jersey, to the extent
that such laws are not preempted by ERISA.
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APPENDIX A
SECTION 409A TRANSITION ELECTIONS
(a) Deferral Elections. An Employee of the Company who first becomes eligible to
participate in the Plan on or after January 1, 2005 and on or prior to March 15,
2005 shall be permitted to elect, at any time on or prior to March 15, 2005, in
accordance with procedures established by the Committee and Q&A 21 of Notice
2005-1, to defer his Base Salary earned in the calendar year beginning on
January 1, 2005 and/or Bonus Compensation earned in the calendar year beginning
on January 1, 2004 or January 1, 2005; provided, however, that the Base Salary
and/or Bonus Compensation to which such election relates has not been paid or
become payable at the time of such election.
(b) Payment Elections.
(1) Effective as of December 1, 2005, a Participant who elected in 2004 to defer
Bonus Compensation earned in 2005 and payable in 2006 shall be permitted to
elect by no later than December 31, 2005 to change the time and/or form of
payment previously elected for such 2005 Bonus Compensation to another time
and/or form of payment permitted under the Plan.
(2) With respect to amounts previously deferred in the Deferral Account, a
Participant shall be permitted to make, through December 31, 2006, an election
to change the time and/or form of payment, to the extent such election is
permitted under the terms of the Plan; provided, however, that such election
shall apply solely to amounts that would not otherwise be payable in 2006 and
shall not cause any amount to be paid in 2006 that would not otherwise be
payable in 2006.
(3) With respect to amounts previously deferred in the Deferral Account, a
Participant shall be permitted to make from January 1, 2007 through December 31,
2007, an election to change the time and/or form of payment, to the extent such
election is permitted under the terms of the Plan; provided, however, that such
election shall apply solely to amounts that would not otherwise be payable in
2007 and shall not cause any amount to be paid in 2007 that would not otherwise
be payable in 2007.
(4) Payment elections pursuant to this Section (b) shall be deemed pursuant to
Q&A 19(c) of Notice 2005-1, as amended by the preamble to the proposed Treasury
Regulations under Section 409A, issued on September 29, 2005.
(c) Termination of Participation; Cancellation of Deferral Election.
(1) Effective as of December 1, 2005, a Participant who elected in 2004 to defer
Bonus Compensation earned in 2005 and payable in 2006 shall be permitted to
elect by no later than December 31, 2005, in accordance with procedures
established by the Administrative Record Keeper, to cancel, in whole or in part,
his deferral election under the Plan with respect to his Bonus Compensation
earned in 2005 and payable in 2006.
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(2) The Committee shall be permitted, in 2005, to the extent it deems necessary
or advisable under Section 409A, to cancel any 2005 deferral election and/or
terminate a Participant’s participation in the Plan solely with respect to his
Deferral Account; provided that amounts subject to such cancellation or
termination be distributed by the later of December 31, 2005 and the date on
which such amounts are earned and vested.
(3) Any termination of participation or cancellation of a deferral election
pursuant to this Section (c) shall be deemed pursuant to Q&A 20(a) of Notice
2005-1.
2 |
Exhibit 10.16
THE EXERCISE OF AN OPTION OR THE SALE OF SHARES ACQUIRED UNDER AN OPTION MAY
RESULT IN SIGNIFICANT TAX CONSEQUENCES TO OPTIONEE. OPTIONEE SHOULD SEEK
INDEPENDENT TAX AND LEGAL ADVICE BEFORE EXERCISING AN OPTION OR SELLING SHARES.
THE COMPANY ASSUMES NO RESPONSIBILITY FOR ADVISING OPTIONEE REGARDING TAX ISSUES
RELATING TO THE OPTION, OR SHARES ACQUIRED THEREUNDER, OR FOR ANY TAX LIABILITY
INCURRED BY OPTIONEE IN CONNECTION THEREWITH.
ACCENTIA BIOPHARMACEUTICALS, INC.
2005 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION
AWARD AGREEMENT
THIS INCENTIVE STOCK OPTION AWARD AGREEMENT (the “Agreement”) is made and
entered into as of the day of , 200 , by and between Accentia
Biopharmaceuticals, Inc., a Florida corporation (the “Company”), and
(“Optionee”), with reference to the following facts:
A. WHEREAS, Optionee is currently an employee of the Company or of a subsidiary
of the Company (a “Subsidiary”);
B. WHEREAS, the Company desires to provide Optionee, and Optionee desires to
accept, an option to purchase shares of the Company’s common stock (“Stock”);
and
C. WHEREAS, any option to be granted to Optionee pursuant to this Agreement is
being granted in connection with, and the terms of this Agreement are expressly
subject to the terms of, the Company’s 2005 Equity Incentive Plan (the “Plan”),
a copy of which is attached hereto as Exhibit ”A” and incorporated herein by
this reference.
NOW, THEREFORE, in consideration of the foregoing recitals, and of the mutual
terms and conditions set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which being hereby acknowledged,
the parties hereto do hereby agree as follows:
1. Certain Defined Terms. To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the
Plan.
2. Option Granted. The Company hereby grants to Optionee an option (the
“Option”) to purchase shares (the “Shares”) of Stock of the Company
at an exercise price of $ per Share (the “Purchase Price”). The
Option granted pursuant to this Section 2 is intended to be an Incentive Stock
Option.
To the extent that the aggregate Fair Market Value of Stock (as determined on
the date of the Option grant) that may be purchased by Optionee for the first
time during any calendar year pursuant Incentive Stock Options granted under the
Plan or any other plan of the Company or its Subsidiaries exceeds $100,000, then
the excess of such option shall be treated as a nonqualified stock option. This
limitation shall be applied by taking options into account in the order in which
they were granted.
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
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3. Time of Exercise of the Option. The Option shall become exercisable by
Optionee, as follows:
(a) (1/3 of total) shares on (1st anniversary date);
(b) (1/3 of total ) additional shares on (2nd Anniversary date); and
(c) (1/3 of total ) additional shares on (3rd anniversary date).
Subject to the foregoing, the Option shall be exercisable until termination of
the Option as provided in Section 7 below and in the Plan. However,
notwithstanding the provisions of Sections 7.1, 7.2, and 7.3 of this Agreement,
the Option will cease vesting as of the date of the death, disability, or
termination of Optionee’s employment with the Company or a Subsidiary, and the
Option will thereafter (until the termination of the Option pursuant to
Section 7 below) represent the right to purchase only the number of shares as to
which the Option was exercisable as of the date of such death, disability, or
termination of employment.
4. Merger and Consolidation; Dissolution.
4.1 In the event the Company and/or the shareholders of the Company shall at any
time propose to merge into, consolidate with, or sell or otherwise transfer all
or substantially all of the Company’s stock or assets to, any other person or
entity (a “Transaction”), and provision is not made pursuant to the terms of the
Transaction for the assumption by the surviving, resulting or acquiring person
or entity of the Option, or for the substitution of a new option for the Option,
the Administrator shall cause written notice of the proposed Transaction to be
given to Optionee not less than twenty (20) days prior to the anticipated
effective date of the proposed Transaction. The Option shall accelerate and be
exercisable until ten (10) days before the anticipated effective date specified
in the notice from the Administrator. Optionee, by so notifying the Company in
writing, may condition the exercise of the Option upon, and provide that each
exercise of the Option shall become effective at the time of, but immediately
before, the consummation of the Transaction, in which event Optionee need not
make payment for the Shares to be purchased upon exercise of the Option until
five (5) days after written notice by the Company to Optionee that the
Transaction has been consummated; provided, however, Optionee shall not be
entitled to receive any certificates evidencing his or her ownership of the
Shares obtained pursuant to exercise of the Option until Optionee shall make
full payment for the Shares being so purchased.
If the Transaction is consummated, any portion of the Option remaining
unexercised on the Transaction date specified in the notice to Optionee by the
Administrator shall terminate on the date such Transaction is consummated. If
the Transaction is abandoned, Shares subject to any unexercised portion of the
Option shall, continue to be available for purchase in accordance with the terms
of the Plan and this Agreement.
4.2 In the event the Company and/or the shareholders of the Company shall at any
time propose to enter into a Transaction, and provision is made pursuant to the
terms of the Transaction for the assumption by the surviving, resulting or
acquiring person or entity of the Option, or for the substitution of a new
option for the Option, on substantially equivalent
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
2
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economic terms, then, following the consummation of the Transaction, the
exercise of the Option by Optionee shall apply to the shares of common stock of
the surviving, resulting or acquiring corporation in the Transaction.
4.3 Notwithstanding anything contained herein, the Option shall terminate on the
dissolution or liquidation of the Company.
5. Method of Exercise.
5.1 In General. The Option shall be exercised by Optionee by written notice
delivered to the Company at its principal executive office, stating the number
of Shares with respect to which the Option is being exercised and any notice of
exercise shall be accompanied by the following: (i) an executed copy of the
Exercise Notice attached hereto as Exhibit “B” and incorporated herein by this
reference; and (ii) full payment of the Purchase Price for the number of Shares
with respect to which the Option is so exercised, in any of the forms set forth
in Section 5.2 below.
5.2 Payment. Upon exercise of the Option, payment of the Purchase Price for the
number of Shares with respect to which the Option is so exercised may be in any
of the following forms: (i) certified or cashier’s check; (ii) if specifically
permitted by the Administrator, shares of the Company’s common stock whose fair
market value is at least equal to the aggregate Purchase Price for the exercise
of the portion of the Option so exercised, which shares of the Company’s common
stock have been held by Optionee for at least six (6) months prior to the date
of exercise of the Option; provided, however, payment of the exercise price for
any Incentive Stock Option may not be by “statutory option stock” (as defined in
Section 424(c)(3)(B) of the Code) unless the applicable holding period
requirements specified in Section 424(c)(3)(A)(ii) for the statutory option
stock have been met; (iii) to the extent permitted by the Administrator, any
combination of such items; or (iv) such other consideration as the Administrator
may approve, so long as the Fair Market Value of such consideration, as
determined by the Administrator in its reasonable discretion, is no less than
the Purchase Price due.
5.3 “Same Day” Net Exercise. In lieu of the payment methods set forth in
Section 5.2 above and if permitted by the Administrator, at any time: (i) that
the Company’s common stock is listed on a national stock exchange or quoted on
the Nasdaq Stock Market (“Nasdaq”) or other automatic quotation system; and
(ii) when permitted by law and applicable regulations (including the Nasdaq and
National Association of Securities Dealers (“NASD”) rules), Optionee may pay the
Purchase Price though a “same day sale” commitment from Optionee (and, if
applicable, a broker-dealer that is a member of the NASD (a “NASD Dealer”)),
whereby Optionee irrevocably elects to exercise the Option and to sell a
sufficient portion of the Shares so purchased to pay the Purchase Price, and
Optionee (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such Shares to forward the Purchase Price
directly to the Company.
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
3
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6. Capital Adjustments.
6.1 The existence of the Option shall not affect in any way the right or power
of the Company or its shareholders to make or authorize any adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company with or
into another person or entity or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the common stock or the rights
thereof, or the issuance of any securities convertible into common stock or of
any rights, options, or warrants to purchase common stock, or the dissolution or
liquidation of the Company, any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceedings of the Company,
whether of a similar character or otherwise.
6.2 The Shares with respect to which the Option is granted are shares of the
common stock of the Company as presently constituted, but if and whenever, prior
to the delivery by the Company of all the Shares with respect to which this
Option is granted, the Company shall effect a subdivision or consolidation of
shares of common stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares of common stock
without receiving compensation therefore in money, services, or property, the
remaining Shares subject to the Option shall: (i) in the event of an increase in
the number of outstanding shares of common stock of the Company, be
proportionately increased, and the cash consideration payable per Share shall be
proportionately reduced; or (ii) in the event of a reduction in the number of
outstanding shares of common stock of the Company, be proportionately reduced,
and the cash consideration payable per Share shall be proportionately increased.
7. Termination of the Option. The Option shall terminate on the earliest of the
following dates:
7.1 The expiration of three (3) months from the date of termination of the
Optionee’s employment with Company or a Subsidiary (as applicable), except for a
termination pursuant to Section 7.2, 7.3, 7.4, or 7.5 of this Agreement;
7.2 The expiration of twelve (12) months from the date of termination of the
Optionee’s employment due to Optionee’s disability (with “disability” being
determined by the Administrator in accordance with Section 22(e)(3) of the
Code);
7.3 The expiration of twelve (12) months from the date of the Optionee’s death,
provided that Optionee’s death occurred no later than three (3) months from the
date of termination of Optionee’s employment with Company or a Subsidiary;
7.4 Immediately upon the occurrence of an Event of Cause, as defined below; or
7.5 At 5:00 p.m. (Eastern time) on the day that is the tenth (10th) anniversary
of the grant date of the Option (or the fifth (5th) anniversary if Optionee owns
more than 10% of the voting power of the Company), except where earlier
termination is required under the Plan.
Upon the termination of the Option, Optionee’s right to exercise any portion of
this Option (including any portion that has become vested pursuant to Section 3
of this Agreement) shall automatically and immediately terminate. For purposes
of this Agreement, the term “Event
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
4
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of Cause” shall mean any of the following: (i) any breach by Optionee under any
agreement between the Optionee and the Company (or any Subsidiary of the
Company), including without limitation under any employment agreement,
confidentiality agreement, noncompetition agreement, or nonsolicitation
agreement; (ii) any violation or breach by the Optionee of any policy, code of
conduct, or directive of the Company or any Subsidiary, including without
limitation any policy relating to trading in the Company’s stock and handling
confidential information; or (iii) Optionee is convicted, pleads guilty, or
pleads no contest to any legal or regulatory violation that constitutes a
felony, that involves the Company or its assets, or that results in a fine or
penalty to the Company. The Administrator will have the sole and absolute
discretion to determine whether an “Event of Cause” has occurred.
8. No Rights as a Shareholder. Optionee will not be deemed to be a holder of any
shares of common stock pursuant to the exercise of the Option until he/she pays
the Purchase Price, in full, and Optionee shall have no rights as a shareholder
in the Company unless and until such time. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date the
Purchase Price is paid in full.
9. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company
or any representative of the Company’s underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act of 1933, as amended (the “Securities Act”), Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such other period as may be requested in writing by any
representative of the Company’s underwriters and agreed to in writing by the
Company) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
10. Restrictions on Transfer and Exercise of Option.
10.1 The Option shall not be assignable or transferable by the Optionee other
than by will or by the laws of descent and distribution except that the Optionee
may, with the consent of the Administrator, transfer, without consideration,
Options that do not constitute Incentive Stock Options to the Optionee’s
children, stepchildren, grandchildren, parent(s), stepparent(s), grandparent(s),
spouse, sibling(s), mother-in-law, father-in-law, son(s)-in-law,
daughter(s)-in-law, brother(s)-in-law or sister(s)-in-law, and to person’s with
whom the Optionee has an adoptive relationship, (or to one or more trusts for
the benefit of any such family members or to one or more partnerships in which
any such family members are the only partners).
10.2 During Optionee’s lifetime, the Option shall be exercisable only by
Optionee. In the event of Optionee’s death during employment or during the three
(3) month period after termination of employment described in Section 7.1 above,
Optionee’s personal representative(s) may exercise any portion of the Option
that remain unexercised at the time of Optionee’s death, provided that any such
exercise must in any event be made, if at all, (a) during the period within
twelve (12) months after termination of Optionee’s employment, and (b) before
the Option termination date specified in Section 7.4 above.
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
5
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11. Sale or Other Disposition. Optionee understands that, under current law,
beneficial tax treatment resulting from the exercise of this Option will be
available only if certain requirements of the Code are satisfied, including
without limitation, the requirement that no disposition of Shares acquired
pursuant to exercise of the Option be made within two (2) years from the grant
date or within one (1) year after the transfer of Shares to Optionee. If
Optionee at any time contemplates the disposition (whether by sale, gift,
exchange, or other form of transfer) of any such Shares, Optionee will first
notify the Company in writing of such proposed disposition and cooperate with
the Company in complying with all applicable requirements of law, which, in the
judgment of the Company, must be satisfied prior to such disposition. In
addition to the foregoing, Optionee hereby agrees that before Optionee disposes
(whether by sale, exchange, gift, or otherwise) of any Shares acquired by
exercise of this Option within two (2) years of the grant date or within one
(1) year after the transfer of such Shares to Optionee upon exercise of this
Option, Optionee shall promptly notify the Company in writing of the date and
terms of the proposed disposition and shall provide such other information
regarding the Option as the Company may reasonably require immediately before
such disposition. Said written notice shall state the date of such proposed
disposition, and the type and amount of the consideration to be received for
such Share or Shares by Optionee in connection therewith. In the event of any
such disposition, the Company shall have the right to require Optionee to
immediately pay the Company the amount of taxes (if any) which the Company is
required to withhold under Federal, state and/or local law as a result of the
granting or exercise of the Option and the disposition of the Shares.
12. Withholding. At the time of exercise, Optionee shall pay to the Company such
amount as the Company deems necessary to satisfy its obligation to withhold
Federal, state or local income or other taxes incurred by reason of the exercise
of the Option or the transfer of the Shares, by tendering to the Company a check
in the amount of such withholding or, if allowed in the sole discretion of the
Administrator, by electing to: (i) have withheld upon exercise no more than the
number of the Shares having a fair market value equal to the minimum amount
required to satisfy the Company’s tax withholding obligations; or (ii) have
withheld from any compensation due to Optionee from the Company the minimum
amount required to satisfy the Company’s tax withholding obligations.
13. No Rights to Continued Employment. Notwithstanding the provisions contained
in this Agreement or the Plan, nothing contained in this Agreement shall provide
Optionee with any right to continued employment, nor shall anything in this
Agreement in any way interfere with the right of Company or a Subsidiary, as the
case may be, to terminate Optionee’s employment or increase or decrease
Optionee’s compensation. Nothing contained in this Agreement or the Plan shall
affect the other contractual rights of Optionee.
14. Miscellaneous.
14.1 Notices. Any and all notices which are required or permitted to be given by
any one party to the other hereunder shall be given in writing, sent by
registered or certified mail, electronic communications (including e-mail or
facsimile) followed by a confirmation letter sent by registered or certified
mail, postage prepaid, return receipt requested, or delivered by hand or
messenger service, with the charges therefore prepaid, addressed to such party
as follows:
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
6
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Notices to the Company:
Accentia Biopharmaceuticals, Inc.
Attention: General Counsel
324 South Hyde Park Ave., Suite 350
Tampa, Florida 33606
Fax: 813.258.6912
Notices to Optionee:
or to such other address as the parties shall from time to time give notice of
in accordance with this Section 14.1. Notices sent in accordance with this
Section shall be deemed effective on the date of dispatch, and an affidavit of
mailing or dispatch, executed under penalty of perjury, shall be deemed
presumptive evidence of the date of dispatch.
14.2 Entire Agreement and Modifications. This Agreement, including any and all
exhibits hereto, and the agreements expressly referred to herein, including,
without limitation, the Plan, constitutes the entire understanding between the
parties pertaining to the subject matter hereof, and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written. There are no warranties, representations or other agreements between
the parties, in connection with the subject matter hereof, except as
specifically set forth herein. No supplement, modification, waiver or
termination of this Agreement shall be binding unless made in writing and
executed by the party thereto to be bound.
14.3 Waivers. No term, condition or provision of this Agreement may be waived
except by an express written instrument to such effect signed by the party to
whom the benefit of such term, condition or provision runs. No such waiver of
any term, condition or provision of this Agreement shall be deemed a waiver of
any other term, condition or provision, irrespective of similarity, or shall
constitute a continuing waiver of the same term, condition or provision, unless
otherwise expressly provided. No failure or delay on the part of any party in
exercising any right, power or privilege under any term, condition or provision
of this Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any other
right, power or privilege.
14.4 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida, notwithstanding the
fact that one or more counterparts hereof may be executed outside of the state,
or one or more of the obligations of the parties hereunder are to be performed
outside of the state.
14.5 Attorneys’ Fees. In the event that any party to this Agreement shall
commence any suit, action, arbitration or other proceeding to interpret this
Agreement, or determine or enforce any right or obligation created hereby,
including, but not limited to, any action for rescission of this Agreement or
for a determination that this Agreement is void or
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
7
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ineffective ab initio, the prevailing party in such action shall recover such
party’s costs and expenses incurred in connection therewith, including
reasonable attorneys’ fees and costs of appeal, if any. Any court, arbitrator or
panel of arbitrators shall, in entering any judgment or making any award in any
such suit, action, arbitration or other proceeding, in addition to any and all
other relief awarded to such prevailing party, include in such judgment or award
such party’s costs and expenses as provided in this Section 14.5.
14.6 Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one instrument.
Any one of such counterparts shall be sufficient for the purpose of proving the
existence and terms of this Agreement, and no party shall be required to produce
an original or all of such counterparts in making such proof.
14.7 Compliance with Laws. Nothing contained in this Agreement shall be
construed to require the commission of any act contrary to law, and whenever
there is a conflict between any term, condition or provision of this Agreement
and any present or future statute, law, ordinance or regulation contrary to
which the parties have no legal right to contract, the latter shall prevail, but
in such event the term, condition or provision of this Agreement affected shall
be curtailed and limited only to the extent necessary to bring it within the
requirement of the law, provided that such construction is consistent with the
intent of the parties as expressed in this Agreement.
14.8 Covenant of Further Assurances. All parties to this Agreement shall, upon
request, perform any and all acts and execute and deliver any and all
certificates, instruments and other documents that may be necessary or
appropriate to carry out any of the terms, conditions and provisions hereof or
to carry out the intent of this Agreement.
14.9 Inconsistencies. In the event of any inconsistency between the terms of
this Agreement and the terms of the Plan, the terms of the Plan shall control.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
“COMPANY” “OPTIONEE” ACCENTIA BIOPHARMACEUTICALS, INC. By:
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(Signature) Its:
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(Print Name)
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
8
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EXHIBIT “A”
2005 EQUITY INCENTIVE PLAN
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
9
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EXHIBIT “B”
EXERCISE NOTICE
Accentia Biopharmaceuticals, Inc.
Incentive Stock Option Award Agreement
10 |
blue ball logo
[bluelogo.jpg] Exhibit 10.15
Ball Corporation
345 South High Street, Muncie, IN 47305-2326 (317) 747-6100
PERSONAL & CONFIDENTIAL
January 24, 1996
Dear _________________,
Ball Corporation (the "Corporation") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that the possibility of a change in control
of the Corporation exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation or any wholly
owned subsidiary of the Corporation, the Corporation agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement"), which amends and restates the agreement between you and the
Corporation, dated January 6, 1995, in the event your employment with the
Corporation is terminated under the circumstances described below subsequent to
a "Change in Control of the Corporation" (as defined in Section 2).
1. Term of Agreement. The Agreement shall continue in effect through August
1, 1996; provided, however, that commencing on August 1, 1996, and each August
1, thereafter, the term of this Agreement shall automatically be extended for
one additional year unless, not later than June 1 immediately preceding such
August 1, and every June 1, thereafter, the Corporation shall have given notice
that it does not wish to extend this Agreement; and provided, further, that if a
Change in Control of the Corporation as defined in Section 2, shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of not less than twenty-four (24) months
beyond the month in which such Change in Control occurred.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Corporation, as set forth below. For
purposes of this Agreement, a "Change in Control of the Corporation" shall be
deemed to have occurred upon the first to occur of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Corporation, any trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any subsidiary of the Corporation, or any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation), is or becomes the "beneficial
--------------------------------------------------------------------------------
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 30 percent or more of
the combined voting power of the Corporation's then outstanding securities;
(ii) at any time during any period of two consecutive years, individuals, who at
the beginning of such agreement with the Corporation to effect a transaction
described in Subsection (i), (iii) or (iv) of this Section) whose election by
the Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors at the
beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute at least a majority
thereof;
(iii) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than (1) a merger or
consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50 percent of the combined voting power of the
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Corporation (or similar
trans-action) in which no person acquires 50 percent or more of the combined
voting power of the Corporation's then outstanding securities; or
(iv) the stockholders of the Corporation approve a plan of complete liquidation
of the Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's assets.
3. Takeover Threat. For purposes of this Agreement, a "Takeover Threat"
shall be deemed to have occurred if (i) the Corporation enters into an
agreement, the consummation of which would result in the occurrence of a Change
in Control of the Corporation; (ii) any person (including the Corporation)
publicly announces an inten-tion to take or to consider taking actions which, if
consummated, would constitute a Change in Control of the Corporation; (iii) any
"person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, or any subsidiary of the
Corporation, or any corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation), who is or has become the "beneficial
owner" (as defined in Rule 13 d-3 under the Exchange Act), directly or
indirectly of securities of the Corporation representing t0 percent or more of
the combined voting power of the Corporation's then outstanding securities
increases such ownership by 5 percentage points or more of such voting power
over a period of less than twenty-four (24) months; or (iv) the Board adopts a
resolution to the effect that a Takeover Threat for purposes of this Agreement
has occurred. Solely for purposes of determining your entitlement to payment of
severance benefits pursuant to this Agreement, you agree that, subject to the
terms and conditions of this Agreement, in the event of a Takeover Threat, you
will remain in the employ of the Corporation for a period of one (1) year from
the occurrence of such Takeover Threat, or until an actual Change in Control of
the Corporation, whichever occurs earlier.
4. Termination Following Change in Control.
(i) General. If any of the events described in Section 2 constituting a Change
in Control of the Corporation shall have occurred, (A) you shall be entitled to
the benefits provided in Section 5(iii) upon the subsequent termi-nation of your
employment
2
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during the term of this Agreement unless such termination is (a) because of your
death or Disability, (b) by the Corporation for Cause, or (c) by you other than
on account of Constructive Termination, and (B) you shall be entitled to the
benefits provided in Section 5(vi) whether or not your employment with the
Corporation is terminated. In the event your employment with the Corporation is
terminated for any reason at any time prior to the occurrence of a Change in
Control of the Corporation and subse-quently a Change in Control of the
Corporation shall have occurred, you shall not be entitled to any benefits
hereunder.
(ii) Disability. If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with the Corporation for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
(iii) Cause. Termination by the Corporation of your employment for "Cause" shall
mean termination (a) upon the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of Termination
(as defined in Subsection (v) hereof) by you or on account of Constructive
Termination (as defined in Subsection (iv) hereof)), after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties or (b) the willful engaging by you in
conduct which is demonstrably and materially injurious to the Corporation,
monetarily or otherwise. For purposes of this Subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be done,
by you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in this
Subsection and specifying the particulars thereof in detail.
(iv) Constructive Termination. You shall be entitled to terminate your
employment upon the occurrence of Constructive Termination. For purposes of this
Agreement, "Constructive Termination" shall mean, without your expressed written
consent, the occurrence after a Change in Control of the Corporation of any of
the following circumstances unless, in the case of paragraphs (a), (e), (f), (g)
or (h), such circumstances are fully corrected prior to the Date of Termination
(as defined in Subsection (vi) hereof) specified in the Notice of Termination
(as defined in Subsection (v) hereof) given in respect thereof:
(a) the assignment to you of any duties inconsistent (unless in the nature of a
promotion) with the position in the Corporation that you held immediately prior
to the Change in Control of the Corporation, or a significant adverse reduction
or alteration in the nature or status of your position, duties or
responsibilities or the conditions of your employment from those in effect
immediately prior to such Change in Control;
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(b) a reduction by the Corporation in your annual base salary as in effect
immediately prior to the Change in Control of the Corporation or as the same may
be increased from time to time, except for across-the-board salary reductions
similarly affecting all management personnel of the Corporation and all
management personnel of any person in control of the Corporation;
(c) the Corporation's requiring that your principal place of business be at an
office located more than twenty (20) miles from the location where your
principal place of business is located immediately prior to the Change in
Control of the Corporation, except for required travel on the Corporation's
business to an extent substantially consistent with your present business travel
obligations;
(d) the failure by the Corporation to pay to you any portion of your current
compensation except pursuant to an across-the-board compensation deferral
similarly affecting all management personnel of the Corporation and all
management personnel of any person in control of the Corporation or to pay to
you any portion of an installment of deferred compensation under any deferred
compensation program of the Corporation within seven (7) days of the date such
compensation is due;
(e) the failure by the Corporation to continue in effect any compensation or
benefit plan in which you participate immediately prior to the Change in Control
of the Corporation that is material to your total compensation, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Corporation to
continue your par-ticipation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to other
participants, as existed at the time of the Change in Control of the
Corporation;
(f) the failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corpora-tion's
life insurance, medical, health and accident, or disability plans in which you
were participating at the time of the Change in Control of the Corporation, the
taking of any action by the Corporation which would directly or indirectly
materially reduce any of such benefits or deprive you of any material fringe
benefit enjoyed by you at the time of the Change in Control of the Corporation,
or the failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service with
the Corporation in accordance with the Corporation's normal vacation policy in
effect at the time of the Change in Control of the Corporation;
(g) the failure of the Corporation to continue this Agreement in effect, or to
obtain a satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 6 hereof; or
(h) any purported termination of your employment that is not effected strictly
in accordance with the terms of this Agreement and pursuant to a Notice of
Termination satisfying the requirements of Subsection (v) hereof (and, if
applicable, the requirements of Subsection (iii) hereof), which purported
termination shall not be effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Constructive Termination hereunder.
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(v) Notice of Termination. Any purported termination of your employment by the
Corporation or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 7. "Notice of Termination"
shall mean a notice that shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(vi) Date of Termination, Etc. "Date of Termination" shall mean (a) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30)-day period), and (b) if your
employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination for Cause shall not be less
than thirty (30) days from the date such Notice of Termination is given, and in
the case of a termination on account of Constructive Termination shall not be
less than fifteen (15) nor more than sixty (60) days from the date such Notice
of Termination is given); provided, however, that if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this proviso), the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, then the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties or by a binding arbitration award; and provided, further, that the
Date of Termination shall be extended by a notice of dispute only if such notice
is given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary), and continue you as a participant in all compensation,
benefit and insurance plans in which you were participating when the notice
giving rise to the dispute was given until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection, in addition
to all other amounts due under this Agreement, shall not be offset against or
reduce any other amounts due under this Agreement and shall not be reduced by
any compensation earned by you as the result of employment by another employer.
5. Compensation Upon Termination or During Disability; Gross-up Payment.
Following a Change in Control of the Corporation, you shall be entitled to the
following benefits during a period of disability, or upon termination of your
employment, as the case may be, provided that such period or termination occurs
during the term of this Agreement or, if earlier, within one year following such
Change in Control of the Corporation; provided further, however, that you shall
be entitled to the benefits described in Subsection (vi) hereof whether or not
your employment with the Corporation is terminated:
(i) During any period that you fail to perform your full-time duties with the
Corporation as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, reduced to the extent disability benefits are
actually received by you during this period, until this Agreement is terminated
pursuant to Section 4 (ii) hereof Thereafter, or in the event your employment
shall be terminated by reason of your death, your benefits shall be determined
under the Corporation's retire-ment, insurance, disability and other
compensation programs then in effect in accordance with the terms of such
programs.
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(ii) If your employment shall be terminated by the Corporation for Cause or by
you other than on account of Constructive Termination, the Corporation shall pay
you your full base salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation or benefit plan of the Corporation at the
time such payments are due, and the Corporation shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated by you on
account of Constructive Termination or by the Corporation other than for Cause
or Disability, then you shall be entitled to the benefits provided below:
(a) no later than the fifth day following the Date of Termination, the
Corporation shall pay to you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any incentive, bonus or
other compensation plan of the Corporation, at the time such payments are due;
(b) in lieu of any further salary payments to you for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to you, at the
time specified in Subsection (iv) hereof, a lump sum severance payment (together
with the payments provided in paragraph (c), below, the "Severance Payments")
equal to two times the sum of (1) your annual salary rate (including for this
purpose any deferred salary) as in effect as of the Date of Termination or
immediately prior to the Change in Control of the Corporation, whichever is
greater, and (2) your annual target bonus under the applicable bonus or
incentive compensation plans in respect of the calendar years preceding that in
which occurs the Date of Termination or that in which occurs the Change in
Control;
(c) in lieu of any payments under any bonus or annual incentive compensation
plan in effect for the year in which your Date of Termination occurs, the
Corporation shall pay you in a lump sum, at the time specified in Subsection
(iv) hereof, a pro rata portion (based on the number of whole months, with a
partial month treated as a whole month, elapsed since the first day of the
calendar year in which the Date of Termination occurs), of the target amount of
all contingent awards granted under such plans for all uncompleted periods;
(d) in lieu of shares of common stock of the Corporation ("Corporation Shares")
issuable upon the exercise of outstanding options ("Options"), if any, granted
to you under any Corporation stock option plan (which Options shall be cancelled
upon the making of the payment, referred to below), you shall receive within the
time provided for in Subsection (iv) hereof an amount in cash equal to the
product of(A) the excess of, the higher of the closing price of Corporation
Shares as reported on The New York Stock Exchange on or nearest the Date of
Termination or the highest per share price for Corporation Shares actually paid
in connection with any Change in Control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable), times (B) the number of Corporation Shares covered by each such
Option;
(e) in addition to any retirement benefits to which you are entitled under the
Ball Corporation Pension Plan for Salaried Employees (the "Qualified Plan") or
any successor plans thereto, the Corporation shall pay to you in a lump. sum, at
the time specified in Subsection (iv) hereof, an amount equal to the actuarial
present value of the excess of(l) over (2), where (1) equals the aggregate
retirement pension (determined as
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a straight life annuity) to which you would have been entitled under the terns
of the Qualified Plan (without regard to any amendment to the Qualified Plan
made subsequent to a Change in Control of the Corporation and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits under such plan), determined as if you had
accumulated thereunder two additional years of Benefit Service (after any
termination pursuant to Section 4) at your rate of Salary in effect on the Date
of Termination and where (2) equals the aggregate retirement pension (determined
as a straight life annuity) to which you are entitled pursuant to the provisions
of the Qualified Plan. All defined terms used in this paragraph (e) shall have
the same meaning as in the Qualified Plan, unless otherwise defined herein or
otherwise required by the context;
(f) for a period beginning with your termination of employment and not to exceed
the earlier of two years or until your commencement of employment with a
subsequent employer, the Corporation shall arrange to provide you with life,
disability, accident and health insurance benefits substantially similar to
those which you were receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this paragraph (f) shall be
reduced to the extent comparable benefits are actually received by you from any
and all successor employers during the period following your termination, and
any such benefits actually received by you shall be reported to the Corporation;
(g) the Corporation shall pay to you all reasonable legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement);
unless the decision-maker in any proceeding, contest or dispute arising
hereunder makes a formal finding that you did not have a reasonable basis for
instituting such proceeding, contest or dispute;
(h) the Corporation shall provide you with individual outplacement services in
accordance with the general custom and practice generally accorded to an
executive of your position.
(iv) The payments provided for in Subsections (iii) (b) and (c), above, and
Subsection (vi) below, shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall pay to
you on such day an estimate, as determined in good faith by the Corporation, of
the minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Internal Revenue Code of 1986, as amended (the "Code")) as soon as the amount
thereof can be determined but in no event later than the thirtieth day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Corporation to you, payable on the fifth day after
demand by the Corporation (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code).
(v) Except as provided in Subsection (iii)(f) hereof, you shall not be required
to mitigate the amount of any payment provided for in this Section 5 by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 5 be reduced by any compensation earned by you as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to the Corporation, or otherwise.
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(vi) (a) Whether or not you become entitled to the Severance Payments, if any of
the payments or benefits received or to be received by you in connection with a
Change in Control or your termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Corporation, any person (as defined in Section 2(i)) whose actions result in a
Change in Control or any person affiliated with the Corporation or such person)
(such payments or benefits, excluding the Gross-Up Payment (as defined below),
being hereinafter referred to as the "Total Payments") will be subject to any
excise tax imposed under section 4999 of the Code (the "Excise Tax"), the
Corporation shall pay to you an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and employment taxes and
Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (the "Tax
Counsel") reasonably acceptable to you and selected by the accounting firm which
was, immediately prior to the Change in Control, the Corporation's independent
auditor (the "Auditor"), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in
the opinion of the Tax Counsel, such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered (within
the meaning of section 280G(b)(4)(B) of the Code) in excess of the base amount
(as defined in section 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (iii) the
value of any noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of your residence on the
Date of Termination (or if there is no Date of Termination, then the date that
the Gross-Up Payment is calculated for purposes of this Section), net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.
(c) In the event that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of your
employment, you shall repay to the Corporation, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive
to the extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction) plus interest on the
amount of such repayment at 120% of the rate provided in section t 274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment),
the Corporation shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by you with
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respect to such excess) at the time that the amount of such excess is finally
determined. You and the Corporation shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the Total
Payments.
(vii) As soon as practicable, following a Takeover Threat, or in any event,
within twenty (20) business days thereafter, the Corporation agrees it will
establish and fund a so-called "Rabbi Trust" in an amount sufficient to provide
for all cash payments of benefits specified in Section 5, assuming that you were
entitled to such benefits, plus an additional $50,000 to cover legal fees
referred to in Section 5(iii)(g).
6.
Successors; Binding Agreement.
(i) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle you to compensation from the Corporation in the same amount
and on the same terms to which you would be entitled hereunder if you terminate
your employment on account of Constructive Termination following a Change in
Control of the Corporation, except that for the purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by you and
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder had you continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by the United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
9
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governed by the laws of the State of Indiana without regard to its conflicts of
law principles. All references to section of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Corporation
under Section 5 shall survive the expiration of the term of this Agreement.
9. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three arbitrators in Muncie, Indiana, in accordance with the
roles of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
12 Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign both copies and return one, in the enclosed envelope, to the Corporation,
which will then constitute our agreement on this subject.
Sincerely,
BALL CORPORATION
By
President and Chief Executive Officer
Agreed to this 24th day of January, 1996
10 |
Credit Agrmt
Exhibit 10.17
U.S. $12,000,000
CREDIT AGREEMENT,
dated as of November 28, 2006
among
SONORAN ENERGY, INC.,
as the Borrower,
CERTAIN INSTITUTIONAL LENDERS
as the Lenders,
and
NGPC ASSET HOLDINGS, LP,
as Administrative Agent for the Lenders
--------------------------------------------------------------------------------
Credit Agrmt
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 28, 2006, among SONORAN ENERGY,
INC., a Washington corporation (the “Borrower”), the various institutional
lenders as are or may hereafter become Parties hereto (collectively, the
“Lenders”) and NGPC ASSET HOLDINGS, LP, as administrative agent for the Lenders
(in such capacity, the “Administrative Agent”),
W I T N E S S E T H:
WHEREAS, the Borrower is engaged in the business of owning, operating,
producing, processing, marketing of and exploration for, Hydrocarbons, and
activities related or ancillary thereto; and
WHEREAS, the Borrower desires to obtain Commitments from the Lenders pursuant to
which Loans will be made to the Borrower from time to time prior to the
applicable Commitment Termination Date, in a maximum aggregate principal amount
of Loans at any one time not to exceed in the aggregate the lesser of (x) the
Collateral or (y) $12,000,000; and
WHEREAS, the Lenders are willing, on the terms and subject to the conditions
hereinafter set forth (including Article VI), to extend such Commitments and to
make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used
(1)
to finance certain trade payables; and
(2)
to repay indebtedness of the Borrower to Cornell Capital Partners, L.P.
(“Cornell Capital”) existing as of the Effective Date; and
(3)
to finance the Financed Acquisition; and
(4)
to conduct other Approved Development Activities pursuant to the Approved
Capital and Operating Budget on the Oil and Gas Properties owned by the Borrower
or any of the Borrower’s Qualified Subsidiaries, including without limitation,
those Oil and Gas Properties (i) located in Beauregard, Livingston, Rapides,
Vernon Parishes, Louisiana, and Smith, and Wood Counties, Texas, owned by the
Borrower immediately prior to the Financed Acquisition, and (ii) located in Tom
Green County, Texas acquired pursuant to the Financed Acquisition (such
interests existing as of the date hereof, each individually, an “Initial Subject
Property”, and collectively, the “Initial Subject Properties”); and
(5)
to enter into Hedge Agreements as may be required from time to time by the
Administrative Agent; and
(6)
for working capital purposes in accordance with the Approved Capital and
Operating Budget; and
--------------------------------------------------------------------------------
Credit Agrmt
WHEREAS, the Parties have agreed it is in their respective best interests to
enter into this Agreement,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1.
Defined Terms. The following terms (whether or not underscored) when used in
this Agreement, including its preamble and recitals, shall, except where the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
“Acquired Properties” means those Oil and Gas Properties and other assets that
are acquired from time to time in an Acquisition.
“Acquisition” means (i) the Financed Acquisition and (ii) any other acquisition
of Acquired Properties after the Effective Date by the Borrower or one or more
Qualified Subsidiaries of the Borrower.
“Administrative Agent” is defined in the preamble and includes each other Person
as shall have subsequently been appointed as successor Administrative Agent
pursuant to Section 10.4.
“Affiliate” of any Person means any other Person which, directly or indirectly,
controls, is controlled by or is under common control with such Person
(excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be “controlled by” any
other Person if such other Person possesses, directly or indirectly, power
(a)
to vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managers; or
(b)
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
“Agreement” means, on any date, this Credit Agreement as originally in effect on
the Effective Date and as thereafter from time to time amended, supplemented,
amended and restated, or otherwise modified and in effect on such date.
“Applicable Law” means with respect to any Person or matter, any United States
or foreign, federal, state, regional, tribal or local statute, law, code, rule,
treaty, convention, application, order, decree, consent decree, injunction,
directive, determination or other requirement (whether or not having the force
of law) relating to such Person or matter and, where applicable, any
interpretation thereof by a Government Agency having jurisdiction with respect
thereto or charged with the administration or interpretation thereof.
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“Applicable Margin” means, with respect to any Credit Extension at any time of
determination, a margin above the LIBO Rate applicable to such Credit Extension
equal to six percent (6%).
“Approvals” means each and every approval, authorization, license, permit,
consent, variance, land use entitlement, franchise, agreement, filing or
registration by or with any Government Agency or other Person necessary for all
stages of developing, operating, maintaining and abandoning Oil and Gas
Properties.
“Approved Capital and Operating Budget” means the Borrower’s plan, as approved
by the Administrative Agent pursuant to Section 6.1.13, for conducting Approved
Development Activities on the Oil and Gas Properties comprising the Collateral
Value Properties, Mortgaged Properties and the Development Properties. The
Approved Capital and Operating Budget shall set forth, by geographic region or
trend, as appropriate, projected drilling costs, completion costs, geological
and geophysical costs for each well and property; the Approved General and
Administrative Budget (setting forth the G&A expenses), workover expenses
(beyond those accounted for by the Borrower as lease operating expenses), the
number of wells to be drilled and other major items as the Administrative Agent
may request, in each quarter covered by such Approved Capital and Operating
Budget. The Approved Capital and Operating Budget shall be presented in
substantially the form of Exhibit L, or such other form as the Administrative
Agent may approve, and shall be updated each Fiscal Quarter for a period of not
less than the following six (6) Fiscal Quarters as provided in Section 8.1.1.
“Approved General and Administrative Budget” means the Borrower’s planned G&A
Expenses, as approved by the Administrative Agent pursuant to Section 6.1.13, to
be incurred in conducting Approved Development Activities on the Oil and Gas
Properties comprising the Collateral Value Properties, Mortgaged Properties and
the Development Properties. The Approved General and Administrative Budget
shall be presented in substantially the form of Exhibit M, or such other form as
the Administrative Agent may approve, and shall be updated each Fiscal Quarter
for a period of not less than the following six (6) Fiscal Quarters as provided
in Section 8.1.1.
“Approved Development Activities” means drilling, geological and geophysical
investigations and evaluations and related activities on the Collateral Value
Properties, the Mortgaged Properties and/or Development Properties,
substantially in accordance with the Approved Capital and Operating Budget (i)
in order to bring into production Proven Reserves which are included in the
determination of the Collateral Value, and (ii) in order to further explore
and/or develop the Mortgaged Properties and the Development Properties not
otherwise included in the Collateral Value, in each case as approved by the
Administrative Agent. Certain Approved Development Activities have been
approved in the initial Approved Capital and Operating Budget; depending upon
the success of these initial Approved Development Activities, the Administrative
Agent may approve additional Approved Development Activities, in an Approved
Capital and Operating Budget or otherwise.
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“Approved Hedge Counterparty” means each Person, other than Borrower or an
Affiliate of Borrower, who (a) has been approved in writing by the
Administrative Agent as a counterparty to a Hedging Agreement with the Borrower
or a Qualified Subsidiary of the Borrower; and (b) if the Hedging Agreement
relates to or otherwise permits the execution of any type of transaction other
than the purchase of commodity floors by the Borrower, has executed and
delivered to the Administrative Agent a duly executed counterpart of an
Intercreditor Agreement on terms and conditions acceptable to the Administrative
Agent.
“Assignee Lender” is defined in Section 11.11.1.
“Assignment” means each Assignment and Conveyance of Overriding Royalty
Interest, substantially in the form of Exhibit J, as such may be amended,
supplemented, restated or otherwise modified from time to time, from the
Borrower and the Borrower’s Subsidiaries to the Designee, assigning to the
Designee, as additional consideration for the making of Commitments by the
Initial Lenders and not as collateral security for the Loans, overriding royalty
interests in its or their Hydrocarbon Interests comprising all Oil and Gas
Properties of the Borrower and its Subsidiaries, as set forth in the
Confidential Payment Letter. The Overriding Royalty Interests conveyed by the
Assignment to NGPCRC or its Designee are subject to the Agreement Concerning
Overriding Royalty Interests which shall be in a form satisfactory to the
Administrative Agent, as such may be amended, supplemented, restated or
otherwise modified from time to time, among the Borrower, NGPCRC as an Initial
Lender and the Designee of NGPCRC.
“Authorized Officer” means, relative to any Obligor, those of its officers whose
signatures and incumbency shall have been certified to the Administrative Agent
pursuant to Section 6.1.1.
“Borrower” is defined in the preamble.
“Borrowing” means the Loans having the same Interest Period made by all Lenders
on the same Business Day and pursuant to the same Borrowing Request in
accordance with Section 2.1.
“Borrowing Request” means a loan request and certificate duly executed by an
Authorized Officer of the Borrower, substantially in the form of Exhibit B
hereto.
“Business Day” means
(a)
any day which is neither a Saturday or Sunday nor any other day on which banks
are authorized or required to be closed in Houston, Texas or New York, New York;
and
(b)
relative to the making, continuing, prepaying or repaying of any LIBO Rate
Loans, any day on which dealings in Dollars are carried on in the London
interbank market.
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Credit Agrmt
“Capital Expenditures” means, for any period, (without duplication) the
aggregate amount of all expenditures of the Borrower and its consolidated
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures including,
with respect to any period, payments made by the Borrower and its consolidated
Subsidiaries with respect to Capitalized Lease Liabilities incurred during such
period.
“Capital Stock” means any and all shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person and any
rights (other than debt securities convertible into an equity interest),
warrants or options to subscribe for or to acquire interest in such Person.
“Capitalization” means, at any time, the sum of (a) the total Debt of the
Borrower and its consolidated Subsidiaries plus (b) the total equity of the
Borrower and its consolidated Subsidiaries, plus or minus, as the case may be
(c) the effects, if any, of FAS 133.
“Capitalized Lease Liabilities” means all monetary obligations of the Borrower
or any of its consolidated Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
“Cash Equivalent Investment” means, at any time:
(a)
any evidence of Indebtedness, maturing not more than one year after such time,
issued or guaranteed by the United States Government;
(b)
commercial paper, maturing not more than nine months from the date of issue,
which is issued by
(i)
a corporation (other than an Affiliate of the Borrower) organized under the laws
of any state of the United States or of the District of Columbia and rated at
least A-1 by S&P or P-1 by Moody’s, or
(ii)
any Lender which is rated at least A-1 by S&P or P-1 by Moody’s;
(c)
any certificate of deposit or bankers acceptance, maturing not more than one
year after such time, which is issued by
(i)
a commercial banking institution that is a member of the Federal Reserve System
and has a combined capital and surplus and undivided profits of not less than
$500,000,000, or
(ii)
any Lender which is rated at least A-1 by S&P or P-1 by Moody’s; or
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Credit Agrmt
(d)
any repurchase agreement entered into with any Lender (or other commercial
banking institution of the stature referred to in clause (c)) which
(i)
is secured by a fully perfected security interest in any obligation of the type
described in any of clauses (a) through (c); and
(ii)
has a market value at the time such repurchase agreement is entered into of not
less than 100% of the repurchase obligation of any Lender (or other commercial
banking institution) thereunder.
“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
“CERCLIS” means the Comprehensive Environmental Response Compensation Liability
Information System List.
“Change in Control” means, if Peter Rosenthal, Frank T. Smith, Jr. or Bill McFie
shall cease to be actively and regularly involved in the day to day operations
and management of the Borrower’s business.
“Code” means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, and the regulations promulgated
thereunder.
“Collateral Value” means (a) prior to the initial Collateral Value
Redetermination, $7,000,000, and (b) thereafter, the lesser of
(X)
the quotient of (i) the projected net future cash flow, discounted at ten
percent (10%) per annum, from the anticipated production of Hydrocarbons from
Proven Reserves attributable to Hydrocarbon Interests owned directly by the
Borrower or one of the Borrower’s Qualified Subsidiaries which are a part of the
Collateral Value Properties and which is reasonably projected by the
Administrative Agent and the Required Lenders to be brought into production
prior to the Stated Maturity Date with funds that the Administrative Agent
determines are available to the Borrower for such purposes and use, divided by
(ii) 1.5, and
(Y)
quotient of (i) the projected net future cash flow, discounted at ten percent
(10%) per annum, from the anticipated production of Hydrocarbons from Proven
Reserves attributable to Hydrocarbon Interests owned directly by the Borrower or
one of the Borrower’s Qualified Subsidiaries which are a part of the Collateral
Value Properties and which is reasonably projected by the Administrative Agent
and the Required Lenders to be brought into production prior to the Stated
Maturity Date with funds that the Administrative Agent determines are available
to the Borrower for such purposes and use, divided by (ii) 1.25, minus the
amount calculated from time to time as the Mark to Market Exposure under all
Hedging Agreements between the Borrower and any other Person.
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Credit Agrmt
“Collateral Value Deficiency” means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Loans exceeds (b) the then current
Collateral Value.
“Collateral Value Deficiency Notification Date” means the date on which any
notice of a Collateral Value Deficiency is received by the Borrower.
“Collateral Value Properties” means, those Mortgaged Properties, those
Development Properties and those other Oil and Gas Properties owned by the
Borrower or its Subsidiaries, if any, that are given value by the Administrative
Agent and the Required Lenders in its or their determination of the then current
Collateral Value.
“Collateral Value Redetermination” means a Scheduled Redetermination or a
Requested Redetermination, as the case may be, as defined in Section 2.7.
“Commitment” means, relative to any Lender, such Lender’s obligation pursuant to
Sections 2.1.1 and 2.1.2 to make Loans to the Borrower in accordance with the
terms and provisions of this Agreement.
“Commitment Amount” means the lesser of (i) $12,000,000, as reduced from time to
time pursuant to the provisions of Section 2.2, or (ii) the Collateral Value.
“Commitment Availability” means, on any date, the excess of
(a)
the then applicable Commitment Amount, over
(b)
the aggregate outstanding principal amount of all applicable Loans on such date.
“Commitment Termination Date” means the earliest of
(a)
the Stated Maturity Date;
(b)
the date on which the Commitment Amount is cancelled, terminated in full or
reduced to zero pursuant to Section 2.2; and
(c)
the date on which any Commitment Termination Event occurs.
“Commitment Termination Event” means
(a)
the occurrence of any Default described in clauses (a) through (d) of Section
9.1.9 with respect to the Borrower or any Subsidiary or any other Obligor; or
(b)
the occurrence and continuance of any other Event of Default and either
(i)
the declaration of the Loans and other Obligations to be due and payable
pursuant to Section 9.3, or
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Credit Agrmt
(ii)
in the absence of such declaration, the giving of notice by the Administrative
Agent to the Borrower that the Commitment has been terminated.
“Confidential Payment Letter” means that certain Confidential Payment Letter
dated as of September 15, 2006, among the Borrower and the Administrative Agent,
as the same may be from time to time amended, modified and supplemented.
“Consent” means a Consent to Assignment executed and delivered pursuant to
Section 6.2.6, substantially in the form of Exhibit N, as amended, supplemented,
restated or otherwise modified from time to time pursuant to which the
Borrower’s counterparty to each Material Contract (i) consents to the assignment
of each such Material Contract to the Administrative Agent as security for the
Obligations and (ii) provides the Administrative Agent an independent right to
cure defaults under such Material Contract.
“Consolidated Net Income” means, with respect to the Borrower and its
consolidated Subsidiaries for any period, the consolidated net income (or loss)
of the Borrower and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
“Contingent Liability” means, as to any Person, any direct or indirect liability
of that Person, whether or not contingent, with or without recourse, (a) with
respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the “primary obligations”) of another Person (the “primary
obligor”), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a “Guaranty Obligation”); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered; provided, however, that the term “Contingent Liabilities”
shall not include the obligations of the Borrower or any Qualified Subsidiaries
of the Borrower (if applicable) for normal gas pipeline capacity reservation
charges under gas transportation contracts or payments to service contractors
for field services that are provided on an “as needed” basis, in each case where
such obligations and contracts are entered into in the ordinary course of
8
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Credit Agrmt
business and do not otherwise violate any provision of this Agreement (including
Section 8.2.11 and Section 8.2.13) or any other Loan Document.
“Controlled Group” means all members of a controlled group of corporations and
all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
“Cornell Capital” is defined in the fourth recital.
“Credit Extension” means the advancing of any Loans by the Lenders in connection
with a Borrowing hereunder.
“Current Ratio” means, as of the end of each Fiscal Quarter, the ratio of
(a)
the current assets of the Borrower and its consolidated Subsidiaries (including
the unused portion of the Commitment Amount (to the extent available to be
borrowed)
to
(b)
the current liabilities (minus the current portion of long term Debt) of the
Borrower and its consolidated Subsidiaries.
“Debt” means the outstanding principal amount of all Indebtedness of the
Borrower and its consolidated Subsidiaries of the nature referred to in clauses
(a) and (b) of the definition of “Indebtedness”.
“Debt to EBITDA Ratio” means,
(a)
as of April 30, 2007, for the two (2) consecutive Fiscal Quarters ending then,
the ratio of (i) Debt, as of the last day of such Fiscal Quarters to (ii) EBITDA
for such two (2) Fiscal Quarters multiplied times two (2); and
(b)
as of July 31, 2007, for the three (3) consecutive Fiscal Quarters ending then,
the ratio of (i) Debt, as of the last day of such Fiscal Quarters to (ii) EBITDA
for such three (3) Fiscal Quarters multiplied times 1.33; and
(c)
for any four (4) consecutive Fiscal Quarters commencing as of the Fiscal Quarter
beginning on November 1, 2007, the ratio of (i) Debt, as of the last day of such
Fiscal Quarter, to (ii) EBITDA for such Fiscal Quarters.
“Default” means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
“Designee” is defined in Section 3.5.
9
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Credit Agrmt
“Development Properties” means the Oil and Gas Properties owned directly by the
Borrower and its Qualified Subsidiaries that are projected to be the subject of
Approved Development Activities in accordance with the then current Approved
Capital and Operating Budget.
“Disclosure Schedule” means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Administrative Agent.
“Distribution Payments” is defined in Section 8.2.6(a).
“Dollar” and the sign “$” mean lawful money of the United States.
“Domestic Office” means, relative to any Lender, the office of such Lender
designated as such on its signature page hereto or designated in a Lender
Assignment Notice or such other office of a Lender (or any successor or assign
of such Lender) within the United States as may be designated from time to time
by notice from such Lender, as the case may be, to each other Person party
hereto.
“EBITDA” means for any period, the sum, without duplication, of the following:
(a)
Consolidated Net Income for such period, plus
(b)
Interest Expense for such period, plus
(c)
all depreciation and amortization of assets (including goodwill and other
intangible assets) of the Borrower and its consolidated Subsidiaries deducted in
determining Consolidated Net Income for such period, plus (minus)
(d)
all federal, state, local and foreign income taxes of the Borrower and its
consolidated Subsidiaries deducted (or credits added) in determining
Consolidated Net Income for such period, plus (minus)
(e)
all non-cash items deducted or added pursuant to FAS 133, plus (minus)
(f)
other non-cash items deducted or added in determining Consolidated Net Income
for such period.
“Effective Date” means the date this Agreement becomes effective pursuant to
Section 11.8.
“Engineering Report” means one or more reports, in form and substance
satisfactory to the Administrative Agent and the Required Lenders, prepared at
the sole cost and expense of the Borrower by Haas Petroleum Engineering Services
Inc. or another petroleum engineer acceptable to the Administrative Agent in its
reasonable judgment, which shall evaluate the Proven Reserves, probable reserves
and possible reserves attributable to the Hydrocarbon Interests owned directly
by the Borrower
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Credit Agrmt
and/or its Qualified Subsidiaries and constituting part of the Collateral Value
Properties as of the immediately preceding May 1 or November 1. Each
Engineering Report shall set forth volumes, projections of the future rate of
production, Hydrocarbons prices, escalation rates, discount rate assumptions,
and net proceeds of production, estimated costs of Remedial Action, operating
expenses and capital expenditures, in each case based upon updated economic
assumptions acceptable to the Administrative Agent and the Required Lenders.
“Environmental Laws” means all Applicable Laws (including consent decrees and
administrative orders) relating to public health and safety through protection
of the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA also refer to any successor sections.
“Event of Default” is defined in Section 9.1.
“Existing Borrower Properties” means those Oil & Gas Properties shown in Part 1
of Schedule II.
“Facility” means the credit facility providing for the Commitment and the Loans.
“FAS 133” means Statement No. 133 issued by the Financial Accounting Standards
Board and captioned “Accounting for Derivative Instruments and Hedging
Activities”.
“Financed Acquisition” means the Borrower’s purchase of an undivided 100% of the
right, title and interest of Sellers in and to certain Oil and Gas Properties
located in Tom Green County in the State of Texas, pursuant to the Purchase
Agreements and the subsequent assignment to the Borrower from the Sellers.
“Fiscal Quarter” means any quarter ending on the last day of July, October,
January and April of a Fiscal Year.
“Fiscal Year” means any period of twelve consecutive calendar months ending on
April 30; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., “Fiscal Year 2006”) refer to the Fiscal Year ending on the
April 30 occurring during such calendar year.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any
successor thereto.
“GAAP” is defined in Section 1.4.
“G&A Expenses” means the general and administrative expenses of the Borrower and
its Subsidiaries paid in cash or cash equivalents and not attributable to
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Credit Agrmt
any particular Oil and Gas Property or Properties, including without limitation,
salaries, office rent and operating expenses, overhead and the cost of outside
contractors and consultants that are not engaged in work on any particular Oil
and Gas Property.
“Government Agency” means any United States or foreign, federal, state,
regional, tribal or local government or governmental department or other entity
charged with the administration, interpretation or enforcement of any Applicable
Law.
“Guaranties” means the guaranties of the Obligations, executed and delivered
pursuant to Section 6.1.3, Section 6.2.7, Section 8.1.7 and Section 8.1.10
substantially in the form of Exhibit E, as applicable, given by each of the
Borrower’s Subsidiaries, as such may be amended, restated, supplemented or
otherwise modified from time to time.
“Hazardous Material” means
(a)
any “hazardous substance”, as defined by CERCLA;
(b)
any “hazardous waste”, as defined by the Resource Conservation and Recovery Act,
as amended;
(c)
any petroleum, crude oil or fraction thereof;
(d)
any hazardous, dangerous or toxic chemical, material, waste or substance within
the meaning of any Environmental Law;
(e)
any radioactive material, including any naturally occurring radioactive
material, and any source, special or by-product material as defined in 42 U.S.C.
§ 2011 et seq., and any amendments or reauthorizations thereof;
(f)
asbestos-containing materials in any form or condition; or
(g)
polychlorinated biphenyls in any form or condition.
“Hedging Agreements” means, with respect to any Person:
(a)
interest rate swap agreements, basis swap agreements, interest rate cap
agreements, forward rate agreements, interest rate floor agreements and interest
rate collar agreements, and all other agreements or arrangements designed to
protect such Person against fluctuations in interest rates or currency exchange
rates, and
(b)
forward contracts, options, futures contracts, futures options, commodity swaps,
commodity options, commodity collars, commodity caps, commodity floors and all
other agreements or arrangements designed to protect such Person against
fluctuations in the price of commodities.
“Hedging Obligations” means, with respect to any Person, all liabilities
(including but not limited to obligations and liabilities arising in connection
with or as a result of
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Credit Agrmt
early or premature termination of a Hedging Agreement, whether or not occurring
as a result of a default thereunder) of such Person under a Hedging Agreement.
“Highest Lawful Rate” is defined in Section 3.2.4(b).
“Holdings” means NGPC Asset Holdings, LP, a Texas limited partnership.
“Hydrocarbon Interests” means all rights, titles and interests in and to oil and
gas leases; oil, gas and mineral leases and working interests therein; other
Hydrocarbon leases; mineral interests; mineral servitudes; overriding royalty
interests; royalty interests; net profits interests; production payment
interests; and other similar interests.
“Hydrocarbons” means, collectively, oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and all other liquid or gaseous
hydrocarbons and related minerals and all products therefrom, in each case
whether in a natural or a processed state.
“Impermissible Qualification” means, relative to the opinion or certification of
any independent public accountant as to any financial statement of the Borrower,
any qualification or exception to such opinion or certification
(a)
which is of a “going concern” or similar nature;
(b)
which relates to the limited scope of examination of matters relevant to such
financial statement; or
(c)
which relates to the treatment or classification of any item in such financial
statement and which, as a condition to its removal, would require an adjustment
to such item the effect of which would be to cause the Borrower to be in default
of any of its obligations under Section 8.2.4.
“including” means including without limiting the generality of any description
preceding such term, and, for purposes of this Agreement and each other Loan
Document, the parties hereto agree that the rule of ejusdem generis shall not be
applicable to limit a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the matters specifically
mentioned.
“Indebtedness” of any Person means, without duplication:
(a)
all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(b)
all obligations, contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker’s acceptances issued for the
account of such Person;
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Credit Agrmt
(c)
all other items which, in accordance with GAAP, would be included as liabilities
on the liability side of the balance sheet of such Person as of the date at
which Indebtedness is to be determined;
(d)
net liabilities of such Person under all Hedging Obligations;
(e)
all net monetary obligations of such Persons with respect to Production
Payments;
(f)
all Capitalized Lease Liabilities;
(g)
whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of property or
services, and indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse; and
(h)
all Contingent Liabilities of such Person;
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, unless the Administrative Agent expressly
permits exclusion based on non-recourse provisions acceptable to the
Administrative Agent set forth in the agreements regarding such Indebtedness.
“Indemnified Liabilities” is defined in Section 11.4.
“Indemnified Parties” is defined in Section 11.4.
“Initial Lender” means NGPCRC.
“Initial Subject Property” and “Initial Subject Properties” are each defined in
the fourth recital.
“Intercreditor Agreement” means an Intercreditor Agreement and Collateral Agency
Agreement, on terms and conditions acceptable to the Administrative Agent in its
sole discretion, executed by the Borrower, each Subsidiary of the Borrower, each
applicable Approved Hedge Counterparty, each Lender and the Administrative Agent
and delivered by an Approved Hedge Counterparty in accordance with the
definition of “Approved Hedge Counterparty”, as amended, restated, supplemented
or otherwise modified from time to time, including as supplemented by each
supplement executed by any Subsidiary of the Borrower.
“Interest Coverage Ratio” means,
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Credit Agrmt
(a)
as of April 30, 2007, for the two (2) consecutive Fiscal Quarters ending then,
the ratio of (i) EBITDA for such two (2) Fiscal Quarters to (ii) Interest
Expense for such Fiscal Quarters; and
(b)
as of July 31, 2007, for the three (3) consecutive Fiscal Quarters ending then,
the ratio of (i) EBITDA for such three (3) Fiscal Quarters to (ii) Interest
Expense for such Fiscal Quarters; and
(c)
for any four (4) consecutive Fiscal Quarters commencing with the Fiscal Quarter
beginning November 1, 2007, the ratio of (i) EBITDA for such Fiscal Quarters to
(ii) Interest Expense for such Fiscal Quarters.
“Interest Expense” means, for any period, the consolidated interest expense of
the Borrower and its consolidated Subsidiaries for such period (including all
imputed interest under interest rate Hedging Agreements, but excluding all fees
paid under Section 3.3), as determined in accordance with GAAP, including the
interest expense associated with any Capitalized Lease Liabilities of the
Borrower and its consolidated Subsidiaries.
“Interest Period” means, relative to any LIBO Rate Loan, the period beginning on
(and including) the date on which such LIBO Rate Loan is made or continued as a
LIBO Rate Loan pursuant to Section 2.3 or 2.4 and ending on (but excluding) the
day which is, (i) in the case of Loans made as a LIBO Rate Loan on the Effective
Date, the last Business Day in December of 2006; and (ii) in the case of Loans
made or continued as a LIBO Rate Loan after the Effective Date, the last
Business Day of the following month; in each case as the Borrower may select in
its relevant notice pursuant to Section 2.3; provided, however, that
(a)
no more than four (4) different Interest Periods may be in effect at any time;
(b)
Interest Periods commencing on the same date for Loans comprising part of the
same Borrowing shall be of the same duration;
(c)
if such Interest Period would otherwise end on a day which is not a Business
Day, such Interest Period shall end on the next following Business Day (unless,
if such Interest Period applies to LIBO Rate Loans, such next following Business
Day is the first Business Day of another calendar month, in which case such
Interest Period shall end on the Business Day next preceding such numerically
corresponding day);
(d)
no Interest Period may end later than the Stated Maturity Date; and
(e)
the Borrower shall select each Interest Period for a particular LIBO Rate Loan
so as not to require (as reasonably foreseeable as possible) a prepayment of
such LIBO Rate Loan during such Interest Period.
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Credit Agrmt
“Investment” means, relative to any Person,
(a)
any loan or advance made by such Person to any other Person (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business and excluding prepaid expenses incurred in the
ordinary course of business under joint operating agreements);
(b)
any Contingent Liability of such Person; and
(c)
any ownership or similar interest held by such Person in any other Person;
provided, however, that (i) Hedging Obligations and (ii) Production Payments
where the Borrower or a Qualified Subsidiary of the Borrower is the grantor or
transferor thereof shall not be considered Investments.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
“Investor Rights Agreement” means the Investor Rights Agreement, in form and
substance acceptable to the Administrative Agent and Initial Lender, among the
Borrower and the Initial Lender or the Designee.
“Lender Assignment Notice” means a Lender Assignment Notice substantially in
the form of Exhibit G hereto.
“Lenders” is defined in the preamble.
“LIBO Rate” means, with respect to each Interest Period for a LIBO Rate Loan,
(a) the rate of interest per annum (carried out to the fifth decimal place)
equal to the rate determined by Administrative Agent to be the “LIBOR Rate” that
appears in the “Money Rates” section of The Wall Street Journal for deposits in
U.S. dollars with a term equivalent to one month, determined as of approximately
11:00 a.m. (London time) on the last Business Day of each month; provided, from
the Effective Date until the last Business Day of the month in which the
Effective Date occurs, such rate shall be determined as of the Effective Date,
or (b) in the event the rate referenced in the preceding subsection (a) does not
appear in such section or publication or such section or publication page shall
cease to be available, such other comparable index or measure as determined by
the Administrative Agent.
“LIBO Rate Loan” means a Loan bearing interest, at all times during an Interest
Period applicable to such Loan, at a fixed rate of interest determined by
reference to the LIBO Rate.
“Lien” means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in Property to secure (i)
the payment
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Credit Agrmt
of a debt or (ii) the performance of an obligation, or other priority or
preferential arrangement of any kind or nature whatsoever in respect of any
Property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing.
“Loan Documents” means this Agreement, the Notes, the Security Documents, the
Assignments, the Warrant Documents, the Confidential Payment Letter, all Hedging
Agreements and all other agreements relating to this Agreement entered into from
time to time between the Borrower (or any or all of its Subsidiaries or
Affiliates) and the Administrative Agent or any Lender (or any Affiliate of any
Lender), and any document delivered by the Borrower or any of its Subsidiaries
in connection with any of the foregoing.
“Loan or Loans” means the loans made by the Lenders to the Borrower pursuant to
their respective Commitment in accordance with Section 2.1.
“Lockbox Agreement” means an account control agreement among Administrative
Agent, the Borrower, each Subsidiary of Borrower and Wells Fargo Bank Texas,
N.A., in form and substance satisfactory to Administrative Agent, pursuant to
which Administrative Agent shall have certain rights with respect to the
Proceeds Account and funds deposited therein.
“MBOE” means the equivalent energy of one thousand stock tank barrels of oil,
which, with respect to natural gas, shall be defined as six (6) thousand MMBtu
of natural gas per MBOE. For the purposes of this calculation, natural gas
liquids will be considered oil.
“MMBtu” means one million British Thermal Units.
“Mark to Market Exposure” means the net amount, as determined by the Required
Lenders from time to time, that would be required to terminate all outstanding
transactions then open under Hedging Agreements between the Borrower and any
other Person.
“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, assets, properties, liabilities,
contractual obligations, condition (financial or otherwise), affairs or
prospects of the Borrower or any other Obligor and its Material Subsidiaries; or
(b) a material impairment of the ability of the Borrower or any Obligor to
perform under any Loan Document and to avoid any Default.
“Material Contract” means (i) each Acquisition agreement, Hydrocarbon purchase
and sale agreement (having a term longer than thirty (30) days or price terms
that are substantially above the then current market price), or similar contract
relating to
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any Hydrocarbon Interests included in the Mortgaged Properties, Collateral Value
Properties and/or Development Properties, (ii) any other agreement that is, in
Borrower’s judgment, material to the business of the Borrower and its
Subsidiaries; (iii) all Hydrocarbon sales and marketing agreements and (iv) each
operating agreement or similar contract relating to any Hydrocarbon Interests
included in the Mortgaged Properties, Collateral Value Properties and/or
Development Properties and any other agreement designated as such by the
Administrative Agent.
“Material Subsidiary” means, at any particular time, any Subsidiary (i) that has
assets included in the Collateral Value; (ii) that, together with its
Subsidiaries, (a) accounted for more than five percent (5%) of the consolidated
EBITDA of the Borrower and its Subsidiaries for the most recently completed
Fiscal Quarter (computed on a retroactive proforma basis with respect to
acquired Subsidiaries), or (b) was the owner of more than five percent (5%) of
the consolidated assets of the Borrower and its Subsidiaries at the end of such
Fiscal Quarter or, with respect to acquired or newly formed Subsidiaries, on the
date of acquisition or formation of such acquired Subsidiary, all as shown in
the case of (a) and (b) on the consolidated financial statements of the Borrower
and its Subsidiaries for such Fiscal Quarter or on such acquisition or formation
date; or (iii) that is designated by the Borrower in writing to the
Administrative Agent as a Material Subsidiary.
“Monthly Payment Date” means the last Business Day of each month.
“Moody’s” means Moody’s Investors Services, Inc. or any successor thereto.
“Mortgage Consents” means all consents required under existing oil and gas
leases or other agreements and Approvals by Government Agencies to the granting
of a Mortgage to the Administrative Agent, and as determined by the
Administrative Agent with respect to Properties that become Mortgaged Properties
after the Effective Date.
“Mortgaged Properties” means the Hydrocarbon Interests, Properties and interests
described in and secured by the Mortgages, as such Properties and interests are
from time to time constituted, all as further provided in Section 6.1.7 and
Section 6.2.2.
“Mortgages” means the Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statements and Fixture Filing executed and delivered pursuant to
Section 6.1.7 and Section 6.2.2, substantially in the form of Exhibit D-1 and
D-2 hereto, as such may be amended, supplemented, restated or otherwise modified
from time to time.
“Net Reduction in Value” means an amount equal to the difference between the
Collateral Value determined under this Agreement in the most recent
redetermination immediately prior to a sale or other disposition of Collateral
Value Properties (or proposed sale or other disposition) and the Collateral
Value as it would be determined under this Agreement after giving effect to such
sale or other disposition (or proposed sale or other disposition).
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“Net Sales Proceeds” means the gross cash proceeds from the sale by the Borrower
or any of its Subsidiaries of any of the Oil & Gas Properties, less the sum of
the following expenses incurred in connection with such sale: normal and
customary closing-related costs and expenses payable to unaffiliated third
parties, such as taxes, escrow charges, title examination fees, legal fees and
expenses incurred in connection with the sale, reasonable and customary
brokerage commissions to third-parties and recording expenses (specifically
excluding, however, any payments, commissions, fees or other amounts paid or
payable to the Borrower, any of its Affiliates or any other Obligors) payable in
connection therewith by Borrower or any of its Subsidiaries as the seller
thereunder.
“NGPCRC” means NGP Capital Resources Company, a Maryland corporation.
“Notes” means the secured promissory note or notes of the Borrower payable to
the order of a Lender, in the form of Exhibit A hereto (as such promissory notes
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
“Obligations” means all obligations (monetary or otherwise) of the Borrower
and/or each other Obligor arising under or in connection with this Agreement,
the Notes and each other Loan Document, including without limitation, all
Hedging Obligations arising under Hedging Agreements between the Borrower (or
any Affiliate of the Borrower) and a Lender (or any Affiliate of a Lender).
“Obligor” means the Borrower, any of its Subsidiaries or any other Person (other
than the Administrative Agent, a Lender or any Affiliate of a Lender, including
the Designee and any counterparty to a Hedging Agreement that is an Affiliate of
a Lender) obligated under, or otherwise a party to, any Loan Document.
“Oil and Gas Properties” means Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Government Agency having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and all oil
in tanks and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
profits á prendre, hereditaments, appurtenances and Properties in anyway
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests,
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used,
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held for use or useful in connection with the operating, working or development
of any of such Hydrocarbon Interests or Property (excluding drilling rigs,
automotive equipment or other personal property which may be on such premises
for the purpose of drilling a well or for other similar temporary uses) and
including any and all oil wells, gas wells, water wells, injection wells or
other wells, buildings, structures, fuel separators, liquid extraction plants,
plant compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
“Organic Document” means, relative to any corporate Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock, and, relative to any limited liability company Obligor, its limited
liability company agreement, operating agreement or regulations, as the case may
be.
“Overriding Royalty Interest” means the interests conveyed and assigned by the
Assignment (including those delivered on the Effective Date and those delivered
at any time thereafter).
“Participant” is defined in Section 11.11.2.
“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding
to any or all of its functions under ERISA.
“Pension Plan” means a “pension plan”, as such term is defined in section 3(2)
of ERISA, which is subject to Title IV of ERISA (other than a multi-employer
plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
“Percentage” means, relative to any Lender, the percentage set forth on the
signature page of this Agreement attributable to such Lender, as the same may be
adjusted from time to time pursuant to Lender Assignment Notice(s) executed by
the Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11.
“Person” means any natural person, corporation, partnership, joint venture,
limited liability company, firm, association, trust, Government Agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
“Plan” means any Pension Plan or Welfare Plan.
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“Pledge Agreement” means (i) a Pledge Agreement of the Borrower executed and
delivered pursuant to Section 6.1.4 Section 6.2.8 and Section 8.1.10,
substantially in the form of Exhibit F hereto, as applicable and (ii) a Pledge
Agreement of each of the Borrower’s Subsidiaries that owns any Subsidiaries
executed and delivered pursuant to Section 6.1.4, Section 6.2.8 and Section
8.1.10 substantially in the form of Exhibit F hereto, as applicable, in each
case as such may be amended, supplemented, restated or otherwise modified from
time to time.
“Present Value” means the calculation of the present value of future cash flows
for Proved Developed Producing Reserves from the Oil and Gas Properties, based
upon the then effective Reserve Report, as calculated by the Administrative
Agent.
“Proceeds Account” is defined in Section 3.4.
“Production Payments” means the grant or transfer to any Person of a production
payment (whether volumetric or dollar denominated) or similar royalty,
overriding royalty, net profits interest or other similar interest in Oil and
Gas Properties, or the right to receive all or a portion of the production or
the proceeds from the sale of production attributable to such Oil and Gas
Properties where the holder of such interest has recourse solely to such
interest and the grantor or transferor thereof has an express contractual
obligation to produce and sell Hydrocarbons from such Oil and Gas Properties, or
to cause such Oil and Gas Properties to be so operated and maintained, in each
case in a reasonably prudent manner.
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
“Proved Developed Producing Reserves” means “Proved Reserves” that are
“Developed” and “Producing” as each such term is defined by the Society of
Petroleum Engineers in its Petroleum Reserves Definitions.
“Proven Reserves” means collectively, “Proved Reserves,” “Proved Reserves” that
are “Developed” and “Producing,” “Proved Reserves” that are “Developed” and
“Non-producing,” (consisting of proved developed shut-in oil and gas reserves
and proved developed behind-pipe oil and gas reserves), and “Proved Reserves”
that are “Undeveloped,” in each case as such terms are defined by the Society
of Petroleum Engineers in its Petroleum Reserves Definitions.
“Purchase Agreements” means collectively, (a) that certain Oil and Gas Lease, by
and among the Trustees of the Angie Carr Brown Trust and the Trustees of the
Kenneth W. Brown Testamentary Trust and the Borrower, dated as of December 1,
2006 with respect to mineral rights below the surface up to the “Strawn sand” as
more fully described therein, (b) that certain Oil and Gas Lease, by and among
the Trustees of the Angie Carr Brown Trust and the Trustees of the Kenneth W.
Brown Testamentary Trust and the Borrower, dated as of December 1, 2006 with
respect to mineral rights below the “Strawn sand” as more fully described
therein, and (c) that certain Bonus Agreement by and among the Trustees of the
Angie Carr Brown Trust and the Trustees
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of the Kenneth W. Brown Testamentary Trust and the Borrower, dated as of
December 1, 2006, in each case as the same has been amended, restated,
supplemented or otherwise modified from time to time.
“Qualified Subsidiary” is defined in Section 8.2.2.
“Quarterly Payment Date” means, commencing January 31, 2007, and the last
Business Day of each Fiscal Quarter thereafter.
“Reference Rate” means, on any date and with respect to all Reference Rate
Loans, a fluctuating rate of interest per annum, calculated on a year comprised
of 365 days, or if applicable, 366 days, equal to the rate of interest as
publicly announced from time to time by SunTrust Bank (or such other commercial
bank as may be designated from time to time by Administrative Agent) to be its
prime lending rate.
“Reference Rate Loan” means a Loan bearing interest at a fluctuating rate
determined by reference to the Reference Rate.
“Release” means a “release,” as such term is defined in CERCLA.
“Remedial Action” means any action under Environmental Laws required to
(a) clean up, remove, treat, dispose of, abate, or in any other way address
pollutants (including Hazardous Materials) in the environment, (b) prevent the
Release or threat of a Release or minimize the further Release of pollutants, or
(c) investigate and determine if a remedial response is needed and to design
such a response and any post-remedial investigation, monitoring, operation, and
maintenance and care.
“Requested Redetermination” is defined in Section 2.7.
“Required Lenders” means, at any time, Lenders holding, in the aggregate, at
least 66-2/3% of the then outstanding principal amount of all Loans or, if no
such principal amount is outstanding, Lender’s having Percentages aggregating at
least 66-2/3% of the Commitment.
“Reserved P&A Costs” means the aggregate amount shown as a liability on the
balance sheets of the Borrower and its Subsidiaries as a reserve against the
estimated, aggregate amount of all costs and expenses (after accounting for all
credits, contributions from other parties and salvage value of equipment)
anticipated to be incurred by the Borrower and its Subsidiaries in connection
with plugging and abandoning wells located on its or their Oil and Gas
Properties.
“Resource Conservation and Recovery Act” means the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time.
“S&P” means Standard & Poor’s Ratings Group, a division of the McGraw-Hill
Companies, Inc. or any successor thereto.
“Scheduled Redetermination” is defined in Section 2.7.
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“Security Agreement” means each security agreement and any similar instrument or
agreement executed and delivered pursuant to Section 6.1.5 or Section 6.2.6,
substantially in the form of Exhibit C, as such may be amended, supplemented,
restated or otherwise modified from time to time, pursuant to which the Borrower
or its Subsidiaries, as the case may be, pledges to the Administrative Agent as
security for the Obligations the Material Contracts and the Borrower’s or its
Subsidiaries’, as the case may be, bank accounts and intercompany accounts and
loans receivable.
“Security Documents” means, collectively, (a) the Guaranties, (b) the Pledge
Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the Lockbox
Agreement, (f) the Consents, (g) the Mortgage Consents and (h) the Intercreditor
Agreement (if any), together with any exhibits, schedules and other attachments
to such documents and any financing statements related thereto, as such
documents, exhibits, schedules, attachments or financing statements may be, from
time to time, amended, supplemented, restated or otherwise modified.
“Sellers” means, collectively, the Angie Carr Brown Trust and the Trustees of
the Kenneth W. Brown Testamentary Trust.
“Shareholders” means the Persons owning all of the Capital Stock of the
Borrower.
“Stated Maturity Date” means the date that is fifteen (15) months after the
Effective Date.
“Subsidiary” means, with respect to any Person, (a) any corporation of which
more than 50% of the outstanding Capital Stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time Capital Stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, (b) any
partnership, limited liability company, joint venture, association or other
business entity in which more than 50% of the equity interest or voting power is
at the time directly or indirectly owned by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such Person
or (c) any partnership in which such Person is a general partner.
“Surety Instruments” means all letters of credit (including standby and
commercial), banker’s acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
“Taxes” is defined in Section 5.6.
“United States” or “U.S.” means the United States of America, its fifty States
and the District of Columbia.
"Warrant Documents" means the Warrants and the Investor Rights Agreement.
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"Warrants" means the warrants, in form and substance acceptable to the
Administrative Agent and Initial Lender, from the Borrower to the Initial Lender
or the Designee.
“Welfare Plan” means a “welfare plan”, as such term is defined in section 3(1)
of ERISA.
SECTION 1.2.
Use of Defined Terms. Unless otherwise defined or the context otherwise
requires, terms for which meanings are provided in this Agreement shall have
such meanings when used in the Disclosure Schedule and in each Note, Borrowing
Request, notice and other communication or other Loan Document delivered from
time to time in connection with this Agreement or any other Loan Document.
SECTION 1.3.
Cross-References. Unless otherwise specified, references in this Agreement and
in each other Loan Document to any Article or Section are references to such
Article or Section in this Agreement or other Loan Document, as applicable.
(a)
The meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b)
The words “hereof,” “herein,” “hereunder” and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
subsection, Section, Schedule and Exhibit references are to this Agreement or
such other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references to
such clause of such Article, Section or definition.
(c)
(a)
The term “documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.
(ii)
In the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”; the words “to” and “until”
each mean “to but excluding,” and the word “through” means “to and including.”
(iii)
The term “property” includes any kind of property or asset, real, personal or
mixed, tangible or intangible.
(d)
Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
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(e)
This Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms. Unless otherwise expressly provided, any
reference to any action of the Administrative Agent by way of consent, approval
or waiver shall be deemed modified by the phrase “in its sole discretion” or
“their sole discretion,” as the case may be.
(f)
This Agreement and the other Loan Documents are the result of negotiations among
and have been reviewed by counsel to the Administrative Agent, the Lenders, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Administrative Agent or
the Lenders merely because of the Administrative Agent’s and the Lender’s
involvement in their preparation.
SECTION 1.4.
Accounting and Financial Determinations. Unless otherwise specified, all
accounting terms used herein or in any other Loan Document shall be interpreted,
all accounting determinations and computations hereunder or thereunder
(including under Section 8.2.4) shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be prepared in accordance
with, those generally accepted accounting principles (“GAAP”) applied in the
preparation of the financial statements referred to in Section 7.7.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1.
Commitments. On the terms and subject to the conditions of this Agreement
(including Article VI), each Lender severally agrees to make loans (relative to
each Lender, its “Loans”) to the Borrower as described in this Section 2.1.
SECTION 2.1.1
Commitment.
(a)
On the terms and subject to the conditions of this Agreement (including Article
VI), from time to time on the Effective Date and on the last Business Day of
each month during the period beginning after the Effective Date and ending
on any Commitment Termination Date relating to all Commitments, each Lender will
make Loans to the Borrower equal to such Lender’s Percentage of the aggregate
principal amount of the Loan requested by the Borrower to be made on such day in
the applicable Borrowing Request therefor. Once repaid or prepaid, such Loans
may not be reborrowed.
(b)
[Reserved.]
SECTION 2.1.2
Lenders Not Required To Make Loans Under Certain Circumstances. No Lender
shall, as applicable, be required to make any Loan if, after giving effect
thereto
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(i)
the aggregate outstanding principal amount of all Loans of all Lenders would
exceed the Commitment Amount, or
(ii)
the aggregate outstanding principal amount of all Loans of such Lender would
exceed such Lender’s Percentage of the Commitment Amount; or
(iii)
a Collateral Value Deficiency would exist; or
(iv)
a Default has occurred and is continuing.
SECTION 2.2.
Reduction of Commitment Amounts. The Commitment Amount is subject to reduction
from time to time pursuant to this Section 2.2.
SECTION 2.2.1
Optional. The Borrower may, from time to time on any Business Day, voluntarily
reduce the Commitment Amount; provided, however, that all such reductions shall
require at least three (3) Business Days’ prior notice to the Administrative
Agent and be permanent, and any partial reduction of the Commitment Amount shall
be in a minimum amount of $100,000 and in an integral multiple of $50,000.
SECTION 2.2.2
Mandatory.
(a)
[Reserved.]
(b)
On any Commitment Termination Date, the Commitment Amount shall be reduced to
zero.
SECTION 2.3.
Borrowing Procedure. By delivering a Borrowing Request to the Administrative
Agent on or before 10:00 a.m. (Houston, Texas time) on or before the
fifth-to-last Business Day of each month, the Borrower may from time to time
irrevocably request, on not less than five (5) Business Days’ notice, that a
Borrowing be made in a minimum amount of $100,000 and an integral multiple of
$25,000, or in the unused amount of the applicable Commitment Amount; provided,
however, that the Borrower may not request a Borrowing to be made more than once
during any one calendar month. On the terms and subject to the conditions of
this Agreement, each Borrowing shall be made on the Business Day specified in
such Borrowing Request on or before 1:00 p.m. (Houston, Texas time). On such
Business Day each Lender shall deposit with the Administrative Agent same day
funds in an amount equal to such Lender’s Percentage of the requested Borrowing.
Such deposit will be made to an account located in the State of New York which
the Administrative Agent shall specify from time to time by notice to the
Lenders. To the extent funds are received from the Lenders, the Administrative
Agent shall make such funds available to the Borrower by wire transfer to the
accounts the Borrower shall have specified in its Borrowing Request. No
Lender’s obligation to make any Loan shall be affected by any other Lender’s
failure to make any Loan; provided that if any Lender (other than a Lender that
is an Affiliate of the Administrative Agent) fails to make a Loan, following a
request from the Borrower,
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the Administrative Agent agrees to use commercially reasonable efforts to assist
the Borrower in locating an Assignee Lender to replace such Lender.
SECTION 2.4.
Continuation Elections. Upon the expiration of the then current Interest
Period, each LIBO Rate Loan shall automatically be continued as a LIBO Rate Loan
with an Interest Period commencing on the expiration of such immediately
preceding Interest Period; provided, however, that each such continuation shall
be pro rated among the applicable outstanding Loans of all Lenders.
SECTION 2.5.
Funding. Each Lender may, if it so elects, fulfill its obligation to make or
continue LIBO Rate Loans hereunder by causing one of its foreign branches or
Affiliates (or an international banking facility created by such Lender) to make
or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan
shall nonetheless be deemed to have been made and to be held by such Lender, and
the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless
be to such Lender for the account of such foreign branch, Affiliate or
international banking facility.
SECTION 2.6.
Loan Accounts and Notes.
(a)
The Loans made by each Lender shall be evidenced by one or more loan accounts or
records maintained by such Lender in the ordinary course of business. The loan
accounts or records maintained by such Lender shall, in the absence of manifest
error, be final and conclusive and binding as to the amount of the Loans made by
such Lender to the Borrower and the interest and payments thereon. Any failure
so to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Borrower hereunder to pay any amount owing with
respect to the Loans.
(b)
Each Lender’s Loans shall also be evidenced by a Note or Notes payable to the
order of such Lender in an aggregate principal amount not to exceed such
Lender’s Percentage of the Commitment. The Borrower hereby irrevocably
authorizes each Lender to make (or cause to be made) appropriate notations on
the grid attached to such Lender’s Notes (or on any continuation of such grid)
or in other books and records maintained by such Lender, which notations, if
made, shall evidence, inter alia, the date of, the outstanding principal of, and
the interest rate and interest period applicable to the Loans evidenced thereby
(the Borrower may from time to time reasonably request a copy of such grid).
Such notations shall, in the absence of manifest error, be final and conclusive
and binding as to the matters described therein; provided, however, that the
failure of any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor.
SECTION 2.7.
Collateral Value Redetermination.
(a)
The Administrative Agent shall, based upon a review of the most recent
Engineering Report received by Agent, and based upon its own internal
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engineering review and any other supplemental information received by the
Administrative Agent that the Administrative Agent deems appropriate, propose to
all of the Lenders a redetermined Collateral Value on or around January 31,
April 30, July 31 and November 30 of each calendar year. The initial
redetermination shall commence on January 31, 2007 based upon a review of the
Engineering Report delivered pursuant to Section 8.1.1(j) and such other
supplemental information received by the Administrative Agent after the
Effective Date that the Administrative Agent deems appropriate. The Required
Lenders shall, within ten (10) Business Days after receipt from the
Administrative Agent of a proposal for a redetermined Collateral Value, approve
a redetermined Collateral Value at the amount proposed by the Administrative
Agent, subject to the provisions of Section 2.7(d). Upon approval of a
redetermined Collateral Value, the Administrative Agent shall notify the
Borrower in writing of the Collateral Value determined on the basis of such
Engineering Report, where provided, or its own internal engineering review.
Each such redetermination of the Collateral Value is herein called a “Scheduled
Redetermination.” Each Scheduled Redetermination of the Collateral Value shall
be effective when the Borrower is notified of the amount of the redetermined
Collateral Value by the Administrative Agent.
(b)
In addition to the Collateral Value Redeterminations described in the foregoing
Section 2.7(a), the Borrower or Administrative Agent may request, and
Administrative Agent will consider, no more than one (1) additional
redetermination requested by the Administrative Agent and one (1) additional
redetermination requested by the Borrower of the Collateral Value at any time
during each calendar year following the Effective Date. Each such requested
redetermination of the Collateral Value is herein called a “Requested
Redetermination.” Within thirty (30) days after the later of (x) receipt of any
such request for a Requested Redetermination and (y) receipt of any updated
Engineering Report requested by the Administrative Agent, the Administrative
Agent shall, based upon a review of the most recent Engineering Report or, if
the Administrative Agent shall so require, an updated Engineering Report, and
any supplemental information it has received and deems appropriate, propose to
all of the Lenders a redetermined Collateral Value. The Required Lenders shall,
within ten (10) Business Days after receipt from the Administrative Agent of a
proposal for a redetermined Collateral Value, approve a redetermined Collateral
Value at the amount proposed by the Administrative Agent, subject to the
provisions of Section 2.7(d). Upon such approval of a redetermined Collateral
Value, the Administrative Agent shall notify the Borrower in writing of the
Collateral Value determined by the Administrative Agent. Each Requested
Redetermination shall be effective when the Borrower is notified of the amount
of the redetermined Collateral Value by the Administrative Agent.
(c)
Each determination or redetermination of the Collateral Value pursuant to this
Section 2.7 and Section 3.1.2 shall be made after an engineering and economic
review of the Proven Reserves attributable to the Hydrocarbon Interests owned
directly by the Borrower or its Subsidiaries has been conducted
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by the Administrative Agent and the Required Lenders and shall be made in the
exercise of their sole discretion. In each case where the Administrative Agent
shall propose a redetermined Collateral Value, any Lender who objects to the
proposed Collateral Value shall, within the ten (10) Business Days period
described in subsections (a) or (b) above, as applicable, notify the
Administrative Agent and each other Lender of the amount of the redetermined
Collateral Value that it believes appropriate, and such objecting Lender shall
also be deemed to have approved any Collateral Value which is less than the
Collateral Value it has so indicated in writing it believes is appropriate. Any
Lender that does not object to the redetermined Collateral Value proposed by the
Administrative Agent within the prescribed time period shall be deemed to have
approved (i) the redetermined Collateral Value proposed by the Administrative
Agent and (ii) any lesser Collateral Value proposed by any other Lender.
(d)
The Collateral Value is also subject to adjustment as provided for in
Section 3.1.2.
SECTION 2.8.
Purposes. The Borrower shall apply the proceeds of each Loan only in the
following manner:
(a)
to finance certain trade payables of the Borrower and its Qualified
Subsidiaries;
(b)
to repay Indebtedness of the Borrower to Cornell Capital existing as of the date
hereof
(c)
to finance the Financed Acquisition;
(d)
to finance Approved Development Activities pursuant to the Approved Capital and
Operating Budget with respect to the Oil and Gas Properties owned by the
Borrower or any of the Borrower’s Qualified Subsidiaries including, without
limitation, the Initial Subject Properties;
(e)
to enter into Hedge Agreements as may be required from time to time by the
Administrative Agent; and
(f)
for working capital purposes in accordance with the Approved Capital and
Operating Budget.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1.
Repayments and Prepayments and Certain Collateral Value Matters. The Borrower
shall repay the unpaid principal amount of the Loans as set forth in this
Section 3.1.
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SECTION 3.1.1
Repayments and Prepayments. The Borrower shall repay in full the unpaid
principal amount of each Loan, and each Loan shall mature and be due and
payable, upon the Stated Maturity Date applicable thereto. Prior thereto, the
Borrower
(a)
may, from time to time on any Business Day, make a voluntary prepayment, in
whole or in part, of the outstanding principal amount of any Loans; provided,
however, that
(i)
any such prepayment shall be made pro rata among Loans in accordance with the
provisions of Section 5.7;
(ii)
no such prepayment of any LIBO Rate Loan may be made on any day other than the
last day of the Interest Period for such Loan;
(iii)
all such voluntary prepayments shall require at least three (3) but no more than
five (5) Business Days’ prior written notice to the Administrative Agent (which
notice is irrevocable) stating the date and amount of such prepayment; and
(iv)
all such voluntary partial prepayments shall be in an aggregate minimum amount
of $100,000 and an integral multiple of $50,000;
(b)
shall, on each date when any reduction in any Commitment Amount shall become
effective, including pursuant to Section 2.2, make a mandatory prepayment (which
shall be applied (or held for application, as the case may be) by the Lenders to
the payment of the aggregate unpaid principal amount of those Loans then
outstanding) equal to the excess, if any, of the aggregate outstanding principal
amount of all Loans over such Commitment Amount as so reduced;
(c)
shall make prepayments as specified in Section 3.1.2;
(d)
shall make a prepayment on each Monthly Payment Date to be applied toward
repayment of the outstanding Loans in an amount equal to: (x) all revenues
received by the Borrower during such month in respect of the ownership or
operation of the Mortgaged Properties, including revenue from the sale of
Hydrocarbons, minus (y) all expenses that have been approved in the Approved
Capital and Operating Budget and that have been incurred and paid by the
Borrower during such month;
(e)
[Reserved.];
(f)
[Reserved.];
(g)
shall, on the Stated Maturity Date, pay an amount necessary to repay in full the
entire, outstanding principal amount of the Loans; and
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(h)
shall, immediately upon any acceleration of the Loans pursuant to Section 9.2 or
Section 9.3, repay all Loans, unless, pursuant to Section 9.3, only a portion of
all Loans is so accelerated.
Each payment or prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 5.4, and shall
be applicable, to the extent of such prepayment, in the inverse order of
maturity. No voluntary prepayment of principal of any Loans or any prepayment
pursuant to the preceding clause (c) shall cause a reduction in any Commitment
Amount.
SECTION 3.1.2
Collateral Value Deficiencies and Asset Sales.
(a)
Upon the occurrence of a Collateral Value Deficiency, the Administrative Agent
shall notify the Borrower of such Collateral Value Deficiency. Within ten (10)
days from and after the Collateral Value Deficiency Notification Date, the
Borrower shall notify the Administrative Agent that it shall take one of the
following actions within sixty (60) days after the occurrence of such Collateral
Value Deficiency Notification Date:
(i)
The Borrower shall, within sixty (60) days of the occurrence of such Collateral
Value Deficiency Notification Date, execute and deliver to the Administrative
Agent supplemental or additional Security Documents, in form and substance
reasonably satisfactory to the Administrative Agent and its counsel, securing
payment of the Notes and the other Obligations and covering other Properties of
the Borrower or its Subsidiaries, including additional Oil and Gas Properties
directly owned by the Borrower or one or more of the Borrower’s Subsidiaries
which are not then covered by any Loan Document and which are of a type and
nature satisfactory to the Administrative Agent, and having a value (as
determined by the Required Lenders, and in addition to other Oil and Gas
Properties already subject to a mortgage and/or other collateral of a type in an
amount, and in all other respects satisfactory to the Administrative Agent and
the Required Lenders), sufficient to eliminate the Collateral Value Deficiency,
all as more particularly described in Section 8.1.7(a) and (b); or
(ii)
the Borrower shall indefeasibly make a cash payment with respect to the
Obligations (which shall be applied (or held for application, as the case may
be) by the Administrative Agent on behalf of the Lenders to the payment of the
aggregate unpaid principal amount of those Loans then outstanding) in an amount
sufficient to eliminate such Collateral Value Deficiency within sixty (60) days
after the occurrence of such Collateral Value Deficiency Notification Date (and
the Borrower shall indefeasibly make such cash payment within such sixty (60)
day period).
If the Borrower shall elect to execute and deliver (or cause one or more of the
Borrower’s Subsidiaries to execute and deliver) supplemental or additional
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Security Documents to the Administrative Agent pursuant to clause (i), it shall
provide the Administrative Agent and each Lender with descriptions of the
additional assets to be collaterally assigned (together with current valuations,
Engineering Reports, Phase 1 environmental reports, Security Documents described
in clause (i) and title evidence applicable thereto and other documents
including opinions of counsel, each of which shall be in form and substance
satisfactory to the Administrative Agent) within the sixty (60) day period
commencing with the occurrence of such Collateral Value Deficiency Notification
Date as described in clause (i). Such supplemental or additional Security
Documents shall be subject to the terms of Section 8.1.7. If the Borrower fails
to (i) elect to take either of the actions described in clauses (i) or (ii)
above within such ten (10) day period, (ii) deliver such supplemental or
additional Security Documents within such sixty (60) days or (iii) to
indefeasibly make such cash payment within such sixty (60) days, then without
any necessity for notice to the Borrower or any other person, the Borrower shall
become obligated immediately to indefeasibly pay in cash, Obligations in an
aggregate principal amount equal to the Collateral Value Deficiency.
(b)
(b)
If the Borrower or any Subsidiary sells, transfers or otherwise disposes of any
of the Collateral Value Properties that have been given a value in excess of
$100,000 in the most recent determination of the Collateral Value (considering,
in the aggregate, all such sales, transfers or other dispositions since the most
recent determination of Collateral Value), then the Collateral Value shall be
immediately reduced, until the effective date of the next Collateral Value
Redetermination, by an amount equal to the Net Reduction in Value, or by any
lesser amount as may be reasonably determined by the Administrative Agent and
the Required Lenders.
(ii)
If such reduction described in the foregoing clause (i) shall result in a
Collateral Value Deficiency, then in lieu of the provisions of clause (a) of
this Section 3.1.2, the Borrower shall immediately make an indefeasible cash
payment with respect to the Obligations (which shall be applied (or held for
application, as the case may be) by each Lender to the payment of the aggregate
unpaid principal amount of those Loans then outstanding) in the following
amount: if the Net Sales Proceeds in respect of such sale are equal to or
greater than the Net Reduction in Value, then in an amount equal to the lesser
of (I) the amount of the Collateral Value Deficiency (after giving effect to the
applicable sale, transfer or other disposition) or (II) one hundred percent
(100%) of the Net Sales Proceeds and provided, that if the Net Sales Proceeds in
respect of such proposed sale are less than the Net Reduction in Value, then the
Borrower shall pay an amount equal to one hundred percent (100%) of the Net
Sales Proceeds plus an additional amount equal to the amount of the Net
Reduction in Value.
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In addition to and cumulative of the foregoing, if a Collateral Value Deficiency
exists prior to such sale, transfer or other disposition of assets, then in lieu
of the provisions of clause (a) of this Section 3.1.2, the Borrower shall
immediately make an indefeasible cash payment with respect to the Obligations
(which shall be applied (or held for application, as the case may be) by each
Lender to the payment of the aggregate unpaid principal amount of those Loans
then outstanding) in an amount equal to the lesser of (i) the amount of the
Collateral Value Deficiency (after giving effect to the applicable sale,
transfer or other disposition), as applicable, or (ii) one hundred percent
(100%) of the Net Sales Proceeds.
(c)
In addition, if the Borrower or any of its Subsidiaries raises capital through
the issuance of any type of common, preferred or other equity or issues any
subordinated debt or senior unsecured debt, the net proceeds of such issuance
will first be applied to cure any Collateral Value Deficiency, if any, existing
as of the date of the receipt of such net proceeds by applying such net proceeds
to the payment of the unpaid principal amount of the Loans in an amount
sufficient to eliminate the Collateral Value Deficiency, and the remaining
balance of such net proceeds, if any, shall be retained by the Borrower.
SECTION 3.2.
Interest Provisions. Interest on the outstanding principal amount of Loans
shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1
Rate. Pursuant to an appropriately delivered Borrowing Request, the Borrower
may elect that Loans comprising a Borrowing accrue interest at a rate per annum
on that portion maintained as a LIBO Rate Loan, during each Interest Period
applicable thereto, equal to the lesser of (i) the sum of the LIBO Rate for such
Interest Period plus the Applicable Margin and (ii) the Highest Lawful Rate.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
All Reference Rate Loans made pursuant to Section 5.1 shall accrue interest at
a rate per annum equal to the lesser of (i) the Reference Rate plus a margin of
four percent (4%), or a margin of seven percent (7%) if Section 3.2.2 would be
applicable if such Loan were a LIBO Rate Loan, and (ii) the Highest Lawful Rate.
SECTION 3.2.2
Post-Maturity Rates. After (w) the date any principal amount of any Loan shall
have become due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), until such payment is made in full, (x) the date any
other monetary Obligation of the Borrower shall have become due and payable,
until such payment is made in full, (y) the date that is sixty (60) days after a
Collateral Value Deficiency Notification Date, if the applicable Collateral
Value Deficiency has not been cured, until such cure is effected, or (z) the
date any other Event of Default shall have occurred (and so long as such Event
of Default shall be continuing), and upon written notice to the Borrower, the
Borrower shall pay, but only to the extent permitted by Applicable Law, interest
(after as well as before judgment) on all Obligations at a rate per annum equal
to with respect to LIBO Rate Loans, for the period
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from the date such Loan becomes due and payable to the end of the then
applicable Interest Period, the sum of the LIBO Rate for such Interest Period
plus the Applicable Margin plus a margin of three percent (3%).
SECTION 3.2.3
Payment Dates. Interest accrued on each Loan shall be payable, without
duplication:
(a)
on the Stated Maturity Date;
(b)
on the date of any optional or required payment or prepayment, in whole or in
part, of principal outstanding on such Loan and on that portion of such Loan so
paid or prepaid;
(c)
with respect to LIBO Rate Loans, on the last day of each applicable Interest
Period; and
(d)
on that portion of any Loans which is accelerated pursuant to Section 9.2 or
Section 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
SECTION 3.2.4
Maximum Interest. It is the intention of the parties hereto to conform strictly
to applicable usury laws and, anything herein to the contrary notwithstanding,
the Obligations of the Borrower to the Lenders, the Administrative Agent and the
Designee under this Agreement and the other Loan Documents shall be subject to
the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary to provisions of Applicable Law limiting
rates of interest which may be charged or collected by the Lenders.
Accordingly, if the transactions contemplated hereby would be usurious under
Applicable Law with respect to the Lenders then, in that event, notwithstanding
anything to the contrary in this Agreement, it is agreed as follows:
(a)
the provisions of this Section 3.2.4 shall govern and control;
(b)
the aggregate of all consideration which constitutes interest under Applicable
Law that is contracted for, charged or received under this Agreement, or under
any of the other aforesaid agreements or otherwise in connection with this
Agreement by the Lenders shall under no circumstances exceed the maximum amount
of interest allowed by Applicable Law (such maximum lawful interest rate, if
any, with respect to the Lenders herein called the “Highest Lawful Rate”), and
any excess shall be credited to the Borrower by the Lenders (or, if such
consideration shall have been paid in full, such excess refunded to the
Borrower);
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(c)
all sums paid, or agreed to be paid, to the Lenders for the use, forbearance and
detention of the indebtedness of the Borrower to the Lenders hereunder shall, to
the extent permitted by Applicable Law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment in full so
that the actual rate of interest is uniform throughout the full term thereof;
and
(d)
if at any time the interest provided pursuant to Sections 3.2.1 and 3.2.2
together with any other fees payable pursuant to this Agreement and deemed
interest under Applicable Law, exceeds that amount which would have accrued at
the Highest Lawful Rate, the amount of interest and any such fees to accrue to
the Lenders pursuant to this Agreement shall be limited, notwithstanding
anything to the contrary in this Agreement, to that amount which would have
accrued at the Highest Lawful Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue to such Lenders pursuant to
this Agreement below the Highest Lawful Rate until the total amount of interest
accrued pursuant to this Agreement and such fees deemed to be interest equals
the amount of interest which would have accrued to such Lenders if a varying
rate per annum equal to the interest provided pursuant to Sections 3.2.1 and
3.2.2 had at all times been in effect, plus the amount of fees which would have
been received but for the effect of this Section 3.2.4.
SECTION 3.3.
Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All
such fees shall be non-refundable.
SECTION 3.3.1
Confidential Payment Letter. The Borrower agrees to pay to the Administrative
Agent, for itself and for the account of the Lenders, the fees and other
payments as provided in the Confidential Payment Letter.
SECTION 3.3.2
Unused Fee. The Borrower agrees to pay to the Administrative Agent, for the pro
rata account of the Lenders, for the period (including any portion thereof when
any of the Commitments are suspended by reason of the Borrower’s inability to
satisfy any condition of Article VI) commencing on the Effective Date, and
continuing through the final Commitment Termination Date, an unused fee at the
rate of one-half of one percent (0.5%) per annum on the average daily Commitment
Availability. Such fees shall be based on a year comprised of three-hundred and
sixty (360) days and shall be payable by the Borrower in arrears on each
Quarterly Payment Date, commencing with the first such day following the
Effective Date, and on the Commitment Termination Date.
SECTION 3.4.
Proceeds Account. The Security Documents contain an assignment to the
Administrative Agent by the Borrower and its Subsidiaries of all production of
Hydrocarbons and all proceeds attributable thereto properly allocable to the
Mortgaged Properties.
SECTION 3.4.1
Revenues Into Account. All revenue from the sale of Hydrocarbons from the
Mortgaged Properties shall be paid into an account maintained
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with a bank designated by the Administrative Agent and subject to the Lockbox
Agreement (the “Proceeds Account”). The Borrower hereby grants to the
Administrative Agent, subject to the prior assignment in favor of the
Administrative Agent of such production and its proceeds, a security interest in
its interest in the Proceeds Account and all proceeds thereof.
SECTION 3.4.2
Cash Sweep. From time to time each month during which no Default has occurred
and is continuing, upon the written request of the Borrower, the Administrative
Agent will transfer from the Proceeds Account to another account designated by
the Borrower, an amount equal to the sum of all expenses that have been approved
in the Approved Capital and Operating Budget and that have been, or will be,
incurred or paid by the Borrower during such month, and then on each Monthly
Payment Date, the Administrative Agent shall apply all remaining amounts in the
Proceeds Account first, as a payment of interest and fees then due and payable,
and second, as a mandatory prepayment of Loans as contemplated by Section
3.1.1(d).
SECTION 3.4.3
[Reserved.]
SECTION 3.5.
Overriding Royalty Interest; Assignment Is Not Collateral Security.
(a)
As more fully set forth in the Agreement Concerning Overriding Royalty Interests
(which shall be in a form satisfactory to the Administrative Agent), and subject
to the terms and conditions thereof, in addition to interest paid on the Loans,
the Borrower and its Subsidiaries, as applicable, shall assign and convey to
each Initial Lender or the designee of each Initial Lender (each, a “Designee”),
as additional consideration payable to such Lenders to be retained in perpetuity
and not as additional collateral security, an overriding royalty interest in the
Borrower’s and each of Borrower’s Subsidiaries’ Hydrocarbon Interests comprising
all Oil and Gas Properties of the Borrower and its Subsidiaries that are
identified as Collateral Value Properties in the “Summary of Principal Terms &
Conditions” (as such term is defined in the Confidential Payment Letter)
attached to the Confidential Payment Letter. Each such overriding royalty
interest shall be conveyed by an Assignment. In addition to the representations
and warranties given in such Assignment, the Borrower hereby represents and
warrants that the overriding royalty interest conveyed by such Assignment is
free and clear of any mortgages, deeds of trust, voluntary or contractual Liens,
pledges, security interests, charges, conditional sales or other title retention
documents, or other encumbrances or burdens other than those in favor of the
Lenders, and as expressly set forth in such Assignment.
(b)
The Overriding Royalty Interests conveyed to NGPCRC as an Initial Lender are
subject to the terms and conditions set forth in such Agreement Concerning
Overriding Royalty Interests of even date herewith among the Borrower, the
Initial Lender and the Designee.
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SECTION 3.6.
Warrants; Warrants are Not Collateral Security. In addition to interest paid on
the Loans, the Borrower shall issue to the Initial Lender or the Designee, as
additional consideration payable to the Lenders to be retained in perpetuity and
not as additional collateral security, the rights and interests granted in the
Warrant Documents.
ARTICLE IV
[RESERVED]
ARTICLE V
CERTAIN INTEREST RATE AND OTHER PROVISIONS
SECTION 5.1.
LIBO Rate Lending Unlawful. If any Lender shall determine (which determination
shall, upon notice thereof to the Borrower, the Administrative Agent and each
other Lender, be conclusive and binding on the Borrower) that the introduction
of or any change in or in the interpretation by any Government Agency of any law
makes it unlawful, or any central bank or other Government Agency asserts that
it is unlawful, for such Lender to make, continue or maintain any Loan as a LIBO
Rate Loan, the obligations of all Lenders to make, continue or maintain any such
LIBO Rate Loans shall, upon such determination, forthwith be suspended until
such Lender shall notify the Borrower, the Administrative Agent and each other
Lender, that the circumstances causing such suspension no longer exist, and all
LIBO Rate Loans shall automatically convert into Reference Rate Loans at the end
of the then current Interest Periods with respect thereto or sooner, if required
by such law or assertion; provided, that if circumstances subsequently change so
a Lender shall not continue to be so affected, the Administrative Agent shall,
by notice to the Borrower, reinstate its obligations to make, maintain or
continue Loans as LIBO Rate Loans.
SECTION 5.2.
Inability to Determine Interest Rate. If the Administrative Agent or any Lender
shall have determined that adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBO Rate Loans, then Administrative Agent
will promptly with give telecopy, electronic or telephonic notice of such
determination to the Borrower and each Lender at least one Business Day prior to
the commencement of the next succeeding Interest Period for such Loan. If such
notice is given, each Lender may provide the Administrative Agent with a
proposed interest rate for a maturity comparable to such Interest Period and the
interest rate that shall be applicable to such Loan for such Interest Period
shall be the arithmetic mean of all such interest rates proposed by the Lenders
for such Interest Period that have been provided to the Administrative Agent
within twenty-four hours of the issuance of such notice, as calculated by the
Administrative Agent.
SECTION 5.3.
Increased Loan Costs, etc. If by reason of
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(a)
any change in Applicable Law after the Effective Date or any change after the
Effective Date in the interpretation or application by any judicial or
regulatory authority of any Applicable Law, or
(b)
compliance by any Lender with any direction, request or requirement, whether or
not having the force of law, of any Government Agency, including Regulation D of
the F.R.S. Board:
(i)
any Lender shall be subject to any tax (other than taxes on net income and
franchises), levy, charge or withholding of any nature or to any variation
thereof or to any penalty with respect to any payment due under any LIBO Rate
Loan or other amounts due under this Agreement, whether directly or by such
being imposed on or suffered by such Lender;
(ii)
any reserve, deposit or similar requirement is or shall be applicable,
increased, imposed or modified in respect of extensions of credit or other
assets of, or any deposits with or other liabilities of, any Lender or Loans
made by such Lender or against any other funds, obligations or other property
owned or held by, such Lender and such Lender actually incurs such additional
costs; or
(iii)
there shall be imposed on any Lender any other condition affecting this
Agreement (or any of such extensions of credit or liabilities),
and the result of the foregoing is directly or indirectly to increase the cost
to such Lender of making, continuing or maintaining (or of its obligation to
make, continue or maintain) any Loans as LIBO Rate Loans, or to reduce any
amount receivable in respect thereof by such Lender, then and in any such case
such Lender may, at any time after the additional cost is incurred or the amount
received is reduced, notify the Borrower and the Administrative Agent thereof,
and the Borrower shall pay on demand such amounts as such Lender may specify to
be necessary to compensate such Lender for such additional cost or reduced
receipt. The determination by such Lender, as the case may be, of any amount
due pursuant to this Section, as set forth in a statement setting forth the
calculation thereof in reasonable detail, shall in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto.
SECTION 5.4.
Funding Losses. In the event any Lender shall incur any loss or expense
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as a LIBO
Rate Loan) as a result of
(a)
any repayment or prepayment of the principal amount of any LIBO Rate Loans on a
date other than the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1 or otherwise;
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(b)
any Loans not being made as LIBO Rate Loans in accordance with the Borrowing
Request therefor by reason of any act or omission by the Borrower or failure of
a condition precedent to be satisfied; or
(c)
any Loans not being continued as LIBO Rate Loans by reason of any act or
omission by the Borrower;
then, upon the written notice of such Lender to the Borrower and the
Administrative Agent, the Borrower shall, within ten (10) days of its receipt
thereof, pay to such Lender such amount as will (in the reasonable determination
of such Lender) reimburse such Lender for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall in the
absence of manifest error, be final and conclusive and binding on all of the
parties hereto.
SECTION 5.5.
Increased Capital Costs. After the Effective Date, if any change in, or
the introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law by any Government Agency, affects or would
affect the amount of capital required or expected to be maintained by any Lender
or any Person controlling any Lender, and such Lender determines (in its sole
and absolute discretion) that the rate of return on its or such controlling
Person’s capital as a consequence of its Commitments hereunder or the Loans made
by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower and the Administrative Agent, the Borrower shall
immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall in the absence of
manifest error, be final and conclusive and binding on all of the parties
hereto. In determining such amount, such Lender may use any method of averaging
and attribution that it (in its reasonable discretion) shall deem applicable.
SECTION 5.6.
Taxes.
(a)
All payments by the Borrower of principal of, and interest on, the Loans and all
other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, levies, assessments, imposts, deductions, fees, duties,
withholdings or other charges and all liabilities with respect thereto of any
nature whatsoever imposed by any taxing authority, but excluding franchise taxes
and taxes imposed on or measured by any Lender’s or Designee’s net income or
receipts (such non-excluded items being called “Taxes”). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any Applicable Law then (unless
the Borrower already knows of such withholding or deduction, upon notice thereof
from the Lender) the Borrower will
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(i)
pay directly to the relevant authority the full amount required to be so
withheld or deducted;
(ii)
promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment
to such authority; and
(iii)
pay to the Administrative Agent for the account of the relevant Lenders such
additional amount or amounts as is necessary to ensure that the net amount
actually received by each Lender will equal the full amount such Lender would
have received and retained had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
any Lender hereunder, the Administrative Agent or such Lender may pay such Taxes
and the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted.
(b)
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent for the account of the
relevant Lenders the required receipts or other required documentary evidence,
the Borrower shall indemnify the Lenders for any incremental Taxes or other
liability (including interest, expenses or penalties) that may become payable by
any Lender as a result of any such failure, whether or not such Taxes or
liabilities were correctly or legally asserted. Payment under this indemnity
shall be made within thirty (30) days after the date the Administrative Agent
makes written demand therefor. For purposes of this Section 5.6, a distribution
hereunder by the Administrative Agent or any Lender to or for the account of any
Lender shall be deemed a payment by the Borrower.
(c)
Upon the request of the Borrower, each Assignee Lender that is organized under
the laws of a jurisdiction other than the United States shall, prior to the due
date of any payment in respect of the Borrowings, execute and deliver to the
Borrower, on or about January 15 of each calendar year, one or more (as the
Borrower may reasonably request) United States Internal Revenue Service
Forms W-8 BEN or Forms W-8 ECI or such other forms or documents (or successor
forms or documents), appropriately completed, as may be applicable to establish
the extent, if any, to which a payment to such Assignee Lender is exempt from
withholding or deduction of Taxes.
(d)
To the extent taxes are imposed against the overriding royalty interest conveyed
to the Designee, or the production attributable thereto, the terms and
provisions of the Assignment shall govern the payment of the same.
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SECTION 5.7.
Payments, Computations, etc. Unless otherwise expressly provided in this
Agreement or the Confidential Payment Letter, all payments by the Borrower
pursuant to this Agreement, the Notes or any other Loan Document shall be made
by the Borrower to the Administrative Agent for the pro rata account of the
Lenders entitled to receive such payment. All such payments shall be made
without setoff, deduction or counterclaim, not later than 11:00 a.m. (Houston,
Texas time) on the date due, in U.S. Dollars in same day or immediately
available funds, to such account, located in the State of New York, with the
Administrative Agent as the Administrative Agent shall specify from time to time
by notice to the Borrower. Funds received after that time shall be deemed to
have been received by the Administrative Agent on the next succeeding Business
Day and any applicable interest or fee shall continue to accrue. The
Administrative Agent shall promptly remit in same day funds to each Lender its
share, if any, of such payments received by the Administrative Agent for the
account of such Lender. All interest and fees shall be computed on the basis of
the actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest and fees is payable over a
year comprised of three hundred and sixty (360) days. Whenever any payment to
be made shall otherwise be due on a day which is not a Business Day, such
payment shall (except as otherwise required by clause (c) of the definition of
the term “Interest Period” with respect to LIBO Rate Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 5.8.
Sharing of Payments. If any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of setoff or otherwise) on
account of any Loan (other than pursuant to the terms of Sections 5.3, 5.4 and
5.5) in excess of its pro rata share of payments then or therewith obtained by
all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender, the purchase
price to the ratable extent of such recovery together with an amount equal to
such selling Lender’s ratable share (according to the proportion of
(a)
the amount of such selling Lender’s required repayment to the purchasing Lender
to
(b)
the total amount so recovered from the purchasing Lender)
of any interest or other amount paid by the purchasing Lender in respect of the
total amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section may, to the fullest
extent permitted by law, exercise all its rights of payment (including pursuant
to Section 5.9) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.
If under any applicable bankruptcy,
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insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section to share
in the benefits of any recovery on such secured claim.
SECTION 5.9.
Setoff. The Administrative Agent and each Lender shall, upon the occurrence of
any Default described in clauses (a) through (d) of Section 9.1.9 or, with the
consent of the Administrative Agent, upon the occurrence of any other Default,
have the right to appropriate and apply to the payment of the Obligations owing
to it (whether or not then due), and (as security for such Obligations) the
Borrower hereby grants to the Administrative Agent and each Lender a continuing
security interest in, any and all balances, credits, deposits, accounts or
moneys of the Borrower then or thereafter maintained with or otherwise held by
the Administrative Agent and each Lender, including without limitation, the
Proceeds Account. The Administrative Agent and each Lender agree promptly to
notify the Borrower after any such setoff and application made by the
Administrative Agent or such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such setoff and application. The
rights of the Administrative Agent and each Lender under this Section 5.9 are in
addition to other rights and remedies (including other rights of setoff under
Applicable Law or otherwise) which the Administrative Agent or such Lender may
have.
SECTION 5.10.
Use of Proceeds. The Borrower shall apply the proceeds of each Borrowing in
accordance with Section 2.8; without limiting the foregoing, no proceeds of any
Loan will be used to acquire any equity security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin
stock”, as defined in F.R.S. Board Regulation T, U, or X.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1.
Initial Credit Extension. The obligation of each Lender to make the initial
Credit Extension shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Section 6.1.
SECTION 6.1.1
Resolutions, etc. The Administrative Agent shall have received from the
Borrower and each of Borrower’s Subsidiaries a certificate, dated the date of
the initial Credit Extension, of the respective Secretary or Assistant Secretary
of each of the Borrower and the Borrower’s Subsidiaries, respectively, as to
(a)
resolutions of the Board of Directors, or its equivalent, of the Borrower and
the shareholders of each of the Borrower’s Subsidiaries then in full force and
effect authorizing the execution, delivery and performance of this Agreement,
the Notes and each other Loan Document to be executed by it;
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(b)
the incumbency and signatures of those of its officers or Persons authorized to
act with respect to this Agreement, the Notes and each other Loan Document
executed by it;
(c)
the Organic Documents of the Borrower and each of the Borrower’s Subsidiaries;
and
(d)
evidence that each of the Borrower and each of the Borrower’s Subsidiaries (i)
is duly organized or formed or registered and (ii) is validly existing and in
good standing and qualified to transact business under the laws of the
jurisdiction of its respective organization and in each of the jurisdictions
where the Mortgaged Properties, Collateral Value Properties and Development
Properties are located and in each other jurisdiction where the failure to be so
qualified or in good standing would have a Material Adverse Effect,
upon which certificates the Administrative Agent and the Lenders may
conclusively rely until the Administrative Agent shall have received a further
certificate of the Secretary of the Borrower canceling or amending such prior
certificate.
SECTION 6.1.2
Delivery of Notes. The Administrative Agent shall have received, for the
account of each Lender, its Notes duly executed and delivered by the Borrower.
SECTION 6.1.3
Guaranties. The Administrative Agent shall have received executed counterparts
of the Guaranties, dated as of the date hereof, duly executed by each of the
Borrower’s Subsidiaries.
SECTION 6.1.4
Pledge Agreements. The Administrative Agent shall have received executed
counterparts of the Pledge Agreements, dated as of the date hereof, duly
executed by the Borrower, pledging 100% of its interest in the Capital Stock of
each Subsidiary of the Borrower organized under the laws of the United States of
America and pledging 65% of its interest in the Capital Stock of each Subsidiary
of the Borrower organized under the laws of a country other than the United
States of America, together with the certificates, evidencing all of the issued
and outstanding shares of Capital Stock pledged pursuant to the Pledge
Agreements, which certificates shall in each case be accompanied by undated
stock powers duly executed in blank, and, as applicable, with the evidence of
completion (or satisfactory arrangement for the completion) of all filings and
recordings of the Pledge Agreements as may be necessary, or in the reasonable
opinion of the Administrative Agent, desirable, effectively to create a valid,
perfected first priority lien against and security interest in the collateral
covered thereby
SECTION 6.1.5
Security Agreement. The Administrative Agent shall have received executed
counterparts of the Security Agreements, dated as of the date hereof, duly
executed by the Borrower and each of its Subsidiaries, as applicable, together
with
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(a)
Uniform Commercial Code financing statements (Form UCC-1), in proper form for
filing, naming the Borrower (or its Subsidiary, as applicable) as the debtor and
the Administrative Agent as the secured party, or other similar instruments or
documents, filed under the Uniform Commercial Code of all jurisdictions as may
be necessary or, in the opinion of the Administrative Agent, desirable to
perfect the security interest of the Administrative Agent pursuant to such
Security Agreement; and
(b)
proper Uniform Commercial Code Form UCC-3 termination statements, if any,
necessary to release all Liens and other rights of any Person in any collateral
described in such Security Agreement previously granted by any Person together
with such other Uniform Commercial Code Form UCC-3 termination statements as the
Administrative Agent may request from the Borrower.
SECTION 6.1.6
Consents, Mortgage Consents and Approvals. The Administrative Agent shall have
received true and correct copies, certified by the Borrower, of (a) all Mortgage
Consents and Consents set forth in Schedule V required in connection with the
Properties to be encumbered by Mortgages delivered pursuant to Section 6.1.7 or
the Security Agreements delivered pursuant to Section 6.1.5, respectively, and
(b) all Approvals that may be requested by the Administrative Agent.
SECTION 6.1.7
Mortgage. The Administrative Agent shall have received counterparts of a
Mortgage, relating to all of the Hydrocarbon Interests and related Oil and Gas
Properties of the Borrower and its Subsidiaries that are included in the
Lenders’ determination of the initial Collateral Value, dated as of a recent
date, in each case duly executed by the Borrower and/or its Subsidiaries, as
applicable, together with
(a)
evidence of the completion (or satisfactory arrangements for the completion) of
all recordings and filings of such Mortgage as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable effectively to create
a valid, perfected first priority Lien against the Properties purported to be
covered thereby;
(b)
favorable mortgagee’s title opinions in favor of the Administrative Agent and
all Lenders (in form and substance and issued by title counsel satisfactory to
the Administrative Agent, substantially in the form of Exhibit I hereto), with
respect to the Property purporting to be covered by the Mortgage (including,
without limitation to the Oil and Gas Properties described on Schedule II
hereto) setting forth the working interest and net revenue interest of the
Borrower and its Subsidiaries in such Properties and opining that the Borrower’s
and its Subsidiaries’ title to such property is good and marketable and valid
and that the interests created by the Mortgage constitute valid first Liens
thereon free and clear of all defects and encumbrances other than as provided in
Section 8.2.3 or as approved by the Administrative Agent;
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(c)
letters in lieu of transfer orders for each purchaser of Hydrocarbons
attributable to the Borrower’s and its Subsidiaries’ interests in the Mortgaged
Properties; and
(d)
such other approvals, opinions, or documents as the Administrative Agent may
request.
SECTION 6.1.8
Opinions of Counsel. The Administrative Agent shall have received opinions,
dated the date of the initial Credit Extension and addressed to the
Administrative Agent and all Lenders from
(a)
Dieterich & Associates, counsel to the Borrower, substantially in the form of
Exhibit H-1 hereto;
(b)
Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P., Louisiana counsel
to the Borrower, substantially in the form of Exhibit H-2 hereto; and
(c)
Flowers Davis, P.L.L.C., Texas counsel to the Borrower, substantially in the
form of Exhibit H-3 hereto.
(d)
Morris Reese, Texas counsel to the Borrower, substantially in the form of
Exhibit H-3 hereto.
SECTION 6.1.9
UCC-11s. The Administrative Agent shall have received certified copies of
Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to the Administrative
Agent, dated a date reasonably near to the date of the initial Credit Extension,
listing all effective financing statements which name the Seller, the Borrower,
its Subsidiaries and each other Obligor (under their present names and any
previous names) as the debtor and which are filed in the States of Arizona,
Louisiana, Texas and Washington and such other jurisdictions which may be
reasonably requested by the Administrative Agent, together with copies of such
financing statements (none of which shall cover any collateral described in the
Mortgages or other Security Documents).
SECTION 6.1.10
Evidence of Insurance. The Administrative Agent shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents.
SECTION 6.1.11
Engineering Reports. The Administrative Agent shall have received Engineering
Reports from internal engineers employed by the Borrower (as approved by the
Administrative Agent) as to all Collateral Value Properties located in Tom Green
County, Texas and from Haas Petroleum Engineering Services Inc. as to all other
Collateral Value Properties listed on Schedule II.
SECTION 6.1.12
Environmental Report. The Administrative Agent shall have received the Phase I
environmental assessment dated as of a date satisfactory to
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the Administrative Agent and prepared by a Person acceptable to the
Administrative Agent with respect to the Acquired Properties and the Existing
Borrower Properties, and such other information with respect to the ownership
and past use of the Mortgaged Properties as the Administrative Agent may
request, and such reports and information shall be satisfactory in form,
substance and scope to the Administrative Agent and the Lenders.
SECTION 6.1.13
Approved Budgets. The Administrative Agent shall have received the Approved
Capital and Operating Budget and the Approved General and Administrative Budget
(for the period beginning with the Effective Date and ending on the last day of
the sixth Fiscal Quarter following the Effective Date), each in form, scope and
detail satisfactory to the Administrative Agent and the Lenders in their sole
and absolute discretion.
SECTION 6.1.14
Release of Liens and Payment of Existing Obligations. Administrative Agent
shall have received evidence, in form and substance satisfactory to
Administrative Agent, in its sole discretion, of the prior or contemporaneous
indefeasible payment in full of all Indebtedness of the Borrower and its
Subsidiaries (other than Indebtedness permitted by Section 8.2.2) including all
Indebtedness outstanding to Cornell Capital, Thomas Energy Services, Inc. and
Coil Tubing Services, L.L.C., all open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services and any
indebtedness secured by Liens (other than Liens permitted under Section 8.2.3)
which encumber the Initial Subject Properties.
SECTION 6.1.15
ORRI Agreement and Certificate, etc. The Administrative Agent shall have
received an executed Agreement Concerning Overriding Royalty Interests, which
shall be in a form satisfactory to the Administrative Agent, a Certificate as to
Overriding Royalty Interests, substantially in the form of Exhibit K, pertaining
to the Overriding Royalty Interests granted by the Assignment.
SECTION 6.1.16
Assignment. The Administrative Agent shall have received counterparts of the
Assignments in favor of the Designee with respect to the Collateral Value
Properties described on Schedule II, duly executed by the Borrower and the
Borrower’s Subsidiaries, together with
(a)
evidence of the completion (or satisfactory arrangements for the completion) of
all recordings and filings of the Assignment as may be necessary or desirable to
vest title to the Overriding Royalty Interest described therein in favor of the
Designee; and
(b)
such title opinions or other assurances of title with respect to the overriding
royalties which are the subject of the Assignment as the Administrative Agent
may require.
SECTION 6.1.17
Financial Statements. Administrative Agent shall have received such financial
statements concerning the Borrower and its Subsidiaries, as the Administrative
Agent shall have requested, in form and substance satisfactory to the
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Administrative Agent, certified by an Authorized Officer of the Borrower as
being true, correct and complete.
SECTION 6.1.18
Hydrocarbon Hedging. The Borrower will enter into natural gas and crude oil
Hedging Agreements with Approved Hedge Counterparties and on such other terms as
are reasonably satisfactory to the Administrative Agent, that will enable the
Borrower to obtain the net realized prices of at least $5.00/MMBtu for natural
gas and at least $50.00/bbl for crude oil] for Hydrocarbons produced from its
and each Borrower’s Subsidiary’s Hydrocarbon Interests, for the volumes and for
the time periods set forth on Part 1 of Schedule IV.
SECTION 6.1.19
Lockbox Agreement. The Administrative Agent shall have received counterparts of
the Lockbox Agreement, duly executed by the Borrower and each of its
Subsidiaries.
SECTION 6.1.20
Compliance with Representations and Warranties. The Administrative Agent shall
have received a certificate from an Authorized Officer of the Borrower stating
that all representations and warranties contained in Article VII are true and
correct in all material respects as of the Effective Date.
SECTION 6.1.21
Closing Fees, Expenses, etc. The Administrative Agent shall have received, for
its own account, or for the account of each Lender, as the case may be, all
reasonable costs and expenses due and payable pursuant to Sections 3.3 and 11.3,
if then invoiced.
SECTION 6.1.22
Consummation of Financed Acquisition. With respect to the funding of the
Financed Acquisition, the conditions set forth in the Financed Acquisition
documents to the obligations of Sellers and the Borrower to consummate the
Financed Acquisition shall have been satisfied in full (without amendment or
waiver of, or other forbearance to exercise any rights with respect to, any of
the terms or provisions thereof by Sellers or the Borrower), and the Financed
Acquisition shall have been consummated and Administrative Agent shall have
received a certificate to that effect signed by an Authorized Officer of
Borrower. Administrative Agent shall have received a copy of the Financed
Acquisition documents, certified by an Authorized Officer of Borrower as being
true, correct and complete.
SECTION 6.1.23
Proceeds of Issuance of Capital Stock. The Borrower shall have received
proceeds from the issuance of Capital Stock of the Borrower in an amount not
less than Two Million Seven Hundred Thousand Dollars ($2,700,000), and the
Administrative Agent shall have received evidence satisfactory to it of the
receipt of such funds.
SECTION 6.1.24
Warrants, etc. The Administrative Agent shall have received counterparts of the
Warrant Documents, in each case executed and delivered by the Borrower.
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SECTION 6.1.25
Other Documents. The Administrative Agent and each Lender shall have received
such other documents as it may request, including without limitation each
Material Contract listed on Schedule VI.
SECTION 6.2.
Inclusion of Hydrocarbon Interests in the Collateral Value. The inclusion of
any additional Hydrocarbon Interests in the Collateral Value is subject to the
following conditions having been satisfied and receipt by the Administrative
Agent and each Lender of the following documents, in each case with respect to
each Hydrocarbon Interest and related Oil and Gas Properties which the Borrower
requests be included in the Collateral Value, and each of which conditions and
documents shall be satisfactory to the Administrative Agent in form and
substance.
SECTION 6.2.1
Environmental Report. Unless the Administrative Agent has already received a
satisfactory environmental assessment covering the same lands to which such
Hydrocarbon Interests pertain, the Administrative Agent and each Lender shall
have received Phase I environmental assessments as of a recent date prepared by
an environmental consulting firm as shall be acceptable to the Administrative
Agent, and such other information with respect to the ownership and past use of
the Mortgaged Properties relating to such Hydrocarbon Interests as the
Administrative Agent may request, and such reports shall be satisfactory in
form, substance and scope to the Administrative Agent.
SECTION 6.2.2
Mortgage. The Administrative Agent shall have received counterparts of a
Mortgage relating to such Hydrocarbon Interests and related Oil and Gas
Properties, dated as of a recent date, duly executed by the Borrower and/or its
Subsidiaries, as applicable, together with
(a)
evidence of the completion (or satisfactory arrangements for the completion) of
all recordings and filings of such Mortgage as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable effectively to create
a valid, perfected first priority Lien against the Properties purported to be
covered thereby, subject only to those Liens permitted by Section 8.2.3;
(b)
favorable mortgagee’s title opinions in favor of the Administrative Agent and
all Lenders (in form and substance and issued by title counsel satisfactory to
the Administrative Agent, substantially in the form of Exhibit I hereto), with
respect to the Property purporting to be covered by the Mortgage setting forth
the working interest and net revenue interest of the Borrower and/or its
Subsidiaries in such Properties and opining that the Borrower’s and/or its
Subsidiaries’ title to such property is good and marketable and valid and that
the interests created by the Mortgage constitute valid first Liens thereon free
and clear of all defects and encumbrances other than as approved by the
Administrative Agent, subject only to those Liens permitted by Section 8.2.3;
provided that such opinions shall not be then required if, after considering the
effect of adding such Hydrocarbon Interests to the Collateral Value, at least
90% of the value of the Proven Reserves to which value is given in the most
recent
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determination of the then current Collateral Value, are then covered by
favorable mortgagee’s title opinions, and
(c)
such other approvals, opinions, or documents as the Administrative Agent may
request.
SECTION 6.2.3
UCC-11s. The Administrative Agent shall have received certified copies of
Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to the Administrative
Agent, dated as of a recent date, listing all effective financing statements
which name the Borrower or its Subsidiaries (under their present names and any
previous names) as the debtor and which are filed in the jurisdictions in the
State of Washington, State of Arizona or the state in which such Oil and Gas
Properties are located and in which the Mortgage referenced in Section 6.2.2. is
to be filed, together with copies of such financing statements (none of which
shall cover any collateral described in any such Mortgage, subject only to those
Liens permitted by Section 8.2.3).
SECTION 6.2.4
Evidence of Insurance. The Administrative Agent shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents with respect to the Hydrocarbon Interests and related Oil
and Gas Properties being added to the Collateral Value.
SECTION 6.2.5
Engineering Reports. The Administrative Agent and the Lenders shall have
received an Engineering Report, dated as of a recent date from Haas Petroleum
Engineering Services Inc., or a petroleum engineer acceptable to the
Administrative Agent, as to the Hydrocarbon Interests being added to the
Collateral Value, which Engineering Report shall be satisfactory to the
Administrative Agent in form and substance.
SECTION 6.2.6
Material Contracts and Related Consents; Security Agreement. The Administrative
Agent shall have received true and correct copies, certified by the Borrower,
and approved the form and substance of, (a) each Material Contract listed on
Schedule VI, related to the Hydrocarbon Interests being added to the Collateral
Value, (b) each Approval as may be requested by the Administrative Agent. In
addition, the Administrative Agent shall have received duly executed
counterparts of a Security Agreement or, if applicable, amendments to an
existing Security Agreement which add any such Material Contract to the
Collateral (as defined in the Security Agreement), a Consent and, as applicable,
a Mortgage Consent, for each such Material Contract, dated as of a recent date.
SECTION 6.2.7
Guaranties. The Administrative Agent shall have received duly executed
counterparts of a Guaranty from any Subsidiary of the Borrower which is adding
Hydrocarbon Interests to the Collateral Value, unless such a Guaranty has
already been delivered to the Administrative Agent in connection with a previous
addition to the Collateral Value on the Effective Date.
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SECTION 6.2.8
Additional Stock or Membership Pledge. The Administrative Agent shall have
received executed counterparts of the Pledge Agreement, dated not later than the
date of such Loan, duly executed by Borrower or the applicable Subsidiary
pledging its interest in the Capital Stock of any such Subsidiary which is
adding Hydrocarbon Interests to the Collateral Value, unless such Pledge
Agreement has already been delivered to the Administrative Agent, accompanied by
the original share certificate evidencing such Capital Stock or equity interests
and executed stock powers (in blank), and the evidence of satisfactory
arrangement for the completion of all filings and recordings of the Pledge
Agreement as may be necessary or, in the reasonable opinion of the
Administrative Agent, desirable, effectively to create a valid, perfected first
priority lien against and security interest in the collateral covered thereby.
SECTION 6.2.9
Overriding Royalty Interests. To the extent that (x) new Properties, additional
interests in existing Properties, or new classifications of Properties are
considered in a redetermination of the Collateral Value, (y) the Designee have
not already received an Assignment pertaining thereto and (z) pursuant to
Section 3.5(a), the Designee is entitled to receive an Overriding Royalty
Interest, the Designee shall have received Assignment and Conveyance of
Overriding Royalty Interests and Certificate as to Overriding Royalty Interests
with respect to such Properties duly executed by the Borrower and the Borrower’s
Subsidiaries, together with
(a)
evidence of the completion (or satisfactory arrangements for the completion) of
all recordings and filings of the Assignment as may be necessary or desirable to
vest title to the Overriding Royalty Interest described therein; and
(b)
such title opinions or other assurances of title with respect to the overriding
royalties which are the subject of the Assignment as the Administrative Agent
may require.
SECTION 6.2.10
Other Documents. The Administrative Agent shall have received such other
documents as it may request.
SECTION 6.3.
All Credit Extensions. The obligation of each Lender to make any Credit
Extension (including the initial Credit Extension) shall be subject to the
satisfaction of each of the conditions precedent set forth in this Section 6.3.
SECTION 6.3.1
Compliance with Warranties, No Default, etc. Both before and after giving
effect to any Credit Extension (but, if any Default of the nature referred to in
Section 9.1.5 shall have occurred with respect to any other Indebtedness,
without giving effect to the application, directly or indirectly, of the
proceeds of any Borrowing unless all such Defaults of the nature referred to in
Section 9.1.5 are cured with the proceeds of such Borrowing) the following
statements shall be true and correct
(a)
the representations and warranties set forth in Article VII (excluding, however,
those contained in Section 7.9) and in the other Loan Documents shall be true
and correct with the same effect as if then made (unless
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stated to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date);
(b)
except as disclosed in Item 7.9 of the Disclosure Schedule by the Borrower to
the Administrative Agent and Lenders pursuant to Section 7.9
(i)
no labor controversy, litigation, arbitration or governmental investigation or
proceeding shall be pending or, to the knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries, or any of their respective
Properties, businesses, assets or revenues, which has or might be expected to
have a Material Adverse Effect; and
(ii)
no development shall have occurred in any labor controversy, litigation,
arbitration or governmental investigation or proceeding disclosed pursuant to
Section 7.9 which has or might be expected to have a Material Adverse Effect;
and
(c)
no Default shall have then occurred and be continuing, and neither the Borrower
nor any other Obligor are in material violation of any Applicable Law or court
order or decree if such violation has or might be expected to have a Material
Adverse Effect.
SECTION 6.3.2
Credit Request. The Administrative Agent shall have received a Borrowing
Request for such Credit Extension. The delivery of a Borrowing Request and the
acceptance by the Borrower of the proceeds of the Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section 6.3.1 are
true and correct.
SECTION 6.3.3
Satisfactory Legal Form. All documents executed or submitted pursuant hereto by
or on behalf of the Borrower or any of its Subsidiaries shall be satisfactory in
form and substance to the Administrative Agent and its counsel; the
Administrative Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Administrative Agent or its
counsel may request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each Lender to enter into this
Agreement and to make Loans hereunder, the Borrower represents and warrants unto
Administrative Agent and each Lender as set forth in this Article VII.
SECTION 7.1.
Organization, etc. The Borrower and each other Subsidiary of Borrower is a
corporation, company or partnership, each validly organized and existing and in
good standing under the laws of the jurisdiction of its organization, is
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duly qualified to do business and is in good standing as a foreign corporation,
company or partnership in each jurisdiction where the nature of its business
requires such qualification, where the failure so to qualify would have a
Material Adverse Effect and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform its
Obligations under this Agreement, the Notes and each other Loan Document to
which it is a party and to own and hold under lease its Property and to conduct
its business substantially as currently conducted by it, in each case where the
failure so to do would have a Material Adverse Effect. As of the Effective
Date, the Borrower has no Subsidiaries other than as listed in Schedule III.
SECTION 7.2.
Due Authorization, Non-Contravention, etc. The execution, delivery and
performance by the Borrower and each other Obligor of this Agreement, the Notes
and each other Loan Document executed or to be executed by it are within the
Borrower’s and each such Obligor’s company powers, have been duly authorized by
all necessary company or other action, as the case may be, on the part of the
Borrower or such other Obligor and do not
(a)
contravene the Borrower’s or such Obligor’s Organic Documents;
(b)
contravene or result in any violation of or default under any Applicable Law or
any material contractual restriction, court decree or order, in each case
binding on or affecting the Borrower or any other Obligor or any Properties,
businesses, assets or revenues of the Borrower or any other Obligor;
(c)
result in, or require the creation or imposition of, any Lien on (except for the
Liens of the Loan Documents) any of the Borrower’s or any other Obligor’s
Properties, businesses, assets or revenues.
SECTION 7.3.
Government Approval, Regulation, etc. Except for those which have been
obtained, and those for which a temporary written waiver from the Administrative
Agent has been received, no authorization or approval or other action by, and no
notice to or filing with, any Government Agency or other Person is required for
the due execution, delivery or performance by the Borrower or any other Obligor
of this Agreement, the Notes or any other Loan Document to which it is a party.
SECTION 7.4.
Investment Company Act. Neither the Borrower nor any of its Subsidiaries nor
any other Obligor, is an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 7.5.
[Reserved.]
SECTION 7.6.
Validity, etc. This Agreement constitutes, and the Notes and each other Loan
Document executed by the Borrower or any of its Subsidiaries will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Borrower and such Subsidiaries, as applicable, enforceable in
accordance with their respective terms, and each Loan Document executed pursuant
hereto by each other Obligor will, on the due execution and delivery thereof by
such Obligor, be the legal, valid and binding obligation of such Obligor
enforceable in
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accordance with its terms, in each case subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally.
SECTION 7.7.
Financial Information. The audited balance sheets of the Borrower as at April
30, 2006 and April 30, 2005, the audited statements of income and cash flows for
the Borrower for the twelve months ending April 30, 2006 and April 30, 2005, and
the unaudited consolidating balance sheets of the Borrower as at July 31, 2006,
and the respective, related consolidated unaudited statements of operations and
cash flow of the Borrower, copies of which have been furnished to the
Administrative Agent and each Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition of
the corporations covered thereby as at the date thereof and the results of their
unaudited operations for the period then ended, and show all material
Indebtedness of the Borrower and its consolidated Subsidiaries, as of the date
thereof, including liabilities for taxes, material commitments and Contingent
Liabilities.
SECTION 7.8.
No Material Adverse Change. Since July 31, 2006, there has been no change in
the financial condition, operations, assets, business, Properties or prospects
of the Borrower or its Subsidiaries that has or might be expected to have a
Material Adverse Effect.
SECTION 7.9.
Litigation, Labor Controversies, etc. There is no pending or, to the knowledge
of the Borrower, threatened litigation, action, proceeding, or labor controversy
affecting the Borrower or any of its Subsidiaries, or any of their respective
Properties, businesses, assets or revenues, which has or might be expected to
have a Material Adverse Effect, except as disclosed in Item 7.9 (“Litigation”)
of the Disclosure Schedule. As of the Effective Date, neither the Borrower nor
any of its Subsidiaries is in default of any of its material obligations under
any Material Contract.
SECTION 7.10.
Ownership of Properties. Each of the Borrower and each of its Subsidiaries has
good and marketable title to its Properties (including, without limitation, all
Hydrocarbon Interests), free and clear of all Liens except (a) those referred to
in the financial statements referred to in Section 7.7, (b) as disclosed to the
Lender in the Disclosure Schedule or (c) as permitted by Section 8.2.3. After
giving full effect to all Liens permitted under Section 8.2.3, and except as to
those Oil and Gas Properties disposed of pursuant to Section 8.2.9, the Borrower
and its Subsidiaries own the net interests in Hydrocarbons produced from the Oil
and Gas Properties as reflected in the most recent Engineering Report (less any
interests conveyed to the Designee), and neither the Borrower nor any of its
Subsidiaries is obligated to bear costs or expenses in respect of the Oil and
Gas Properties in excess of its working interest percentage as reflected in the
most recent Engineering Report. The Administrative Agent has received currently
effective, duly executed Mortgages and other Loan Documents encumbering Oil and
Gas Properties constituting at least ninety percent (90%) of the amount of
Proven Reserves to which value is given in the determination of the current
Collateral Value. No employee of the Borrower or its Subsidiaries has any right
to receive any overriding royalty interest or other interest in any of the
Collateral Value Properties.
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SECTION 7.11.
Taxes. Except as disclosed in Item 7.11 (“Taxes”) of the Disclosure Schedule,
each of the Borrower and its Subsidiaries has filed, or caused to be filed, all
Federal and other tax returns and reports required by Applicable Law to have
been filed by it and has paid all taxes and other governmental charges thereby
shown to be owing, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books. None
of the disclosed events described in Item 7.11 (“Taxes”) of the Disclosure
Schedule could reasonably be expected to cause a Material Adverse Effect, either
individually or in the aggregate.
SECTION 7.12.
Pension and Welfare Plans. During the twelve-consecutive-month period prior to
the Effective Date and prior to the date of any Borrowing hereunder, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Borrower or any member of the Controlled Group of any material liability,
fine or penalty. Except as disclosed in Item 7.12 (“Employee Benefit Plans”) of
the Disclosure Schedule or as otherwise reflected in the financial statements of
the Borrower and its consolidated Subsidiaries, neither the Borrower nor any
member of the Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 7.13.
Compliance with Law. Neither the Borrower nor any of its Subsidiaries (a) is in
violation of any Applicable Law of, or is in violation of the terms of any
Approval issued by any Government Agency; or (b) has failed to obtain any
Approval necessary to ownership of any of its properties or the conduct of its
business (including without limitation any such authorization from the Federal
Energy Regulatory Commission, the U.S. Minerals Management Service, the U.S.
Bureau of Land Management, the U.S. Bureau of Indian Affairs or any state
conservation commission or similar body); in each case, which violation or
failure could be expected to have a Material Adverse Effect.
SECTION 7.14.
Claims and Liabilities. Except as disclosed to the Lenders in Item 7.14
(“Claims and Liabilities”) of the Disclosure Schedule, neither the Borrower nor
any of its Subsidiaries has accrued any liabilities under gas purchase contracts
for gas not taken, but for which it is liable to pay if not made up and which,
if not paid, would have a Material Adverse Effect. Except as disclosed to the
Lenders in Item 7.14 of the Disclosure Schedule, no claims exist against the
Borrower or any of its Subsidiaries for gas imbalances which claims if adversely
determined would have a Material Adverse Effect. No purchaser of product
supplied by the Borrower or any of its Subsidiaries has any claim against the
Borrower or any of its Subsidiaries for product paid for, but for which delivery
was not taken as and when paid for, which claim if adversely determined would
have a Material Adverse Effect.
SECTION 7.15.
No Prohibition on Perfection of Security Documents. None of the terms or
provisions of any indenture, mortgage, deed of trust, agreement or
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other instrument to which the Borrower or any of its Subsidiaries is a party or
by which the Borrower or any of its Subsidiaries or the property of the Borrower
or any of its Subsidiaries is bound prohibit the filing or recordation of any of
the Loan Documents or any other action which is necessary or appropriate in
connection with the perfection of the Liens evidenced and created by any of the
Loan Documents.
SECTION 7.16.
Solvency. Neither the Borrower nor any of its Subsidiaries is “insolvent”, as
such term is used and defined in the United States Bankruptcy Code, 11 U.S.C.
§ 101, et seq.
SECTION 7.17.
Environmental Warranties. As a reasonable and prudent operator of oil and gas
producing properties, in the ordinary course of its business, the Borrower has
conducted, with respect to its Oil and Gas Properties, and, on an ongoing basis,
conducts a review of the effect of Environmental Laws on the business,
operations and Properties of the Borrower and its Subsidiaries, in the course of
which it identifies and evaluates associated liabilities and costs (including
any capital or operating expenditures required for Remedial Action or other
clean-up or closure of Properties presently owned or operated, any capital or
operating expenditures required for Remedial Action or otherwise to achieve or
maintain compliance with environmental protection standards imposed by any
Environmental Law or as a condition of any Approval, license, permit or
contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of or
change in the nature of operations conducted thereat and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that, except as disclosed in Item 7.17 (“Environmental Matters”) of the
Disclosure Schedule, to the best of its knowledge after due inquiry:
(a)
all facilities and Property (including underlying groundwater) owned, leased or
operated by the Borrower or any of its Subsidiaries have been, and continue to
be, owned, leased or operated by the Borrower or any of its Subsidiaries in
compliance with all Environmental Laws where the failure to do so could be
expected to have a Material Adverse Effect;
(b)
there have been no past, and there are no pending or threatened
(i)
claims, complaints, notices or inquiries to, or requests for information
received by, the Borrower or any of its Subsidiaries with respect to any alleged
violation of any Environmental Law, that, singly or in the aggregate, have or
may be expected to have a Material Adverse Effect, or
(ii)
claims, complaints, notices or inquiries to, or requests for information
received by, the Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law or under any common law theories relating
to operations or the condition of any facilities or Property (including
underlying groundwater) owned, leased or operated by the
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Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or
may be expected to have a Material Adverse Effect;
(c)
there have been no Releases of Hazardous Materials at, on or under any Property
now or previously owned or leased by the Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or may be expected to have, a Material
Adverse Effect;
(d)
each of the Borrower, each of its Subsidiaries, as applicable, has been issued
and is in compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for its business where the failure to do so could be expected to have
a Material Adverse Effect;
(e)
no Property now or previously owned, leased or operated by the Borrower or any
of its Subsidiaries is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, or, to the extent that such listing may, singly or in
the aggregate, have, or may be expected to have a Material Adverse Effect, on
the CERCLIS or on any other similar federal or state list of sites requiring
investigation or clean-up;
(f)
there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any Property now or previously owned, leased or
operated by the Borrower or any of its Subsidiaries that, singly or in the
aggregate, have, or may be expected to have, a Material Adverse Effect;
(g)
neither the Borrower nor any Subsidiaries of the Borrower has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, or, to the extent that such listing may,
singly or in the aggregate, have, or may be expected to have a Material Adverse
Effect, on the CERCLIS or on any similar federal or state list or which is the
subject of federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or any of its
Subsidiaries for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA;
(h)
there are no polychlorinated biphenyls, radioactive materials or friable
asbestos present at any Property now or previously owned or leased by the
Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or
may be expected to have, a Material Adverse Effect;
(i)
since the respective dates of the reports delivered pursuant to Section 6.1.12
and Section 6.2.1, no event has occurred or condition changed which would make
the descriptions and characterizations of the Properties covered thereby
incomplete or misleading in any material respect; and
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(j)
no condition exists at, on or under any property now or previously owned or
leased by the Borrower or any of its Subsidiaries which, with the passage of
time, or the giving of notice or both, would give rise to material liability
under any Environmental Law that, singly or in the aggregate have, or may be
expected to have a Material Adverse Effect.
SECTION 7.18.
Regulations T, U and X. Neither the Borrower nor any of its Subsidiaries is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock, and no proceeds of any Loans will be used for a purpose
which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or
X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X
or any regulations substituted therefor, as from time to time in effect, are
used in this Section with such meanings.
SECTION 7.19.
Insurance. The Borrower and its Subsidiaries have the benefit of the insurance
coverage described in the certificates of insurance delivered pursuant to
Section 6.1.10 and required to be maintained pursuant to Section 8.1.4.
SECTION 7.20.
Bank Regulatory Requirements. None of the Borrower nor any of its Subsidiaries
(i) is a Person described or designated in the Specially Designated Nationals
and Blocked Persons List of the Office of Foreign Assets Control or in Section 1
of the Anti-Terrorism Order or (ii) to the knowledge of the Borrower, engages in
any dealings or transactions with any such Person. Each of the Borrower and its
Subsidiaries is in compliance, in all material respects, with the U.S.A. Patriot
Act, and the Administrative Agent has received all documentation and other
information required by bank regulatory authorities under applicable “know your
customer” and anti-money-laundering rules and regulations, including the U.S.A.
Patriot Act.
SECTION 7.21.
Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Administrative Agent or the Lenders for purposes
of or in connection with this Agreement or any transaction contemplated hereby
(including without limitation each Engineering Report) is, and all other such
factual information hereafter furnished by or on behalf of the Borrower or any
of its Subsidiaries to the Administrative Agent or the Lenders will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of this
Agreement by the Lenders, and such information is not, or shall not be, as the
case may be, incomplete by omitting to state any material fact necessary to make
such information not misleading.
SECTION 7.22.
Representation Regarding Subsidiaries. On and after the Effective Date, none of
the Borrower’s Subsidiaries nor any Subsidiary of such Subsidiaries (a) has any
liabilities, obligations, or claims against it or its Property, contingent or
otherwise, that individually or in the aggregate could reasonably be expected to
exceed $50,000, (b) is a Material Subsidiary or (c) owns, has an interest in or
has rights in or to any Property that individually or in the aggregate has a
fair market value of more than $50,000, in each case, other than any Qualified
Subsidiaries.
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ARTICLE VIII
COVENANTS
SECTION 8.1.
Affirmative Covenants. The Borrower agrees with the Administrative Agent and
the Lenders that, until all Commitments have terminated and all Obligations have
been indefeasibly paid and performed in full, the Borrower and each of its
Subsidiaries will perform the obligations set forth in this Section 8.1.
SECTION 8.1.1
Financial Information, Reports, Notices, etc. The Borrower will furnish, or
will cause to be furnished, to the Administrative Agent and each Lender copies
of the following financial statements, reports, notices and other information:
(a)
as soon as available and in any event within forty-five (45) days after the end
of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower,
consolidated and consolidating balance sheets of the Borrower and its
consolidated Subsidiaries as of the end of such Fiscal Quarter and consolidated
and consolidating statements of operations and cash flow of the Borrower and its
consolidated Subsidiaries for such Fiscal Quarter and for the period commencing
at the end of the previous Fiscal Year and ending with the end of such Fiscal
Quarter, certified by the chief financial Authorized Officer of the Borrower;
(b)
as soon as available and in any event within ninety (90) days after the end of
each Fiscal Year of the Borrower, a copy of the annual audit report for such
Fiscal Year for the Borrower and its consolidated Subsidiaries, including
therein the audited consolidated and consolidating balance sheets of the
Borrower and its consolidated Subsidiaries as of the end of such Fiscal Year and
audited statements of operations and cash flow of the Borrower and its
consolidated Subsidiaries for such Fiscal Year, in the case of such audited
financials, each case certified (without any Impermissible Qualification) in a
manner acceptable to the Administrative Agent by an independent public
accountant acceptable to the Administrative Agent, together with a certificate
from the Chief Financial Officer of the Borrower containing a computation of,
and showing compliance with, each of the financial ratios and restrictions
contained in Section 8.2.4 and to the effect that, in making the examination
necessary for the signing of such annual report by such accountants, they have
not become aware of any Default that has occurred and is continuing, or, if they
have become aware of such Default, describing such Default and the steps, if
any, being taken to cure it;
(c)
concurrently with the delivery of the financial statements referred to in
clauses (a) and (b), a certificate, executed by the Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate calculations and
computations in all respects satisfactory to the Administrative Agent)
(i) compliance with the financial covenants set forth in Section 8.2.4 and (ii)
a comparison between the actions described in the then current Approved Capital
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and Operating Budget, including Approved General and Administrative Budget, and
the actual actions taken in such period, and also certifying, to such Authorized
Officer’s best knowledge, that no Default has occurred and is then outstanding;
(d)
commencing January 31, 2007, and thereafter on or prior to the last Business Day
of each Fiscal Quarter, an Approved Capital and Operating Budget, including
Approved General and Administrative Budget, for the Borrower for a period not
shorter than the immediately following six (6) Fiscal Quarters, satisfactory in
all respects to the Administrative Agent. Such budgets to be substantially in
the form of Exhibit L and Exhibit M. In the event that the Administrative Agent
shall have not approved such proposed Approved Capital and Operating Budget or
proposed Approved General and Administrative Budget, the Borrower shall discuss
such objections with the Administrative Agent and shall further revise and
resubmit the proposed Approved Capital and Operating Budget or proposed Approved
General and Administrative Budget until such Approved Capital and Operating
Budget or proposed Approved General and Administrative Budget, as applicable, is
in all respects reasonably satisfactory to the Administrative Agent in its
reasonable judgment;
(e)
on or prior to the forty-fifth (45th) day after the end of each Fiscal Quarter,
a proposed revision and/or addition, as applicable, to the then current Approved
Capital and Operating Budget, including Approved General and Administrative
Budget, for a period of not less than the following six (6) Fiscal Quarters, in
form, scope and detail satisfactory to the Administrative Agent and the Required
Lenders;
(f)
as soon as possible and in any event within five (5) Business Days after any
responsible officer of the Borrower becomes aware of the occurrence of each
Default or any event which has or is likely to have a Material Adverse Effect, a
statement of Authorized Officer of the Borrower setting forth details of such
Default or event and the action which the Borrower has taken and proposes to
take with respect thereto;
(g)
as soon as possible and in any event within five (5) Business Days after any
responsible officer of the Borrower becomes aware of (x) the occurrence of any
adverse development with respect to any litigation, action, proceeding or labor
controversy described in Section 7.9 or (y) the commencement of any litigation,
action, proceeding or labor controversy of the type described in Section 7.9,
notice thereof and, to the extent requested by the Administrative Agent, copies
of all documentation relating thereto not subject to the attorney-client
privilege or attorney work product;
(h)
as soon as possible and in any event within ten (10) days after any responsible
officer of the Borrower or any of its Subsidiaries has actual knowledge thereof,
notice of
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(i)
any claim by any Person against the Borrower or any of its Subsidiaries of
nonpayment of, or
(ii)
any attempt by any Person to collect upon or enforce any accounts payable (that
are more than thirty (30) days past due) of the Borrower or any of its
Subsidiaries, in the case of any single account payable in excess of $10,000, or
in the case of all accounts payable in the aggregate in excess of $50,000;
(i)
upon, but in no event later than ten (10) days after, any responsible officer of
the Borrower or any of its Subsidiaries becomes aware of (i) any and all
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened or other environmental claims against the
Borrower or any Subsidiary or any of its Properties pursuant to any applicable
Environmental Laws which could have a Material Adverse Effect, and (ii) any
environmental or similar condition on any real property adjoining or in the
vicinity of the property of the Borrower or any Subsidiary that could be
anticipated to cause such property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of such
property under any Environmental Laws;
(j)
as soon as available and in any event within sixty (60) days (i) after April
30th of each calendar year commencing in 2007, an Engineering Report from an
independent petroleum engineering firm acceptable to the Administrative Agent in
its sole and absolute judgment, and (ii) after October 31st of each calendar
year commencing in 2007, (A) an Engineering Report from an independent petroleum
engineering firm acceptable to the Administrative Agent in its sole and absolute
judgment, or (B) following a written request from the Borrower and upon the
written consent of the Administrative Agent acting at the direction of the
Required Lenders, an Engineering Report from the Borrower’s internal reserve
engineers;
(k)
promptly after (i) the sending or filing thereof, copies of all reports which
the Borrower sends to any of its security holders, (ii) the sending or filing
thereof, all material reports and registration statements which the Borrower or
any of its Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange, including any proxy statements, (iii) the filing
thereof, copies of all tariff and rate cases and other material reports filed
with any regulatory authority (other than routine operating reports), and (iv)
receipt thereof, copies of all notices received from any regulatory authority
concerning material noncompliance by the Borrower or any of its Subsidiaries
with any applicable regulations;
(l)
immediately upon becoming aware of the institution of any steps by the Borrower
or any other Person to terminate any Pension Plan, or the failure to make a
required contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any action with
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respect to a Pension Plan which could result in the requirement that the
Borrower furnish a bond or other security to the PBGC or such Pension Plan, or
the occurrence of any event with respect to any Pension Plan which could result
in the incurrence by the Borrower of any material liability, fine or penalty, or
any material increase in the contingent liability of the Borrower with respect
to any post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(m)
on or before the date that is forty-five (45) days after the first day of each
month, reports in forms customarily produced in the oil and gas industry,
covering the subjects identified on Exhibit O hereto, containing operational and
accounting information with respect to the Mortgaged Properties, Collateral
Value Properties, as applicable, and Development Properties for the immediately
preceding month, including estimated production volumes, revenues, operating
costs, drilling costs, completion costs, geological and geophysical costs, and
G&A Expenses, position under Hedging Agreements and such other information
(including drilling and completion reports and well test data) respecting the
condition or operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as the Administrative Agent may from time to time request; and
(n)
within thirty (30) days after the end of each Fiscal Quarter, the Chief
Executive Officer of the Borrower shall meet with the Administrative Agent, at a
location and at a time to be reasonably determined by Administrative Agent, to
discuss the Borrower’s performance for the preceding Fiscal Quarter.
SECTION 8.1.2
Compliance with Laws, etc. The Borrower will, and will cause each of its
Subsidiaries to, comply with all Applicable Laws, except where failure to so
comply would not be expected to have a Material Adverse Effect, such compliance
to include (without limitation):
(a)
the maintenance and preservation of its corporate, company or partnership
existence and qualification as a foreign corporation, foreign limited liability
company or foreign partnership;
(b)
the payment, before the same become delinquent, of all taxes, assessments and
governmental charges imposed upon it or upon its property except to the extent
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books; and
(c)
the timely filing of all required tax forms and other related documents and
certificates, including without limitation the filing of true, correct and
complete copies of all tax forms and other related documents and certificates of
the Borrower and its Subsidiaries required to be filed in connection with the
items disclosed in Item 7.11 (“Taxes”) of the Disclosure Schedule and any other
tax forms and other related documents and certificates not timely filed prior to
the Effective Date no later than one hundred-twenty (120) days after the
Effective
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Date, along with the payment of any fees, fines or other penalties in connection
with such filings.
SECTION 8.1.3
Maintenance, Development and Sale of Properties.
(a)
The Borrower will, and will cause each of its Subsidiaries to, maintain (subject
to any disposition permitted by Section 8.2.9), preserve, protect and keep its
Properties in good repair, working order and condition (ordinary wear and tear
excepted), and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times in accordance with standard industry practices. In particular, the
Borrower will, and will cause each of its Subsidiaries to, operate or cause to
be operated its Oil and Gas Properties as a reasonable and prudent operator.
(b)
The Borrower shall use all reasonable efforts promptly to complete in a timely
manner the Approved Development Activities contemplated by the Approved Capital
and Operating Budget. In addition, the Borrower shall use all reasonable
efforts to develop in a timely manner and bring into production in a prudent and
businesslike manner all proved developed non-producing reserves and projects
that the Administrative Agent and the Required Lenders have considered in the
determination of the Collateral Value as identified in the Approved Capital and
Operating Budget.
(c)
The Borrower shall ensure that at all times it has available to it, either
through its employees or through independent contractors, petroleum engineers
with appropriate experience and expertise in the proper operation and
development of properties similar to the Mortgaged Properties, the Collateral
Value Properties and the Development Properties.
(d)
From time-to-time, but not less than once each Fiscal Quarter (at the time
described in Section 8.1.1(e)), the Borrower shall deliver to the Administrative
Agent and each Lender a written proposal containing revisions to the Approved
Capital and Operating Budget, including the Approved General and Administrative
Budget, then in effect, showing, among other things, revised projections of
Approved Development Activities for the applicable period following such
revision as prescribed by Section 8.1.1(e), which revisions shall in all
respects be satisfactory to the Administrative Agent. In the event that the
Administrative Agent shall object (within thirty (30) days after receipt) to a
proposed revision, the Borrower shall discuss such objections with the
Administrative Agent and shall further revise and resubmit such proposed
revisions to the Approved Capital and Operating Budget or Approved General and
Administrative Budget, as applicable, until such revised Approved Capital and
Operating Budget or Approved General and Administrative Budget, as applicable,
is in all respects satisfactory to the Administrative Agent. Once approved in
writing by the Administrative Agent, the then existing Approved Capital and
Operating Budget, including the Approved General and
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Administrative Budget, shall be amended and the Approved Capital and Operating
Budget, including the Approved General and Administrative Budget, as revised and
amended shall thereafter replace and supersede the prior Approved Capital and
Operating Budget, including the Approved General and Administrative Budget.
(e)
Promptly after the drilling and completion of each new well drilled on the Oil
and Gas Properties that have been considered in the determination or
redetermination of the Collateral Value, the Borrower shall promptly request
assignments of any interests earned by virtue of such drilling and, within
fifteen (15) days after the earlier to occur of the receipt of such assignments
or sixty (60) days after first production from such well, shall deliver to the
Administrative Agent:
(i)
true and correct copies of any such assignments of record title of the
applicable Oil & Gas Properties into the Borrower or its Subsidiary, as
applicable,
(ii)
true and correct copies of all required Consents and Approvals (including copies
of applications for the relevant Approvals) applicable to such assignments,
(iii)
original, executed and acknowledged counterparts of an Assignment from the
Borrower or its Subsidiary, as applicable, to each Designee (effective not later
than the date of first production from such well),
(iv)
original, executed and acknowledged counterparts of a supplemental Mortgage and
related amendments to financing statements and
(v)
except to the extent that a title opinion acceptable to the Administrative Agent
has previously been delivered to the Administrative Agent, a favorable
mortgagee’s title opinion showing that the Borrower or its Subsidiary, as
applicable, is vested with good and marketable title to interests in the
applicable Mortgaged Property consistent with the working interests and net
revenue interest for such property shown in the most recent Engineering Report
and showing that the interests created by such supplemental Mortgage constitute
valid first Liens thereon, free and clear of all defects and encumbrances other
than as approved by the Administrative Agent,
in each case in form and substance satisfactory to the Administrative Agent.
With respect to each of the covenants of the Borrower in this Section 8.1.3, in
the case of Oil and Gas Properties not operated by the Borrower or a Subsidiary,
the Borrower shall use all reasonable efforts to cause the operator of such Oil
and Gas Properties to
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take all such actions as would permit the Borrower to be in compliance with this
Section 8.1.3.
SECTION 8.1.4
Insurance. The Borrower will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained with responsible insurance companies
insurance with respect to its properties and business against such casualties
and contingencies and of such types and in such amounts as is customary in the
case of similar businesses (including, where appropriate, well control,
operator’s extra expense and remediation insurance) and will furnish to the
Administrative Agent at reasonable intervals at the request of the
Administrative Agent a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section 8.1.4. The following shall
apply to the insurance required by this Section 8.1.4:
(a)
Each policy for property insurance covering the Mortgaged Property shall show
the Administrative Agent, for the benefit of the Lenders, as loss payee;
provided, that in the event that an insurer pays to the Administrative Agent any
amount in respect of a claimed loss under such insurance policy, the
Administrative Agent shall, in its discretion, either apply such amount against
the outstanding amount of any Loans or other Obligations or pay over such amount
to the Borrower; and provided further, that in the event that the insured loss
was of surface equipment only necessary or useful in the production, treatment
or transportation of Hydrocarbons produced from the Mortgaged Properties, then,
if no Default shall have occurred and be continuing, the Administrative Agent
shall permit such insurance proceeds to be used for the repair or replacement of
such surface equipment and the excess proceeds, if any, shall be applied as a
mandatory prepayment of outstanding Loans or other Obligations;
(b)
Each policy for liability insurance covering the Mortgaged Property shall show
the Administrative Agent, for the benefit of the Lenders, as additional insured;
(c)
Each insurance policy covering the Mortgaged Property shall provide (i) that at
least thirty (30) days’ prior written notice of cancellation, reduction in
amount or other change in coverage, or of lapse shall be given to the
Administrative Agent by the insurer, and (ii) other standard mortgagee
endorsements acceptable to the Administrative Agent; and
(d)
The Borrower shall, if so requested by the Administrative Agent, deliver to the
Administrative Agent the original or a certified copy of each insurance policy
covering the Mortgaged Property.
SECTION 8.1.5
Books and Records. The Borrower will, and will cause each of its Subsidiaries
to, keep books and records which accurately reflect all of its material business
affairs and transactions and permit the Administrative Agent, on behalf of each
Lender, or any of their respective representatives, at reasonable times (but in
any event, within twenty four (24) hours after notice from the Administrative
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Agent and during all normal business hours) and at reasonable intervals, to
visit all of its offices, to discuss its financial matters with its officers,
directors and, after twenty-four (24) hours notice to the Borrower and
independent public accountant (and the Borrower hereby authorizes such
independent public accountant to discuss the Borrower’s and its Subsidiaries’
financial matters with the Administrative Agent and each Lender or their
representatives whether or not any representative of the Borrower is present)
and to examine (and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records. The Borrower shall pay any
reasonable fees of such independent public accountant incurred in connection
with the Administrative Agent’s or any Lender’s exercise of its rights pursuant
to this Section. Furthermore, the Borrower will permit the Administrative
Agent, or its agents, at the cost and expense of the Borrower, to enter upon the
Oil and Gas Properties and all parts thereof, for the purpose of investigating
and inspecting the condition and operation thereof, and shall permit reasonable
access to the field offices and other offices, including the principal place of
business, of the Borrower to inspect and examine the Oil and Gas Properties;
provided, however, in the absence of any negligence, gross negligence or willful
misconduct on the part of Borrower, any of its Subsidiaries and their agents and
representatives, and notwithstanding the provisions of Section 11.4, the
Administrative Agent assumes sole responsibility for loss, damage or personal
injury of its representatives and agents in connection with their inspection of
any Property of Borrower or its Subsidiaries so visited and inspected, the
access and egress thereto, and any vice or defect therein or thereon, and
assumes all responsibility for and hereby releases Borrower and each Subsidiary,
and their officers, directors, employees and agents against any such claim for
damage or injury to or by Lender (or the representatives thereof) of to
Borrower’s or its Subsidiaries’ Property. Notwithstanding the foregoing,
neither Borrower nor any of its Subsidiaries shall be required to disclose to
the Administrative Agent or any Lender or any agents or representative thereof
any written material which is the subject of attorney-client privilege or
attorney’s work product privilege properly asserted by the applicable Person to
prevent the loss of such privilege in connection with such information.
SECTION 8.1.6
Environmental Covenant. The Borrower will, and will cause each of its
Subsidiaries to,
(a)
use, operate and maintain all of its facilities and Properties in compliance
with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in compliance therewith, and handle all Hazardous
Materials in compliance with all applicable Environmental Laws, in each case,
where failure to do so would be expected to have a Material Adverse Effect;
(b)
(i) promptly notify the Administrative Agent, and if requested by the
Administrative Agent, and provide copies of all written claims, complaints,
notices or inquiries from any Government Agency relating to the condition of its
facilities and Properties or compliance with Environmental Laws, (ii) use all
reasonable efforts within ninety (90) days to have dismissed with prejudice any
actions or proceedings relating to compliance with Environmental Laws which
would or
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could in the reasonable opinion of the Administrative Agent have a Material
Adverse Effect, and (iii) diligently pursue cure of any material underlying
environmental problem which forms the basis of any such claim, complaint, notice
or inquiry;
(c)
provide such information and certifications which the Administrative Agent may
request from time to time to evidence compliance with this Section 8.1.6,
including environmental assessments or reports; and
(d)
promptly take all such actions, whether remedial or otherwise, as may be from
time to time requested or directed to be taken by the Administrative Agent or
any Government Agency to correct or remedy any condition identified in any Phase
1 environmental site assessment delivered in connection with this Agreement and
diligently pursue the completion of all such actions to the satisfaction of the
Administrative Agent or any Government Agency.
With respect to each of the covenants of the Borrower in this Section 8.1.6, in
the case of Oil and Gas Properties not operated by the Borrower or a Subsidiary,
the Borrower shall use all reasonable efforts to cause the operator of such Oil
and Gas Properties to take all such actions as would permit the Borrower to be
in compliance with this Section 8.1.6.
SECTION 8.1.7
Further Assurances.
(a)
The Borrower shall, and shall cause each of its Subsidiaries to, upon the
request of the Administrative Agent, take such actions and execute and deliver
such documents and instruments as the Administrative Agent shall require to
ensure that the Administrative Agent shall, at all times, have received
currently effective, duly executed Loan Documents encumbering Oil and Gas
Properties of the Borrower and its Subsidiaries constituting ninety percent
(90%) of value of the Proven Reserves to which value is given in the
determination of the then current Collateral Value (with accompanying letters in
lieu of transfer orders) and satisfactory title evidence in form and substance
acceptable to the Administrative Agent in its reasonable business judgment as to
ownership of such Oil and Gas Properties; provided that, upon thirty (30) days
notice to the Borrower, the Administrative Agent may require, and the Borrower
and/or its Subsidiaries, as applicable, shall execute, acknowledge and deliver
to the Administrative Agent, Mortgages effectively encumbering one hundred
percent (100%) of the Oil and Gas Properties of the Borrower and its
Subsidiaries (x) to which value is given in the determination of the then
current Collateral Value, and (y) where the expense of preparing and recording
such Mortgage in any particular county or parish is not more than the value
referred to the clause (x) for such Oil and Gas Properties located in such
county or parish, and a lock box agreement satisfactory in form and substance to
the Administrative Agent pertaining to the collection of revenues from such Oil
and Gas Properties.
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(b)
If the Administrative Agent shall determine that, as of the date of any
Collateral Value Redetermination, the Borrower or any of its Subsidiaries shall
have failed to comply with the preceding subsection 8.1.7(a), the Administrative
Agent may notify the Borrower in writing of such failure and, within thirty (30)
days from and after receipt of such written notice by the Borrower, the Borrower
or its Subsidiaries (as applicable) shall execute and deliver to the
Administrative Agent supplemental or additional Loan Documents, in form and
substance satisfactory to the Administrative Agent and its counsel, securing
payment of the Notes and the other Obligations and covering additional assets
not then encumbered by any Loan Documents (together with current valuations,
Engineering Reports, and title evidence applicable to the additional assets
collaterally assigned and such other documents as the Administrative Agent may
require, including opinions of counsel, each of which shall be in form and
substance satisfactory to the Administrative Agent) such that the Administrative
Agent shall have received currently effective duly executed Loan Documents
encumbering Oil and Gas Properties constituting at least ninety percent (90%)
(or, as provided in Subsection 8.1.7(a), one hundred percent (100%)) of the
value of the Proven Reserves of the Borrower and its Subsidiaries to which value
is given in the determination of the then current Collateral Value (with
accompanying letters in lieu of transfer orders) and satisfactory title evidence
in form and substance acceptable to the Administrative Agent in its reasonable
business judgment as to ownership of such Oil and Gas Properties.
(c)
Once each Fiscal Quarter, the Borrower shall, and shall cause each of its
Subsidiaries to, deliver duly executed and acknowledged counterparts of the
Assignment as are necessary to ensure that the Designee shall have received the
Overriding Royalty Interests in all of the Oil and Gas Properties required by
Section 3.5.
(d)
The Borrower shall ensure that all written information, exhibits, certificates
and reports furnished by or on behalf of the Borrower to the Administrative
Agent or any Lender do not and will not contain any untrue statement of a
material fact and do not and will not omit to state any material fact or any
fact necessary to make the statements contained therein not misleading in light
of the circumstances in which made, and will promptly disclose to the
Administrative Agent and correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgment or
recordation thereof.
(e)
The Borrower shall, and shall cause each of its Subsidiaries to, cause each
Person that becomes a Subsidiary after the Effective Date to deliver to the
Administrative Agent a duly executed counterpart of a Guaranty and Security
Agreement, substantially in the form of Exhibit E and Exhibit C, respectively.
SECTION 8.1.8
Hydrocarbon Hedging. At all times prior to the Stated Maturity Date, the
Borrower will maintain the natural gas and crude oil Hedging
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Agreements in the amounts set forth on Schedule IV hereto and with the Approved
Hedge Counterparties that are party to such Hedge Agreements on or prior to the
Effective Date and such other natural gas and crude oil Hedging Agreements with
Approved Hedge Counterparties on terms and prices as may be reasonably
satisfactory to the Administrative Agent.
SECTION 8.1.9
Lockbox Agreement. Upon request by the Administrative Agent, the Borrower shall
deliver to Administrative Agent counterparts of a Lockbox Agreement, duly
executed by the Borrower and each of its Subsidiaries.
SECTION 8.1.10
Subsidiary Disposition. With respect to each Subsidiary of the Borrower, no
later than the six (6) month anniversary of the Effective Date, the Borrower
shall either (a) wind up, dissolve or otherwise dispose of any such Subsidiary
or Subsidiaries, (b) merge any such Subsidiary or Subsidiaries with and into the
Borrower where the Borrower is the surviving entity in accordance with Section
8.2.8, or (c) deliver a Pledge Agreement pledging 100% of the Borrower’s
interest in the Capital Stock of such Subsidiary or Subsidiaries, together with
the certificates, undated stock powers and other documents, instruments and
filings described in Section 6.1.4, and cause each such Subsidiary to deliver a
Guaranty, a Security Agreement and, if the Subsidiary owns or holds any Capital
Stock in another Person, a Pledge Agreement with respect to all such Capital
Stock, along with any other related documents otherwise required to be delivered
by the Borrower in connection with the Pledge Agreements described above or in
connection with the delivery of its Security Agreement as described in Section
6.1.5 and any other related Security Documents that the Administrative Agent
shall reasonably request related to any such Subsidiary that is not otherwise
dissolved, sold, merged into the Borrower or otherwise disposed pursuant to
clause (a) or (b) above; provided that if a Subsidiary qualifies as a Material
Subsidiary at any time prior to such six month anniversary date, the Borrower
and such Subsidiary shall promptly comply with the terms and conditions of
clause (c) above.
SECTION 8.2.
Negative Covenants. The Borrower agrees with the Administrative Agent and each
Lender that, until all Commitments have terminated and all Obligations have been
indefeasibly paid and performed in full, the Borrower will perform the
obligations set forth in this Section 8.2.
SECTION 8.2.1
Business Activities. The Borrower will not, and will not permit its
Subsidiaries to, engage in any business activity, except those described in the
first recital.
SECTION 8.2.2
Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or
be liable in respect of any Indebtedness, other than, without duplication, the
following:
(a)
Indebtedness in respect of the Loans and other Obligations;
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(b)
Indebtedness in an aggregate principal amount not to exceed $50,000 at any time
outstanding which is incurred by the Borrower or any Subsidiary that complies
with the requirements of Section 8.1.10(c) (each such Subsidiary a “Qualified
Subsidiary”) to a vendor of any assets to finance its acquisition of such
assets;
(c)
unsecured Indebtedness of the Borrower and any Qualified Subsidiary incurred in
the ordinary course of business (including (i) open accounts extended by
suppliers on normal trade terms in connection with purchases of goods and
services, and (ii) gas balancing, but excluding Indebtedness incurred through
the borrowing of money or Contingent Liabilities);
(d)
Hedging Obligations incurred pursuant to the Hedging Agreements approved by the
Administrative Agent pursuant to Sections 6.1.18 and 8.1.8 and made subject to
the Intercreditor Agreement;
(e)
Contingent Liabilities of the Borrower and any Qualified Subsidiary incurred to
satisfy bonding requirements imposed by any Government Agency not to exceed, in
the aggregate, $200,000;
(f)
Indebtedness of its Subsidiaries existing as of the Effective Date which is
identified in Item 8.2.2(f) of the Disclosure Schedule;
(g)
Indebtedness in respect of Capitalized Lease Liabilities and leases
substantially equivalent to title retention or conditional sales agreements of
the Borrower and any Qualified Subsidiary, in an aggregate amount not to exceed
$100,000 at any time outstanding;
(h)
Indebtedness owed by the Borrower to any Qualified Subsidiary or by any
Qualified Subsidiary of the Borrower to the Borrower or any other Qualified
Subsidiary;
(i)
endorsements of negotiable instruments for collection in the ordinary course of
business;
(j)
Indebtedness of the Borrower and any Qualified Subsidiary which are Investments
to the extent permitted by Section 8.2.5(b);
(k)
subordinated Indebtedness of Borrower to any of its Shareholders which contains
terms and conditions, including subordination provisions, acceptable to the
Administrative Agent;
(l)
Indebtedness of the Borrower and any Qualified Subsidiary for current taxes and
deferred taxes not delinquent or being contested in good faith and by
appropriate proceedings; provided that the total amount of such taxes being
contested shall not exceed $100,000 in the aggregate at any one time
outstanding; and
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(m)
unsecured Indebtedness of the Borrower with respect to convertible notes or
other similar debt instruments issued by the Borrower and in existence prior to
the Effective Date as identified in Item 8.2.2(m) of the Disclosure Schedule, in
each case solely to the extent that such debt instruments are convertible or
exchangeable into common stock of the Borrower; provided that at all times
during this Agreement, the stated principal maturity date of such Indebtedness
shall be after the Stated Maturity Date; and
(n)
additional Indebtedness of the Borrower and any of its Qualified Subsidiaries
not permitted by clauses (a) through (l) above, provided, however, that the
aggregate amount of all Indebtedness incurred by the Borrower and, if
applicable, any of its consolidated Qualified Subsidiaries pursuant to this
clause (m) shall not exceed $50,000 at any one time outstanding;
provided, however, that no Indebtedness otherwise permitted by clause (b) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION 8.2.3
Liens. The Borrower will not, and will not permit any of the Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its Property,
revenues or assets, whether now owned or hereafter acquired, except:
(a)
Liens securing payment of the Obligations, granted pursuant to any Loan
Document;
(b)
Liens granted to secure payment of Indebtedness of the type permitted and
described in clause (b) of Section 8.2.2 and covering only those assets financed
with the proceeds of such Indebtedness (together with receivables and
intangibles related to such property or assets, and the proceeds and products
thereof);
(c)
Liens arising under Hydrocarbon production sales contracts entered into by the
Borrower or any of its Qualified Subsidiaries in the ordinary course of
business;
(d)
Liens for taxes, assessments or other governmental charges or levies not at the
time delinquent or thereafter payable without penalty by the Borrower and its
Subsidiaries, or with respect to the Borrower and any of its Qualified
Subsidiaries, being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;
(e)
Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred
by the Borrower and its Subsidiaries in the ordinary course of business for sums
not more than sixty (60) days overdue or with respect to the Borrower and any of
its Qualified Subsidiaries being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books; provided, that at no time shall
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such sums being contested exceed in the aggregate $50,000, unless the Borrower
has set aside segregated cash reserves in the amount equal to or greater than
the amount then subject to such contest;
(f)
Liens incurred in the ordinary course of business by the Borrower or its
Subsidiaries in connection with workmen’s compensation, unemployment insurance
or other forms of governmental insurance or benefits (other than ERISA), or with
respect to the Borrower and any of its Qualified Subsidiaries to secure
performance of bonds, licenses, statutory obligations, and performance bonds,
tenders, statutory obligations, leases and contracts (other than for borrowed
money), all other obligations of a like nature entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds and all
other obligations of a like nature;
(g)
zoning and similar covenants, restrictions, easements, servitudes, permits,
conditions, exceptions, reservations, minor rights, minor encumbrances, minor
irregularities in title or conventional rights of reassignment prior to
abandonment and similar restrictions and other similar encumbrances or title
defects which do not materially interfere with the occupation, use and enjoyment
by the Borrower of its assets in the ordinary course of business as presently
conducted, or materially impair the value thereof for the purpose of such
business;
(h)
judgment Liens in existence less than thirty (30) days after the entry thereof
or with respect to which execution has been stayed or the payment of which is
covered in full (subject to a customary deductible) by insurance maintained with
responsible insurance companies;
(i)
deposits of cash to secure insurance in the ordinary course of business;
(j)
banker’s liens incurred by the Borrower and any of its Qualified Subsidiaries
arising by operation of law securing fees and costs of such banks, but not liens
securing borrowed money;
(k)
Liens in favor of operators and non-operators under joint operating agreements,
pooling or unitization agreements or similar contractual arrangements arising in
the ordinary course of the business of the Borrower to secure amounts owing,
which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall have
been made therefor;
(l)
production sales agreements, division orders, operating agreements and other
agreements customary in the oil and gas business for producing, processing,
gathering, transporting and selling Hydrocarbons entered into by the Borrower
and any of its Qualified Subsidiaries;
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(m)
Liens of the Borrower arising under the terms of any provisions of the leases,
unit agreements, assignments and other transfer of title documents in the chain
of title under which the Borrower acquired the relevant Properties;
(n)
any Liens securing Indebtedness, neither assumed nor guaranteed by the Borrower
nor on which it customarily pays interest, existing upon real estate or rights
in or relating to real estate acquired by the Borrower for substation, metering
station, pump station, storage, gathering line, transmission line,
transportation line, distribution line, or right of way purposes, and any Liens
reserved in leases for rent and compliance with the terms of the leases in the
case of leasehold estates, so long as no default has occurred in the payment or
performance thereof, and to the extent that any such Lien referred to in this
clause does not materially impair the use of the Properties covered by such Lien
for the purposes for which such Properties is held by the Borrower;
(o)
the statutory Lien to secure payment of the proceeds of Hydrocarbon production
established by Texas Bus. & Com. Code §9. 343 and similar laws of other
jurisdictions;
(p)
rights reserved to or vested in any Government Agency by the terms of any right,
power, franchise, grant, license, or permit, or by any provision of law, to
terminate such right, power, franchise, grant, license, or permit or to
purchase, condemn, expropriate, or recapture or to designate a purchaser of any
of the Properties of the Borrower;
(q)
rights of a common owner of any interest in real estate, rights of way, or
easements held by the Borrower and such common owner as tenant in common or
through other common ownership;
(r)
any Lien existing on any property or asset prior to the acquisition thereof by
the Borrower or any of its Qualified Subsidiaries or existing on any property or
asset of any Person that is acquired after the date hereof and becomes a
Qualified Subsidiary prior to the time such Person becomes a Subsidiary;
provided that (i) such Lien is not created in contemplation of or in connection
with such acquisition or such Person becoming a Subsidiary, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the Borrower
or any Subsidiary and (iii) such Lien shall secure only those obligations which
it secures on the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be;
(s)
any interest or title of a lessor under any lease of personal property entered
into by the Borrower or any of its Qualified Subsidiaries in the ordinary course
of its business and covering only the assets so leased; and
(t)
[Reserved.]
(u)
as disclosed in the Disclosure Schedule.
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SECTION 8.2.4
Financial Condition. The Borrower will not permit, on or at any time after the
Effective Date:
(a)
the Current Ratio at any time to be less than 1.0:1.0;
(b)
the Debt to EBITDA Ratio, as of the end of any Fiscal Quarter beginning with the
Fiscal Quarter ending on January 31, 2007, to be greater than 3.5:1.0;
(c)
the Interest Coverage Ratio, as of the end of any Fiscal Quarter beginning with
the Fiscal Quarter ending on January 31, 2007, to be less than 2.5:1.0; or
(d)
G&A Expenses to exceed $575,000 in any Fiscal Quarter, in each case, in
accordance with the Approved General and Administrative Budget; provided,
however, that (i) if on any date of determination, the Debt to EBITDA Ratio
shall be less than or equal to 3:25:1.0 and the Interest Coverage Ratio shall be
greater than or equal to 3.0:1.0, then as of the next Scheduled Redetermination,
G&A Expenses permitted hereunder shall be increased by $75,000 for each Fiscal
Quarter thereafter and the then applicable Approved General and Administrative
Budget shall be revised accordingly to reflect such increase, and (ii) if on any
date of determination, the Debt to EBITDA Ratio shall be less than or equal to
3:00:1.0 and the Interest Coverage Ratio shall be greater than or equal to 3:0
to 1:0, then as of the next Scheduled Redetermination, G&A Expenses permitted
hereunder shall be increased by an additional $100,000 for each Fiscal Quarter
thereafter and the then applicable Approved General and Administrative Budget
shall be revised accordingly to reflect such additional increase; provided,
further, that the maximum G&A Expenses permitted hereunder shall at no time
exceed $750,000 in any Fiscal Quarter.
The Borrower shall not, and shall not suffer or permit any Subsidiary to, make
any significant change in accounting treatment or reporting practices, except as
required by GAAP, or, without the consent of the Administrative Agent, change
the fiscal year of the Borrower or of any Subsidiary.
SECTION 8.2.5
Investments. The Borrower will not, and will not permit any of its Subsidiaries
to, make, incur, assume or suffer to exist any Investment in any other Person,
except:
(a)
Cash Equivalent Investments by the Borrower and any of its Qualified
Subsidiaries;
(b)
without duplication, Investments by the Borrower and any of its Qualified
Subsidiaries permitted as Indebtedness pursuant to Section 8.2.2;
(c)
advances to operators pursuant to cash calls by the operator under typical
provisions of joint operating agreements, not to exceed in any particular
instance (i) the amount of the Borrower’s applicable working interest share of
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capital costs to be incurred by such operator in the next thirty (30) days, or
(ii) the amount of an cash call by an operator under an operating agreement for
drilling or completing a well, if such well and amount are shown in the then
Approved Capital and Operating Budget, or (iii) if any other amount is shown in
the then Approved Capital and Operating Budget, the amount shown in the then
Approved Capital and Operating Budget for the applicable Approved Development
Activity, in no event to exceed, in any instance, $100,000;
(d)
non-cash proceeds from sales of assets permitted under this Agreement; provided
that, the aggregate value of all such non-cash proceeds shall not exceed
$50,000;
(e)
without duplication, Investments in the nature of Capital Expenditures by the
Borrower and any of its Qualified Subsidiaries;
(f)
to the extent the existence, formation or acquisition of any Subsidiary is
permitted hereunder, Investments in Qualified Subsidiaries of the Borrower; and
(g)
Investments permitted by Section 8.2.8; provided, however, that
(x)
any Investment which when made complies with the requirements of the definition
of the term “Cash Equivalent Investment” may continue to be held notwithstanding
that such Investment if made thereafter would not comply with such requirements;
and
(y)
no Investment otherwise permitted by clause (b) shall be permitted to be made
if, immediately before or after giving effect thereto, any Default shall have
occurred and be continuing.
SECTION 8.2.6
Restricted Payments, etc. At all times after the Effective Date:
(a)
the Borrower will not, and will not permit any of its Subsidiaries (other than a
Qualified Subsidiary which is wholly-owned on a fully diluted basis) to,
declare, pay or make any dividend or distribution (in cash, property or
obligations) on any class of equity (now or hereafter outstanding) of the
Borrower or such Qualified Subsidiary or on any options, warrants or other
rights with respect to any interest or shares of any class of Capital Stock (now
or hereafter outstanding) of the Borrower or such Qualified Subsidiary or apply
any of its funds, property or assets to the purchase, redemption, sinking fund
or other retirement of, any class of Capital Stock (now or hereafter
outstanding) of the Borrower or such Qualified Subsidiaries, or options,
warrants or other rights with respect to any interest or shares of or in any
class of Capital Stock (now or hereafter outstanding) of the Borrower or such
Qualified Subsidiary (such dividends, distributions or applications being called
“Distribution Payments”); and
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(b)
the Borrower will not permit any Subsidiary to make any Distribution Payments
other than to the Borrower; and
(c)
the Borrower will not, and will not permit its Subsidiaries to, make any deposit
for any of the foregoing purposes;
provided, however, that each of the foregoing notwithstanding, the Borrower
shall be permitted to make a Distribution Payment to the applicable Government
Agencies for the payment of Federal or State income tax obligations that arise
as a result of the Borrower’s income generated from the Collateral Value
Properties (such liability subject to the independent verification and approval
of the Administrative Agent) as calculated pursuant to a tax rate mutually
agreed upon by the Borrower and the Administrative Agent in their reasonable
discretion and provided that no Default shall have occurred and be continuing.
SECTION 8.2.7
Rental Obligations. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into at any time any arrangement (excluding oil and gas
leases entered into in the ordinary course of business) which involves the
leasing by the Borrower or any Subsidiary from any lessor of any real or
personal property (or any interest therein), except for the renewal of, or the
entering of a new leasing arrangement in replacement of, the current leased
space of the Borrower and its Subsidiaries which is identified in Item 8.2.7
(“Rental Obligations”) of the Disclosure Schedule and arrangements which,
together with all other such arrangements which shall then be in effect, will
not require the payment of an aggregate amount of rentals by the Borrower and
any of its Qualified Subsidiaries in excess of (excluding escalations resulting
from a rise in the consumer price or similar index) $250,000 for any Fiscal
Year, including any so-called “synthetic lease”; provided, however, that any
calculation made for purposes of this Section 8.2.7 shall exclude any amounts
(i) required to be expended for maintenance and repairs, insurance, taxes,
assessments, and other similar charges and (ii) any amounts relating to
Capitalized Lease Liabilities.
SECTION 8.2.8
Consolidation, Merger, etc. The Borrower will not, and will not permit any of
its Subsidiaries to, liquidate or dissolve (except as specifically permitted
pursuant to Section 8.1.10(a) with respect to Subsidiaries of the Borrower in
existence on the Effective Date), consolidate with, or merge into or with, any
other partnership, company or corporation, unless, in the case of such
consolidation or merger, (i) the Borrower or another wholly-owned Qualified
Subsidiary of the Borrower is the surviving entity, and (ii) no Default
(including a Change in Control) exists and is continuing or occurs as a result
of such consolidation or merger. The Borrower will not create any Subsidiary
except with the prior written consent of the Administrative Agent.
SECTION 8.2.9
Asset Dispositions, etc. The Borrower will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant
options, warrants or other rights with respect to, all or substantially all of
the assets of the Borrower or any of its Subsidiaries (except as specifically
permitted pursuant to Section 8.1.10(a)) in any one transaction or in any series
of transactions, whether or not related, except that, if at the time thereof and
immediately after giving
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effect thereto no Default shall have occurred and be continuing, any Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to the Borrower or
any Qualified Subsidiary. The Borrower will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant
options, warrants (or other rights with respect to), less than all or any
substantial part of its assets (including accounts receivable and including any
assets sold and then leased pursuant to a “sale/leaseback” transaction) to any
Person other than
(a)
equipment which is worthless or obsolete or which is replaced by equipment of
equal suitability and value;
(b)
inventory (including Hydrocarbons sold as produced) which is sold for cash only
in the ordinary course of business on ordinary trade terms;
(c)
farmouts of the Borrower and any of its Qualified Subsidiaries under standard
industry terms of Properties not holding Proven Reserves;
(d)
abandonment of Properties of the Borrower and any of its Qualified Subsidiaries
not capable of producing Hydrocarbons in paying quantities after the expiration
of their primary terms;
(e)
as permitted by Section 2.7 of the Mortgage; and
(f)
sales of Oil and Gas Properties of the Borrower and any of its Qualified
Subsidiaries under standard industry terms, but only if the Net Sales Proceeds,
when added to the aggregate amount of Net Sales Proceeds from all other sales
that may have occurred during the most recent six-month period, does not exceed
$100,000, and if such sale does not create a Collateral Value Deficiency, and
subject to the provisions of Section 3.1.2;
provided, however, that
(x)
if such assets are not Collateral Value Properties or Development Properties,
such transfer, lease, contribution or conveyance is for cash or other
consideration having a value at least equal to the fair market value of such
assets;
(y)
if such assets are Collateral Value Properties or Development Properties, the
Borrower complies with the terms of Section 3.1.2 and such sale, transfer,
lease, contribution or conveyance is for cash in an amount at least equal to the
fair market value of such assets; and
(z)
no sale, transfer, lease or other disposition shall be permitted after the
occurrence and during the continuance of a Default.
SECTION 8.2.10
Modification of Certain Documents. Except with respect to amendments to
Material Contracts that could not be expected to have a Material
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Adverse Effect on the rights of Administrative Agent, any Lender or any Designee
under the Loan Documents, the Borrower will not amend its Organic Documents or
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, the Material Contracts, in each
case without the prior written consent of the Administrative Agent.
SECTION 8.2.11
Transactions with Affiliates. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of its other Affiliates unless such arrangement
or contract is fair and equitable to the Borrower and is an arrangement or
contract of the kind which would be entered into by a prudent Person in the
position of the Borrower or such Subsidiary with a Person which is not one of
its Affiliates; provided however, that the Borrower will in no event assign,
convey, sell, or otherwise transfer any of its Property to any Subsidiary other
than a Qualified Subsidiary in compliance with the terms and conditions of this
Agreement.
SECTION 8.2.12
Negative Pledges, Restrictive Agreements, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any agreement (excluding this
Agreement, any other Loan Document and any agreement governing any Indebtedness
permitted by clauses (b) or (e) of Section 8.2.2 as in effect on the Effective
Date as to the assets financed with the proceeds of such Indebtedness)
prohibiting
(a)
the creation or assumption of any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired (other than those assets subject to
Liens permitted by Section 8.2.3(b) and (s)), or the ability of the Borrower or
any other Obligor to amend or otherwise modify this Agreement or any other Loan
Document; or
(b)
the ability of any Subsidiary to make any payments, directly or indirectly, to
the Borrower by way of dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges, expenses and
accruals or other returns on investments, or any other agreement or arrangement
which restricts the ability of any such Subsidiary to make any payment, directly
or indirectly, to the Borrower.
SECTION 8.2.13
Take or Pay Contracts. Except as disclosed to the Administrative Agent and each
Lender in Item 8.2.13 of the Disclosure Schedule, and except for reservation
charges payable for reservations of capacity in gathering systems and pipelines
incurred in the ordinary course of business on an arm’s length basis for volumes
expected to be produced from the Borrowers’ Properties to be transported through
such systems and pipelines, the Borrower will not, and will not permit any of
its Subsidiaries to, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property (including without limitation
Hydrocarbons), or services if such arrangement requires that payment be made by
the Borrower or such Subsidiary regardless of whether such materials, supplies,
other property, or services are delivered or furnished to it.
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ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1.
Listing of Events of Default. Each of the following events or occurrences
described in this Section 9.1 shall constitute an “Event of Default”.
SECTION 9.1.1
Non-Payment of Obligations. The Borrower shall default in the payment or
prepayment when due of any principal of any Loan; the Borrower shall default in
the payment when due of any Hedging Obligation under a Hedging Agreement in
effect between the Borrower (or any Affiliate of the Borrower) and a Lender (or
any Affiliate of a Lender); or the Borrower or any other Obligor shall default
in the payment when due of any interest on any Loan or in the payment when due
of any fee or of any other Obligation.
SECTION 9.1.2
Breach of Warranty. Any representation or warranty of the Borrower or any other
Obligor made or deemed to be made hereunder or in any other Loan Document
executed by it or any other writing or certificate furnished by or on behalf of
the Borrower or any other Obligor to the Administrative Agent or any Lender for
the purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered pursuant to Article VI) is or
shall be false, misleading or incorrect in any material respect when made or
deemed made.
SECTION 9.1.3
Non-Performance of Certain Covenants and Obligations. The Borrower shall
default in the due performance and observance of any of its obligations under
Section 3.1.2, Section 8.1 (other than 8.1.2 and 8.1.6) or Section 8.2.
SECTION 9.1.4
Non-Performance of Other Covenants and Obligations. The Borrower or any other
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of thirty (30) days after
notice thereof shall have been given to the Borrower by the Administrative
Agent.
SECTION 9.1.5
Default on Other Indebtedness.
(a)
A default shall occur in the payment when due (subject to any applicable grace
period), whether by acceleration or otherwise, of any Indebtedness (including
any subordinated indebtedness permitted by Section 8.2.2, and any Hedging
Agreements, but excluding Indebtedness and Hedging Agreements described in
Section 9.1.1) of the Borrower, any Subsidiary or other Obligor having a
principal amount, individually or in the aggregate, in excess of $25,000, or a
default shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness if the effect of such default is to
accelerate the maturity of any such Indebtedness or such default shall continue
unremedied for any applicable period of time sufficient to permit any holder of
such Indebtedness, or any trustee or agent for such holders, to
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cause such Indebtedness to become due and payable prior to its expressed
maturity.
(b)
A failure to pay when due any royalty, overriding royalty or similar interest
burdening the Oil and Gas Properties of the Borrower or any of its Subsidiaries
(but excluding such payment included in Section 9.1.1), in the aggregate, in
excess of $25,000.
(c)
The Borrower or any of its Subsidiaries shall commit a breach of, or shall
default under, any Material Contract, subject to any applicable grace period.
SECTION 9.1.6
Judgments. Any final, non-appealable judgment, decree, arbitration award or
order for the payment of money in excess of $50,000 (individually or in the
aggregate for all such judgments, decrees, arbitration awards or orders) in
excess of valid and collectible insurance in respect thereof the payment of
which is not in good faith being disputed or contested by the insurer or
insurers shall be rendered against the Borrower, any Subsidiary, or other
Obligor and either
(a)
enforcement proceedings shall have been commenced by any creditor upon any such
judgment, decree, award or order; or
(b)
there shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment, decree, award or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 9.1.7
Pension Plans. Any of the following events shall occur with respect to any
Pension Plan
(a)
the institution of any steps by the Borrower, any member of its Controlled Group
or any other Person to terminate a Pension Plan if, as a result of such
termination, the Borrower or any such member could be required to make a
contribution to such Pension Plan, or could expect to incur a liability or
obligation to such Pension Plan; or
(b)
a contribution failure occurs with respect to any Pension Plan sufficient to
give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8
Control of the Borrower. Any Change in Control shall occur.
SECTION 9.1.9
Bankruptcy, Insolvency, etc. The Borrower or any other Obligor shall
(a)
become insolvent or generally fail to pay, or admit in writing its inability or
unwillingness to pay, debts as they become due;
(b)
apply for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any other Obligor or
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any property of any thereof, or make a general assignment for the benefit of
creditors;
(c)
in the absence of such application, consent or acquiescence, permit or suffer to
exist the appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or any other Obligor or for a substantial part of the property
of any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within sixty (60) days, provided that the Borrower and
each other Obligor hereby expressly authorizes the Administrative Agent and each
Lender to appear in any court conducting any relevant proceeding during such
60-day period to preserve, protect and defend its or their rights under the Loan
Documents;
(d)
permit or suffer to exist the commencement of any bankruptcy, reorganization,
debt arrangement or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution, winding up or liquidation proceeding, in respect of the
Borrower or any other Obligor, and, if any such case or proceeding is not
commenced by the Borrower or such other Obligor, such case or proceeding shall
be consented to or acquiesced in by the Borrower or such other Obligor or shall
result in the entry of an order for relief or shall remain for sixty (60) days
undismissed, provided that the Borrower and each other Obligor hereby expressly
authorizes the Administrative Agent and each Lender to appear in any court
conducting any such case or proceeding during such 60-day period to preserve,
protect and defend its or their rights under the Loan Documents; or
(e)
take any action authorizing, or in furtherance of, any of the foregoing.
SECTION 9.1.10
Impairment of Security, etc. Any Loan Document, or any Lien granted thereunder,
shall (except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and enforceable
obligation of any Obligor party thereto; the Borrower, any other Obligor or any
other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability or shall disaffirm or
deny any of its obligations under any of the Guaranties; or any Lien securing
any Obligation shall, in whole or in part, cease to be a perfected first
priority Lien, subject only to those exceptions expressly permitted by such Loan
Document.
SECTION 9.1.11
Material Adverse Effect. Any Material Adverse Effect shall occur; provided,
however, that if the Administrative Agent shall determine that such Material
Adverse Effect is one that is susceptible of cure by the Borrower within thirty
(30) days following notice thereof to the Borrower, then after such 30-day
period unless such Material Adverse Effect shall no longer continue at such
time.
SECTION 9.2.
Action if Bankruptcy. If any Event of Default described in clauses (a) through
(d) of Section 9.1.9 shall occur with respect to the Borrower or any
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other Obligor, the Commitments (if not theretofore terminated) shall
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations shall automatically be and become immediately
due and payable, without notice or demand.
SECTION 9.3.
Action if Other Event of Default. If any Event of Default (other than any Event
of Default described in clauses (a) through (d) of Section 9.1.9 with respect
to the Borrower or any other Obligor) shall occur for any reason, whether
voluntary or involuntary, and be continuing, the Administrative Agent, may
declare all or any portion of the outstanding principal amount of the Loans and
other Obligations (other than Hedging Obligations) to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations (other than Hedging
Obligations) which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate.
SECTION 9.4.
Rights Not Exclusive. The rights provided for in this Agreement and the other
Loan Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by Applicable Law or in equity, or under any
other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION 10.1.
Actions. Each Lender hereby appoints Holdings as its Administrative Agent under
and for purposes of this Agreement, the Notes and each other Loan Document, and
Holdings hereby accepts such appointment. Each Lender authorizes the
Administrative Agent to act on behalf of such Lender under this Agreement, the
Notes and each other Loan Document and receive from time to time by the
Administrative Agent (with respect to which the Administrative Agent agrees that
it will comply, except as otherwise provided in this Section and to the extent
such instructions may be expected to comply with applicable law), to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the terms
hereof and thereof, together with such powers as may be incidental thereto;
provided, however, that the Administrative Agent shall not take any action that
requires the consent of any Lender unless it receives such consent. Each Lender
hereby indemnifies (which indemnity shall survive any termination of this
Agreement) the Administrative Agent, pro rata according to such Lender’s
Percentage, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, CLAIMS, COSTS OR EXPENSES OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT
ANY TIME BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST, THE ADMINISTRATIVE
AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE NOTES AND ANY
OTHER LOAN DOCUMENT, INCLUDING REASONABLE ATTORNEYS’ FEES, AND AS TO WHICH THE
ADMINISTRATIVE AGENT IS NOT REIMBURSED BY THE
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BORROWER; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF
ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, CLAIMS, COSTS OR
EXPENSES WHICH ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL
PROCEEDING TO HAVE RESULTED SOLELY FROM THE ADMINISTRATIVE AGENT’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. The Administrative Agent shall not be
required to take any action hereunder, under the Notes or under any other Loan
Document, or to prosecute or defend any suit in respect of this Agreement, the
Notes or any other Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Administrative Agent shall be or
become, in the Administrative Agent’s determination, inadequate, the
Administrative Agent may call for additional indemnification from the Lenders
and cease to do the acts indemnified against hereunder until such additional
indemnity is given.
SECTION 10.2.
Funding Reliance, etc. Unless the Administrative Agent shall have been notified
by telephone, confirmed in writing, by any Lender by 5:00 p.m. (Houston, Texas
time) on the day prior to a Borrowing that such Lender will not make available
the amount which would constitute its Percentage of such Borrowing on the date
specified therefor, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent and, in reliance upon
such assumption, make available to the Borrower a corresponding amount;
provided, however, that the Administrative Agent shall not be obligated to make
available to Borrower any such amount assumed to have been made available. If
and to the extent that such Lender shall not have made such amount available to
the Administrative Agent, such Lender and the Borrower severally agree to repay
the Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date the Administrative Agent made
such amount available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION 10.3.
Exculpation. NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS DIRECTORS,
OFFICERS, EMPLOYEES OR AGENTS SHALL BE LIABLE TO ANY LENDER FOR ANY ACTION TAKEN
OR OMITTED TO BE TAKEN BY IT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
IN CONNECTION HEREWITH OR THEREWITH, EXCEPT FOR ITS OWN WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution of
this Agreement or any other Loan Document, nor for the creation, perfection or
priority of any Liens purported to be created by any of the Loan Documents, or
the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or under any other Loan Document. Any
such inquiry which may be made by the Administrative Agent shall not obligate it
to make any further inquiry or to take any action. The Administrative Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the
Administrative Agent believes to be genuine and to have been presented by a
proper Person.
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SECTION 10.4.
Successor. The Administrative Agent may resign as such at any time upon at
least thirty (30) days’ prior notice to the Borrower and all Lenders, and the
Administrative Agent may be removed with or without cause as such by the
Required Lenders upon at least thirty (30) days’ prior notice to the
Administrative Agent and the Borrower. If the Administrative Agent at any time
shall resign or be removed, the Required Lenders may appoint another Lender as a
successor Administrative Agent which Lender shall thereupon become the
Administrative Agent hereunder. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within thirty (30) days after the giving of notice of resignation
or removal, then the retiring or removed Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be one of the
Lenders and, if no Lender accepts such appointment, a commercial banking
institution organized under the laws of the United States (or any State thereof)
or a United States branch or agency of a commercial banking institution, and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall be entitled to
receive from the retiring or removed Administrative Agent such documents of
transfer and assignment as such successor Administrative Agent may request, and
shall thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring or removed Administrative Agent, and the retiring or
removed Administrative Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent’s
resignation or removal hereunder as the Administrative Agent, the provisions of
this Article X shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Administrative Agent under this Agreement; and
Section 11.3 and Section 11.4 shall continue to inure to its benefit.
SECTION 10.5.
Loans, etc. by NGPC Asset Holdings, LP. Holdings shall have the same rights and
powers with respect to (x) the Loans made by it or any of its Affiliates, and
(y) the Notes held by it or any of its Affiliates, as any other Lender and may
exercise the same as if it were not the Administrative Agent. Holdings and its
Affiliates and each of the Lenders and their respective Affiliates may accept
deposits from, lend money to, and generally engage in any kind of business with
the Borrower or any Subsidiary or Affiliate of the Borrower as if Holdings were
not the Administrative Agent hereunder and in the case of each Lender, as if
such Lender were not a Lender hereunder.
SECTION 10.6.
Credit Decisions. Each Lender acknowledges that it has, independently of the
Administrative Agent, each other Lender, and based on such Lender’s review of
the financial information of the Borrower, this Agreement, the other Loan
Documents (the terms and provisions of which being satisfactory to such Lender)
and such other documents, information and investigations as such Lender has
deemed appropriate, made its own credit decision to extend its Commitments.
Each Lender also acknowledges that it will, independently of the Administrative
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising
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or not exercising from time to time any rights and privileges available to it
under this Agreement or any other Loan Document.
SECTION 10.7.
Copies, etc. The Administrative Agent shall give prompt notice to each Lender
of each notice or request required or permitted to be given to the
Administrative Agent by the Borrower pursuant to the terms of this Agreement
(unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute promptly to each Lender each document or
instrument received for its account and copies of all other communications
received by the Administrative Agent from the Borrower for distribution to the
Lenders by the Administrative Agent in accordance with the terms of this
Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1.
Waivers, Amendments, etc.
(a)
The provisions of this Agreement and of each other Loan Document may from time
to time be amended, modified or waived, if such amendment, modification or
waiver is in writing and consented to by the Borrower and the Administrative
Agent; provided, however, that no such amendment, modification or waiver which
would:
(i)
modify any requirement hereunder that any particular action be taken by all the
Lenders or by the Administrative Agent shall be effective unless consented to by
each Lender;
(ii)
modify any requirement hereunder that any particular action be taken by the
Required Lenders shall be effective unless consented to by the Required Lenders;
(iii)
waive compliance by the Borrower with any covenant under Article VIII or waive
any Default hereunder shall be effective unless consented to by the Required
Lenders;
(iv)
modify this Section 11.1, change the definitions of “Required Lenders,”
“Commitment,” or “Commitment Amount,” increase the Percentage of any Lender,
reduce any fees or change any interest rate described in Article III, amend
Section 8.2.6 or extend the Stated Maturity Date or the Commitment Termination
Date, shall be made without the consent of each Lender affected thereby;
(v)
extend the due date for, or reduce the amount of, any scheduled or mandatory
repayment or prepayment of principal of or interest on any Loan (or reduce the
principal amount of or rate of interest on any Loan) shall be made without the
consent of each Lender affected thereby; or
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(vi)
affect adversely the interests, rights or obligations of the Administrative
Agent in its capacity as the Administrative Agent shall be made without consent
of the Administrative Agent.
No failure or delay on the part of the Administrative Agent or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Borrower in
any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by the Administrative Agent or any Lender
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
(b)
[Reserved.]
SECTION 11.2.
Notices.
(a)
All notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing and shall be hand
delivered or sent by overnight courier, certified mail (return receipt
requested), or telecopy, or by electronic copy with the original promptly hand
delivered or sent by overnight courier or certified mail, to such party at its
address or telecopy number set forth on the signature pages hereof or set forth
in the Lender Assignment Notice or at such other address or telecopy number as
may be designated by such party in a notice to the other parties. Without
limiting any other means by which a party may be able to provide that a notice
has been received by the other party, a notice shall be deemed to be duly
received (a) if sent by hand, on the date when left with a responsible person at
the address of the recipient; (b) if sent by telefax, on the date of receipt by
the sender of an acknowledgment or transmission reports generated by the machine
from which the telefax was sent indicating that the telefax was sent in its
entirety to the recipient’s telefax number.
(b)
All such notices, requests and communications shall, when transmitted by
overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery.
(c)
Any agreement of the Administrative Agent or any Lender herein to receive
certain notices by telephone, electronically or facsimile is solely for the
convenience and at the request of the Borrower. The Administrative Agent or any
Lender shall be entitled to rely on the authority of any Person purporting to be
a Person authorized by the Borrower to give such notice and neither the
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Administrative Agent nor any Lender shall have any liability to the Borrower or
other Person on account of any action taken or not taken by the Administrative
Agent or any Lender in reliance upon such telephonic, electronic or facsimile
notice. The obligation of the Borrower to repay the Loans shall not be affected
in any way or to any extent by any failure by the Administrative Agent or any
Lender to receive written confirmation of any telephonic, electronic or
facsimile notice or the receipt by the Administrative Agent or any Lender of a
confirmation which is at variance with the terms understood by the
Administrative Agent or any Lender to be contained in the telephonic,
electronic` or facsimile notice.
SECTION 11.3.
Payment of Costs and Expenses. The Borrower agrees to pay within thirty (30)
days after written demand all reasonable expenses of the Administrative Agent
and each Lender (including the reasonable fees and out-of-pocket expenses of
internal and external counsel to the Administrative Agent and of local counsel,
if any, who may be retained by counsel to the Administrative Agent) in
connection with
(a)
the negotiation, preparation, due diligence, execution, delivery syndication,
administration and enforcement of this Agreement and of each other Loan
Document, including schedules and exhibits, and any amendments, waivers,
consents, supplements or other modifications to this Agreement or any other Loan
Document as may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated,
(b)
the filing, recording, refiling or rerecording of the Mortgages, the Security
Agreements, the Pledge Agreements and/or any Uniform Commercial Code financing
statements relating thereto and all amendments, supplements and modifications
to, and all releases and terminations of, any thereof and any and all other
documents or instruments of further assurance required to be filed or recorded
or refiled or rerecorded by the terms hereof or of the Mortgages, the Security
Agreements and the Pledge Agreements, and
(c)
the preparation and review of the form of any document or instrument relevant to
this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save each of the Administrative Agent
and each Lender harmless from all liability for, any stamp or other taxes (other
than any income or franchise tax of the Lender) which may be payable in
connection with the execution or delivery of this Agreement, the Borrowings
hereunder, the issuance of the Notes or any other Loan Documents. The Borrower
also agrees to reimburse the Administrative Agent and each Lender within thirty
(30) days after written demand for all reasonable out-of-pocket expenses
(including attorneys’ fees and legal expenses of internal and external
attorneys, and the expenses of any accountant, engineer or other expert retained
or utilized in connection therewith) incurred by the Administrative Agent and
each Lender in connection with (x) the negotiation of any restructuring or
“work-out”, whether or not consummated, of any Obligations and (y) the
enforcement of any
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Obligations. All requests for payment under this Section 11.3 shall be
accompanied by invoices containing reasonable details.
SECTION 11.4.
Indemnification. In consideration of the execution and delivery of this
Agreement by the Administrative Agent and each Lender and the extension of the
Commitments, THE BORROWER HEREBY INDEMNIFIES, EXONERATES AND HOLDS NGP CAPITAL
RESOURCES COMPANY, THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH OF THEIR
RESPECTIVE AFFILIATES AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS, BUT EXCLUDING THE DESIGNEE IN ITS CAPACITY AS A
SHAREHOLDER OF THE BORROWER (COLLECTIVELY, THE “INDEMNIFIED PARTIES”) FREE AND
HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, LOSSES,
COSTS, LIABILITIES AND DAMAGES, AND EXPENSES INCURRED IN CONNECTION THEREWITH
(IRRESPECTIVE OF WHETHER ANY SUCH INDEMNIFIED PARTY IS A PARTY TO THE ACTION FOR
WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), INCLUDING REASONABLE ATTORNEYS’ FEES
AND DISBURSEMENTS (COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a)
this Agreement, any Loan Document or any document or transaction contemplated
by or referred to herein;
(b)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan, including any Acquisition;
(c)
any investigation, litigation or proceeding related to any acquisition or
proposed acquisition by the Borrower or any of its Subsidiaries of all or any
portion of the stock or assets of any Person, whether or not the Administrative
Agent or such Lender is party thereto;
(d)
any investigation, litigation or proceeding related to any environmental
cleanup, audit, compliance or other matter relating to any Environmental Law or
the condition of any facility or Property owned, leased or operated by the
Borrower or any of its Subsidiaries;
(e)
the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, discharging or Releases from, any facility or Property owned, leased
or operated by the Borrower or any of its Subsidiaries thereof of any Hazardous
Material (including any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Environmental Law), regardless of
whether caused by, or within the control of, the Borrower or any of its
Subsidiaries; or
(f)
any misrepresentation, inaccuracy or breach in or of Section 7.17 or
Section 8.1.6,
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EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING FOR THE ACCOUNT OF A
PARTICULAR INDEMNIFIED PARTY BY REASON OF THE RELEVANT INDEMNIFIED PARTY’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION IN A FINAL JUDGMENT. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law. The
obligations in this Section 11.4 shall survive payment of all other Obligations.
At the election of any Indemnified Party, the Borrower shall defend such
Indemnified Party using legal counsel satisfactory to such Indemnified Party in
such Person’s sole discretion, at the sole cost and expense of the Borrower.
All amounts owing under this Section 11.4 shall be paid within thirty (30) days
after written demand.
SECTION 11.5.
Survival. The obligations of the Borrower under Sections 11.3 and 11.4 shall in
each case survive any termination of this Agreement, the payment in full of all
Obligations and the termination of all Commitments. The representations and
warranties made by each Obligor in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 11.6.
Severability. Any provision of this Agreement or any other Loan Document which
is prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or such Loan Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 11.7.
Headings. The various headings of this Agreement and of each other Loan
Document are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or such other Loan Document or any provisions
hereof or thereof.
SECTION 11.8.
Execution in Counterparts, Effectiveness, etc. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be executed
by the Borrower, the Administrative Agent and each Initial Lender and be deemed
to be an original and all of which shall constitute together but one and the
same agreement. This Agreement shall become effective when counterparts hereof
are executed on behalf of the Borrower, the Administrative Agent and each
Initial Lender. This Agreement is made and entered into for the sole protection
and legal benefit of the Borrower, the Lenders, the Obligors (as applicable) and
Persons indemnified hereunder, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
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SECTION 11.9.
Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN
DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY PROVIDED IN ANY SUCH
DOCUMENT) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW (EXCEPT SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements, written
or oral, with respect thereto.
SECTION 11.10.
Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that:
(a)
the Borrower may not assign or transfer its rights or obligations hereunder
without the prior written consent of each Lender; and
(b)
the rights of sale, assignment and transfer of the Lenders are subject to
Section 11.11.
SECTION 11.11.
Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Any
Lender may assign, or sell participations in, its Loans and Commitments to one
or more other Persons in accordance with this Section 11.11 if the
Administrative Agent has consented to such assignment or sale.
SECTION 11.11.
Assignments. Any Lender may at any time assign and delegate to one or more
Persons, including without limitation, commercial banks or other lenders, in
each case consented to by the Administrative Agent (each Person to whom such
assignment and delegation is to be made, being hereinafter referred to as an
“Assignee Lender”), all or any fraction of such Lender’s total Loans and
Commitments (which assignment and delegation shall be of a constant, and not a
varying, percentage of all such Lender’s Loans and Commitments) in a minimum
aggregate amount of $1,000,000 (or the entire remaining amount of such Lender’s
Loans and Commitments); provided, however, that such Lender is required at all
times to maintain Loans and Commitments hereunder in an aggregate amount of
$1,000,000 (unless such Lender shall have reduced its Loans and Commitments to
zero); provided, further, however, that the Borrower and each other Obligor
shall be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until
(a)
written notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such Assignee
Lender, shall have been given to the Borrower and the Administrative Agent by
such Lender and such Assignee Lender,
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(b)
such Assignee Lender shall have executed and delivered to the Borrower, the
Administrative Agent and such Lender a Lender Assignment Notice, consented to
and accepted by the Administrative Agent and, so long as no Event of Default
shall have occurred and be continuing, approved by the Borrower, such approval
not to be unreasonably withheld, and
(c)
the processing fees described below shall have been paid.
From and after the date that the Assignee Lender delivers such Lender Assignment
Notice, (x) the Assignee Lender thereunder shall be deemed automatically to have
become a party hereto and to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee Lender in connection with such
Lender Assignment Notice, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Notice, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five (5) Business Days after the Borrower’s receipt and approval of such
assignee Lender’s Lender Assignment Notice executed by the Administrative Agent,
the Borrower shall execute and deliver to the Administrative Agent (for delivery
to the relevant Assignee Lender) new Notes evidencing such Assignee Lender’s
assigned Loans and Commitments and, if the assignor Lender has retained Loans
and Commitments hereunder, replacement Notes in the principal amount of the
Loans and Commitments retained by the assignor Lender hereunder (each such Note
to be in exchange for, but not in payment of, the corresponding Note then held
by such assignor Lender). The assignor Lender shall mark the predecessor Note
“exchanged” and deliver it to the Borrower. Accrued interest on that part of
the predecessor Note evidenced by the new Notes, and accrued fees, shall be paid
as provided in the Lender Assignment Notice. Accrued interest on that part of
the predecessor Note evidenced by the replacement Notes shall be paid to the
assignor Lender. Accrued interest and accrued fees shall be paid at the same
time or times provided in the predecessor Notes and in this Agreement. Such
assignor Lender or such Assignee Lender must also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment Notice in the amount
of $3,500. Any attempted assignment and delegation not made in accordance with
this Section 11.11.1 shall be null and void. Nothing contained in this
Agreement shall prohibit any Lender from pledging or assigning any Note to any
Federal Reserve Bank in accordance with Applicable Law. The Borrower hereby
agrees, if requested by a Lender, to provide all information reasonably deemed
necessary by such Lender to complete an assignment, including information and
projections prepared by the Borrower or on its behalf relating to the Borrower
or to transactions contemplated hereby.
SECTION 11.11.
Participations. Any Lender may at any time sell to one or more Persons,
including without limitation, commercial banks or other lenders (each of such
Persons being herein called a “Participant”) participating interests in any of
the Loans, Commitments, or other interests of such Lender hereunder; provided,
however, that
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(a)
no participation contemplated in this Section 11.11.2 shall relieve a Lender
from its Commitments or its other obligations hereunder or under any other Loan
Document,
(b)
a Lender shall remain solely responsible for the performance of its Commitments
and such other obligations,
(c)
the Borrower and each other Obligor shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations under
this Agreement and each of the other Loan Documents, and
(d)
the Borrower shall not be required to pay any amount under Section 5.2 or
Section 11.3 that is greater than the amount which it would have been required
to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 5.1, 5.2 (except as provided in Section 11.11.2(d)), 11.3 and 11.4,
shall be considered a Lender.
SECTION 11.12.
Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER
MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK SITTING IN
THE CITY AND THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE PARTIES HERETO HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK SITTING IN THE CITY AND THE COUNTY OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
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HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.13.
Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE ADMINISTRATIVE AGENT, EACH LENDER OR THE BORROWER. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT AND EACH LENDER ENTERING INTO THIS AGREEMENT AND EACH SUCH
OTHER LOAN DOCUMENT.
SECTION 11.14.
Other Transactions. Nothing contained herein shall preclude the Administrative
Agent or any other Lender or any of their respective Affiliates from engaging in
any transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its Affiliates in which the
Borrower or such Affiliate is not restricted hereby from engaging with any other
Person.
SECTION 11.15.
Confidentiality. The Borrower acknowledges and agrees NGPCRC is a publicly
traded company that may be required by law to disclose certain terms hereof as
part of its normal public and regulatory reporting and related disclosures.
SECTION 11.16.
Tax Matters; Administrative Services.
SECTION 11.16.
Tax Matters. The Borrower and the Lenders acknowledge that the Notes, the
Warrants and the Overriding Royalty Interests together shall constitute an
“investment unit” within the meaning of Section 1273(c)(2) of the Code. The
Borrower and the Lenders agree to allocate $10,000 of issue price to the
Warrants and $100,000 of issue price to the Overriding Royalty Interests
burdening the Initial Subject Properties, pursuant to Treas. Reg. § 1.1273-2(h).
The Borrower and the Lenders agree that they will use such allocation to
prepare and file all returns and other reports with, and to prepare or file any
other information provided to the Internal Revenue Service or any other Person
or Governmental Agency for federal income tax purposes, including but not
limited to, for purposes of the Lenders’ reporting the
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allocation of the issue price pursuant to Treas. Reg. § 1.1273-2(h)(2). The
Lenders agree to provide the Borrower with the information required to be
provided pursuant to Treas. Reg. § 1.1275-2(e) promptly upon request of the
Borrower. The Borrower and the Lenders acknowledge that this Section 11.16 is
intended to establish the allocation of the issue price of the investment unit
in accordance with Treas. Reg. § 1.1273-2(h)(1) and Section 1273(c)(2) of the
Code, which allocation is binding on the Borrower and the Lenders pursuant to
Treas. Reg. § 1.1273-2(h)(2), but this Section 11.16 does not constitute
recognition by any of them that the amount allocated to each component shall be
treated as its issue price for any purpose other than as expressly provided
herein. The Borrower shall report payments of interest to each Lender as
required by section 6049 of the Code (or any other provision requiring such
report) in the amounts reasonably requested by the Administrative Agent.
SECTION 11.16.
Administrative Services. NGPCRC has notified the Borrower that it is willing to
make available significant managerial services to the Borrower, including
significant guidance and counsel concerning the management, operations, or
business objectives and policies of the Borrower, which services may be
provided, at NGPCRC’s election, by NGPCRC or one of its affiliates. The
Borrower would be charged fees for such services on a reasonable basis mutually
acceptable to NGPCRC and the Borrower. The Borrower has declined such offer,
and no such services are being requested or accepted at this time.
SECTION 11.17.
Notice. THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER LOAN DOCUMENTS
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
BORROWER:
SONORAN ENERGY, INC.,
a Washington corporation
By:/s/ Frank T. Smith, Jr.
Name:
Frank T. Smith, Jr.
Title:
Executive Vice President and CFO
All notices should be sent to:
Sonoran Energy, Inc.,
Attn: Frank T. Smith, Jr.
Pacific Center 1
14180 N. Dallas Parkway, Suite 400
Dallas, TX 75254
Phone: (469) 374-9068
Fax: (469) 374-9265
-1-
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ADMINISTRATIVE AGENT:
NGPC ASSET HOLDINGS, LP
By: NGPC Asset Holdings GP, LLC, its general partner
By: /s/ John H. Homier
Name: John H. Homier
Title: President and Chief Executive Officer
Address:
c/o NGP Capital Resources Company, Suite 2975
1221 McKinney Street
Houston, TX 77010
All notices should be sent to:
NGPC Asset Holdings, LP
Attn: Mr. John H. Homier
1221 McKinney, Suite 2975
Houston, TX 77010
Phone: 713-752-0062
Fax: 713-752-0063
-2-
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LENDERS:
NGP CAPITAL RESOURCES COMPANY
By: /s/ John H. Homier
Name: John H. Homier
Title: President and Chief Executive Officer
Address:
NGP Capital Resources Company
1221 McKinney Street
Houston, TX 77010
All notices should be sent to:
NGP Capital Resources Company
Attn: Mr. John H. Homier
1221 McKinney, Suite 2975
Houston, TX 77010
Phone: 713-752-0062
Fax: 713-752-0063
PERCENTAGE: 100.00%
-3-
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|
Exhibit 10.1
[NOTICE: This Document Contains A Waiver Of Any Claims You Might Have Under
The Age Discrimination In Employment Act. You are Advised to Consult With an
Attorney Before Signing This Document]
GENERAL RELEASE & SEPARATION AGREEMENT
THIS GENERAL RELEASE & SEPARATION AGREEMENT is made and entered into by and
between SIRVA, Inc., its subsidiaries and their subsidiaries including, but not
limited to, Allied Van Lines, Inc. and North American Van Lines, Inc. (hereafter
collectively referred to as “Company”) and Ralph A. Ford (“Associate”).
Recitals
A. Associate’s employment with Company is terminating, and Associate
wishes to receive certain compensation and benefit enhancements as described in
this Agreement.
B. Associate’s employment relationship with Company is covered by the
Age Discrimination in Employment Act of 1967, as amended.
C. As a condition to receipt of the compensation and benefit
enhancements to which Associate is not otherwise entitled, the Company requires
the Associate to execute a General Release & Separation Agreement satisfactory
to Company.
NOW, THEREFORE, in consideration of the matters set forth in the Recitals, the
parties agree as follows:
Terms and Conditions
1. Separation. Associate hereby submits, and the Company hereby
accepts, Associate’s resignation from his employment with Company, and his
status as an officer, effective February 28, 2006 (“Termination Date”).
Associate shall continue to receive his current pay and benefits through that
date.
2. Severance Pay and Benefits. In consideration of the execution and
non-revocation of this Agreement, the Company shall pay Associate severance pay
at his current base rate of pay including car allowance, beginning on the first
regular pay period following the Termination Date and the expiration of this
Agreement’s seven-day revocation period, and continuing for twelve (12) months.
(the “Severance Period”).
Associate’s health benefits previously elected under the Company’s Benefits Plus
program, including AYCO Financial Counseling and an annual Executive Physical,
but excluding short and long term disability benefits and life insurance
benefits, shall continue during the Severance Period. Additionally, on the first
regular pay-period following the expiration of this Agreement’s seven-day
revocation period, Company shall pay Associate a
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one-time lump-sum payment of Forty-Eight Thousand Dollars ($48,000) less
applicable taxes and withholding in lieu of payment or reimbursement for any
health insurance premiums to be paid by Associate after the expiration of the
Severance Period.
For informational purposes only, Associate is entitled to any amounts due for
unused Earned Paid Time Off (“PTO”).
If Associate had established direct deposit for his payment of wages, then the
severance payments will be directly deposited into the same account and
financial institution where Associate’s previous payment of wages had been
directly deposited by Company, unless Associate provides otherwise below:
Name of Institution:
Account Number:
[NOTE TO ASSOCIATE: only complete the above information if you wish to change
the account to where you want your severance payments directly deposited from
where you currently have your payment of wages directly deposited.]
The Company shall pay to Associate, as additional consideration, the net amount
of One Hundred Fifty-Four Thousand Seven Hundred Twenty-Two Dollars and 00/100s
($154,722.00). This payment shall be made within thirty (30) days following
Associate’s execution of this Agreement and the expiration of the revocation
period, provided the Associate has not revoked this Agreement during the
revocation period.
3. Associate acknowledges and agrees that the consideration set
forth in Paragraph 2 of this Agreement is the only severance and benefit
enhancement Associate shall receive by electing to execute this Agreement.
Associate further acknowledges and agrees that upon payment of the amounts
expressly provided for in this Agreement and payment of the amount, if any,
determined by the Compensation Committee to be payable to Associate under the
Company’s 2005 Management Incentive Plan, Associate shall have received full
payment for all services rendered on behalf of the Company, including any
amounts Associate would be otherwise entitled to receive from Company under any
other compensation or incentive programs; provided, however, that nothing in
this Agreement shall be construed as a waiver of Associate’s rights to exercise
vested stock options, to any vested benefits under the Company’s 401(k) plan and
the SIRVA Executive Retirement & Savings Plan, to continue group health
insurance coverage pursuant to COBRA, or to convert group life insurance
coverage to an individual policy pursuant to the terms of the applicable group
policy. Company will provide Associate at Company’s expense, beginning on or
about June 1, 2006, twelve (12) months of Company paid outplacement services at
Kensington International. Company also acknowledges and agrees to provide
Associate with written notice when he is permitted to exercise any vested stock
options pursuant to the terms of the governing Stock Option Plans.
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4. In consideration of the benefits received, and to be received by
Associate hereunder, Associate hereby IRREVOCABLY, VOLUNTARILY, UNCONDITIONALLY
AND GENERALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES Company, and each of
Company’s owners, stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, divisions,
subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such divisions, subsidiaries and affiliates),
and all persons acting by, through, under or in concert with any of them
(collectively “Releasees”), or any of them, from any and all charges,
complaints, claims, damages, actions, causes of action, suits, rights, demands,
grievances, costs, losses, debts, and expenses (including attorneys’ fees and
costs incurred), of any nature whatsoever, arising out of the termination of
Associate’s employment with Company, known or unknown, which Associate now has,
owns, or holds, or claims to have, own, or hold, or which Associate at any time
heretofore had, owned, or held, or claimed to have, own, or hold from the
beginning of time to the date of this Agreement, provided, however, that nothing
herein shall release Company from its indemnity obligations to Associate in
accordance with the Company’s Articles of Incorporation and By-Laws.
5. By way of specification and not by way of limitation, Associate
specifically waives, releases and agrees to forego any rights or claims that
Associate may now have, or may have heretofore had, against each or any of the
Releasees, under tort, contract or other law of the State of Illinois or other
state (including, but by no means limited to, claims arising out of or alleging
wrongful discharge, breach of contract, breach of implied covenant of good faith
and fair dealing, misrepresentation, interference with contractual or business
relations, personal injury, slander, libel, emotional distress, mental suffering
or damage to professional reputation), under the Age Discrimination in
Employment Act of 1967 (ADEA), under the Worker Adjustment & Retraining
Notification Act, under the Employee Retirement Income Security Act of 1974,
under Title VII of the Civil Rights Act of 1964, under the Equal Pay Act, under
42 U.S.C. Section 1981, under 42 U.S.C. Section 1983, under 42 U.S.C. Section
1985, under the Vocational Rehabilitation Act of 1977, under the Illinois Human
Rights Act or any other applicable state or local anti-discrimination law, under
the Americans with Disabilities Act, under the Family Medical Leave Act, or
under any other laws, ordinances, executive orders, rules, regulations or
administrative or judicial case law arising under the statutory or common laws
of the United States, any state, or any political subdivision of any state.
Associate also voluntarily waives any claims or rights Associate may otherwise
have against Releasees for severance, travel and expense reimbursement, or for
other payments or compensation, such as under Company’s Management and/or
Performance Incentive Plans, PTO Policy, Car Allowance Program and/or Severance
Plan, except as otherwise set forth herein. The parties intend that the claims
released be construed as broadly as possible. This is not a waiver of any claims
that may arise after the date this Agreement is executed.
6. It is understood by Associate that this Agreement is
confidential, and its terms and conditions are not to be released to anyone,
except where otherwise required by law, required for legitimate law enforcement
or compliance purposes or where released to Associate’s immediate family, legal
counsel, and tax advisor, and, with respect to the release of such information
to any of them, Associate will inform them of this confidentiality provision.
3
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7. Associate represents and warrants that Associate has not filed
any complaints or claims against Company or Releasees with any local, state or
federal court or agency, and that, except as otherwise provided by law,
Associate will not do so at any time hereafter for claims which arose prior to
the date Associate signs this Agreement, and that if any such court or agency
assumes jurisdiction on any complaint or claim against Company or Releasees
which arose prior to the execution of this Agreement, Associate shall
immediately request such court or agency to dismiss the matter and take all such
additional steps at Associate’s sole cost and expense necessary to facilitate
such dismissal with prejudice. Nothing in this Agreement shall be construed to
prohibit Associate from filing a charge or complaint, including a challenge to
the validity of this Agreement, with the Equal Employment Opportunity Commission
or participating in any investigation or proceeding conducted by the Equal
Employment Opportunity Commission.
8. By and in consideration of the benefits to be provided by the
Company hereunder, including particularly the benefits described in Paragraph 2
hereof, Associate covenants and agrees that:
A. Confidentiality. Without the prior written
consent of the Company, or except to the extent required by an order of a court
having competent jurisdiction or under subpoena from an appropriate government
agency, Associate shall not disclose any trade secrets, customer lists, designs,
information regarding product development, marketing plans, sales plans,
projected acquisitions or dispositions of properties or management agreements,
management organization information (including data and other information
relating to members of the Board and management), operating policies or manuals,
business plans, purchasing agreements, financial records, or other financial,
commercial, business or technical information relating to the Company or any of
its subsidiaries or information designated as confidential or proprietary that
the Company or any of its subsidiaries may receive belonging to suppliers,
customers or others who do business with the Company or any of its subsidiaries
(collectively, “Confidential Information”) to any third person unless such
Confidential Information has been previously disclosed to the public by the
Company or is in the public domain other than by reason of Associate’s breach of
this subparagraph.
B. Non-Solicitation of Employees and Agents.
Except if Associate is directly approached by another Associate of the Company,
for the twelve (12) month period commencing from the effective date of this
Agreement (the “Non-Solicitation Period”), Associate shall not directly or
indirectly solicit, encourage or induce any person who provides services to the
Company or any of its subsidiaries, whether as an employee, consultant,
independent contractor or agent, or any entity which provides services to the
Company or any of its subsidiaries under an agency relationship (including,
without limitation, under a relationship governed by an Agency Contract) to
terminate his, her or its relationship with or services for the Company or any
such subsidiary and shall not directly or
4
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indirectly, either individually or as owner, agent, employee, consultant or
otherwise, employ or offer employment to any person who is or was employed by
the Company or a subsidiary thereof unless such person, agent or entity shall
have ceased to provide services to the Company and its subsidiaries or to have
had a legal relationship with the Company and each of its subsidiaries for a
period of at least six (6) months. Notwithstanding the foregoing, Associate
further covenants and agrees he shall not solicit during the Non-Solicitation
Period any business, in competition with Company, from any person or entity who
has entered into an agency relationship (including, without limitation, a
relationship governed by an Agency Contract) with either Allied Van Lines, Inc.,
North American Van Lines, Inc., and/or Global Van Lines, Inc. This subparagraph
B specifically excludes responses to any general advertisements or solicitations
for employment made to the general public.
C. Remedies with Respect to Covenants.
Associate understands and agrees that if he breaches or threatens to breach the
covenants and obligations contained in Paragraphs 6, 7 or 8 of this Agreement,
Company shall be entitled to the following remedies:
i. Associate acknowledges and agrees
that the covenants and obligations of Associate with respect to Paragraphs 6, 7,
and 8 of this Agreement relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Associate understands and agrees that if he
breaches or threatens to breach the covenants and obligations of Paragraphs 6,
7, or 8 of this Agreement, in any respect, Company shall be entitled to seek an
injunction, restraining order or other equitable relief (without the requirement
to post bond) to restrain such breach or threatened breach or otherwise
specifically enforce the covenants and obligations set forth therein.
ii. Associate and Company acknowledge and
agree that the damages resulting from Associate’s breach of the covenants and
obligations contained in Paragraphs 6, 7, and 8 of this Agreement, would be
uncertain and difficult to ascertain. Associate agrees to indemnify and hold
each and all of the Releasees harmless from and against any and all loss, cost,
damage, or expense, including, but not limited to, attorneys’ fees, incurred by
Releasees, or any of them, provided the Releasees are the prevailing party in
any such legal action, as a result of Associate’s breach of the covenants and
obligations contained in Paragraphs 6, 7, or 8 of this Agreement, or by the fact
that any representations made by Associate in this Agreement were false when
made; or
5
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iii. Associate shall forfeit any remaining
severance benefits in the event of his breach of this Agreement.
9. Associate agrees that Associate has had sufficient opportunity to
review and consider this Agreement and to discuss it with anyone Associate
desires and that Associate has carefully read it and fully understands all its
provisions. Associate further represents and agrees that Associate has not been
under any duress, coercion, or undue influence from Company or any of its
representatives either during the communications which led to this Agreement or
at the time of the execution of this Agreement.
10. This Agreement sets forth the entire agreement between the parties
and fully supersedes any and all prior agreements or understandings, written or
oral, between the parties pertaining to the subject matter of this Agreement.
Additionally, Associate represents and acknowledges that in executing this
Agreement Associate does not rely on, and has not relied on, any representation
or statement made by Company or any of its directors, officers, Associates,
agents or representatives, or their attorneys with regard to the subject matter,
basis or effect of this Agreement or otherwise, other than those specifically
stated in this written Agreement.
11. This Agreement shall be binding upon Associate and upon
Associate’s heirs, administrators, representatives, executors, and successors
and shall inure to the benefit of the Releasees and to their heirs,
administrators, representatives, executors and successors.
12. Should Associate file any claim against Company or any Releasee or
should Associate sue Company, any Releasee or any of their directors, officers,
associates, agents or representatives, or their attorneys in any administrative
or judicial forum, local, state or federal, in contravention of the terms of
this Agreement, Associate shall immediately forfeit the right to any further
consideration provided or paid to Associate under the terms of this Agreement
and shall be obligated to reimburse Company all costs and expenses, including
reasonable attorneys’ fees, incurred by Company in bringing about dismissal of
the claim or complaint, unless Associate promptly dismisses with prejudice such
claim or complaint at no cost or expense to the Company.
13. This Agreement is made under and shall be governed by the laws of
the States of Illinois.
14. Associate has represented and hereby reaffirms that Associate has
disclosed to Company any information in Associate’s possession or within
Associate’s knowledge concerning any conduct involving Company, or any of its
affiliates, employees, associates, officers, directors, or agents that Associate
has any reason to believe involves any false claims to the United States or is
or may be unlawful or violates Company policy in any respect. Within seven (7)
days of the execution of this Agreement, Associate also agrees to return all
notes, reports sketches, plans, books, keys, credit cards, unpublished memoranda
or other documents or property which were created, developed, generated or held
or controlled by Associate and which concern or are related to the Company’s
business and are the property of the Company.
6
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Associate may retain the use of his Company issued laptop and cell phone during
the Severance Period.
15. Associate agrees to provide the Company with his full cooperation,
as requested by the Company from time to time, subject to reimbursement by the
Company of reasonable out-of pocket costs and expenses in accordance with the
Company’s travel and expense reimbursement policies (and including advancement
of attorneys’ fees, costs and other expenses as provided by the Company’s
By–Laws in effect as of December 31, 2005) regarding any matter including any
litigation, claims, governmental proceeding, investigation or independent
review, which relates to matters with which Associate was involved or which
Associate had knowledge during the term of his employment with the Company;
provided, however, that such cooperation shall not materially or unreasonably
interfere with Associate’s future employment or business affairs. In any
proceeding involving Associate, Company will provide Associate with any
documents or information reasonably requested by Associate to enable him to
provide such cooperation or to otherwise participate in such proceeding. Company
shall compensate Associate at the rate of $200.00 per hour for any consulting or
litigation support in excess of ten (10) hours after the Termination Date. The
Company agrees that it shall indemnify, defend and hold harmless Associate, to
the full extent allowed by the Company’s By-Laws as in effect as of February 28,
2006 (including advancement of attorneys’ fees, costs and other expenses), for
Associate’s actions taken on behalf of the Company and/or executing Associate’s
duties in the course of his employment and other positions held with the
Company.
16. Knowing and Voluntary. Associate acknowledges that Company: (i)
provided Associate this Agreement on January 23, 2006; (ii) advised Associate to
consult an attorney prior to signing this Agreement; (iii) informed Associate
that Associate could have twenty-one (21) days to consider this Agreement; and
(iv) advised Associate that this Agreement shall not be effective or enforceable
against Associate or Company if Associate revokes it by giving written notice to
Company not later than seven (7) days after the date of signing this Agreement.
Associate and Company agree that any change to this Agreement, whether material
or not, will not change or re-start the twenty-one (21) day period described
above. Associate further states and acknowledges that Associate has been
provided 21 days by the Company to review this Agreement, and that, to the
extent Associate signs the Agreement prior to the expiration of such 21 day
period, Associate has done so knowingly and voluntarily in accordance with 29
C.F.R. § 1625.22(e)(6), and that in making such an election to sign the
Agreement prior to the expiration of said 21 day period of time, Associate has
not been induced by any fraud or misrepresentation by Company or by any threat
by Company to withdraw or alter the terms of the Agreement prior to the
expiration of said 21 day period of time.
17. Except pursuant to Paragraph 15, Associate agrees that at no time
hereafter will he make, issue release, or authorize any written or oral
statements, derogatory or defamatory in nature about the Company, its directors,
officers, employees, agents or related entities. No member of the Company’s
Board or Senior Management Team (defined as the Chief Executive Officer, and his
or her direct reports) shall at any time make, issue, release or authorize any
written or oral statements, derogatory or defamatory in nature, about the
Associate.
7
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18. It is the parties understanding that none of the payments under
this Agreement will result in Associate being subject to the payment of interest
and/or taxes under Internal Revenue Code Section 409A. In the event the parties
subsequently determine, whether in connection with the issuance of final
regulations under Code Section 409A or otherwise, that one or more of the
payments under this Agreement will result in Associate being subject to the
payment of interest and/or taxes under Internal Revenue Code Section 409A, the
parties shall use their best efforts to amend this Agreement in order to avoid
the imposition of any such interest or additional tax, provided that the Company
shall have no obligation to agree to any amendment that would materially
increase its obligations hereunder.
IN WITNESS WHEREOF, the parties do hereby KNOWINGLY and VOLUNTARILY enter into
this General Release & Separation Agreement on the date last signed by both
parties.
Ralph A. Ford
Company
/s/ Ralph A. Ford
By:
/s/ Todd W. Schorr
Associate’s Signature
Print Name:
Ralph A. Ford
Its:
SVP - HR
Date:
May 15, 2006
Date:
May 22, 2006
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Exhibit 10.3
November 9, 2006
Christopher D. Genry
1449 Wynkoop, No. 402
Steelbridge Building
Denver, CO 80202
Re: Separation of Employment from United Dominion Realty Trust, Inc.
Dear Chris:
As we have discussed, your employment with United Dominion Realty Trust, Inc.
(the “Company”) will end effective December 31, 2006 (the “Separation Date”).
This letter (this “Letter Agreement”) reflects our agreement with respect to the
separation of your employment with the Company.
1. Last Day of Employment. Your last day of employment with the
Company will be December 31, 2006.
2. Vacation Pay. You will be paid an amount equal to all accrued
but unused vacation up to December 31, 2006. You are entitled to payment of all
accrued but unused vacation whether or not you sign this Letter Agreement. You
will not be entitled to use sick leave, salary continuation or disability
benefits after the Separation Date.
3. Consideration. In consideration for signing this Letter
Agreement the Company agrees that:
(a) You may continue to participate in the Company’s group health insurance
plans at the same coverage levels as immediately prior to the Separation Date.
Coverage will continue through the Consolidated Omnibus Budget Reconciliation
Act of 1985 until the first to occur of (a) five (5) years from the Separation
Date or (b) your employment by a third party (a third party shall not be deemed
to include an entity of which all of the outstanding capital stock or ownership
interests are owned by you ) or (c) you default in the payment of or no longer
continue to pay your portion of the premiums (the “Severance Period”). During
the Severance Period, the Company shall continue to pay its portion of the
premiums and you will pay your portion of the premiums.
(b) The Company shall cause United Dominion Realty, L.P. and/or UDR
Out-Performance III, LLC to repurchase 22,500 Membership Units in UDR
Out-Performance III, LLC, which constitutes 50% of the Membership Units in UDR
Out-Performance III, LLC owned by you, for Twenty-Two Thousand Five Hundred
Dollars and No Cents ($22,500.00), such amount to be paid to you within thirty
(30) days of the Separation Date.
(c) The Company shall cause United Dominion Realty, L.P. and/or UDR
Out-Performance IV, LLC to repurchase 55,333 Membership Units in UDR
Out-Performance IV, LLC, which constitutes 2/3 of the Membership Units in UDR
Out-Performance IV, LLC owned by you, for Fifty-Five Thousand Three Hundred
Thirty-Three Dollars and No Cents ($55,333.00), such amount to be paid to you
within thirty (30) days of the Separation Date.
(d) On December 31, 2006, you shall receive 3,502 shares of Common Stock of
the Company pursuant to your 2005 Performance Contingent Restricted Stock Award.
Further, upon determination by the Compensation Committee of the Board
(“Compensation Committee”) as to the targeted award level for the 2006 PARS
Program you will either receive 2,472 shares of Common Stock of the Company or
such other number consistent with the Compensation Committee’s determination of
the award level for the 2006 PARS Program and pursuant to your 2006 Performance
Contingent Restricted Stock Award. You will forfeit any right to receive
additional shares of Common Stock under your 2005 and 2006 Performance
Contingent Restricted Stock Award grants.
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(e) All restrictions on the following Restricted Stock Awards held by you that
remain subject to restrictions on December 31, 2006 shall lapse:
(i) 6,423 shares of restricted Common Stock granted to you on February 27,
2003;
(ii) 13,543 shares of restricted Common Stock granted to you on February 12,
2004;
(iii) 8,949 shares of restricted Common Stock granted to you on February 18,
2005; and
(iv) 1,986 shares of restricted Common Stock granted to you on February 15,
2006.
(f) A bonus for fiscal year 2006 in the amount of $400,000 payable at the
same time the Company pays fiscal year 2006 bonuses to the Company’s other
senior executives.
(g) You will be treated as an employee of the Company for purposes of
eligibility to participate in the “Board of Directors Guidelines Regarding
Purchase of Out-Performance Units (“Guidelines”) once and if such Guidelines are
approved by the Board of Directors of the Company.
4. Other Benefits. Except as provided explicitly in this Letter
Agreement, you shall not be entitled to any other or further benefits from
Company, including, without limitation, participation in health and dental
insurance plans, disability and life insurance plans, stock plans, 401(k) plans,
and profit sharing plans.
5. Expenses. Your expense report for expenses incurred through
the Separation Date must be received within three business days after the
Separation Date. You will be reimbursed for expenses incurred through the
Separation Date in accordance with ordinary Company reimbursement practices and
policies. If a final accounting of these new expenditures indicates that you owe
the Company any amount (e.g., for charges to Company accounts) after your
expense reports have been processed, you must pay such amount within three days
after the Separation Date.
6. Consulting. For a term commencing upon the Separation Date
and terminating upon the earlier of (a) twelve (12) months from the Separation
Date or (b) your employment by a company which owns, acquires, renovates,
operates, manages or develops apartment communities (the “Consulting Term”), you
shall provide consulting services to the Company. During the Consulting Term,
you will be reasonably available by telephone to consult with the Company. You
agree to apply your attention, knowledge and skills faithfully, diligently, to
the best of your ability as a consultant, in furtherance of the business and
activities of the Company.
As compensation for the performance of your consulting services the Company will
pay you the sum of Two Hundred Sixty Thousand Dollars and No Cents
($260,000.00), to be paid in equal bimonthly installments in arrears during the
Consulting Term.
You hereby agree to inform Thomas W. Toomey, Chief Executive Officer and
President, United Dominion Realty Trust, Inc. 1745 Shea Center Drive, Suite 200,
Highlands Ranch, CO 80129, immediately upon your acceptance of employment with a
real estate investment trust or a company which owns, acquires, renovates,
operates, manages or develops apartment communities, regardless of your
anticipated start date at the new position.
7. Company Property. You acknowledge that you have returned to
the Company all proprietary Company documents (including copies) and property
which you may possess, including, but not limited to, the following proprietary
information of the Company: files, memoranda, notes, computer-recorded
information, personnel records (except copies of any agreements you may have
signed with the Company), equipment, materials, keys, entry cards,
identification, credit cards, and any other materials of any kind that embodies
any confidential or proprietary information of the Company (and all
reproductions thereof).
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8. Revocation. You understand that you have twenty-one (21) days
to consider the preclusive effect of this Letter Agreement prior to executing
this Letter Agreement. You further understand that you may revoke this Letter
Agreement for a period of seven (7) days following your execution of this Letter
Agreement. Any revocation within this period must be submitted, in writing, to:
the Company, c/o Sara Jo Light, Executive Vice President - Director of Talent
Management, and state, “I hereby revoke my acceptance of the Letter Agreement.”
The revocation must be mailed to the Company, c/o Sara Jo Light, Executive Vice
President - Director of Talent Management, or her designee, and postmarked
within seven (7) days of execution of this Letter Agreement. This Letter
Agreement shall not become effective or enforceable until the revocation period
has expired. If the last day of the revocation period is a Saturday, Sunday, or
legal holiday in Colorado, then the revocation period shall not expire until the
next following day which is not a Saturday, Sunday, or legal holiday in
Colorado.
9. General Release of Claim and Covenant Not to Sue.
(a) In consideration of the consulting agreement and the other benefits
provided to you under this Letter Agreement, and except for the obligations
created by this Letter Agreement, you knowingly and voluntarily release and
forever discharge the Company and its affiliates, as well as their respective
officers, directors, employees, stockholders, agents, attorneys, insurers,
representatives, assigns and successors, past and present, and each of them
(hereinafter together and collectively referred to as the “Released Parties”)
of, with respect to and from any and all actions, and claims of any kind, known
and unknown, suspected or unsuspected, against the Released Parties, which you,
your heirs, executors, administrators, successors, and assigns (together and
collectively “Executive”) have or may have as of the date of execution of this
Letter Agreement, including, but not limited to, any alleged violation of:
The National Labor Relations Act, as amended;
Title VII of the Civil Rights Act of 1964, as amended;
Sections 1981 through 1988 of Title 42 of the United States Code, as amended;
The Employee Retirement Income Security Act of 1974, as amended;
The Immigration Reform Control Act, as amended;
The Americans with Disability Act of 1990, as amended;
The Age Discrimination in Employment Act of 1967, as amended;
The Fair Labor Standards Act, as amended;
The Occupational Safety and Health Act, as amended;
The Equal Pay Act;
The Family and Medical Leave Act of 1993;
all Colorado laws concerning the workplace;
any other federal, state or local civil or human rights law or any other local,
state or federal law, regulation or ordinance; based upon any covenant of good
faith and fair dealing, implied or express contract, wrongful discharge,
promissory estoppel, equitable estoppel, employee benefit, violation of public
policy, negligent or intentional infliction of emotional distress, defamation,
false light, compelled self-publication, fraud, misrepresentation, invasion of
privacy, assault, battery, tortious interference with a contract, tortious
interference with a business relationship or economic interest, negligent
retention, negligent hiring, negligent supervision, negligence, negligent
misrepresentation, gross negligence, loss of consortium, equity or any
intentional or other tort; and/or
(i) Arising out of the Released Parties’ personnel practices, policies, or
procedures; and
3
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(ii) Arising out of or relating to Executive’s employment or the initiation,
existence or cessation of Executive’s employment with the Released Parties,
including any claims for salary, wages, severance pay, vacation pay, sick pay,
bonuses, and any other compensation or benefit of any nature; and
(iii) Arising out of any statements or representations to or about Executive;
and
(iv) Arising out of any other wrong, injury or loss allegedly suffered by
Executive; and
any allegation for costs, fees, or other expenses including attorneys’ fees
incurred in these matters (collectively the “Released Claims”).
You shall not sue or initiate against the Released Parties any action or
proceeding, or participate in the same, individually or as a member of a class,
under any contract (express or implied), or any federal, state or local law,
statute or regulation pertaining in any manner to the Released Claims.
(b) Except for the obligations created by this Letter Agreement, the Released
Parties hereby covenant not to sue and release and forever discharge you from
any and all claims, known and unknown, which the Release Parties have or may
have against you, including all claims arising from your positions as Executive
Vice President - Chief Financial Officer or Executive Vice President - Corporate
Strategy or as an employee of the Company or its subsidiaries or affiliates and
the termination of that relationship (and specifically including any and all
claims related to prior promises or contracts of employment), as of the date of
this Letter Agreement; provided, however, the Released Parties do not release
you with respect to claims arising out of or relating to fraud, gross negligence
or willful misconduct.
10. No Claims Exist. You confirm that no claim, charge, complaint, or
action exists pertaining in any manner to the Released Claims in any forum or
form. In the event that any such claim, charge, complaint or action is filed,
you shall not be entitled to recover any relief or recovery therefrom, including
costs and attorney’s fees.
11. Non-Disparagement. You agree not to make any negative, disparaging,
disruptive or damaging statements, comments or remarks to any third party
concerning the Company and its business. In response to inquiries about you from
individuals outside of Company, Company’s official response shall be to provide
our standard reference information of dates of employment and title.
12. Assistance. In partial consideration for your receipt of the
consulting agreement and the other benefits provided to you by the Company under
this Letter Agreement, to which you are not otherwise entitled, you agree to
provide reasonable assistance related to transition matters to the Company
and/or its employees through the end of the Consulting Term.
13. Confidentiality. You acknowledge that you have been exposed to and
have learned a substantial amount of information, which is proprietary and
confidential to the Company, whether or not you developed or created such
information. You acknowledge that such proprietary and confidential information
may include, but is not limited to, trade secrets; acquisition or merger
information; advertising and promotional programs; resource or developmental
projects; plans or strategies for future business development; financial or
statistical data; customer information, including, but not limited to, customer
lists, sales records, account records, sales and marketing programs, pricing
matters, and strategies and reports; and any Company manuals, forms, techniques,
and other business procedures or methods, devices, computer software or matters
of any kind relating to or with respect to any confidential program or projects
of the Company, or any other information of a similar nature made available to
you and not known in the trade in which the Company is engaged, which, if
misused or disclosed, could adversely affect the business or standing of the
Company (collectively, the “Confidential Information”). Confidential Information
shall not include (a) information that is generally known or generally available
to the public through no fault of your own; or (b) information
4
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relating to a strategy/business endeavor involving the ownership, operation and
development of real estate aimed at enhancing the level of product and service
unique to the Latino consumer. You agree that except as required by court order,
you will not at any time divulge to any person, agency, institution, the Company
or other entity any information which you know or has reason to believe is
proprietary or confidential to the Company, including but not limited to the
types of information described above, or use such information to the competitive
disadvantage of the Company. You agree that your duties and obligations under
this Section 13 will continue until the later of twelve (12) months after the
Separation Date, or as long as the Confidential Information remains proprietary
or confidential to the Company.
14. Non-Solicitation. As further consideration for the benefits
provided in this Letter Agreement for a period terminating on the earlier of one
(1) year from the Separation Date or the Consulting Term, you agree not to
directly or indirectly solicit for employment any person employed by the Company
or its affiliates.
15. Joint Preparation of Agreement. This Letter Agreement is deemed to
have been drafted jointly by the parties. In any interpretation of this Letter
Agreement, the provisions of this Letter Agreement shall not be interpreted or
construed against any party on the basis that the party was the drafter.
16. Severability. If any provision of this Letter Agreement is
determined to be invalid or unenforceable, in whole or in part, such
determination will not affect any other provision of this Letter Agreement. For
example, if the release of a particular claim is held by a court to be invalid
or unenforceable, such ruling will not affect the releases of any other claims.
17. Entire Agreement. This Letter Agreement (including the exhibits
hereto) contains the entire agreement between you and the Company and is the
complete, final and exclusive embodiment of our agreement with regard to the
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it may not be
modified except in writing signed by you and an officer of the Company.
18. Governing Law. This Letter Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Colorado, as
applied to contracts made and performed entirely within the State of Colorado.
Please sign and return this Letter Agreement to me, keeping a copy for yourself.
Our sincerest wishes in your future endeavors.
Sincerely,
United Dominion Realty Trust, Inc.
/s/ Thomas W. Toomey
Thomas W. Toomey
Chief Executive Officer and President
Accepted and Agreed:
Date: November 9, 2006
By:
/s/ Christopher D. Genry
Christopher D. Genry
5
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FEE AGREEMENT
GPH LIQUIDATING TRUST
This Fee Agreement (this “Agreement”) is made as of May 17, 2006 (the “Closing
Date”), by and between Joseph F. Barone, a New Jersey resident (“Trustee”), and
GPH Liquidating Trust, a Delaware statutory trust (the “Trust”).
W I T N E S S E T H
WHEREAS, pursuant to a Trust Agreement, dated as of May 17, 2006 (the “Trust
Agreement”), between Wilmington Trust, Global Preferred Holdings, Inc. and the
named Administrator and named additional Trustees, Trustee will act as an
additional trustee (a “Managing Trustee”) of the Trust;
WHEREAS, pursuant to Section 6.4 of the Trust Agreement, Trustee is entitled to
compensation for his services as a Managing Trustee;
WHEREAS, Trustee and the Trust desire to set forth with greater particularity
the specific agreement as to the compensation owing to Trustee as a Managing
Trustee pursuant to the Trust Agreement;
NOW, THEREFORE, for good and valuable consideration, the parties hereto hereby
agree as follows.
1. The compensation due and owing to Trustee pursuant to Section 6.4 of the
Trust Agreement shall be (a) a fee of $500.00 per month, plus (b) a fee of
$250.00 for each formal meeting of the Trustees in which the Trustee
participates, in person or by telephone, during the term of this Agreement, plus
(c) a fee of $100.00 per month for Trustee’s services as a supervisor of the
activities of the Administrator. The monthly fees shall be payable in advance on
the first day of each calendar month during the term of this Agreement,
commencing with a payment on June 1, 2006, which shall also include a pro-rated
amount for the period from the date hereof through May 31, 2006. The meeting fee
in (b) above shall be paid following the end of each calendar month in which
Trustee participated in a formal meeting of the Trustees. Upon the termination
of Trustee’s service as a Managing Trustee, for any reason, including without
limitation the termination or cancellation of the Trust, the monthly fees in
(a) and (c) above shall be pro-rated through his last day of service.
2. This Agreement shall terminate on the earlier of (a) termination of Trustee’s
service as a Managing Trustee of the Trust, or (b) the termination or
cancellation of the Trust.
3. Additionally, Trustee shall be entitled to reimbursement of expenses and
indemnification as provided in Section 6.6 of the Trust Agreement.
4. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of such counterparts shall together constitute but one and the same
Agreement.
5. No waiver, modification or amendment of this Agreement shall be valid unless
executed in writing by the parties hereto.
6. This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to conflicts of laws principles.
7. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned such terms in the Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Fee Agreement to be
executed effective as of the day first above written.
/s/ Joseph F. Barone
Joseph F. Barone
GPH LIQUIDATING TRUST
By:__/s/ Caryl P. Shepherd ______
Name:
Caryl P. Shepherd
Title:
Administrator
|
Exhibit 10.1
AGREEMENT AS TO ASHWORTH, INC.
EXECUTIVE EMPLOYMENT AGREEMENT WITH
RANDALL L. HERREL, SR.
This Agreement is effective as of September 12, 2006 (the “Effective Date”)
and pertains to and confirms certain understandings regarding, and amends, that
certain Second Amended and Restated Executive Employment Agreement dated
February 28, 2006 (the “Employment Agreement”) between ASHWORTH, INC. (the
“Company”) and RANDALL L. HERREL, SR. (“Herrel”) and Herrel’s continuing
employment thereunder.
1. Employment. The Company shall continue to employ Herrel as its Chief
Executive Officer, and Herrel accepts such continued employment, upon the terms
and conditions set forth herein and the Employment Agreement (as modified
pursuant to this Agreement). On and after the Effective Date, Herrel shall no
longer serve as Chairman of the Board or President of the Company.
2. Term. Consistent with the Resignation (attached as Exhibit A hereto)
which Herrel has executed and delivered concurrently with this Agreement, the
term of Herrel’s employment shall continue until, and then automatically
terminate, on October 17, 2006, unless earlier terminated as provided herein
(the “Remaining Term”).
3. Authority and Duties. Herrel shall report directly to the Chairman of
the Board during the Remaining Term. Herrel’s scope of authority and duties
during the Remaining Term shall be as determined in the discretion of the
Chairman of the Board (and may be reduced from the scope of authority and duties
of Herrel prior to the Effective Date), but any new or expanded duties of Herrel
shall be consistent with the duties normally associated with the position of a
chief executive officer.
4. Employment Compensation During Remaining Term. Herrel’s salary and
employee benefits (and executive perquisites to the extent Herrel has the same)
shall continue during the Remaining Term at the same levels as were in effect
immediately prior to the Effective Date. Section 14 (Expenses) of the Employment
Agreement also remains in full force and effect.
5. Severance.
A. Resignation Effective October 17, 2006 or for Constructive
Discharge. If Herrel’s employment terminates on October 17, 2006 in accordance
with the Resignation executed and delivered concurrently herewith or earlier if
Herrel resigns for Constructive Discharge (as defined hereinbelow), Herrel shall
immediately be entitled to receive severance compensation and benefits as
follows, and such severance payments and benefits shall be immediately payable
upon termination (except as may be provided in Section 16 of the Employment
Agreement) notwithstanding any other employment that Herrel may find or have
after such termination:
i. Cash compensation in an amount equal to Six Hundred Twenty Nine Thousand
Three Hundred Forty Nine Dollars ($629,349.00);
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ii. All stock options owned by Herrel listed on Exhibit B hereto, whether
granted pursuant to the Employment Agreement or otherwise and regardless of
their scheduled vesting dates, will vest immediately upon termination of
Herrel’s employment, and will be exercisable for a period of two years following
the date of termination, provided that no option may be exercised beyond its
original expiration date;
iii. The following employee benefits for one year after the date of
termination: (1) medical insurance (including Exec-u-care), dental insurance,
life insurance and disability insurance, in such forms as exist on the date
hereof; (2) an the automobile allowance at the rate of $1,250.00 per month;
(3) a clothing allowance at the rate of $100.00 per month; and (4) monthly dues
for the current country club of which Herrel is a member (but not special
assessments). Herrel shall not receive any other expense reimbursement or any
other benefits after his employment termination, including, without limitation,
an office and secretarial support; and
iv. Reimbursement for accrued but unpaid vacation and amounts reimbursable
under Section 14 (Expenses) of the Employment Agreement.
B. Termination Without Cause/Death/Disability. If Herrel’s employment
is terminated without Cause (as defined hereinbelow) by the Company or by death
or disability prior to October 17, 2006, Herrel shall be entitled to receive
severance compensation and benefits as follows:
i. Cash compensation in an amount equal to Six Hundred Eight Thousand Nine
Hundred Seventy Three Dollars ($608,973.00) plus Five Hundred Eighty Two Dollars
($582.00) per day Herrel is employed by the Company after the Effective Date
(including weekends and holidays) until the date of such termination;
ii. All stock options owned by Herrel, whether granted pursuant to this
Agreement or otherwise and regardless of their scheduled vesting dates, will
vest immediately upon termination of Herrel’s employment, and will be
exercisable for a period of two years following the date of termination,
provided that no option may be exercised beyond its original expiration date;
iii. The following employee benefits for one year after the date of
termination: (1) medical insurance (including Exec-u-care), dental insurance,
life insurance and disability insurance, in such forms as exist on the date
hereof; (2) an the automobile allowance at the rate of $1,250.00 per month;
(3) a clothing allowance at the rate of $100.00 per month; and (4) monthly dues
for the current country club of which Herrel is a member (but not special
assessments). Herrel shall not receive any other expense reimbursement or any
other benefits after his employment termination, including, without limitation,
an office and secretarial support; and
iv. Reimbursement for accrued but unpaid vacation, and amounts reimbursable
under Section 14 (Expenses) of the Employment Agreement.
C. Termination For Cause/Earlier Resignation for Other than
Constructive Discharge. In the event that Herrel’s employment is terminated
prior to
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October 17, 2006 as a result of (i) a termination for Cause by the Company, or
(ii) Herrel’s earlier resignation for any reason other than Constructive
Discharge (as defined hereinbelow), Herrel’s entitlement (if any) to severance
compensation and benefits shall be in accordance with and governed by the
relevant provisions of the Employment Agreement and without any regard
whatsoever to the provisions of Sections 5(A) or 5(B) of this Agreement.
Paragraph 15(e) of the Employment Agreement (regarding Resignation in the Event
of Change of Circumstances) and the definition of a Change in Duties,
Compensation or Benefits contained in Exhibit A thereto are hereby deleted in
their entirety, it being the intent of the parties that the provisions herein
regarding Constructive Discharge replace such provisions in their entirety.
D. Satisfaction of Severance Obligations. Notwithstanding anything to
the contrary in the Employment Agreement, the parties specifically acknowledge
and agree that if the Company is obligated to provide severance compensation and
post-termination benefits to Herrel pursuant to Section 5(A) or Section 5(B)
above, the provisions of Section 5(A) or 5(B) of this Agreement, as relevant,
shall constitute the entirety of the Company’s obligations to make severance
payments and provide post-termination benefits, and no separate or additional
severance compensation or post-termination benefits shall be payable or due
under the terms of the Employment Agreement or otherwise; provided, however,
that this Section shall in no way limit any and all of Herrel’s right or the
Company’s obligations to defend and indemnify Herrel against a claim arising out
of or relating to Herrel’s service as an employee or Director of the Company.
E. Definitions.
A “termination without Cause” shall be deemed to have occurred if
Herrel is terminated for any reason other than his (i) fraud,
(ii) misappropriation of or intentional material damage to the property or
business of the Company (including its subsidiaries), (iii) conviction of a
felony or (iv) the willful and deliberate refusal of Herrel to comply with a
lawful, written instruction of the Chairman of the Board, which refusal is not
remedied by Herrel within a reasonable period of time after his receipt of
written notice from the Company identifying the refusal.
A “Constructive Discharge” shall exist only if both of the following
conditions are met:
i. Herrel is assigned material new or additional responsibilities not
consistent with the position of a chief executive officer; and
ii. The Chairman of the Ashworth Board of Directors ceases to be one of the
following persons: James Hayes, James O’Connor, Detlef Adler, John Richardson or
another person acceptable to Herrel.
6. Section 409A Compliance. Section 16 of the Employment Agreement shall
remain in full force and effect.
7. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or sent by
registered or certified mail to Herrel’s residence in the case of Herrel or to
its principal office in the case of the Company.
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8. Arbitration. Any dispute arising out of this Agreement shall be resolved
by binding arbitration at San Diego, California pursuant to the rules of the
American Arbitration Association. In any such proceeding, the prevailing party
shall be entitled to an award of its reasonable attorneys fees and expenses.
9. Waiver. The waiver of any provision of this Agreement shall not operate
or be construed as a waiver of any other provision of this Agreement. No waiver
shall be valid unless in writing and executed by the party to be charged
therewith.
10. Severability/Modification. In the event that any clause or provision of
this Agreement shall be determined to be invalid, illegal or unenforceable, such
clause or provision may be severed or modified to the extent necessary, and, as
severed and/or modified, this Agreement shall remain in full force and effect.
11. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Herrel acknowledges that the services to be rendered
under this Agreement are unique and personal. Accordingly, Herrel may not assign
his rights and obligations under this Agreement.
12. Amendment. This instrument may not be amended except by an agreement in
writing signed by both parties.
13. Change in Control Agreement. Nothing contained herein shall have any
effect on the Amended and Restated Agreement re Change in Control dated as of
February 28, 2006 by and between Herrel and the Company, and the parties hereto
acknowledge that such agreement is in full effect and binding on the parties
thereto.
14. Governing Law and Jurisdiction. This Agreement shall be interpreted,
construed, and enforced under the laws of the State of California. The courts
and authorities of the State of California shall have sole jurisdiction and
venue for purposes of enforcing the arbitration agreement above.
15. Authorization to Sign. The undersigned represents that he is properly
authorized to legally bind Ashworth, Inc., to this Agreement and to sign this
Agreement on behalf of Ashworth, Inc.
[Remainder of page left blank intentionally, signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Agreement
the date and year indicated above.
“COMPANY”
ASHWORTH, INC.
By: /s/ James B. Hayes Name: James B. Hayes Title:
Chairman of the Board “HERREL”
RANDALL L. HERREL, SR.
By: /s/ Randall L. Herrel, Sr. Randall L. Herrel, Sr.
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EXHIBIT A
Date:
September 12, 2006
To:
Board of Directors
Ashworth, Inc.
From:
Randall L. Herrel, Sr.
Subject:
Resignation
This letter is to confirm my resignation as a Director and Chief Executive
Officer of Ashworth, Inc. (the“Company”), effective as of October 17, 2006,
together with all other employment and trustee positions held with Ashworth,
Inc. and any of its subsidiaries or with their respective employee plans.
This letter is also to confirm that my resignation is not a result of any
material disagreement with the Company as to the Company’s operations, policies
or practices.
/s/ Randall L. Herrel, Sr.
Randall L. Herrel, Sr.
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EXHIBIT B
Optionee Statement
Ashworth, Inc.
Exercisable as of 8/31/2006
Randall L. Herrel Sr
Date Grant Expiration Grant Granted or Grant
Transferred Date Date Plan ID Type Transferred To Price
Out Outstanding Exercisable
10/2/1996
12/31/2003 3 Incentive 16,666 $ 6.0000 0 0
current
10/2/1996
12/31/2003 3 Non-Qualified 33,334 $ 6.0000 0 0
current
10/2/1996
12/31/2005 3 Incentive 16,666 $ 6.0000 0 0
current
10/2/1996
12/31/2004 3 Non-Qualified 83,334 $ 6.0000 0 0
current
10/2/1996
12/31/2004 3 Incentive 16,666 $ 6.0000 0 0
current
10/2/1996
6/14/2003 3 Non-Qualified 33,334 $ 6.0000 0 0
current
10/2/1996
6/14/2003 3 Incentive 16,666 $ 6.0000 0 0
current
10/2/1996
12/31/2005 3 Non-Qualified 83,334 $ 6.0000 0 0
current
2/6/1997
7/31/2002 3 Non-Qualified 6,094 $ 5.7500 0 0
current
2/25/1997
12/31/2004 3 Non-Qualified 100,000 $ 6.5000 0 0
current
11/11/1997
11/10/2003 3 Incentive 204 $ 10.1875 0 0
current
11/11/1997
11/10/2003 3 Non-Qualified 19,796 $ 10.1875 0 0
current
11/11/1997
11/10/2004 3 Non-Qualified 20,000 $ 10.1875 0 0
current
11/11/1997
11/10/2005 3 Non-Qualified 20,000 $ 10.1875 0 0
current
12/11/2000
12/11/2010 2KEIP Non-Qualified 40,865 $ 6.8750 40,865
40,865 current
12/11/2000
12/11/2010 2KEIP Incentive 43,635 $ 6.8750 43,635
43,685 current
12/22/2003
12/22/2013 2KEIP Incentive 17,713 $ 8.0900 17,713
17,713 current
12/21/2004
12/21/2014 2KEIP Non-Qualified 25,980 $ 10.7500 25,980
25,980 current
12/21/2004
12/21/2014 2KEIP Incentive 19,020 $ 10.7500 19,020
19,020 current
Optionee Totals
613,307 147,213 147,213
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Exhibit 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT (TIER I)
This Amendment to Employment Agreement between Magellan Health Services, Inc.
(“Employer”) and Daniel Gregoire entered into as of this 28th day of July, 2006
(“Employee”).
WHEREAS, Employer and Employee desire to amend the terms of the Employment
Agreement currently in effect between Employer and Employee (the “Employment
Agreement”).
NOW THEREFORE, Employer or Employee agree that the Employment Agreement is
hereby amended as follows:
I. New Change in Control Provisions — Add the following new paragraphs:
1. Termination Without Cause by the
Company or With Good Reason By Executive In connection With, Or Within Two Years
After, A Change In Control: If Employer terminates this Agreement and
Employee’s employment without cause, or if Employee terminates this Agreement
and Employee’s employment with Good Reason, in connection with a Change in
Control (as defined below) (whether before or at the time of such Change in
control) or within two years after a change in Control, Employee shall receive
the following, in lieu of the amounts and benefits described in Section 6:
(i) Base Salary through the date of termination;
(ii) pro-rata Target Bonus for the year in
which termination occurs, payable in a single installment immediately after
termination;
(iii) 2 times the sum of (a) Base Salary plus (b)
Target bonus, payable in a single cash installment immediately after
termination;
(iv) if employee elects COBRA coverage for health,
dental and vision benefits, Employer shall pay Employer’s contributions for
health insurance and Employee shall pay Employee’s contributions rate for
health, dental and vision insurance for up to eighteen (18) months after
termination.
(v) any other amounts earned, accrued or owing
to Executive but not yet paid;
(vi) other payments, entitlements or benefits, if
any, that are payable in accordance with applicable plans, programs,
arrangements or other agreements of the company or any affiliate; and
(vii) all stock options granted to Employee from
January 4, 2004 and prior to March 10, 2005 shall vest and become immediately
exercisable.
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2. Definitions:
A. Change in Control:
A “Change in Control” of the Company shall mean the first to occur after the
date hereof of any of the following events:
(i) any “person,” as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), becomes a “beneficial owner,” as such term is used in Rule
13d-3 promulgated under the Exchange Act, of 51% or more of the Voting Stock (as
defined below) of the Company;
(ii) the majority of the Board of Directors of
the Company consists of individuals other than “Continuing Directors,” which
shall mean the members of the Board on the date hereof, provided that any person
becoming a director subsequent to the date hereof whose election or nomination
for election was supported by a vote of the directors who then comprised the
Continuing Directors, shall be considered to be a Continuing Director;
(iii) the Board of Directors of the Company adopts
and, if required by law or the certificate of incorporation of the Corporation,
the shareholders approve the dissolution of the Company or a plan of liquidation
or comparable plan providing for the disposition of all or substantially all of
the Company’s assets;
(iv) all or substantially all of the assets of the
Company are disposed of pursuant to a merger, consolidation, share exchange,
reorganization or other transaction unless the shareholders of the Company
immediately prior to such merger, consolidation, share exchange, reorganization
or other transaction beneficially own, directly or indirectly, in substantially
the same proportion as they previously owned the Voting Stock or other ownership
interests of the Company, 51% of the Voting Stock or other ownership interests
of the entity or entities, if any, that succeed to the business of the Company;
or
(v) the Company merges or combines with another
company and, immediately after the merger or combination, the shareholders of
the Company immediately prior to the merger or combination own, directly or
indirectly, 50% or less of the Voting Stock of the successor company, provided
that in making such determination there shall be excluded from the number of
shares of Voting Stock held by such shareholders, but not from the Voting Stock
of the successor company, any shares owned by Affiliates of such other company
who were not also Affiliates of the Company prior to such merger or combination.
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B. “Cause” in connection with a Change in Control shall mean:
(i) Employee is convicted of (or pleads
guilty or nolo contendere to) a felony or a crime involving moral turpitude;
(ii) Employee’s commission of an act of fraud
or dishonesty involving his or her duties on behalf of the Company;
(iii) Employee’s willful failure or refusal to
faithfully and diligently perform duties lawfully assigned to Employee as an
officer or employee of the Company or other willful breach of any material term
of any employment agreement at the time in effect between the Company and
Employee; or
(iv) Employee’s willful failure or refusal to abide
by the Company’s policies, rules, procedures or directives, including any
material violation of the Company’s Code of Ethics.
C. “Good Reason” shall mean:
(i) a reduction in Employee’s salary in
effect at the time of a Change in Control, unless such reduction is comparable
in degree to the reduction that takes place for all other employees of the
Company of comparable rank, or a reduction in Employee’s target bonus
opportunity for the year in which or any year after the year in which the Change
of Control occurs from Employee’s target bonus opportunity for the year in which
the Change in Control occurs (if any) as established under any employment
agreement Employee has with the Company or any bonus plan of the Company
applicable to Employee (or, if no such target bonus opportunity has yet been
established for Employee under a bonus plan applicable to Employee for the year
in which the Change of Control has occurred, the target bonus opportunity so
established for Employee for the immediately preceding year, if any);
(iii) a material diminution in Employee’s
position, duties or responsibilities as in effect at the time of a Change in
Control, or the assignment to Employee of duties which are materially
inconsistent with such position, duties and authority, unless in either case
such change is made with the consent of the Employee; or
(iv) the relocation by more than 50 miles of the
offices of the Company which constitute at the time of the Change in Control
Employee’s principal location for the performance of his or her services to the
Company;
provided that, in each such case, such event or condition continues uncured for
a period of more than 15 days after Employee gives notice thereof to the
Company.
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D. “Company” shall include any entity that
succeeds to all or substantially all of the business of the Company,
E. “Affiliate” of a person or other entity
shall mean a person or other entity that directly or indirectly controls, is
controlled by, or is under common control with the person or other entity
specified,
F. “Voting Stock” shall mean any capital
stock of any class or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation and reference to a percentage of Voting Stock shall refer to such
percentage of the votes that all such Voting Stock is entitled to cast.
3 Tax Gross-Up. The following provisions shall apply with
respect to any excise tax imposed under Section 4999 of the Internal Revenue
Code as amended (the “Code”), (the “Excise Tax):
a. If any of the payments or benefits received or to
be received by Employee in connection with a Change in Control or Employee’s
termination of employee (whether pursuant to the terms of this Agreement or any
other plan, arrangement of agreement with the Company, any person whose actions
result in a Change on Control of the Company or any person affiliated with the
Company or such person (the “Total Payments”)) will be subject to the Excise
Tax, the Company shall pay to Employee an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Employee after payment of (a) the
Excise Tax, if any, on the Total Payments and (b) any Excise Tax and income tax
due in respect of the Gross-Up Payment, shall equal the Total Payments. Such
payment shall be made in a single lump sum within 10 days following the date of
a determination that only such payment is required.
b. For purposes of determining whether any of the Total
payments will be subject to Excise Tax and the amount of such Excise Tax, (i)
any Total Payments shall be treated as “parachute payments” (within the meaning
of Section280G(b) (2) of the Code) unless, in the opinion of tax counsel
selected by the Company and reasonably acceptable to Employee, such payments or
benefits (in whole or in part) should not constitute parachute payments,
including by reason of Section 280G (b) (4) (A) of the Code, and all “excess
parachute payments” (within the meeting of Section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
4
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(within the meaning of Section 280G(b) (4) (B) of the Code), or are otherwise
not subject to the Excise Tax, and (ii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Company’s independent
auditors in accordance with the principles of Section 280G(d) (3) of the Code.
For purposes of determining the amount of the Gross-Up payment, Employee shall
be deemed to pay federal income and employment taxes at the highest marginal
rate of federal income and employment taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income and employment taxes
at the highest marginal rate of taxation in the state and locality of Employee’s
residence on the date of termination of employment (or such other time as
hereinafter described), net of the maximum reduction in federal income or
employment taxes which could be obtained from deduction of such state and local
taxes.
In the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of Employee’s
employment (or such other time as is hereinafter described), Employee shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction plus interest on the amount of such repayment at the applicable
federal rate, as defined in Section 1274(b) (2) (B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Employee’s employment (or such other
time as is hereinafter described) (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest at the applicable federal rate, penalties or
additions payable by Employee with respect to such excess) at the time that the
amount of such excess is finally determined. Employee and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total payments.
II. Other Changes
1. Amendment to Section 6(c)
Section 6 (c) in the Employment Agreement is hereby amended to change the
reference in the fifth line from “35 miles” to “50 miles”.
2. Amendment to Section 7(b)(i):
Section 7(b)(i) is hereby amended to delete it and insert the following in place
thereof:
(i) Employee covenants and agrees that during any period in which
Base Salary is continued after termination of this Agreement (or in respect of
which Base Salary is paid in a lump sum) or for one year after Employee’s
voluntary termination of employment without Good Reason or termination of
Employee’s employment for cause, he or she will not, on his or her own behalf or
as a partner, officer, director, employee, agent, or consultant of any other
person or entity, directly or indirectly, engage or attempt to engage in the
business of providing or selling services in the United States that are services
offered by Employer at the time of the termination of this Agreement, unless
waived in writing by Employer in its sole discretion. Employee recognizes that
the above restriction is reasonable and necessary to protect the interest of the
Employer and its controller subsidiaries and affiliates.
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IN WITNESS WHEREOF, Employer and Employee have executed this Amendment to
Employment Agreement as of the date first above written.
Magellan Health Services, Inc.
By
/s/ Caskie Lewis-Clapper
Duly Authorized
/s/ Daniel Gregoire
Employee
6
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Exhibit 10(e)(e)
HEWLETT-PACKARD COMPANY
<PLAN>
RESTRICTED STOCK UNIT AGREEMENT
THIS AGREEMENT, dated <GRANT DATE> between Hewlett-Packard Company, a
Delaware Corporation ("Company"), and <EMPNO> <NAME> (the "Employee"), is
entered into as follows:
WHEREAS, the continued participation of the Employee is considered by
the Company to be important for the Company's continued growth; and
WHEREAS, in order to give the Employee an incentive to continue in the
employ of the Company and to participate in the affairs of the Company, the HR
and Compensation Committee of the Board of Directors of the Company or its
delegates ("Committee") has determined that the Employee shall be granted stock
units representing hypothetical shares of the Company's common stock ("Stock
Units"), with each Stock Unit equal in value to one share of the Company's $0.01
par value common stock ("Stock"), subject to the restrictions stated below and
in accordance with the terms and conditions of the <PLAN> ("Plan"), a copy of
which can be found on the Stock Incentive Program Web Site at:
http://hrcms01.atl.hp.com:6047/public/pages/home/en_US/index.htm or by written
or telephonic request to the Company Secretary.
THEREFORE, the parties agree as follows:
1.Grant of Stock Units.
Subject to the terms and conditions of this Agreement and of the Plan, the
Company hereby grants to the Employee <SHARES> Stock Units.
2.Vesting Schedule.
The interest of the Employee in the Stock Units shall vest as follows: <INSERT
VESTING PROVISION HERE>. Provided the Employee remains in the employ of the
Company on a continuous, full-time basis through the close of business on the
<INSERT FULL VESTING DATE HERE>, the interest of the Employee in the Stock Units
shall become fully vested on that date.
3.Benefit Upon Vesting.
Upon the vesting of the Stock Units, the Employee shall be entitled to receive,
as soon as administratively practicable, Stock or a combination of cash and
Stock, as the Company determines in its sole discretion, equal to:
(a)the number of Stock Units that have vested multiplied by the fair market
value (as defined in the Plan) of a share of Stock on the date on which such
Stock Units vest, and
(b)a dividend equivalent payment determined by
(1)multiplying the number of vested Stock Units by the dividend per share of
Stock on each dividend payment date between the date here of and the vesting
date to determine the dividend equivalent amount for each dividend payment date;
(2)dividing the amount determined in (1) above by the fair market value of a
share of Stock on the date of such dividend payment to determine the number of
additional Stock Units to be credited to the Employee; and
(3)multiplying the number of additional Stock Units determined in (2) above by
the fair market value of a share of Stock on the vesting date to determine the
aggregate amount of dividend equivalent payments for such vested Stock Units;
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provided, however, that if any aggregated dividend equivalent payments in
paragraph (b)(3) above results in a payment of a fractional share, such
fractional share shall be rounded up to the nearest whole share.
4.Restrictions. (a)Except as otherwise provided for in this Agreement, the Stock
Units or rights granted hereunder may not be sold, pledged or otherwise
transferred until the Stock Units become vested in accordance with Section 2.
The period of time between the date hereof and the date the Stock Units become
fully vested is referred to herein as the "Restriction Period."
(b)Except as otherwise provided for in this Agreement, if the Employee's
employment with the Company is terminated at any time for any reason prior to
the lapse of the Restriction Period, all Stock Units granted hereunder shall be
forfeited by the Employee. 5.Legend.
All certificates representing any Stock of the Company subject to the provisions
of this Agreement shall have endorsed thereon the following legend:
"The shares represented by this certificate are subject to an agreement between
the Corporation and the registered holder, a copy of which is on file at the
principal office of this Corporation."
6.No Stockholder Rights.
Stock Units represent hypothetical shares of Stock. During the Restriction
Period, the Employee shall not be entitled to any of the rights or benefits
generally accorded to stockholders.
7.Disability or Retirement of the Employee.
If the Employee's termination of employment is due to the Employee's total and
permanent disability or retirement after attaining 55 years of age with 15 years
of service to the Company or 65 years of age or age under local law without
regard to service, in accordance with the Company's retirement policy, all
outstanding and unvested Stock Units shall continue to vest in accordance with
Section 2, provided that the following conditions are met for the entire
Restriction Period:
(a)The Employee shall render, as an independent contractor and not as an
employee, such advisory or consultative services to the Company as shall
reasonably be requested by the Company, consistent with the Employee's health
and any other employment or other activities in which such Employee may be
engaged;
(b)The Employee shall not render services for any organization or engage
directly or indirectly in any business which, in the opinion of the Company,
competes with or is in conflict with the interests of the Company;
(c)The Employee shall not, without prior written authorization from the Company,
disclose to anyone outside the Company, or use in other than the Company's
business, any confidential information or material relating to the business of
the Company, either during or after employment with the Company; and
(d)The Employee shall disclose promptly and assign to the Company all right,
title and interest in any invention or idea, patentable or not, made or
conceived by the Employee during employment by the Company, relating in any
manner to the actual or anticipated business, anything reasonably necessary to
enable the Company to secure a patent where appropriate in the United States and
in foreign countries.
8.Death of the Employee.
In the event of the Employee's death prior to the end of the Restriction Period,
the Employee's estate or designated beneficiary shall have the right to receive
a pro rata payment of cash, Stock or combination of cash and Stock, as the
Company determines in its sole discretion. In the event of the Employee's death
after the vesting date but prior to the payment associated with such the
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Stock Units, payment for such Stock Units shall be made to the Employee's estate
or designated beneficiary.
9.Taxes.
(a)The Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Stock Units hereunder. In the
event that the Company or the Employer is required to withhold taxes as a result
of the grant or vesting of Stock Units, or subsequent sale of Stock acquired
pursuant to such Stock Units, or due upon receipt of dividend equivalent
payments, the Employee shall surrender a sufficient number of whole shares of
such Stock or make a cash payment as necessary to cover all applicable required
withholding taxes and required social security contributions at the time the
restrictions on the Stock Units lapse, unless alternative procedures for such
payment are established by the Company. The Employee will receive a cash refund
for any fraction of a surrendered share not necessary for required withholding
taxes and required social insurance contributions. To the extent that any
surrender of Stock or payment of cash or alternative procedure for such payment
is insufficient, the Employee authorizes the Company, its Affiliates and
Subsidiaries, which are qualified to deduct tax at source, to deduct all
applicable required withholding taxes and social security contributions from the
Employee's compensation. The Employee agrees to pay any amounts that cannot be
satisfied from wages or other cash compensation, to the extent permitted by law.
(b)Regardless of any action the Company or the Employee's employer (the
"Employer") takes with respect to any or all income tax, social insurance,
payroll tax, payment on account or other tax-related withholding ("Tax-Related
Items"), the Employee acknowledges and agrees that the ultimate liability for
all Tax-Related Items legally due by him is and remains the Employee's
responsibility and that the Company and or the Employer (i) make no
representations nor undertakings regarding the treatment of any Tax-Related
Items in connection with any aspect of this grant of Stock Units, including the
grant and vesting of Stock Units, subsequent payment of Stock and or cash
related to such Stock Units or the subsequent sale of any Stock acquired
pursuant to such Stock Units and receipt of any dividend equivalent payments;
and (ii) do not commit to structure the terms or any aspect of this grant of
Stock Units to reduce or eliminate the Employee's liability for Tax-Related
Items. The Employee shall pay the Company or the Employer any amount of
Tax-Related Items that the Company or the Employer may be required to withhold
as a result of the Employee's participation in the Plan or the Employee's
receipt of Stock Units that cannot be satisfied by the means previously
described. The Company may refuse to deliver the benefit described in Section 3
if the Employee fails to comply with the Employee's obligations in connection
with the Tax-Related Items.
10.Data Privacy Consent.
The Employee hereby explicitly and unambiguously consents to the collection, use
and transfer, in electronic or other form, of the Employee's personal data as
described in this document by and among, as applicable, the Employer, and the
Company and its Subsidiaries and Affiliates for the exclusive purpose of
implementing, administering and managing the Employee's participation in the
Plan. The Employee understands that the Company, its Affiliates, its
Subsidiaries and the Employer hold certain personal information about the
Employee, including, but not limited to, name, home address and telephone
number, date of birth, social insurance number or other identification number,
salary, nationality, job title, any shares of stock or directorships held in the
Company, details of all options or any other entitlement to shares of stock
awarded, canceled, purchased, exercised, vested, unvested or outstanding in the
Employee's favor for the purpose of implementing, managing and administering the
Plan ("Data"). The Employee understands that the Data may be transferred to any
third parties assisting in the implementation, administration and management of
the Plan, that these recipients may be located in the Employee's country or
elsewhere and that the recipient country may have different data privacy laws
and protections than
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the Employee's country. The Employee understands that he may request a list with
the names and addresses of any potential recipients of the Data by contacting
the local human resources representative. The Employee authorizes the recipients
to receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing the
Employee's participation in the Plan, including any requisite transfer of such
Data, as may be required to a broker or other third party with whom the Employee
may elect to deposit any Stock acquired under the Plan. The Employee understands
that Data will be held only as long as is necessary to implement, administer and
manage participation in the Plan. The Employee understands that he may, at any
time, view Data, request additional information about the storage and processing
of the Data, require any necessary amendments to the Data or refuse or withdraw
the consents herein, in any case without cost, by contacting the local human
resources representative in writing. The Employee understands that refusing or
withdrawing consent may affect the Employee's ability to participate in the
Plan. For more information on the consequences of refusing to consent or
withdrawing consent, the Employee understands that he may contact an HP local
human resources representative.
11.Plan Information.
The Employee agrees to receive copies of the Plan, the Plan prospectus and other
Plan information, including information prepared to comply with laws outside the
United States, from the Stock Incentive Program Web Site referenced above and
stockholder information, including copies of any annual report, proxy and
Form 10-K, from the investor relations section of the HP web site at www.hp.com.
The Employee acknowledges that copies of the Plan, Plan prospectus, Plan
information and stockholder information are available upon written or telephonic
request to the Company Secretary.
12.Acknowledgment and Waiver.
By accepting this grant of Stock Units, the Employee acknowledges and agrees
that: (i) the Plan is established voluntarily by the Company, it is
discretionary in nature and may be modified, amended, suspended or terminated by
the Company at any time unless otherwise provided in the Plan or this Agreement;
(ii) the grant of Stock Units is voluntary and occasional and does not create
any contractual or other right to receive future grants of Stock or Stock Units,
or benefits in lieu of Stock or Stock Units, even if Stock or Stock Units have
been granted repeatedly in the past; (iii) all decisions with respect to future
grants, if any, will be at the sole discretion of the Company; (iv) the
Employee's participation in the Plan shall not create a right to further
employment with Employer and shall not interfere with the ability of Employer to
terminate the Employee's employment relationship at any time with or without
cause and it is expressly agreed and understood that employment is terminable at
the will of either party, insofar as permitted by law; (v) the Employee is
participating voluntarily in the Plan; (vi) stock unit, stock unit grants and
resulting benefits are an extraordinary item that does not constitute
compensation of any kind for services of any kind rendered to the Company or the
Employer, and is outside the scope of the Employee's employment contract, if
any; (vii) stock units, stock unit grants and resulting benefits are not part of
normal or expected compensation or salary for any purposes, including, but not
limited to calculating any severance, resignation, termination, redundancy, end
of service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments insofar as permitted by law; (viii) in the event
that the Employee is not an employee of the Company, this grant of Stock Units
will not be interpreted to form an employment contract or relationship with the
Company, and furthermore, this grant of Stock Units will not be interpreted to
form an employment contract with the Employer or any Subsidiary or Affiliate of
the Company; (ix) the future value of the underlying Stock is unknown and cannot
be predicted with certainty; (x) in consideration of this grant of Stock Units,
no claim or entitlement to compensation or damages shall arise from termination
of this grant of Stock Units or diminution in value of this grant of Stock Units
resulting from termination of the Employee's employment by the Company or the
Employer (for any reason whatsoever and whether or not in breach of local labor
laws) and the Employee irrevocably releases the Company and the Employer from
any such claim that may arise;
--------------------------------------------------------------------------------
if, notwithstanding the foregoing, any such claim is found by a court of
competent jurisdiction to have arisen, then, by accepting the terms of this
Agreement, the Employee shall be deemed irrevocably to have waived any
entitlement to pursue such claim; and (xi) notwithstanding any terms or
conditions of the Plan to the contrary, in the event of involuntary termination
of the Employee's employment (whether or not in breach of local labor laws), the
Employee's right to receive benefits under this Agreement, if any, will
terminate effective as of the date that the Employee is no longer actively
employed and will not be extended by any notice period mandated under local law
(e.g., active employment would not include a period of "garden leave" or similar
period pursuant to local law); furthermore, in the event of involuntary
termination of employment (whether or not in breach of local labor laws), the
Employee's right to receive benefits under this Agreement after termination of
employment, if any, will be measured by the date of termination of the
Employee's active employment and will not be extended by any notice period
mandated under local law; the Committee shall have the exclusive discretion to
determine when the Employee is no longer actively employed for purposes of this
grant of Stock Units.
13.Miscellaneous.
(a)The Company shall not be required to treat as owner of Stock Units, and
associated benefits hereunder, to any transferee to whom such Stock Units or
benefits shall have been so transferred.
(b)The parties agree to execute such further instruments and to take such action
as may reasonably be necessary to carry out the intent of this Agreement.
(c)Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon delivery to the Employee at his address
then on file with the Company.
(d)The Plan is incorporated herein by reference. The Plan and this Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Employee with respect to the subject matter
hereof, and may not be modified adversely to the Employee's interest except by
means of a writing signed by the Company and the Employee. This Agreement is
governed by the laws of the state of Delaware.
(e)If the Employee has received this or any other document related to the Plan
translated into a language other than English and if the translated version is
different than the English version, the English version will control.
(f)The provisions of this Agreement are severable and if any one or more
provisions are determined to be illegal or otherwise unenforceable, in whole or
in part, the remaining provisions shall nevertheless be binding and enforceable.
HEWLETT-PACKARD COMPANY
By
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Mark V. Hurd
CEO and President
By
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Ann O. Baskins
Senior Vice President, General Counsel and Secretary
RETAIN THIS AGREEMENT FOR YOUR RECORDS
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QuickLinks
Exhibit 10(e)(e)
HEWLETT-PACKARD COMPANY <PLAN> RESTRICTED STOCK UNIT AGREEMENT
|
EXHIBIT 10-C-2
Description of Long-Term EBIT Bonus Plan
Established Under the Management Incentive Plan
The Company had in effect during 2003, 2004 and 2005 a long-term incentive
performance plan established under the Management Incentive Plan which was
approved by stockholders at the Company’s April 15, 2004 annual meeting.
The Compensation and Stock Option Committee of the Board of Directors, which is
comprised of “independent directors” under the New York Stock Exchange listing
standards and “outside directors” as defined in Section 162(m) of the Internal
Revenue Code, approved the plan which provides an opportunity for certain of the
key executives of the Company and its subsidiaries, including Named Executive
Officers to earn qualified performance-based compensation upon the attainment of
specified earnings before interest and taxes (“EBIT”) goals established for
certain of the Company’s operating groups.
Under the terms of the plan, upon the attainment by any specific operating group
of a pre- established EBIT goal during the long-term performance period—fiscal
years 2003, 2004 or 2005, certain of the key executives of the Company are
awarded a cash bonus equal to a specified percentage of such executive’s total
EBIT award, and certain operating company executives are paid their full EBIT
award. If each of the Company’s operating groups achieves its EBIT goal in the
same fiscal year, 100% of the executive’s total EBIT award would be paid to him
or her. Once an operating group attains its EBIT goal and an award is paid to an
executive, the EBIT goal has been attained and no other payments are made in
subsequent years of the performance period with respect to EBIT attainment by
that particular operating unit. |
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this “Agreement”) dated as of July 1, 2006,
between Metro One Telecommunications, Inc., an Oregon corporation (the
“Company”), and Jingle Networks, Inc., a Delaware corporation (“Holder” or
“JNI”).
RECITALS
WHEREAS, pursuant to that certain Telecom Information Services Agreement dated
as of July 1, 2006, by and between the Company and Holder (the “Services
Agreement”), Holder has been issued certain warrants to purchase shares of
Common Stock of the Company;
WHEREAS, THE WARRANTS ISSUED TO HOLDER PURSUANT TO THE SERVICES AGREEMENT ARE IN
TWO TRANCHES EACH OF WHICH IS EXERCISABLE UPON SATISFACTION OF CERTAIN
CONDITIONS THEREIN SPECIFIED, WITH THE FIRST TRANCHE FOR UP TO 623,250 SHARES OF
THE COMPANY’S COMMON STOCK (THE “FIRST TRANCHE”) AND THE SECOND TRANCHE FOR UP
TO 870,075 SHARES OF THE COMPANY’S COMMON STOCK (THE “SECOND TRANCHE”) (THE
FIRST TRANCHE AND THE SECOND TRANCHE BEING COLLECTIVELY REFERRED TO HEREIN AS
THE “WARRANTS” AND THE SHARE AMOUNTS STATED IN THIS AGREEMENT REFLECT A 1-FOR-4
REVERSE STOCK SPLIT EFFECTED BY THE COMPANY ON JULY 6, 2006);
WHEREAS, in connection with Services Agreement and the Warrants, the Company
agreed to provide certain rights to Holder to cause the shares purchased upon
proper exercise of the Warrants to be registered pursuant to the Securities Act;
and
WHEREAS, the parties hereto hereby desire to set forth Holder’s rights and the
Company’s obligations to cause the registration of the Registrable Securities
pursuant to the Securities Act;
NOW, THEREFORE, in consideration of the Services Agreement, the Warrants, the
mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND USAGE.
As used in this Agreement the following capitalized terms shall have the
following meanings:
1.1. DEFINITIONS.
“Agent” shall mean the principal placement agent on an agented placement of
Registrable Securities.
“Board” shall mean the Board of Directors of the Company.
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“Business Day” shall mean any day other than (A) Saturday or Sunday or (B) any
other day in which banks in Portland, Oregon are permitted or required to be
closed.
“Commission” shall mean the U.S. Securities and Exchange Commission.
“Common Stock” shall mean (i) the common stock, no par value, of the Company,
and (ii) shares of capital stock of the Company issued by the Company in respect
of or in exchange for shares of such common stock in connection with any stock
dividend or distribution, stock split-up, recapitalization, recombination or
similar exchange by the Company generally of shares of such common stock.
“Demand Registration” shall have the meaning set forth in Section 2.1.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Form S-3” means such form under the Securities Act as in effect on the date
hereof or any successor registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
“Form S-3 Registration” shall have the meaning set forth in Section 3.1.
“Holder” shall mean JNI and any subsequent transferee of Registrable Securities
as permitted by Section 9 and the term “Holders” shall include Holder and
transferees of Registrable Securities with respect to the rights that such
Transferees shall have acquired in accordance with Section 9, at such times as
such Persons shall own Registrable Securities.
“Initiating Holders” shall have the meaning set forth in Section 3.3.
“Person” shall mean an individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, unincorporated
syndicate, unincorporated association, trust, trustee, executor, administrator
or other legal representative, governmental authority or agency, political
subdivision, or any group of Persons acting in concert.
“Piggyback Registration” shall have the meaning set forth in Section 4.
“Register”, “registered”, and “registration” shall refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the
Commission of effectiveness of such registration statement or document.
“Registrable Securities” shall mean, subject to Section 9 and Section 11.3: (i)
Shares owned by a Holder from the proper exercise of all or any portion of the
Warrants on the date of determination; (ii) any shares of Common Stock or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Company generally for,
2
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or in replacement by the Company generally of, such Shares; and (iii) any
securities issued in exchange for Shares in any subsequent merger or
reorganization of the Company; provided, however, that Registrable Securities
shall not include any securities which have theretofore been registered and sold
pursuant to the Securities Act or which have been sold to the public pursuant to
Rule 144 or any similar rule promulgated by the Commission pursuant to the
Securities Act, and, provided further, the Company shall have no obligation
under Section 2, Section 3 or Section 4 to register any Registrable Securities
of a Holder if the Company shall deliver to the Holders requesting such
registration an opinion of counsel reasonably satisfactory to such Holders and
their counsel to the effect that the proposed sale or disposition of all of the
Registrable Securities for which registration was requested does not require
registration under the Securities Act for a sale or disposition, and offers to
remove any and all legends restricting transfer from the certificates evidencing
such Registrable Securities. For purposes of this Agreement, a Person will be
deemed to be an owner of Registrable Securities whenever such Person has the
then-existing right to acquire such Registrable Securities (by conversion,
purchase or otherwise, including acquisition pursuant to proper exercise of the
Warrants), whether or not such acquisition has actually been effected.
“Registrable Securities then outstanding” shall mean, with respect to a
specified determination date, the Registrable Securities owned by all Holders on
such date.
“Registration Expenses” shall have the meaning set forth in Section 7.1.
“S-3 Notice” shall have the meaning set forth in Section 3.1.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Selling Holders” shall mean, with respect to a specified registration pursuant
to this Agreement, Holders whose Registrable Securities are included in such
registration.
“Shares” shall mean all shares of Common Stock issued by the Company to Holder
upon proper exercise of and pursuant to the Warrants.
“Shelf Registration” shall have the meaning set forth in Section 3.3.
“Transfer” shall mean and include the act of selling, giving, transferring,
creating a trust (voting or otherwise), conveying, assigning or otherwise
disposing of (other than pledging, hypothecating or otherwise transferring as
security) (and correlative words shall have correlative meanings); provided,
however, that any transfer or other disposition upon foreclosure or other
exercise of remedies of a secured creditor after an event of default under or
with respect to a pledge, hypothecation or other transfer as security shall
constitute a “Transfer.”
“Underwriters’ Representative” shall mean the managing underwriter, or, in the
case of a co-managed underwriting, the managing underwriter designated as the
Underwriters’ Representative by the co-managers.
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“Violation” shall have the meaning set forth in Section 8.1.
“Warrants” shall have the meaning set forth in the Recitals, above.
1.2. USAGE.
(i) When a reference is made in this Agreement to a Section or
Exhibit, such reference shall be to a Section or Exhibit of this Agreement
unless otherwise indicated or unless the context otherwise requires.
(ii) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(iii) Whenever the words “include,” “includes” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without
limitation.”
(iv) References to a Person are also references to its assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be)
permitted by the terms of this Agreement.
(v) References to a document are to such document as amended, waived
and otherwise modified from time to time and references to a statute or other
governmental rule are to such statute or rule as amended and otherwise modified
from time to time (and references to any provision thereof shall include
references to any successor provision).
(vi) The definitions set forth herein are equally applicable both to
the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
(vii) The term “hereof” and similar terms refer to this Agreement as a
whole.
(viii) References to Registrable Securities “owned” by a Holder shall
include Registrable Securities beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other agent, but
shall exclude shares of Common Stock held by a Holder in a fiduciary capacity
for customers of such Person.
(ix) The “date of” any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 14.2.
SECTION 2. DEMAND REGISTRATION.
2.1. (I) AT ANY TIME ON OR AFTER THE DATE THE WARRANTS SHALL
BE EXERCISABLE BY HOLDER IN ACCORDANCE WITH THEIR TERMS AND UPON SATISFACTION OF
ANY REQUIREMENTS IN THE WARRANTS OR IN THE SERVICES AGREEMENT WITH RESPECT TO
THE DISPOSITION OF THE WARRANTS OR OF SUCH SHARES, IF ONE OR MORE HOLDERS THAT
OWN AN AGGREGATE MARKET VALUE OF $2,000,000 OR MORE AT THE TIME OF THE REQUEST
OF THE REGISTRABLE SECURITIES SHALL MAKE A WRITTEN REQUEST TO THE COMPANY, THE
COMPANY SHALL CAUSE THERE TO BE FILED WITH THE COMMISSION A REGISTRATION
STATEMENT MEETING THE REQUIREMENTS OF THE SECURITIES ACT (A “DEMAND
REGISTRATION”), AND EACH HOLDER SHALL BE ENTITLED TO HAVE INCLUDED THEREIN
(SUBJECT TO SECTION 2.6) ALL OR SUCH NUMBER OF SUCH HOLDER’S REGISTRABLE
SECURITIES, AS THE
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HOLDER SHALL DESIGNATE PURSUANT TO SECTION 2.1(I) OR (III) IN WRITING. ANY
REQUEST MADE PURSUANT TO THIS SECTION 2.1 SHALL BE ADDRESSED TO THE ATTENTION OF
THE SECRETARY OF THE COMPANY, AND SHALL SPECIFY THE NUMBER OF REGISTRABLE
SECURITIES TO BE REGISTERED, THE INTENDED METHODS OF DISPOSITION THEREOF AND
THAT THE REQUEST IS FOR A DEMAND REGISTRATION PURSUANT TO THIS SECTION 2.1(I).
(ii) The Company shall be entitled to postpone for up to 90 days the
filing of, or any Transfer under, any registration statement otherwise required
to be prepared and filed pursuant to this Section 2.1, if the Company furnishes
to the Holders a certificate signed by the chief executive officer of the
Company stating that in the good-faith judgment of the Board of Directors of the
Company, it would be materially detrimental to the Company and its stockholders
for such registration to be effected or Transfer to be made at such time;
provided, however, that such right shall not be invoked more than once in any
twelve month period.
(iii) Whenever the Company shall have received a demand pursuant to
Section 2.1(i) to effect the registration of any Registrable Securities, the
Company shall promptly give written notice of such proposed registration to all
other Holders. Any such Holder may, within 20 days after receipt of such
notice, request in writing that all of such Holder’s Registrable Securities, or
any portion thereof designated by such Holder, be included in the registration.
2.2. FOLLOWING RECEIPT OF A REQUEST FOR A DEMAND REGISTRATION THE COMPANY
SHALL:
(i) File the registration statement with the Commission in accordance
with Section 5 hereof as promptly as practicable, and shall use its reasonable
best efforts to have the registration declared effective under the Securities
Act as soon as reasonably practicable, in each instance giving due regard to the
need to prepare current financial statements, conduct due diligence and complete
other actions that are reasonably necessary to effect a registered public
offering.
(ii) Use the Company’s reasonable best efforts to keep the relevant
registration statement continuously effective for up to 90 days or until such
earlier date as of which all the Registrable Securities under the Demand
Registration statement shall have been disposed of in the manner described in
the registration statement.
2.3. THE COMPANY SHALL BE OBLIGATED TO EFFECT NO MORE THAN ONE DEMAND
REGISTRATION. FOR PURPOSES OF THE PRECEDING SENTENCE, REGISTRATION SHALL NOT BE
DEEMED TO HAVE BEEN EFFECTED (I) UNLESS A REGISTRATION STATEMENT WITH RESPECT
THERETO HAS BECOME EFFECTIVE, (II) IF AFTER SUCH REGISTRATION STATEMENT HAS
BECOME EFFECTIVE, SUCH REGISTRATION OR THE RELATED OFFER, SALE OR DISTRIBUTION
OF REGISTRABLE SECURITIES THEREUNDER IS INTERFERED WITH BY ANY STOP ORDER,
INJUNCTION OR OTHER ORDER OR REQUIREMENT OF THE COMMISSION OR OTHER GOVERNMENTAL
AGENCY OR COURT FOR ANY REASON NOT ATTRIBUTABLE TO THE SELLING HOLDERS AND SUCH
INTERFERENCE IS NOT THEREAFTER ELIMINATED, OR (III) IF THE CONDITIONS TO CLOSING
SPECIFIED IN THE UNDERWRITING AGREEMENT, IF ANY, ENTERED INTO IN CONNECTION WITH
SUCH REGISTRATION ARE NOT SATISFIED OR WAIVED, OTHER THAN BY REASON OF A FAILURE
ON THE PART OF THE SELLING HOLDERS. IF THE COMPANY SHALL HAVE COMPLIED WITH ITS
OBLIGATIONS UNDER THIS AGREEMENT, A RIGHT TO DEMAND A REGISTRATION PURSUANT TO
THIS SECTION 2 SHALL BE DEEMED TO HAVE BEEN SATISFIED UPON THE EARLIER OF (X)
THE DATE AS OF WHICH ALL OF THE REGISTRABLE SECURITIES INCLUDED THEREIN SHALL
HAVE BEEN DISPOSED OF PURSUANT TO THE REGISTRATION STATEMENT, AND (Y) THE DATE
AS OF WHICH SUCH DEMAND REGISTRATION SHALL HAVE BEEN CONTINUOUSLY EFFECTIVE FOR
A PERIOD OF 90 DAYS.
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2.4. A REGISTRATION PURSUANT TO THIS SECTION 2 SHALL BE ON SUCH APPROPRIATE
REGISTRATION FORM OF THE COMMISSION AS SHALL (I) BE SELECTED BY THE COMPANY AND
BE REASONABLY ACCEPTABLE TO THE SELLING HOLDERS, AND (II) PERMIT THE DISPOSITION
OF THE REGISTRABLE SECURITIES IN ACCORDANCE WITH THE INTENDED METHOD OR METHODS
OF DISPOSITION SPECIFIED IN THE REQUEST PURSUANT TO SECTION 2.1(I) OR SECTION
2.2, RESPECTIVELY.
2.5. IF ANY REGISTRATION PURSUANT TO SECTION 2 INVOLVES AN UNDERWRITTEN
OFFERING (WHETHER ON A “FIRM”, “BEST EFFORTS” OR “ALL REASONABLE EFFORTS” BASIS
OR OTHERWISE), OR AN AGENTED OFFERING, THE COMPANY SHALL HAVE THE RIGHT TO
SELECT THE UNDERWRITER OR UNDERWRITERS AND MANAGER OR MANAGERS TO ADMINISTER
SUCH UNDERWRITTEN OFFERING OR THE AGENT OR AGENTS FOR SUCH AGENTED OFFERING;
PROVIDED, HOWEVER, THAT EACH PERSON SO SELECTED SHALL BE REASONABLY ACCEPTABLE
TO THE SELLING HOLDERS.
2.6. WHENEVER THE COMPANY SHALL EFFECT A REGISTRATION PURSUANT TO THIS
SECTION 2 IN CONNECTION WITH AN UNDERWRITTEN OFFERING BY ONE OR MORE SELLING
HOLDERS OF REGISTRABLE SECURITIES: (I) IF SUCH SELLING HOLDERS HAVE REQUESTED
THE INCLUSION THEREIN OF MORE THAN ONE CLASS OF REGISTRABLE SECURITIES, AND THE
UNDERWRITERS’ REPRESENTATIVE OR AGENT ADVISES EACH SUCH SELLING HOLDER IN
WRITING THAT, IN ITS OPINION, THE INCLUSION OF MORE THAN ONE CLASS OF
REGISTRABLE SECURITIES WOULD ADVERSELY AFFECT SUCH OFFERING, THE HOLDERS HOLDING
AT LEAST A MAJORITY OF THE REGISTRABLE SECURITIES (DETERMINED BY THE RELATIVE
MARKET VALUE AS OF THE DATE ON WHICH A TIMELY DEMAND IS LAST RECEIVED FROM
HOLDER) PROPOSED TO BE SOLD THEREIN BY THEM, SHALL DECIDE WHICH CLASS OF
REGISTRABLE SECURITIES SHALL BE INCLUDED THEREIN IN SUCH OFFERING AND THE
RELATED REGISTRATION, AND THE OTHER CLASS SHALL BE EXCLUDED; AND (II) IF THE
UNDERWRITERS’ REPRESENTATIVE OR AGENT ADVISES EACH SUCH SELLING HOLDER IN
WRITING THAT, IN ITS OPINION, THE AMOUNT OF SECURITIES REQUESTED TO BE INCLUDED
IN SUCH OFFERING (WHETHER BY SELLING HOLDERS OR OTHERS) EXCEEDS THE AMOUNT WHICH
CAN BE SOLD IN SUCH OFFERING WITHIN A PRICE RANGE ACCEPTABLE TO THE SELLING
HOLDERS, SECURITIES SHALL BE INCLUDED IN SUCH OFFERING AND THE RELATED
REGISTRATION, TO THE EXTENT OF THE AMOUNT WHICH CAN BE SOLD WITHIN SUCH PRICE
RANGE, AND ON A PRO RATA BASIS AMONG ALL SELLING HOLDERS: FIRST FOR THE ACCOUNT
OF THE HOLDER, AND SECOND BY ALL OTHER SELLING HOLDERS.
SECTION 3. FORM S-3 REGISTRATION.
3.1. IF THE COMPANY RECEIVES A REQUEST FROM HOLDERS OF AT LEAST 10% OF THE
REGISTRABLE SECURITIES THEN OUTSTANDING THAT THE COMPANY EFFECT A REGISTRATION
ON FORM S-3 (A “FORM S-3 REGISTRATION”) WITH RESPECT TO ALL OR A PART OF THE
REGISTRABLE SECURITIES OWNED BY SUCH HOLDERS (THE “INITIATING HOLDERS”), THEN
THE COMPANY SHALL:
(I) WITHIN 10 DAYS AFTER THE DATE SUCH REQUEST IS GIVEN, GIVE NOTICE OF THE
PROPOSED REGISTRATION TO ALL HOLDERS OTHER THAN THE INITIATING HOLDERS (THE “S-3
NOTICE”); AND
(II) AS SOON AS PRACTICABLE, USE ITS COMMERCIALLY REASONABLE EFFORTS TO EFFECT
SUCH REGISTRATION AS WOULD PERMIT OR FACILITATE THE SALE AND DISTRIBUTION OF ALL
OR SUCH PORTION OF SUCH INITIATING HOLDERS’ REGISTRABLE SECURITIES AS ARE
SPECIFIED IN SUCH REQUEST, TOGETHER WITH ALL OR SUCH PORTION OF THE REGISTRABLE
SECURITIES OF ANY OTHER HOLDERS JOINING IN SUCH REQUEST AS ARE SPECIFIED IN A
REQUEST GIVEN TO THE COMPANY WITHIN 15 DAYS AFTER THE S-3 NOTICE IS GIVEN;
PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE OBLIGATED TO EFFECT ANY SUCH
REGISTRATION PURSUANT TO THIS SECTION 3 IF:
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(A) FORM S-3 IS NOT THEN AVAILABLE FOR SUCH OFFERING BY THE HOLDERS;
(B) THE HOLDERS, TOGETHER WITH THE HOLDERS OF ANY OTHER SECURITIES OF
THE COMPANY ENTITLED TO AND REQUESTING INCLUSION IN SUCH REGISTRATION, PROPOSE
TO SELL REGISTRABLE SECURITIES AND SUCH OTHER SECURITIES (IF ANY) AT AN
AGGREGATE PRICE TO THE PUBLIC (NET OF ANY UNDERWRITING DISCOUNTS, SELLING
COMMISSIONS AND STATE TRANSFER TAXES APPLICABLE TO THE SALE OF REGISTRABLE
SECURITIES) OF LESS THAN $2,000,000; OR
(C) THE COMPANY FURNISHES TO THE INITIATING HOLDERS A CERTIFICATE
SIGNED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY STATING THAT IN THE GOOD
FAITH JUDGMENT OF THE BOARD, IT WOULD BE MATERIALLY DETRIMENTAL TO THE COMPANY
AND ITS SHAREHOLDERS FOR SUCH FORM S-3 REGISTRATION TO BE EFFECTED AT SUCH TIME,
IN WHICH EVENT THE COMPANY SHALL HAVE THE RIGHT TO DEFER THE FILING OF THE FORM
S-3 REGISTRATION STATEMENT FOR A PERIOD OF NOT MORE THAN 90 DAYS AFTER RECEIPT
OF THE REQUEST OF THE INITIATING HOLDERS UNDER THIS SECTION 3; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL NOT INVOKE THIS RIGHT MORE THAN ONCE IN ANY
TWELVE MONTH PERIOD; AND PROVIDED FURTHER THAT THE COMPANY SHALL NOT REGISTER
ANY SECURITIES FOR ITS OWN ACCOUNT OR THAT OF ANY OTHER STOCKHOLDER DURING SUCH
90 DAY PERIOD OTHER THAN PURSUANT TO (A) A REGISTRATION RELATING TO THE SALE OF
SECURITIES TO EMPLOYEES OF THE COMPANY PURSUANT TO A STOCK OPTION, STOCK
PURCHASE, OR SIMILAR PLAN; (B) A REGISTRATION ON ANY FORM THAT DOES NOT INCLUDE
SUBSTANTIALLY THE SAME INFORMATION AS WOULD BE REQUIRED TO BE INCLUDED IN A
REGISTRATION STATEMENT COVERING THE SALE OF THE REGISTRABLE SECURITIES ON FORM
S-3; OR (C) A REGISTRATION IN WHICH THE ONLY COMMON STOCK BEING REGISTERED IS
COMMON STOCK ISSUABLE UPON CONVERSION OF DEBT SECURITIES THAT ARE ALSO BEING
REGISTERED.
3.2. THE COMPANY SHALL BE OBLIGATED TO EFFECT NO MORE THAN TWO S-3
REGISTRATIONS PURSUANT TO THIS SECTION 3, AND NO SUCH REGISTRATIONS SHALL BE
COUNTED AS A DEMAND REGISTRATION EFFECTED PURSUANT TO SECTION 2.
3.3 Should any Form S-3 Registration pursuant to this Section 3 be a
shelf registration pursuant to Rule 415 under the Securities Act (the “Shelf
Registration”), then the registration statement to be filed in connection
therewith shall provide for the resale by Holders of all of the Registrable
Securities affected thereby in accordance with the manner of sale provisions set
forth in Rule 144(f) under the Securities Act or otherwise in customary
brokerage transactions on the Nasdaq Capital Market or other public market on
which the Common Stock is traded; provided, however, no more than 400,000
Registrable Securities can be registered as Shelf Registrations at any given
time.
3.4 The Company shall use its reasonable best efforts to keep any Form
S-3 Registration (other than a Shelf Registration) continuously effective for up
to 90 days or until such earlier date as of which all the Registrable Securities
under the registration statement shall have been disposed of in the manner
described in the registration statement, and to keep any Shelf Registration
continuously effective until the date that is two years after the date hereof or
such shorter period ending (i) when the Registrable Securities cease to meet the
definition of Registrable Securities or (ii) the Company’s obligations hereunder
terminate pursuant to Section 14.9; provided, however, that the Company shall be
entitled to postpone Transfers under a registration statement filed under this
Section 3 on Form S-3 and to require Holders to discontinue any Transfers
covered by a Shelf Registration for a reasonable period of time due to
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(A) the existence of a material development or potential material development
involving the Company which the Company would be obligated to disclose in the
prospectus contained in the registration statement, which disclosure would in
the good faith judgment of the Board be premature or otherwise inadvisable at
such time and would have a material adverse affect upon the Company and its
shareholders, (B) it is necessary for the Company to supplement the prospectus
or make an appropriate filing under the Exchange Act so as to cause the
prospectus to become current, or (C) the Company is required under the
Securities Act and the regulations thereunder to amend the registration
statement in order to cause the prospectus to be current. In the event that the
Company determines that a supplement to the prospectus, the filing of a report
pursuant the Exchange Act or an amendment to the registration statement under
the Securities Act is necessary, the Company will take such actions as soon as
practicable; whereupon it will notify the Initiating Holders of the filing of
such supplement, report or amendment, and, in the case of an amendment, the
effectiveness thereof; provided further, that the Company will not invoke this
right more than once in any twelve month period.
SECTION 4. PIGGYBACK REGISTRATION.
4.1. IF AT ANY TIME DURING THE TERM OF THIS AGREEMENT THE COMPANY PROPOSES
TO REGISTER (INCLUDING FOR THIS PURPOSE A REGISTRATION EFFECTED BY THE COMPANY
FOR SHAREHOLDERS OF THE COMPANY OTHER THAN THE HOLDERS) SECURITIES UNDER THE
SECURITIES ACT IN CONNECTION WITH THE PUBLIC OFFERING SOLELY FOR CASH ON FORMS
S-1 OR S-3 (OR ANY REPLACEMENT OR SUCCESSOR FORMS), THE COMPANY SHALL PROMPTLY
GIVE EACH HOLDER WRITTEN NOTICE OF SUCH REGISTRATION (A “PIGGYBACK
REGISTRATION”). UPON THE WRITTEN REQUEST OF EACH HOLDER GIVEN WITHIN 20 DAYS
FOLLOWING THE DATE OF SUCH NOTICE, THE COMPANY SHALL CAUSE TO BE INCLUDED IN
SUCH REGISTRATION STATEMENT AND USE ITS REASONABLE BEST EFFORTS TO BE REGISTERED
UNDER THE SECURITIES ACT ALL THE REGISTRABLE SECURITIES THAT EACH SUCH HOLDER
SHALL HAVE REQUESTED TO BE REGISTERED. THE COMPANY SHALL HAVE THE ABSOLUTE
RIGHT TO WITHDRAW OR CEASE TO PREPARE OR FILE ANY REGISTRATION STATEMENT FOR ANY
OFFERING REFERRED TO IN THIS SECTION 3 WITHOUT ANY OBLIGATION OR LIABILITY TO
ANY HOLDER.
4.2. IF THE UNDERWRITERS’ REPRESENTATIVE OR AGENT SHALL ADVISE THE COMPANY
IN WRITING (WITH A COPY TO EACH SELLING HOLDER) THAT, IN ITS OPINION, THE AMOUNT
OF REGISTRABLE SECURITIES REQUESTED TO BE INCLUDED IN SUCH REGISTRATION WOULD
MATERIALLY ADVERSELY AFFECT SUCH OFFERING, OR THE TIMING THEREOF, THEN THE
COMPANY WILL INCLUDE IN SUCH REGISTRATION, TO THE EXTENT OF THE AMOUNT AND CLASS
WHICH THE COMPANY IS SO ADVISED CAN BE SOLD WITHOUT SUCH MATERIAL ADVERSE EFFECT
IN SUCH OFFERING: FIRST, ALL SECURITIES PROPOSED TO BE SOLD BY THE COMPANY FOR
ITS OWN ACCOUNT; AND SECOND, ALL OTHER SECURITIES BEING REGISTERED PURSUANT TO
THE EXERCISE OF CONTRACTUAL RIGHTS COMPARABLE TO THE RIGHTS GRANTED IN SECTION
2, SECTION 3 OR SECTION 4, PRO RATA BASED ON THE ESTIMATED GROSS PROCEEDS FROM
THE SALE THEREOF; PROVIDED, HOWEVER, THAT THE REGISTRABLE SECURITIES THAT HAVE
BEEN REQUESTED TO BE REGISTERED SHALL NOT BE REDUCED BELOW 40% OF THE SHARES
INCLUDED IN SUCH REGISTRATION UNLESS SUCH ACTION IS NECESSARY TO AVOID A
MATERIAL ADVERSE EFFECT ON THE COMPANY TAKEN AS A WHOLE.
4.3. THE COMPANY SHALL BE OBLIGATED TO EFFECT NO MORE THAN THREE PIGGYBACK
REGISTRATIONS PURSUANT TO THIS SECTION 4.
4.4. IF THE COMPANY HAS PREVIOUSLY FILED A REGISTRATION STATEMENT WITH
RESPECT TO REGISTRABLE SECURITIES PURSUANT TO SECTION 2, SECTION 3 OR THIS
SECTION 4, AND IF SUCH PREVIOUS REGISTRATION HAS NOT BEEN WITHDRAWN OR
ABANDONED, THE COMPANY NEED NOT FILE OR CAUSE TO BE
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EFFECTED ANY OTHER REGISTRATION OF ANY OF ITS EQUITY SECURITIES OR SECURITIES
CONVERTIBLE OR EXCHANGEABLE INTO OR EXERCISABLE FOR ITS EQUITY SECURITIES UNDER
THE SECURITIES ACT (EXCEPT ON FORM S-3 OR ANY SUCCESSOR FORM), WHETHER ON ITS
OWN BEHALF OR AT THE REQUEST OF ANY HOLDER OR HOLDERS OF SUCH SECURITIES, UNTIL
A PERIOD OF 180 DAYS HAS ELAPSED FROM THE EFFECTIVE DATE OF SUCH A PREVIOUS
REGISTRATION.
SECTION 5. REGISTRATION PROCEDURES.
Whenever required under Section 2, Section 3 or Section 4 to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as practicable:
5.1. PREPARE AND FILE WITH THE COMMISSION A REGISTRATION STATEMENT WITH
RESPECT TO SUCH REGISTRABLE SECURITIES AND USE THE COMPANY’S REASONABLE BEST
EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE; PROVIDED,
HOWEVER, THAT BEFORE FILING A REGISTRATION STATEMENT OR PROSPECTUS OR ANY
AMENDMENTS OR SUPPLEMENTS THERETO, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE
AFTER THE INITIAL FILING OF THE REGISTRATION STATEMENT AND PRIOR TO
EFFECTIVENESS THEREOF, THE COMPANY SHALL FURNISH TO ONE FIRM OF COUNSEL FOR THE
SELLING HOLDERS COPIES OF ALL SUCH DOCUMENTS IN THE FORM SUBSTANTIALLY AS
PROPOSED TO BE FILED WITH THE COMMISSION AT LEAST FOUR BUSINESS DAYS PRIOR TO
FILING FOR REVIEW AND COMMENT BY SUCH COUNSEL.
5.2. PREPARE AND FILE WITH THE COMMISSION SUCH AMENDMENTS AND SUPPLEMENTS
TO SUCH REGISTRATION STATEMENT AND THE PROSPECTUS USED IN CONNECTION WITH SUCH
REGISTRATION STATEMENT AS MAY BE NECESSARY TO COMPLY WITH THE PROVISIONS OF THE
SECURITIES ACT AND RULES THEREUNDER WITH RESPECT TO THE DISPOSITION OF ALL
SECURITIES COVERED BY SUCH REGISTRATION STATEMENT. IF THE REGISTRATION IS FOR
AN UNDERWRITTEN OFFERING, THE COMPANY SHALL AMEND THE REGISTRATION STATEMENT OR
SUPPLEMENT THE PROSPECTUS WHENEVER REQUIRED BY THE TERMS OF THE UNDERWRITING
AGREEMENT ENTERED INTO PURSUANT TO SECTION 6.2. IF THE REGISTRATION IS FOR AN
UNDERWRITTEN OFFERING, AND IF ANY EVENT OR DEVELOPMENT OCCURS AS A RESULT OF
WHICH THE REGISTRATION STATEMENT OR PROSPECTUS CONTAINS A MISSTATEMENT OF A
MATERIAL FACT OR OMITS TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, THE COMPANY SHALL
PROMPTLY NOTIFY EACH SELLING HOLDER, AMEND THE REGISTRATION STATEMENT OR
SUPPLEMENT THE PROSPECTUS SO THAT EACH WILL THEREAFTER COMPLY WITH THE
SECURITIES ACT AND FURNISH TO EACH SELLING HOLDER OF REGISTRABLE SECURITIES SUCH
AMENDED OR SUPPLEMENTED PROSPECTUS, WHICH EACH SUCH HOLDER SHALL THEREAFTER USE
IN THE TRANSFER OF REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION
STATEMENT. PENDING SUCH AMENDMENT OR SUPPLEMENT EACH SUCH HOLDER SHALL CEASE
MAKING THE OFFERS OR TRANSFERS OF REGISTRABLE SECURITIES PURSUANT TO THE PRIOR
PROSPECTUS. IN THE EVENT THAT ANY REGISTRABLE SECURITIES INCLUDED IN A
REGISTRATION STATEMENT SUBJECT TO, OR REQUIRED BY, THIS AGREEMENT REMAIN UNSOLD
AT THE END OF THE PERIOD DURING WHICH THE COMPANY IS OBLIGATED TO USE ITS
REASONABLE BEST EFFORTS TO MAINTAIN THE EFFECTIVENESS OF SUCH REGISTRATION
STATEMENT, THE COMPANY MAY FILE A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION
STATEMENT FOR THE PURPOSE OF REMOVING SUCH SECURITIES FROM REGISTERED STATUS.
5.3. FURNISH TO EACH SELLING HOLDER OF REGISTRABLE SECURITIES, WITHOUT
CHARGE, SUCH NUMBERS OF COPIES OF THE REGISTRATION STATEMENT, ANY PRE-EFFECTIVE
OR POST-EFFECTIVE AMENDMENT THERETO, THE PROSPECTUS, INCLUDING EACH PRELIMINARY
PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, IN EACH CASE IN CONFORMITY
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND THE RULES THEREUNDER, AND SUCH
OTHER RELATED DOCUMENTS AS ANY SUCH SELLING HOLDER MAY REASONABLY
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REQUEST IN ORDER TO FACILITATE THE DISPOSITION OF REGISTRABLE SECURITIES OWNED
BY SUCH SELLING HOLDER.
5.4. USE ITS REASONABLE BEST EFFORTS (I) TO REGISTER AND QUALIFY THE
SECURITIES COVERED BY SUCH REGISTRATION STATEMENT UNDER SUCH OTHER SECURITIES OR
BLUE SKY LAWS OF SUCH STATES OR DOMESTIC JURISDICTIONS AS SHALL BE REASONABLY
REQUESTED BY THE UNDERWRITERS’ REPRESENTATIVE OR AGENT (AS APPLICABLE, OR, IF
INAPPLICABLE, THE SELLING HOLDERS), AND (II) TO OBTAIN THE WITHDRAWAL OF ANY
ORDER SUSPENDING THE EFFECTIVENESS OF A REGISTRATION STATEMENT, OR THE LIFTING
OF ANY SUSPENSION OF THE QUALIFICATION (OR EXEMPTION FROM QUALIFICATION) OF THE
OFFER AND TRANSFER OF ANY OF THE REGISTRABLE SECURITIES IN ANY JURISDICTION, AT
THE EARLIEST POSSIBLE MOMENT; PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE
REQUIRED IN CONNECTION THEREWITH OR AS A CONDITION THERETO TO QUALIFY TO DO
BUSINESS, TO SUBJECT ITSELF TO TAXATION OR TO FILE A GENERAL CONSENT TO SERVICE
OF PROCESS IN ANY SUCH STATES OR JURISDICTIONS.
5.5. IN THE EVENT OF ANY UNDERWRITTEN OR AGENTED OFFERING, ENTER INTO AND
PERFORM THE COMPANY’S OBLIGATIONS UNDER AN UNDERWRITING OR AGENCY AGREEMENT
(INCLUDING INDEMNIFICATION AND CONTRIBUTION OBLIGATIONS OF UNDERWRITERS OR
AGENTS), IN USUAL AND CUSTOMARY FORM, WITH THE MANAGING UNDERWRITER OR
UNDERWRITERS OF OR AGENTS FOR SUCH OFFERING. THE COMPANY SHALL ALSO COOPERATE
WITH THE SELLING HOLDERS, AND THE UNDERWRITERS’ REPRESENTATIVE OR AGENT FOR SUCH
OFFERING IN THE MARKETING OF THE REGISTRABLE SECURITIES, INCLUDING MAKING
AVAILABLE THE COMPANY’S OFFICERS, INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS,
COUNSEL, PREMISES, BOOKS AND RECORDS FOR SUCH PURPOSE, BUT THE COMPANY SHALL NOT
BE REQUIRED TO INCUR ANY OUT-OF-POCKET EXPENSE PURSUANT TO THIS SENTENCE.
5.6. PROMPTLY NOTIFY EACH SELLING HOLDER OF ANY STOP ORDER ISSUED OR
THREATENED TO BE ISSUED BY THE COMMISSION IN CONNECTION THEREWITH AND TAKE ALL
REASONABLE ACTIONS REQUIRED TO PREVENT THE ENTRY OF SUCH STOP ORDER OR TO REMOVE
IT IF ENTERED.
5.7. MAKE GENERALLY AVAILABLE TO THE COMPANY’S SECURITY HOLDERS COPIES OF
ALL PERIODIC REPORTS, PROXY STATEMENTS, AND OTHER INFORMATION REFERRED TO IN
SECTION 11.1 AND, AS SOON AS REASONABLY PRACTICABLE, AN EARNINGS STATEMENT
SATISFYING THE PROVISIONS OF SECTION 11(A) OF THE SECURITIES ACT COVERING THE
12-MONTH PERIOD BEGINNING WITHIN THREE MONTHS AFTER THE EFFECTIVE DATE OF EACH
REGISTRATION STATEMENT FILED PURSUANT TO THIS AGREEMENT.
5.8. MAKE AVAILABLE FOR INSPECTION BY ANY SELLING HOLDER, ANY UNDERWRITER
PARTICIPATING IN SUCH OFFERING AND THE REPRESENTATIVES OF SUCH SELLING HOLDER
AND UNDERWRITER (BUT NOT MORE THAN ONE FIRM OF COUNSEL TO SUCH SELLING HOLDERS),
ALL FINANCIAL AND OTHER INFORMATION AS SHALL BE REASONABLY REQUESTED BY THEM,
AND PROVIDE THE SELLING HOLDER, ANY UNDERWRITER PARTICIPATING IN SUCH OFFERING
AND THE REPRESENTATIVES OF SUCH SELLING HOLDER AND UNDERWRITER THE OPPORTUNITY
TO DISCUSS THE BUSINESS AFFAIRS OF THE COMPANY WITH ITS APPROPRIATE OFFICERS AND
INDEPENDENT PUBLIC ACCOUNTANTS WHO HAVE CERTIFIED THE AUDITED FINANCIAL
STATEMENTS INCLUDED IN SUCH REGISTRATION STATEMENT, IN EACH CASE ALL AS
NECESSARY TO ENABLE THEM TO EXERCISE THEIR DUE DILIGENCE RESPONSIBILITY UNDER
THE SECURITIES ACT; PROVIDED, HOWEVER, THAT INFORMATION THAT THE COMPANY
DETERMINES, IN GOOD FAITH, TO BE CONFIDENTIAL, AND WHICH THE COMPANY ADVISES
SUCH PERSON IN WRITING IS CONFIDENTIAL, SHALL NOT BE DISCLOSED UNLESS SUCH
PERSON SIGNS A CONFIDENTIALITY AGREEMENT REASONABLY SATISFACTORY TO THE COMPANY
OR THE RELATED SELLING HOLDER OF REGISTRABLE SECURITIES AGREES TO BE RESPONSIBLE
FOR SUCH PERSON’S BREACH OF CONFIDENTIALITY ON TERMS SATISFACTORY TO THE
COMPANY.
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5.9. USE THE COMPANY’S REASONABLE BEST EFFORTS TO OBTAIN A SO-CALLED
“COMFORT LETTER” FROM ITS INDEPENDENT PUBLIC ACCOUNTANTS AND LEGAL OPINIONS OF
COUNSEL TO THE COMPANY ADDRESSED TO THE SELLING HOLDERS, IN CUSTOMARY FORM AND
COVERING SUCH MATTERS OF THE TYPE CUSTOMARILY COVERED BY SUCH LETTERS, AND IN A
FORM THAT SHALL BE REASONABLY SATISFACTORY TO THE SELLING HOLDERS. THE COMPANY
SHALL FURNISH TO EACH SELLING HOLDER A SIGNED COUNTERPART OF ANY SUCH COMFORT
LETTER OR LEGAL OPINION. DELIVERY OF ANY SUCH OPINION OR COMFORT LETTER SHALL
BE SUBJECT TO THE RECIPIENT FURNISHING SUCH WRITTEN REPRESENTATIONS OR
ACKNOWLEDGMENTS AS ARE CUSTOMARILY PROVIDED BY SELLING SHAREHOLDERS WHO RECEIVE
SUCH COMFORT LETTERS OR OPINIONS.
5.10. PROVIDE AND CAUSE TO BE MAINTAINED A TRANSFER AGENT AND REGISTRAR FOR
ALL REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT FROM AND AFTER
A DATE NOT LATER THAN THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT.
5.11. USE ALL REASONABLE EFFORTS TO CAUSE THE REGISTRABLE SECURITIES COVERED
BY SUCH REGISTRATION STATEMENT (I) IF THE COMMON STOCK IS THEN LISTED ON A
SECURITIES EXCHANGE OR INCLUDED FOR QUOTATION IN A RECOGNIZED TRADING MARKET, TO
CONTINUE TO BE SO LISTED OR INCLUDED FOR A REASONABLE PERIOD OF TIME AFTER THE
OFFERING, AND (II) TO BE REGISTERED WITH OR APPROVED BY SUCH OTHER UNITED STATES
OR STATE GOVERNMENTAL AGENCIES OR AUTHORITIES AS MAY BE NECESSARY BY VIRTUE OF
THE BUSINESS AND OPERATIONS OF THE COMPANY TO ENABLE THE SELLING HOLDERS OF
REGISTRABLE SECURITIES TO CONSUMMATE THE DISPOSITION OF SUCH REGISTRABLE
SECURITIES.
5.12. USE THE COMPANY’S REASONABLE EFFORTS TO PROVIDE A CUSIP NUMBER FOR THE
REGISTRABLE SECURITIES PRIOR TO THE EFFECTIVE DATE OF THE FIRST REGISTRATION
STATEMENT INCLUDING REGISTRABLE SECURITIES.
5.13. TAKE SUCH OTHER ACTIONS AS ARE REASONABLY REQUIRED IN ORDER TO EXPEDITE
OR FACILITATE THE DISPOSITION OF REGISTRABLE SECURITIES INCLUDED IN EACH SUCH
REGISTRATION.
SECTION 6. HOLDERS’ OBLIGATIONS.
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to the Registrable Securities of
any Selling Holder of Registrable Securities that such Selling Holder shall:
6.1. FURNISH TO THE COMPANY SUCH INFORMATION REGARDING SUCH SELLING HOLDER,
THE NUMBER OF THE REGISTRABLE SECURITIES OWNED BY IT, AND THE INTENDED METHOD OF
DISPOSITION OF SUCH SECURITIES AS SHALL BE REQUIRED TO EFFECT THE REGISTRATION
OF SUCH SELLING HOLDER’S REGISTRABLE SECURITIES, AND TO COOPERATE WITH THE
COMPANY IN PREPARING SUCH REGISTRATION.
6.2. AGREE TO SELL THEIR REGISTRABLE SECURITIES TO THE UNDERWRITERS (IF
ANY) AT THE SAME PRICE AND ON SUBSTANTIALLY THE SAME TERMS AND CONDITIONS AS THE
COMPANY OR THE OTHER PERSONS ON WHOSE BEHALF THE REGISTRATION STATEMENT WAS
BEING FILED HAVE AGREED TO SELL THEIR SECURITIES, AND TO EXECUTE THE
UNDERWRITING AGREEMENT (IF ANY) AGREED TO BY THE SELLING HOLDERS (IN THE CASE OF
A REGISTRATION UNDER SECTION 2 OR SECTION 3) OR THE COMPANY AND THE SELLING
HOLDERS (IN THE CASE OF A REGISTRATION UNDER SECTION 4).
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SECTION 7. EXPENSES OF REGISTRATION.
Expenses in connection with registrations pursuant to this Agreement shall be
allocated and paid as follows:
7.1. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 7.1, WITH RESPECT TO A
DEMAND REGISTRATION PURSUANT TO SECTION 2, THE COMPANY SHALL BEAR AND PAY ALL
EXPENSES INCURRED IN CONNECTION WITH ANY REGISTRATION, FILING, OR QUALIFICATION
OF REGISTRABLE SECURITIES WITH RESPECT TO SUCH DEMAND REGISTRATION FOR EACH
SELLING HOLDER (WHICH RIGHT MAY BE ASSIGNED TO ANY PERSON TO WHOM REGISTRABLE
SECURITIES ARE TRANSFERRED AS PERMITTED BY SECTION 9), INCLUDING ALL
REGISTRATION, FILING AND NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. FEES,
ALL FEES AND EXPENSES OF COMPLYING WITH SECURITIES OR BLUE SKY LAWS, ALL WORD
PROCESSING, DUPLICATING AND PRINTING EXPENSES, MESSENGER AND DELIVERY EXPENSES,
THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR THE COMPANY AND OF THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS, INCLUDING THE EXPENSES OF
“COLD COMFORT” LETTERS REQUIRED BY OR INCIDENT TO SUCH PERFORMANCE AND
COMPLIANCE (THE “REGISTRATION EXPENSES”); PROVIDED, HOWEVER, THE COMPANY SHALL
ONLY BE OBLIGATED FOR UP TO A MAXIMUM AGGREGATE OF THE FIRST ONE HUNDRED
THOUSANDS DOLLARS ($100,000) OF SUCH REGISTRATION EXPENSES, AFTER WHICH POINT
ANY REMAINING REGISTRATION EXPENSES FOR THE DEMAND REGISTRATION SHALL BE BORNE
PRO RATA BY THE SELLING HOLDERS; PROVIDED FURTHER, THAT ANY FEES AND
DISBURSEMENTS OF COUNSEL FOR THE SELLING HOLDERS AND ANY UNDERWRITING DISCOUNTS
AND COMMISSIONS RELATING TO THE SELLING HOLDER’S REGISTRABLE SECURITIES SHALL BE
BORNE AND PAID EXCLUSIVELY BY THE SELLING HOLDERS.
7.2. THE COMPANY SHALL BEAR AND PAY ALL REGISTRATION EXPENSES INCURRED IN
CONNECTION WITH ANY FORM S-3 REGISTRATIONS PURSUANT TO SECTION 3 OR ANY
PIGGYBACK REGISTRATIONS PURSUANT TO SECTION 4 FOR EACH SELLING HOLDER (WHICH
RIGHT MAY BE TRANSFERRED TO ANY PERSON TO WHOM REGISTRABLE SECURITIES ARE
TRANSFERRED AS PERMITTED BY SECTION 9), BUT EXCLUDING UNDERWRITING DISCOUNTS AND
COMMISSIONS RELATING TO REGISTRABLE SECURITIES AND ANY FEES AND DISBURSEMENTS OF
COUNSEL FOR THE SELLING HOLDERS (WHICH SHALL BE PAID ON A PRO RATA BASIS BY THE
SELLING HOLDERS OF REGISTRABLE SECURITIES).
7.3. ANY FAILURE OF THE SELLING HOLDERS OR THE COMPANY TO PAY ANY
REGISTRATION EXPENSES AS REQUIRED BY THIS SECTION 7 SHALL NOT RELIEVE THE
SELLING HOLDERS OR THE COMPANY, AS APPLICABLE, OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
SECTION 8. INDEMNIFICATION; CONTRIBUTION.
If any Registrable Securities are included in a registration statement under
this Agreement:
8.1. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY SHALL INDEMNIFY
AND HOLD HARMLESS EACH SELLING HOLDER, EACH PERSON, IF ANY, WHO CONTROLS SUCH
SELLING HOLDER WITHIN THE MEANING OF THE SECURITIES ACT, AND EACH OFFICER,
DIRECTOR, PARTNER, AND EMPLOYEE OF SUCH SELLING HOLDER AND SUCH CONTROLLING
PERSON, AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND REASONABLE
EXPENSES (JOINT OR SEVERAL), INCLUDING REASONABLE ATTORNEYS’ FEES AND
DISBURSEMENTS AND EXPENSES OF INVESTIGATION, INCURRED BY SUCH PARTY PURSUANT TO
ANY ACTUAL OR THREATENED ACTION, SUIT, PROCEEDING OR INVESTIGATION, OR TO WHICH
ANY OF THE FOREGOING PERSONS MAY BECOME SUBJECT UNDER THE SECURITIES ACT, THE
EXCHANGE ACT OR OTHER FEDERAL OR STATE LAWS, INSOFAR AS SUCH LOSSES, CLAIMS,
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DAMAGES, LIABILITIES AND REASONABLE EXPENSES ARISE OUT OF OR ARE BASED UPON ANY
OF THE FOLLOWING STATEMENTS, OMISSIONS OR VIOLATIONS (COLLECTIVELY A
“VIOLATION”):
(i) Any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein, or any amendments or
supplements thereto;
(ii) The omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading; or
(iii) Any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
applicable state securities law; provided, however, that the indemnification
required by this Section 8.1 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement is
effected without the consent of the Company, nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or expense to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished by the
indemnified party expressly for use in connection with such registration;
provided further, that the indemnity agreement contained in this Section 8 shall
not apply to any underwriter to the extent that any such loss is based on or
arises out of an untrue statement or alleged untrue statement of a material
fact, or an omission or alleged omission to state a material fact, contained in
or omitted from any preliminary prospectus if the final prospectus shall correct
such untrue statement or alleged untrue statement, or such omission or alleged
omission, and a copy of the final prospectus has not been sent or given to such
person at or prior to the confirmation of sale to such person if such
underwriter was under an obligation to deliver such final prospectus and failed
to do so. The Company shall also indemnify the Selling Holders against claims
asserted by underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees and each person who controls such
persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Selling Holders.
8.2. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH SELLING HOLDER SHALL
INDEMNIFY AND HOLD HARMLESS THE COMPANY, EACH OF ITS DIRECTORS, EACH OF ITS
OFFICERS WHO SHALL HAVE SIGNED THE REGISTRATION STATEMENT, EACH PERSON, IF ANY,
WHO CONTROLS THE COMPANY WITHIN THE MEANING OF THE SECURITIES ACT, ANY OTHER
SELLING HOLDER, ANY CONTROLLING PERSON OF ANY SUCH OTHER SELLING HOLDER AND EACH
OFFICER, DIRECTOR, PARTNER, AND EMPLOYEE OF SUCH OTHER SELLING HOLDER AND SUCH
CONTROLLING PERSON, AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
EXPENSES (JOINT AND SEVERAL), INCLUDING REASONABLE ATTORNEYS’ FEES AND
DISBURSEMENTS AND EXPENSES OF INVESTIGATION, INCURRED BY SUCH PARTY PURSUANT TO
ANY ACTUAL OR THREATENED ACTION, SUIT, PROCEEDING OR INVESTIGATION, OR TO WHICH
ANY OF THE FOREGOING PERSONS MAY OTHERWISE BECOME SUBJECT UNDER THE SECURITIES
ACT, THE EXCHANGE ACT OR OTHER FEDERAL OR STATE LAWS, INSOFAR AS SUCH LOSSES,
CLAIMS, DAMAGES, LIABILITIES AND EXPENSES ARISE OUT OF OR ARE BASED UPON ANY
VIOLATION, IN EACH CASE TO THE EXTENT (AND ONLY TO THE EXTENT) THAT SUCH
VIOLATION OCCURS IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION
ABOUT SUCH SELLING HOLDER FURNISHED BY SUCH SELLING HOLDER TO THE COMPANY
EXPRESSLY FOR USE IN CONNECTION WITH SUCH REGISTRATION; PROVIDED, HOWEVER, THAT
(X) THE INDEMNIFICATION REQUIRED BY THIS
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SECTION 8.2 SHALL NOT APPLY TO AMOUNTS PAID IN SETTLEMENT OF ANY SUCH LOSS,
CLAIM, DAMAGE, LIABILITY OR EXPENSE IF SETTLEMENT IS EFFECTED WITHOUT THE
CONSENT OF THE RELEVANT SELLING HOLDER OF REGISTRABLE SECURITIES, AND (Y) IN NO
EVENT SHALL THE AMOUNT OF ANY INDEMNITY UNDER THIS SECTION 8.2 EXCEED THE GROSS
PROCEEDS FROM THE APPLICABLE OFFERING RECEIVED BY SUCH SELLING HOLDER.
8.3. PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED PARTY UNDER THIS SECTION 8 OF
NOTICE OF THE COMMENCEMENT OF ANY ACTION, SUIT, PROCEEDING, INVESTIGATION OR
THREAT THEREOF MADE IN WRITING FOR WHICH SUCH INDEMNIFIED PARTY MAY MAKE A CLAIM
UNDER THIS SECTION 8, SUCH INDEMNIFIED PARTY SHALL DELIVER TO THE INDEMNIFYING
PARTY A WRITTEN NOTICE OF THE COMMENCEMENT THEREOF AND THE INDEMNIFYING PARTY
SHALL HAVE THE RIGHT TO PARTICIPATE IN, AND, TO THE EXTENT THE INDEMNIFYING
PARTY SO DESIRES, JOINTLY WITH ANY OTHER INDEMNIFYING PARTY SIMILARLY NOTICED,
TO ASSUME THE DEFENSE THEREOF WITH COUNSEL MUTUALLY SATISFACTORY TO THE
PARTIES. THE FAILURE TO DELIVER WRITTEN NOTICE TO THE INDEMNIFYING PARTY WITHIN
A REASONABLE TIME FOLLOWING THE COMMENCEMENT OF ANY SUCH ACTION, IF PREJUDICIAL
TO ITS ABILITY TO DEFEND SUCH ACTION, SHALL RELIEVE SUCH INDEMNIFYING PARTY OF
ANY LIABILITY TO THE INDEMNIFIED PARTY UNDER THIS SECTION 8 BUT SHALL NOT
RELIEVE THE INDEMNIFYING PARTY OF ANY LIABILITY THAT IT MAY HAVE TO ANY
INDEMNIFIED PARTY OTHERWISE THAN PURSUANT TO THIS SECTION 8. ANY FEES AND
EXPENSES INCURRED BY THE INDEMNIFIED PARTY (INCLUDING ANY FEES AND EXPENSES
INCURRED IN CONNECTION WITH INVESTIGATING OR PREPARING TO DEFEND SUCH ACTION OR
PROCEEDING) SHALL BE PAID TO THE INDEMNIFIED PARTY, AS INCURRED, WITHIN 30 DAYS
OF WRITTEN NOTICE THEREOF TO THE INDEMNIFYING PARTY; PROVIDED, HOWEVER, THAT
SUCH NOTICE IS ACCOMPANIED BY AN APPROPRIATE UNDERTAKING OF THE INDEMNIFIED
PARTY TO REIMBURSE THE INDEMNIFYING PARTY TO THE EXTENT IT IS ULTIMATELY
DETERMINED THAT SUCH PARTY IS NOT ENTITLED TO INDEMNIFICATION. ANY SUCH
INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL IN ANY SUCH
ACTION, CLAIM OR PROCEEDING AND TO PARTICIPATE IN THE DEFENSE THEREOF, BUT THE
FEES AND EXPENSES OF SUCH COUNSEL SHALL BE THE EXPENSES OF SUCH INDEMNIFIED
PARTY UNLESS (I) THE INDEMNIFYING PARTY HAS AGREED TO PAY SUCH FEES AND EXPENSES
OR (II) THE INDEMNIFYING PARTY SHALL HAVE FAILED TO PROMPTLY ASSUME THE DEFENSE
OF SUCH ACTION, CLAIM OR PROCEEDING. NO INDEMNIFYING PARTY SHALL BE LIABLE TO
AN INDEMNIFIED PARTY FOR ANY SETTLEMENT OF ANY ACTION, PROCEEDING OR CLAIM
WITHOUT THE WRITTEN CONSENT OF THE INDEMNIFYING PARTY.
8.4. IF THE INDEMNIFICATION REQUIRED BY THIS SECTION 8 FROM THE
INDEMNIFYING PARTY IS UNAVAILABLE TO AN INDEMNIFIED PARTY HEREUNDER IN RESPECT
OF ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES REFERRED TO IN THIS
SECTION 8:
(i) The indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 8.1 and
Section 8.2, any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
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(ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 8.4 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in Section 8.4(i). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8.5. IF INDEMNIFICATION IS AVAILABLE UNDER THIS SECTION 8, THE INDEMNIFYING
PARTIES SHALL INDEMNIFY EACH INDEMNIFIED PARTY TO THE FULL EXTENT PROVIDED IN
THIS SECTION 8 WITHOUT REGARD TO THE RELATIVE FAULT OF SUCH INDEMNIFYING PARTY
OR INDEMNIFIED PARTY OR ANY OTHER EQUITABLE CONSIDERATION REFERRED TO IN SECTION
8.4.
8.6. THE OBLIGATIONS OF THE COMPANY AND THE SELLING HOLDERS OF REGISTRABLE
SECURITIES UNDER THIS SECTION 8 SHALL SURVIVE THE COMPLETION OF ANY OFFERING OF
REGISTRABLE SECURITIES PURSUANT TO A REGISTRATION STATEMENT UNDER THIS AGREEMENT
OR OTHERWISE.
SECTION 9. TRANSFER OF REGISTRATION RIGHTS.
Subject to restrictions in the Warrants and in the Services Agreement on the
right to transfer the Shares, including, without limitation, the right of first
refusal in favor of the Company and the prohibition of transfer to any
competitor or reasonably foreseeable competitor of the Company, rights with
respect to the Shares constituting Registrable Securities may be transferred by
JNI with respect to more than 400,000 Shares to any third party transferee
(other than a competitor or potential competitor of the Company). Any transferee
to whom rights under this Agreement are so transferred shall, as a condition to
such transfer, have executed and delivered to the Secretary of the Company a
properly completed agreement substantially in the form of Exhibit A, and the
transferor shall have delivered to the Secretary of the Company, no later than
15 days following the date of the Transfer, written notification of such
Transfer setting forth the name of the transferor, name and address of the
transferee, and the number of Registrable Securities which shall have been so
transferred.
SECTION 10. HOLDBACK.
Each Holder entitled pursuant to this Agreement to have Registrable Securities
included in a registration statement prepared pursuant to this Agreement, if so
requested by the Underwriters’ Representative or Agent in connection with an
offering of any Registrable Securities, shall not effect any public sale or
distribution of shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten or agented registration), during the 30 day period prior to, and
during the 90 day period beginning on, the date such registration statement is
declared effective under the Securities Act by the Commission, provided,
however, that such Holder is timely notified of such effective date in writing
by the Company or such Underwriters’ Representative or Agent. In order to
enforce the foregoing covenant, the Company shall be entitled to impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder until the end of such period.
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SECTION 11. COVENANTS OF THE COMPANY.
The Company hereby agrees and covenants as follows:
11.1. THE COMPANY SHALL FILE AS AND WHEN APPLICABLE, ON A TIMELY BASIS, ALL
REPORTS REQUIRED TO BE FILED BY IT UNDER THE EXCHANGE ACT. IF THE COMPANY IS
NOT REQUIRED TO FILE REPORTS PURSUANT TO THE EXCHANGE ACT, UPON THE REQUEST OF
ANY HOLDER OF REGISTRABLE SECURITIES, THE COMPANY SHALL MAKE PUBLICLY AVAILABLE
THE INFORMATION SPECIFIED IN SUBPARAGRAPH (C)(2) OF RULE 144 OF THE SECURITIES
ACT, AND TAKE SUCH FURTHER ACTION AS MAY BE REASONABLY REQUIRED FROM TIME TO
TIME AND AS MAY BE WITHIN THE REASONABLE CONTROL OF THE COMPANY, TO ENABLE THE
HOLDERS TO TRANSFER REGISTRABLE SECURITIES WITHOUT REGISTRATION UNDER THE
SECURITIES ACT WITHIN THE LIMITATION OF THE EXEMPTIONS PROVIDED BY RULE 144
UNDER THE SECURITIES ACT OR ANY SIMILAR RULE OR REGULATION HEREAFTER ADOPTED BY
THE COMMISSION.
11.2. THE COMPANY SHALL NOT EFFECT ANY PUBLIC SALE OR DISTRIBUTION OF ANY
SHARES OF COMMON STOCK OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR SHARES OF COMMON STOCK, DURING THE FIVE BUSINESS DAYS PRIOR TO,
AND DURING THE 90-DAY PERIOD BEGINNING ON, THE COMMENCEMENT OF A PUBLIC
DISTRIBUTION OF THE REGISTRABLE SECURITIES PURSUANT TO ANY REGISTRATION
STATEMENT PREPARED PURSUANT TO THIS AGREEMENT. THE COMPANY SHALL NOT EFFECT ANY
REGISTRATION OF ITS SECURITIES (OTHER THAN ON FORMS S-4 OR FORMS S-8 OR ANY
SUCCESSOR FORMS OR PURSUANT TO SUCH OTHER REGISTRATION RIGHTS AGREEMENTS AS MAY
BE APPROVED IN WRITING BY THE SELLING HOLDERS), OR EFFECT ANY PUBLIC OR PRIVATE
SALE OR DISTRIBUTION OF ANY OF ITS SECURITIES, INCLUDING A SALE PURSUANT TO
REGULATION D UNDER THE SECURITIES ACT, WHETHER ON ITS OWN BEHALF OR AT THE
REQUEST OF ANY HOLDER OR HOLDERS OF SUCH SECURITIES FROM THE DATE OF A REQUEST
FOR A DEMAND REGISTRATION PURSUANT TO SECTION 2.1 UNTIL THE EARLIER OF (X) 90
DAYS FOLLOWING THE DATE AS OF WHICH ALL SECURITIES COVERED BY SUCH DEMAND
REGISTRATION SHALL HAVE BEEN TRANSFERRED, AND (Y) 180 DAYS FOLLOWING THE
EFFECTIVE DATE OF SUCH DEMAND REGISTRATION, UNLESS THE COMPANY SHALL HAVE
PREVIOUSLY NOTIFIED IN WRITING ALL SELLING HOLDERS OF THE COMPANY’S DESIRE TO DO
SO, AND SELLING HOLDERS OWNING A MAJORITY OF THE REGISTRABLE SECURITIES OR THE
UNDERWRITERS’ REPRESENTATIVE, IF ANY, SHALL HAVE CONSENTED THERETO IN WRITING.
11.3. THE COMPANY SHALL NOT, DIRECTLY OR INDIRECTLY, (X) ENTER INTO ANY
MERGER, CONSOLIDATION OR REORGANIZATION IN WHICH THE COMPANY SHALL NOT BE THE
SURVIVING CORPORATION OR (Y) TRANSFER OR AGREE TO TRANSFER ALL OR SUBSTANTIALLY
ALL THE COMPANY’S ASSETS, UNLESS PRIOR TO SUCH MERGER, CONSOLIDATION,
REORGANIZATION OR ASSET TRANSFER, THE SURVIVING CORPORATION OR THE TRANSFEREE,
RESPECTIVELY, SHALL HAVE AGREED IN WRITING TO ASSUME THE OBLIGATIONS OF THE
COMPANY UNDER THIS AGREEMENT, AND FOR THAT PURPOSE REFERENCES HEREUNDER TO
“REGISTRABLE SECURITIES” SHALL BE DEEMED TO INCLUDE THE SECURITIES WHICH THE
HOLDERS OF REGISTRABLE SECURITIES WOULD BE ENTITLED TO RECEIVE IN EXCHANGE FOR
REGISTRABLE SECURITIES PURSUANT TO ANY SUCH MERGER, CONSOLIDATION OR
REORGANIZATION.
SECTION 12. AMENDMENT, MODIFICATION AND WAIVERS; FURTHER ASSURANCES.
(i) This Agreement may be amended with the consent of the Company,
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company shall have
obtained the written consent of Holders owning Registrable Securities possessing
a majority in number of the Registrable Securities then outstanding to such
amendment, action or omission to act.
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(ii) No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived, and no such waiver in any instance shall constitute a waiver in
any other instance or for any other purpose or impair the right of the party
against whom such waiver is claimed in all other instances or for all other
purposes to require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
SECTION 13. ASSIGNMENT; BENEFIT.
This Agreement and all of the provisions hereof shall be binding upon and shall
inure to the benefit of the parties hereto and their permitted successors and
assigns. A Holder may transfer its rights hereunder to a successor in interest
to the Registrable Securities owned by such assignor only as permitted by
Section 9.
SECTION 14. MISCELLANEOUS.
14.1. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
14.2. NOTICES. ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER SHALL BE IN
WRITING AND SHALL BE DEEMED GIVEN IF DELIVERED PERSONALLY, SENT BY OVERNIGHT
COURIER (WITH DELIVERY CONFIRMED) OR TELECOPIED (WITH A CONFIRMATORY COPY SENT
BY OVERNIGHT COURIER) TO THE PARTIES AT THE FOLLOWING ADDRESSES (OR AT SUCH
OTHER ADDRESS FOR A PARTY AS SHALL BE SPECIFIED BY LIKE NOTICE):
(i) if to Company, to:
Metro One Telecommunications, Inc.
11200 Murray Scholls Place
Beaverton, OR 97008
Attn: Chief Executive Officer
Telecopy No.: 503-521-8443
with a copy (which shall not constitute notice) to:
Heller Ehrman LLP
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Attn: Neal H. Brockmeyer, Esq.
Telecopy No.: 213-614-1868
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(ii) if to the original Holder, to:
Jingle Networks, Inc..
New England Executive Park, West Wing 3rd Floor
Burlington, MA 01803
Attn: Chief Technology Officer
Telecopy No.: 707-202-3399
with a copy (which shall not constitute notice) to:
Ropes & Gray LLP
One Embarcadero, Suite 220
San Francisco, CA 94111
Attn: Christopher Austin
Telecopy No.: 415-315-6350
In the event of a Transfer of any Registrable Securities, notices given pursuant
to this Agreement to a subsequent Holder shall be delivered to the relevant
address specified in the relevant agreement in the form of Exhibit A whereby
such Holder became bound by the provisions of this Agreement.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by telecopy; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next Business Day delivery.
14.3. ENTIRE AGREEMENT; INTEGRATION. THIS AGREEMENT SUPERSEDES ALL PRIOR
AGREEMENTS BETWEEN OR AMONG ANY OF THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER CONTAINED HEREIN, AND EMBODIES THE ENTIRE UNDERSTANDING AMONG THE
PARTIES RELATING TO SUCH SUBJECT MATTER.
14.4. INJUNCTIVE RELIEF. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT IN THE
EVENT OF A BREACH BY ANY OF THEM OF ANY MATERIAL PROVISION OF THIS AGREEMENT,
THE AGGRIEVED PARTY MAY BE WITHOUT AN ADEQUATE REMEDY AT LAW. EACH OF THE
PARTIES THEREFORE AGREES THAT IN THE EVENT OF SUCH A BREACH HEREOF THE AGGRIEVED
PARTY MAY ELECT TO INSTITUTE AND PROSECUTE PROCEEDINGS IN ANY COURT OF COMPETENT
JURISDICTION TO ENFORCE SPECIFIC PERFORMANCE OR TO ENJOIN THE CONTINUING BREACH
HEREOF. BY SEEKING OR OBTAINING ANY SUCH RELIEF, THE AGGRIEVED PARTY SHALL NOT
BE PRECLUDED FROM SEEKING OR OBTAINING ANY OTHER RELIEF TO WHICH IT MAY BE
ENTITLED.
14.5. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, AND ALL OF WHICH SHALL
TOGETHER CONSTITUTE ONE AND THE SAME INSTRUMENT. ALL SIGNATURES NEED NOT BE ON
THE SAME COUNTERPART.
14.6. SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID OR
UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY
AND ENFORCEABILITY OF THE REMAINING
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PROVISIONS OF THIS AGREEMENT, UNLESS THE RESULT THEREOF WOULD BE UNREASONABLE,
IN WHICH CASE THE PARTIES HERETO SHALL NEGOTIATE IN GOOD FAITH AS TO APPROPRIATE
AMENDMENTS HERETO.
14.7. FILING. A COPY OF THIS AGREEMENT AND OF ALL AMENDMENTS THERETO SHALL
BE FILED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY WITH THE CORPORATE
SECRETARY OF THE COMPANY.
14.8. TERMINATION. THIS AGREEMENT MAY BE TERMINATED AT ANY TIME BY A WRITTEN
INSTRUMENT SIGNED BY THE PARTIES HERETO. UNLESS SOONER TERMINATED IN ACCORDANCE
WITH THE PRECEDING SENTENCE, THIS AGREEMENT (OTHER THAN SECTION 8 HEREOF) SHALL
TERMINATE IN ITS ENTIRETY ON SUCH DATE AS THERE SHALL BE NO REGISTRABLE
SECURITIES OUTSTANDING, PROVIDED, HOWEVER, THAT ANY SHARES OF COMMON STOCK
PREVIOUSLY SUBJECT TO THIS AGREEMENT SHALL NOT BE REGISTRABLE SECURITIES
FOLLOWING THE SALE OF ANY SUCH SHARES IN AN OFFERING REGISTERED PURSUANT TO THIS
AGREEMENT; AND PROVIDED FURTHER THAT A HOLDER SHALL CEASE TO BE A HOLDER UNDER
THIS AGREEMENT FOR ALL PURPOSES IF SUCH HOLDER (I) IS PROVIDED WITH AN OPINION
OF COUNSEL OF THE COMPANY WHICH IS REASONABLY SATISFACTORY TO HOLDER TO THE
EFFECT THAT SUCH HOLDER MAY SELL ALL OF THE REGISTRABLE SECURITIES OWNED BY IT
WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND (II) ENTERS INTO AN AGREEMENT
WITH THE COMPANY PURSUANT TO WHICH THE COMPANY AGREES TO REMOVE ALL LEGENDS AND
“STOP TRANSFERS” RELATING TO SUCH REGISTRABLE SECURITIES.
14.9. ATTORNEYS’ FEES. IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY
PROVISION OF THIS AGREEMENT, OR WHERE ANY PROVISION HEREOF IS VALIDLY ASSERTED
AS A DEFENSE, THE SUCCESSFUL PARTY SHALL BE ENTITLED TO RECOVER REASONABLE
ATTORNEYS’ FEES (INCLUDING ANY FEES INCURRED IN ANY APPEAL) IN ADDITION TO ITS
COSTS AND EXPENSES AND ANY OTHER AVAILABLE REMEDY.
14.10. NO THIRD PARTY BENEFICIARIES. NOTHING HEREIN EXPRESSED OR IMPLIED IS
INTENDED TO CONFER UPON ANY PERSON, OTHER THAN THE PARTIES HERETO OR THEIR
RESPECTIVE PERMITTED SUCCESSORS AND ASSIGNS, ANY RIGHTS, REMEDIES, OBLIGATIONS
OR LIABILITIES UNDER OR BY REASON OF THIS AGREEMENT, EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT.
19
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the date and year first written above.
METRO ONE TELECOMMUNICATIONS, INC.
By:
/s/ Gary E. Henry
Name:
Gary E. Henry
Title:
President and CEO
JINGLE NETWORKS, INC.
By:
/s/ Scott A. Kliger
Name:
Scott A. Kliger
Title:
CTO
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
20
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EXHIBIT A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee of ______ shares of the common stock, no
par value (the “Registrable Securities”), of Metro One Telecommunications, Inc.,
an Oregon corporation (the “Company”), as a condition to the receipt of such
Registrable Securities, acknowledges that matters pertaining to the registration
of such Registrable Securities is governed by the Registration Rights Agreement
dated as of July 1, 2006, initially among the Company and the Holder referred to
therein (the “Agreement”), and the undersigned hereby (1) acknowledges receipt
of a copy of the Agreement, and (2) agrees to be bound as a Holder by the terms
of the Agreement, as the same has been or may be amended from time to time.
Agreed to this __ day of ______________, 200_.
_________________________________
_________________________________*
_________________________________*
*Include address for notices.
A-1
-------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------
Exhibit 10.1
RESTRICTED STOCK EQUIVALENT AWARD AGREEMENT
Energizer Holdings, Inc. (“Company”), pursuant to its 2000 Incentive Stock Plan
(the “Plan”), grants to __________ (“Recipient”) a Restricted Stock Equivalent
Award of _____ restricted common stock equivalents (“Equivalents”). This Award
Agreement is subject to the provisions of the Plan and to the following terms
and conditions:
1. Vesting; Payment
Twenty-five percent of the Equivalents granted to Recipient will vest on October
9, 2009 (the “Anniversary Date”), an additional twenty-five percent will vest on
the date that the Company publicly releases earnings results for its 2009 fiscal
year (“the Announcement Date”) only if the Company’s CAGR, as defined below, for
the period from September 30, 2006 through September 30, 2009 (the “Measurement
Period”), equals or exceeds 10%, and the remaining fifty percent will vest in
its entirety on the Announcement Date only if the Company achieves CAGR for the
Measurement Period at or above 15%, with smaller percentages of that remaining
fifty percent vesting at each of the milestones indicated:
CAGR
% Vesting
11%
20%
12%
40%
13%
60%
14%
80%
15%
100%
Upon vesting, as described above, each vested Equivalent will convert, at that
time into one share of the Company’s $.01 par value Common Stock (“Common
Stock”), which will be issued to the Recipient. Any Equivalents which fail to
vest as of the Announcement Date will be forfeited and the Recipient will have
no further rights with respect thereto.
2. Additional Cash Payment
At the time of issuance of shares of Common Stock to Recipient, as described in
paragraph 1 above, Recipient will also receive an additional cash payment equal
to the amount of dividends, if any, which would have been paid on the shares of
Common Stock issued to him or her if the Recipient had actually acquired those
shares on the date or dates of crediting of his or her Equivalents. No interest
shall be included in the calculation of such additional cash payment.
3. Acceleration
Notwithstanding the provisions of paragraph 1 above, all Equivalents credited to
the Recipient will immediately vest, convert into shares of Common Stock and be
paid to the Recipient, his or her designated beneficiary, or his or her legal
representative, in accordance with the terms of the Plan, in the event of:
(a) the Recipient’s death;
(b) a declaration of Recipient’s total and permanent disability;
(c) Recipient’s involuntary termination of employment, other than for cause;
or
(d)
a Change of Control of the Company.
4. Forfeiture
All rights in and to any and all Equivalents granted pursuant to this Award
Agreement, and to any shares of Common Stock into which they would convert,
which have not vested by the Announcement Date, as described in paragraph 1 of
this Award Agreement shall be forfeited. In addition, prior to that date, all
rights in and to any and all Equivalents granted pursuant to this Award
Agreement which have not vested in accordance with the terms hereof, and to any
shares of Common Stock into which they would convert, shall be forfeited upon
(i) the Recipient’s involuntary termination for cause; (ii) the Recipient’s
voluntary termination of employment; (iii) a determination by the Committee that
the recipient engaged in competition with the Company; or (iv) a determination
by the Committee that the recipient engaged in activity or conduct contrary to
the best interests of the Company, as described in the Plan.
5. Shareholder Rights; Adjustment of Equivalents
Recipient shall not be entitled, prior to the conversion of Equivalents into
shares of Common Stock, to any rights as a shareholder with respect to such
shares of Common Stock, including the right to vote, sell, pledge, transfer or
otherwise dispose of the shares. Recipient shall, however, have the right to
designate a beneficiary to receive such shares of Common Stock under this Award
Agreement, subject to the provisions of Section V of the Plan. The number of
Equivalents credited to Recipient may be adjusted, in the sole discretion of the
Nominating and Executive Compensation Committee of the Company’s Board of
Directors, in accordance with the provisions of Section VI(F) of the Plan.
6. Other
The Company reserves the right, as determined by the Committee, to convert this
Award Agreement to a substantially equivalent award and to make any other
modification it may consider necessary or advisable to comply with any
applicable law or governmental regulation, or to preserve the tax deductibility
of any payments hereunder.
7. Definitions:
Change of Control of the Company shall be deemed to occur when (i) a person, as
defined under the U.S. securities laws, acquires beneficial ownership of more
than fifty percent (50%) of the outstanding voting securities of the Company; or
(ii) the directors of the Company immediately before a business combination
between the Company and another entity, or a proxy contest for the election of
directors, shall, as a result thereof, cease to constitute a majority of the
Board of Directors of the Company (or a successor corporation of the Company).
Notwithstanding the above, however, a Change of Control which is approved in
advance by a majority of the Board of Directors of the Company shall not trigger
acceleration as described in paragraph 3 of this Award Agreement.
CAGR shall mean the Company’s compound annual growth in earnings per share for
the period from September 30, 2006 to September 30, 2009. For purposes of the
calculation of CAGR, the determination on annual earnings per share will be
based on all-inclusive GAAP results, adjusted only for certain unusual items:
·
extraordinary dividends;
·
stock split-ups; stock dividends or distributions;
·
recapitalizations;
·
any merger of the Company with another corporation;
·
any consolidation of the Company and another corporation into another
corporation;
·
any separation of the Company or its business units (including a spin-off or
other distribution of stock or property by the Company);
·
any reorganization of the Company (whether or not such reorganization comes
within the definition of such term in Code Section 368);
·
any partial or complete liquidation by the Company; or sale of all or
substantially all of the assets of the Company;
·
unusual or non-recurring accounting impacts or changes in accounting standards
or treatment;
·
unusual or non-recurring accounting treatments related to an acquisition by the
Company completed during the period of the award.
8. Effective Date
This Award Agreement shall be deemed to be effective as of the 9th day of
October, 2006.
ACKNOWLEDGED AND ACCEPTED: ENERGIZER HOLDINGS, INC.
________________________________ By:_____________________________
Recipient Ward M. Klein
Chief Executive Officer
Recipients:
W. Klein - 80,000 total equivalents
J. McClanathan - 20,000 total equivalents
J. Lynch - 20,000 total equivalents
D. Sescleifer - 16,000 total equivalents
D. Hatfield - 10,000 total equivalents
P. Conrad - 10,000 total equivalents
G. Stratmann - 12,000 total equivalents
|
Exhibit 10.1
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
CIPHERGEN BIOSYSTEMS, INC.
and
The Initial Purchasers of Ciphergen Biosystems, Inc.’s
7.00% CONVERTIBLE SENIOR NOTES DUE 2011
Dated as of November 15, 2006
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of November 15, 2006 among
Ciphergen Biosystems, Inc., a Delaware corporation (together with any successor
entity, herein referred to as the “Company”), and the initial purchasers of the
Company’s Notes (as such term is defined below) named in Annex A hereto (each,
and “Initial Purchaser,” and collectively, the “Initial Purchasers”) under those
separate Exchange Agreements (as defined below).
Pursuant to those certain Exchange Agreements, each dated as of November 3,
2006, between the Company and each of the Initial Purchasers (collectively, the
“Exchange Agreements”), the Initial Purchasers have agreed to purchase from the
Company a total of up to $16,500,000 in aggregate principal amount of 7.00%
Convertible Senior Notes Due 2011 (the “Notes”). The Notes will be convertible
into fully paid, nonassessable shares of common stock, no par value per share,
of the Company (the “Common Stock”). The Notes will be convertible on the terms,
and subject to the conditions, set forth in the Indenture (as defined herein).
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
“Affiliate”: of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms “controlling” and “controlled” have meanings correlative to the
foregoing.
“Agreement”: This Registration and Investor Rights Agreement.
“Amendment Effectiveness Deadline Date”: has the meaning set forth in
Section 2(e) hereof.
“Blue Sky Application”: As defined in Section 6(a)(i) hereof.
“Business Day”: The definition of “Business Day” in the Indenture.
“Commission”: Securities and Exchange Commission.
“Common Stock”: As defined in the preamble hereto.
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“Company”: As defined in the preamble hereto.
“EDGAR”: Electronic Data Gathering and Retrieval System.
“Effectiveness Period”: As defined in Section 2(a)(iii) hereof.
“Effectiveness Target Date”: As defined in Section 2(a)(ii) hereof.
“Exchange Act”: Securities Exchange Act of 1934, as amended.
“Exchange Agreements”: As defined in the preamble hereto.
“Holder”: A Person who owns, beneficially or otherwise, Transfer Restricted
Securities.
“Indemnified Holder”: As defined in Section 6(a) hereof.
“Indenture”: The Indenture, dated as of November 15, 2006 between the
Company and U.S. Bank National Association, as trustee (the “Trustee”), pursuant
to which the Notes are to be issued, as such Indenture is amended, modified or
supplemented from time to time in accordance with the terms thereof.
“Initial Purchasers”: As defined in the preamble hereto.
“Liquidated Damages”: As defined in Section 3(a) hereof.
“Majority of Holders”: Holders holding over 50% of the aggregate principal
amount of Notes outstanding; provided that, for the purpose of this definition,
a holder of shares of Common Stock which constitute Transfer Restricted
Securities and issued upon conversion of the Notes shall be deemed to hold an
aggregate principal amount of Notes (in addition to the principal amount of
Notes held by such holder) equal to the product of (x) the number of such shares
of Common Stock held by such holder and (y) the conversion rate in effect at the
time of such conversion as determined in accordance with the Indenture.
“NASD”: National Association of Securities Dealers, Inc.
“Notes”: As defined in the preamble hereto.
“Notice Holder”: means, on any date, any Holder that has delivered a
Selling Securityholder Questionnaire to the Company on such date.
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“Person”: An individual, partnership, corporation, company, unincorporated
organization, trust, joint venture or a government or agency or political
subdivision thereof.
“Prospectus”: The prospectus included in a Shelf Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such prospectus.
“Registration Default”: As defined in Section 3(a) hereof.
“Securities Act”: Securities Act of 1933, as amended.
“Selling Securityholder Questionnaire”: means a written notice executed by
the respective Holder and delivered to the Company containing substantially the
information called for by the Selling Securityholder Questionnaire attached as
Annex B hereto.
“Shelf Filing Deadline”: As defined in Section 2(a)(i) hereof.
“Shelf Registration Statement”: As defined in Section 2(a)(i) hereof.
“Suspension Notice”: As defined in Section 4(c) hereof.
“Suspension Period”: As defined in Section 4(b)(i) hereof.
“TIA”: Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission thereunder, in each case, as in effect on the date
the Indenture is qualified under the TIA.
“Transfer Restricted Securities”: Each Note and each share of Common Stock
issued upon conversion of Notes until the earlier of:
(i) the date on which such Note or such share of Common Stock issued upon
conversion has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement;
(ii) the date on which such Note or such share of Common Stock issued upon
conversion is transferred in compliance with Rule 144 under the Securities Act
or may be sold or transferred by a person who is not an affiliate of the Company
pursuant to Rule 144(k) under the Securities Act (or any other similar provision
then in force); or
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(iii) the date on which such Note or such share of Common Stock issued upon
conversion ceases to be outstanding (whether as a result of redemption,
repurchase and cancellation, conversion or otherwise).
Unless the context otherwise requires, the singular includes the plural,
and words in the plural include the singular.
2. Shelf Registration.
(a) The Company shall:
(i) use its reasonable best efforts to cause to be filed as promptly as
practicable, but in any event not later than 30 days after the date hereof (the
“Shelf Filing Deadline”), a registration statement on Form S-3 (the “Shelf
Registration Statement”), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities held by Holders that have provided
the information required pursuant to the terms of Section 2(b) hereof (in the
event that Form S-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration on another
appropriate form; provided, that the Company shall undertake to register the
Transfer Restricted Securities on Form S-3 as soon as such form is available,
provided, further, that the Company shall maintain the effectiveness of the
Shelf Registration Statement then in effect until such time as a Shelf
Registration Statement on Form S-3 covering the Transfer Restricted Securities
has been declared effective by the SEC);
(ii) use its reasonable efforts to cause the Shelf Registration Statement
to be declared effective by the Commission not later than: (a) if the Shelf
Registration Statement receives a “no-review” status from the Commission, 90
days after the date hereof, or (b) if the Shelf Registration Statement is
reviewed by the Commission, 120 days after the date hereof (the “Effectiveness
Target Date”); and
(iii) subject to Section 4(b)(i) hereof, use its reasonable efforts to keep
the Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 4(b) hereof to the extent
necessary to ensure that (A) it is available for resales by the Holders of
Transfer
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Restricted Securities entitled, subject to Section 2(b), to the benefit of this
Agreement and (B) conforms with the requirements of this Agreement and the
Securities Act and the rules and regulations of the Commission promulgated
thereunder as announced from time to time, for a period (the “Effectiveness
Period”) until the earliest of:
(1) two years following the date hereof;
(2) the date when the Holders of Transfer Restricted Securities are able to
sell all such Transfer Restricted Securities immediately without restriction
pursuant to Rule 144(k) under the Securities Act or any successor rule thereto;
or
(3) the date when all of the Transfer Restricted Securities are registered
under the Shelf Registration Statement and disposed of in accordance with the
Shelf Registration Statement.
(b) At the time the Shelf Registration Statement is declared effective,
each Holder that became a Notice Holder on or prior to the date five
(5) Business Days prior to such time of effectiveness shall be named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of Transfer Restricted Securities in accordance with applicable
law. None of the Company’s security holders (other than the Holders of Transfer
Restricted Securities) shall have the right to include any of the Company’s
securities in the Shelf Registration Statement.
(c) If the Shelf Registration Statement ceases to be effective for any
reason at any time during the Effectiveness Period (other than because all
Transfer Restricted Securities registered thereunder shall have been resold
pursuant thereto or shall have otherwise ceased to be Transfer Restricted
Securities), the Company shall use its reasonable efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within fifteen (15) days of such cessation of effectiveness amend the
Shelf Registration Statement in a manner reasonably expected to obtain the
withdrawal of the order suspending the effectiveness thereof.
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(d) The Company shall supplement and amend the Shelf Registration Statement
if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement, if
required by the Securities Act or as reasonably requested by the Holders or by
the Trustee on behalf of the Holders of the Transfer Restricted Securities
covered by such Shelf Registration Statement.
(e) Each Holder agrees that if such Holder wishes to sell Transfer
Restricted Securities pursuant to a Shelf Registration Statement and related
Prospectus, it will do so only in accordance with this Section 2(e) and
Section 4(b). Each Holder wishing to sell Transfer Restricted Securities
pursuant to a Shelf Registration Statement and related Prospectus agrees to
deliver a Selling Securityholder Questionnaire to the Company at least five
(5) Business Days prior to the effectiveness of the Shelf Registration
Statement. From and after the date the Shelf Registration Statement is declared
effective, the Company shall, within a reasonably practicable period of time
after the date a Selling Securityholder Questionnaire is delivered, and in any
event within the later of ten (10) Business Days after such date or ten
(10) Business Days after the expiration of the Suspension Period (1) in effect
when the Notice and Questionnaire is delivered or (2) put into effect within ten
(10) Business Days of such delivery date:
(i) if required by applicable law, file with the SEC a post-effective
amendment to the Shelf Registration Statement or prepare and, if required by
applicable law, file a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any other
required document so that the Holder delivering such Selling Securityholder
Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of the Transfer Restricted Securities
in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use its reasonable
efforts to cause any such post-effective amendment to be declared effective
under the Securities Act as promptly as is practicable, but in any event by the
date (the “Amendment Effectiveness Deadline Date”) that is thirty (30) days
after the date such post-effective amendment is filed; and
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(ii) notify such Holder as promptly as practicable after the effectiveness
under the Securities Act of any post-effective amendment filed pursuant to
Section 2(e)(i);
provided that if such Selling Securityholder Questionnaire is delivered during a
Suspension Period, the Company shall so inform the Holder delivering such
Selling Securityholder Questionnaire and shall take the actions set forth in
clauses (i) and (ii) above upon expiration of the Suspension Period in
accordance with Section 4(b). Notwithstanding anything contained herein to the
contrary, (i) the Company shall be under no obligation to name any Holder that
is not a Notice Holder as a selling securityholder in any Registration Statement
or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall
be extended by up to ten (10) Business Days from the expiration of a Suspension
Period (and the Company shall incur no obligation to pay Liquidated Damages
during such extension) if such Suspension Period shall be in effect on the
Amendment Effectiveness Deadline Date; and provided further, that after the date
of effectiveness of the Shelf Registration Statement, the Company shall not be
obligated to file more than one post-effective amendment in any 60-day period
(measured from the date any previous post-effective amendment has been filed, or
in the case of the first post-effective amendment, the date the first Selling
Securityholder Questionnaire is delivered to the Company after the date of
effectiveness) for the purpose of naming Holders as selling securityholders who
were not so named in the Shelf Registration Statement at the time of
effectiveness.
3. Liquidated Damages.
If:
(i) the Shelf Registration Statement is not filed with the Commission prior
to or on the Shelf Filing Deadline;
(ii) the Shelf Registration Statement has not been declared effective by
the Commission prior to or on the Effectiveness Target Date;
(iii) the Company has failed to perform its obligations set forth in
Section 2(e) within the time period required therein;
(iv) any post-effective amendment to a Shelf Registration filed pursuant to
Section 2(e)(i) has not become effective under the Securities Act on or prior to
the Amendment Effectiveness Deadline Date;
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(v) except as provided in Section 4(b)(i) hereof, the Shelf Registration
Statement is filed and declared effective but, during the Effectiveness Period,
shall thereafter cease to be effective or fail to be usable for its intended
purpose; or
(vi) (A) prior to or on the 30th under the provisions of Section 4(b), of
any Suspension Period, such suspension has not been terminated or (B) Suspension
Periods exceed an aggregate of 60 days in any 360 day period,
(each such event referred to in foregoing clauses (i) through (v), a
“Registration Default”), the Company hereby agrees to pay interest as partial
relief for the damages (“Liquidated Damages”) with respect to the Transfer
Restricted Securities from and including the day following the Registration
Default to but excluding the earlier of (1) the day on which the Registration
Default has been cured and (2) the date the Shelf Registration Statement is no
longer required to be kept effective, in an amount in cash equal to one and
one-half percent (1.5%) of the aggregate outstanding principal amount of Notes
on each of the following days: (i) the day of the Registration Default and on
every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until such Registration Default is cured; provided that in no event
shall Liquidated Damages exceed 10% of the Holder’s initial investment in the
Notes in the aggregate and provided, further, that Liquidated Damages shall only
accrue with respect to clauses (iii) and (iv) above with respect to Notes for
which the Company has failed to perform its obligations under Section 2(e)
above, and with respect to clauses (v) and (vi) above only for Notes for which a
Holder is named as a selling securityholder on the Shelf Registration Statement.
Liquidated Damages shall be paid within five (5) Business Days of the day of the
Registration Default, and thereafter on the earlier of (I) the last day of the
calendar month during which such Liquidated Damages are incurred and (II) the
third Business Day after the event or failure giving rise to the Liquidated
Damages is cured. In the event the Company fails to pay Liquidated Damages in a
timely manner, such Liquidated Damages shall bear interest at the rate of one
and one-half percent (1.5%) per month (prorated for partial months) until paid
in full.
All obligations of the Company set forth in this Section 3 that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such Transfer Restricted Security
shall have been satisfied in full.
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Nothing shall preclude a Holder from pursuing or obtaining any other
remedies at law or in equity, including specific performance, with respect to
this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Section 3 constitutes a reasonable estimate of the damages that may be incurred
by Holders of Transfer Restricted Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Transfer Restricted Securities in accordance with the
provisions hereof.
4. Registration Procedures.
(a) In connection with the Shelf Registration Statement, the Company shall
comply with all the provisions of Section 4(b) hereof and shall prepare and file
with the Commission a Shelf Registration Statement relating to the registration
on any appropriate form under the Securities Act in accordance with Section 2
hereof; provided that before filing any Shelf Registration Statement or
Prospectus or any amendments or supplements (other than a prospectus supplement
filed solely to update the selling securityholder information in the Prospectus)
thereto with the SEC, the Company shall furnish to the Holders and counsel for
the Holders copies of all such documents proposed to be filed which documents
(other than a prospectus supplement filed solely to update the selling
securityholder information in the Prospectus) will be subject to the review of
such counsel for a period of three (3) Business Days, and the Company will not
file the Shelf Registration Statement or Prospectus or any amendment or
supplement thereto (other than documents incorporated by reference) to which
such counsel shall reasonably object within three (3) Business Days after the
receipt thereof.
(b) In connection with the Shelf Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted
Securities, the Company shall:
(i) Subject to any notice by the Company in accordance with this Section
4(b) of the existence of any fact or event of the kind described in Section
4(b)(iii)(D), use its reasonable efforts to keep the Shelf Registration
Statement continuously effective during the Effectiveness Period; upon the
occurrence of any event that would cause the Shelf Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or omission
or (B) not to be effective and
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usable for resale of Transfer Restricted Securities during the Effectiveness
Period, the Company shall file promptly an appropriate amendment to the Shelf
Registration Statement, a supplement to the Prospectus or a report filed with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, in the case of clause (A), correcting any such misstatement or omission,
and, in the case of either clause (A) or (B), use its reasonable efforts to
cause such amendment to be declared effective and the Shelf Registration
Statement and the related Prospectus to become usable for resale of Transfer
Restricted Securities during the Effectiveness Period as soon as practicable
thereafter. Notwithstanding the foregoing, the Company may suspend the use of
the Prospectus and may elect to suspend the effectiveness of the Shelf
Registration Statement by written notice to the Holders for a period not to
exceed an aggregate of 30 days in any 90-day period (each such period, a
“Suspension Period”) if:
(x) an event occurs and is continuing as a result of which the Shelf
Registration Statement, the Prospectus, any amendment or supplement thereto, or
any document incorporated by reference therein would, in the Company’s judgment,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and
(y) the Company determines in good faith that the disclosure of such event
at such time would be seriously detrimental to the Company and its subsidiaries;
provided, however, that Suspension Periods shall not exceed an aggregate of 60
days in any 360-day period. The Company shall not be required to specify in the
written notice to the Holders the nature of the event giving rise to the
Suspension Period and the Company agrees that it will not specify in the written
notice to the Holders any material non-public information.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf
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--------------------------------------------------------------------------------
Registration Statement effective during the Effectiveness Period; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Shelf Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
the Shelf Registration Statement or supplement to the Prospectus.
(iii) Advise the selling Holders promptly and, if requested by such selling
Holders, to confirm such advice in writing:
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Shelf Registration Statement
or any post-effective amendment thereto, when the same has become effective;
(B) of any request by the Commission or any other federal or state
governmental authority for amendments to the Shelf Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto;
(C) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Shelf Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes;
(D) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Transfer Restricted Securities for sale in any
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jurisdiction or the initiation or threatening of any proceeding for such
purpose; or
(E) of the existence (but not the substance) of any fact, other than
material non-public information, or the happening of any event during the
Effectiveness Period, that makes any statement of a material fact made in the
Shelf Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus in order to make the statements therein not
misleading.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company shall use its
reasonable efforts to obtain the withdrawal or lifting of such order at the
earliest possible time and will provide to each Holder who is named in the Shelf
Registration Statement prompt notice of the withdrawal of any such order.
(iv) Make available at reasonable times for inspection by one or more
representatives of the selling Holders, and one attorney or accountant retained
by such selling Holders, all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably necessary to
enable them to conduct a reasonable investigation within the meaning of Section
11 of the Securities Act, and cause the Company’s officers, directors, managers
and employees to supply all information reasonably requested by any such
representative or representatives of the selling Holders, attorney or accountant
in connection therewith; provided, however, that the Company shall have no
obligation to deliver information to any selling Holder or representative
pursuant to this Section 4(b)(iv) unless such selling Holder or representative
shall have executed and delivered a confidentiality agreement in a form
reasonably acceptable to the Company relating to such information.
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(v) If requested by any selling Holders, promptly incorporate in the Shelf
Registration Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders may reasonably
request to have included therein, including, without limitation, information
relating to the “Plan of Distribution” and “Selling Securityholders” of the
Transfer Restricted Securities.
(vi) Furnish to each selling Holder upon such Holder’s written request,
without charge, at least one copy of the Shelf Registration Statement, as first
filed with the Commission, and of each amendment thereto (and any documents
incorporated by reference therein or exhibits thereto (or exhibits incorporated
in such exhibits by reference) as such Person may request).
(vii) Deliver to each selling Holder, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; subject to any notice
by the Company in accordance with this Section 4(b) of the existence of any fact
or event of the kind described in Section 4(b)(iii)(D) or 4(b)(i), the Company
hereby consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto.
(viii) Before any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions in the United States as the
selling Holders may reasonably request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Transfer Restricted Securities covered by the Shelf Registration Statement;
provided, however, that the Company shall not be required (A) to register or
qualify as a foreign corporation or a dealer of securities where it is not now
so qualified or to take any action that would subject it to the service of
process in any jurisdiction where it is not now so subject or (B) to subject
itself to general or unlimited service of process or to taxation in any such
jurisdiction if it is not now so subject.
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(ix) Cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends (unless required
by applicable securities laws); and enable such Transfer Restricted Securities
to be in such denominations and registered in such names as the Holders may
reasonably request at least two (2) Business Days before any sale of Transfer
Restricted Securities made by such Holders.
(x) Subject to Section 4(b)(i) hereof and the provision in clause (viii)
above, use its reasonable efforts to cause the Transfer Restricted Securities
covered by the Shelf Registration Statement to be registered with or approved by
such other U.S. governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities.
(xi) Subject to Section 4(b)(i) hereof, if any fact or event contemplated
by Section 4(b)(iii)(D) hereof shall exist or have occurred, use its reasonable
efforts to prepare a supplement or post-effective amendment to the Shelf
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading.
(xii) Provide CUSIP numbers for all Transfer Restricted Securities not
later than the effective date of the Shelf Registration Statement and provide
the Trustee under the Indenture with certificates for the Notes that are in a
form eligible for deposit with The Depository Trust Company.
(xiii) Subject to Section 4(b)(i) hereof, otherwise use its reasonable
efforts to comply with all applicable rules and regulations of the Commission
and all reporting requirements under the rules and regulations of the Exchange
Act.
(xiv) Cause the Indenture to be qualified under the TIA not later than the
effective date of the Shelf Registration
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Statement required by this Agreement, and, in connection therewith, cooperate
with the Trustee and the holders of Notes to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its reasonable efforts to cause
the Trustee thereunder to execute all documents that may be required to effect
such changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner.
(xv) Cause all Common Stock covered by the Shelf Registration Statement to
be listed or quoted, as the case may be, on each securities exchange or
automated quotation system on which Common Stock is then listed or quoted, if
any.
(xvi) Provide to each Holder upon written request each document filed with
the Commission pursuant to the requirements of Section 13 and Section 15 of the
Exchange Act after the effective date of the Shelf Registration Statement,
unless such document is available through the Commission’s EDGAR system.
(xvii) Comply with all applicable rules and regulations of the Commission
and make generally available to its securityholders earning statements (which
need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) commencing on the first day of the first fiscal quarter of the Company
commencing after the effective date of a Shelf Registration Statement, which
statements shall cover said 12-month periods.
(c) Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice (a “Suspension Notice”) from the Company of the
existence of any fact of the kind described in Section 4(b)(iii)(D) or 4(b)(i)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until:
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(i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 4(b)(xi) hereof; or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.
If so directed by the Company, each Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such Suspension Notice.
(d) Each Holder agrees, by acquisition of the Transfer Restricted
Securities, that no Holder shall be entitled to sell any of such Transfer
Restricted Securities pursuant to a Registration Statement or to receive a
Prospectus relating thereto, unless such Holder has furnished the Company with a
Selling Securityholder Questionnaire as required pursuant to Section 2(e) hereof
(including the information required to be included in such Selling
Securityholder Questionnaire) and the information set forth in the next
sentence. Each Notice Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Notice Holder not misleading and any other
information regarding such Notice Holder and the distribution of such Transfer
Restricted Securities. Any sale of any Transfer Restricted Securities by any
Holder shall constitute a representation and warranty by such Holder that the
information relating to such Holder and its plan of distribution is as set forth
in the Prospectus delivered by such Holder in connection with such disposition,
that such Prospectus does not as of the time of such sale contain any untrue
statement of a material fact relating to or provided by such Holder or its plan
of distribution and that such Prospectus does not as of the time of such sale
omit to state any material fact relating to or provided by such Holder or its
plan of distribution necessary to make the statements in such Prospectus, in the
light of the circumstances under which they were made, not misleading.
5. Registration Expenses.
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All expenses incident to the Company’s performance of or compliance with
this Agreement shall be borne by the Company regardless of whether a Shelf
Registration Statement becomes effective, including, without limitation:
(i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state
Blue Sky or securities laws;
(iii) all expenses of printing (including printing of Prospectuses and
certificates for the Common Stock to be issued upon conversion of the Notes) and
the Company’s expenses for messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel to the Company;
(v) all reasonable fees and disbursements of one counsel chosen by the
Holders of a majority of Transfer Restricted Securities;
(vi) all application and filing fees in connection with listing (or
authorizing for quotation) the Common Stock on a national securities exchange or
automated quotation system pursuant to the requirements hereof, if any; and
(vii) all fees and disbursements of independent certified public
accountants of the Company.
The Company shall bear its internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal, accounting or other duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless each Holder
of Transfer Restricted Securities, such Holder’s directors, officers, members,
agents, and employees and each person, if any, who controls any such Holder
within the meaning of the Securities Act (each, an “Indemnified Holder”),
against any loss, claim, damage, liability, action, cost or expense, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability,
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action, cost or expense relating to resales of the Transfer Restricted
Securities), to which such Indemnified Holder may become subject, insofar as any
such loss, claim, damage, liability, action, cost or expense arises out of, or
is based upon:
(i) any untrue statement or alleged untrue statement of a material fact
contained in (A) the Shelf Registration Statement as originally filed or in any
amendment thereof, in any Prospectus, or in any amendment or supplement thereto
or (B) any blue sky application or other document or any amendment or supplement
thereto prepared or executed by the Company (or based upon written information
furnished by or on behalf of the Company expressly for use in such blue sky
application or other document or amendment on supplement) filed in any
jurisdiction specifically for the purpose of qualifying any or all of the
Transfer Restricted Securities under the securities law of any state or other
jurisdiction (such application or document being hereinafter called a “Blue Sky
Application”); or
(ii) the omission or alleged omission to state therein any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
and agrees to reimburse each Indemnified Holder promptly upon demand for any
legal or other expenses reasonably incurred by such Indemnified Holder in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, action, cost or expense; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability, action, cost or expense arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder (or its
related Indemnified Holder) specifically for use therein. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have.
(b) Each Holder, severally and not jointly, agrees to indemnify and hold
harmless the Company, its directors, officers and employees and each person, if
any, who controls the Company within the meaning of the Securities Act to the
same extent as the foregoing indemnity from the
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Company to each such Holder, but only with reference to written information
relating to such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement set forth in this Section shall be in
addition to any liabilities which any such Holder may otherwise have. In no
event shall any Holder, its directors, officers or any person who controls such
Holder be liable or responsible for any amount in excess of the amount by which
the net proceeds received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Shelf Registration Statement exceeds the
amount of any damages that such Holder, its directors, officers or any person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 6 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 6. If any such claim
or action is brought against an indemnified party, and it notifies the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ a separate counsel to
represent such indemnified party and its officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties against the
indemnifying party under this Section 6 (i) if the indemnifying party has failed
within a reasonable time after receipt of notice to assume defense of a
proceeding to retain counsel reasonably satisfactory to the indemnified
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party and (ii) if the indemnified party shall have been advised by legal counsel
that there may be one or more legal defenses available to such indemnified party
and their respective officers, employees and controlling persons that are
different from or additional to those available to the indemnifying party, and
in that event, the fees and expenses of such separate counsel shall be paid by
the indemnifying party. No indemnifying party shall:
(i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld) settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding, or
(ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss of liability by
reason of such settlement or judgment in accordance with this Section 6.
(d) The indemnifying party under this Section shall not be liable for any
settlement of any proceeding effected without its written consent, which shall
not be withheld unreasonably, but if settled with such consent or if there is a
final judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have validly requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 6(c) hereof, the indemnifying party agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid valid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such valid request prior to the date of such settlement.
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No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the entry of
judgment in any pending or threatened action, suit or proceeding in respect of
which any indemnified party is or could have been a party and indemnity was or
could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent (x) includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding and (y) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(e) If the indemnification provided for in this Section 6 shall for any
reason be unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability
(or action in respect thereof) referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability (or action in respect thereof):
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company from the offering and sale of the Transfer Restricted
Securities on the one hand and a Holder with respect to the sale by such Holder
of the Transfer Restricted Securities on the other, or
(ii) if the allocation provided by Section (6)(e)(i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in Section 6(e)(i) but also the relative fault of
the Company on the one hand and the Holders on the other in connection with the
statements or omissions or alleged statements or alleged omissions that resulted
in such loss, claim, damage or liability (or action in respect thereof), as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and a Holder on
the other with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Notes
purchased under the Exchange Agreements (before deducting expenses) received by
the Company, on the one hand, bear to the net proceeds received by such Holder
with respect to its sale of
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Transfer Restricted Securities on the other. The relative fault of the parties
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each Holder agree that it would not be
just and equitable if the amount of contribution pursuant to this Section 6(e)
were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the first
sentence of this paragraph (e).
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 6 shall be deemed to include, for purposes of this Section 6, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim.
Notwithstanding the provisions of this Section 6, no Holder shall be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holder with respect to its sale of Transfer Restricted
Securities exceeds the amount of any damages which such Holder has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Holders’ obligations to contribute as provided in this
Section 6(d) are several and not joint.
(f) The provisions of this Section 6 shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder or the
Company or any of the officers, directors or controlling persons referred to in
Section 6 hereof, and will survive the sale by a Holder of Transfer Restricted
Securities.
7. Rule 144A and Rule 144. The Company agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange
Act, to make available, upon request of any Holder, to such Holder or
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beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
8. Miscellaneous.
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 2 hereof may result in
material irreparable injury to the Holders for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely, and that, in the event of any such failure, any Holder may seek such
relief as may be required to specifically enforce the Company’s obligations
under Section 2 hereof.
(b) No Inconsistent Agreements. The Company will not on or after the date
hereof, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Company shall
not grant to any of its securityholders (other than the Holders of Transfer
Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities. The Company has not previously
entered into any agreement (which has not expired or been terminated) granting
any registration rights with respect to its securities to any Person, which
rights conflict with the provisions hereof.
(c) Amendments and Waivers. This Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
a Majority of Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof, with respect to a matter, which relates
exclusively to the rights of Holders whose securities are being sold pursuant to
a Shelf Registration Statement and does not directly or indirectly adversely
affect the rights of other Holders, may be given by the Majority Holders,
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determined on the basis of Notes being sold rather than registered under such
Shelf Registration Statement.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, facsimile
transmission, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
registrar under the Indenture or the transfer agent of the Common Stock, as the
case may be
With, in the case of notice to Highbridge International LLC, a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Fax No.: (212) 593-5955
Attn: Eleazer N. Klein, Esq.; and
(ii) if to the Company, initially at its address set forth in the Exchange
Agreements,
With a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Fax No.: (650) 493-6811
Attn: Michael O’Donnell
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if transmitted by
facsimile; and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
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(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities, provided,
however, that nothing contained herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms of the Exchange Agreements or the Indenture. If any transferee of any
Holder shall acquire Transfer Restricted Securities, in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all the terms of this Agreement except for Section 8 hereof, and by
taking and holding such Transfer Restricted Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Notes Held by the Company or Their Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted Securities
is required hereunder, Transfer Restricted Securities held by the Company or its
Affiliates (other than subsequent Holders if such subsequent Holders are deemed
to be Affiliates solely by reason of their holding of such Notes) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without regard to conflict of
law principles that would result in the application of any law other than the
law of the State of New York. Each party hereby irrevocably submits to the
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or
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proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(j) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby, it being intended that all of the rights
and privileges of the parties shall be enforceable to the fullest extent
permitted by law.
(k) Independent Nature of Holders’ Obligations and Rights. The obligations
of each Holder under this Agreement are several and not joint with the
obligations of any other Holder, and no Holder shall be responsible in any way
for the performance of the obligations of any other Holder under this Agreement.
Nothing contained herein, and no action taken by any Holder pursuant hereto,
shall be deemed to constitute the Holder as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement. Each Holder
confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors.
Each Holder shall be entitled to independently protect and enforce its
- 26 -
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rights, including, without limitation, the rights arising out of this Agreement,
and it shall not be necessary for any other Holder to be joined as an additional
party in any proceeding for such purpose.
(l) Entire Agreement. This Agreement, together with the Exchange Agreements
and the Indenture, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Company with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
- 27 -
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CIPHERGEN BIOSYSTEMS, INC.
By: /s/ Gail S. Page Name: Gail S. Page Title:
President and Chief Executive Officer
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
HIGHBRIDGE INTERNATIONAL LLC
By: HIGHBRIDGE CAPITAL MANAGEMENT, LLC
By: /s/ Adam J. Chill Adam J. Chill,
Managing Director
DEERFIELD INTERNATIONAL LIMITED
By: /s/ Darren Levine Name: Darren Levine
Title: CFO
DEERFIELD PARTNERS, L.P.
By: /s/ Darren Levine Name: Darren Levine
Title: CFO
BRUCE FUNDS, INC.
By: /s/ R. Jeffrey Bruce Name: R. Jeffrey
Bruce Title: Secretary
PROFESSIONAL LIFE & CASUALTY
By: /s/ R. Jeffrey Bruce Name: R. Jeffrey
Bruce Title: Director
--------------------------------------------------------------------------------
ANNEX A
LIST OF INITIAL PURCHASERS
Name of Initial Purchaser Principal Amount of Notes
Highbridge International LLC
$ 11,100,000
Deerfield International Limited
$ 1,560,000
Deerfield Partners, L.P.
$ 1,440,000
Bruce Fund, Inc.
$ 1,800,000
Professional Life & Casualty
$ 600,000
--------------------------------------------------------------------------------
ANNEX B
SELLING SECURITYHOLDER QUESTIONNAIRE
The undersigned beneficial owner (the “Selling Securityholder”) of the
7.00% Convertible Senior Notes due 2011 (the “Notes”) of Ciphergen Biosystems,
Inc. (the “Company”) or the shares of the Company’s Common Stock, par value
$0.001 per share, issuable upon conversion of the Notes (the “Common Stock” and,
together with the Notes, the “Registrable Securities”) hereby gives notice to
the Company of its intention to sell or otherwise dispose of Registrable
Securities beneficially owned by it and listed below in Item 3 (unless otherwise
specified under Item 3) pursuant to the Shelf Registration Statement. The
undersigned, by signing and returning this Selling Securityholder Questionnaire,
understands that it will be bound by the terms and conditions of this Selling
Securityholder Questionnaire and the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the undersigned has agreed
to indemnify and hold harmless the Company’s directors, the Company’s officers
and each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), from and against certain losses arising
in connection with statements concerning the undersigned made in the Shelf
Registration Statement or the related prospectus in reliance upon the
information provided in this Selling Securityholder Questionnaire. The
undersigned hereby acknowledges its obligations under the Registration Rights
Agreement to indemnify and hold harmless certain persons set forth therein.
The undersigned hereby provides the following information to the Company
and represents and warrants that such information is accurate and complete:
(1)
(a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities listed in (3) below are held:
(c) Full Legal Name of DTC Participant (if applicable and if not the same as
(b) above) through which Registrable Securities listed in (3) below are held:
(2) Address for Notices to Selling Securityholder:
Telephone (including area code):
--------------------------------------------------------------------------------
Fax (including area code):
Contact Person:
(3) Beneficial Ownership of Registrable Securities:
(a) Type and Principal Amount/Number of Registrable Securities beneficially
owned:
(b) CUSIP No(s). of such Registrable Securities beneficially owned:
(4) Beneficial Ownership of Other Securities of the Company Owned by
the Selling Securityholder:
Except as set forth below in this Item (4), the undersigned is not
the beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item (3).
(a) Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:
(b) CUSIP No(s). of such Other Securities beneficially owned:
(5) Relationship with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Is the Selling Securityholder a registered broker-dealer?
Yes o
No o
If “Yes”, please answer subsection (a) and subsection (b):
(a) Did the Selling Securityholder acquire the
Registrable Securities as compensation for underwriting/broker-dealer activities
to the Company?
Yes o
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No o
(b) If you answered “No” to question 6(a), please
explain your reason for acquiring the Registrable Securities:
(7) Is the Selling Securityholder an affiliate of a registered
broker-dealer?
Yes o
No o
If “Yes”, please identify the registered broker-dealer(s),
describe the nature of the affiliation(s) and answer subsection (a) and
subsection (b):
(a) Did the Selling Securityholder purchase the
Registrable Securities in the ordinary course of business (if no, please
explain)?
Yes o
No o Explain:
(b) Did the Selling Securityholder have an agreement
or understanding, directly or indirectly, with any person to distribute the
Registrable Securities at the same time the Registrable Securities were
originally purchased (if yes, please explain)?
Yes o Explain:
No o
(8) Is the Selling Securityholder a non-public entity?
Yes o
No o
If “Yes”, please answer subsection (a):
(a) Identify the natural person or persons that have
voting or investment control over the Registrable Securities that the non-public
entity owns:
(9) Plan of Distribution:
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Except as set forth below, the undersigned Selling
Securityholder (including its donees and pledgees) intends to distribute the
Registrable Securities listed above in Item (3) pursuant to the Shelf
Registration Statement only as follows (if at all): Such Registrable Securities
may be sold from time to time directly by the undersigned Selling Securityholder
or, alternatively, in accordance with the Registration Rights Agreement, through
underwriters, broker-dealers or agents. If the Registrable Securities are sold
through underwriters or broker-dealers, the Selling Securityholders will be
responsible for underwriting discounts or commissions or agent commissions. Such
Registrable Securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve cross or block transactions) (i) on any national
securities exchange or quotation service on which the Registrable Securities may
be listed or quoted at the time of sale, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or services or in the
over-the-counter market, or (iv) through the writing of options. In connection
with sales of the Registrable Securities or otherwise, the undersigned Selling
Securityholder may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the Registrable Securities in the course of
hedging positions they assume. The undersigned Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to close
out short positions, or loan or pledge Registrable Securities to broker-dealers
that in turn may sell such securities.
State any exceptions here:
Note: In no event will such method(s) of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.
The undersigned Selling Securityholder acknowledges that it
understands its obligations to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and the rules thereunder relating to stock
manipulation, particularly Regulation M thereunder (or any successor rules or
regulations), in connection with any offering of Registrable Securities pursuant
to the Shelf Registration Agreement. The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of
such provisions.
Pursuant to the Registration Rights Agreement, the Company has
agreed under certain circumstances to indemnify the Selling Securityholder
against certain liabilities.
In the event the undersigned transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company other than pursuant to the Shelf
Registration Statement, the undersigned agrees to notify the transferee(s) at
the time of the transfer of its rights and obligations under this Selling
Securityholder Questionnaire and the Registration Rights Agreement.
In accordance with the undersigned’s obligation under the
Registration Rights Agreement to provide such information as may be required by
law or by the staff of the Commission for inclusion in the Shelf Registration
Statement, the undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at anytime while the Shelf Registration Statement
remains effective. All notices hereunder and pursuant to the Registration Rights
Agreement shall be made in writing, by hand-delivery, first-class mail, or air
courier guaranteeing overnight delivery to the address set forth below.
--------------------------------------------------------------------------------
By signing below, the undersigned consents to the disclosure of
the information contained herein in its answers to Items (1) through (9) above
and the inclusion of such information in the Shelf Registration Statement and
the related prospectus. The undersigned understands that such information will
be relied upon by the Company in connection with the preparation or amendment of
the Shelf Registration Statement and the related prospectus.
Once this Selling Securityholder Questionnaire is executed by the
undersigned and received by the Company, the terms of this Selling
Securityholder Questionnaire, and the representations, warranties and agreements
contained herein, shall be binding on, shall inure to the benefit of and shall
be enforceable by the respective successors, heirs, personal representatives,
and assigns of the Company and the undersigned with respect to the Registrable
Securities beneficially owned by the undersigned and listed in Item (3) above.
This Selling Securityholder Questionnaire shall be governed in all respects by
the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Selling Securityholder Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Dated:
Beneficial Owner
By: Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED SELLING
SECURITYHOLDER QUESTIONNAIRE TO THE COMPANY AT:
CIPHERGEN BIOSYSTEMS, INC.
6611 Dumbarton Circle
Fremont, California 94555
Tel: (510) 505-2100
Fax: (510) 505-2107
Attn: Chief Executive Officer
|
Exhibit 10.1
THE MILLS CORPORATION
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into on this 3rd day
of April 2006 (the “Effective Date”), by and between THE MILLS CORPORATION, a
Delaware corporation (the “Company”), and F. SCOTT BALL (“Executive”).
Recitals
R-1 The Company is engaged directly and indirectly in the business of
developing, constructing, leasing, financing and managing super regional
value-oriented retail and entertainment-based shopping centers, malls, strip
centers and other commercial properties.
R-2 Executive currently is employed by the Company in the capacity of Executive
Vice President, Asset Management and the Company wishes to continue to employ
Executive, and Executive wishes to accept continued employment with the Company,
on the terms and conditions set forth herein.
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Executive, intending to be
legally and equitably bound, hereby agree as follows:
1. Employment; Employment Period.
1.1 Employment. The Company hereby employs Executive, and Executive hereby
accepts employment with the Company, all upon the terms and conditions set forth
in this Agreement.
1.2 Employment Period. The term of Executive’s employment under this Agreement
shall be the period commencing on the Effective Date and ending on December 31,
2007 (the “Employment Period”); provided that, commencing on January 1, 2008,
and on each January 1 thereafter, the Employment Period shall automatically be
extended for one (1) year unless either party has given written notice of
non-renewal to the other party at least ninety (90) days prior to the then
scheduled expiration of the Employment Period, and each such extension shall,
ipso facto, become part of (and incorporated into) the Employment Period for all
purposes of this Agreement; and provided, further, that Executive’s employment
hereunder may be terminated prior to the end of the Employment Period as
provided in Section 6 hereof. Notwithstanding anything in this Agreement to the
contrary, upon a Change in Control (as defined in Section 7.1) of the Company,
the term of Executive’s employment under this Agreement shall be the longer of
the period commencing on the effective date of such Change in Control and ending
on the second anniversary of the effective date of the Change in Control and the
term that would otherwise apply pursuant to this Section 1.2, subject in any
case to earlier termination of Executive’s employment pursuant to Section 6
hereof.
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2. Duties. During the Employment Period, Executive shall be employed by the
Company as an executive. In such capacity, Executive shall perform such duties
and responsibilities, and shall have such title or titles, as are reasonably
assigned to Executive by the Company in its sole discretion during the
Employment Period.
3. Performance of Duties/Standard of Care. During the Employment Period,
Executive shall act at all times in the best interests of the Company and
diligently discharge his duties and responsibilities to the Company under this
Agreement. Without limiting the generality of the foregoing, Executive shall at
all times abide strictly by the policies of the Company including, without
limitation, The Mills Corporation Code of Business Conduct and Ethics as it may
be amended from time to time in the Company’s sole discretion (the “Code of
Conduct”). Such duties shall be rendered at the principal office of the Company
and Executive shall travel to other places as the interests, needs, business or
opportunity of the Company shall require. During the Employment Period,
Executive agrees to devote his full business time, attention and energies to the
business of the Company and its subsidiaries and not to engage in any other
business activity, whether or not such business activity is pursued for gain,
profit or other economic or financial advantage, except that Executive may serve
in charitable or philanthropic capacities or positions and serve as a director
of other companies which do not directly or indirectly compete with the Company
with the prior consent of the Chief Executive Officer or President of the
Company, in each case so long as such activities comply with the Code of
Conduct, are not injurious to the Company and do not interfere with the
performance of Executive’s duties hereunder. In connection with the performance
of his duties hereunder, Executive shall at all times seek to exercise the
highest degree of loyalty to the Company and shall comply with the highest
standards of conduct in the performance of his duties. Subject to compliance
with the Code of Conduct and the provisions of this Agreement, this Section 3
shall not be construed to prevent or prohibit Executive from managing his
personal assets or investments as long as such activities do not interfere with
the performance of Executive’s duties hereunder.
4. Compensation and Expenses.
4.1 Base Salary. The Company shall pay to Executive, during the Employment
Period, an annual base salary (the “Base Salary”) in accordance with the
Company’s normal payroll practice applicable to executives of the Company in the
same or similar positions to that of Executive. Initially, the Base Salary shall
be calculated at the rate of $365,000. The Base Salary shall be reviewed
effective as of April 1, 2006 and at least annually thereafter for such
adjustments as may be determined by the Executive Compensation Committee of the
Board of Directors (the “Executive Compensation Committee”) to be appropriate;
provided, however, that the Base Salary shall not be decreased below the amount
set forth in this Section 4.1 except as part of a salary reduction program
approved by the Board of Directors that is generally applicable to executives of
the Company in the same or similar positions to that of Executive.
4.2 Annual Bonus Program.
(a) During each calendar year of the Employment Period, Executive will be
eligible to participate in the Company’s annual short-term performance incentive
plan applicable to executives in the same or similar positions to that of
Executive, as such plan may exist from time to time (the “PIP”). The amount of
Executive’s target annual bonus under the PIP for each calendar year during the
Employment Period (each a “Target Annual Bonus”) shall be determined by the
Executive Compensation Committee in its discretion. The amount of the
-2-
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actual annual bonus, if any, awarded to Executive under the PIP with respect to
any calendar year during the Employment Period (each an “Annual Bonus Award”)
shall be determined in accordance with the terms of the PIP as administered by
the Executive Compensation Committee; provided, however, that for calendar years
2005 and 2006, Executive’s Annual Bonus Award shall be at least 40% of
Executive’s Base Salary as of April 1, 2005 and April 1, 2006, respectively. All
decisions regarding the criteria to be used to determine awards under the PIP
(which may consist of both corporate and individual performance factors and
metrics), the amount, if any, to be awarded to Executive under the PIP with
respect to any calendar year during the Employment Period and interpretations of
the terms of the PIP shall be made solely and exclusively by the Executive
Compensation Committee in its discretion. The Company reserves the right to
change, alter, or terminate the PIP at any time in its sole discretion;
provided, that no such change, alteration or termination shall adversely affect
Executive’s rights under this Agreement, or with respect to any Annual Bonus
Award made prior to the date of such change, alteration or termination, without
Executive’s prior written consent.
(b) Each Annual Bonus Award shall be paid to Executive in cash when the Company
customarily pays annual bonus awards to other executives in the same or similar
positions to that of Executive under the PIP; provided however that Executive’s
Annual Bonus Award for 2005 shall be paid on or about April 1, 2006 and his
Annual Bonus Award for 2006 shall be paid on or about April 1, 2007; and
provided further that payment shall in all event be made not later than the end
of calendar year immediately following the annual performance period to which
the bonus relates.
4.3 Long Term Incentive Plan. Executive will be eligible to participate in the
Company’s long term incentive plan applicable to executives in the same or
similar positions to that of Executive, as such plan may exist from time to time
(the “LTIP”). Executive’s target LTIP award for any LTIP performance period
during the Employment Period (each a “Target LTIP Award”) shall be determined by
the Executive Compensation Committee in its discretion. The amount of the actual
LTIP award, if any, made to Executive with respect to any LTIP performance
period during the Employment Period (each an “LTIP Award”) shall be determined
in accordance with the terms of the LTIP as administered by the Executive
Compensation Committee. All decisions regarding the criteria to be used to
determine LTIP Awards (which may consist of both corporate and individual
performance factors and metrics), the actual amount of the LTIP Award, if any,
with respect to any LTIP performance period during the Employment Period, the
form of payment of such awards (which may be in cash, shares of Company Stock or
a combination thereof, or any other medium chosen by the Executive Compensation
Committee), and interpretations of the terms of the LTIP shall be made solely
and exclusively by the Executive Compensation Committee in its discretion. The
Company reserves the right to change, alter or terminate the LTIP at any time in
its sole discretion; provided, that no such change, alteration or termination
shall adversely affect Executive’s rights under this Agreement or under any LTIP
Award made prior to the date of such change, alteration or termination. Payment
shall be made as soon as practicable after completion of the performance period;
provided that it shall in all events be made not later than the end of the
calendar year immediately following the completion of such performance period.
4.4 Expense Reimbursement Policy. During the Employment Period, the Company
shall reimburse Executive for all ordinary and reasonable business expenses paid
by Executive in connection with the performance of his duties under this
Agreement in accordance with and subject to the Company’s expense reimbursement
policies then in effect for executives in the same or similar positions to that
of Executive.
-3-
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4.5 Special One-Time Bonus. On or about August 15, 2006, the Company shall pay
to Executive a one-time bonus equal to $400,000.
5. Personnel Policies and Benefits.
5.1 Benefits Generally. During the Employment Period, Executive shall be
entitled to participate in all benefit programs, policies or plans adopted by
the Company and applicable to executives in the same or similar positions to
that of Executive on the same basis as such other executives, as such programs,
policies or plans may be interpreted, adopted, revised or terminated from time
to time by the Company in its sole discretion. All matters of eligibility for
coverage or benefits under any such benefit programs, policies or plans shall be
determined in accordance with the provisions of the applicable program, policy
or plan. The Company reserves the right to change, alter, interpret or terminate
any such programs, policies or plans at any time in its sole discretion.
5.2 Personnel Policies. Except as otherwise provided herein, Executive’s
employment shall be subject to the personnel policies that apply generally to
the Company’s executives in the same or similar positions to that of Executive,
as the same may be interpreted, adopted, revised or terminated from time to time
during the Employment Period by the Company in its sole discretion.
6. Termination.
6.1 Payment of Accrued But Unpaid Amounts Upon Termination. Notwithstanding any
provision in this Agreement to the contrary, in the event of termination of
Executive’s employment for any reason during the Employment Period, Executive or
his beneficiaries or estate (as provided in Section 10.2) shall be entitled to
receive, in addition to any other payments or benefits required to be made or
provided under the remaining provisions of this Article 6, within fourteen
(14) days after the Effective Date of Termination (as defined below):
(a) any accrued but unpaid Base Salary for services rendered by Executive to the
Company prior to the Effective Date of Termination;
(b) any earned but unpaid Annual Bonus Awards for calendar years that have ended
prior to the Effective Date of Termination;
(c) reimbursement of any accrued but unpaid expenses required to be reimbursed
under this Agreement that were incurred by Executive prior to the Effective Date
of Termination;
(d) payment for any accrued but unpaid vacation time to the extent consistent
with Company policy in effect as of the Effective Date of Termination; and
(e) any earned but unpaid LTIP Awards.
Except as specifically provided in this Agreement and under the terms of any
incentive compensation and benefit plans in effect and applicable to Executive
on the Effective Date of
-4-
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Termination, Executive shall have no right to receive any other compensation, or
to participate in any other plan, arrangement or benefit of the Company after
such termination and all other obligations of the Company and rights of
Executive under this Agreement shall terminate effective as of the Effective
Date of Termination.
6.2 Termination Due to Death. Executive’s employment with the Company shall
automatically terminate upon Executive’s death. From and after the date of
death, the Company shall have no further obligation to pay any Base Salary to
Executive. In the event of such termination:
(a) the entitlement of any beneficiary of Executive to benefits under any
benefit program, policy or plan described in Section 5.1 hereof shall be
determined in accordance with the provisions of such program, policy or plan;
(b) vesting and all other rights with respect to stock options and any other
equity-based compensation awards not covered by Section 6.1 above (other than
LTIP Awards) will be treated in accordance with the equity incentive plan under
which the relevant grant was made and any applicable grant documents; provided,
however, that Executive shall be considered for such purpose to have been
employed at the end of the calendar year in which the termination occurred; and
(c) any LTIP Awards that are not covered by Section 6.1 above will be treated in
accordance with the LTIP as then in effect.
6.3 Termination by the Company Due to Disability.
(a) If Executive becomes “Disabled” (as defined below) during the Employment
Period, the Company shall have the right to terminate Executive’s employment by
giving written notice of such termination to Executive, which notice shall
specify the Effective Date of Termination and which Effective Date of
Termination shall be no less than thirty (30) calendar days after the date of
such notice. From and after the Effective Date of Termination, the Company shall
have no further obligation to pay any Base Salary to Executive. In the event of
such termination:
(i) the entitlement of Executive to benefits under any benefit program, policy
or plan described in Section 5.1 hereof shall be determined in accordance with
the provisions of such program, policy or plan;
(ii) vesting and all other rights with respect to stock options and any other
equity-based compensation awards not covered by Section 6.1 above (other than
LTIP Awards) will be treated in accordance with the equity incentive plan under
which the relevant grant was made and any applicable grant documents; provided,
however that Executive shall be considered for such purpose to have been
employed at the end of the calendar year in which the termination occurred; and
(iii) any LTIP Awards that are not covered by Section 6.1 above will be treated
in accordance with the LTIP as then in effect.
(b) The term “Disabled” or “Disability” shall mean that (i) Executive has been
unable, notwithstanding such reasonable accommodations as may be required
-5-
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by applicable law, to engage in the essential functions of his position with the
Company due to a disability, as determined by the Company upon receipt of and in
reliance on independent competent medical advice, for more than one hundred
eighty (180) total calendar days during any period of twelve (12) consecutive
months, or (ii) the Company has reasonably determined, upon receipt of and in
reliance on independent competent medical advice, that Executive is unlikely to
be able, notwithstanding such reasonable accommodations as may be required by
applicable law, to engage in the essential functions of his position with the
Company due to a disability for more than one hundred eighty (180) total
calendar days during any period of twelve (12) consecutive months. With respect
to Executive, the foregoing definition of Disability shall supersede the
definition of Disability set forth in, and shall be used for purposes of, the
Company’s 2004 Stock Incentive Plan, as it has been or may be amended from time
to time (the “2004 Plan”), the Operating Guidelines for the Administration of
Executive Long-Term Incentive Awards (“LTIP Guidelines”) and the Operating
Guidelines for the Administration of Annual Incentive Awards (“PIP Guidelines”)
and any awards or grants under the 2004 Plan, the LTIP Guidelines and the PIP
Guidelines.
6.4 Voluntary Termination by Executive. Executive may terminate his employment
at any time during the Employment Period without Good Reason (as defined in
Section 6.7) by giving the Company written notice of Executive’s intent to
terminate not less than ninety (90) calendar days before the effective date of
such termination; provided, however, that the required notice period shall be
reduced to forty-five (45) days in the event Executive’s voluntary termination
is not for the purpose of taking alternative employment. Such written notice of
termination shall state the Effective Date of Termination, which shall not be
earlier than the last day of the applicable notice period set forth in the
preceding sentence. From and after the Effective Date of Termination, the
Company shall have no further obligation to pay any Base Salary to Executive. In
the event of such termination:
(a) the entitlement of Executive to benefits under any benefit program, policy
or plan described in Section 5.1 shall be determined in accordance with the
provisions of such program, policy or plan;
(b) all unvested equity or equity-based compensation awards shall be forfeited
by Executive; and
(c) any LTIP Awards that are not covered by Section 6.1 or Section 6.4(b) above
will be treated in accordance with the LTIP as then in effect.
6.5 Termination by the Company without Cause.
(a) The Company may terminate Executive’s employment at any time during the
Employment Period for reasons other than death, Disability or Cause by giving
written notice to Executive, which notice shall specify the Effective Date of
Termination and which Effective Date of Termination shall be no less than thirty
(30) calendar days after the date of such notice. From and after the Effective
Date of Termination, the Company shall have no further obligation to pay any
Base Salary to Executive. In the event of such termination, except as provided
in Section 6.8 with respect to termination within twenty-four (24) months after
a Change in Control, Executive shall be entitled to the payments and benefits
described in Section 6.5(b), contingent upon executing and returning to the
Company (and not revoking) a release of claims in substantially the form
attached hereto as Exhibit A within the time permitted by the Company (which
permitted time period shall not be less than twenty-one (21) days).
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(b) Within the later of (x) fifteen (15) days following the Effective Date of
Termination and (y) eight (8) days after Executive provides an executed release
of claims which he is obligated to deliver as described above, and as long as
such release of claims is not revoked by Executive during the seven (7) day
period following its execution by Executive), the Company shall pay to Executive
a lump sum cash payment equal to (i) two (2) times the sum of (A) Executive’s
Base Salary in effect as of the Effective Date of Termination and
(B) Executive’s Target Annual Bonus for the year in which the termination occurs
and (ii) a pro rata cash payment equal to Executive’s Target Annual Bonus for
the year of termination based on service from commencement of the applicable
bonus year through the Effective Date of Termination. In addition, vesting and
all other rights with respect to stock options and other equity-based
compensation awards not covered under Section 6.1 above (other than LTIP Awards)
will be treated in accordance with the equity incentive plan under which the
relevant grant was made and any applicable grant documents; provided, however,
that Executive shall be considered for such purpose to have been employed at the
end of the calendar year in which the termination occurred. Any LTIP Awards not
covered by Section 6.1 above will be treated in accordance with the LTIP as then
in effect. The entitlement of Executive to benefits under any benefit program,
policy or plan described in Section 5.1 hereof shall be determined in accordance
with the provisions of such program, policy or plan; provided, however, that,
subject to the last sentence of this Section 6.5, the Company shall provide, at
its expense, continued participation in any medical insurance and dental
insurance plans in which Executive or his dependents participated as of the
Effective Date of Termination for twenty-four (24) months following the
Effective Date of Termination at the same coverage level as in effect as of the
Effective Date of Termination, but subject to such modifications as shall be
established for executives of the Company in the same or similar positions to
that of Executive. As a condition to receiving such continued coverage,
Executive may be required to elect continuation coverage under “COBRA” under the
terms of the applicable plans, in which case the Company shall reimburse
Executive for the cost of such continued coverage at the same coverage level as
in effect as of the Effective Date of Termination subject to such modifications
as shall be established for executives of the Company in the same or similar
positions to that of Executive.
6.6 Termination by the Company for Cause.
(a) The Company may terminate Executive’s employment at any time during the
Employment Period for “Cause,” which termination shall be effective immediately
upon written notice to Executive.
(b) For purposes of this Agreement and notwithstanding any other provision of
this Agreement, “Cause” shall mean any of the following: (i) Executive commits
an act of fraud or embezzlement with respect to the Company or any of its
affiliates; (ii) Executive is convicted of, or enters a plea of guilty or nolo
contendere to, any felony; (iii) Executive commits any act of dishonesty, breach
of fiduciary duty or misconduct (whether in connection with Executive’s
responsibilities as an employee of the Company or otherwise) that, in the
Company’s reasonable judgment, either (A) materially impairs the Company’s
business, goodwill or reputation or (B) materially compromises Executive’s
ability to perform Executive’s job duties or represent the Company with the
public; (iv) Executive fails to substantially perform any of his duties
hereunder (other than any such failure resulting from a material breach of this
Agreement by the Company or the Disability of Executive) which failure continues
for more than thirty (30) days after written notice by the Company; (v) such
carelessness, lack of judgment, ineffectiveness or inefficiency in performance
by Executive of his duties that Executive is determined by the
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Executive Compensation Committee to be unfit to continue in service; provided
that Executive shall be given notice and an opportunity to cure unless the
Executive Compensation Committee determines, in its sole discretion, not to
provide Executive with notice and an opportunity to cure given the severity or
frequency of the carelessness, lack of judgment, ineffectiveness or
inefficiency; or (vi) Executive materially violates any provision of this
Agreement. With respect to Executive, the foregoing definition of Cause shall
supersede the definition of Cause set forth in, and shall be used for purposes
of, the 2004 Plan, the LTIP Guidelines and the PIP Guidelines and any awards or
grants under the 2004 Plan, the LTIP Guidelines and the PIP Guidelines.
(c) From and after the Effective Date of Termination, the Company shall have no
further obligation to pay any Base Salary to Executive. In the event of such
termination:
(i) the entitlement of Executive to benefits under any benefit program, policy
or plan described in Section 5.1 shall be determined in accordance with the
provisions of such program, policy or plan;
(ii) any unvested equity or equity-based compensation awards shall be forfeited
by Executive; and
(iii) any LTIP Awards that are not covered by Section 6.1 or Section 6.6(c)(ii)
above will be treated in accordance with the LTIP as then in effect.
6.7 Termination by Executive for Good Reason.
(a) Executive may terminate his employment hereunder at any time during the
Employment Period for “Good Reason” (as hereinafter defined) by providing the
Company with written notice of termination within ninety (90) days after
Executive knows, or should have known, that an event constituting “Good Reason”
has occurred. Such notice of termination shall state the Effective Date of
Termination, which effective date shall not be less than thirty (30) days nor
more than ninety (90) days after the date of such notice, except in the case of
any event described in subparagraph 6.7(b)(ii) below, in which case such
termination shall be effective immediately upon delivery of such notice. If
Executive terminates his employment under this Section 6.7 for Good Reason (a
“Termination for Good Reason”), and a Change in Control has not occurred within
the twenty-four (24) month period preceding the Effective Date of Termination,
Executive shall receive the same payments and benefits Executive would be
entitled to receive under Section 6.5 following a termination of employment by
the Company without Cause, subject to providing a release of claims as described
therein. If Executive terminates his employment under this Section 6.7 for Good
Reason and a Change in Control has occurred within the twenty-four (24) month
period preceding the Effective Date of Termination, Executive shall receive the
payments and benefits described in Section 6.8.
(b) “Good Reason” shall mean the occurrence of any one or more of the following
events without the express written consent of Executive; provided, however, that
any of the events described in subparagraph 6.7(b)(ii) below shall only
constitute Good Reason if the Company shall have failed to correct or remedy
such event within thirty (30) days following receipt of written notice from
Executive describing in reasonable detail such event and demanding correction or
remedy; and provided further that any of the events described in subparagraphs
(b)(vii) and (b)(viii) below shall only be treated as a Good Reason event if
such event occurs within twenty-four (24) months following a Change in Control:
(i) the relocation of Executive’s principal office to a location that is more
than fifty (50) miles from the Company’s current or future Washington, D.C. area
headquarters;
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(ii) a failure by the Company to pay or provide for any earned Base Salary,
earned Annual Bonus, earned LTIP Award or any other material earned compensation
or benefits required to be paid or provided for under this Agreement, in each
case when due;
(iii) a reduction by the Company in Executive’s Base Salary except as part of a
salary reduction program approved by the Board of Directors that is generally
applicable to executives of the Company in the same or similar positions to that
of Executive;
(iv) except as part of a benefit reduction program approved by the Board of
Directors that is generally applicable to executives of the Company in the same
or similar positions to that of Executive, a material reduction in the terms of
Executive’s eligibility for benefits under any of the Company’s incentive
compensation plans or health or welfare benefit plans from the terms that were
in effect on the Effective Date or a material modification to, or termination
of, any such plans as such plans were in effect on the Effective Date (the
“Existing Plans”) without replacement of such modified or terminated plans with
one or more plans offering to Executive eligibility for benefits at least as
favorable to Executive as those offered by the Existing Plans;
(v) a material diminution in Executive’s responsibilities or position not
related to Executive’s individual performance or as a result of any
organizational change or restructuring approved by the Board of Directors that
involves two or more employees;
(vi) the failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and perform the obligations of the Company
hereunder, as contemplated by Section 10.1;
(vii) the assignment to Executive of duties materially inconsistent with
Executive’s authorities, duties, responsibilities and status (including offices,
titles and reporting requirements) as an officer of the Company (or its
successor), or a material reduction or alteration in the nature or status of
Executive’s authority, duties or responsibilities from those in effect
immediately prior to the effective date of the Change in Control; or
(viii) a reduction by the Company (or its successor) in Executive’s Base Salary
from the Base Salary that was in effect with respect to Executive immediately
prior to the effective date of the Change in Control or a material reduction in
the terms of Executive’s eligibility for benefits under any of the Company’s
incentive compensation plans or health or welfare benefit plans from the terms
that were in effect immediately prior to the effective date of the Change in
Control or a material modification to, or termination of, any such plans as such
plans were in effect immediately prior to the effective date of the Change in
Control (the “Pre-Change in Control Existing Plans”) without replacement of such
modified or terminated plans with one or more plans offering to Executive
eligibility for benefits at least as favorable to Executive as those offered by
the Pre-Change in Control Existing Plans.
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Executive shall also be entitled to voluntarily terminate his employment with
the Company for any reason by giving not less than five (5) days’ advance
written notice to the Company of his intention to terminate his employment
within the thirty (30)-day period commencing on the first anniversary of the
effective date of a Change in Control of the Company and any such termination
shall be considered a termination for Good Reason after a Change in Control for
purposes of this Agreement. The continued employment of Executive after an event
constituting Good Reason shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason, until the passage of
ninety (90) days after Executive knew or should have known that an event
constituting Good Reason has occurred without delivery by Executive of a written
notice of termination for Good Reason, as provided above. With respect to
Executive, the foregoing definition of Good Reason shall supersede the
definition of Good Reason set forth in, and shall be used for purposes of, the
2004 Plan, the LTIP Guidelines and the PIP Guidelines and any awards or grants
under the 2004 Plan, the LTIP Guidelines and the PIP Guidelines.
6.8 Termination after a Change in Control.
(a) If during the Employment Period (i) the Company terminates Executive’s
employment for reasons other than death, Disability or Cause or (ii) Executive
timely terminates his employment for Good Reason, and either (i) or (ii) occurs
within twenty-four (24) months after a Change in Control, then, from and after
the Effective Date of Termination, the Company shall have no further obligation
to pay any Base Salary to Executive and, in lieu of any severance amounts
payable under Section 6.5 or 6.7, whichever would otherwise apply, Executive
shall be entitled to the payments and benefits described in paragraph (b) below,
contingent upon executing and returning to the Company (and not revoking) a
release of claims in substantially the form attached hereto as Exhibit A within
the time permitted by the Company (which permitted time period shall not be less
than twenty-one (21) days).
(b) Within the later of (x) fifteen (15) days following the Effective Date of
Termination and (y) eight (8) days after Executive provides an executed release
of claims as described above, as long as such release of claims is not revoked
by Executive during the seven (7) day period following its execution by
Executive), the Company shall pay to Executive a lump sum cash payment equal to
(i) two (2) times the sum of (A) Executive’s Base Salary in effect as of the
Effective Date of Termination and (B) Executive’s Target Annual Bonus for the
year in which the termination occurs and (ii) a pro rata cash payment equal to
Executive’s Target Annual Bonus for the year of termination based on service
from the commencement of the applicable bonus year through the Effective Date of
Termination. In addition, vesting and all other rights with respect to stock
options and other equity-based compensation awards not covered by Section 6.1
above (other than LTIP Awards) will be treated in accordance with the equity
incentive plan under which the relevant grant was made and any applicable grant
agreements; provided, however, that Executive shall be considered for such
purpose to have been employed at the end of the calendar year in which the
termination occurred. Any LTIP Awards not covered by Section 6.1 hereof will be
treated in accordance with the LTIP as then in effect; provided that if the
Company terminates Executive’s employment for reasons other than death,
Disability or Cause or Executive timely terminates his employment for Good
Reason, and such termination occurs during the Employment Period and within
twenty-four (24) months after a
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Change in Control, notwithstanding Section VI.D. of the LTIP Guidelines
currently in effect (or any comparable provisions in any subsequently adopted
LTIP Guidelines), Executive will be entitled to payment of the full amount
(without pro ration) of any unvested LTIP Awards that have been made to
Executive for any Performance Period that has commenced, payable in cash and/or
equity, as previously determined by the Executive Compensation Committee with
respect to the applicable Performance Period, calculated in accordance with the
LTIP Guidelines; provided that for purposes of calculating the LTIP Award for
any Performance Period that has commenced (1) for any completed calendar year in
which actual performance by the Company and/or Executive against corporate
Performance Targets (as defined in the LTIP Guidelines) or individual
performance goals, as applicable, has been measured, and such measurement has
been ratified by the Company’s Executive Compensation Committee prior to the
effective date of the Change in Control, such measurement shall be used and
(2) for any calendar year in which actual performance by the Company and/or
Executive against corporate Performance Targets or individual performance goals
has not yet been so measured and ratified by the Executive Compensation
Committee prior to the effective date of the Change in Control, such corporate
Performance Targets and individual performance goals shall be either (x) deemed
100% satisfied or (y) measured against actual performance by the Company and/or
the Employee against corporate Performance Targets or individual performance
goals, as applicable, whichever is greater, which LTIP Awards shall be payable
in accordance with the terms of the original grant agreement, if any, and
otherwise in accordance with the LTIP Guidelines in effect for such Performance
Period. The entitlement of Executive to benefits under any benefit program,
policy or plan described in Section 5.1 shall be determined in accordance with
the provisions of such program, policy or plan; provided, however, that, subject
to the last sentence of Section 6.5, the Company shall provide, at its expense,
continued participation in any medical insurance and dental insurance plans in
which Executive or his dependents participated as of the Effective Date of
Termination for twenty-four (24) months following the Effective Date of
Termination, as described in Section 6.5.
6.9 Effective Date of Termination. For purposes of this Agreement, the Effective
Date of Termination shall mean: in the event of (a) Executive’s death, his date
of death; (b) Executive’s Disability, the date specified in the written notice
of termination provided for in Section 6.3(a); (c) termination of Executive’s
employment without Cause, the date specified in the Company’s notice of
termination provided for in Section 6.5; (d) termination of Executive’s
employment for Cause, the date on which written notice of termination is
delivered to Executive as provided in Section 6.6(a); (e) termination of
Executive’s employment for Good Reason, the date specified by Executive in his
written notice of termination as provided for in Section 6.7(a); (f) voluntary
termination by Executive pursuant to Section 6.4, the date specified by
Executive in his written notice of termination provided for in Section 6.4 and
(g) either party giving written notice of non-renewal in accordance with
Section 1.2, the date of expiration of the Employment Period.
6.10 Termination by Mutual Consent; Expiration of Term. If at any time during
the Employment Period, the parties by mutual consent decide to terminate
Executive’s employment or this Agreement on a basis other than that set forth in
this Agreement, they shall do so only by separate written agreement setting
forth the terms and conditions of such termination.
6.11 Cooperation with the Company after Termination of Employment. Following
termination of Executive’s employment for any reason, Executive shall cooperate
with the Company in all matters relating to any litigation in which the Company
is or becomes
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involved or any investigation of the Company or its affairs by a governmental
agency or a Committee of the Company’s Board of Directors, and in the winding up
of his pending work on behalf of the Company, including, but not limited to, the
orderly transfer of any such pending work to other employees of the Company as
may be designated by the Company. The Company agrees to reimburse Executive for
any time and reasonable out-of-pocket expenses he incurs in performing any work
on behalf of the Company following the termination of his employment.
6.12 Company Right to Recover Severance Payments. Executive hereby agrees that,
if it is ever determined by the Board of Directors, as recommended by the Audit
Committee of the Company, that actions by the Executive have constituted
wrongdoing that contributed to any material misstatement or omission from any
report or statement filed by the Company with the U.S. Securities and Exchange
Commission, gross misconduct, breach of fiduciary duty to the Company, or fraud,
then the Company, or its successor, as appropriate, may recover all of any award
or payment made to Executive, less the amount of any net tax owed by the
Executive with respect to such award or payment over the tax benefit to the
Executive from the repayment or return of the award or payment, pursuant to
Section 6.5 (“Termination by the Company without Cause”), 6.7 (“Termination by
Executive for Good Reason”) or 6.8 (“Termination After a Change in Control”),
and Executive agrees to repay and return such awards and amounts to the Company
within 30 calendar days of receiving notice from the Company that the Board of
Directors has made the determination referenced above and accordingly the
Company is demanding repayment pursuant to this Section 6.12. The Company or its
successor may, in its sole discretion, affect any such recovery by (i) obtaining
repayment directly from Executive; (ii) setting off the amount owed to it
against any amount or award that would otherwise be payable by the Company to
Executive; or (iii) any combination of (i) and (ii) above.
6.13 Compliance with Code Section 409A. The Company and Executive agree to
execute any reasonable amendments to this Agreement as may be necessary to
ensure compliance with Section 409A of the Code.
7. Change in Control.
7.1 Definition of “Change in Control.” A “Change in Control” of the Company
shall be deemed to have occurred as of the first day on which any one or more of
the following conditions shall have been satisfied:
(a) The acquisition of beneficial ownership, as such term is defined in the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), in a single
transaction or series of related transactions (by tender offer or otherwise), of
more than fifty percent (50%) of the voting securities of the Company by a
single person or entity (other than the Company) or “group” within the meaning
of Section 13(d)(3) of the Exchange Act, whether through the acquisition of
previously issued and outstanding voting securities, or of voting securities
that have not been previously issued, or any combination thereof; or
(b) There shall be consummated any consolidation, merger, business combination
or reorganization involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to such
consummation own, as a group, immediately after such consummation, voting
securities of the Company (or, if the Company does not survive such transaction,
voting securities of the corporation surviving such transaction) having less
than fifty percent (50%) of the total voting power in an election of directors
of the Company (or such other surviving corporation); or
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(c) The individuals who constituted the Company’s Board of Directors as of the
Effective Date (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the directors of the Company; provided, however, that
individuals whose election, or whose nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds (2/3) of the persons
then comprising the Incumbent Board shall be considered, for purposes of this
Agreement, members of the Incumbent Board; and provided, further, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened “election contest” (as described in Rule 14a-11 promulgated under the
Exchange Act) (an “Election Contest”) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person or entity other than the
Company’s Board of Directors (a “Proxy Contest”), including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(d) There shall be consummated any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or substantially all
of the assets of the Company (on a consolidated basis) to a party which is not a
direct or indirect wholly-owned subsidiary of the Company, including, without
limitation, any sale, lease, exchange or other transfer of all or substantially
all of the assets of the Company (on a consolidated basis) that includes the
assets of The Mills Limited Partnership, a Delaware limited partnership (the
“Operating Partnership”); or
(e) The Company (or its successor) no longer serves as the sole general partner
of the Operating Partnership other than as a result of (i) the merger of the
Operating Partnership with the Company or a subsidiary of the Company, (ii) the
redemption of all limited partnership interests in the Operating Partnership by
the Operating Partnership or the purchase of all such limited partnership
interests by the Company, or (iii) the liquidation, dissolution or winding up of
the Operating Partnership.
Notwithstanding anything in this Agreement to the contrary, a Change in Control
shall be deemed not to have occurred with respect to Executive (a) if Executive
is involved as an officer, director, employee, agent, finder, consultant,
partner, investor, creditor or principal, or in any other individual or
representative capacity whatsoever, with an entity that acquires an interest in
the Company in a transaction that otherwise would constitute a Change in Control
and, pursuant to a written or unwritten agreement or understanding with such
entity entered into prior to or in connection with such transaction (a “Change
in Control Agreement”), Executive receives or has the right to receive a
material economic benefit as a result of or in connection with such transaction
(other than compensation granted or awarded to Executive by the Company in the
ordinary course of business consistent with past practice pursuant to this
Agreement or solely as a result of his then-current ownership interest in the
Company), or (b) if any of the foregoing transactions occurs with any employee
benefit plan of the Company or with any trustee or fiduciary or committee of any
employee benefit plan of the Company, any affiliate of the Company, any direct
or indirect wholly-owned subsidiary of the Company, or any entity owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company prior to the event
that would otherwise constitute a Change in Control. For purposes of this
Section 7.1, a “material economic benefit” shall mean any compensation, payment,
beneficial ownership interest in the Company or another entity that is party to
any of the foregoing transactions, or other economic benefit (other than
compensation granted or awarded to Executive by the Company in the ordinary
course of business consistent with past practice pursuant to this Agreement or
solely as a result of his then-current ownership
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interest in the Company) that has a value equal to or greater than forty percent
(40%) of Executive’s Base Salary in effect as of the effective date of the
Change in Control; provided, however, that if this Agreement is terminated as a
result of or in connection with such transaction, the amount of compensation
paid or payable pursuant to this Agreement shall be deducted from any
compensation paid or payable pursuant to a Change in Control Agreement in
calculating whether Executive receives or has the right to receive a material
economic benefit as a result of or in connection with such transaction. With
respect to Executive, the foregoing definition of Change in Control shall
supersede the definition of Change in Control set forth in, and shall be used
for purposes of, the 2004 Plan, the LTIP Guidelines and the PIP Guidelines and
any awards or grants under the 2004 Plan, the LTIP Guidelines and the PIP
Guidelines.
8. Confidentiality and Non-competition.
8.1 Post-Employment Obligations.
(a) Unless Executive obtains the prior written approval of the Company,
Executive shall not, at any time during the Employment Period or at any time
during an applicable Non-Compete Period (as defined below), directly or
indirectly, engage either individually or as an officer, director, employee,
agent, consultant, partner, investor (excluding passive investments in voting
securities of a publicly traded entity aggregating less than five percent
(5%) of any such entity’s total outstanding voting securities), creditor,
principal or otherwise, (i) in the predevelopment, development, redevelopment,
operation, management or leasing of any type of retail or entertainment-based
shopping centers, malls, strip centers or other similar commercial properties,
(ii) in the provision of related services or (iii) in any other businesses then
carried on by the Company in which Executive was involved during the Employment
Period, in each such instance noted above, in any way that would compete with
the business activities then carried on by the Company; provided, however, that
retail or entertainment-based shopping centers, malls, strip centers or other
commercial properties with an aggregate square footage of less than 250,000
square feet shall be deemed not to compete with the business activities of the
Company for purposes of this Section 8.1(a). For purposes of this
Section 8.1(a), the term “Non-Compete Period” shall mean (Y) in the event that
Executive’s employment with the Company is terminated by the Company without
Cause or by Executive with Good Reason and a Change in Control has not occurred
within the twenty-four (24) month period preceding the Effective Date of
Termination, the period beginning on the Effective Date of Termination and
ending on the first anniversary of the Effective Date of Termination, and (Z) in
the event that Executive’s employment with the Company is terminated by the
Executive voluntarily pursuant to Section 6.4 hereof, the period beginning on
the Effective Date of Termination and ending on the date that is one hundred
twenty (120) days after the Effective Date of Termination; provided that there
shall be no Non-Compete Period in the event that, within the twenty-four
(24) month period following a Change in Control, Executive’s employment with the
Company is terminated by the Company without Cause or by Executive for Good
Reason or the Executive voluntarily terminates his employment with the Company.
Any Non-Compete Period in effect upon the occurrence of a Change in Control
shall end as of the effective date of such Change in Control.
(b) Unless Executive obtains the prior written approval of the Company,
Executive shall not, at any time during the Employment Period and for a period
of twenty-four (24) months following the termination of Executive’s employment
with the Company for any reason, whether voluntary or involuntary, or whether
due to the expiration, non-renewal
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or termination of this Agreement, directly or indirectly, cause, solicit, entice
or induce any employee of the Company or any employee of any affiliate of the
Company to leave the employ of the Company or such affiliate, to interfere in
any manner with the business of the Company or any such affiliate or to accept
employment with, or compensation from, Executive or any other person, entity or
business.
8.2 Confidentiality Covenants.
(a) Executive acknowledges that, in the course of his employment with the
Company, the Company has provided and will provide Executive with, and Executive
has had and will have access to, material, non-public information and other
materials and information that constitute trade secrets or other intellectual
property or proprietary material of the Company and its affiliates (“Proprietary
Property”). Such Proprietary Property includes, but is not limited to,
information (regardless of the form or medium in which such information is
stored or contained) regarding the operations, markets, structure, project
development or redevelopment activities or plans, business opportunities,
acquisition activities or plans, processes, techniques, technologies,
promotional or marketing plans, strategies, forecasts, new products or services,
systems, financial information, budgets, projections, licenses, prices, costs,
or employees of the Company or any affiliate of the Company and/or their
clients, tenants, prospective clients or prospective tenants or the identity of,
or the Company’s or any affiliate of the Company’s relationship with, its
clients, tenants, prospective clients, prospective tenants, subcontractors or
vendors, including but not limited to technical data, drawings, specifications,
trade secrets, databases, proprietary software, works of authorship, designs,
research and development, ideas, concepts, improvements, inventions, theories,
formulas, plans, policies, procedures and other innovations and all other
information and materials developed, conceived, made or reduced to practice by
Executive or other employees of the Company or its affiliates in connection with
their activities for or on behalf of the Company or its affiliates and/or
developed through the use of the Company’s or any affiliate of the Company’s
resources, including trademarks, copyrights and other intellectual property,
whether or not any of the foregoing is patentable or copyrightable, and any
other information learned by Executive in the course of Executive’s employment
with the Company. Such Proprietary Property shall be the sole and exclusive
property of the Company and its affiliates. Executive shall have no right, title
or interest in and to the Proprietary Property and hereby assigns to the Company
any rights Executive may have or acquire in the Proprietary Property.
(b) Executive covenants and agrees to hold the Proprietary Property in the
strictest confidence and not to during the Employment Period or at any time
thereafter directly or indirectly, (i) communicate, disclose or divulge to any
other person or entity any Proprietary Property or any information in any way
relating to the Proprietary Property other than in connection with the
performance of Executive’s duties for the Company under this Agreement or
(ii) use for the benefit of Executive or any other person or entity (other than
the Company and its affiliates), or to the disadvantage of the Company and its
affiliates, the Proprietary Property or any information in any way relating to
the Proprietary Property.
(c) Notwithstanding anything herein to the contrary, (i) any disclosure of
Proprietary Property made by Executive pursuant to valid legal process
(including, but not limited to, a subpoena or court order) shall not be
considered a violation of this Section 8.2 so long as Executive has promptly
notified the Company of his receipt of such process and provided the Company
with an opportunity to contest the validity of the process; and (ii) the term
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“Proprietary Property” shall not include any information that becomes public by
any means other than a breach by Executive of this Agreement or is rightfully
disclosed to Executive by a third party without restriction and not in violation
of any duty of confidentiality owed to the Company.
(d) Executive agrees that Executive will not, during Executive’s employment with
the Company, improperly use or disclose any proprietary or confidential
information or trade secrets of any former or concurrent employer or other
person or entity and that Executive will not bring onto the premises of the
Company any unpublished document or proprietary or confidential information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.
(e) Executive recognizes that the Company has received and in the future will
receive from third parties their confidential or proprietary information subject
to a duty on the Company’s part to maintain the confidentiality of such
confidential or proprietary information in the strictest confidence and not to
disclose it to any person or entity or use it except as necessary in carrying
out Executive’s work for the Company consistent with the Company’s agreement
with such third party.
(f) Executive will obtain the written approval of the Senior Vice President,
Marketing of the Company before publishing or submitting for publication any
material (written, verbal, or otherwise) that relates to Executive’s work at the
Company and/or incorporates any Proprietary Property.
8.3 Covenants Concerning Return of Company Property. Upon demand by the Company
and/or upon termination of Executive’s employment with the Company for any
reason, whether voluntary or involuntary or whether due to the expiration,
non-renewal or termination of this Agreement, Executive shall promptly deliver
to the Company (and not keep in Executive’s possession, recreate or deliver to
anyone else) all Proprietary Property (in any format whatsoever) and all other
property and materials belonging to the Company, including, without limitation,
all lists of and information pertaining to the Company’s clients, tenants,
prospective clients, prospective tenants, subcontractors and vendors and any
work product developed by Executive pursuant to or in connection with
Executive’s employment with the Company or otherwise belonging to the Company,
but excluding materials distributed to employees of the Company generally and
relating to Executive’s rights and obligations as an employee of the Company.
Upon termination of Executive’s employment by the Company or Executive or in the
event the Company or Executive delivers a notice of non-renewal in accordance
with Section 1.2 hereof, on the Effective Date of Termination Executive shall
deliver to the Company a Termination Certification substantially in the form of
Exhibit C attached hereto duly executed by Executive and dated as of the
Effective Date of Termination.
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8.4 Certain Acknowledgments. Executive acknowledges and agrees that:
(a) As a key management person, Executive is involved, on a high level, in the
development, implementation and management of the Company’s development
strategies and plans. By virtue of Executive’s unique and sensitive position and
special background, employment of Executive by a competitor of the Company at
any time while the covenants set forth in Section 8.1 are in effect represents a
serious competitive danger to the Company, and the use of Executive’s talent and
knowledge and information about the Company’s business strategies can and would
constitute a valuable competitive advantage over the Company;
(b) Enforcement of the covenants set forth in this Section 8 hereof will not
prevent Executive from earning a living in the real estate industry;
(c) The Company has made or will make a substantial investment in Executive and
the Company’s business;
(d) The restrictions provided in this Section 8 are reasonable, proper and
necessary for the Company’s protection; and
(e) This Agreement is not intended to restrict Executive from performing work in
a role that does not compete with the then-current business of the Company.
8.5 Enforcement and Remedies.
(a) If a court of competent jurisdiction finds Section 8, or any of its
restrictions, to be ambiguous, unenforceable and/or invalid, Executive and the
Company agree that such court shall (i) in the case of ambiguity, read Section 8
as a whole and interpret the restriction(s) at issue to be enforceable and valid
to the maximum extent allowed by law for the protection of the Company’s
business interests; and (ii) in the case of unenforceability or invalidity,
eliminate such enforceable or invalid provisions from this Agreement to the
extent necessary to permit the remaining provisions to be enforced to the
maximum extent permitted for the protection of the Company’s business interests.
(b) Executive acknowledges that it may be impossible to assess the monetary
damages incurred by his violation of this Section 8, or any of its terms, and
that any threatened or actual violation or breach of this Section 8, or any of
its terms, will constitute immediate and irreparable injury to the Company.
Executive expressly agrees that, in addition to any and all other damages and
remedies available to the Company as a result of Executive’s breach of
Section 8, the Company shall be entitled to an injunction restraining Executive
from violating or breaching Section 8 or any of its terms.
(c) If the Company is successful in whole or part in any legal or equitable
action against Executive under this Section 8, the Company shall be entitled to
reimbursement from Executive of all costs, including reasonable attorney’s fees,
incurred by the Company in connection with such legal or equitable action.
8.6 Mutual Non-Disparagement. Executive shall not, at any time during or after
the Employment Period, make or publish any derogatory, unfavorable, negative,
disparaging, false, damaging or deleterious written or oral statements or
remarks (including without limitation, the repetition or distribution of
derogatory rumors, allegations, or negative or
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unfavorable reports or comments) regarding the Company or any of its affiliates
or any members of their respective managements or the business affairs or
performance of the Company or any of its affiliates or any of the respective
managements. The Company shall not at any time during or after the Employment
Period make or publish any derogatory, unfavorable, negative, disparaging,
false, damaging or deleterious written or oral statements or remarks regarding
Executive or his performance to anyone who is not an officer, director or
employee of the Company or any of its affiliates. For purposes of this
Section 8.6, a statement or remark shall be deemed to have been made by the
Company only if it is made or authorized by a member of the Board of Directors
or executive management of the Company. Nothing in this Section 8.6 shall be
construed to limit any person’s ability to give truthful testimony pursuant to
valid legal process, including but not limited to, a subpoena or court order.
8.7 Publication of this Agreement to Subsequent Employers or Business
Associates. Executive agrees that, if Executive is offered employment or the
opportunity to enter into any business venture as an owner, partner, consultant
or in any other capacity in the businesses or industries covered by Section 8 of
this Agreement while the restrictions described in Section 8 of this Agreement
are in effect, Executive will inform the offeror of the existence of Section 8
of this Agreement and provide the offeror with a copy thereof. Executive
authorizes the Company to provide a copy of relevant provisions of this
Agreement to any of the persons or entities described herein and to make such
persons aware of Executive’s obligations under this Section 8.
8.8 Employee Inventions Agreement. As a condition to effectiveness of the
Company’s obligations under this Agreement, Executive shall have duly executed
and delivered to the Company, on or prior to the Effective Date, an Employee
Inventions Agreement substantially in the form of Exhibit B attached hereto, the
terms of which are hereby incorporated by reference into, and shall be deemed a
part of, this Section 8.
9. Director’s and Officer’s Liability Insurance. The Company shall, at its sole
cost and expense, provide Executive with director’s and officer’s liability
insurance coverage with respect to services rendered during the Employment
Period in an amount not less than $10,000,000.
10. Assignment.
10.1 Assignment by the Company. This Agreement may, and shall be, assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes for the “Company” under the terms of this Agreement (other than for
the purpose of determining whether a Change in Control has occurred under
Section 7.1). Notwithstanding such assignment, the Company (if it survives)
shall remain, with such successor, jointly and severally liable for all its
obligations hereunder. Except as herein provided, this Agreement may not
otherwise be assigned by the Company.
10.2 Assignment by Executive. The services to be provided by Executive to the
Company pursuant to this Agreement are personal to Executive, and Executive’s
duties may not be assigned by Executive; provided, however, that this Agreement
shall inure to the benefit of and shall be enforceable by Executive’s personal
or legal representatives, executors and administrators, heirs, distributees,
devisees and legatees. Unless otherwise required by law, if Executive dies while
any amounts payable to Executive hereunder remain outstanding, all such
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amounts shall be paid in accordance with the terms of this Agreement to the
beneficiary designated in writing to the Company prior to his death or if
Executive has not designated a beneficiary or the designated beneficiary does
not survive Executive, to Executive’s estate.
11. Arbitration.
11.1 Exclusive Remedy. The parties recognize that litigation in federal or state
courts or before federal or state administrative agencies of disputes arising
out of Executive’s employment with the Company or out of this Agreement, with
the exception of Section 8, may not be in the best interests of either Executive
or the Company, and may result in unnecessary costs, delays, complexities and
uncertainty. The parties agree that any dispute between the parties arising out
of or relating to Executive’s employment, or to the negotiation, execution,
interpretation, performance or termination of this Agreement, whether that
dispute arises during or after employment and whether the dispute derives in
contract, tort, statute or otherwise, with the exception of any dispute arising
out of or related to Section 8, shall be resolved by arbitration in the
Washington, D.C. metropolitan area before one neutral arbitrator, which
arbitration shall be conducted in accordance with the National Employment
Arbitration Rules of the American Arbitration Association (“AAA”), as modified
by the provisions of this Section 11. The parties each further agree that the
arbitration provisions of this Agreement shall provide each party with its
exclusive remedy, and each party expressly waives any right it might have to
seek redress in any other forum, except as otherwise expressly provided in this
Agreement. By election of arbitration as the means for final settlement of all
claims, the parties hereby waive their respective rights to, and agree not to,
sue each other in any action in a Federal, State or local court with respect to
such claims, but may seek to enforce in court an arbitration award rendered
pursuant to this Agreement.
11.2 Arbitrator’s Authority. Except as provided in Section 12.4 hereof, in
reaching his or her decision, the arbitrator shall have no authority to add to,
detract from or otherwise modify any provision of this Agreement. Judgment upon
the award rendered by the arbitrator may be entered in any court having
competent jurisdiction.
11.3 Effect of Arbitrator’s Decision: Arbitrator’s Fees. The decision of the
arbitrator shall be final and binding on the parties as to all claims which were
or could have been raised in connection with the dispute, to the full extent
permitted by law. If the Company initiates the arbitration, then it shall pay
AAA’s administrative fees. If Executive initiates the arbitration, then
Executive shall pay up to the first $150.00 of AAA’s administrative fees
(representing the current federal court filing fee) and the Company shall pay
the remainder. Each side shall pay its own legal fees and expenses, although the
arbitrator shall have the discretion to award reasonable legal fees and expenses
to a prevailing party or as provided by any applicable substantive law. The fees
and expenses of the arbitrator shall be paid completely by the Company to AAA,
which shall disburse the fees to the arbitrator without identifying which party
paid the fees.
11.4 Indemnification. If either party breaches this arbitration agreement and
attempts to resolve in court claims covered by this provision, the litigating
party agrees to indemnify the other party for all its reasonable legal costs and
attorney’s fees incurred to defend such action in court and to enforce the
provisions of the arbitration clause.
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11.5 Continuing Nature of Agreement to Arbitrate. The parties acknowledge and
agree that their obligations under this arbitration agreement survive the
termination of this Agreement and continue after the termination of the
employment relationship between Executive and the Company.
12. General Provisions.
12.1 Notice. Any notice required or permitted hereunder shall be made in writing
(a) by actual delivery of the notice into the hands of the party thereunder
entitled, (b) by the mailing of the notice by first class mail, certified or
registered mail, return receipt requested, all postage prepaid or (c) by
nationally recognized overnight delivery service and addressed to the party to
whom the notice is to be given at the party’s respective address set forth
below, or such other address as the parties may from time to time designate by
written notice as herein provided.
To the Company: The Mills Corporation 1300 Wilson Boulevard, Suite 400
Arlington, Virginia 22209 Attn: Chief Executive Officer with copies to:
The Mills Corporation 1300 Wilson Boulevard, Suite 400 Arlington, Virginia
22209 Attn: General Counsel and Karen A. Dewis, Esquire McDermott,
Will & Emery 600 13th Street, NW Washington, DC 20005 To Executive: F.
Scott Ball 823 Hillside Road PO Box 961 Brooklandville, Maryland 21022
The notice shall be deemed to be received in case (a) on the date of its actual
receipt by the party entitled thereto, in case (b) on the third business day
following the date of its mailing and in case (c) on the next business day
following the date of its delivery to such nationally recognized overnight
delivery service.
12.2 Amendment and Waiver. No amendment or modification of this Agreement shall
be valid or binding upon (a) the Company unless made in writing and signed by a
duly authorized officer of the Company or (b) Executive unless made in writing
and signed by him.
12.3 Non-Waiver of Breach. No failure by either party to declare a default due
to any breach of any obligation under this Agreement by the other, nor failure
by either party to act quickly with regard thereto, shall be considered to be a
waiver of any such obligation, or of any future breach.
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12.4 Severability. If any provision or portion of this Agreement, with the
exception of Sections 1, 2 and 4, shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this Agreement shall
be unaffected thereby and shall remain in full force and effect.
12.5 Tax Withholding. The Company may withhold from any payments to Executive
under this Agreement all Federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
12.6 Governing Law. To the extent not preempted by Federal law, the validity and
effect of this Agreement and the rights and obligations of the parties hereto
shall be construed and determined in accordance with the internal substantive
laws of the State of Delaware, without regard to its conflict-of-laws or
choice-of-law principles.
12.7 Entire Agreement. This Agreement, including the Exhibits and Schedules
hereto, contains all of the terms agreed upon by the Company and Executive with
respect to the subject matter hereof and, as of the Effective Date, supersedes
all prior agreements, arrangements and communications between the parties
dealing with the subject matter hereof, whether oral or written; provided that
the terms and conditions relating to the relocation bonus and benefits set forth
in Executive’s offer letter dated February 24, 2005 shall remain in effect as
specified in such offer letter. To the extent this Agreement conflicts with any
terms, conditions or agreements set forth in any Company plan, policy or manual,
the terms of this Agreement shall govern.
12.8 Headings. Numbers and titles to paragraphs and sections hereof are for
information purposes only and, where inconsistent with the text, are to be
disregarded.
12.9 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which, when taken
together, shall be and constitute one and the same instrument.
12.10 Survival beyond Termination. Notwithstanding anything in this Agreement to
the contrary, the restrictions and obligations contained in Sections 6, 8, 11
and 12.5 shall survive termination of Executive’s employment, whether voluntary
or involuntary and whether due to the expiration, non-renewal or termination of
this Agreement, and be binding regardless of the reason for termination of
employment. Executive covenants that if Executive should ever seek to avoid his
obligations under Section 6.11, Section 8, Section 11 or Section 12.5 because
Executive contends that such restrictions are unenforceable as written for any
reason, Executive shall provide notice to the Company in accordance with the
provisions of Section 12.1 of this Agreement setting forth in detail the reasons
that Executive believes such restrictions to be unenforceable.
12.11 Knowing and Voluntary Execution. Each of the parties hereto has carefully
read and considered all of the terms of this Agreement, including Section 8 and
the restrictions contained in it. Each of the parties has freely, willing and
knowingly entered into this Agreement with the intent to be bound by it.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first written above.
The Company: THE MILLS CORPORATION a Delaware corporation By:
/s/ Mark S. Ordan
Chief Operating Officer Executive:
/s/ F. Scott Ball
F. SCOTT BALL
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EXHIBIT A
FORM OF GENERAL RELEASE
1. Parties. This General Release (“General Release”) is made by
for himself and his family, heirs, executors,
administrators, personal and legal representatives and their respective
successors and assigns (“Executive”), for the benefit of The Mills Corporation
(the “Company”), and its subsidiaries and affiliated companies, and their
current or former directors, officers, employees, shareholders or agents
(together with the Company, the “Released Parties”).
2. Separation Benefits. If Executive signs and does not revoke this General
Release, he or she will receive the benefits specified in Section 6.5, 6.7, or
6.8, as applicable, in the Employment Agreement by and between the Company and
the Executive dated (the “Separation Benefits”).
3. General Release. In exchange for the benefits described in Paragraph 2 above,
Executive does hereby release and forever discharge the Released Parties from
any and all actions, causes of action, suits, controversies, claims, liabilities
and demands whatsoever, for or by reason of any matter, cause, or thing
whatsoever, whether known or unknown, that Executive has or may have against the
Released Parties, arising under or in connection with Executive’s employment or
termination thereof, as of the date he signs this General Release, including,
but not limited to, any and all claims that the Released Parties:
• violated Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act (“ADEA”), the Civil Rights Act of 1991, the
Americans with Disabilities Act, or the Family and Medical Leave Act, or
discriminated against Executive on the basis of any other status protected by
local, state, or federal common laws, statutes, constitutions, regulations,
ordinances, or executive orders;
• violated the Company’s personnel policies, procedures, any covenant of good
faith and fair dealing, or any express or implied contract of any kind; or
• violated public policy, statutory, or common law, including claims for: any
tort, personal injury; invasion of privacy; wrongful discharge, intentional
infliction of emotional distress, intentional interference with contract;
negligence; or detrimental reliance.
4. Exclusions From General Release. Excluded from the release above are any
claims or rights that cannot be waived by law, including Executive’s right to
file a charge with an administrative agency or to participate in any agency
investigation. Executive is, however, waiving his right to recover money in
connection with a charge filed by any other individual or by the Equal
Employment Opportunity Commission or any other federal or state agency. Also
excluded from the General Release are: (a) any indemnification protection
afforded to Executive pursuant to the Company’s Certificate of Incorporation or
Bylaws; (b) any rights or claims that may arise as a result of events occurring
after the date this General Release is executed; (c) any claims for benefits
under any directors’ and officers’ liability insurance policy maintained by the
Company, in accordance with its terms; and (d) any claims by Executive solely in
his or her capacity as a stockholder of the Company or a holder of units of the
Mills Limited Partnership, a Delaware limited partnership.
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5. Covenant Not To Sue. A “covenant not to sue” is a legal term that means
Executive promises not to file a lawsuit in court, or otherwise sue the Released
Parties in any forum. It is different from the General Release of claims
contained in Paragraph 3 above. In addition to waiving and releasing the claims
covered by Paragraph 3, Executive further agrees that he will never individually
or with any other person file, or commence the filing of, any lawsuits,
complaints or proceedings of any kind with any state or federal court against
the Released Parties with respect to the matters covered by the General Release
in Paragraph 3. Notwithstanding this Covenant Not to Sue, Executive may bring a
claim against the Released Parties to enforce this General Release, or to
challenge the validity of this General Release under the ADEA.
Executive further represents that he has not assigned to any party any rights
with respect to any actions, causes of action, suits, controversies, claims,
liabilities or demands released by Executive pursuant to Paragraph 3 above.
6. Revocation Period. Executive will have seven days after he signs this General
Release to revoke it if Executive so desires. Any revocation must be transmitted
in writing to Michael Rodis, SVP Human Resources, The Mills Corporation, 1300
Wilson Boulevard, Suite 400, Arlington, VA 22209, in a manner to be received
within the seven day revocation period. This General Release will not be
effective or enforceable until the seven day revocation period has expired
without Executive revoking it.
7. Executive Acknowledgments. Executive hereby acknowledges that (a) Executive
has read this General Release, understands all of its terms, and executes it
knowingly and voluntarily, with full knowledge of its significance and the
consequences thereof; and (b) some or all of the Separation Benefits exceed the
benefits that Executive would otherwise be entitled to upon separation of
employment.
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8. Governing Law. Executive acknowledges that this General Release will be
governed by and construed and enforced in accordance with the laws of the State
of Delaware, to the extent not preempted by Federal law, and without regard to
the conflict or choice of law provisions thereof.
Executive Name
, 200
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EXHIBIT B
EMPLOYEE INVENTIONS AGREEMENT
As a condition of my employment with The Mills Corporation, its subsidiaries,
affiliates, successors or assigns (collectively, the “Company”), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by the Company, I agree to the
following:
1. Inventions
(a) Without further consideration, I agree to promptly disclose to the Company
(during the period of my employment with the Company and for one year
thereafter) and to hold in trust for the sole benefit of the Company and do
hereby assign and agree to assign to the Company or its designee, my entire
right, title and interest in and to all inventions, discoveries, formulae,
processes, systems, methods of operation, improvements, developments, ideas,
concepts, designs, work of authorship, Internet domain names, tradenames,
trademarks, programs, source codes and related documentation (whether or not
patentable or copyrightable) (collectively the “Intellectual Property”),
including, without limitation, all rights to obtain, register, perfect and
enforce such Intellectual Property, which I may solely or jointly conceive or
develop or reduce to practice or cause to be conceived or developed or reduced
practice during the period of my employment with the Company. Without limiting
the generality of the foregoing, such assignment shall include, without
limitation, all Intellectual Property that:
(i) relates to any services performed by me for the Company, or if not actually
performed, services requested by the Company to be so performed, during the
period of my employment with the Company, whether alone or with others, whether
or not during normal working hours and regardless of whether my own equipment,
supplies or facilities or the Company’s equipment, supplies or facilities were
used to create the Intellectual Property;
(ii) pertains to any present or reasonably anticipated line of business activity
of the Company; or
(iii) was or is aided by the use of time, equipment, supplies, facilities,
information or proprietary rights of the Company.
(b) I acknowledge and agree that any Intellectual Property that is a work of
authorship belongs to the Company and is a “work made for hire” within the
definition of Section 101 of the United States Copyright Acts of 1976, Title 17,
United States Code. To the extent that any such Intellectual Property does not
qualify as a “work made for hire,” this Agreement will constitute an irrevocable
assignment by me to the Company of the ownership of, and all rights of copyright
in, such Intellectual Property. The Company or any of its direct or indirect
licensees shall not be obligated to designate me as author of any design,
software, firmware, related documentation or any other work of authorship when
distributed publicly or otherwise, nor to make any distribution.
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(c) I agree to keep and maintain adequate and current written records of all
Intellectual Property made by me, whether alone or with others, in the form of
notes, sketches, drawings and other notations as may be specified by the
Company, which records shall be available to and remain the sole property of the
Company at all times.
(d) I agree to perform, during and after the period of my employment with the
Company, all acts deemed necessary or desirable by the Company or its designee
to permit and assist the Company or its designee, at the Company’s or its
designee’s expense, in obtaining and enforcing the full benefits, enjoyment,
rights and title throughout the world in any patents, copyrights, trademarks,
trade secrets and other rights in the Intellectual Property assigned to the
Company or its designee in this Section 1, including, without limitation,
execution of documents and assistance or cooperation in legal proceedings and
disclosure to the Company of all pertinent information and data with respect to
the Intellectual Property. If the Company is unable because of my mental or
physical capacity or for any other reason to secure my signature to apply for or
to pursue any application for United States or foreign patents or copyright
registrations covering any Intellectual Property assigned to the Company or its
designee under this Section 1, then I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.
2. Notification to New Employer. In the event that I leave the employ of the
Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
3. Representations. I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement. I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict herewith.
4. Legal and Equitable Relief. I agree that a breach of the covenants in
Section 1 may cause irreparable harm and result in significant commercial
damages to the Company and such harm and damages may be difficult to ascertain.
Accordingly, I agree that if I breach such Section or threaten to do so, the
Company will have available, in addition to any other right or remedy available,
the right to obtain an injunction from a court of competent jurisdiction
restraining such breach or threatened breach and to specific performance of this
Agreement and of any such provision of this Agreement. I further agree that no
bond or other security shall be required in obtaining such equitable relief, and
I hereby consent to the issuance of such injunction and to the ordering of
specific performance. Finally, I agree that, in the event I breach this
Agreement and the Company prevails in any action brought against me pursuant to
this Section 4, the Company will be entitled to recover from me, in addition to
all other relief to which it may be entitled, the costs of such action,
including reasonable attorneys’ fees.
5. Notices. Any notices required or permitted by this Agreement shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three days after the date of mailing.
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If to The Mills Corporation:
The Mills Corporation
1300 Wilson Boulevard, Suite 400
Arlington, Virginia 22209
Attention: General Counsel
If to Employee, to my address set forth in the Company’s books and records.
6. General Provisions.
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement is governed
by the laws of the Commonwealth of Virginia without regard to the choice or
conflict of law provisions thereof. I hereby expressly consent to the personal
jurisdiction of the state and federal courts located in Virginia for any lawsuit
filed there against me by the Company arising from or relating to this
Agreement.
(b) Severability. If any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to activity or
subject, the Company and I agree that a court of competent jurisdiction shall
reform that provision to the extent necessary to cause it to be enforceable to
the maximum extent permitted by law. The Company and I agree that we desire the
court to reform such provision, and therefore agree that the court will have
jurisdiction to do so and that we will abide by what the court determines. If
such an interpretation is not possible regarding one or more of the provisions
in this Agreement, then such provision shall be deemed severed and the remaining
provisions will continue in full force and effect, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
(c) Successors and Assigns. This Agreement may not be assigned by me, but may be
assigned by the Company to any successor-in-interest thereof, including without
limitation, by way of merger, reorganization or sale of all or substantially all
of the assets of the Company. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and is for the benefit
of the Company, its successors, and its assigns.
(d) Waiver. No waiver by the Company of any breach of this Agreement shall be a
waiver of any preceding or succeeding breach. No waiver by the Company of any
right under this Agreement shall be construed as a waiver of any other right.
The Company shall not be required to give notice to enforce strict adherence to
all terms of this Agreement. No waiver of any rights under this Agreement will
be effective unless in writing signed by both parties and in the case of the
Company signed by the Chief Executive Officer, President or Chief Operating
Officer of the Company or his/her designee.
(e) Opportunity to Review. I acknowledge and agree that I have carefully
reviewed this Agreement, understand it, and have been given an opportunity to
consult with counsel regarding this Agreement and my obligations hereunder.
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(f) Survival. This Agreement shall survive the termination of my employment with
the Company for any reason and the assignment of this Agreement by the Company
to any successor-in-interest thereof.
(g) Entire Agreement; Amendments. This Agreement sets forth the entire agreement
and understanding between the Company and me and supersedes all prior agreements
or understandings, oral or written, between us relating to the subject matter
hereof. No modification of or amendment to this Agreement will be effective
unless in writing signed by both parties. Any subsequent change or changes in my
duties, salary or compensation will not affect the validity or scope of this
Agreement.
Date Signature
Witness Name of Employee (typed or printed)
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EXHIBIT C
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed to
return, any Proprietary Property (as defined in the Employment Agreement between
the Company (as defined below) and me) or other information or property
belonging to The Mills Corporation, its subsidiaries, affiliates, successors or
assigns (together, the “Company”), including without limitation, any work
product developed by me pursuant to or in connection with my employment with the
Company or otherwise belonging to the Company.
I further certify that I have complied with all terms of the Employee Inventions
Agreement between the Company and me, including the reporting of any inventions
conceived or made by me (solely or jointly with others) covered by that
agreement.
Date:
(Employee’s Signature)
(Type/Write Employee’s Name)
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Exhibit 10.5
Employee Stock Option Agreement
This Employee Stock Option Agreement (this “Agreement”) is made this 30th day of
June, 2006, between Electric City Corp., a Delaware corporation (the “Company”)
and Daniel Parke (the “Holder”).
WHEREAS, Holder is an employee of Parke Industries, LLC, a subsidiary of the
Company, and the Company desires, by affording Holder an opportunity to purchase
its common shares of $0.0001 par value common stock (the “Common Stock”) as
hereinafter provided, to help align the long-term economic interests of the
Holder with the long-term economic interests of the Company.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the parties hereto agree as
follows:
1. Grant of Option. The Company hereby agrees to grant to the Holder, on the
date hereof (the “Grant Date”), options (the “Options”) to purchase up to an
aggregate of 46,667 shares (the “Option Shares”) of the Company’s common stock,
par value $0.001 (the “Common Stock”), subject to the terms and conditions set
forth herein.
2. Exercise Price. The exercise price per Option Share, subject to adjustment as
hereinafter provided (the “Exercise Price”) under the Options shall be equal to
the closing market price of the Company’s common stock on [the date immediately
following the date of this Agreement].
3. Vesting. The Options shall vest according to the following schedule:
Vesting Date Number of Shares
The Grant Date
15,555
The First Anniversary of the Grant Date (except as otherwise provided in that
certain Employment Agreement dated as of the date hereof between the Holder and
Parke Industries, LLC)
15,556
The Second Anniversary of the Grant Date (except as otherwise provided in that
certain Employment Agreement dated as of the date hereof between the Holder and
Parke Industries, LLC)
15,556
Reference is made to the Employment Agreement dated as of the date hereof
between Holder and Parke Industries, LLC (the “Employment Agreement”) for
additional terms and conditions relating to the vesting of any unvested Stock
Options in the event that Holder ceases to be employed by Parke Industries, LLC.
- 1 -
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4. Exercise of the Option. Any vested Options may be exercised at any time after
vesting by delivering the Exercise Price, paid in cash, along with a notice of
exercise to the Company. The Exercise Price of the shares as to which Option
shall be exercised shall be paid in full, in cash at the time of exercise,
provided, that if the Fair Market Value of one share of Common Stock is greater
than the Exercise Price (at the date of calculation as set forth below), in lieu
of exercising this Option for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Option (or the portion thereof being
exercised) by surrender of this Option at the principal office of the Company
together with the properly endorsed Exercise Notice in which event the Company
shall issue to the Holder a number of shares of Common Stock computed using the
following formula:
X = Y (A-B)
A
Where:
X = the number of shares of Common Stock to be issued to the Holder;
Y = the number of shares of Common Stock purchasable under the Option or, if
only a portion of the Option is being exercised, the portion of the Option being
exercised (at the date of such calculation);
A = the Fair Market Value of one share of the Company’s Common Stock (at the
date of such calculation); and
B = Exercise Price (as adjusted to the date of such calculation)
5. Transferability. Except as otherwise provided in the Employment Agreement,
the Options shall not be transferable except by will or the laws of dissent and
distribution, and the Options will only be exercised during the lifetime of
Holder, and only by Holder.
6. Expiration of the Options. The Options will expire on the earlier of the
tenth anniversary of the date of this Agreement or as provided in the Employment
Agreement if the Holder ceases to be a full time employee of the Parke
Industries, LLC or the Company.
7. Adjustments. The number of shares issuable as a result of the exercise of any
unexercised Options, and the purchase price payable therefore, may be adjusted
from time to time to give effect to stock splits, both forward and reverse, and
any stock dividends which may be declared payable to the holders of the
outstanding Common Stock.
8. Terms Governing Stock Options. Except to the extent otherwise expressly
provided herein, the terms of the Options shall be governed in accordance with
the provisions of the Company’s 2001 Employee Stock Incentive Plan (the “Plan”),
as it may be amended and in effect from time to time. The Options shall be
incentive stock options to the extent permitted by law and the terms of the
Plan, and the balance shall be non-qualified options.
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9. Taxes. The Company will have the right to deduct from all cash or property
payments made to the Holder upon exercise of the Option, any and all federal,
state or local taxes required to be withheld with respect to such payments.
10. Trading Restrictions. The Company shall have the right at any time to impose
trading restrictions on the shares issuable pursuant to the exercise of the
Options (the “Option Shares”) which may limit the number of shares that can be
sold on any trading day or during any 90 day period and/or prohibit the sale of
the Option Shares on any trading day, not to exceed thirty (30) trading days a
year.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as
of the date first written above.
ELECTRIC CITY CORP. HOLDER
By:
Name:
/s/ Jeffrey Mistarz
Jeffrey Mistarz /s/ Daniel Parke
Daniel Parke
Title:
Chief Financial Officer
- 4 - |
AMENDMENT NUMBER 2006-1
to the
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
dated as of March 16, 2005
among
ECC CAPITAL CORPORATION,
BRAVO CREDIT CORPORATION,
ENCORE CREDIT CORP.
and
WACHOVIA BANK, NATIONAL ASSOCIATION
This AMENDMENT NUMBER 2006-1 (this “Amendment 2006-1”), is made this 14th day of
March, 2006, among ECC Capital Corporation (“ECC”), Bravo Credit Corporation
(“Bravo”), Encore Credit Corp. (“Encore”; each of Encore, ECC and Bravo, a
“Seller”, and jointly and severally, the “Sellers”) and Wachovia Bank, National
Association (the “Buyer”), to the Amended and Restated Master Repurchase
Agreement, dated as of March 16, 2005, as amended, among the Buyer and the
Sellers (the “Master Repurchase Agreement”).
RECITALS
WHEREAS, the Buyer and the Sellers have agreed to amend the Master Repurchase
Agreement as more specifically set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and of the mutual covenants herein contained,
the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Any terms capitalized but not otherwise defined herein
shall have the respective meanings set forth in the Master Repurchase Agreement.
SECTION 2. Amendment.
The definition of “Termination Date” in Section 2 (Definitions and
Interpretation) is hereby deleted in its entirety and replaced with the
following:
“Termination Date” means the earliest of (i) April 17, 2006, (ii) a Termination
Event or (iii) at Buyer’s option, upon the occurrence of an Event of Default.
SECTION 3. Conditions Precedent. This Amendment 2006-1 shall become effective on
the date on which the Buyer shall have received the following:
(a) this Amendment 2006-1, executed and delivered by duly authorized officers of
each of the Sellers and the Buyer; and
(b) such other documents as the Buyer or counsel to the Buyer may reasonably
request.
SECTION 4. Expenses. Sellers shall promptly reimburse Buyer for all
out-of-pocket costs and expenses of Buyer in connection with the preparation,
execution and delivery of this Amendment (including, without limitation, the
fees and expenses of counsel for Buyer).
SECTION 5. Representations. In order to induce the Buyer to execute and deliver
this Amendment 2006-1, the Sellers hereby represent to the Buyer that (i) no
Default or Event of Default has occurred prior to the date hereof and is
continuing on the date hereof and (ii) as of the date hereof, after giving
effect to this Amendment 2006-1, the Sellers are in full compliance with all of
the representations and warranties, covenants and any other terms and conditions
of the Master Repurchase Agreement and the other Program Documents. In addition,
each Seller hereby represents and warrants that no event has occurred that
constitutes or should reasonably be expected to constitute a Material Adverse
Change with respect to it.
SECTION 6. Governing Law. THIS AMENDMENT 2006-1 SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS DOCTRINE APPLIED
IN SUCH STATE.
SECTION 7. Counterparts. This Amendment 2006-1 may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.
SECTION 8. Limited Effect. Except as expressly amended and modified by this
Amendment 2006-1, the Master Repurchase Agreement shall continue in full force
and effect in accordance with its terms. Reference to this Amendment 2006-1 need
not be made in the Master Repurchase Agreement or any other instrument or
document executed in connection therewith or herewith, or in any certificate,
letter or communication issued or made pursuant to, or with respect to, the
Master Repurchase Agreement, any reference in any of such items to the Master
Repurchase Agreement being sufficient to refer to the Master Repurchase
Agreement as amended hereby.
[SIGNATURE PAGE FOLLOWS]
1
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 2006-1 to be
executed and delivered by their duly authorized officers as of the day and year
first above written.
ECC CAPITAL CORPORATION, as a Seller
By: /s/ William E. Moffatt
Name: William E. Moffatt
Title: Director/Warehouse Lending
ENCORE CREDIT CORP., as a Seller
By: /s/ William E. Moffatt
Name: William E. Moffatt
Title: Director/Warehouse Lending
BRAVO CREDIT CORPORATION, as a Seller
By: /s/ William E. Moffatt
Name: William E. Moffatt
Title: Director/Warehouse Lending
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Buyer
By: /s/ Justin Zakocs
Name: Justin Zakocs
Title: Vice President
2 |
Exhibit 10.1
COVAD COMMUNICATIONS GROUP, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“Agreement”) is made as of this 8th day of
December, 2006, by and between Covad Communications Group, Inc., a Delaware
corporation (the “Company”), and Diana Leonard (“Indemnitee”).
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors’ and officers’ liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, in consideration for Indemnitee’s services as an officer or
director of the Company, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or any alternative
dispute resolution mechanism, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that Indemnitee is or was a director, officer, employee or agent of
the Company, or any subsidiary of the Company, or by reason of the fact that
Indemnitee is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld)
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee’s conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee’s conduct was unlawful.
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(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, or by reason
of the fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’ fees)
and, to the fullest extent permitted by law, amounts paid in settlement actually
and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1, or in
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Agreement to Serve. In consideration of the protection afforded by this
Agreement, if Indemnitee is a director of the Company he agrees to serve at
least for the 90 days after the effective date of this Agreement as a director
and not to resign voluntarily during such period without the written consent of
a majority of the Board of Directors. If Indemnitee is an officer of the Company
not serving under an employment contract, he agrees to serve in such capacity at
least for 90 days and not to resign voluntarily during such period without the
written consent of a majority of the Board of Directors. Following the
applicable period set forth above, Indemnitee agrees to continue to serve in
such capacity at the will of the Company (or under separate agreement, if such
agreement exists) so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing. Nothing contained in this Agreement is intended to create in Indemnitee
any right to continued employment.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that
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Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within thirty (30) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement, give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the President of the Company at the address
shown on the signature page of this Agreement (or such other address as the
Company shall designate in writing to Indemnitee and given as provided in
Section 14). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee’s
power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than thirty (30) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company’s Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within thirty (30) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 14 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys’ fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed. However, Indemnitee
shall be entitled to receive interim payments of expenses pursuant to Subsection
3(a) unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties’
intention that if the Company contests Indemnitee’s right to indemnification,
the question of Indemnitee’s right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including it Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
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(e) Selection of Counsel. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel subject to the approval of Indemnitee, which
shall not be unreasonably withheld. After delivery of written notice of the
assumption of the defense, approval of such counsel by Indemnitee as described
above and the retention of such counsel by the Company, the Company will not be
liable to Indemnitee under this Agreement for any fees of counsel subsequently
incurred by Indemnitee with respect to the same proceeding, provided that
(i) Indemnitee shall have the right to employ his counsel in any such proceeding
at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the
expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company’s Certificate
of Incorporation, the Company’s Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee’s rights and Company’s obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties’ rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested Directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee’s official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
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6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company’s right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company’s
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company’s directors, if
Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a
director of the Company but is an officer. Notwithstanding the foregoing, the
Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a subsidiary or parent of the
Company.
8. Severability. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company’s inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
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(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers’ and directors’ liability insurance maintained by the Company.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the “Company” shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to “other enterprises”
shall include employee benefit plans; references to “fines” shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to “serving at the request of the Company” shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not
opposed to the best interests of the Company” as referred to in this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns.
13. Attorneys’ Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all
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court costs and expenses, including reasonable attorneys’ fees, incurred by
Indemnitee with respect to such action, unless as a part of such action, the
court of competent jurisdiction determines that each of the material assertions
made by Indemnitee as a basis for such action were not made in good faith or
were frivolous. In the event of an action instituted by or in the name of the
Company under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys’ fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee’s counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee’s material defenses to such action were made in bad faith or were
frivolous.
14. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
16. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware without regard to the conflict of law principles thereof.
17. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against Indemnitee,
Indemnitee’s estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
18. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
-7-
--------------------------------------------------------------------------------
20. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
-8-
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COVAD COMMUNICATIONS GROUP, INC.
/s/ Charles Hoffman Signature of Authorized Signatory
Charles Hoffman, President and CEO Print Name and Title
Address: 110 Rio Robles
San Jose, CA 95134
AGREED TO AND ACCEPTED:
INDEMNITEE:
/s/ Diana Leonard
Signature
Diana Leonard
Print Name
Address:
110 Rio Robles
San Jose, CA 95134
-9- |
Exhibit10.2
AGREEMENT
This Agreement (“Agreement”) is made as of October 27, 2006, by and among CRAUN
Research Sdn. Bhd., a limited liability company organized under the laws of
Malaysia (the “Purchaser”), Advanced Life Sciences Holdings, Inc., a Delaware
corporation (“Holdings”), and Advanced Life Sciences, Inc., an Illinois
corporation and wholly owned subsidiary of Holdings (the “Seller”).
PRELIMINARY STATEMENTS
A. The parties to this Agreement have simultaneously entered into a
Stock Purchase Agreement (the “Purchase Agreement”).
B. Capitalized terms used in this Agreement without definition have
the respective meanings given to them in the Purchase Agreement.
C. On July 12, 2006, an involuntary bankruptcy petition under chapter
7 of the Bankruptcy Code was filed in the United States Bankruptcy Court for the
Northern District of Illinois, Chicago Division by Sarawak as creditor and with
the Company as the alleged debtor. This case is administered under Case No.
06-08241 (the “Bankruptcy Case”).
NOW, THEREFORE, intending to be legally bound and in consideration of the mutual
provisions set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
Section 1 Conditions to Closing. The obligations of the
Purchaser and the Seller to consummate the purchase and sale of the Shares and
the other transactions contemplated by the Purchase Agreement, including but not
limited to the performance by the Purchaser and the Seller of their respective
obligations pursuant to Section 2.4 of the Purchase Agreement, is subject to the
satisfaction of each of the following conditions: (i) the order dismissing the
Bankruptcy Case becoming a final, non-appealable order; (ii) completion of a
financial audit of the Company, to be conducted by an auditor selected in the
Purchaser’s sole discretion and at the Purchaser’s sole expense, which such
audit in any event will be deemed complete for purposes of this section on
December 18, 2006, if not completed sooner; and (iii) each of the Seller’s
representations and warranties set forth in the Purchase Agreement being true
and correct in all material respects (but without regard to any materiality
qualifications or references to material adverse effect contained in any
specific representation or warranty) on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and warranties
made as of some other specified date, in which case, as of such specified date).
Section 2 Deferral of Closing. Notwithstanding anything to the
contrary in the Purchase Agreement, the Purchaser, the Seller and Holdings
hereby agree that the Closing shall occur on or within two days after the
satisfaction of each of the conditions set forth in Section 1.
Section 3 Miscellaneous. Any party may terminate this Agreement
and the Purchase Agreement by providing written notice to the other parties if
the Closing has not occurred on or before December 21, 2006. Notwithstanding
the terms or provisions of the Purchase Agreement, the Purchaser, the Seller and
Holdings hereby agree that in the event of a conflict between the terms and
provisions of this Agreement and the terms and provisions of the Purchase
Agreement, the terms and provisions of this Agreement shall prevail. The
Purchaser, the Seller and Holdings hereby acknowledge and agree that this
Agreement constitutes an integral part of the Purchase Agreement.
--------------------------------------------------------------------------------
The parties have executed and delivered this Agreement as of the date indicated
in the first sentence of this Agreement.
CRAUN RESEARCH SDN. BHD.
By:
/s/ Abdullah Chek bin Sahamat
Name:
Abdullah Chek bin Sahamat
Its:
Chairman
ADVANCED LIFE SCIENCES, INC.
By:
/s/ Michael T. Flavin
Name:
Michael T. Flavin, Ph.D.
Its:
Chairman and Chief Executive Officer
ADVANCED LIFE SCIENCES HOLDINGS, INC
By:
/s/ Michael T. Flavin
Name:
Michael T. Flavin, Ph.D.
Its:
Chairman and Chief Executive Officer
-------------------------------------------------------------------------------- |
EXHIBIT 10.9
Summary Sheet of Executive Cash Compensation
and Award Formula under the 2004 Key Officers Incentive Plan
The following table sets forth the current base salaries provided to the
Company’s CEO and four most highly compensated executive officers. Salary
increases are determined annually in March.
Executive Officer
--------------------------------------------------------------------------------
Current Salary
--------------------------------------------------------------------------------
Felix E. Wright
842,520
David S. Haffner
716,140
Karl G. Glassman
572,915
Jack D. Crusa
260,000
Joseph D. Downes, Jr.
235,000
Executive officers are also eligible to receive a bonus each year under the
Company’s 2004 Key Officers Incentive Plan (filed as Exhibit 10.13). The target
percentages under this plan for the Company’s CEO and four most highly
compensated executive officers are as shown in the following table.
Executive Officer
--------------------------------------------------------------------------------
Target Percentage
--------------------------------------------------------------------------------
Felix E. Wright
70%
David S. Haffner
60%
Karl G. Glassman
50%
Jack D. Crusa
44%
Joseph D. Downes, Jr.
44%
AWARD FORMULA FOR 2006
LEGGETT & PLATT, INCORPORATED
2004 KEY OFFICERS INCENTIVE PLAN
The 2004 Key Officers Incentive Plan (“Plan”) provides cash awards to
participants based on the Company’s operating results for the prior year. Awards
are calculated based on Return on Net Assets, using either the Corporate Formula
or the Profit Center Formula, depending on the type of participant.
Return on Net Assets (“RONA”), as defined by the Plan, is Leggett’s return for
the year on its net assets. Certain adjustments are made to Earnings Before
Interest and Taxes (EBIT) and net asset amounts reported in the Company’s
Consolidated Financial Statements to determine Plan RONA. “Return” is equal to
EBIT with addbacks for Management Incentive Bonus and Additional Stock Match.
“Net Assets” are total assets with the following adjustments: (i) deduction of
cash and current liabilities, (ii) deduction or addback of accumulated other
comprehensive income (deduction if positive, addback if negative) reported in
shareholder’s equity section of balance sheet, and (iii) quarterly averaging of
all calculations.
Under both formulas, a participant’s “basic potential award” is calculated by
multiplying the participant’s target percentage times his annual base salary as
of the end of the calendar year. For example, if the participant’s target
percentage is 50% and his annual base salary is $300,000, his basic potential
award would be $150,000 (50% x $300,000).
Award Formula for Corporate Participants
Corporate awards made under the Plan are based on the Company’s overall
financial performance during the previous year. The basic potential award for
corporate participants has two components:
Corporate portion
90% of total award
Discretionary portion
10% of total award
1
--------------------------------------------------------------------------------
When the Company achieves at least 8% RONA in a calendar year, the corporate
payout will begin at 5% and will follow the schedule below. No awards are
payable for a year when RONA falls below 8%. The total incentive payout will be
limited to 4% of EBIT.
Using the schedule below, if the Company achieved a 14% RONA, the resulting
corporate payout would be 65%. Using the example of a participant with a
$150,000 basic potential award, the corporate portion of his or her award would
be $87,750 ($150,000 x 90% x 65%). The discretionary portion of the award would
be $9,750 ($150,000 x 10% x 65%). Thus, the total award for the Corporate
Participant in this example would be $97,500 ($87,750 + $9,750).
CORPORATE PARTICIPANT PAYOUT SCHEDULE
RONA
--------------------------------------------------------------------------------
Payout %
--------------------------------------------------------------------------------
RONA
--------------------------------------------------------------------------------
Payout %
--------------------------------------------------------------------------------
8%
5% 15% 75%
9%
15% 16% 85%
10%
25% 17% 100%
11%
35% 18% 115%
12%
45% 19% 130%
13%
55% 20% 145%
14%
65% 21% 165%
The Compensation Committee has established a different payout schedule for the
Company’s Executive Team, consisting of the top three corporate officers. Under
the Executive Team payout schedule below, no bonus is payable if RONA is below
11%. For returns between 11% and 17%, the payout schedule mirrors that for other
Corporate Participants. For returns above 17%, however, the corporate payout is
higher.
Using the schedule below, if the Company achieved an 18% RONA, the resulting
corporate payout for the Executive Team would be 130% (compared to 115% for
other Corporate Participants). For an Executive Team participant with a $350,000
basic potential award, the corporate portion of his or her award would be
$409,500 ($350,000 x 90% x 130%). The discretionary portion of the award would
be $45,500 ($350,000 x 10% x 130%). Thus, the total award for the Executive Team
Corporate Participant in this example would be $455,000 ($409,500 + 45,500).
EXECUTIVE TEAM PAYOUT SCHEDULE
RONA
--------------------------------------------------------------------------------
Payout %
--------------------------------------------------------------------------------
RONA
--------------------------------------------------------------------------------
Payout %
--------------------------------------------------------------------------------
8%
0% 15% 75%
9%
0% 16% 85%
10%
0% 17% 100%
11%
35% 18% 130%
12%
45% 19% 160%
13%
55% 20% 190%
14%
65% 21% 220%
2
--------------------------------------------------------------------------------
Award Formula for Profit Center Participants
Profit Center awards are based on the budget achievement of a particular group
of operating locations. The basic potential award for profit center participants
has two components:
Profit Center portion
75% of total award
Corporate and Discretionary portion
25% of total award
Each profit center has budgeted operating income for the year. The profit center
portion of the award is determined by the profit center’s achievement of that
budget. The table below is used to determine the payout. The highlighted part of
this table, for example, shows that participants in a profit center that
achieves 90% of budget would receive 80% of the profit center portion of their
award. Accordingly, for a participant with a $150,000 basic potential award, the
profit center portion of his or her award would be $90,000 ($150,000 x 75% x
80%). The maximum Corporate and Discretionary portion, assuming a 65% corporate
payout, would be $24,375 ($150,000 x 25% x 65%). Thus, the total award for this
Profit Center Participant would be $114,375 ($90,000 + $24,375).
PROFIT CENTER TABLE
Budget %
Achieved
--------------------------------------------------------------------------------
Pays
This %
--------------------------------------------------------------------------------
Budget %
Achieved
--------------------------------------------------------------------------------
Pays
This %
--------------------------------------------------------------------------------
<62.5%
0% 81% 62%
62.5%
25% 82% 64%
63%
26% 83% 66%
64%
28% 84% 68%
65%
30% 85% 70%
66%
32% 86% 72%
67%
34% 87% 74%
68%
36% 88% 76%
69%
38% 89% 78%
70%
40% 90% 80%
71%
42% 91% 82%
72%
44% 92% 84%
73%
46% 93% 86%
74%
48% 94% 88%
75%
50% 95% 90%
76%
52% 96% 92%
77%
54% 97% 94%
78%
56% 98% 96%
79%
58% 99% 98%
80%
60% ³100% 100%
3 |
EXHIBIT 10.3
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and
entered into as of August 11, 2006, by and between Martha Stewart Living
Omnimedia, Inc., a Delaware Corporation (the “Company”), and Mark Burnett (the
“Holder”).
WHEREAS, the Company issued to Holder the original warrant (the “Original
Warrant”) on September 17, 2004, pursuant to which Holder had the right to
exercise the Original Warrant to purchase up to 2,500,000 shares of Class A
Common Stock, par value $.01 per share of the Company (the “Class A Common
Stock”), if certain vesting terms and other conditions were satisfied;
WHEREAS, pursuant to the terms of the Original Warrant, Holder’s right to
purchase 1,666,667 shares of Class A Common Stock has vested, but Holder’s
rights with respect to 833,333 shares have not vested and will not vest;
WHEREAS, the Company and Holder have agreed to terms with respect to their
ongoing relationship, which terms include the issuance of a new warrant to
purchase up to 833,333 shares (the “Warrant”) and this grant to Holder of the
registration rights described herein with respect to Warrant Shares issuable in
respect of the Original Warrant or the Warrant.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree, intending to be legally bound hereby, as follows:
1. Certain Definitions.
In addition to the other terms defined in this Agreement, the following
terms shall have the following meanings:
“Commission” means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
“Exchange Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
“Koppelman Rights Agreement” means the Registration Rights Agreement
between Charles A. Koppelman and the Company dated January 24, 2005.
“NASD” means National Association of Securities Dealers, Inc.
“Person” means an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust
--------------------------------------------------------------------------------
(inter vivos or testamentary), an estate, a quasi-governmental entity, a
government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.
“Registrable Securities” means (i) any Warrant Shares issued or
issuable by the Company to Holder upon exercise of the Original Warrant and/or
the Warrant, and (ii) any additional shares of Class A Common Stock or other
equity securities of the Company issued by the Company in respect of Warrant
Shares described in subclause (i) after the issuance of such Warrant Shares, in
connection with a stock dividend, stock split, combination, exchange,
reorganization, recapitalization or similar reclassification of the Company’s
securities; provided that, as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities when: (w) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder; (x) such securities shall have been sold in satisfaction
of all applicable conditions to the resale provisions of Rule 144 under the
Securities Act (or any similar provision then in force); (y) such securities are
eligible to be publicly sold without limitation as to amount or manner of sale
pursuant to Rule 144(k) under the Securities Act (or any successor provision to
such Rule); or (z) such securities shall have ceased to be issued and
outstanding.
“Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
“Warrant Shares” means shares of Class A Common Stock issuable
pursuant to the terms of the Original Warrant or the Warrant.
2. Shelf Registration.
(a) At any time during which Holder owns Registrable Securities,
Holder may request in writing that the Company effect a shelf registration under
the Securities Act registering for resale by Holder of all of the Registrable
Securities eligible for registration pursuant to a shelf registration statement
on Form S-3 (or any similar short-form registration statement that is a
successor to Form S-3) or, in the Company’s sole discretion, any other
appropriate form. Subject to Section 2(b) of this Agreement, the Company shall
use its reasonable best efforts to prepare and file a shelf registration
statement under the Securities Act as soon as practicable after receipt by the
Company of such request from Holder. The Company shall use its reasonable best
efforts to cause such shelf registration statement to be declared effective by
the Commission as promptly as shall be reasonably practicable after it has been
filed. The Company shall not be required to effect more than one shelf
registration pursuant to this Section 2. Subject to Sections 2(c) and 2(e) of
this Agreement, the Company shall use its reasonable best efforts to keep such
shelf registration statement effective until all securities included in such
registration statement have ceased to constitute Registrable Securities.
(b) Notwithstanding Section 2(a) above, the Company may defer the
filing of or effectiveness of any shelf registration statement required by this
Section 2 if the Company is, at such time, in the process of pursuing an
underwritten public offering of equity securities and is advised by its managing
underwriter(s) that such offering would in its or their opinion be adversely
affected by such filing or (ii) the Board of Directors of the Company in its
good faith
- 2 -
--------------------------------------------------------------------------------
judgment, determines that any such filing or the offering of any Registrable
Securities would materially impede, delay or interfere with any proposed
financing, offer or sale of securities, acquisition, corporate reorganization or
other transaction involving the Company or any of its subsidiaries (a “Valid
Business Reason”). The Company may defer filing a shelf registration statement
until such Valid Business Reason no longer exists, provided that notwithstanding
anything to the contrary herein, in no event shall the Company defer the filing
or effectiveness of any such registration statement more than 180 days.
(c) At any time when a shelf registration statement effected pursuant
to this Section 2 is effective, upon written notice from the Company to Holder
that the Board of Directors of the Company has determined in good faith that the
sale of Registrable Securities pursuant to such shelf registration statement
would require disclosure of non-public material information not otherwise
required to be disclosed under applicable law having a material adverse effect
on the Company (an “Information Blackout”), Holder shall suspend sales of
Registrable Securities pursuant to such shelf registration statement until such
time as the Company notifies Holder that such material information has been
disclosed to the public or has ceased to be material or that sales pursuant to
such shelf registration statement may otherwise be resumed (the number of days
from such suspension of sales by Holder until the day when such sale may be
resumed hereunder is hereinafter called a “Sales Blackout Period”).
(d) Notwithstanding the provisions of Section 2(c): (i) there shall be
no more than two (2) Information Blackouts during any fiscal year of the Company
and (ii) in no event shall the aggregate Sales Blackout Periods during any
365 day period exceed 180 days in the aggregate.
(e) The Company shall bear all Registration Expenses in connection
with any shelf registration pursuant to this Section 2, whether or not such
shelf registration becomes effective; provided, however, that if Holder requests
a shelf registration and subsequently withdraws his request, then such Holder
either shall pay all Registration Expenses reasonably incurred in connection
with such shelf registration or forfeit the right to request another shelf
registration unless the withdrawal of such request is the result of facts or
circumstances relating to the Company that arise after the date on which such
request was made and would have a material adverse effect on the offering of the
Registrable Securities.
(f) Inclusion of Additional Securities. If the Holder elects to
request a Shelf Registration, the Company may include in such registration any
additional securities of the Company, including without limitation, shares of
Class A Common Stock requested and permitted to be included pursuant to the
terms of the Koppelman Rights Agreement.
3. Incidental or “Piggy-Back” Registration.
(a) If, at any time Holder owns Registrable Securities, the Company
proposes to file a Registration Statement under the Securities Act covering an
underwritten offering by the Company for its own account (other than a
Registration Statement on Form S-4 or S-8 or any successor thereto), then the
Company shall promptly give written notice of such proposed filing to Holder.
Upon the written request of Holder received by the Company within 10 days after
the delivery of such notice by the Company (but in any event prior to 10 days
following the
- 3 -
--------------------------------------------------------------------------------
expiration of the Registration Rights Period), the Company shall use
commercially reasonable efforts to cause a registration statement covering those
Registrable Securities that Holder has requested to be registered to become
effective under the Securities Act.
(b) The Company shall not be required under this Section 3 to include
any of the Holder’s securities in an underwriting unless he accepts the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by the Company. If the managing underwriter for the offering shall
advise the Company that marketing factors require a limitation of the number of
shares to be underwritten, then the Company shall so advise Holder and the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated in accordance with Section 3(c) below.
(c) If the managing underwriters of an underwritten offering notify
the Company or such other parties that in their opinion the number of shares of
securities requested to be including in such offering exceeds the number which
can be sold in such offering in an orderly manner within a price range
acceptable to the Company, the Company will include in such offering (i) first,
the greatest number of shares of Common Stock requested to be included by the
Company or by any party to the Koppelman Rights Agreement and permitted to be
included pursuant to the terms thereof and (ii) second, other shares of Class A
Common Stock, including the Warrant Shares as requested by the Holder, in each
case up to the greatest number of shares of Class A Common Stock which, in the
opinion of such managing underwriters, can be sold in an orderly manner in the
price range of such offering.
(d) The Company shall bear all Registration Expenses in connection
with any incidental registration pursuant to this Section 3, whether or not such
incidental registration statement becomes effective.
4. Restrictions on Public Sale; Rule 144
(a) In the event the Company is issuing equity securities to the
public in an underwritten offering, and, if requested by the managing
underwriter or underwriters for such underwritten offering, the Holder shall not
effect any public sale or distribution of Registrable Securities or any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 (or any similar provision then
in force) under the Securities Act, for a period commencing on the tenth (10th)
day prior to the date such underwritten offering commences (such offering being
deemed to commence for this purpose on the later of the effective date for the
registration statement for such offering or, if applicable, the date of the
prospectus supplement for such offering) and ending 90 days after the closing of
such underwritten offering, or such other period as the managing underwriters
may require;
(b) The Holder shall not, during any period in which any of his
Registrable Securities are included in any effective registration statement:
(i) effect any stabilization transactions or engage in any stabilization
activity in connection with the Warrant Shares or other equity securities of the
Company in contravention of Rule 104 of Regulation M under the Exchange Act; or
(ii) permit any Affiliated Purchaser (as that term is defined in Rule 101 of
Regulation M under the Exchange Act) to bid for or purchase for any account in
which Holder
- 4 -
--------------------------------------------------------------------------------
has a beneficial interest, or attempt to induce any other person to purchase,
any Warrant Shares in contravention of Rule 102 of Regulation M under the
Exchange Act.
(c) The Company shall make and keep information publicly available
relating to the Company so as to satisfy the requirements of Rule 144 under the
Securities Act (or any successor or corresponding rule) and file with the SEC
all reports and other documents required of the Company under the Securities Act
and the Exchange Act in a timely manner. If requested by the Holder, the Company
shall provide the Holder certificates or other reasonable assurances of its
compliance with the foregoing requirements.
5. Registration Procedures.
(a) In connection with any registration contemplated by Sections 2 or
3 the Company shall:
(i) prepare and file with the Commission, a registration
statement, which registration statement shall (x) be available for the sale of
the Registrable Securities in accordance with the intended method or methods of
distribution by Holder, and (y) comply as to form in all material respects with
the requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith; provided that, before filing a
registration statement, the Company shall upon request furnish to Holder copies
of such registration statement as proposed to be filed and thereafter such
number of copies of such registration statement (including all exhibits
thereto), and any documents incorporated by reference after the initial filing
of any registration statement as Holder may reasonably request on a case by case
basis after each such filing to the extent such documents are not otherwise
publicly available in order to facilitate the disposition of the Registrable
Securities owned by Holder, and shall revise the registration statement as it
specifically relates to Holder based on information received by Holder as
determined by the Company;
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period of time as is necessary to
allow the distribution of the Registrable Securities contemplated therein and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during the period
during which any such registration statement is required to be effective;
provided that, before filing any amendments or supplements to such registration
statement or the prospectus, the Company shall upon request furnish to Holder
copies of such amendments and supplements (in each case including all exhibits
thereto) and the prospectus (including each preliminary prospectus) as proposed
to be filed and thereafter such number of copies of such amendments,
supplements, prospectuses and any documents incorporated by reference after the
initial filing of any registration statement as Holder may reasonably request on
a case by case basis after each such filing to the extent such documents are not
otherwise publicly available in order to facilitate the disposition of the
Registrable Securities owned by Holder, and revise such documents as they
specifically relate to Holder based on information received by Holder as
determined by the Company;
- 5 -
--------------------------------------------------------------------------------
(iii) use its reasonable best efforts to cause the Registrable
Securities covered by such registration statement to be registered with, or
approved by, such other public, governmental or regulatory authorities as may be
necessary to facilitate the disposition of such Registrable Securities in
accordance with the methods of disposition intended herein;
(iv) notify Holder (A) when a prospectus or any prospectus
supplement has been filed with the Commission, and, with respect to such
registration statement or any post-effective amendment thereto, when the same
has been declared effective by the Commission, (B) of any request by the
Commission for amendments or supplements to such registration statement or
related prospectus, or for additional information, (C) of the issuance by the
Commission of any stop order or the initiation of any proceedings for such or a
similar purpose (and the Company shall use commercially reasonable efforts to
obtain the withdrawal of any such order at the earliest practicable moment),
(D) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose (and the Company shall use its commercially reasonable efforts to obtain
the withdrawal of any such suspension at the earliest practicable moment),
(E) of the occurrence of any event that requires the making of any changes to
such registration statement or related prospectus so that such documents will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (and the Company shall promptly prepare and furnish to Holder a
reasonable number of copies of a supplemented or amended prospectus such that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading), and (F) of the Company’s determination that the filing of a
post-effective amendment to such registration statement shall be necessary or
appropriate. Holder shall be deemed to have agreed by acquisition of Registrable
Securities that, upon the receipt of any notice from the Company of the
occurrence of any event of the kind described in clause (E) of this
Section 5(a)(iv), Holder shall forthwith discontinue his or its offer and
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until the Company notifies the Holder
otherwise. In addition, if so directed by the Company, the Holder shall deliver
to the Company, at the Company’s expense, all copies (other than permanent file
copies) of any defective prospectus as contemplated by clause (E) of this
Section 5(a)(iv) covering such Registrable Securities which are then in its
possession;
(v) use its reasonable best efforts to cause the Registrable
Securities to be listed on the principal exchange or exchanges or qualified for
trading on the principal over-the-counter market or listed on the automated
quotation market on which securities of the same class and series as the
Registrable Securities (or into which such Registrable Securities will be or
have been converted) are then listed, traded, or quoted upon the sale of such
Registrable Securities pursuant to the registration statement;
(vi) enter into customary agreements (including an underwriting
agreement in customary form including customary indemnification provisions) and
perform its obligations under any such agreements and shall take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
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(vii) make available for inspection by the Holder, any
underwriter selected by a Holder participating in any disposition pursuant to
such Registration Statement, and any attorney, accountant, or other professional
retained by any such Holder or underwriter, all financial and other records,
pertinent corporate documents, and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility in connection therewith, and cause the Company’s officers,
directors, and employees to supply all information reasonably requested by any
of such parties in connection with such registration statement;
(viii) furnish, in the case of an underwritten public offering,
to Holder and to each underwriter a signed counterpart of (i) an opinion or
opinions of counsel to the Company addressed to Holder and underwriters (on
which opinion both Holder and each such underwriter shall be entitled to rely)
and (ii) a comfort letter or comfort letters from the Company’s independent
public accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Holder or the managing underwriter therefor reasonably requests;
(ix) otherwise use commercially reasonable efforts to comply with
all applicable rules and regulations of the Commission, as the same may
hereafter be amended; and
(x) cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold; and use commercially reasonable efforts to cause the Registrar and
Transfer Agent for the Company to issue, upon request of the Holder,
certificates for such numbers of Registrable Securities registered in such names
as the Holder may reasonably request at least two business days prior to any
sale of Registrable Securities.
(b) In connection with any registration contemplated by Sections 2 or
3, Holder shall:
(i) cooperate with the Company in connection with the preparation
of the registration statement to be filed by the Company pursuant to this
Agreement, and for so long as the Company is obligated to keep such registration
statement effective, shall (a) respond within five (5) business days to any
request by the Company to provide or verify information regarding such Holder or
such Holder’s Registrable Securities (including the proposed manner of sale)
that may be required to be included in such registration statement pursuant to
the rules and regulations of the Commission, and (b) provide in a timely manner
information regarding the proposed distribution by such Holder of the
Registrable Securities and such other information as may reasonably be requested
by the Company from time to time in connection with the preparation of and for
inclusion in a shelf registration statement pursuant to Section 2 and/or any
related prospectus or supplement thereto; and
(ii) if requested by the Company, before using any registration
statement or any prospectus contained therein or any amendment or supplement
thereto, deliver to the Company a certification that he or it has reviewed the
information contained therein and representing and warranting to the Company
that the information relating to such Holder and his or its plan of distribution
is as set forth in the related prospectus, that the prospectus does not, as
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of the time of such sale, contain any untrue statement of a material fact
relating to or provided by such Holder or his or its plan of distribution and
that the prospectus does not, as of the time of such sale, omit to state any
material fact relating to such Holder or his or its plan of distribution
required to be stated in the prospectus or necessary to make the statements in
such prospectus, in the light of the circumstances under which they were made,
not misleading.
6. Registration Expenses.
Whether or not any registration statement prepared and filed pursuant to
Sections 2 or 3 of this Agreement is declared effective by the Commission, the
Company shall pay all of the following expenses (“Registration Expenses”)
arising in connection with any registrations pursuant to this Agreement (except
as specified in the following sentence): (a) all Commission and any NASD
registration and filing fees and expenses; (b) any and all expenses incident to
the Company’s performance of, or compliance with, this Agreement, including,
without limitation, any allocation of salaries and expenses of Company personnel
or other general overhead expenses of the Company, or other expenses for the
preparation of historical and pro forma financial statements or other data
prepared by the Company; (c) all listing, NASD, transfer and/or exchange agent
and registrar fees; (d) fees and expenses in connection with the qualification
of the Registrable Securities under securities or “blue sky” laws; (e) printing
and delivery expenses; (f) fees and out-of-pocket expenses of counsel for the
Company and its independent certified public accountants and other persons,
including special experts, retained by the Company; and (g) all reasonable fees
and disbursements of one (1) counsel for the Holder attributable to the
distribution of the Registrable Securities of such Holder included in such
registration (provided the amounts payable pursuant to this clause (g) shall not
exceed $10,000 in the aggregate). Notwithstanding the foregoing, the Company
shall not be required to pay any discounts or commissions of selling brokers,
dealers and underwriters relating to the distribution of the Registrable
Securities.
7. Indemnification; Contribution.
(a) The Company hereby indemnifies and holds harmless, to the fullest
extent permitted by law, Holder and each Person, if any, who controls Holder
within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, against all losses, claims, damages, liabilities (or proceedings
in respect thereof) and expenses (under the Securities Act, common law and
otherwise), joint or several, which arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement contemplated hereby or in any prospectus, preliminary
prospectus, free-writing prospectus, any amendment or supplement thereto or any
document incorporated by reference relating thereto or in any filing made in
connection with the registration or qualification of the offering under “blue
sky” or other securities laws of jurisdictions in which the Registrable
Securities are offered, or any omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Company shall reimburse Holder for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or proceeding, and (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or free-writing prospectus, if used prior to the
effective date of such registration statement or contained in the final
prospectus (as amended
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or supplemented if the Company shall have filed with the Commission any
amendment thereof or supplement thereto) if used within the period during which
the Company is required to keep the registration statement to which such
prospectus relates current, or the omission or alleged omission to state therein
a material fact necessary in order to make the statements therein in light of
the circumstances under which they were made, not misleading; provided, however,
that such indemnification shall not extend to any such losses, claims, damages,
liabilities (or proceedings in respect thereof) or expenses that are caused by
any untrue statement or alleged untrue statement contained in, or by any
omission or alleged omission from, information furnished in writing to the
Company by such Holder in such capacity specifically and expressly for use in
any such registration statement or prospectus.
(b) The Holder hereby indemnifies and hold harmless, to the fullest
extent permitted by law, the Company, its officers, directors, employees, agents
and each Person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act, against any
losses, claims, damages, liabilities (or proceedings in respect thereof) and
expenses resulting from any untrue statement, or alleged untrue statement of a
material fact, or any omission or alleged omission of a material fact required
to be stated, or necessary to make the statements in the registration statement
or prospectus, or any amendment thereof or supplement thereto, not misleading;
provided, however, that Holder shall be liable hereunder if and only to the
extent that any such loss, claim, damage, liability (or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement, or
alleged untrue statement or omission or alleged omission, made in reliance upon
and in conformity with information pertaining to Holder which is requested by
the Company and furnished in writing to the Company by such Holder specifically
and expressly for use in any such registration statement or prospectus.
(c) Any Person seeking indemnification under the provisions of this
Section 7 shall, promptly after receipt by such Person of notice of the
commencement of any action, suit, claim or proceeding, notify in writing each
party against whom indemnification is to be sought of the commencement thereof;
provided, however, that the failure so to notify an indemnifying party shall not
relieve the indemnifying party from any liability which it or he may have under
this Section 7 (except to the extent that it has been prejudiced in any material
respect by such failure) or from any liability which the indemnifying party may
otherwise have. In case any such action, suit, claim or proceeding is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent it or he may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such suit, action, claim or proceeding, (ii) the indemnifying party shall not
have employed counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding within a
reasonable time after notice of commencement of the action, suit, claim or
proceeding, or (iii) such indemnified party shall have reasonably concluded,
based on the advice of counsel, that there may be defenses available to it which
are different from or additional to those available
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to the indemnifying party which, if the indemnifying party and the indemnified
party were to be represented by the same counsel, would result in a conflict of
interest for such counsel or materially prejudice the prosecution of the
defenses available to such indemnified party. If any of the events specified in
clauses (i), (ii) or (iii) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the fees and expenses of one counsel
selected by a majority in interest of the indemnified parties shall be borne by
the indemnifying party. If, in any case, the indemnified party employs separate
counsel, the indemnifying party shall not have the right to direct the defense
of such action, suit, claim or proceeding on behalf of the indemnified party.
Anything in this paragraph to the contrary notwithstanding, an indemnifying
party shall not be liable for the settlement of any action, suit, claim or
proceeding effected without its prior written consent (which consent in the case
of an action, suit, claim or proceeding exclusively seeking monetary relief
shall not be unreasonably withheld or delayed). Such indemnification shall
remain in full force and effect irrespective of any investigation made by or on
behalf of an indemnified party.
(d) If the indemnification from the indemnifying party as provided in
this Section 7 is unavailable or is otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of such indemnifying party shall be
determined by reference to, among other things, whether any action in question,
including any untrue (or alleged untrue) statement of a material fact or
omission (or alleged omission) to state a material fact, has been made, or
relates to information supplied by such indemnifying party or such indemnified
party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 7(d) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any such investigation or proceeding.
The parties hereto acknowledge that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation other than as described above.
Notwithstanding the provisions of this Section 7(d), the Holder shall not be
required to contribute any aggregate amount in excess of the amount by which the
total price at which the Registrable Securities of such Holder were offered to
the public exceed the amount of any damages which such Holder otherwise would
have been required to pay or become liable to pay by reason of such untrue
statement or omission unless such loss, claim, damage, liability (or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement, or alleged untrue statement or omission or alleged omission, made in
reliance upon and in conformity with information pertaining to Holder which is
requested by the Company and furnished in writing to the Company by such Holder
specifically and expressly for use in any such registration statement or
prospectus. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
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If, however, indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the fullest
extent provided in Sections 7(a) through 7(d) hereof without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration.
8. Miscellaneous
(a) Notices. Except as otherwise provided below, whenever it is
provided in this Agreement that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties hereto, or whenever any of the parties hereto, desires to provide
to or serve upon any person any other communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
or sent by telecopy, addressed as follows:
if to the Company:
Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, New York 10019
Attention: General Counsel
Telecopy: (864) 987-9903
with a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 13th Street, N.W.
Washington, D.C. 20004-1109
Attention: Stuart A. Barr, Esq.
Telecopy: (202) 637-5910
if to the Holder:
Mark Burnett
PMB 208
9899 Santa Monica Boulevard
Beverly Hills, CA 90212
with a copy to:
Conrad Riggs
201 Wilshire Boulevard
2nd Floor
Santa Monica, CA 90401
Telecopy: (301) 471-7647
and:
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Irell & Manella LLP
1800 Avenue of the Stars
Sutie 900
Los Angeles, CA 90067
Attention: Richard C. Wirthlin, Esq.
Telecopy: (310) 203-7199
(b) Entire Agreement. This Agreement represents the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with respect to such
subject matter. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by a written instrument making specific
reference to this Agreement signed by the Company on the one hand, and Holder on
the other hand.
(c) Assignment; Successors and Assigns. Except as set forth in the
next sentence, this Agreement and the rights granted hereunder may not be
assigned by Holder without the prior written consent of the Company, which may
be granted or withheld by the Company in its sole and absolute discretion.
Notwithstanding the foregoing, this Agreement and Holder’s rights hereunder may
be assigned to any party to which Holder’s rights under the Warrant or Original
Warrant are assigned in whole or in part.
(d) Headings. Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
(e) Applicable Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the internal laws of the State of New York.
(f) Severability. If fulfillment of any provision of this Agreement,
at the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
(g) Equitable Remedies. The parties hereto agree that irreparable harm
would occur in the event that any of the agreements and provisions of this
Agreement were not performed fully by the parties hereto in accordance with
their specific terms or conditions or were otherwise breached, and that money
damages are an inadequate remedy for breach of this Agreement because of the
difficulty of ascertaining and quantifying the amount of damage that will be
suffered by the parties hereto in the event that this Agreement is not performed
in accordance with its terms or conditions or is otherwise breached. It is
accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and
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prevent breaches of this Agreement by the other parties and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, such remedy being in addition to and not in
lieu of, any other rights and remedies to which the other parties are entitled
to at law or in equity.
(h) No Waiver. No waiver by a party hereto shall be effective unless
made in a written instrument duly executed by the party against whom such waiver
is sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.
(i) Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature of or on behalf of each party appear on each counterpart, but
it shall be sufficient that the signature of or on behalf of each party appear
on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in any proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of or on behalf of all of the parties.
(j) Company Assets. The Holder acknowledges that no officer, director
or shareholder of the Company is liable to such Holder in respect of this
Agreement and that such Holder shall look only to the income and assets of the
Company in respect of any payments or claims related to this Agreement.
(k) Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.
(SIGNATURES APPEAR ON FOLLOWING PAGE)
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IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Warrant Registration Rights Agreement, or has caused this Warrant
Registration Rights Agreement to be duly executed and delivered in their names
and on their behalf, as of the date first written above.
Martha Stewart Living Omnimedia, Inc.
By:
/s/ John R. Cuti
Name: John R. Cuti
Title: Secretary and General Counsel
Mark Burnett
/s/ Mark Burnett
|
Exhibit 10.4
SECURITY AGREEMENT
This SECURITY AGREEMENT (this “Agreement”) is entered into as of January
27, 2006 (the “Effective Date”), by and between Raptor Pharmaceutical Inc., a
Delaware corporation (“Raptor”), and BioMarin Pharmaceutical Inc., a Delaware
corporation (“BioMarin”). BioMarin and Raptor are each referred to herein
individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, BioMarin assigned certain technology and intellectual property to
Raptor under that certain “Asset Purchase Agreement” entered into on even date
herewith (the “Asset Purchase Agreement”); and
WHEREAS, BioMarin desires to retain, and Raptor is willing to grant to
BioMarin, a security interest in and to the Transferred Technology (as defined
in the Asset Purchase Agreement), and certain Improvements (as defined in the
Asset Purchase Agreement), on the terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained herein and
intending to be legally bound, the Parties agree as follows:
1. Security Interest. (a) Raptor hereby assigns, transfers and grants to
BioMarin, and there is hereby created in favor of BioMarin, a security interest
under the California (Uniform) Commercial Code in and to the Collateral
described on Exhibit A hereto. (b) Concurrently with the execution of this
Agreement, Raptor shall deliver to BioMarin a UCC-1 Financing Statement which
Raptor hereby authorizes to be filed with respect to the Collateral. (c)
The security interest granted to BioMarin (the “Security Interest”) hereunder
shall secure: (1) the payments to BioMarin that have become due and
payable to BioMarin under Articles 3 and 4 of the Asset Purchase Agreement;
(2) the obligations to assign the Transferred Technology back to BioMarin
under Section 11.3 of the Asset Purchase Agreement; and (3) the
indemnity obligations in Section 10.1 of the Asset Purchase Agreement; and
(4) all of Raptor’s other obligations under the Asset Purchase Agreement.
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2. No Other Payments. Other than Section 8 hereof, nothing in this Agreement
shall be construed to require, and the Security Interest does not secure,
additional payments to BioMarin that are not required by the terms and
conditions of the Asset Purchase Agreement.
3. Restrictions on Transfer of Collateral.
Subject to any such activities being expressly subordinate to the Security
Interest, Raptor shall retain all right and license to (i) grant, authorize, and
otherwise transfer rights and licenses with respect to the Collateral; (ii) use,
sell, transfer, and otherwise dispose of and exploit the Collateral; and (iii)
sell and otherwise transfer its business or assets and such activities may be
taken without any requirements to obtain the consent, approval, acceptance, or
other authorization of BioMarin, or to notify BioMarin, in order to engage in
any such activities with respect to the Collateral, and BioMarin hereby waives
any provisions of applicable law that would require any such consent, approval,
acceptance, authorization, or notice. Notwithstanding the foregoing, in the
event that Raptor obtains BioMarin’s prior written consent, such consent not to
be unreasonably withheld, to a license of the Collateral, as part of such
consent, BioMarin will agree that, in the event BioMarin enforces the Security
Interest, conditioned on the licensee paying BioMarin the amounts that would
otherwise be due to it under the Asset Purchase Agreement, following enforcement
of the Security Interest and continuing for as long as the licensee continues to
make such payments, BioMarin will automatically, without further action or the
requirement for further payments, grant a license to the Collateral to the
licensee with the same scope and rights as the license between Raptor and the
licensee.
Nothing in this Agreement shall be construed to require Raptor to file,
prosecute, maintain, or enforce any of the Collateral, and Raptor shall have the
right to abandon, disclaim and terminate the Collateral, except subject to
BioMarin’s rights to prosecute and maintain the Patents in the Transferred
Technology under Section 9.1(b) of the Asset Purchase Agreement if Raptor elects
to not do so.
RAPTOR SHALL HAVE NO LIABILITY TO BIOMARIN, INCLUDING UNDER THIS AGREEMENT, AS A
RESULT OF ANY INVALIDATION OR UNENFORCEABILITY OF THE COLLATERAL OR ANY
NARROWING, ABANDONMENT, DISCLAIMER, TERMINATION, OR OTHER LOSS OF THE
COLLATERAL. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 3 SHALL BE
CONSTRUED TO LIMIT EITHER PARTY’S RIGHTS OR REMEDIES, OR EITHER PARTY’S
OBLIGATIONS, UNDER THE ASSET PURCHASE AGREEMENT.
4. Intentionally Omitted 5. Representations And Warranties. EXCEPT
AS EXPRESSLY SET FORTH IN THE ASSET PURCHASE AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES IN CONNECTION WITH THIS AGREEMENT, WHETHER EXPRESS
OR IMPLIED, STATUTORY, OR OTHERWISE, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS
ANY AND ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY, TITLE,
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FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, COMPATIBILITY,
SECURITY, OR ACCURACY.
6. Modification of Asset Purchase Agreement by BioMarin. Without affecting the
liability of Raptor or of any other person who is or shall become bound by the
terms of this Agreement or who is or shall become liable for the performance of
any obligation secured hereby, BioMarin may, in such manner, upon such terms and
at such times as BioMarin deems best and without notice or demand, (i) release
any party now or hereafter liable for the performance of any such obligation,
(ii) extend the time for such performance, (iii) accept additional security
therefore, (iv) consent to substitute or release any property securing such
performance, or (v) enter into any agreement with Raptor modifying in any way
whatsoever the terms and provisions of the Asset Purchase Agreement. No exercise
or non-exercise by BioMarin of any of its rights under this Agreement, no
dealing by BioMarin with any person, firm or corporation and no change,
impairment, loss or suspension of any right or remedy of BioMarin shall in any
way affect any of the obligations of Raptor hereunder or any security furnished
by Raptor, or give Raptor any recourse against BioMarin.
7. Further Acts of Raptor. Raptor shall, at the reasonable request of BioMarin,
execute (either alone or with BioMarin, as BioMarin may require) and deliver to
BioMarin any financing statements, financing statement changes and any and all
additional instruments and documents, and Raptor shall perform all actions,
which from time to time may be necessary to carry into effect the provisions of
this Agreement or to establish or maintain a perfected security interest in the
Collateral, including, without limitation, any filing or notice with the United
States Patent and Trademark Office or comparable office of any jurisdiction.
BioMarin shall be responsible for the costs of filing, renewing and terminating
UCC-1 financing statements and similar documents.
8. Additional Security. If the performance of any obligation secured hereby
shall at any time be secured by any other instrument or instruments, the
exercise by BioMarin, in the event of a default in the performance of any such
obligation, of any right or remedy under such instrument or instruments shall
not be construed as or deemed to be a waiver of or limitation upon the right of
BioMarin to exercise, at any time and from time to time thereafter, any right or
remedy under this Agreement or under any such other instrument or instruments.
9. Default. Upon the occurrence of an uncured breach of sections 3, 4, or 10 of
the Asset Purchase Agreement, or termination of the Asset Purchase Agreement
under Section 11.2 of the Asset Purchase Agreement (any such occurrence, an
“Event of Default”), and in addition to all other rights and remedies under the
Asset Purchase Agreement, at law or in equity, BioMarin shall have the rights
and remedies of a secured party under the California (Uniform) Commercial Code,
or under any other applicable law, together with any and all of the rights and
remedies provided in this Agreement. Expenses of retaking, holding, preparing
for sale, selling or the like shall include BioMarin’s reasonable attorneys’
fees and legal expenses, including without limitation those attorneys’ fees and
legal expenses incurred by BioMarin in connection with any insolvency,
bankruptcy, reorganization, arrangement or other similar proceedings involving
Raptor which in any way affect the exercise by BioMarin of its rights and
remedies hereunder.
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10. No Implied Waivers. The several rights and remedies of BioMarin
hereunder or herein referred to shall, to the full extent permitted by law, be
construed as cumulative, and none of said rights and remedies is exclusive of
the others. No delay or omission on the part of BioMarin in exercising any right
or remedy created by, connected with or provided for in this Agreement or
arising from any default by Raptor or by any other person the performance of
whose obligations is secured hereby, shall be construed as or be deemed to be an
acquiescence in or a waiver of such default or a waiver of or limitation upon
the right of BioMarin to exercise, at any time and from time to time thereafter,
any right or remedy under this Agreement. No waiver of any breach of any of the
covenants or conditions in this Agreement shall be deemed to be a waiver of or
acquiescence in or consent to any previous or subsequent breach of the same or
any other covenant or condition.
11. Successive Actions. In the event of any Event of Default, BioMarin may
maintain an action therefore and may maintain successive actions for each Event
of Default. BioMarin’s rights hereunder shall not be exhausted by its exercise
of any of its rights or remedies or by any such action or by any number of
successive actions until and unless each obligation secured hereby has been
fully performed or paid.
12. Transfer of Indebtedness. Upon the transfer by BioMarin of all or any
portion of the Asset Purchase Agreement or any of the obligations secured
hereby, BioMarin may transfer therewith all or any portion of the security
interest created hereunder, but BioMarin shall retain all of its rights
hereunder with respect to any part of such obligations and any part of its
security interest hereunder not so transferred.
13. Term; Binding Effect. This Agreement shall be and remain in full force
and effect until the earlier of the obligations secured hereby have been fully
performed or paid or upon termination or expiration of the Asset Purchase
Agreement, in which case this Agreement shall automatically terminate and
BioMarin shall promptly return possession of the remaining Collateral, if any,
to Raptor, and shall promptly file termination statements where appropriate.
14. Rules of Construction. When the identity of the parties hereto or the
circumstances make it appropriate, the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural. The headings of each
Section are for information and convenience only and do not limit or construe
the contents of any provision hereof.
15. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one (1) and the same instrument.
16. Entire Agreement. This Agreement, and the Asset Purchase Agreement,
entered into between the Parties on even date herewith, constitutes and contains
the entire agreement and final understanding between the Parties concerning the
Transactions and all other subject matters addressed herein or pertaining
thereto. This Agreement, and such Asset Purchase Agreement are intended by the
Parties as a final expression of their agreement with respect to such terms as
are included herein and therein and, further, are intended by the Parties as a
complete and exclusive
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statement of the terms of their agreement. This Agreement, and such Asset
Purchase Agreement supersede and replace all prior negotiations and all prior or
contemporaneous representations, promises or agreements, proposed or otherwise,
whether written or oral, concerning all subject matters addressed herein or
pertaining hereto. Any representation, promise or agreement not specifically
included in this Agreement, or such Asset Purchase Agreement shall not be
binding upon or enforceable against any Party to this Agreement. This is a fully
integrated agreement.
17. Governing Law. This Agreement shall be governed by, interpreted under,
and construed in accordance with the internal laws of the State of California
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines, except to the extent that certain matters are
preempted by Federal law.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed by a duly authorized officer as of the day and year first above
written.
RAPTOR PHARMACEUTICAL INC.
By:
Name: Christopher Starr
Title: CEO
BIOMARIN PHARMACEUTICAL INC.
By:
Name: G. Eric Davis
Title: Vice President, Corporate Counsel
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EXHIBIT A
DESCRIPTION OF THE COLLATERAL
The term “Collateral” shall mean (i) the Transferred Technology; and (ii)
claims in Patents owned by Raptor that claim and are primarily directed to an
Improvement in a NeuroTrans Product. The term “Collateral” shall not include (i)
any Technology or Intellectual Property, other than the Transferred Technology
and other than the Patents owned by Raptor that are described in clause (ii) of
the preceding sentence, or (ii) any Patent claims that extend to any protein
other than the Receptor Associated Protein or an Improvement or that extend to
any product other than a NeuroTrans Product.
In addition, the word “Collateral” also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located: all proceeds (including insurance proceeds) or sums due from a
third party who has infringed the Collateral or from that party’s insurer,
whether due to judgment, settlement or other process.
The following definitions are referenced in the above description of
“Collateral”:
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“Business” means (i) the research and development activities of, or under
authority of, BioMarin, Raptor or their Affiliates, which activities directly
and specifically relate to the use of a receptor associated protein, or any
similar or related protein, as a drug or drug delivery platform, including the
Technology necessary for such research and development activities and (ii) the
further research and development concerning such use beyond the research and
development activities described in clause (i) and the commercial exploitation
of all of the foregoing research and development; including all further
research, development, making, use, license, import and sale of products that
involve or use such a protein.
“Business Copyrights” shall mean the Copyrights listed on Section 1.2(g) of
the Disclosure Schedule.
“Business Patents” shall mean the Patents listed on Section 1.2(h) of the
Disclosure Schedule and all patents, utility models, certificates of invention,
patents of addition or substitution, and other governmental grants for the
protection of inventions anywhere in the world, including any reissue, renewal,
re-examination, or extension thereof, and all applications for any of the
foregoing, including any international, regional, national, provisional,
divisional, continuation, continuation in part, continued prosecution, and petty
patent application, in each case that correspond or that claim priority to the
Patents listed on Section 1.2(h) of the Business Disclosure Schedule.
“Business Trademarks” shall mean the Trademarks listed on Section 1.2(i) of
the Disclosure Schedule and all goodwill associated with such Trademarks.
“Copyrights” shall mean U.S. and foreign registered and unregistered
copyrights (including those in computer software and databases), rights of
publicity and all registrations and applications to register the same.
“Disclosure Schedule” shall mean the disclosure schedule of even date
herewith prepared and signed by BioMarin and delivered to Raptor simultaneously
with the execution of the Asset Purchase Agreement.
“Improvement” means any carrier protein that has at least seventy five
percent (75%) homology with the Receptor Associated Protein. As used herein, “at
least seventy five percent (75%) homology” means the nucleotide or amino acid
residue sequence is at least seventy five percent (75%) identical to the amino
acid sequence of the Receptor Associated Protein.
“Intellectual Property” shall mean all rights in, to and under any and all
of the following: Trademarks, Patents, Copyrights, Trade Secrets, Technology and
other intellectual property and proprietary rights anywhere in the world.
“Transferred Know-How” shall mean all Technology in the possession or
control of BioMarin or its Affiliates necessary for the Business, which shall
include all Technology listed in Section 1.2(v) of the Disclosure Schedule.
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“Transferred Technology” shall mean all Intellectual Property which is
owned by BioMarin or its Affiliates and which is reasonably necessary for the
operation of the Business, or the making, use, sale, offer for sale, or import
of any Products, which shall include: (i) the Business Patents; (ii) the
Business Trademarks; (iii) the Business Copyrights, (iv) the Transferred
Know-How, and (v) all Products.
“NeuroTrans Product” means a therapeutic product that is delivered across
a blood brain barrier using a carrier protein that facilitates transport of such
therapeutic product across such barrier, but only if (a) the manufacture, sale,
import, offer to sell, use, or other activities with respect to such product
would, but for the assignment to Raptor in Section 2.1 below, infringe in the
country for which such product is sold, a Valid Claim; (b) the manufacture,
sale, import, offer to sell, use, or other activities with respect to such
product would, but for the assignment to Raptor in Section 2.1 below, infringe
upon some or all of the Transferred Know-How, provided that the carrier protein
is the Receptor Associated Protein or an Improvement; or (c) such product is
otherwise based upon the Transferred Technology and the carrier protein is the
Receptor Associated Protein or an Improvement.
“Patents” shall mean all patents, utility models, certificates of
invention, patents of addition or substitution, and other governmental grants
for the protection of inventions anywhere in the world, including any reissue,
renewal, re-examination, or extension thereof, and all applications for any of
the foregoing, including any international, regional, national, provisional,
divisional, continuation, continuation in part, continued prosecution, and petty
patent applications.
“Products” means all products, Technology and services of BioMarin or its
Affiliates, along with collateral materials of BioMarin and its Affiliates,
researched, developed, sold, licensed, used, or otherwise exploited or
commercialized by BioMarin or any of its Affiliates in the Business, whether
commercially available or in the development stage (including any pre-clinical
and clinical research or development).
“Receptor Associated Protein” means the receptor associated protein, as
disclosed in and having the sequence disclosed in U.S. Patent No. 5,474,766.
“Technology” means any and all technology, and technical and other
information, and tangible embodiments thereof, including Trade Secrets,
know-how, research, processes, formulations, techniques, diagnostics, models,
concepts, ideas, knowledge, developments, samples, methods, invention and other
disclosures, recipes, specifications, materials, instructions, compositions,
designs, results, assays, reagents, systems, descriptions, analyses, opinions,
works of authorship, plans, procedures, manuals, depictions, inventions,
discoveries, methods, data, reports, market information, projections, and any
other written, printed or electronically stored information and materials of any
nature whatsoever.
“Trademarks” shall mean U.S. and foreign registered and unregistered
trademarks, trade dress, service marks, logos, trade names, corporate names and
all registrations and applications to register the same and all goodwill
associated with any of the foregoing.
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“Trade Secrets” shall mean all categories of trade secrets as defined in
the Uniform Trade Secrets Act, including trade secrets that are business
information, inventions, know-how, or confidential information.
“Valid Claim” means (i) an issued, unexpired, and enforceable claim in the
Business Patents, or any other Patent assigned to Raptor in the Transferred
Technology, that has an effective filing date (as defined in 35 USC §119 or
§120, or equivalent in a country outside the United States) that precedes the
Effective Date or (ii) an issued, unexpired, and enforceable claim in another
Patent owned by Raptor that claims, and is primarily directed to, an Improvement
(and not any protein more generally); in each case provided that the claim has
not been held invalid or unenforceable, and has not been abandoned, disclaimed,
waived, or terminated.
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Exhibit 10.3
AETNA PERFORMANCE UNIT AWARD AGREEMENT
AETNA PERFORMANCE UNIT AWARD AGREEMENT, dated as of
between AETNA INC., a Pennsylvania corporation (the
“Company”), and (the “Executive”) pursuant to the Company’s
2000 Stock Incentive Plan (the “Plan”).
1. Confirmation of Grant. The Company hereby evidences and confirms
its grant to the Executive, effective as of the date hereof, of an award of
___Performance Units which represent the Company’s obligation, subject to the
satisfaction of the conditions as to vesting set forth in Section 2 below, to
pay cash upon the terms and conditions set forth herein (the “Award”). Each unit
represents a potential future payment to the Executive of $___(before taking
into account federal, state or local taxes). The Award may be settled in cash or
stock at the discretion of the Committee.
This Agreement is subject in all respects to the terms of the Plan,
which is incorporated into this Agreement and made a part hereof. Terms used in
this Agreement with initial capital letters, but not defined herein, shall have
the same meanings as they have under the Plan.
2. Vesting.
(a) At the End of the Performance Period. The Performance Units
awarded hereby will become vested only to the extent that the Committee
determines that the performance goals established by the Committee for the
performance period through (the
“Performance Goals” and “Performance Period”, respectively) have been achieved.
The Performance Goals and related vesting schedule are set forth on Exhibit A to
this Agreement which is incorporated into this Agreement and is made a part
hereof.
(b) Acceleration of Vesting and Payout of Performance Units Upon a
Change in Control. Notwithstanding any other provision of this Agreement to the
contrary, if a Change in Control (as defined below) shall occur, the Performance
Units not previously forfeited pursuant to this Agreement shall become
immediately vested at a level which equals the greater of (x) 100% vesting or
(y) the number of Performance Units that would have vested based on the
Company’s actual performance level using the date on which the Change in Control
occurs as the end of the Performance Period. The Executive shall be paid as soon
as is practicable, but in no event later than fifteen business days following
the Change in Control, the value of the Performance Units, without regard to any
prior deferral election in effect and without regard to Section 3(a) hereof.
The term “Change in Control” means the happening of any of the
following:
(i) When any “person” as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections
13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the
Exchange Act but excluding the Company and any Subsidiary thereof and any
employee benefit plan sponsored or maintained by the Company or any Subsidiary
(including any trustee of such plan acting as trustee), directly or indirectly,
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act,
as amended from time to time), of securities of the Company representing 20
percent or more of the combined voting power of the Company’s then outstanding
securities;
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(ii) When, during any period of 24 consecutive months, the individuals who,
at the beginning of such period, constitute the Board (the “Incumbent
Directors”) cease for any reason other than death to constitute at least a
majority thereof, provided that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this Paragraph 2(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder approval for
the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or otherwise.
Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed
to have occurred (i) as a result of the formation of a Holding Company, or
(ii) with respect to Executive, if Executive is part of a “group,” within the
meaning of Section 13(d)(3) of the Exchange Act as in effect on the effective
date, which consummates the Change in Control transaction. In addition, for
purposes of the definition of “Change in Control” a person engaged in business
as an underwriter of securities shall not be deemed to be the “Beneficial Owner”
of, or to “beneficially own,” any securities acquired through such person’s
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
For purposes of this Section 2(b) the term “Holding Company” means an entity
that becomes a holding company for the Company or its businesses as a part of
any reorganization, merger, consolidation or other transaction, provided that
the outstanding shares of common stock of such entity and the combined voting
power of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors is, immediately after such
reorganization, merger, consolidation or other transaction, beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the voting stock
outstanding immediately prior to such reorganization, merger, consolidation or
other transaction in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation or other
transaction, of such outstanding voting stock.
3. Deferral of Distributions.
(a) Mandatory Deferral. If the Committee determines that Section
162(m) of the Code would preclude the Company (and, as applicable, a Subsidiary
or Affiliate) from receiving a Federal income tax deduction upon a distribution
of an Award, the Committee shall have the authority to defer the timing of any
such distribution in accordance with this Section 3. If the Committee determines
that any such distribution should be deferred, it shall be deferred until the
earliest date or dates at which the Award may be distributed without presenting
a material risk that Section 162(m) of the Code would preclude the receipt of a
Federal income tax deduction with respect to the Award distributed. To the
extent any portion (but not all) of the Award whose distribution is deferred
hereunder can be distributed in a given year under the standard set forth in the
preceding sentence, such portion shall be so distributed. Notwithstanding
anything else contained herein to the contrary, the Award which the Executive is
entitled to receive in accordance with the terms of this Agreement (absent
application of this Section 3(a)) shall be distributed to the Executive as soon
as practicable after the first business day of the calendar year following the
termination of the Executive’s employment with the Company and each of its
Subsidiaries and Affiliates.
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(b) Voluntary Deferral. At such times and upon such terms and
conditions as the Company shall determine, the Company may permit the Executive
to elect to defer the distribution of an Award otherwise payable to the
Executive under this Agreement until termination of the Executive’s Employment
or such other date as the Executive shall specify in the deferral election.
(c) Earnings on Deferral. If any payment is deferred pursuant to this
Section 3, such amount shall be placed in a bookkeeping account and the value of
the account shall be determined during such deferral period according to a
formula to be determined from time to time by the Company.
4. Termination of Employment.
(a) Special Termination. In the event that the Executive’s Employment
with the Company and each of its Subsidiaries and Affiliates terminates by
reason of the Executive’s death, Disability or Retirement or involuntary
termination of Employment by the Company for reasons other than misconduct
(including violation of the Company’s Code of Conduct) (each a “Special
Termination”), then the Performance Units awarded hereunder shall become vested
and nonforfeitable, if at all, after the date of termination of Employment and
at the end of the Performance Period, as the case may be, as to that number of
Units which is equal to that percentage, if any, of such number of Performance
Units that would have become vested under Section 2 at the end of the
Performance Period, times a fraction as follows: the numerator is the number of
days occurring on or after and the denominator is ___.
Notwithstanding anything in this Section 4(a) to the contrary, if following the
Executive’s termination of Employment, the Committee determines that the
Executive has engaged in conduct, whether before or after the Executive’s
termination of Employment, that would have constituted grounds to terminate
employment for Cause had the Executive still been employed at the time of such
determination, all of the Executive’s Performance Units shall be forfeited as of
the date of such determination.
(b) Other Termination of Employment. Unless the Committee shall
otherwise determine, in the event that the Executive’s Employment with the
Company and each of its Subsidiaries and Affiliates terminates for any reason
other than a Special Termination, any portion of the Performance Units that has
not become vested pursuant to Section 2 at the date of the Executive’s
termination of Employment shall be forfeited as of the date of such termination
of Employment.
For purposes of this Section 4, the term “Employment” shall refer to
active employment with the Company and shall not include severance or salary
continuation periods or any other approved leaves of absence and the term
“Retirement” shall mean termination of Employment by Executive provided the
Executive’s age and completed years of service total 65 or more points at such
termination.
5. Capital Adjustments. In the event that the Committee shall
determine that any Fundamental Corporate Event affects the Common Stock or the
Performance Goals such that an adjustment is required to preserve, or to prevent
enlargement of, the benefits or potential benefits made available under this
Agreement, then the Committee may make an adjustment in the Performance Goals,
in such manner as the Committee may deem equitable.
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6. Amendments. The Committee shall have the right, in its sole
discretion, to alter or amend this Agreement, from time to time, as provided in
the Plan, provided that no such amendment shall reduce the Executive’s rights
under this Agreement without the Executive’s consent. Notwithstanding, this
limitation on amendments is not intended to reduce the Committee’s authority to
construe, interpret and administer the Plan and this Award or to establish or
modify the Performance Goals or determine whether the Performance Goals have
been met. Subject to the first sentence of this Section 6, any alteration or
amendment of this Agreement by the Committee shall, upon adoption thereof by the
Committee, become and be binding and conclusive on all persons affected thereby
without requirement for consent or other action with respect thereto by any such
person. The Company shall give written notice to the Executive of any such
alteration or amendment of this Agreement as promptly as practicable after the
adoption thereof. This Agreement may also be amended by a written agreement
signed by both the Company and the Executive.
7. Additional Consideration for Grant.
(a) Nondisclosure, Nonsolicitation, Cooperation and Intellectual
Property. As consideration for the grant of Performance Units evidenced hereby,
without the prior written consent of the Company:
(i) the Executive shall not (except to the extent required by an order of a
court having competent jurisdiction or under subpoena from an appropriate
government agency) disclose to any third person, whether during or subsequent to
the Executive’s Employment, any trade secrets, confidential information or
proprietary materials, which may include but are not limited to, the following
categories of information and materials: customer lists and identities, employee
lists and identities, provider lists, product development and related
information, marketing plans and related information, sales plans and related
information, premium or any other pricing information, operating policies and
manuals, research, payment rates, methodologies, contractual forms, business
plans, financial records, computer programs and databases or other financial,
commercial, business or technical information related to the Company or any
Subsidiary or Affiliate unless such information has been previously disclosed to
the public by the Company or has become public knowledge other than by a breach
of this Agreement; provided, however, that this limitation shall not apply to
any such disclosure made while the Executive is employed by the Company, any
Subsidiary or Affiliate if such disclosure occurred in connection with the
performance of Executive’s job as an employee of the Company, any Subsidiary or
Affiliate;
(ii) while in Employment and for two years after the termination of such
Employment, the Executive shall not, directly or indirectly, induce or attempt
to induce any employee of the Company, any Subsidiary or any Affiliate to be
employed or perform services elsewhere;
(iii) while in Employment and for two years after the termination of such
Employment, the Executive shall not, directly or indirectly, induce or attempt
to induce any agent or agency, broker, supplier or health care provider of the
Company, any Subsidiary or Affiliate to cease or curtail providing services to
the Company, any Subsidiary or Affiliate;
(iv) while in Employment and for two years after the termination of such
Employment, the Executive shall not directly or indirectly, solicit or attempt
to solicit the trade of any individual or entity which, at the time of such
solicitation, is a customer of the Company, any Subsidiary or Affiliate, or
which the Company, any Subsidiary or Affiliate is undertaking reasonable steps
to procure as a customer at the time of or immediately preceding termination of
Employment; provided, however, that this limitation shall only apply to any
product or service which is in competition with a product or service of the
Company, any Subsidiary or Affiliate and shall apply only with respect to a
customer with whom the Executive has been directly or indirectly involved;
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(v) following the termination of the Executive’s Employment, the Executive
shall provide assistance to and shall cooperate with the Company or a Subsidiary
or Affiliate, upon its reasonable request and without additional compensation,
with respect to matters within the scope of the Executive’s duties and
responsibilities during Employment, provided that any reasonable out-of-pocket
expenses incurred in connection with any assistance Executive has been requested
to provide under this provision for items including, but not limited to
transportation, meals, lodging and telephone, shall be reimbursed by the
Company. The Company agrees and acknowledges that it shall, to the maximum
extent possible under the then prevailing circumstances, coordinate or cause a
Subsidiary or Affiliate to coordinate any such request with the Executive’s
other commitments and responsibilities to minimize the degree to which such
request interferes with such commitments and responsibilities.
(vi) Executive will promptly notify Company’s General Counsel if Executive
is contacted by regulatory or self-regulatory agency with respect to matters
pertaining to the Company or by an attorney or other individual who informs
Executive that he/she has filed, intends to file, or is considering filing a
claim or complaint against the Company.
(vii) Executive acknowledges that all original works of authorship that are
created by Executive (solely or jointly with others) within the scope of
Executive’s employment which are protectable by copyright are “works made for
hire” as that term is defined in the United States Copyright Act (17 U.S.C.,
Section 101). Executive further acknowledges that while employed by the Company,
Executive may develop ideas, inventions, discoveries, innovations, procedures,
methods, know-how or other works which relate to the Company’s current or are
reasonably expected to relate to the Company’s future business that may be
patentable or subject to trade secret protection. Executive agrees that all such
works of authoriship, ideas, inventions, discoveries, innovations, procedures,
methods, know-how and other works shall belong exclusively to the Company and
Executive hereby assigns all right, title and interest therein to the Company.
To the extent any of the foregoing works may be patentable, Executive agrees
that the Company may file and prosecute any application for patents for such
works and that Executive will, on request, execute assignments to the Company
relating to (and take all such further steps as may be reasonably necessary to
perfect the Company’s sole and exclusive ownership of) any such application and
any patents resulting therefrom.
(b) Intention of the Parties. If any provision of Section 7(a) is
determined by a court of competent jurisdiction not to be enforceable in the
manner set forth in this Agreement, the Company and the Executive agree that it
is the intention of the parties that such provision should be enforceable to the
maximum extent possible under applicable law and that such court shall reform
such provision to make it enforceable in accordance with the intent of the
parties. The Company does not intend to enforce the restrictions of Section 7(a)
to the extent (i) such enforcement would violate applicable law or (ii) the
restrictions are invalid or void under applicable law. The Executive
acknowledges that a material part of the inducement for the Company to grant the
Performance Units evidenced hereby is the Executive’s covenants set forth in
Section 7(a) and that the covenants and obligations of the Executive with
respect to nondisclosure, nonsolicitation, cooperation and intellectual property
rights relate to special, unique and extraordinary matters and that a violation
of any of the terms of such covenants and obligations will cause the Company
irreparable injury for which adequate remedies are not available at law.
Therefore, the Executive agrees that, if the Executive shall breach any of those
covenants, the Company shall have no further obligation to pay the Executive any
benefits otherwise payable hereunder. Notwithstanding Section 7(c) of this
Agreement, the Company shall be entitled to temporary, preliminary and permanent
equitable relief (without the requirement to post bond) restraining the
Executive from committing any violation of the covenants and obligations
contained in Section 7(a). The remedies in the preceding sentence are cumulative
and are in addition to any other rights and remedies the Company may have at law
or in equity as a court or arbitrator shall reasonably determine.
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(c) Mandatory Binding Arbitration of Employment Disputes.
(i) Except as otherwise specified in this Agreement, the Executive and the
Company agree that all employment-related legal disputes between them will be
submitted to and resolved by binding arbitration, and neither the Executive nor
the Company will file or participate as an individual party or member of a class
in a lawsuit in any court against the other with respect to such matters. This
shall apply to claims brought on or after the date the Executive signs this
Agreement, even if the facts and circumstances relating to the claim occurred
prior to that date.
For purposes of Section 7(c) of this Agreement, “the Company” includes
Aetna Inc., its subsidiaries and related companies, their predecessors,
successors and assigns, and those acting as representatives or agents of those
entities. THE EXECUTIVE UNDERSTANDS THAT, WITH RESPECT TO CLAIMS SUBJECT TO THE
ARBITRATION REQUIREMENT, ARBITRATION REPLACES THE RIGHT OF THE EXECUTIVE AND THE
COMPANY TO SUE OR PARTICIPATE IN A LAWSUIT. THE EXECUTIVE ALSO UNDERSTANDS THAT
IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR
JURY, AND THE DECISION OF THE ARBITRATOR IS FINAL AND BINDING.
(ii) THE EXECUTIVE UNDERSTANDS THAT THE ARBITRATION PROVISIONS OF THIS
AGREEMENT AFFECT THE LEGAL RIGHTS OF THE EXECUTIVE AND THE COMPANY AND
ACKNOWLEDGES THAT THE EXECUTIVE HAS BEEN ADVISED TO, AND HAS BEEN GIVEN THE
OPPORTUNITY TO, OBTAIN LEGAL ADVICE BEFORE SIGNING THIS AGREEMENT.
(iii) Section 7(c) of this Agreement does not apply to workers’
compensation claims, unemployment compensation claims, and claims under the
Employee Retirement Income Security Act of 1974 (“ERISA”) for employee benefits.
A dispute as to whether Section 7(c) of this Agreement applies must be submitted
to the binding arbitration process set forth in this Agreement.
(iv) The Executive and/or the Company may seek emergency or temporary
injunctive relief from a court (including with respect to claims arising out of
Section 7(a)) in accordance with applicable law. However, except as provided in
Section 7(b) of this Agreement, after the court has issued a ruling concerning
the emergency or temporary injunctive relief, the Executive and the Company
shall be required to submit the dispute to binding arbitration pursuant to this
Agreement.
(v) Unless otherwise agreed, the arbitration will be administered by the
American Arbitration Association (the “AAA”) and will be conducted pursuant to
the AAA’s National Rules for Dispute Resolution (the “Rules”), as modified in
this Agreement, in effect at the time the request for arbitration is filed. The
AAA’s Rules are available on the AAA’s website at www.adr.org. They may also be
obtained from the Company’s Office of Employment Dispute Resolution
(860-273-4410 or 1-888-291-1444). THE EXECUTIVE ACKNOWLEDGES THAT THE COMPANY
HAS ENCOURAGED THE EXECUTIVE TO READ THESE RULES PROMPTLY AND CAREFULLY AND THAT
THE EXECUTIVE HAS BEEN AFFORDED SUFFICIENT OPPORTUNITY TO DO SO.
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(vi) If the Company initiates a request for arbitration, the Company will
pay all of the administrative fees and costs charged by the AAA, including the
arbitrator’s compensation and charges for hearing room rentals, etc. If the
Executive initiates a request for arbitration or submits a counterclaim to the
Company’s request for arbitration, the Executive shall be required to contribute
One Hundred Dollars ($100.00) to those administrative fees and costs, payable to
the AAA at the time the Executive’s request for arbitration or counterclaim is
submitted. The Company may increase the contribution amount in the future
without amending this Agreement, but not to exceed the amount of the
then-current fee for filing a lawsuit in federal court. In all cases, the
Executive and the Company shall be responsible for payment of any fees assessed
by the arbitrator as a result of that party’s delay, request for postponement,
failure to comply with the arbitrator’s rulings and for other similar reasons.
(vii) The Executive and the Company may choose to be represented by legal
counsel in the arbitration process and shall be responsible for their own legal
fees, expenses and costs. However, the arbitrator shall have the same authority
as a court to order the Executive or the Company to pay some or all of the
other’s legal fees, expenses and costs, in accordance with applicable law.
(viii) Unless otherwise agreed, there shall be a single arbitrator,
selected by the Executive and the Company from a list of qualified neutrals
furnished by the AAA. If the Executive and the Company cannot agree on an
arbitrator, one will be selected by the AAA.
(ix) Unless otherwise agreed, the arbitration hearing will take place the
city where the Executive works or last worked for the Company. If the Executive
and the Company disagree as to the proper locale, the AAA will decide.
(x) The Executive and the Company shall be entitled to conduct limited
pre-hearing discovery. Each may take the deposition of one person and anyone
designated by the other as an expert witness. The party taking the deposition
shall be responsible for all associated costs, such as the cost of a court
reporter and the cost of an original transcript. Each party also has the right
to submit one set of ten written questions (including subparts) to the other
party, which must be answered under oath, and to request and obtain all
documents on which the other party relies in support of its answers to the
written questions. Additional discovery may be permitted by the arbitrator upon
a showing that it is necessary for that party to have a fair opportunity to
present a claim or defense.
(xi) The arbitrator shall apply the same substantive law that would apply
if the matter were heard by a court and shall have the authority to order the
same remedies (but no others) as would be available in a court proceeding. The
time limits for requesting arbitration or submitting a counterclaim are the same
as they would be in a court proceeding. The arbitrator shall have the authority
to consider and decide dispositive motions (motions seeking a decision on some
or all of the claims or counterclaims without an arbitration hearing).
(xii) All proceedings, including the arbitration hearing and decision, are
private and confidential, unless otherwise required by law. Arbitration
decisions may not be published or publicized without the consent of both the
Executive and the Company.
(xiii) Unless otherwise agreed, the arbitrator’s decision will be in
writing with a brief summary of the arbitrator’s opinion.
(xiv) The arbitrator’s decision is final and binding on the Executive and
the Company. After the arbitrator’s decision is issued, the Executive or the
Company may obtain an order of judgment from a court and may obtain a court
order enforcing the decision. The arbitrator’s decision may be appealed to the
courts only under the limited circumstances provided by law.
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(xv) If the Executive previously signed an agreement, including but not
limited to an employment agreement, containing arbitration provisions, those
provisions are superseded by the arbitration provisions of this Agreement.
(xvi) If any provision of Section 7(c) is found to be void or otherwise
unenforceable, in whole or in part, this shall not affect the validity of the
remainder of Section 7(c) and the remainder of the Agreement. All other
provisions shall remain in full force and effect.
8. Performance Units Nontransferable. The Performance Units conveyed
hereby are not assignable or transferable, in whole or in part, and they may
not, directly or indirectly, be offered, transferred, sold, pledged, assigned,
alienated, hypothecated or otherwise disposed of or encumbered (including
without limitation by gift, operation of law or otherwise) other than by will or
by the laws of descent and distribution to the estate of the Executive upon
Executive’s death.
9. Tax Withholding. The Company shall have the power to withhold, or
require the Executive to remit to the Company, an amount sufficient to satisfy
Federal, state, and local withholding tax requirements relating to the vesting
of any award, and the Company may defer payment of cash until such requirements
are satisfied.
10. No Guarantee of Employment. Nothing in this Agreement shall
interfere with or limit in any way the right of the Company or any Subsidiary or
Affiliate to terminate the Executive’s employment at any time, or confer upon
the Executive any right to continue in the employ of the Company or any
Subsidiary or Affiliate.
11. Interpretation; Construction. Any determination or interpretation
by the Committee under or pursuant to this Agreement shall be final and
conclusive on all persons affected hereby. In the event of a conflict between
any term of this Agreement and the terms of the Plan, the terms of the Plan
shall control.
12. Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
13. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, or by any recognized international
equivalent of such mail delivery, to the Company or the Executive, as the case
may be, at the following addresses or to such other address as the Company or
the Executive, as the case may be, shall specify by notice to the other party:
(i) if to the Company, to:
Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Corporate Secretary
(ii) if to the Executive, to the address shown on the last page of
this Agreement.
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof.
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(b) Waiver. Either party hereto may by written notice to the other (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement, (ii) waive compliance with any of the
conditions or covenants of the other contained in this Agreement and (iii) waive
or modify performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party’s rights
or privileges hereunder or shall be deemed a waiver of such party’s rights to
exercise the same at any subsequent time or times hereunder.
(c) Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Connecticut, regardless of the laws
that might be applied under principles of conflict of laws.
(d) Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Executive have agreed to be
bound by their respective duties, obligations and covenants (including, without
limitation, those covenants agreed to by the Executive contained in Section 7)
set forth above and have duly executed this Agreement as of the date first above
written.
AETNA INC.
By: Its Chairman
The Executive may revoke acceptance of this Agreement by notifying in writing
Executive Compensation Client Services, Aetna Human Resources, not more than
seven (7) days after signing and returning this Agreement.
Accepted:
Date:
(Signature)
Name:
Aetna Number:
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Exhibit A to Aetna Performance Unit Award Agreement
Performance Goal
The number of Performance Units that will vest, if any, at the end of the
Performance Period ( through ) is
dependent on the degree to which Aetna performs relative to targets on two
internal financial measures:
[Performance Goal to be added]
Vesting Schedule
Vesting between established percents is linear (e.g., 110% of target results in
110% vesting).
[Vesting Schedule to be added]
11 |
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”), is made and entered into as of the
3rd day of November, 2006, by and between First Federal Bank, a federal savings
bank (“Employer”), and Mark A. Tyrpin (“Executive”) and shall be effective
immediately upon the consummation of the Merger (as defined below) (the date of
such consummation, the “Effective Date”).
RECITALS
A. Heartland Bancorp, Inc. (the “Company”) has entered into an Agreement and
Plan of Reorganization, dated as of the date hereof (the “Merger Agreement”),
with Heartland Acquisition Corporation and First Federal Bancshares, Inc., the
parent company of Employer (“Seller”), pursuant to which the Company will
acquire Seller and Employer through the merger of Heartland Acquisition
Corporation with and into Seller (the “Merger”).
B. Employer desires to continue to employ Executive as an officer of Employer
after the consummation of the Merger and Executive desires to continue such
employment, all on the terms and conditions set forth herein.
C. Employer and Executive have made commitments to each other on a variety of
important issues concerning Executive’s employment, including the performance
that will be expected of Executive, the compensation that Executive will be
paid, how long and under what circumstances Executive will remain employed and
the financial and other terms resulting from a decision on the part of either
Executive or Employer to terminate the employment of Executive with Employer.
D. Employer and Executive believe that the commitments they have made to each
other should be memorialized in writing, and that is the purpose of this
Agreement.
E. Employer and Executive desire to enter into this Agreement to be effective as
of the Effective Date, which Agreement shall supersede that certain Change in
Control Agreement by and among Executive, Employer and Seller dated as of
September 27, 2000 (the “Prior Agreement”).
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter contained and/or other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by the parties
hereto, it is covenanted and agreed by and between the parties hereto as
follows:
AGREEMENTS
Section 1. Term With Automatic Renewal Provisions. Subject to Section 6,
Executive’s employment under this Agreement shall commence on the Effective Date
and shall continue for a period of one (1) year (the “Initial Term”). Upon
expiration of the Initial Term, the term of this Agreement shall be
automatically renewed for one additional year on each anniversary of the
Effective Date unless Employer has given Executive written notice of non-renewal
(“Non-Renewal Notice”) at least sixty (60) days prior to that anniversary date.
The Initial Term and any renewal periods are referred to herein collectively as
the “Employment Term”.
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Section 2. Position and Duties. Employer hereby employs Executive as Senior Vice
President of Employer. During the period of Executive’s employment hereunder,
Executive shall devote Executive’s best efforts and full business time, energy,
skills and attention to the business and affairs of Employer. Executive’s duties
and authority shall consist of and include all duties and authority customarily
performed and held by persons holding equivalent positions with business
organizations similar in nature and size to Employer, as such duties and
authority are reasonably defined, modified and delegated from time to time by
Employer’s President and Chief Executive Officer. Executive shall have the
powers necessary to perform the duties assigned to Executive and shall be
provided such supporting services, staff, secretarial and other assistance,
office space and accouterments as shall be reasonably necessary and appropriate
in the light of such assigned duties.
Section 3. Termination of Prior Agreement and Retention Payment. Executive and
Employer agree that as of the Effective Date the Prior Agreement shall
automatically terminate and be of no further force and effect, and Executive
shall have no rights under such Prior Agreement. In consideration of Executive’s
agreement to terminate the Prior Agreement and Executive’s entitlement to
amounts thereunder, and Executive’s agreement to continue Executive’s employment
with Employer under the terms of this Agreement, Executive shall receive a
retention payment in an amount equal to $214,000.00, less applicable
withholding. The retention payment shall be paid on or as soon as practicable
after the Effective Date and in no event later than the first regular payroll
date administratively feasible after the Effective Date. In the event the Merger
Agreement is terminated prior to the consummation of the Merger, this Agreement
shall automatically terminate and be of no further force and effect and the
Prior Agreement shall continue in accordance with its terms. Executive
represents and warrants for the benefit of Employer and the Company that, other
than the rights of Executive under the Prior Agreement (which shall be
terminated at the Effective Date as provided in this Section 3) or payments to
be received by Executive under Seller Bank’s Employee Stock Ownership Plan as
provided in such plan and the Merger Agreement, Executive is not party to any
written or oral agreement, arrangement or understanding with Employer or Seller,
nor is Executive eligible under any other written or oral agreement,
arrangement, policy, plan or promise, in either case, that would entitle
Executive to any payments or benefits related to, as a result of, or in
connection with, the Merger or his ongoing employment with Employer or Seller,
as applicable.
Section 4. Compensation. As compensation for the services to be provided by
Executive hereunder, Executive shall receive the following compensation, expense
reimbursement and other benefits:
(a) Base Salary. Executive shall receive an aggregate annual “Base Salary” at
the rate of One Hundred and Twenty-five Thousand Dollars ($125,000.00) payable
in installments in accordance with the regular payroll schedule of Employer.
Such Base Salary shall be subject to review annually, with the first such review
to occur in December 2007 (with any increase to be effective in 2008) and such
Base Salary shall be adjusted during the term hereof in accordance with
Employer’s established management compensation policies and plans (as the same
may be modified from time to time).
(b) Performance Bonus. Executive shall be eligible to receive an annual cash
performance bonus, payable within sixty (60) days after the end of the fiscal
year of Employer, which shall be based upon performance criteria mutually agreed
upon by Executive and Employer and as shall be approved by Employer’s President
and Chief Executive Officer.
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(c) Vacations. Executive shall be entitled to an annual vacation in accordance
with the vacation policy of Employer, which vacation shall be taken at a time or
times mutually agreeable to Employer and Executive, provided, however, that
Executive shall accrue and be entitled to at least sixteen and one-half
(16.5) days of paid vacation annually beginning with Executive’s initial year of
employment.
(d) Other Benefits. Executive shall be entitled to all benefits specifically
established for Executive, including, but not limited to, those benefits, if
any, listed on the attached Schedule 4(d) and, when and to the extent he is
eligible therefor, to participate in plans and benefits as from time to time
generally accorded to executives of Employer and at levels mutually agreed upon
between Executive and Employer, and also to perquisites extended to executives,
provided, however, that such plans, benefits and perquisites shall be no less
than those made generally available to all other employees of Employer and that
Executive shall be obligated to make the same contributions toward such benefits
as all other employees of Employer are obligated to make (either in the same
amount or percentage of compensation as determined under Employer’s practices
for the applicable plan or benefit).
(e) Reimbursement of Expenses. Executive shall be reimbursed, subject to
submission of appropriate vouchers and supporting documentation, for all travel,
entertainment and other out-of-pocket expenses reasonably and necessarily
incurred by Executive in the performance of his duties hereunder.
(f) Stock Purchase Opportunity. Executive shall be afforded the opportunity to
purchase shares of Class A non-voting common stock, $1.00 par value per share,
of the Company during the sixty (60) day period immediately following the
Effective Date, with a total purchase price of not more than Two Hundred
Thousand Dollars ($200,000.00). The purchase price per share of such stock shall
be based on a valuation performed by a third party selected by the Company in
good faith. Executive agrees that as a condition to purchasing any stock of the
Company, Executive shall become a party to the Company’s Stockholders Agreement
and execute and deliver such subscription documents as may be reasonably
requested by the Company. Executive agrees that the Company shall have the right
to repurchase any shares purchased by Executive under this Section 4(f) upon
Executive’s termination of employment. Provided Executive has complied with and
satisfied all of Executive’s obligations in Section 7, then the purchase price
to be paid by Company shall be the then-agreed value of the shares, such agreed
value to be determined by Company in a manner consistent with the Company’s
determination of the price paid by Executive (the “Termination Date Agreed
Value”). If Executive fails to comply with and satisfy all of Executive’s
obligations in Section 7, then the purchase price paid by Company shall be the
price paid by Executive. Unless Executive has previously executed and delivered
an Agreement and Release under this Agreement, as a condition to the receipt of
payments upon repurchase Executive shall execute an Agreement and Release
substantially in the form attached as Exhibit A to this Agreement. Payment of
the repurchase price shall be made in two (2) installments. The first
installment shall be made upon the exercise of the repurchase right by the
Company and shall equal the price paid by Executive. The second installment, if
any, shall be paid upon the expiration of the Restrictive Covenant (as defined
in Section 7) and shall equal the difference between the Termination Date Agreed
Value and the amount paid in the first installment.
(g) Withholding. Employer shall be entitled to withhold from amounts payable to
Executive hereunder, any federal, state or local withholding or other taxes or
charges which it is from time to time required to withhold. Employer shall be
entitled to rely upon the opinion of its legal counsel with regard to any
question concerning the amount or requirement of any such withholding.
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Section 5. Confidentiality and Loyalty. Executive acknowledges that during the
course of Executive’s employment Executive may produce and have access to
confidential and/or proprietary non-public information regarding Employer and
its Affiliates (as defined below), including marketing materials, financial and
other information concerning customers and prospective customers, customer
lists, records, data, trade secrets, proprietary business information, pricing
and profitability information and policies, strategic planning, commitments,
plans, procedures, litigation, pending litigation and other information not
generally available to the public (collectively, “Confidential Information”).
Notwithstanding the foregoing, Confidential Information shall not include any
information which: (i) is or subsequently is obtained by Executive through legal
means available to the public; (ii) was available on a non-confidential basis
prior to its disclosure to Executive by Employer; or (iii) is or subsequently
becomes available to Executive on a non-confidential basis from a source other
than the Employer who did not acquire or disclose such information by a wrongful
or tortious act. Accordingly, during and subsequent to the termination of the
Employment Term:
(a) Executive shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any Confidential Information for the benefit of
anyone other than Employer, except to the extent that Executive obtains such
information lawfully from public sources, or such disclosure is authorized in
writing by Employer, required by a law or any competent administrative agency or
judicial authority, or otherwise as reasonably necessary or appropriate in
connection with performance by Executive of Executive’s duties as an employee of
Employer.
(b) Executive agrees that, if he receives a subpoena or other court order or is
otherwise required by law to provide information to a governmental authority or
other person concerning the activities of Employer or any of its Affiliates, or
his activities in connection with the business of Employer or any of its
Affiliates, Executive will immediately notify Employer of such subpoena, court
order or other requirement and deliver forthwith to Employer a copy thereof, and
any attachments and non-privileged correspondence related thereto.
(c) Executive shall take reasonable precautions to protect against the
inadvertent disclosure of Confidential Information.
(d) Executive agrees to abide by Employer’s reasonable policies, as in effect
from time to time, respecting avoidance of interests conflicting with those of
Employer and its Affiliates. In this regard, Executive shall not directly or
indirectly render services to any person or entity where Executive’s service
would involve the use or disclosure of Confidential Information. Executive
agrees not to use any Confidential Information to guide him in searching
publications or other publicly available information, selecting a series of
items of knowledge from unconnected sources and fitting them together to claim
that he did not violate any agreements set forth in this Agreement. For purposes
of this Agreement, Employer’s “Affiliates” include each company, corporation,
partnership, bank, savings bank, savings and loan association, credit union or
other financial institution, directly or indirectly, which is controlled by,
controls, or is under common control with, Employer, and “control” means (x) the
ownership of 51% or more of the voting securities or other voting interest or
other equity interest of any company, corporation, partnership, joint venture or
other business entity, or (y) the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
company, corporation, partnership, joint venture or other business entity.
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(e) Executive agrees that all records, files, documents and other materials or
copies thereof relating to the business of Employer and its Affiliates which
Executive shall prepare or use, shall be and remain the sole property of
Employer, and other than in connection with performance by Executive of
Executive’s duties hereunder, shall not be removed from the premises of Employer
or any of its Affiliates without Employer’s written consent, and shall be
promptly returned to Employer upon termination of Executive’s employment
together with all copies (including copies or recordings in electronic form),
abstracts, notes or reproductions of any kind made from or about the records,
files, documents or other materials.
Section 6. Termination.
(a) Voluntary Termination by Executive. In the event Executive voluntarily
terminates Executive’s employment under this Agreement for any reason, other
than pursuant to Section 6(c)(i) (Constructive Discharge), then Employer shall
only be required to pay Executive such Base Salary and the value of any vacation
days as shall have accrued but remain unpaid or unused, as the case may be,
through the effective date of such termination (the “Earned Amounts”), and
Employer shall not be obligated to pay to Executive any bonus or other
compensation of any kind for the then-current fiscal year of Employer, or have
any further obligations to Executive; provided, however, Executive shall not
forfeit any rights Executive may have under any welfare or retirement benefit
plans of Employer.
(b) Payments Upon Termination Without Cause. In the event of the termination of
Executive’s employment by Employer and prior to the last day of the then-current
term for any reason other than a termination in accordance with the provisions
of Section 6(d) (Termination for Cause), then notwithstanding any actual or
allegedly available alternative employment or other mitigation of damages by
Executive, Employer shall provide Executive with the following entitlements:
(A) the Earned Amounts; and (B) the amount of his then-current Base Salary. In
addition, Executive shall not forfeit any rights Executive may have under any
welfare or retirement benefit plans of Employer.
(c) Payments Upon Termination Through Constructive Discharge. In the event of
Executive’s termination of employment prior to the last day of the Employment
Term by Executive following a Constructive Discharge (as defined below) which is
not cured by Employer, then notwithstanding any actual or allegedly available
alternative employment or other mitigation of damages by Executive, Employer
shall provide Executive with the following entitlements: (A) the Earned Amounts;
and (B) six (6) months of his then-current Base Salary. In addition, Executive
shall not forfeit any rights Executive may have under any welfare or retirement
benefit plans of Employer. Executive shall provide Employer with at least thirty
(30) days’ prior written notice of Executive’s intention to terminate
Executive’s employment for Constructive Discharge specifying the grounds for
such termination. Employer shall have the right to cure any basis or fact
specified by Executive and upon such cure, such fact or basis shall not support
a termination by Executive pursuant to a Constructive Discharge.
(i) For purposes of this Agreement, Executive shall be deemed to have been
“Constructively Discharged” upon the occurrence of any one of the following
events:
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(A) Executive’s duties and authority shall be diminished by Employer, other than
for Cause, by more than de minimus amounts as compared to Executive’s duties and
authority immediately prior to such change or as shall be appropriate in the
event that the operations of Employer are combined with one or more subsidiaries
of the Company; or
(B) Executive shall fail to be vested by Employer with the powers, authority and
support services customarily attendant to said office within the banking
industry, other than for Cause and other than due to financial constraints
applicable to Employer resulting in a general reduction of support services
within Employer; or
(C) Employer shall change the primary employment location of Executive to a
place that is more than twenty-five (25) miles from the Employer’s Quincy,
Illinois office; or
(D) Employer shall commit a material breach of its obligations under this
Agreement, which it shall fail to cure or commence to cure within thirty
(30) days after receipt of written notice thereof from Executive.
Executive acknowledges and agrees that Executive shall not be deemed to have
been Constructively Discharged as a result of a merger of Employer and any
subsidiary of the Company or other similar transaction that has the effect of
combining the operations of Employer with one or more subsidiaries of the
Company.
(d) Termination for Cause. Employer may terminate Executive’s employment for
cause as hereinafter defined. “Cause” shall mean: (i) a material violation by
Executive of any applicable material law or regulation respecting the business
of Employer or its Affiliates; (ii) Executive’s commission of an action
constituting a felony, an act of dishonesty in connection with the performance
of Executive’s duties as an officer of Employer, or an act which disqualifies
Executive from serving as an officer of Employer; (iii) Executive’s willful or
negligent failure to perform his duties hereunder in any material respect;
(iv) Executive’s failure (as determined by the Board of Directors of Employer
(the “Board”)) to comply with the reasonable rules, regulations, policies,
directions and restrictions as may be established from time to time by the Board
or the President and Chief Executive Officer, provided that the implementation
of such rules, regulations, policies, directions and restrictions would not give
the Executive the right to terminate for Constructive Discharge under
Section 6(c)(i)(B) unless Executive did not object in writing to such rules,
regulations, policies, directions or restrictions within ten (10) days after
their implementation; or (v) Executive is removed or suspended from banking
pursuant to Section 8(e) of the Federal Deposit Insurance Act, as amended (the
“FDIA”), or any other applicable state or federal law.
Executive shall be entitled to at least thirty (30) days’ prior written notice
of Employer’s intention to terminate Executive’s employment for any Cause
specifying the grounds for such termination, a reasonable opportunity to cure
any conduct or act, if curable, alleged as grounds for such termination, and a
reasonable opportunity to present to the Board Executive’s position regarding
any dispute relating to the existence of such cause. Upon a termination of
Executive’s employment with Employer for Cause, Executive shall be entitled to
receive from Employer only the Earned Amounts and Employer shall not be
obligated to pay Executive any bonus or other compensation of any kind, or have
any further obligations to Executive; provided, however, Executive shall not
forfeit any rights Executive may have under any welfare or retirement benefit
plans of Employer. For purposes of this Agreement, Executive’s employment shall
be deemed to have been terminated for Cause as of the date of termination if,
after
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Executive’s employment is terminated, facts and circumstances are discovered
that would have justified, in the Board’s opinion, a termination for Cause. If
Executive’s termination is determined to be for Cause as provided in the
immediately preceding sentence, Executive shall, upon notice from Employer,
immediately repay all amounts paid to Executive pursuant to his termination of
employment.
(e) Payments Upon Death. As soon as administratively practicable following the
death of Executive, payment of all Earned Amounts shall be made to such
beneficiary as Executive may designate in writing, or failing such designation,
to the executor of his estate, in full settlement and satisfaction of all claims
and demands on behalf of Executive. Such payments shall be in full settlement
and satisfaction of all claims and demands on behalf of Executive under this
Agreement.
(f) Payments Upon Permanent Disability. Executive shall be entitled to the
compensation and benefits provided for under this Agreement for any period
during the Employment Term and prior to the establishment of Executive’s
Permanent Disability (as defined below) during which Executive is unable to work
due to a physical or mental infirmity. For purposes of this Agreement,
Executive’s “Permanent Disability”, shall mean Executive’s inability, as a
result of physical or mental incapacity, substantially to perform his duties
hereunder for a period of ninety (90) days in any six (6) consecutive month
period. Notwithstanding anything contained in this Agreement to the contrary,
until the date specified in a notice of termination relating to Executive’s
Permanent Disability, Executive shall be entitled to return to his position with
Employer as set forth in this Agreement in which event no Permanent Disability
of Executive will be deemed to have occurred. Upon the establishment of
Executive’s Permanent Disability and termination of his employment, payment of
all Earned Amounts shall be made to Executive or his representative. In
addition, Executive shall not forfeit any rights Executive may have under any
welfare or retirement benefit plans of Employer.
(g) Termination Following Change of Control.
(i) Subject to the conditions of this Section 6, Section 7 and Executive’s
continued compliance with the restrictions contained in Section 5 hereof, upon a
Change of Control, as defined in Section 6(g)(ii) hereof, Executive shall have
the right, by written notice to Employer or its successor, to terminate his
employment during the period beginning on the date that is six (6) months after
the Change of Control and the date that is twelve (12) months after the Change
of Control and upon such termination Employer or its successor, as the case may
be, shall pay Executive an amount in cash equal to: (A) the Earned Amounts; and
(B) one years’ Base Salary. In addition, Executive shall not forfeit any rights
Executive may have under any welfare or retirement benefit plans of Employer.
(ii) Definition of Change of Control. Change of Control shall mean the happening
of any one of the following:
(A) The consummation of the acquisition by any person (as such term is defined
in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the “1934 Act”)) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of fifty-one percent (51%) or more of the
combined voting power of the then outstanding voting securities of the Company;
(B) The individuals who, as of the date hereof, are members of the Board of
Directors of the Company (the “Company Board”) cease for any reason to
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constitute a majority of the Company Board, unless the election, or nomination
for election by the Company stockholders, of any new director was approved by a
vote of a majority of the Company Board, and such new director shall, for
purposes of this Agreement, be considered as a member of the Company Board; or
(C) The consummation of: (A) a merger or consolidation to which the Company is a
party if the Company stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than fifty-one percent (51%) of the combined voting power of
the then outstanding voting securities of the entity resulting from such merger
or consolidation in substantially the same proportion as their ownership of the
combined voting power of the Company’s voting securities outstanding immediately
before such merger or consolidation; or (B) a complete liquidation or
dissolution or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company or Employer.
Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because fifty-one percent (51%) or more of the combined voting power of
the Company’s then outstanding securities is acquired by: (1) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
for employees of the entity; or (2) any corporation which, immediately after
such acquisition, is owned directly or indirectly by the stockholders in
substantially the same proportion as their ownership of stock immediately prior
to such acquisition.
(iii) It is the intention of Employer and Executive that no portion of any
payment under this Agreement, or payments to or for the benefit of Executive
under any other agreement or plan, be deemed to be an “Excess Parachute Payment”
as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), or its successors. It is agreed that the present value of and payments
to or for the benefit of Executive in the nature of compensation, receipt of
which is contingent on the Change of Control, and to which Section 280G of the
Code applies (in the aggregate “Total Payments”) shall not exceed an amount
equal to one dollar ($1.00) less than the maximum amount which Employer may pay
without loss of deduction under Section 280G(a) of the Code. Present value for
purposes of this Agreement shall be calculated in accordance with
Section 280G(d)(4) of the Code. Within ninety (90) days following the earlier of
the giving of the notice of termination or the giving of notice by Employer to
Executive of its belief that there is a payment or benefit due Executive that
will result in an excess parachute payment as defined in Section 280G of the
Code, Executive and Employer, at Employer’s expense, shall obtain the opinion of
such legal counsel and certified public accountants as Employer may choose
(notwithstanding the fact that such persons have acted or may also be acting as
the legal counsel or certified public accountants for Employer), which opinions
need not be unqualified, which sets forth: (A) the amount of the includable
compensation of Executive for the base period, as determined under Section 280G
of the Code; (B) the present value of Total Payments; and (C) the amount and
present value of any excess parachute payments. In the event that such opinions
determine that there would be an excess parachute payment, the payment hereunder
or any other payment determined by such counsel to be includable in Total
Payments shall be modified, reduced or eliminated as specified by Executive in
writing delivered to Employer within sixty (60) days of Executive’s receipt of
such opinions or, if Executive fails to so notify Employer, then as Employer
shall reasonably determine, so that under the bases of calculation set forth in
such opinions there will be no excess parachute payment. If the provisions of
Sections 280G and 4999 of the Code are repealed without succession, this
Section 6 shall be of no further force or effect.
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(h) Payment. The payments of Earned Amounts required pursuant to Section 6(b),
(c) and (g) shall be paid in one lump sum on the next regular payroll date
following the effective date of termination. Any payments to Executive from any
welfare or retirement benefit plans of Employer shall be made in the manner and
within the times as provided in the applicable plan documents and applicable law
and regulations. All payments other than of Earned Amounts provided in
Section 6(b), (c) and (g) shall be paid in substantially equal installments in
accordance with Employer’s regular payroll practice over twelve (12) months and
commencing on the next regular payroll date following the “Effective Date” as
such term is defined in the form of release and waiver attached hereto as
Exhibit A (the “Release”); provided, however, that in the event there is a
Change in Control during such twelve (12) month period, the unpaid payments
shall be payable in a lump sum payable upon consummation of the Change in
Control; provided, further, however, that if Employer is not in compliance with
its minimum capital requirements or if payments other than Earned Amounts would
cause Employer’s capital to be reduced below its minimum capital requirements,
such other payments shall be deferred until such time as Employer is in capital
compliance; provided, further, that, notwithstanding anything to the contrary
contained in this Agreement, in no event shall any amount other than Earned
Amounts be paid or other termination benefits be provided to Executive, except
in the event of Executive’s death, prior to the eighth day following execution
(without a subsequent revocation) of the Release.
(i) Regulatory Suspension and Termination.
(i) If Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of Employer’s affairs by a notice served under
Section 8(e)(3) (12 U.S.C. § 1818(e)(3)) or 8(g) (12 U.S.C. § 1818(g)) of the
FDIA, Employer’s obligations under this Agreement shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, Employer may in its discretion (A) pay Executive all or
part of the compensation withheld while their contract obligations were
suspended and (B) reinstate (in whole or in part) any of the obligations which
were suspended.
(ii) If Executive is removed and/or permanently prohibited from participating in
the conduct of Employer’s affairs by an order issued under Section 8(e) (12
U.S.C. § 1818(e)) or 8(g) (12 U.S.C. § 1818(g)) of the FDIA, all obligations of
Employer under this contract shall terminate as of the effective date of the
order, but vested rights of the contracting parties shall not be affected.
Section 7. Non-Competition and Non-Solicitation Covenants. Employer and
Executive have jointly reviewed the operations of Employer and have agreed that
the primary service area of Employer’s business in which Employer has and will
actively participate extends separately to an area that encompasses a ten
(10) mile radius from each banking and other office location of Employer and its
Affiliates and a twenty-five (25) mile radius from the Employer’s facility in
Quincy, Illinois (collectively, the “Restrictive Area”). Therefore, as an
essential ingredient of and in consideration of this Agreement and Executive’s
employment by Employer, Executive hereby agrees that, except with the express
prior written consent of Employer, for a period of one (1) year after
termination of Executive’s employment with Employer for any reason, other than
if Executive’s employment terminates on the last day of an Employment Term after
the delivery of a Non-Renewal Notice, and whether such termination of employment
is during the Employment Term or after the termination or expiration of the
Employment Term (the “Restrictive Period”) (provided, however, that if Executive
terminates his employment pursuant to a Constructive Discharge, the Restrictive
Period shall be six (6) months) he will not directly or indirectly compete with
the business of Employer, including, but not by way of limitation, by doing any
of the following (the “Restrictive Covenant”):
9
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(a) engage or invest in, own, manage, operate, control, finance, or participate
in the ownership, management, operation or control of, be employed by, associate
with or in any manner be connected with, serve as an employee, officer or
director of or consultant to, lend his name or any similar name to, lend his
credit to, or render services or advice to any person, firm, partnership,
corporation, trust or other entity which owns or operates, a bank, savings and
loan association, credit union or similar financial institution (a “Financial
Institution”) with any office located, or to be located at an address identified
in a filing with any regulatory authority, within the Restrictive Area;
(b) directly or indirectly, for himself or any Financial Institution: (i) induce
or attempt to induce any officer of Employer or any of its Affiliates, or any
employee who previously reported to Executive, to leave the employ of Employer
or any of its Affiliates; (ii) in any way interfere with the relationship
between Employer or any of its Affiliates and any such officer or employee;
(iii) employ, or otherwise engage as an employee, independent contractor or
otherwise, any such officer or employee; or (iv) induce or attempt to induce any
customer, supplier, licensee, or business relation of Employer or any of its
Affiliates to cease doing business with Employer or any of its Affiliates or in
any way interfere with the relationship between Employer or any of its
Affiliates and any of their respective customers, suppliers, licensees or
business relations, where Executive had personal contact with, or has accessed
Confidential Information in the preceding twelve (12) months with respect to,
such customers, suppliers, licensees or business relations; or
(c) directly or indirectly, either for himself or any Financial Institution,
solicit the business of any person or entity known to Executive to be a customer
of Employer or any of its Affiliates, where Executive, or any person reporting
to Executive, had personal contact with such person or entity, with respect to
products, activities or services which compete in whole or in part with the
products, activities or services of Employer or any of its Affiliates.
The foregoing Restrictive Covenant shall not prohibit Executive from owning
directly or indirectly capital stock or similar securities which are listed on a
securities exchange or quoted on the National Association of Securities Dealers
Automated Quotation System which do not represent more than one percent (1%) of
the outstanding capital stock of any Financial Institution.
Section 8. Work for Hire Provisions.
(a) Exclusive Rights of the Company in Work Product. The parties acknowledge and
agree that all work performed by Executive for Employer or any of its Affiliates
shall be deemed “work for hire.” Employer shall at all times own and have
exclusive right, title and interest in and to all Confidential Information and
Inventions (as defined below), and Employer shall retain the exclusive right to
license, sell, transfer and otherwise use and dispose of the same. Any and all
enhancements of the technology of Employer or any of its Affiliates that are
developed by Executive shall be the exclusive property of Employer. Executive
hereby assigns to Employer any right, title and interest in and to all
Inventions that Executive may have, by law or equity, without additional
consideration of any kind whatsoever from Employer or any of its Affiliates.
Executive agrees to execute and deliver any instruments or documents and to do
all other things (including the giving of testimony) requested by Employer (both
during and after the termination of Executive’s employment with Employer) in
order to vest more fully in Employer or any of its Affiliates all ownership
rights in the Inventions (including obtaining patent, copyright or trademark
protection therefore in the United States and/or foreign countries).
10
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(b) Definitions and Exclusions. For purposes of this Agreement, “Inventions”
means all systems, procedures, techniques, manuals, data bases, plans, lists,
inventions, trade secrets, copyrights, patents, trademarks, discoveries,
innovations, concepts, ideas and software conceived, compiled or developed by
Executive in the course of Executive’s employment with Employer or any of its
Affiliates and/or comprised, in whole or part, of Confidential Information.
Notwithstanding the foregoing, Inventions shall not include: (i) any inventions
independently developed by Executive and not derived, in whole or part, from any
Confidential Information or (ii) any invention made by Executive prior to
Executive’s exposure to any Confidential Information.
(c) Required Notice. The Employee Patent Act, Ill. Rev. Stat. ch. 140, para. 302
(1987), requires Employer to provide each of its employees who enters into an
agreement containing a “work for hire” provision with a written notification of
the following:
The agreements in this Section do not apply to an invention for which no
equipment, supplies, facility or trade secret information of the employer was
used and which was developed entirely on the employee’s own time, unless (a) the
invention relates (i) to the business of the employer, or (ii) to the employer’s
actual or demonstrably anticipated research or development, or (b) the invention
results from any work performed by the employee for the employer.
Section 9. Remedies for Breach. Executive has reviewed the provisions of this
Agreement with legal counsel, or has been given adequate opportunity to seek
such counsel, and Executive acknowledges and expressly agrees that the covenants
contained herein are reasonable with respect to their duration, geographical
area and scope. Executive further acknowledges that the restrictions contained
in this Agreement are reasonable and necessary for the protection of the
legitimate business interests of Employer, that they create no undue hardships,
that any violation of these restrictions would cause substantial injury to
Employer and its interests, that Employer would not have agreed to enter into
this Agreement without receiving Executive’s agreement to be bound by these
restrictions and that such restrictions were a material inducement to Employer
to enter into this Agreement. Executive hereby acknowledges and agrees that for
a period of two (2) years after the effective date of the termination of
Executive’s employment under this Agreement, Employer shall have the right to
communicate the existence and terms of this Agreement to any third party with
whom Executive may seek or obtain future employment or other similar
arrangement. In addition, in the event of any violation or threatened violation
of these restrictions, Employer, in addition to and not in limitation of, any
other rights, remedies or damages available to Employer under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary and permanent
injunctive relief to prevent or restrain any such violation by Executive and any
and all persons directly or indirectly acting for or with him, as the case may
be. If Executive violates the Restrictive Covenant and Employer brings legal
action for injunctive or other relief, Employer shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to have the duration specified herein computed from the date the
relief is granted but reduced by the time between the period when the
Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Executive. In the event that a successor assumes and
agrees to perform this Agreement, this Restrictive Covenant shall continue to
apply only to the Restrictive Area of Employer as it existed immediately before
such assumption and shall not apply to any of the successor’s other offices.
11
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Section 10. General Provisions.
(a) Successors; Assignment. This Agreement shall be binding upon and inure to
the benefit of Executive, Employer and his and its respective personal
representatives, successors and assigns, and any successor or assign of Employer
shall be deemed the “Employer” hereunder. Employer shall require any successor
to all or substantially all of the business and/or assets of Employer, whether
directly or indirectly, by purchase, merger, consolidation, acquisition of
stock, or otherwise, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as Employer would be required to perform
if no such succession had taken place.
(b) Prevailing Party. Should any party institute any action or proceeding to
enforce this Agreement or any provision hereof, or for damages by reason of any
alleged breach of this Agreement or of any provision hereof, or for a
declaration of rights hereunder, the prevailing party in any such action or
proceeding shall be entitled to receive from the other party all costs and
expenses, including reasonable attorneys’ fees, incurred by the prevailing party
in connection with such action or proceeding.
(c) Entire Agreement; Modifications; Counterparts. This Agreement constitutes
the entire agreement between the parties respecting the subject matter hereof,
and supersedes all prior negotiations, undertakings, agreements and arrangements
with respect thereto, whether written or oral. Except as otherwise explicitly
provided herein, this Agreement may not be amended or modified except by written
agreement signed by Executive and Employer. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Enforcement, Governing Law and Survival. The provisions of this Agreement
shall be regarded as divisible and separate; if any of said provisions should be
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remaining provisions shall not be affected
thereby. Furthermore, if the scope of any restriction or requirement contained
in this Agreement is too broad to permit enforcement of such restriction or
requirement to its full extent, then such restriction or requirement shall be
enforced to the maximum extent permitted by law, and Executive consents and
agrees that any court of competent jurisdiction may so modify such scope in any
proceeding brought to enforce such restriction or requirement. This Agreement
shall be construed and the legal relations of the parties hereto shall be
determined in accordance with the laws of the State of Illinois without
reference to the law regarding conflicts of law. Executive agrees and
acknowledges that the restrictions contained in Section 5 (Confidentiality and
Loyalty) and Section 7 (Restrictive Covenant) shall survive the termination of
this Agreement to the extent and for the time period provided herein.
(e) Waiver. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to be
performed by the other party, shall be deemed a waiver of any similar or
dissimilar provisions or conditions at the same time or any prior or subsequent
time.
(f) Notices. Notices pursuant to this Agreement shall be in writing and shall be
deemed to have been duly delivered when hand delivered or telecopied to the
other party or
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two (2) days after being deposited in the United States mail, certified or
registered, return receipt requested, with first class postage prepaid, and
addressed to the parties as follows (or at such other address as the party may
have previously provided in writing):
If to Employer: First Federal Bank 109 East Depot
Street Colchester, Illinois 62326 ATTN: James J.
Stebor If to Executive: As set forth on the signature page of
this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FIRST FEDERAL BANK MARK A. TYRPIN By:
/s/ James J. Stebor
/s/ Mark A. Tyrpin
Name: James J. Stebor
2207 Sweetbriar Ave.
Title: President and Chief Executive Officer
Quincy, IL 62301
(address)
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EMPLOYMENT AGREEMENT
MARK A. TYRPIN
Schedule 4(d)
1. Car Allowance: Employer shall provide an automobile similar to the
automobile provided by Employer as of the Effective Date for Executive’s use in
the performance of his duties under the Agreement and shall pay all expenses for
maintenance, repairs and insurance relating to that automobile; provided,
however, that Executive shall pay for all fuel charges and be reimbursed for
business-related fuel expenses in accordance with Employer’s policy regarding
such reimbursements. Employer shall provide a new automobile no more frequently
than once every three (3) years. Executive shall report his business and
personal use of the automobile in conformity with policies adopted by Employer
and his personal use shall be reflected annually on the IRS Form W-2 of
Executive as additional compensation for income tax purposes. 2.
Country Club Dues: Executive shall be entitled to receive reimbursement for
membership dues, initiation fees and special assessments, up to an aggregate
amount of $6,000 per year, at the Quincy Country Club or such other country
clubs that are mutually acceptable to the Employer and Executive and agreed to
in writing.
S-4(d) |
Exhibit 10.2
Execution Copy
TERM COMMITMENT NOTE
$10,000,000.00 Palo Alto, California January 4, 2006
FOR VALUE RECEIVED, the undersigned NATUS MEDICAL INCORPORATED (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at 400 Hamilton Avenue, Palo Alto, California, or at such other
place as the holder hereof may designate, in lawful money of the United States
of America and in immediately available funds, the principal sum of Ten Million
Dollars ($10,000,000.00), with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) “Business Day” means any day except a Saturday, Sunday or any other day on
which commercial banks in California are authorized or required by law to close.
(b) “Fixed Rate Term” means a period commencing on a Business Day and continuing
for one (1) month, two (2) months or three (3) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however, that
no Fixed Rate Term may be selected for a principal amount less than One Million
Dollars ($1,000,000.00); and provided further, that no Fixed Rate Term shall
extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would
end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.
(c) “LIBOR” means the rate per annum determined pursuant to the following
formula:
LIBOR =
Base LIBOR
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100% - LIBOR Reserve Percentage
(i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.
--------------------------------------------------------------------------------
(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) “Prime Rate” means at any time the rate of interest most recently announced
within Bank at its principal office as its Prime Rate, with the understanding
that the Prime Rate is one of Bank’s base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) either (i) at a
fluctuating rate per annum one-quarter percent (0.25%) above the Prime Rate in
effect from time to time, or (ii) at a fixed rate per annum determined by Bank
to be two and one-half percent (2.50%) above LIBOR in effect on the first day of
the applicable Fixed Rate Term. When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become effective
on the date each Prime Rate change is announced within Bank. With respect to
each LIBOR selection hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and Fixed Rate Term applicable thereto and any
payments made thereon on Bank’s books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of this Note
bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end the Fixed Rate Term applicable thereto so that all or a portion
thereof bears interest determined in relation to the Prime Rate or to LIBOR for
a new Fixed Rate Term designated by Borrower. At any time any portion of this
Note bears interest determined in relation to the Prime Rate, Borrower may
convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it’s sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Prime Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.
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(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage
(without duplication), assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR. In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable on the
last day of each month, commencing January 31, 2006.
(e) Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.
BORROWING, REPAYMENT AND PREPAYMENT:
(a) Borrowing. From the date of this Note up to and including January 30, 2006,
Borrower may borrow, pursuant to a one-time advance, an amount not to exceed the
principal amount stated above, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note. The unpaid principal balance of this obligation at any time
shall be the total amounts advanced hereunder by the holder hereof less the
amount of principal payments made hereon by or for Borrower, which balance may
be endorsed hereon from time to time by the holder.
(b) Required Principal Payments. The outstanding principal balance of this Note
as of the close of business on January 30, 2006 shall be amortized over
forty-eight (48) months, and thereafter principal shall be payable on the last
day of each month in equal successive installments over said amortization term,
commencing January 31, 2006, and continuing up to and including November 30,
2009, with a final installment consisting of all remaining unpaid principal due
and payable in full on December 31, 2009.
(c) One-Time Advance. The one-time advance allowed hereunder, which advance
shall not exceed the total amount of the principal sum stated above and can be
made up to and including the final advance date set forth above, may be made by
the holder at the oral or written request of (i) James B. Hawkins or Steven J.
Murphy, any one acting alone, who are authorized to request such advance and
direct the disposition of such advance until written notice of the revocation of
such authority is received by the holder at the office designated above, or
(ii) any person, if such advance is deposited to the credit of any deposit
account of Borrower, which
- 3 -
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advance, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of Borrower regardless of the fact that persons other than
those authorized to request an advance may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by Borrower.
(d) Application of Payments. Each payment made on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR, with
such payments applied to the oldest Fixed Rate Term first.
(e) Prepayment.
Prime Rate. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to the Prime Rate at any time, in any
amount and without penalty.
LIBOR. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount
of One Hundred Thousand Dollars ($100,000.00); provided however, that if the
outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a
fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum four percent (4.00%) above the
Prime Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).
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All prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of January 4, 2006,
as amended from time to time (the “Credit Agreement”). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an “Event of Default”
under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the sale, transfer, hypothecation, assignment or other
encumbrance, whether voluntary, involuntary or by operation of law, of all or
any interest in any real property securing this Note, or upon the occurrence of
any Event of Default, the holder of this Note, at the holder’s option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by Borrower, and the obligation, if any, of the holder to
extend any further credit hereunder shall immediately cease and terminate.
Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’
fees (to include outside counsel fees and all allocated costs of the holder’s
in-house counsel), expended or incurred by the holder in connection with the
enforcement of the holder’s rights and/or the collection of any amounts which
become due to the holder under this Note, and the prosecution or defense of any
action in any way related to this Note, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or entity sign
this Note as a Borrower, the obligations of each such Borrower shall be joint
and several.
(c) Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California.
- 5 -
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
NATUS MEDICAL INCORPORATED
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
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- 6 - |
Exhibit 10(s)
AMENDMENT SEVEN
TO
THE FLEETBOSTON FINANCIAL CORPORATION
RETIREMENT INCOME ASSURANCE PLAN
(1996 Restatement)
Instrument of Amendment
THIS INSTRUMENT is executed by BANK OF AMERICA CORPORATION, a Delaware
corporation with its principal office and place of business in Charlotte, North
Carolina (the “Company”).
Statement of Purpose
By this Instrument the Company is amending the FleetBoston Financial Corporation
Retirement Income Assurance Plan (the “Plan”) to provide for the merger of the
Fleet Capital Corporation Retirement Restoration Plan into the Plan. At all
times, the Company has reserved the right to amend the Plan in whole or in part.
NOW THEREFORE, the Company hereby amends the Plan effective as of January 1,
2006, as follows:
1. A new Section D of Appendix A is added to read as follows:
D. Fleet Capital Corporation
1. Merger.
The Fleet Capital Corporation Retirement Restoration Plan (“Fleet Capital
Restoration Plan”) shall merge into the Plan effective as of January 1, 2006. As
of that date, the liabilities of the Fleet Capital Restoration Plan shall become
the liabilities of the Plan and the Fleet Capital Restoration Plan shall cease
to exist.
2. Eligibility.
This Section D of Appendix A shall apply solely to employees who had been
participants in the Fleet Capital Restoration Plan (“Fleet Capital
Participants”), determined as follows:
(a) Subject to the provisions of subsections (b) and (c) hereof, the Committee
shall in its sole discretion determine which Participants of the Retirement Plan
of Fleet Capital Corporation shall be entitled to participate in the Plan. Such
Participants shall be memorialized in a Schedule of Plan Participants, which
Schedule may from time to time be modified by the Committee, and which Schedule
is set forth in Section 8.
(b) Any Plan Participant who is not included in the Schedule of Participants
described in subsection (a) hereof, but who has accrued a benefit under the
Fleet Capital Restoration Plan as of February 28, 1997, shall cease to accrue
further benefits under the Fleet Capital Restoration Plan as of March 1, 1997,
but shall continue to be a Participant with respect to benefits accrued prior to
such date until the earlier of the date such Participant ceases to be entitled
to benefits under the terms of the Plan, or the date such Participant receives
payment from Employer with respect to all amounts accrued to him under the terms
of the Plan.
(c) In no event shall a Participant or Beneficiary who is not entitled to
benefits under Specification Schedule M of the Basic Plan become entitled to
benefits under the Plan.
(d) Any Plan Participant who is not included in the Schedule of Participants
described in subsection (a) hereof, but who has accrued a benefit under the
Fleet Capital Restoration Plan as of June 30, 1997 shall cease to accrue further
benefits under the Fleet Capital Restoration Plan as of June 30, 1997, but shall
continue to be a Participant with respect to benefits accrued prior to such date
until the earlier of the date such Participant ceases to be entitled to benefits
under the terms of the Plan, or the date such Participant receives payment from
Employer with respect to all amounts accrued to him under the terms of the Plan.
3. Amount Of Benefit.
Notwithstanding Article 4, the benefits of Fleet Capital Participants shall be
determined as follows:
(a) The benefit which Employer shall provide to a Fleet Capital Participant who
is eligible to participate as a Class I Participant pursuant to the provisions
of the Schedule of Participants as revised effective June 1, 1998, or his or her
Beneficiary(ies) under the Plan shall equal the benefit determined under
subsection (c) hereof, provided that if such Participant’s employment with
Employer is for any reason involuntarily terminated by Employer, such
Participant shall
1
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for purposes of this Section 3 be credited with additional Years of Service
equal in number to the additional Years of Service he would have earned under
the terms of Specification Schedule M of the Basic Plan had he continued in the
employ of Employer through his Normal Retirement Date. Such additional Years of
Service shall be credited as of his date of termination of employement.
(b) The benefit which Employer shall provide to a Fleet Capital Participant who
is eligible to participate as a Class II Participant pursuant to the provisions
of the Schedule of Participants as revised effective June 1, 1998, or his or her
Beneficiary(ies) under the Plan shall equal the benefit determined under
subsection (c) hereof, provided that if such Participant’s employment with
Employer is for any reason involuntarily terminated by Employer, such
Participant shall for purposes of this Section 3 be credited with additional
Years of Service equal in number to the additional Years of Service he would
have earned under the terms of Specification Schedule M of the Basic Plan had he
continued in the employ of Employer through his Early Retirement Date. Such
additional Years of Service shall be credited as of his date of termination of
employment.
(c) Subject to the provisions of subsections (a) and (b) of this Section 3, the
benefit which Employer shall provide to a Fleet Capital Participant who is
eligible to participate as a Class I, Class II or Class III Participant pursuant
to the provisions of the Schedule of Participants as revised effective June 1,
1998, or his or her Beneficiary(ies) under the Plan shall equal the excess of
(i) reduced by (ii), where:
(i) equals the monthly benefit which would have been provided to such
Participant or his Beneficiary under the Specification Schedule M of the Basic
Plan, calculated without regard to the following:
(A) without regard to any reduction in compensation attributable to
participation in a non-qualified plan of deferred compensation;
(B) without regard to any reduction in compensation attributable to
participation in Specification Schedule M of the Basic Plan if such
Specification Schedule M of the Basic Plan where administered without regard to
the provisions of Section 415 of the Code;
(C) without regard to the provisions of Section 401(a)(17) of the Code;
(D) without regard to the reduction in bonus earnings taken into consideration
in determining Specification Schedule M of the Basic Plan pensionable earnings
pursuant to Part I(c)(i)(B) thereof; and
(E) without regard to any reduction applicable to such Participant who is not
eligible for any early retirement subsidy otherwise available under the terms of
Specification Schedule M of the Basic Plan because of such Participant’s status
as a Highly Compensated Employee as defined in the Basic Plan; and
(ii) equals the sum of (A), (B) and (C) where:
(A) equals the benefit which will be provided to such Participant or his
Beneficiary under Specification Schedule M of the Basic Plan subject to the
restrictions and limitations described in paragraph (i) hereof;
(B) equals the benefit, if any, accrued to such Participant or his Beneficiary
under the terms of the Restated Retirement Plan of BarclaysAmericanCorporation,
or the Restated Retirement Plan of Barclays Bank PLC, as applicable, on
January 31, 1995; and
(C) equals the benefit, if any, accrued to such Participant or his Beneficiary
under the terms of the BarclaysAmericanCorporation Retirement Restoration Plan,
or the Barclays Bank PLC Retirement Restoration Plan, as applicable, on
January 31, 1995.
(d) The benefit which Employer shall provide to a Fleet Capital Participant who
is eligible to participate as a Class IV Participant pursuant to the provisions
of the Schedule of Participants as revised effective June 1, 1998, or his or her
Beneficiary(ies) under the Plan shall equal the excess of (i) reduced by (ii),
where:
(i) equals the monthly benefit which would have been provided to such
Participant or his Beneficiary under Specification Schedule M of the Basic Plan,
calculated without regard to the following:
(A) subject to Item (E) hereof, without regard to any reduction in compensation
attributable to participation in a non-qualified plan of deferred compensation;
(B) subject to Item (E) hereof, without regard to any reduction in compensation
attributable to participation in Specification Schedule M of the Basic Plan if
such Specification Schedule where administered without regard to the provisions
of Section 415 of the Code;
(C) subject to Item (E) hereof, without regard to the provisions of
Section 401(a)(17) of the Code;
(D) with respect to bonus earnings paid prior to July 1, 1997, without regard to
the reduction in bonus earnings taken into consideration in determining
Specification Schedule M of the Basic Plan pensionable earnings pursuant to Part
I(c)(i)(B) thereof;
2
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(E) with respect to bonus earnings paid on or after July 1, 1997, without regard
to so much of the reduction in bonus earnings excluded in determining
Specification Schedule M of the Basic Plan pensionable earnings pursuant to Part
I(c)(i)(B) thereof as does not exceed one hundred and fifty percent (150%) of
such Participant’s annual base salary or wages taken into consideration as
pensionable earnings under the terms of the Specification Schedule M of the
Basic Plan; and
(F) without regard to any reduction applicable to such Participant who is not
eligible for any early retirement subsidy otherwise available under the terms of
Specification Schedule M of the Basic Plan because of such Participant’s status
as a Highly Compensated Employee as defined in the Basic Plan; and
(ii) equals the sum of (A), (B) and (C) where:
(A) equals the benefit which will be provided to such Participant or his
Beneficiary under Specification Schedule M of the Basic Plan subject to the
restrictions and limitations described in paragraph (i) hereof;
(B) equals the benefit, if any, accrued to such Participant or his Beneficiary
under the terms of the Restated Retirement Plan of BarclaysAmericanCorporation,
or the Restated Retirement Plan of Barclays Bank PLC, as applicable, on
January 31, 1995; and
(C) equals the benefit, if any, accrued to such Participant or his Beneficiary
under the terms of the BarclaysAmericanCorporation Retirement Restoration Plan,
or the Barclays Bank PLC Retirement Restoration Plan, as applicable, on
January 31, 1995.
(e) The benefit which Employer shall provide to a Fleet Capital Participant who
is eligible to participate as a Class V Participant pursuant to the provisions
of the revised Schedule of Participants as revised effective July 1, 2000, or
his or her Beneficiary (ies) under the Plan shall equal the excess of
(i) reduced by (ii) where:
(i) equals the monthly benefit which would have been provided to such
Participant or Beneficiary under Specification Schedule M of the Basic Plan,
calculated with regard to the following:
(A) with respect to the provisions of Section 401(a)(17) of the Code;
(B) with respect to bonus earnings included in determining pensionable earnings
pursuant to Part I(c)(i)(B) of said Specification Schedule thereof up to 20% of
such Participant’s annual base salary or wages taken into consideration as
pensionable earnings under the terms of such Specification Schedule;
(C) with respect to the accrued benefit, if any, to such Participant under the
terms of the Retirement Plan for BarclaysAmerican Corporation or the Barclays
Bank PLC U.S.A. Staff Pension Plan, as applicable on January 31, 1995;
(D) with respect to accrued benefit, if any, to such Participant under the terms
of the NatWest Bank, N.A. Retirement Plan determined as of December 31, 1996.
(ii) is the benefit, if any, accrued to such Participant under the terms of the
Basic Plan.
(f) Notwithstanding any other provision of the Plan to the contrary, no amount
received by a Fleet Capital Participant as special pay, stay pay or severance
pay, including, but not limited to, any amount paid from any pool of funds
created in connection with the sale of Barclays Commercial Corporation shall be
taken into account for purposes of determining the amount of benefits payable
under the Plan.
(g) Notwithstanding any other provision of the Plan to the contrary, a Fleet
Capital Participant who was a Participant in the Fleet Capital Restoration Plan
on February 28, 1997, but who is not included in the Schedule of Participants
with respect to benefits accruing on and after March 1, 1997, shall cease to
accrue Fleet Capital Restoration Plan benefits on and after March 1, 1997. The
Committee may, in its sole and absolute discretion, determine to pay such
Participants out in a single Actuarial Equivalent lump sum amount at any time up
to and including such Participants’ Normal Retirement Date or, alternatively,
pay such Participants out pursuant to the provisions of Section 4 hereof.
(h) Notwithstanding any other provision of the Plan to the contrary, a Fleet
Capital Participant who was a Participant in the Fleet Capital Restoration Plan
on June 30, 1997, but who is not included in the Schedule of Participants with
respect to benefits accruing on and after July 1, 1997, shall cease to accrue
Fleet Capital Restoration Plan benefits on and after July 1, 1997. The Committee
may, in its sole and absolute discretion, determine to pay such Participants out
in a single Actuarial Equivalent lump sum amount at any time up to and including
such Participants’ Normal Retirement Date or, alternatively, pay such
Participants out pursuant to the provisions of Section 4 hereof.
4. Form and Timing of Benefits.
Payment of Plan benefits to a Fleet Capital Participant or his or her
Beneficiary shall be coincident in time and form with the payment of benefits
pursuant to the provisions of Specification Schedule M of the Basic Plan. Plan
benefits shall in all respects be subject to any applicable income tax
withholding under federal or state law.
3
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5. Vesting.
A Fleet Capital Participant shall have the same nonforfeitable right to benefits
payable on his or her behalf under the Plan as such Participant has to benefits
payable on his or her behalf pursuant to the provisions of Specification
Schedule M of the Basic Plan provided, however, that such benefits are subject
to complete forfeiture to the extent that, in the sole and exclusive discretion
of Employer, such Participant is determined to have engaged in activities,
whether before or after Plan benefit payments commence, which are both
fraudulent and detrimental to Employer.
6. Definitions.
All terms under Section D of Appendix A of the Plan shall have the meaning set
forth for such terms pursuant to the provisions of Specification Schedule M of
the Basic Plan.
7. Amendment and Funding
This Section D of Appendix A may be amended only with the written consent of
Bank of America, N.A. All benefits determined to be payable under the Fleet
Capital Restoration Plan, and all benefits earned under this Section D after the
merger, shall be a liability of, and be paid by, Bank of America, N.A.
8. Schedule of Participants.
As described in Section 2, the Schedule of Plan Participants, executed as of
September 11, 2000, is as follows:
Class II Participants
SS#
--------------------------------------------------------------------------------
LAST NAME
--------------------------------------------------------------------------------
FIRST NAME
--------------------------------------------------------------------------------
###-##-####
Coppedge
Ferrell
###-##-####
Farley
Michael
###-##-####
Strauss
Philip
###-##-####
Swindells
William
Class III Participants
SS#
--------------------------------------------------------------------------------
LAST NAME
--------------------------------------------------------------------------------
FIRST NAME
--------------------------------------------------------------------------------
###-##-####
Meyers James
Class IV Participants
SS#
--------------------------------------------------------------------------------
LAST NAME
--------------------------------------------------------------------------------
FIRST NAME
--------------------------------------------------------------------------------
###-##-####
Ausburn Lawrence
###-##-####
Clack Ronald
###-##-####
Dianich Michael Sr.
###-##-####
Dumelin Bruce
###-##-####
Gagnon Richard
###-##-####
Johnson Michael
###-##-####
Meier Alan
###-##-####
Pengelly Audrey
###-##-####
Solomon Stuart
Class V Participants
SS#
--------------------------------------------------------------------------------
LAST NAME
--------------------------------------------------------------------------------
FIRST NAME
--------------------------------------------------------------------------------
###-##-####
Kreft Ira
###-##-####
Tornow Brian
###-##-####
Terry J. Cameron
###-##-####
Broderick Timothy
###-##-####
Clarke Timothy
2. Except as expressly or by necessary implication amended hereby, the Plan
shall continue in full force and effect. This Amendment is not intended to
constitute a “material modification” of the Plan or of the Fleet Capital
Restoration Plan for purposes of the effective date provisions of Code section
409A, and the Plan shall be interpreted, operated, and administered consistent
with this intent.
4
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IN WITNESS WHEREOF, Bank of America Corporation, on behalf of all participating
employers in the Plan, has caused this Instrument to be duly executed on the
day of December, 2005.
BANK OF AMERICA CORPORATION
By:
/s/ J. STEELE ALPHIN
--------------------------------------------------------------------------------
J. Steele Alphin Corporate Personnel Executive
5 |
EX
EXHIBIT 10.5
AMENDED AND RESTATED TAX INDEMNITY AGREEMENT
THIS AMENDED AND RESTATED TAX INDEMNITY AGREEMENT (the "Agreement") is made and
entered into this 10th day of January, 2006 by and among PRIME GROUP REALTY,
L.P., a Delaware limited partnership ("Prime"), ROLAND E. CASATI ("Casati")
RICHARD A. HEISE ("Heise"), CTA GENERAL PARTNER, LLC, a Delaware limited
liability company ("General Partner"), and CONTINENTAL TOWERS, L.L.C., a
Delaware limited liability company ("Newco").
W I T N E S S E T H:
WHEREAS, Casati is the Grantor and the Benefits and Investment Trustee of the
Casati Alaska Community Property Trust ("CACPT");
WHEREAS, CACPT is the sole member of REC, LLC, an Illinois limited liability
company ("REC");
WHEREAS, Heise and REC are the only partners of Casati-Heise Partnership, an
Illinois partnership ("CHP");
WHEREAS, CHP, Heise and CACPT are the only limited partners in Continental
Towers Associates-I, L.P., an Illinois limited partnership ("CTA") and General
Partner is the sole general partner of CTA;
WHEREAS, CTA owns 100% of the beneficial interest in American National Bank and
Trust Company of Chicago Trust No. 40935, established pursuant to a Trust
Agreement dated July 26, 1977 ("Trust No. 40935") and First Bank N.A. Trust
No. 5602, established pursuant to a Trust Agreement dated September 27, 1976
("Trust No. 5602"; Trust No. 40935 and Trust No. 5602 are sometimes collectively
referred to herein as the "Land Trusts");
WHEREAS, the Land Trusts collectively own the real estate located at 1701 Golf
Road, Rolling Meadows, Illinois, legally described on Exhibit A and commonly
known as Continental Towers (the "Real Estate");
WHEREAS, the Real Estate is subject to a first mortgage lien held by SunAmerica
Life Insurance Company ("Senior Lender") which secures indebtedness in the
original principal amount of $75,000,000 (the "Senior Loan"), and the terms of
the Senior Loan are as set forth in that certain Loan Agreement dated as of May
5, 2005 by and among Trust No. 40935, Trust No. 5602, CTA and Lender (as amended
from time to time, the "Senior Loan Agreement") and the documents (the "Senior
Loan Documents") listed on Schedule 1 attached hereto and made a part hereof;
WHEREAS, the Real Estate is also subject to a mortgage lien held by Prime, as
successor in interest to General Electric Capital Corporation ("GECC") and Great
Oak LLC ("Great Oak"), which secures indebtedness in the original principal
amount of $152,106,073 (the "Junior Loan"), and the terms of the Junior Loan are
set forth in that certain Loan Modification and Amended and Restated Loan
Agreement dated as of June 1, 1995 by and among GECC, Trust No. 40935, CTA, CHP,
Casati and Heise and that certain First Amendment to Loan Modification and
Amended and Restated Loan Agreement dated as of December 12, 1997 by and among
GECC, Great Oak, Trust No. 40935, CTA, Heise, Casati, CHP, and Trust No. 5602
(as
--------------------------------------------------------------------------------
amended from time to time, the "Junior Loan Agreement") and the documents (the
"Junior Loan Documents") listed on Schedule 2 attached hereto and made a part
hereof;
WHEREAS, the currently outstanding principal balance and accrued and unpaid
interest under the Junior Loan is $149,593,162 as of 12/31/05;
WHEREAS, pursuant to that certain Subordination and Intercreditor Agreement
dated as of May 5, 2005 by and among Prime and Senior Lender, Prime subordinated
the Junior Loan to the Senior Loan;
WHEREAS, Prime, Casati and Heise executed that certain Tax Indemnity Agreement
(the "Original Tax Indemnity Agreement") dated as of November 17, 1997;
WHEREAS, Casati has agreed to release his rights under the Original Tax
Indemnity Agreement; and
WHEREAS, the parties desire to amend and restate the Original Tax Indemnity
Agreement to reflect the release of Casati's rights and to make certain other
changes to which the parties have agreed.
NOW, THEREFORE, in consideration of the matters set forth in the recitals and
the mutual covenants set forth hereafter, the parties agree as follows:
1.
Definitions. The following terms shall have the meanings set forth below:
"Affiliate" shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with a
specified Person (any Person which is controlled by Casati and Heise acting
together shall be considered an Affiliate of each of them).
"Agreement" shall have the meaning set forth in the recitals.
"CACPT" shall have the meaning set forth in the recitals.
"Casati" shall have the meaning set forth in the recitals.
"CHP" shall have the meaning set forth in the recitals.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"CTA" shall have the meaning set forth in the recitals.
"Final Determination" shall mean (i) a decision, judgment, decree or other order
by any court of competent jurisdiction, which decision, judgment, decree or
other order has become final after all allowable appeals by either party to the
action have been exhausted or the time for filing such appeal has expired, or in
any case where judicial review shall at the time be unavailable because the
proposed adjustment involves a decrease in net operating loss carry forward or a
business credit carry forward, a decision, judgment, decree or other order of an
administrative official or agency of competent jurisdiction, which decision,
judgment, decree or other order has become final (i.e. where all administrative
appeals have been exhausted by all parties thereto), (ii) a closing agreement
entered into in connection with an administrative or judicial proceeding with
the consent of Prime or as otherwise permitted in Paragraph 5 of the Agreement,
or (iii) the expiration of the time for instituting a claim for refund, or if
such a claim was filed, the expiration of the time for instituting suit with
respect thereto.
2
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"General Partner" shall have the meaning set forth in the recitals.
"Heise" shall have the meaning set forth in the recitals.
"Indemnification Event" shall mean (i) a sale, exchange, foreclosure, deed in
lieu of foreclosure or other disposition of all or any portion of the Real
Estate (or a transaction that is treated as a sale, exchange or other
disposition of all or any portion of the Real Estate for federal income tax
purposes) other than pursuant to an exercise of the Option, (ii) a refinancing
or repayment of the Senior Loan or the Junior Loan (other than from Modified NOI
or from payments required under Paragraphs 11 and 12 of the Original Tax
Indemnity Agreement), (iii) any other action by CTA, Newco or General Partner,
(iv) any transfer, cancellation, discharge (other than repayments from
Modified NOI or from payments required under Paragraphs 11 and 12 of the
Original Tax Indemnity Agreement), amendment or modification or all of any
portion of the Senior Loan or the Junior Loan or the rights of Prime under the
Junior Loan Agreement or the Senior Loan Agreement, or (v) any change in the
direct or indirect beneficial ownership of General Partner or Newco or any
increase in the direct or indirect beneficial ownership of Prime by General
Partner or Newco or any direct or indirect owner thereof that is contrary to
Paragraph 7g, which in respect of any of clauses (i), (ii), (iii), (iv) or (v)
above occurs after December 12, 1997 and which results in or creates the risk of
a Tax Event with respect to Heise. Without limiting the foregoing, the parties
hereto acknowledge and agree that (a) the New Transaction described in Paragraph
2b constitutes an "Indemnification Event" for which Indemnitee agrees that the
requirements of Paragraph 4 have been satisfied or waived; and (b) if Prime
transfers all or any portion of the Junior Loan after the date hereof pursuant
to Paragraph 7a, each such transfer shall constitute an "Indemnification Event"
and Indemnitee agrees that the requirements of Paragraph 4 are hereby waived for
each such transfer, provided that, at the time of each such transfer, Prime
certifies in writing to Indemnitee that (1) such transfer does not involve any
change in the rights or obligations of CTA, Indemnitee, Newco or General Partner
(or any Person related to any of the foregoing, within the meaning of Paragraph
7g) with respect to the Junior Loan or the Senior Loan, other than
administrative changes which arise solely from the change in the identity of the
holder of all or any portion of the Junior Loan; and (2) the transferee is not
related to CTA, Indemnitee, Newco or General Partner, as such term is defined in
Paragraph 7g.
"Indemnification Expiration Date" shall mean January 5, 2013.
"Indemnification Security" shall mean that Prime shall either deposit into
escrow with an independent escrow agent which is reasonably acceptable to Prime
and Heise, on terms reasonably acceptable to Prime and Heise, immediately
available funds in an amount equal to 50% of the Tax Indemnity Amount based on
the then current information or deliver to Heise an unconditional, irrevocable
letter of credit in an amount equal to 50% of the Tax Indemnity Amount based on
the then current information issued by a national bank which is one of the 100
largest national banks in the United States ranked on total assets and which has
a long-term credit rating of A or above by Standard & Poor's Ratings Group or an
equivalent rating by Moody's Investor Services; provided, however, that if the
combined Net Worth of Prime and PGRT, as reflected on the most recent quarterly
Prime Financial Statements, falls below $100,000,000, Prime shall deposit 100%
of the Tax Indemnity Amount in escrow or furnish a letter of credit meeting the
requirements set forth above to Heise in immediately available funds in an
amount equal to 100% of the Tax Indemnity Amount. The terms of any such letter
of credit shall provide that such letter of credit may be drawn in full by the
Indemnitee if ten (10) days before the expiration of such letter of credit,
either such letter of credit has not been replaced by a new letter of credit in
an amount not less than that of the letter of credit being
3
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replaced and otherwise on terms identical to the letter of credit being replaced
or Prime has otherwise placed an amount in escrow in accordance with this
Agreement. If the Tax Indemnity Amount increases or decreases because of the
passage of time or a change in the information upon which they are calculated,
Prime shall be obligated to provide additional security in accordance with the
requirements set forth above within 30 days after receipt of the revised
calculation, or, in the case of a decrease, shall have the right to the return
of any excess security or the reduction of the amount of any letter of credit as
provided in this Agreement.
"Indemnitee" shall mean Heise and, to the extent provided herein, his successors
and assigns hereunder.
"Independent Tax Counsel" shall mean (i) such one of the following as Prime, in
its sole discretion, may select: Jones Day, Sidley, Austin, Brown & Wood LLP,
Jenner & Block LLP, Latham & Watkins LLP, Katten Muchin Rosenman LLP,
Sonnenschein Nath & Rosenthal LLP, Mayer Brown, Rowe & Maw LLP, McDermott Will &
Emery, Skadden, Arps, Slate, Meagher & Flom LLP, Cravath Swain & Moore LLP, or
Sullivan & Cromwell LLP; or (ii) if each such law firm is conflicted or
unwilling to serve as Independent Tax Counsel, another law firm selected by
Heise which is reasonably acceptable to Prime.
"Junior Lender" shall have the meaning set forth in the recitals.
"Junior Loan" shall have the meaning set forth in the recitals.
"Junior Loan Agreement" shall have the meaning set forth in the recitals.
"Junior Loan Documents" shall have the meaning set forth in the recitals.
"Land Trusts" shall have the meaning set forth in the recitals.
"Modified NOI" shall mean Adjusted Net Operating Income (as defined in the
Junior Loan Agreement) but excluding therefrom any revenues from a sale,
exchange or other disposition of all or any portion of the Real Estate other
than pursuant to an exercise of the Option.
"Net Worth" shall mean (i) the total assets of any Person, without a deduction
for accumulated depreciation on consolidated properties, unconsolidated
properties and joint ventures and properties held for sale, minus (ii) the total
liabilities of such Person, as detailed on such Person's most recently issued
quarterly financial statements prepared in accordance with generally accepted
accounting principles.
"Person" shall mean any individual, general partnership, limited partnership,
limited liability company, trust, estate, association, corporation or other
entity.
"Prime" shall have the meaning set forth in the recitals.
"Prime Financial Statements" shall mean the financial statements for the most
recent calendar quarter of (a) Prime Group Realty Trust ("PGRT"), the general
partner of Prime, so long as the operations of Prime are consolidated into
PGRT's financial statements, or (b) if such operations are no longer
consolidated, then the separate financial statements of Prime.
4
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"REC" shall have the meaning set forth in the recitals.
"Real Estate" shall have the meaning set forth in the recitals.
"Regulations" shall mean the Income Tax Regulations promulgated under the Code,
whether temporary or final, as such Regulations may be amended from time to
time, including corresponding provisions of succeeding Regulations.
"Senior Lender" shall have the meaning set forth in the recitals.
"Senior Loan" shall have the meaning set forth in the recitals.
"Senior Loan Agreement" shall have the meaning set forth in the recitals.
"Senior Loan Documents" shall have the meaning set forth in the recitals.
"Tax Event" shall mean, with respect to Indemnitee, the inclusion of any item of
taxable income or gain in the gross income of Indemnitee for federal income tax
purposes, other than (i) income or gain attributable to cash and/or other
property distributed to an Indemnitee, received by an Indemnitee, or held by CTA
for the benefit of an Indemnitee, including without limitation rents and other
income received from the operation of the Real Estate in the ordinary course of
business, and (ii) income or gain from Modified NOI.
"Tax Indemnity Amount" shall have the meaning set forth in Paragraph 3.
"Trust No. 5602" shall have the meaning set forth in the recitals.
"Trust No. 40935" shall have the meaning set forth in the recitals.
2.
Related Transactions.
a. Original Transaction. Prime, Casati, Heise, and certain
Affiliates of the foregoing entered into the following agreements and completed
the following transactions contemporaneously with the execution and delivery of
date of the Original Tax Indemnity Agreement (items (i) through (iv) below are
collectively referred to as the "Original Transaction"):
(i) Prime entered into a certain Asset Purchase Agreement dated
October 21, 1997, with Continental Offices Ltd. and Continental Offices Ltd.
Realty, Affiliates of Casati and Heise and purchased certain assets, including
the contract to manage the Real Estate, on December 12, 1997.
(ii) Prime entered into a certain Loan Purchase Agreement dated as of
November 6, 1997, with GECC and Great Oaks and purchased the Junior Loan from
GECC and Great Oaks on December 12, 1997.
(iii) Prime, C-H Partnership, Casati and Heise entered into that certain
Fifth Amendment to the Agreement of Limited Partnership of Continental Towers
Associates-I, L.P. (such Agreement, together with the amendments and
modifications listed on Schedule 3
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attached hereto and made a part hereof, the "CTA Agreement") dated as of
December 12, 1997.
(iv) GECC, Great Oak, Trust No. 40935, CTA, C-H Partnership, Casati and
Heise entered into that certain First Amendment to Loan Modification and Amended
and Restated Loan Agreement dated as of December 12, 1997.
(v) CTA, Trust No. 40935, Trust No. 5602 and Prime Group Management,
L.L.C. entered into that certain Management Agreement dated as of December 31,
2001 (the "Management Agreement").
b. New Transaction. Prime, Casati, Heise, and certain Affiliates of
the foregoing are entering into the following agreements (items (i), (ii) and
(iii) below are collectively referred to as the "New Transaction"):
(i) CHP, Heise and REC will enter into a Dissolution Agreement dated
as of the date hereof pursuant to which CHP will dissolve and assign portions of
its partnership interest in CTA to REC and Heise in complete redemption of REC’s
and Heise's respective partnership interests in CHP. CTA will then direct the
Land Trusts to convey the Real Estate to CTA and terminate the Land Trusts. Upon
termination of the Land Trusts, CTA will form a new limited liability company
("Newco") and will enter into an operating agreement for Newco pursuant to which
CTA will contribute a 64% tenancy-in-common interest in the Real Estate to Newco
in exchange for 100% of the membership interests in Newco.
(ii) CTA, CACPT and REC will enter into a Redemption Agreement dated as
of the date hereof pursuant to which CTA will assign 100% of the membership
interests in Newco to CACPT and/or REC in complete redemption of the CTA
partnership interests held by CACPT and REC. General Partner, CACPT and/or REC
will enter into an Agreement of Purchase and Sale of Membership Interests
pursuant to which General Partner will purchase 100% of the membership interests
in Newco from CACPT and/or REC.
(iii) Newco and CTA will enter into a Co-Ownership Agreement dated as of
the date hereof governing their ownership of the Real Estate as
tenants-in-common that (i) complies with IRS Revenue Procedure 2002-22, to the
extent not inconsistent with the current management agreement, CTA agreement and
debt documents, and (ii) specifies, as among the co-owners, an allocation of the
debt secured by the Real Estate in proportion to their tenancy-in-common
percentages. Newco and CTA will make a “protective” election under Code section
761.
(iv) at Prime's request, subject to the Senior Loan Documents and with
the prior written consent of the Senior Lender in its sole discretion, Newco and
CTA will enter into, with a party designated by Prime, an option through January
5, 2013 to purchase or ground lease, from time to time, portions of the Real
Estate which are not improved with buildings, to permit the construction of
additional improvements on the Real Estate (the "Option"). The option shall be
exercisable, from time to time, upon 90 days' notice of scheduled commencement
of construction of each proposed improvement upon such Real Estate, upon payment
in immediately available funds, equal to the appraised fair market value of such
Real Estate or, in the case of a ground lease, upon market terms, in each case
at the time of exercise. CTA and Newco will also, if appropriate, enter into a
reciprocal cross-easement
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agreement creating the easements necessary to construct and operate the new
facilities in coordination with the existing office buildings and commercial
building.
3. Tax Indemnity Amounts. Subject to the provisions of Paragraphs 4,
5 and 6, if a Tax Event occurs as a result of an Indemnification Event which
takes place prior to the Indemnification Expiration Date, Prime shall pay, at
the time specified in Paragraph 4c below, in immediately available funds to
Indemnitee the sum of the following amounts based upon the amount of taxable
income or gain included in the gross income of Indemnitee for federal income tax
purposes:
(i) the federal and applicable state income tax payable on such
income or gain, calculated as the product of the then current highest stated
marginal federal and applicable state tax rates applicable to each component of
such income or gain that is subject to a different rate by reason of the
character thereof (for example, capital gains, depreciation, recapture and
ordinary income) multiplied by the amount of each applicable component of such
income or gain (the applicable state tax rate being that of the state in which
Indemnitee is then a resident for state income tax purposes, but in no event
greater than the higher of the highest stated marginal income tax rate imposed
on individual residents by the State of Illinois or the highest stated marginal
income tax rate imposed on individual residents by the State of Florida); plus
(ii) any federal and applicable state interest, penalties or additions
to tax for understatement of tax liability; plus
(iii) a "gross-up" amount equal to the federal and applicable state
income tax payable on the amount payable under this Paragraph 3 (calculated in
the same manner described in clause (i)), such that the amounts described in
clauses (i) and (ii) are received by Indemnitee on a net, after-tax basis; less
(iv) any deductions, credits or other federal and applicable state
income tax benefits then realized and resulting from (a) the Tax Event, (b) the
related Indemnification Event, and (c) the payment of the underlying taxes,
interest and penalties.
The amount payable to Indemnitee pursuant to this calculation is the "Tax
Indemnity Amount." Except as provided in Paragraph 10, the maximum amount of
taxable income and gain referred to in clause (i) on which the Tax Indemnity
Amount can be based is $32,337,592.
4. Payment of Indemnity and Deposit of Indemnification Security. The
determination of whether an event or proposed event that would otherwise
constitute an Indemnification Event results in or creates a risk of a Tax Event
to Indemnitee shall be determined by the agreement of Prime and the Indemnitee.
If for any reason Prime and Indemnitee in good faith do not agree as to this
determination, Prime shall obtain Independent Tax Counsel's opinion regarding
the tax consequences of the event or proposed event. The cost of obtaining such
opinion shall be paid 50% by Prime and 50% by Indemnitee.
a. If Independent Tax Counsel issues a formal legal opinion to the
Indemnitee and Prime that the event should not result in a Tax Event with
respect to Indemnitee, the Indemnitee shall report the transaction on their
respective income tax returns without including any taxable income or gain from
the event.
b. If (i) Independent Tax Counsel is not willing to issue a formal
legal opinion that the event should not result in a Tax Event with respect to
Indemnitee, (ii) Independent Tax Counsel is
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willing to issue a formal legal opinion that the Indemnitee has a reasonable
basis (within the meaning of Treasury Regulation Section 1.6662-3(b)(3)) for
reporting the transaction on their respective income tax returns without
including any taxable income or gain from such event and without making specific
disclosure of the relevant facts on the return, as described in Treasury
Regulation Section 1.6662-3(c) (or that such a reporting position satisfies such
other standard as may then be in effect such that the Indemnitee should not be
subject to penalties or additions to tax other than those based upon an
understatement of tax liability not due to negligence if they file their income
tax returns without including any taxable income from the transaction and
without making specific disclosure of the relevant facts on the return), then
the Indemnitee shall report the transaction on his income tax returns without
including any taxable income or gain from the event. In such event, as a
condition to the reporting by the Indemnitee as described above, Prime shall
provide the Indemnification Security if at any time between the date of such
event and a Final Determination with respect to such event, the combined Net
Worth of Prime and PGRT is less than $100,000,000.
c. If the conditions set forth in subparagraph a or subparagraph b
are not met, the Indemnitee shall report the Tax Event on his tax returns and
Prime shall pay to Indemnity his Tax Indemnity Amount with respect to such Tax
Event. Such payment shall be made in full in immediately available funds at one
of the following times, as Prime, in its sole discretion, may select:
(i) not later than ten (10) days before the date on which Indemnitee's
income tax return for the tax year in which the Indemnification Event occurs is
due (without extension) (the "Return Due Date"), in which case the Tax Indemnity
Amount shall be discounted by the then current yield on 90-day treasury notes,
from the Return Due Date to such date of payment, provided that, on or before
the date of the occurrence of the Indemnification Event, Prime provides the
Indemnification Security with respect to such Tax Event in the amount of 100% of
the Tax Indemnity Amount; or
(ii) on the date of the occurrence of the Indemnification Event, in
which case the Tax Indemnity Amount shall be discounted by the then current
yield on one-year treasury notes, from the Return Due Date to such date of
payment.
d. If the conditions set forth in either subparagraph a or
subparagraph b are met, Prime shall remain liable for any Tax Indemnity Amounts
with respect to such event. In such case, Prime shall pay the Tax Indemnity
Amount, if any, in immediately available funds within ten (10) business days
after a Final Determination that such event constituted a Tax Event with respect
to Indemnitee, but not later than the date for which any tax payable by the
Indemnitee with respect to such Tax Event is due.
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5.
Contest Provisions.
a. General Partner shall be entitled to contest, as tax matters
partner of CTA in accordance with the CTA Agreement as part of the unified audit
of CTA, any claim in respect of any "partnership" item of CTA that, if
successful, would result in a Tax Event (a "Partnership Level Issue").
Indemnitee shall take such action or refrain from taking such action as may be
reasonably necessary in order to cause each item which is the subject of a
potential Tax Event to be contested as a Partnership Level Issue. If General
Partner contests a Partnership Level Issue that, if successful, would result in
a Tax Event, Prime's obligation to pay any Tax Indemnity Amounts shall, at
Prime's election, be deferred until thirty (30) days after a Final Determination
of the Indemnitee's federal income tax liabilities in respect of a Tax Event,
provided that, upon receipt of the 30-day letter from the Internal Revenue
Service, Prime furnishes the Indemnification Security.
b. If an audit or proceeding involving a potential Tax Event is being
conducted in a proceeding involving Indemnitee which cannot be transferred to
CTA as a partnership item (an "Indemnitee Level Issue"), Indemnitee hereby
agrees to promptly notify Prime in writing of such adjustment, and Indemnitee
shall, at Prime's request, diligently contest such matter and tender the defense
of the Indemnitee Level Issue to such legal counsel as Prime may select and
which is reasonably acceptable to Indemnitee ("Contest Counsel"). Indemnitee
agrees to reasonably cooperate with Prime and Contest Counsel in connection with
any such proceedings and to follow the advice of Contest Counsel with respect to
decisions as to whether to contest such Indemnitee Level Issue, the extent and
choice of forum with respect to such contest and other material issues relating
thereto. Contest Counsel shall represent Indemnitee only in connection with such
issues as could potentially result in a Tax Event with respect to Indemnitee,
and, unless Indemnitee, in his sole discretion, otherwise consents, Contest
Counsel shall not represent Indemnitee with respect to any other issues, without
regard to whether such other issues are being concurrently challenged by the
Internal Revenue Service or other tax authority or appear on the same tax return
as the Indemnitee Level Issue in question. Prime shall have the right to consult
with Contest Counsel and Indemnitee on decisions relating to strategy and
potential courses of action with regard to such Indemnitee Level Issue.
Indemnitee shall make available to Contest Counsel copies of Indemnitee's tax
returns and other information and materials pertinent to the contest of the
Indemnitee Level Issue; provided, however, if any information relating to
matters other than the Indemnitee Level Issue in question are included in
materials furnished to Contest Counsel, such materials shall be furnished only
upon the agreement by Contest Counsel to maintain such information on a strictly
confidential basis and to not disclose any such information to any person
(including without limitation Prime, General Partner or any Affiliates of either
of them) without the prior written consent of Indemnitee.
c. If Prime recommends acceptance of a settlement offer in respect
of an Indemnitee Level Issue or if General Partner recommends the acceptance of
a settlement offer in respect of a Partnership Level Issue, but the Indemnitee
declines to accept such offer in writing within 30 days (i) the obligation of
Prime to make indemnity payments as the result of any such contest or
proceedings shall not thereafter exceed the obligation that it would have had if
such contest had been settled or proceedings terminated on the basis recommended
by Prime or General Partner, as applicable, and (ii) in the case of an
Indemnitee Level Issue, Prime shall have no further liability for costs or other
expenses in respect of such contest.
d. Notwithstanding the foregoing, Indemnitee will not have any
obligation to contest any action with respect to an Indemnitee Level Issue
(i) unless such items could give rise to a federal income tax liability
(disregarding other items in the assessment and considering effects in future
years)
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in excess of $25,000, (ii) unless Prime furnishes the Indemnification Security
as set forth herein, (iii) without Prime paying when due, reasonable third-party
costs and out-of-pocket expenses including reasonable legal, witness and
accounting fees and other expenses and, in the case of proceedings before the
Court of Federal Claims or Federal District Court (subject to the agreement by
Prime to not litigate in Tax Court, which agreement may be withheld in Prime's
sole discretion), the amount of tax (and any applicable interest and penalties)
for which refund is claimed, and (iv) to the extent Indemnitee waives in writing
Prime's obligation to indemnify Indemnitee for such items, in which case all
third-party costs and out-of-pocket expenses described in clause
(iii) thereafter incurred by Indemnitee and all taxes of Indemnitee would be
paid by Indemnitee.
e. Indemnitee shall not settle any Indemnitee Level Issue without
Prime's prior written consent; provided that Indemnitee shall not be required to
contest any proposed adjustment and may settle any such proposed adjustment if
Indemnitee shall waive his right to indemnity under this Agreement with respect
to such adjustment and any Tax Event that results from such adjustment and, in
the case of proceedings before the Court of Federal Claims or Federal District
Court, shall pay to Prime the amount of tax (and any applicable interest and
penalties) previously paid or advanced by Prime with respect to such adjustment
or the contest of such adjustment.
6. Exclusions from Indemnity. In executing this Agreement, Indemnitee
acknowledges that he was advised by tax counsel satisfactory to him that
entering into the Original Transaction did not cause Indemnitee to recognize
taxable income or gain and that he agreed to proceed in reliance on this advice
and will have no claim against Prime under the terms of this Agreement if he
recognizes taxable income or gain as a result of entering into the Original
Transaction. Furthermore, notwithstanding the provisions of Paragraph 4, but
subject to Paragraph 10, Prime shall have no obligation to make an indemnity
payment or provide the Indemnification Security to Indemnitee if Indemnitee
recognizes taxable income or gain as a result of:
(i) The allocations of income, gain, loss, deduction and credit set
forth in the CTA Agreement not being respected under Sections 704(b) and 704(c)
of the Code, except as a result of the exercise of discretion by General
Partner;
(ii) (A) Any change in, or amendment to, the Code or any other federal
tax statute, which is effective on or after the date of the Original Agreement,
(B) any final or temporary Regulation, which is enacted or adopted after the
date of the Original Agreement, or (C) any court decision (other than a decision
to which CTA, Indemnitee or any Affiliate thereof is a party) issued after the
date of the Original Agreement;
(iii) A voluntary or involuntary sale, assignment, transfer or other
disposition by Indemnitee of any interest in CTA or any part thereof;
(iv) The failure of Indemnitee to take timely action or follow the
proper procedures in reporting his distributive share from CTA or contesting a
claim made by the Internal Revenue Service in accordance with applicable law and
Regulations;
(v) The gross negligence or the willful misconduct of Indemnitee or any
Affiliate thereof;
(vi) Any guarantee by Indemnitee or a person related to Indemnitee of
the Junior Loan, the Senior Loan or any other debt of CTA or its Affiliates;
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(vii) Any recapture of CTA losses or items of deduction or loss that were
allocated to Indemnitee after the closing of the Original Transaction;
(viii) Any acts by any relative of Indemnitee on behalf of Prime or any
Affiliate thereof beyond his or her actual authority;
(ix) Any bad debt deduction claimed by Prime with respect to the Junior
Loan pursuant to Code Section 166 at any time after 1997;
(x) Any failure by Prime to recognize as gross income for income tax
purposes the amounts referred to as "Contingent Interest" in the 1997 Promissory
Note dated December 12, 1997, evidencing the Junior Loan (the "Note"), as such
amounts accrue under the terms of the Note; or
(xi) Any exercise of right of partition in respect of the Real Estate by
Indemnitee or Indemnitee's Designee (as defined below) without the prior consent
of Prime.
7.
Transfers by Prime and PGRT; Other Events Requiring Security.
a. Subject to Paragraph 7f below, Prime agrees that it shall not
transfer, absolutely or as security by pledge or hypothecation, all or any
portion of the Junior Loan or any of its rights under the Junior Loan Agreement
or other instruments evidencing or securing the Junior Loan prior to the
Indemnity Expiration Date unless Prime confirms in writing its continuing
liability under this Agreement.
b. At all times during the term of this Agreement, PGRT shall be the
general partner of Prime, unless, concurrently with the termination of PGRT's
status as the general partner of Prime, PGRT agrees in writing to continue to be
liable for the obligations of Prime under this Agreement to the same extent as
if PGRT continued to be the general partner of Prime.
c. During the term of this Agreement, neither Prime nor PGRT shall
merge with or into another entity, with such other entity being the survivor of
the merger (the "Survivor"), unless (i) the Survivor acknowledges in writing its
assumption of the liability and the obligations of Prime or PGRT, as general
partner of Prime, and (ii) the Net Worth of the Survivor is not less than that
of Prime or PGRT, as applicable, immediately prior to such merger. In the event
of such a merger, all references to the combined Net Worth of Prime and PGRT
under this Agreement shall thereafter be deemed to refer to the Net Worth of the
Survivor.
d. If at any time (x) there occurs one or more sales or other
dispositions of assets by PGRT (or one or more entities controlled by PGRT,
including without limitation Prime) and/or distributions by Prime to its
partners and/or PGRT to its shareholders (without double counting), in an
aggregate amount exceeding the lesser of $100,000,000 or 33% of the combined
gross assets of PGRT and Prime during any continuous twelve-month period, and
(y) immediately following any such event the combined Net Worth of Prime and
PGRT is less than $100,000,000, then, from and after the date of such event,
none of Prime, Newco, General Partner (on its own behalf or on behalf of CTA) or
any Affiliate of any of the foregoing shall have the right to cause an
Indemnification Event without providing the Indemnification Security in the
amount of 100% of the Tax Indemnity Amount concurrently with the closing of such
Indemnification Event. If at any time the combined Net Worth of Prime and PGRT
is less than $50,000,000, then Indemnitee or his designee ("Indemnitee's
Designee") shall have the right (but not the obligation) to, at any time
thereafter but prior to the date
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on which the combined Net Worth of Prime and PGRT increases to $50,000,000 or
more, purchase the General Partner's interest in CTA in exchange for the payment
of cash to the owner of the applicable interest in the amount of $1,000. For
purposes of clause (x) above, the amount and percentage of assets disposed of or
distributed shall be measured by the book value of such assets as reported in
accordance with generally accepted accounting principles, consistently applied,
on the Prime Financial Statements for the period immediately preceding the
applicable disposition or distribution; and to the extent that an asset is
disposed of by PGRT and the proceeds thereof are distributed by PGRT to its
shareholders, or, without double counting, an asset is disposed of by Prime and
the proceeds thereof are distributed by Prime to its partners (including PGRT,
but only to the extent distributed by PGRT to its shareholders), only the
greater of the book value of the disposed property or the distribution proceeds
shall be taken into account for purposes of determining whether the thresholds
in clause (x) have been exceeded. If at any time after the date of this
Agreement Prime's Financial Statements are no longer publicly available, Prime
shall provide to Indemnitee quarterly financial statements certified by its
chief financial or equivalent officer promptly after such financial statements
are completed.
e.
If at any time:
(i) The terms of the Junior Loan Documents (as modified from time to
time) or the Senior Loan Documents (as modified from time to time) provide that
a failure by the obligor under the Junior Loan or the Senior Loan to make
periodic payments of a specified minimum amount (other than payments determined
on the basis of net operating income, adjusted net operating income or some
modification thereof) prior to the Maturity Date of the Junior Loan (as defined
in the Junior Loan Documents, as modified from time to time) or the Maturity
Date of the Senior Loan (or defined in the Senior Loan Documents) as may apply,
shall constitute a default under the Junior Loan or the Senior Loan, an
acceleration of the Maturity Date of the Junior Loan or the Senior Loan, or
otherwise entitle the holder of the Junior Loan or the Senior Loan to foreclose
or otherwise realize upon the collateral securing the Junior Loan or the Senior
Loan (without regard to any additional conditions on such consequences that are
of a procedural or administrative nature, including but not limited to the
giving of notice or the passage of time) (such condition is referred to as a
"Minimum Debt Service Requirement," and the specified minimum payments described
above in this clause (i) for any period are referred to as the "Minimum Debt
Service" for such period);
(ii) The Junior Loan is then pledged, assigned or hypothecated by the
holder thereof as security for any debt obligation;
(iii) Prime is not then providing the Indemnification Security in the
amount of 100% of the Tax Indemnity Amount; and
(iv) For the immediately preceding calendar month, the Annualized NOI is
less than the aggregate Minimum Debt Service for such immediately preceding
calendar month and the succeeding eleven (11) calendar months thereafter;
then within ten (10) days following the end of such immediately preceding
calendar month Prime shall provide, and shall thereafter maintain, the Debt
Service Security. For purposes of the foregoing, the following terms shall have
the meanings set forth below:
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"Annualized NOI" shall mean, for the period of the immediately preceding
calendar month and the succeeding eleven (11) calendar months thereafter, the
anticipated gross income from operations of the Real Estate (excluding the
proceeds of any loans, contributions to capital, the proceeds from any sale,
exchange or other disposition of all or any portion of the Real Estate, and the
proceeds from any casualty insurance or condemnation), including base rental and
expense reimbursement revenue (based on a lease-in-place analysis which reflects
the then current leases in place and not in monetary default in an amount in
excess of two (2) months of rent under any such lease), health club income,
antennae income, storage income, service fees, charges, and other income earned
by the Real Estate, less the anticipated operating expenses of the Real Estate
(such as cleaning, utilities, administrative, landscaping, security,
maintenance, repair, and management, health club, marketing, and reserves for
replacements of $0.15 per square foot) for such period (but not less than the
amount of such expenses for the most recently ended 12 calendar month period),
and less the anticipated fixed expenses (such as insurance premiums and real
estate taxes or assessments) for such period (but not less than the amount of
such expenses for the most recently ended 12 calendar month period, provided
that if Prime provides reasonable evidence to Indemnitee that real estate taxes
or assessments will decrease, lower estimates may be used for such expenses),
but excluding all anticipated capital expenditures in excess of $40,000 per
month, leasing commissions in excess of $200,000 per year, debt service under
the Junior Loan and Senior Loan, depreciation and amortization, amortization of
above/below market leases, bad debt expenses for prior periods, bad debt
expenses related to leases no longer in place, and other similar non-cash items.
Such gross income and expenses for any period shall be determined on a cash
basis.
"Debt Service Security" shall mean that Prime shall either deposit into escrow
with an independent escrow agent which is reasonably acceptable to Prime and
Heise, on terms reasonably acceptable to Prime and Heise, immediately available
funds in an amount equal to the Debt Service Security Amount or deliver to Heise
an unconditional, irrevocable letter of credit in an amount equal to Debt
Service Security Amount issued by a national bank which is one of the 100
largest national banks in the United States ranked on total assets and which has
a long-term credit rating of A or above by Standard & Poor's Ratings Group or an
equivalent rating by Moody's Investor Services. The terms of any such escrow or
letter of credit shall provide that the funds in such escrow or such letter of
credit may be drawn upon by Heise when and to the extent necessary to fund the
Minimum Debt Service. The terms of any such letter of credit shall further
provide that such letter of credit may be drawn in full by Heise if ten (10)
days before the expiration of such letter of credit, either such letter of
credit has not been replaced (subject to adjustment of the Debt Service Security
Amount) by a new letter of credit in an amount not less than that of the letter
of credit being replaced and otherwise on terms identical to the letter of
credit being replaced or Prime has otherwise placed an amount in escrow in
accordance with this Agreement. If the Debt Service Security Amount increases or
decreases as provided below, Prime shall be obligated to provide additional
security in accordance with the requirements set forth above within ten (10)
days after the receipt of the revised calculation, or in the case of a decrease,
shall have the right to a return of any excess security as provided in this
Agreement.
"Debt Service Security Amount" shall initially mean the product of (x) the Time
Factor multiplied by (y) the excess of the Minimum Debt Service described in
clause (i) above over the Annualized NOI described in clause (iv) above. At the
end of each calendar month following the initial provision of the Debt Service
Security, the Debt Service Security Amount
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shall be recalculated based on the components thereof determined as of the then
most recently ended calendar month and the Debt Service Security shall be
increased or reduced as described in the definition thereof.
"Time Factor" shall mean (i) if the Net Worth of PGRT is less than $100,000,000
for at least two (2) consecutive calendar quarters, the number of whole or
partial twelve-month periods between the applicable date of determination of the
Debt Service Security Amount and January 5, 2013; or (ii) in all other cases,
the lesser of (x) the number of whole or partial twelve-month periods between
the applicable date of determination of the Debt Service Security Amount and
January 5, 2013 and (y) five (5).
f. Notwithstanding anything contained in this Agreement to the
contrary, Prime shall have the right, without Indemnitee's consent, to assign
its rights and obligations under this Agreement to another entity (a "transferee
entity"), provided (i) Prime assigns and transfers its rights as holder of the
Junior Loan to such transferee entity (or an Affiliate of the transferee); (ii)
such transferee entity acknowledges in writing its assumption of the obligations
of Prime hereunder, and (iii) such transferee entity has owner’s equity (total
assets, without a deduction for accumulated depreciation, minus total
liabilities) of not less than $100,000,000 at the time of such transfer. For
this purpose, the transferee’s owner’s equity would be determined in accordance
with its financial statements prepared in accordance with generally accepted
accounting principles and certified by independent certified public accountants.
In the event of any such transfer permitted under this Section 7f, Prime and its
Affiliates shall be fully released from all liability hereunder and Indemnitee
shall promptly execute a release in form and substance reasonably satisfactory
to Prime and Indemnitee.
g. During the term of this Agreement, (i) neither Newco nor the
General Partner shall be related to Prime, (ii) neither General Partner nor any
Successor General Partner shall transfer or assign, or permit the transfer or
assignment of, all or any portion of its general partnership interest in CTA to
any Person (such Person being a "Successor General Partner") related to Prime,
and (iii) Newco shall not transfer or assign all or any portion of its interest
in the Real Estate to any Person related to Prime. For purposes of the
foregoing, a Person shall not be considered related to Prime provided (i) such
Person does not, directly or indirectly (by contract (which shall not include
the Management Agreement), attribution under Code Section 267(c) or other
arrangement), own or otherwise have the right to receive the benefit of 10% or
more of the capital or profits interests in Prime; (ii) Prime does not, directly
or indirectly (by contract (which shall not include the Management Agreement),
attribution under Code Section 267(c) or other arrangement), own or otherwise
have the right to receive the benefit of 10% or more of the capital or profits
interests of such Person; (iii) the same Person or Persons do not, directly or
indirectly (by contract (which shall not include the Management Agreement),
attribution under Code Section 267(c) or other arrangement), own or otherwise
have the right to receive the benefit of 10% or more of the capital or profits
interests of each of such Person and Prime; and (iv) in the judgment of DLA
Piper Rudnick Gray Cary US LLP, such Person is not considered related to Prime
on the date hereof within the meaning of any section of the Code or any
provision of the Regulations which would constitute or create a risk of a Tax
Event with respect to Indemnitee upon the assignment of any portion of the Real
Estate to or the admission of such Person. Prime hereby covenants that there
shall be no increase in the levels of direct or indirect ownership or beneficial
rights referred to in clauses (i), (ii) and (iii) of the immediately preceding
sentence beyond the thresholds set forth therein from and after the date hereof
through and including the Indemnification Expiration Date.
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8. Release of Indemnification Security. If Prime has furnished
Indemnification Security under the terms of this Agreement, the amount of such
Indemnification Security shall be reduced or the Indemnification Security shall
be released if:
a. in the case in which the Indemnification Security has been
furnished in connection with an Indemnification Event, to the extent applicable
statutes of limitations expire without a claim being made that Indemnitee has
recognized taxable income, there is a Final Determination that Indemnitee's
return was correct as filed or that an amount smaller than the Tax Indemnity
Amount is owed to Indemnitee and such amount has been paid by Prime in
accordance with this Agreement;
b. in the case in which the Indemnification Security has been
furnished to protect against the possibility that an Indemnification Event may
occur in the future, the basis of Indemnitee's interest in CTA has been
increased pursuant to Section 1014 of the Code and no Indemnification Event has
occurred (subject to the provisions of Paragraph 9); or
c. in the event the amount of Indemnification Security is reduced
because of an increase in the combined Net Worth of Prime and PGRT.
The amount of any such reduction shall be determined based on a recalculation of
the Tax Indemnity Amount or the Tax Indemnity amount (as may apply) taking into
account the events described above.
9. Basis Increase Under Section 1014. If the tax basis of
Indemnitee's partnership interest in CTA has been increased pursuant to
Section 1014 of the Code, and a corresponding adjustment has been made to the
tax basis of the assets of CTA pursuant to an election under Section 754 of the
Code, then (i) the obligations of Prime to the successor to Indemnitee under
this Agreement with respect to an Indemnification Event occurring after the
effective date of such adjustments shall apply only with respect to such an
Indemnification Event that results in or creates a risk of the recognition of
income to such successor of the Indemnitee from the discharge of indebtedness
(which shall not include a foreclosure or deed in lieu of foreclosure with
respect to the Junior Loan), and Prime shall be able to foreclose upon the Real
Estate to the extent provided in the Junior Loan Agreement or receive a deed in
lieu of foreclosure with respect to the Junior Loan on or after such time
without any obligation hereunder to such successor, and (ii) any Indemnification
Security then in place with respect to Indemnitee shall be reduced or released
as provided in Paragraph 8.
10. Tax Savings. If (i) Prime has made a payment to Indemnitee pursuant
to Paragraph 4 of this Agreement, (ii) Indemnitee shall realize with respect to
any year beginning prior to the Indemnification Expiration Date, any actual
reduction in federal or applicable state income tax liability that would not
have been realized but for the Tax Event, the related Indemnification Event or
the payment of the underlying tax, interest and penalties, which tax reduction
was not taken into account in calculating Prime's payment to Indemnitee, then
Indemnitee shall pay to Prime an amount equal to the actual reduction in federal
and applicable state income tax realized by Indemnitee (based upon the then
current highest marginal federal and applicable state income tax rates
applicable to Indemnitee on the particular type of tax reduction). If Indemnitee
makes a payment to Prime pursuant to the immediately preceding sentence, and
Indemnitee subsequently recognizes gross income for federal income tax purposes,
which recognition arises out of the tax benefit that resulted in such payment to
Prime, then Prime shall pay to Indemnitee an amount calculated as provided in
Paragraph 3 of this Agreement with respect to such income inclusion, at the time
described in Paragraph 4 of this Agreement. The immediately preceding sentence
shall apply notwithstanding the maximum Tax Indemnity Amounts set forth in
Paragraph 3 of this Agreement, the limitations of Paragraph 9 of this Agreement
or any other provision of this Agreement. Indemnitee agrees to act in good faith
to claim any tax benefits or savings (including filing claims for refunds and
amended tax returns) and take such other
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actions as may be reasonable to minimize the net amount of any indemnity payment
due from Prime hereunder and to maximize the amount of its tax savings;
provided, however, that Indemnitee shall not be required to take any action
which, in its good faith judgment, would have an adverse economic consequence in
excess of the amount of the tax benefits and/or tax savings therefrom.
11. Release. In consideration for a separate cash payment being made to
Casati, Casati, on his own behalf and on behalf of his successors,
representatives and assigns hereby fully releases and discharges Prime, its
Affiliates and their respective successors, agents, officers, members, managers,
directors, affiliates, trustees, officers, divisions, partners, employees,
representatives and assigns, from any and all debts, damages, claims, demands,
liabilities, obligations, or causes of action, which Casati now has, or at any
time heretofore had, or hereafter shall have, whether known or unknown, on
account of or arising out of the Original Tax Indemnity Agreement, this
Agreement and/or the occurrence of any Tax Event or Indemnification Event, as
defined thereunder or any related matters. Prime on its own behalf and on behalf
of its successors, representatives and assigns hereby fully releases and
discharges Casati, his Affiliates and their respective successors, agents,
officers, members, managers, directors, affiliates, trustees, officers,
divisions, partners, employees, representatives and assigns, from any and all
debts, damages, claims, demands, liabilities, obligations, or causes of action,
which Prime now has, or at any time heretofore had, or hereafter shall have,
whether known or unknown, on account of or arising out of the Original Tax
Indemnity Agreement, this Agreement and/or the occurrence of any Tax Event or
Indemnification Event, as defined thereunder or any related matters.
12.
Intentionally Deleted.
13.
Exercise of Option.
a. In addition to the other obligations of Prime under this
Agreement, concurrently with each acquisition of any portion of the Real Estate
pursuant to an exercise of the Option, Prime shall pay to Indemnitee an amount
equal to the sum of (i) the product of the taxable gain included in the gross
income of Indemnitee for federal income tax purposes as a result of such
transaction, multiplied by the then highest stated marginal federal and
applicable state tax rates then applicable to long-term capital gains of
individuals, plus (ii) an amount equal to 23% of the amount described in
clause (i).
b. Notwithstanding the foregoing, the aggregate gain of the
Indemnitee on which the amount described in clause (i) of Paragraph 13a shall be
calculated shall be limited to the amount of such aggregate gain (determined on
a cumulative basis with respect to all sales of portions of the Real Estate sold
pursuant to exercises of the Option) in excess of $1,000,000 over the tax basis
of the portions of the Real Estate sold pursuant to exercises of Option.
c.
Intentionally Deleted.
14.
Additional Covenants.
a. General Partner and CTA shall not take any action that would
constitute an Indemnification Event unless, concurrently with such action, Prime
has satisfied the requirements set forth in this Paragraph 14 that are required
to be satisfied at such time. Indemnitee agree to reasonably cooperate with
Prime and General Partner to restructure any transaction proposed by Prime
and/or General Partner to avoid creating an Indemnification Event. In addition,
Indemnitee (including, in the case of disability of Heise, his personal
representative) shall give, and shall cause CHP to give, their consent to any
proposed event requiring their consent, as described in the CTA Agreement,
unless
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both (i) the proposed event would constitute an Indemnification Event with
respect to Indemnitee, and (ii) Prime fails to satisfy the requirements set
forth in Paragraph 4 that are required to be satisfied at such time; provided
that (x) each such consent shall be subject to the condition that, at the time
of the closing of the event being consented to, Prime satisfies all of the
requirements set forth in Paragraph 4 that are required by Paragraph 4 to be
satisfied at such time, unless such requirements are waived in writing by
Indemnitee, and (y) the nature and structure of the event consented to has not
changed in any material way. If Prime and Indemnitee cannot reasonably agree as
to whether a proposed event is an Indemnification Event which results in or
creates the risk of a Tax Event, Indemnitee shall not be required to give his
consent until the formal legal opinion of Independent Tax Counsel has been
obtained pursuant to Paragraph 4a. The obligation of Indemnitee pursuant to the
immediately preceding sentence shall be enforceable by an action for specific
performance.
b. Each party hereto agrees to report the Original Transaction for
income tax purposes on a basis consistent with the position that the Original
Transaction will not cause Indemnitee to recognize taxable income or gain for
federal income tax purposes, including without limitation the positions that
(a) the Original Transaction will not constitute a disposition by CTA of all or
any portion of the Real Estate; (b) the Original Transaction will not constitute
any reduction in the issue price (as such term is used in Code Sections 1272
through 1274 and the Treasury Regulations thereunder) of the Junior Loan or any
exchange of the Junior Loan for any other obligation having a lower issue price
for federal income tax purposes; and (c) the Original Transaction will not
otherwise result in any cancellation or discharge (or deemed cancellation or
discharge for federal income tax purposes) of all or any portion of the Junior
Loan. Furthermore, the parties agree that the CTA Agreement shall be amended to
require General Partner (on its own behalf and on behalf of CTA) to report the
Original Transaction for income tax purposes in a manner consistent with the
immediately preceding sentence and to continue at all times thereafter to
maintain such reporting position. By executing this Agreement, General Partner
agrees (on its own behalf and on behalf of CTA) to report the Original
Transaction as described in the immediately preceding sentence.
c. For 2005 and all subsequent years, Prime (or any substitute
manager of the Property controlled by Prime) will furnish CTA with all
information necessary for CTA to complete its federal and state income tax
returns within sufficient time to enable CTA to distribute IRS Form K 1s to the
partners of CTA within 120 days after the close of each calendar year.
d. Each party hereto acknowledges and agrees, without waiving any
rights such party may have hereunder, that, as of the date hereof, (1) such
party is not in default under this Agreement as of the date hereof nor, to the
best of such party's knowledge, is any other party in default under this
Agreement, and (2) no Indemnification Security or Debt Service Security has been
required to be provided or provided under this Agreement; provided that the
acknowledgment and agreement by each of Casati and Heise to clause 2 above is
limited to such party's best knowledge.
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15.
Section 15 Defaults.
a. If at any time Prime commits a Prime Section 15 Default (as
defined below), then, immediately upon the occurrence of such Prime Section 15
Default, Prime shall provide the Indemnification Security in the amount of 100%
of the Tax Indemnity Amount. A "Prime Section 15 Default" shall mean (i) any
failure by Prime to provide the Indemnification Security or to pay any Tax
Indemnity Amount in the applicable amounts at the applicable times in accordance
with Paragraph 4 and Paragraph 5a, and such failure is not cured within ten (10)
days after Indemnitee notifies Prime in writing, describing the specific failure
at issue, of such failure; (ii) any failure by Newco, Prime, any Affiliate of
Prime or General Partner to comply with any provision of Paragraph 7, and such
failure is not cured within ten (10) days after Indemnitee notifies Prime in
writing, describing the specific failure at issue, of such failure; or (iii) any
failure by Prime, any Affiliate of Prime or General Partner (acting either on
its own behalf or on behalf of CTA) to comply with the provisions of
Paragraph 14.
b. If at any time Indemnitee commits an Indemnitee Section 15 Default
(as defined below), then, immediately upon the occurrence of such Indemnitee
Section 15 Default, Prime shall have no further obligations to Indemnitee under
the terms of this Agreement. "Indemnitee Section 15 Default" shall mean (i) any
failure by an Indemnitee to give his consent to a transaction by CTA in
accordance with the provisions described in Paragraph 14a; or (ii) any failure
by an Indemnitee to comply with the provisions of Paragraph 4a. Notwithstanding
the foregoing, in no event shall an Indemnitee Section 15 Default occur unless
and until ten (10) days have expired after the receipt by Indemnitee of written
notice from Prime describing the specific failure without such failure having
been cured.
16. Litigation Expenses. In any action between the parties hereto to
enforce any of the terms of this Agreement, the prevailing party or parties
shall be entitled to recover expenses, including reasonable attorneys' fees,
whether or not such action is prosecuted to judgment. For this purpose, the term
"prevailing party" shall include, without limitation, a party who dismisses any
action for recovery hereunder in exchange for payment of sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in such action.
17. Applicable Law. This Agreement shall, in all respects, be governed
by the laws of the State of Illinois, without regard to conflicts of law
principles.
18. Severability. Nothing contained herein shall be construed so as to
require the commission of any act contrary to law, and wherever there is any
conflict between any provisions contained herein and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail; but the provisions of this
Agreement which are affected shall be curtailed and limited only to the extent
necessary to bring them within the requirements of the law. If any provision of
this Agreement shall be held to be invalid, the same shall not affect the
validity, legality or enforceability of the remainder of this Agreement.
19. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder to carry out the intent of the
parties hereto. Prime, any transferee of all or any portion of Prime's interest
in the Junior Loan under Paragraph 7f of this Agreement, General Partner, Newco
and Heise further agree to cooperate in good faith with each other if the
parties agree, in connection with a specific replacement property, that CTA
effect an exchange of its tenancy-in-common interest in the Property in a
transaction pursuant to which no gain is
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recognized by CTA or Heise under Code Section 1031, provided that such
replacement property and the structure of the proposed transaction are
acceptable to both parties. It is understood that none of Heise, General Partner
nor Prime is committed to invest any amount to acquire replacement property.
20. Successors and Assigns. Except as provided below, this Agreement
shall not be assignable by Indemnitee (including to any heir or the estate of an
Indemnitee) except with the express written consent of Prime, which may be
withheld in its sole discretion. Except as provided in Paragraph 7, Prime shall
not assign this Agreement without the express written consent of Indemnitee,
which may be withheld in his sole discretion. Notwithstanding the first sentence
of this Paragraph 20:
a. Any person acting on behalf of an Indemnitee during the lifetime
of Indemnitee (including but not limited to any trustee in bankruptcy and any
legal representatives in the case of incompetency) shall be entitled to the full
benefit of and the right to enforce all provisions of this Agreement to the same
extent as Indemnitee;
b. If an event occurs during the lifetime of Indemnitee which gives
rise to any right or benefit of Indemnitee under this Agreement (without regard
to whether such right or claim to benefit is asserted or becomes due during the
lifetime of Indemnitee), including but not limited to the right to any Tax
Indemnity Amount or the benefit of the Indemnification Security, then from and
after the death of Indemnitee, the estate and heirs of Indemnitee shall be
entitled to enforce all rights and receive all benefits arising from such event
hereunder, to the same extent as the Indemnitee would be so entitled during his
lifetime; and
c. From and after the death of Indemnitee, the estate of Indemnitee
and any other successor to all or any portion of Indemnitee's direct or indirect
partnership interest in CTA shall be entitled to the rights and benefits of
Indemnitee to the extent set forth in Paragraph 9.
21. Number and Gender. In this Agreement, the masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include
the others whenever the context so requires.
22. Non-Waiver; Good Faith. No waiver by any party hereto of any breach
of this Agreement or any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision. Each party
agrees to act in good faith in regard to all provisions of this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. Full Authority. Each of the parties and signatories to this
Agreement has the full right, power, legal capacity and authority to enter into
and perform the parties' respective obligations hereunder, and no approvals or
consents of any other Person are necessary in connection therewith.
25. Captions. The captions appearing at the commencement of Paragraphs
of this Agreement are descriptive only and for convenience in reference. Should
there be any conflict between any such caption and the paragraph at the head of
which such caption appears, the Paragraph and not such caption shall control and
govern in the construction of this Agreement.
26. Cross Reference. In this Agreement, unless otherwise specifically
provided, any reference to a Paragraph by number shall mean that corresponding
Paragraph in this Agreement.
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27. Parties in Interest. This Agreement shall be binding upon and inure
to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any Persons other than the
parties and their respective successors and permitted assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third Persons to any party to this Agreement, nor shall any provision
give any third Person any right of subrogation or action over or against any
party to this Agreement.
28. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
hereof, and any and all prior agreements, understandings or representations with
respect to such subject matter are hereby terminated and canceled in their
entirety and are of no further force or effect.
29. Cost Reimbursement. Prime shall reimburse Indemnitee for all
reasonable transaction costs incurred by Indemnitee in connection with the
negotiation and documentation of this Agreement and the New Transaction up to a
maximum of $150,000. Such costs shall include, but shall not be limited to, any
and all reasonable attorneys' fees, accountants' fees, other advisors' and
consultants' fees and travel expenses incurred through the date of the closing
of the New Transaction. Prime shall transmit immediately available funds in an
amount equal to such costs to Indemnitee not later than the later of (a) fifteen
(15) days after the closing date of the New Transaction, and (b) fifteen (15)
days after Indemnitee invoices or other documentation reasonably acceptable to
Prime evidencing the amount of such costs.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
PRIME GROUP REALTY, L.P.
By:
Prime Group Realty Trust, its General Partner
By: /s/ Jeffrey A. Patterson
Title: President and CEO
/s/
Roland E. Casati
Roland E. Casati
/s/
Richard A. Heise
Richard A. Heise
CTA GENERAL PARTNER, LLC, a Delaware limited liability company
By:
CTA Member, Inc., its Managing Member
By: /s/ Yochanan Danziger, President, by Paul G. Del Vecchio, Attorney in Fact
for Yochanan Danziger
CONTINENTAL TOWERS, L.L.C., a Delaware limited liability company
By:
CTA General Partner, LLC, its sole member
By:
CTA Member, Inc., its Managing Member
By:
/s/
Yochanan Danziger, President
by Paul G. Del Vecchio, Attorney in Fact for Yochanan Danziger
21
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[EXHIBIT A INTENTIONALLY OMITTED]
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Exhibit 10.1
TELEFLEX INCORPORATED
155 South Limerick Road
Limerick, PA 19468
July 31, 2006
Mr. John J. Sickler
155 South Limerick Road
Limerick, PA 19468
We are pleased to confirm this amended and restated agreement, effective as
of March 7, 2005, with you respecting your continuing employment, service as a
consultant following your retirement and other related matters.
1. Employment and Responsibilities. Subject to the terms of this Agreement,
during the Term (defined in Section 3) you will continue to be employed by
Teleflex Incorporated (the “Company”) as Vice Chairman, or in such other
capacity as the Board of Directors may determine from time to time with your
consent. You will faithfully perform such duties and responsibilities,
consistent with your position as a senior executive officer, as may be assigned
to you by the Board of Directors or by the Chief Executive Officer of the
Company, to whom you will report directly. During the Term you will devote your
full time and attention to the affairs of the Company and will not, directly or
indirectly, accept any other employment or otherwise engage in any other
business activities requiring your personal services, except as the Board of
Directors or the Chief Executive Officer of the Company may approve.
2. Compensation and Benefits. During the Term you will be paid a base
salary at a rate not less than $440,000 per year and you will be eligible to
participate in all bonus and other compensation plans, and all benefit plans, in
which senior executives of the Company generally are eligible to participate
other than the Long Term Incentive Plan under the Company’s Executive Incentive
Plan.
3. Termination of Employment. The term of your employment (the “Term”) will
continue pursuant to this Agreement until the first to occur of the following:
(i) the Termination Date, (ii) the Disability Date, or (iii) the date on which
your employment ceases due to your death.
4. Retirement and Benefits. Upon the Termination Date you will retire from
employment by the Company. During your retirement you will be entitled to
participate in all benefit plans to the extent that such plans provide for your
participation as a retired former employee, and you will be entitled to receive
all your vested benefits under, and pursuant to the terms of, the retirement and
other benefit plans of the Company. Health insurance will be provided to you
during the four (4) years immediately following the Termination Date at the
Company’s expense.
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5. Consulting Services. During the three (3) years immediately following
the Termination Date (the “Consultancy Period”) you will make yourself available
to serve the Company as an independent consultant, performing such duties and
responsibilities as the Chief Executive Officer of the Company, or such
officer’s delegate, may reasonably request from time to time; provided that:
(i) without your consent, you will not be obliged to provide service on more
than fifteen (15) days in any calendar quarter; (ii) you shall not provide
services to the Company on more than one hundred thirty (130) days in any one
calendar year, and (iii) if you have a Disability during the Consultancy Period,
you shall not be required to provide service beyond that which you are
reasonably capable of providing in light of your Disability.
During the Consultancy Period, the Company will pay you monthly a
retainer fee (the “Retainer Fee”) at the annual rate equal to the rate of your
base salary in effect immediately before the Termination Date. Notwithstanding
the foregoing, if on the Termination Date you are a Specified Employee (as
defined by Section 409A of the Internal Revenue Code of 1986), then to the
extent required by the Internal Revenue Code, (i) the Company will not commence
making payments of the Retainer Fee to you until six (6) months after the
Termination Date, at which time the entire amount that had been due to you for
the preceding six (6) month period will be paid to you in one (1) lump sum and
the remainder of the Retainer Fee will be payable to you in equal monthly
installments; and (ii) for the first six-month period of health insurance
coverage as specified in paragraph 4 above, you must pay for the cost of this
coverage and, at the end of this six-month period, you will be reimbursed for
the cost of such coverage. In addition, the Company will pay you such
compensation for each day when you provide such consulting services as you and
the Company may agree in writing. Amounts payable to you on account of the
consulting services you actually provide to the Company will not be subject to
the six (6) month payment delay.
6. Payments in the Event of Death.
(a) In the event of your death prior to the Termination Date, the
Company will pay your estate an amount equal to three times your base annual
salary in effect on the date of your death, subject to all legally required
withholdings. This sum shall be paid in a lump sum within sixty (60) days of the
date of your death.
(b) In the event of your death after the Termination Date but during
the Consultancy Period, the Company will pay your estate an amount equal to the
Retainer Fees that would have been paid to you during the remainder of the
Consultancy Period. The Company shall pay this amount in a lump sum within sixty
(60) days of the date of your death.
7. Restrictive Covenants.
(a) Non-Competition. During the four (4) years immediately following
the Termination Date, without the prior consent of the Chief Executive Officer
of the Company or his delegate, you will not directly or indirectly own, manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be employed or otherwise connected in any manner with, any
business which directly or indirectly competes with the business of the Company
or any Affiliate in any part of the world in which the Company or any such
Affiliate, as the case may be, carried on business at the Termination Date;
provided that the ownership of less than 1% of the outstanding shares of stock
of any class of any corporation (or similar equity
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interest of any other enterprise) which is listed on the New York Stock Exchange
or the American Stock Exchange, or traded or quoted on the NASDAQ National
Market shall not be prohibited by the foregoing.
(b) Confidential Information. At no time will you use for your own
benefit or disclose to any other Person any confidential information of the
Company or any of its Affiliates without written authority from the Chief
Executive Officer of the Company, except as may be required by law.
“Confidential information” at any relevant time means all data and information,
whether or not in written form, relating to the customers, finances, processes,
know-how, plans and arrangements or other affairs of the Company or any of its
Affiliates which, at such time, has not been made available to the public
generally (otherwise than in violation of this or any other confidentiality
agreement or applicable law).
(c) Remedies. You acknowledge that in the event of a breach or
threatened breach of the provisions of this Section 6, the Company’s remedy at
law will be inadequate and the Company will be entitled to appropriate
injunctive or other equitable relief. Should the provisions of this Section 6 be
adjudged invalid to any extent by any competent tribunal, such provisions will
be deemed modified to the extent necessary to make them enforceable.
8. Construction and Definitions.
(a) The term “Affiliate” with respect to the Company means any Person
which controls, is controlled by or is under common control with, the Company.
(b) The term “Disability” shall mean a material incapacity from fully
performing your responsibilities under this Agreement by reason of illness,
injury, or other physical or mental condition.
(c) The term “Person” means a corporation, a partnership, an
association, a trust or other entity or organization.
(d) The term “Termination Date” shall mean the first of the following
to occur: (i) such date as you have a Disability, or (ii) such date as may be
specified in a notice of termination given by either you or the Company to the
other at least thirty (30) days prior to such specified date.
(e) The term “including” means “including but not limited to.”
(f) Unless otherwise expressly stated in connection therewith, a
reference in this Agreement to a “Section” or “party” refers to a Section of, or
a party to, this Agreement.
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of Pennsylvania, excluding any rule or principle
relating to conflicts or choice of law that might otherwise call for the
application of the substantive law of another jurisdiction to the construction
or interpretation of this Agreement.
10. Parties in Interest. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
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11. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes any prior
agreement or understanding between the parties with respect to any of such
subject matter, including any agreement or understanding with respect to your
employment by the Company or your entitlement to compensation or benefits by
reason of, or in connection with, any such employment, whether past, present or
future; provided that nothing in this Agreement is intended to supersede,
terminate or otherwise modify the terms of (i) any stock option or restricted
stock award granted to you by the Company prior to the date of this Agreement or
(ii) of your rights which have vested on or prior to the date of this Agreement
under any employee benefit plan of the Company.
12. Headings and Titles. The headings and titles of Sections of this
Agreement are inserted for convenience of reference only, form no part of this
Agreement and shall not be considered for purposes of construing or interpreting
the provisions hereof.
13. Modification. No amendment or modification of, or supplement to, this
Agreement will be effective unless it is in writing and executed by or on behalf
of the party to be charged thereunder.
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Please indicate your agreement to the foregoing, by signing and returning
to us a copy of this letter.
TELEFLEX INCORPORATED
By: /s/ Jeffrey P. Black Jeffrey P. Black President and
Chief Executive Officer
AGREED:
/s/ John J. Sickler John J. Sickler
5 |
Exhibit 10.1
EXECUTION COPY
AGREEMENT
For
ENGINEERING, PROCUREMENT, AND
CONSTRUCTION SERVICES
for
42 - INCH SABINE PASS PIPELINE PROJECT
between
CHENIERE SABINE PASS PIPELINE COMPANY
and
WILLBROS ENGINEERS, INC.
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AGREEMENT
THIS AGREEMENT for Engineering, Procurement and Construction Services (the
“Agreement”) is made and entered into effective as of this 1st day of February
2006 (“Effective Date”) by and between Cheniere Sabine Pass Pipeline Company, a
company organized under the laws of the State of Delaware (“Cheniere”), and
Willbros Engineers, Inc., a company incorporated under the laws of the State of
Delaware (“Willbros”). Cheniere and Willbros are hereinafter sometimes referred
to individually as a “Party” or collectively as the “Parties.”
WHEREAS, Cheniere desires to design, build, own and operate the 16.0-mile,
42-inch pipeline and related facilities to be constructed from the Cheniere
liquefied natural gas terminal to a pipeline interconnect at Johnson’s Bayou,
all located entirely in Cameron Parish, Louisiana (as more fully described
herein, the “Project”); and
WHEREAS, Willbros, itself or through its Subcontractors or Vendors desires to
provide engineering, procurement and construction services related to the
Project;
NOW, THEREFORE, in consideration of the mutual covenants herein and for other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Cheniere and Willbros hereby agree as follows:
1. SCOPE OF WORK
1.1 In close cooperation and coordination with Cheniere and subject to Paragraph
1.3 below, Willbros agrees to perform the Work, including all Project
management, engineering, procurement, construction and construction management
for the Project, and provide all equipment, materials, supplies, labor
workmanship, apparatus, machinery, tools, structures, inspection, manufacture,
fabrication, installation, design, delivery, transportation, storage and any
incidental work reasonably inferable as required and necessary to complete the
Project in accordance with Applicable Law, Applicable Codes and Standards and
all other provisions of this Agreement. Without limiting the generality of the
foregoing, the Work is described in more particular detail in the Scope of Work
set forth in Schedule “B”.
1.2 The Scope of Work is based upon and shall comply with the preliminary
engineering developed by Cheniere’s other consultants and contractors and the
FERC Certificate.
1.3 Willbros shall not be responsible for and the Work excludes the Cheniere
Provided Items identified in Paragraph 5.3 which are to be provided by Cheniere.
2. PROJECT SCHEDULE
The Work shall be performed in accordance with the dates set forth in the
Project Schedule attached as Schedule “F”.
1
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3. COMPENSATION
Willbros will submit invoices, and Cheniere shall pay Willbros the amounts due
in accordance with Paragraph 5.4 of Schedule “A”. The sum of the Cost of the
Work, the Willbros Management Fee and the Contingency Costs is guaranteed by
Willbros not to exceed Sixty-Seven Million Six Hundred Seventy Thousand Two
Hundred Dollars ($67,670,200), subject to additions and deductions by Change
Order as provided herein (the “Guaranteed Maximum Price”), excluding Louisiana
sales and use taxes applicable to permanent materials and equipment to be
incorporated into the Project, which shall be reimbursed by Cheniere in
accordance with Paragraph 5.4.2 of Schedule “A”. Costs which would cause the
Guaranteed Maximum Price to be exceeded shall be paid by Willbros without
reimbursement by Cheniere.
4. GENERAL
4.1 The Agreement consists of this signed document (the “Signature Document”)
and the following attached Schedules, which by this reference are incorporated
herein and made a part hereof:
Schedule “A” -
Terms and Conditions Attachment I - Willbros Parent Guarantee
Attachment II - Payment Bond, Performance Bond and Riders Attachment
III - Mechanical Completion Certificate Attachment IV - Project
Completion Certificate Attachment V - Start-up Certificate
Attachment VI - Change Order Form Attachment VII - Approved
Subcontractors and Vendors List Attachment VIII - Organizational Chart
Attachment IX - Cheniere’s Health, Safety and Environmental Policies
Attachment X - Lien and Claim Waivers Schedule “B” - Scope of Work
for the Project Attachment I - Work Site Schedule “C” -
Intentionally Omitted Schedule “D” - Applicable Codes and Standards,
Drawings and Specifications Attachment I - Drawings Attachment II
- Specifications Schedule “E” - Intentionally Omitted Schedule “F” -
Project Schedule
4.2 A reference in the Agreement to any of the Schedules shall, in addition, be
considered a reference to any Attachments to said Schedules, and to all
documents referred to in said Schedules or Attachments.
4.3
Any notice, demand, offer or other written instrument required or permitted to
be given pursuant to this Agreement shall be in writing and signed by the Party
giving such notice
2
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and shall be sufficient when delivered in person or sent by e-mail, by
facsimile, or by certified or registered mail, to the other Party at the
appropriate address as follows:
If delivered to Cheniere: If delivered to Willbros: Richard E. Keyser
Willbros Engineers, Inc. Cheniere Sabine Pass Pipeline 2087 East 71st Street
717 Texas Avenue, Suite 3100 P.O. Box 701650 Houston, Texas 77002 Tulsa,
Oklahoma 74170 Telephone: (832) 204-2284 Telephone: (918) 481-4163 Fax: (713)
659-5459 Fax: (918) 493-3430 Attention: Mr. Richard E. Keyser Attention:
Mr. Curtis E. Simkin E Mail: rkeyser@cheniere.com E Mail:
curt.simkin@willbros.com Copy to: Copy to: Allan Bartz Willbros Engineers,
Inc. Cheniere Sabine Pass Pipeline 2087 East 71st Street 717 Texas Avenue,
Suite 3100 P.O. Box 701650 Houston, Texas 77002 Tulsa, Oklahoma 74170
Telephone: (713) 659-1361 Telephone: (918) 499-3706 Fax: (713) 659-5459
Fax: (918) 499-3702 Attention: Mr. Allan Bartz Attention: Mr. Mike Reifel E
Mail: abartz@cheniere.com E Mail: mike.reifel@willbros.com
Willbros or Cheniere may notify the other at any time of a change in, or
addition to, the addresses and/or persons to which communications should be
sent. Notices, demands, offers or other written instruments shall be deemed to
have been duly given on the date actually received by its intended recipient.
IN WITNESS WHEREOF, Cheniere and Willbros have executed duplicate originals of
the Agreement, effective and binding as of the Effective Date.
Witness
Cheniere Sabine Pass Pipeline Company
/s/ Richard Keyser
By:
/s/ Robert Keith Teague
Title:
President
Date:
February 21, 2006
Witness
Willbros Engineers, Inc.
/s/ Kevin R. Fox
By:
/s/ Curtis E. Simkin
Title:
President
Date:
February 1, 2006
3
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SCHEDULE “A”
TERMS AND CONDITIONS
TABLE OF CONTENTS
1. DEFINITIONS
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2. WILLBROS’ OBLIGATIONS
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3. WILLBROS PERSONNEL AND EQUIPMENT
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4. WORK SITE RESPONSIBILITIES
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5. CHENIERE’S OBLIGATIONS
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6. WORK PLAN AND REPORTS
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7. INSPECTION AND TESTING
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8. COMPLETION AND START-UP
A-23
9. CHANGES
A-25
10. INDEMNITY, LIENS AND PATENTS
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11. INSURANCE
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12. WARRANTY
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13. TITLE TO THE WORK AND TO WORK PRODUCT, CONFIDENTIAL INFORMATION
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14. DISPUTE RESOLUTION
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15. SUSPENSION OF WORK
A-42
16. TERMINATION AT CHENIERE’S CONVENIENCE
A-43
17. TERMINATION BY CHENIERE FOR CAUSE
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18. TERMINATION BY WILLBROS
A-45
19. WILLBROS’ OBLIGATIONS UPON SUSPENSION OR TERMINATION
A-45
20. FORCE MAJEURE AND CHENIERE-CAUSED DELAY
A-46
21. LIQUIDATED DAMAGES
A-48
22. PUBLICITY RELEASES
A-49
23. GOVERNING LAW
A-49
24. GENERAL PROVISIONS
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ATTACHMENT I
– WILLBROS PARENT GUARANTEE
ATTACHMENT II
– PAYMENT BOND, PERFORMANCE BOND AND RIDERS
ATTACHMENT III
– MECHANICAL COMPLETION CERTIFICATE
ATTACHMENT IV
– PROJECT COMPLETION CERTIFICATE
ATTACHMENT V
– START-UP CERTIFICATE
ATTACHMENT VI
– CHANGE ORDER FORM
ATTACHMENT VII
– APPROVED SUBCONTRACTORS AND VENDORS LIST
ATTACHMENT VIII
– ORGANIZATIONAL CHART
ATTACHMENT IX
– CHENIERE’S HEALTH, SAFETY AND ENVIRONMENTAL POLICIES
ATTACHMENT X
– LIEN AND CLAIM WAIVERS
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SCHEDULE “A”
TERMS AND CONDITIONS
1. DEFINITIONS
The following terms shall have the meanings indicated for all purposes of the
Agreement and the use of the singular includes the plural, and vice versa:
1.1 “AAA” has the meaning set forth in Paragraph 14.3.
1.2 “AAA Rules” has the meaning set forth in Paragraph 14.3.
1.3 “Actual Contract Amount” has the meaning set forth in Attachment I of the
Letter Agreement.
1.4 “Agreement” has the meaning set forth in, and incorporates by reference the
documents as stated in, Paragraph 4.1 of the Signature Document.
1.5 “Amendment” means any written modification of the Agreement, signed by both
Cheniere and Willbros, other than Change Orders.
1.6 “Applicable Codes and Standards” means any and all codes, standards or
requirements set forth herein (including Schedule “D”) or in any Applicable Law,
which codes, standards and requirements shall govern Willbros’ performance of
the Work, as provided herein. In the event of an inconsistency or conflict
between any of the Applicable Codes and Standards, the highest performance
standard as contemplated therein shall govern Willbros’ performance.
1.7 “Applicable Law” means all laws, statutes, ordinances, certifications,
orders, decrees, injunctions, permits, agreements, rules and regulations,
including any conditions thereto, of any Governing Authority having jurisdiction
over all or any portion of the Work Site or the Project or performance of all or
any portion of the Work, or other legislative or administrative action of a
Governing Authority, or a final decree, judgment or order of a court which
relates to the performance of Work hereunder or the interpretation or
application of this Agreement, including (a) any and all permits,
authorizations, certifications, or other approvals or orders, (b) any Applicable
Codes and Standards set forth in Applicable Law and (c) any Applicable Law
related to (i) conservation, regulation, improvement, protection, pollution,
contamination or remediation of the environment or (ii) Hazardous Substances or
any handling, treatment, storage, release, use and disposal or other disposition
of Hazardous Substances, including the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”).
1.8 “Books and Records” has the meaning set forth in Paragraph 2.9.
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1.9 “Catastrophic Storms” means storms which are listed by the National Oceanic
and Atmospheric Administration as Billion Dollar U.S. Weather Disasters.
1.10 “Change” means an addition, deletion, suspension of, revision or any other
modification or Amendment to the Work. Adjustment to the Guaranteed Maximum
Price, the Preparation and Material Receipt Commencement Date, the Construction
Commencement Date or the Scheduled Mechanical Completion Date shall in every
instance constitute a Change.
1.11 “Change Order” means a document, in the form attached hereto as Attachment
VI and signed by Cheniere and Willbros, issued on or after the Effective Date,
authorizing a Change to the Work, the Guaranteed Maximum Price, the Preparation
and Material Receipt Commencement Date, the Scheduled Mechanical Completion
Date, the Construction Commencement Date or any other material requirement under
this Agreement.
1.12 “Cheniere” has the meaning set forth in the introductory paragraph of the
Signature Document.
1.13 “Cheniere’s Authorized Representative” means Richard E. Keyser, the person
hereby authorized by Cheniere to act on its behalf on all matters pertaining to
the Agreement, and whose actions shall be binding upon Cheniere.
1.14 “Cheniere’s Confidential Information” has the meaning set forth in
Paragraph 13.6.
1.15 “Cheniere Group” means the owners and affiliated companies of Cheniere or
its lenders, including, their respective officers, directors, employees, agents,
representatives, contractors (excluding Willbros, its affiliates, Subcontractors
and Vendors) and subcontractors.
1.16 “Cheniere Provided Items” means those items to be provided by Cheniere, and
those responsibilities to be performed by Cheniere, as described in Paragraph
5.3.
1.17 “Claim” has the meaning set forth in Paragraph 10.1.1.
1.18 “Confidential Information” has the meaning set forth in Paragraph 13.8.
1.19 “Construction Commencement Date” means the date set forth in Paragraph
6.1.2.
1.20 “Contingency Costs” means those reasonable costs actually incurred incident
to the performance of Work under this Agreement and prior to Project Completion
of the Project, which are not reimbursable as a Cost of the Work, are not
attributable to Willbros’ negligence, willful misconduct or breach of this
Agreement, are not recoverable from Subcontractors, Vendors or insurers, and for
which records required hereunder exist and are contemporaneously prepared and
maintained (“Contingency Costs”).
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1.21 “Contingency Pool” has the meaning set forth in Attachment I of the Letter
Agreement.
1.22 “Contract Amount” has the meaning set forth in Paragraph 5.4.1.
1.23 “Corrective Work” has the meaning set forth in Paragraph 12.2.2.
1.24 “Cost of the Work” has the meaning set forth in Paragraph 5.4.1.
1.25 “Defect” or “Defective” has the meaning set forth in Paragraph 12.1.
1.26 “Defect Correction Period” has the meaning set forth in Paragraph 12.2.2.
1.27 “Disclosing Party” has the meaning set forth in Paragraph 13.8.
1.28 “Dispute” has the meaning set forth in Paragraph 14.2.
1.29 “Dispute Notice” has the meaning set forth in Paragraph 14.2.
1.30 “Drawings” means drawings developed by Willbros and approved by Cheniere
for the performance of the Project in accordance with Paragraph 2.7, Paragraph
2.8 and Schedule “B” and as listed in Schedule “D”. The Drawings shall be based
on the Specifications. Should there be an inconsistency between the
Specifications and the Drawings, the Specifications shall prevail.
1.31 “E&O Insurance” has the meaning set forth in Paragraph 11.1.7.
1.32 “Effective Date” shall be the date given in the introductory paragraph of
the Signature Document.
1.33 “Exception Items” means finishing items required to complete various
portions of the Work which are incomplete, Defective or otherwise not in
accordance with the Agreement, but the completion of which shall not affect,
interrupt, disrupt, or interfere with the safe and orderly operation of all or a
part of the Project as more fully described in Paragraph 8.
1.34 “FERC Certificate” means that certification issued by the Federal Energy
Regulatory Commission (“FERC”) (i) authorizing the construction of the Project,
including any conditions governing the conduct of the construction activities
for the Project, and (ii) detailing the pipeline route and required pipe class
associated with the route’s population density survey. The FERC Certificate
includes related FERC filing documents CP04-38-00, CP04-38-001, CP04-39-000 and
CP04-40-000 and the approved implementation plan.
1.35
“Force Majeure” means Catastrophic Storms or floods, lightning, tornadoes,
hurricanes, named tropical storms, earthquakes and other acts of God, wars,
civil disturbances, terrorist attacks, revolts, insurrections, sabotage,
commercial embargoes, epidemics, fires,
A-4
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explosions, and actions of a Governing Authority that were not requested,
promoted, or caused by the affected Party, and strikes or other similar labor
actions (except as set forth in (iii) below); provided that such act or event
(a) renders impossible or impracticable the affected Party’s performance of its
obligations under the Agreement, (b) is beyond the reasonable control of the
affected Party and not due to its fault or negligence and (c) could not have
been prevented or avoided by the affected Party through the exercise of due
diligence, including the expenditure of any reasonable sum taking into account
the Guaranteed Maximum Price. For avoidance of doubt, Force Majeure shall not
include any of the following: (i) a Party’s economic hardship, (ii) changes in
market conditions, (iii) strikes, or other similar labor actions to the extent
caused by the act or omission of the Party claiming Force Majeure,
(iv) unavailability of Subcontractors or Vendors; (v) climatic conditions
(including rain, snow, wind, temperature and other weather conditions), tides,
and seasons, regardless of the magnitude, severity, duration or frequency of
such climatic conditions (except those Catastrophic Storms as set forth above),
or (vi) nonperformance or delay by Willbros or its Subcontractors or Vendors,
unless any of the foregoing conditions is otherwise caused by Force Majeure.
1.36 “Guaranteed Maximum Price” shall have the meaning set forth in Paragraph 3
of the Signature Document.
1.37 “Governing Authority” means any federal, state, or local department,
office, instrumentality, agency, board or commission having jurisdiction over a
Party or any portion of the Work, the Work Site or the Project.
1.38 “Hazardous Substance” means any substance that under Applicable Law is
considered to be hazardous or toxic or is or may be required to be remediated,
including (a) “hazardous substances” as defined in 42 U.S.C. § 9601(14),
(b) “chemicals” subject to regulation under Title III of the Superfunds
Amendments and Reauthorization Act (“SARA”) of 1986, (c) natural gas liquids,
liquefied natural gas or synthetic gas, (d) any petroleum, petroleum-based
products or crude oil or any fraction, or (e) any other chemical, waste,
material, pollutant, contaminant or any other substance, exposure to which is
now or hereafter prohibited, limited or regulated by any Governing Authority or
which may be the subject of liability for damages, costs or remediation.
1.39 “Key Personnel” or “Key Persons” has the meaning set forth in Paragraph 3.1
and includes the Willbros Personnel listed in Attachment VIII.
1.40 “Letter Agreement” means that letter agreement entered into between the
Parties simultaneously with this Agreement dated February 01, 2006.
1.41 “Liquidated Damages” has the meaning set forth in Paragraph 21.1.
1.42
“Major Vendor” means any Vendor (a) who has entered a subcontract or purchase
order having an aggregate value in excess of One Hundred Thousand Dollars
($100,000), or (b)
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who has entered multiple subcontracts or purchase orders with an aggregate value
in excess of One Hundred Thousand Dollars ($100,000).
1.43 “Mechanical Completion” or “Mechanically Complete” means that all of the
following has occurred: (a) the Work is approved by Cheniere as being ready for
pre-commissioning and/or commissioning; (b) Willbros has delivered to Cheniere a
set of original test and inspection certificates, including hydrostatic test
reports, materials documentation, MAOP establishment records, and internal
geometry pig results; (c) Willbros has completed all construction, procurement,
fabrication, assembly, erection, installation and testing, including final
pipeline hydrostatic tests for the pipeline and all appropriate appurtenances to
ensure that such systems were correctly constructed, procured, fabricated,
assembled, erected, installed and tested and are capable of being operated
safely and reliably within the requirements contained in this Agreement;
(d) Willbros has delivered to Cheniere a Mechanical Completion Certificate for
the Project in the form of Attachment III, and Cheniere has accepted such
certificate by signing such certificate; (e) Willbros has dewatered and dried
the pipeline to a dewpoint of negative forty degrees Fahrenheit (-40ºF);
(f) Willbros has completed all Exception Items in accordance with Paragraph 8.1;
and (g) Willbros has performed all other obligations required under this
Agreement for Mechanical Completion.
1.44 “QA/QC Plan” has the meaning set forth in Paragraph 7.1.
1.45 “Party” or “Parties” has the meaning set forth in the introductory
paragraph of the Signature Document.
1.46 “Paragraph” means a paragraph in the Schedule in which it appears, unless
otherwise indicated.
1.47 “Preparation and Material Receipt Commencement Date” has the meaning set
forth in Paragraph 6.1.1.
1.48 “Project” means the whole of the Work to be performed by Willbros in
respect of the pipeline and in accordance with this Agreement, including the
construction, testing, and commissioning of the 16-mile, 42-inch pipeline and
related facilities, including an inlet monitor regulator station, a pig
launcher, a 30-inch side tap, a 42-inch side tap, two- 42-inch mainline valves,
and all other appropriate valves and appurtenances, to be constructed from the
Cheniere liquefied natural gas terminal to a pipeline interconnect at Johnson’s
Bayou, all located entirely in Cameron Parish, Louisiana; for purposes of
clarification, the Project does not include the NGPL Meter Station and the
Cameron Meadows Meter Station being developed by Cheniere.
1.49
“Project Completion” means the date when all Work and all other obligations
under this Agreement are fully and completely performed in accordance with the
terms of this Agreement, including: (a) the successful achievement of Mechanical
Completion of all systems for the Project; (b) the successful achievement of
Start-up of all systems for the
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Project; (c) delivery by Willbros of all documentation required to be delivered
under this Agreement, including any Work Product, Cheniere’s Confidential
Information and other documentation; (d) delivery by Willbros to Cheniere of
fully executed Final Lien and Claim Waivers in the form of Attachment X – Part
2; (e) removal from the Work Site of all of Willbros Personnel, supplies, waste,
materials, rubbish and temporary facilities and restoration of the Work Site to
its natural conditions in accordance with this Agreement, Applicable Law and
Applicable Codes and Standards or any other requirements of any Governing
Authority; (f) delivery by Willbros to Cheniere of a Project Completion
Certificate in the form of Attachment IV, which Cheniere has accepted by signing
such certificate; (g) delivery by Willbros to Cheniere of evidence acceptable to
Cheniere that all Subcontractors and Vendors have been fully and finally paid,
including fully executed Final Lien and Claim Waivers from all Subcontractors
and Major Vendors in the form of Attachment X – Part 4; (h) Willbros has
completed all Exception Items in accordance with Paragraph 8.3; and
(i) performance of all other obligations required by this Agreement for Project
Completion.
1.50 “Project Schedule” means the dates for performance of the Work set forth in
Schedule “F”, including the Preparation and Material Receipt Commencement Date,
the Scheduled Mechanical Completion Date and the Construction Commencement Date.
1.51 “Receiving Party” has the meaning set forth in Paragraph 13.8.
1.52 “Schedule of Values” has the meaning set forth in Paragraph 5.4.13.
1.53 “Scheduled Mechanical Completion Date” means the date set forth in
Paragraph 6.1.3.
1.54 “Shared Savings” has the meaning set forth in Attachment I of the Letter
Agreement.
1.55 “Signature Document” means the cover document to which all Schedules of the
Agreement are attached thereto and which contains the signature page for which
the Parties have signed in order to be bound by this Agreement.
1.56 “Specifications” means those items and requirements governing the
performance and standards of the Work as set forth in this Agreement, including
the FERC Certificate and those standard engineering and construction
specifications developed by Willbros in accordance with Paragraph 2 and approved
by Cheniere and as set forth or incorporated by reference in Schedule “D”.
1.57 “Start-up” means that all of the following has occurred: (a) the successful
achievement of Mechanical Completion of all systems for the Project;
(b) Cheniere has purged the Project with either natural gas or nitrogen with
assistance and support from Willbros as requested; (c) delivery by Willbros to
Cheniere of a Start-up Certificate in the form of Attachment V, which Cheniere
has accepted by signing such certificate; (d) Willbros has completed all
Exception Items in accordance with Paragraph 8.2; and (e) performance of all
other obligations required by this Agreement for Start-up.
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1.58 “Subcontractor” means any person or entity (other than a Vendor), of any
tier, who performs any portion of the Work or otherwise furnishes labor,
materials, supplies or equipment which are a portion of the Work or in
connection with the Work and who is not a direct full-time employee of Willbros.
The term “Subcontractor” may be referred to throughout the Agreement as if
singular in number and means a Subcontractor or an authorized representative of
Subcontractor.
1.59 “Taxes” has the meaning set forth in Paragraph 5.4.2.
1.60 “Vendor” means any person or entity, including a Major Vendor, (other than
a Subcontractor), of any tier, including materialmen and equipment suppliers or
renters, who, sells or supplies materials, supplies or equipment which are to be
incorporated into the Work or used in connection with the Work and who is not a
direct full-time employee of Willbros. The term “Vendor” may be referred to
throughout the Agreement as if singular in number and means a Vendor or an
authorized representative of a Vendor.
1.61 “Warranty” has the meaning set forth in Paragraph 12.1.
1.62 “Willbros” has the meaning set forth in the introductory paragraph of the
Signature Document.
1.63 “Willbros Authorized Representative” means Mike Reifel, the person hereby
authorized by Willbros to act on its behalf on all matters pertaining to the
Agreement, and whose actions shall be binding upon Willbros.
1.64 “Willbros’ Confidential Information” has the meaning set forth in Paragraph
13.7.
1.65 “Willbros Equipment” means all machinery, apparatus, equipment, materials,
tools, temporary facilities and other items previously owned by Willbros or
rented for the purposes of this Project and utilized by Willbros to perform the
Work but not forming a part of the Project, including also that of its
Subcontractors and Vendors at whatever tier.
1.66 “Willbros’ Intellectual Property” has the meaning set forth in Paragraph
13.4.
1.67 “Willbros Management Fee” means Willbros’ lump sum fee for overhead, profit
and indirect job risk which is set forth in the Schedule of Values.
1.68 “Willbros Personnel” means all labor, supervisory and other personnel
utilized by Willbros to perform the Work, including also those of its
Subcontractors and Vendors at whatever tier.
1.69 “Willbros Group” means the owners and affiliated companies of Willbros
Engineers, Inc., and their respective officers, directors, employees, agents,
representatives, Subcontractors, and Vendors.
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1.70 “Willbros RPI, Inc.” means the Willbros Group affiliated construction
company headquartered in Houston, Texas that may be a Subcontractor to Willbros
Engineers, Inc. on this Project.
1.71 “Work” means all the work, services, duties, responsibilities and other
undertakings to be performed by Willbros, its Subcontractors or its Vendors as
described in this Agreement, including that set forth in Schedule “B” and
Paragraphs 2, 3 and 4.
1.72 “Work Plan” means the plan described in Paragraph 6.2 and formulated
pursuant to Schedule “B” and Schedule “F” of the Agreement.
1.73 “Work Product” has the meaning set forth in Paragraph 13.3.
1.74 “Work Site” means the location on which the Project shall be located which
is identified in more detail in Attachment I of Schedule “B”.
2. WILLBROS’ OBLIGATIONS
Subject to Paragraph 5 and in close cooperation and coordination with Cheniere,
and subject to the terms and conditions of the Agreement, Willbros shall perform
the Work in accordance with good engineering and construction practices,
Applicable Law, Applicable Codes and Standards, the Specifications and all other
provisions of this Agreement. Willbros accepts the relationship of trust and
confidence established by this Agreement and covenants with Cheniere to exercise
its skill and judgment in furthering the interests of Cheniere. Without limiting
the generality of the foregoing or the requirements of any other provisions of
this Agreement, Willbros shall:
2.1 Engineering, Procurement and Construction Management: Perform the Project
management, engineering, procurement, construction and construction management
for the Project as described in this Agreement, including in detail at Schedule
“B” and the Specifications set forth in Schedule “D”;
2.2 Manpower and Equipment: Provide Willbros Equipment and Willbros Personnel,
including Subcontractors and Vendors, as set forth in more detail in Paragraph
3;
2.3 Compliance: Perform the Work in compliance with the requirements of and
provide assistance and documentation to Cheniere as reasonably requested by
Cheniere in connection with those approvals, permits, licenses, and/or other
authorizations obtained by Cheniere in accordance with Paragraph 5.1;
2.4
Health, Safety and Environmental Performance: Perform the Work in a safe,
physically secure and environmentally sound manner and otherwise in compliance
with Cheniere’s health, safety and environmental policies, which are attached
hereto as Attachment IX. Cheniere’s provision of such health, safety and
environmental policies shall not in any
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way relieve Willbros of its responsibility regarding safety, health or the
environment, and Cheniere, in providing such policies, assumes no liability for
the policies;
2.5 Authorized Representative: Appoint one (1) or more Willbros Authorized
Representative for the duration of the Work;
2.6 Timeliness and Manner of Performance: Perform all Work in a timely, complete
and workmanlike manner in accordance with this Agreement;
2.7 Drawings and Specifications: Prepare, for Cheniere’s review and approval in
accordance with Paragraph 2.8, all necessary Drawings and Specifications for the
Project in accordance with the Applicable Codes and Standards, Applicable Law,
Schedule “B”, Schedule “D” and all other requirements within this Agreement; and
2.8 Review and Approval of Drawings and Specifications:
2.8.1 Over the Shoulder Review: During the development of the Drawings and
Specifications, provide Cheniere with the opportunity to perform
“over-the-shoulder” reviews of the design and engineering in progress. Such
reviews may be conducted at Willbros’ office located in Tulsa, Oklahoma, at any
of its Subcontractors’ offices or remotely by electronic internet access. The
reviews may be of progress prints, computer images, draft documents, working
calculations, draft specifications or reports, Drawings, Specifications or other
design documents determined by Cheniere.
2.8.2 Submission by Willbros: Submit copies of the Drawings and
Specifications to Cheniere for formal review, comment, disapproval and approval
in accordance with this Paragraph 2.
2.8.3 Review Periods and Cheniere’s Approval: Allow Cheniere up to fifteen
(15) days from Cheniere’s receipt of the Drawings and Specifications submitted
in accordance with Paragraph 2.8.2 to issue written comments, proposed changes
and/or written approvals or disapprovals of the submission of such Drawings and
Specifications to Cheniere.
(i) If Cheniere does not issue any comments, proposed changes or written
approvals or disapprovals within such time period, Willbros may proceed with the
development of such Drawings and Specifications and any construction or
procurement relating thereto, but Cheniere’s lack of comments, approval or
disapproval shall in no event constitute an approval of the matters received by
Cheniere.
(ii)
In the event that Cheniere disapproves the Drawings or Specifications, Cheniere
shall provide Willbros with a written statement of the reasons for such
rejection within the time period required for Cheniere’s response for
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disapproval of the Drawings or Specifications. Willbros shall provide Cheniere
with revised and corrected Drawings or Specifications as soon as possible
thereafter and Cheniere’s rights with respect to the issuing of comments,
proposed changes or approvals or disapprovals of such revised and corrected
Drawings or Specifications are governed by the procedures specified in this
Paragraph 2.8.3; provided that Willbros shall not be entitled to any extensions
of time to the Project Schedule, the Preparation and Material Receipt
Commencement Date, the Construction Commencement Date, the Scheduled Mechanical
Completion Date, or an adjustment to the Guaranteed Maximum Price.
(iii) Upon Cheniere’s written approval of the Drawings and Specifications,
such Drawings and Specifications shall be the Drawings and Specifications that
Willbros shall use to construct the Work; provided that Cheniere’s review or
approval of any Drawings or Specifications shall not in any way be deemed to
limit or in any way alter Willbros’ responsibility to perform and complete the
Work in strict accordance with the requirements of this Agreement, and in the
event that there is a discrepancy, difference or ambiguity between the terms of
this Agreement and any Drawings or Specifications, the Agreement shall control.
Due to the limited time under this Agreement for Cheniere’s review of the
Drawings and Specifications, Willbros’ or its Subcontractors’ or Vendors’
expertise in the Work and Cheniere’s reliance on Willbros to prepare accurate
and complete Drawings and Specifications, Willbros recognizes and agrees that
Cheniere is not required or expected to make detailed reviews of the Drawings
and Specifications, but instead Cheniere’s review of the Drawings or
Specifications may be of only a general, cursory nature. Accordingly, any
reviews or approvals given by Cheniere under this Agreement with respect to any
Drawings or Specifications shall not in any way be, or deemed to be, an approval
of any Work or Drawings or Specifications not meeting the requirements of this
Agreement, as Willbros has the sole responsibility for performing the Work in
accordance with the requirements of this Agreement.
2.9
Audit Rights: During the term of this Agreement and for a period of three
(3) years after the earlier of Project Completion or termination of this
Agreement, retain full and detailed books, construction logs, Drawings,
Specifications, Change Orders, records, daily reports, accounts, payroll
records, receipts, statements, electronic files (including schedules, e-mails
and CAD), correspondence, subcontracts and other documents of Willbros, its
affiliated companies or their respective Subcontractors and Vendors, which in
any way: (a) pertain to the Agreement, including any such documents related to
the Work; or (b) relate to costs, compensation for changes in the Work, or
claims of any type by Willbros or its Subcontractors or Vendors (“Books and
Records”). Upon five (5) days’ written notice, Cheniere or any of its
representatives shall have the right to audit such Books and Records during such
three (3) year period, provided, however, such parties shall not have the right
to audit or have audited Books and Records in connection
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with the internal composition of any compensation that is fixed in amount
hereunder such as the composition of unit rates or hourly rates. When requested
by Cheniere, Willbros shall provide the auditors with reasonable access to all
such Books and Records, and Willbros Personnel shall cooperate with the auditors
to effectuate any audit hereunder. The auditors shall have the right to copy all
such Books and Records. Willbros shall include audit provisions identical to
this Paragraph 2.9 in all subcontracts and purchase orders with Subcontractors
and Vendors. Willbros shall maintain all Books and Records in accordance with
generally accepted accounting principles applicable in the United States.
Willbros will not charge for any costs incurred by it in assisting Cheniere with
audits performed pursuant to this Paragraph 2.9. Willbros obligations under this
Paragraph 2.9 shall survive the termination of this Agreement.
3. WILLBROS PERSONNEL AND EQUIPMENT
3.1 Key Personnel: Willbros Personnel shall be provided in sufficient numbers,
and shall be competent and fully qualified to execute the Work. Willbros shall
submit to Cheniere’s Authorized Representative an updated organization chart of
key Project personnel from Willbros’ or its Subcontractors’ or Vendors’
organization (“Key Personnel” or “Key Persons”) who shall be assigned to the
Work, such organization chart to be in the form of and attached as Attachment
VIII. Key Personnel shall, unless otherwise expressly stated in such
organization chart, be devoted full-time to the Work for the entire duration of
the Project, and Key Personnel shall not be removed or reassigned without
Cheniere’s prior written approval. Cheniere shall have the right, but not the
obligation, at any time to request that Willbros replace any Key Person with
another employee acceptable to Cheniere. In such event, Willbros shall replace
such Key Person without additional expense to Cheniere.
3.2 Willbros Equipment: Willbros Equipment shall be suitable for the performance
of the Work, in good repair and otherwise comply with the terms of this
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
Willbros shall be responsible for repair, damage to or destruction or loss of,
from any cause whatsoever, all Willbros Equipment. Willbros shall require that
all insurance policies (including policies of Willbros and all Subcontractors
and Vendors) in any way relating to such Willbros Equipment include clauses
stating that each underwriter will waive all rights of recovery, under
subrogation or otherwise, against the Cheniere Group.
3.3
Subcontractors and Vendors: Cheniere acknowledges and agrees that Willbros
intends to have portions of the Work accomplished by Subcontractors or Vendors
pursuant to written subcontracts or purchase orders between Willbros and such
Subcontractors and Vendors, and that such Subcontractors and Vendors may have
certain portions of the Work performed by lower tier subcontractors or vendors.
All Subcontractors and Vendors shall be reputable, qualified firms with an
established record of successful performance in their respective trades
performing identical or substantially similar work. All contracts with
Subcontractors and Vendors shall be consistent with the terms or provisions of
this Agreement. No Subcontractor or Vendor is intended to be or shall be
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deemed a third party beneficiary of this Agreement. Willbros shall be fully
responsible to Cheniere for the acts or omissions of Subcontractors and Vendors
and of persons directly or indirectly employed by either of them, as Willbros is
for the acts or omissions of persons directly employed by Willbros. The Work of
any Subcontractor or Vendor shall be subject to inspection by Cheniere to the
same extent as the Work of Willbros. Nothing contained herein shall (i) create
any contractual relationship between any Subcontractor or Vendor and Cheniere,
or (ii) obligate Cheniere to pay or cause the payment of any amounts to any
Subcontractor or Vendor. Willbros shall, within thirty (30) days prior to the
selection of any Subcontractor or Vendor, notify Cheniere in writing of the
selection of such Subcontractor or Vendor and inform Cheniere generally what
portion of the Work such Subcontractor or Vendor is performing.
3.4 Bidding of Subcontracts and Purchase Orders: As part of Willbros’
performance of the Work on an “open book basis”, Willbros shall provide all
necessary services related to the bidding of subcontracts and purchase orders
for the construction and procurement components of the Work, including the
following: (a) preparing lists of prospective bidders for review by Cheniere;
(b) preparing appropriate bid documents, including proposed forms of subcontract
and purchase orders; (c) establishing bid schedules; (d) advertising for bids
and developing bidder interest; (e) furnishing information concerning the
Project to prospective bidders; (f) conducting pre-bid conferences;
(g) receiving bids, as described below, and analyzing bids and making
recommendations to Cheniere regarding bid awards; (h) investigating the
acceptability and responsibility of lower-tiered Subcontractors and Vendors
proposed by any Subcontractor or Vendor and advising Cheniere of such
evaluations; (i) negotiating with Subcontractors and Vendors concerning any
matter related to the Project; and (j) providing such other services required by
Cheniere with respect to the bidding process. Willbros shall require bidders to
submit their sealed bids directly to Willbros, and Willbros shall forward copies
of such bids to Cheniere. Willbros shall require bidders for the construction
component of the Work to submit their sealed bids directly to Cheniere and
copies of such bids to Willbros. The receipt of the proposed bidders list by
Cheniere shall not require Cheniere to investigate the qualifications of
prospective bidders, nor shall it waive the right of Cheniere to later object to
or reject any proposed Subcontractors or Vendors.
3.5 Cheniere Approval of Subcontractors and Vendors:
3.5.1 Approved Subcontractors and Vendors List: Attachment VII sets forth a
list of Subcontractors and Vendors that Willbros and Cheniere have agreed are
approved Subcontractors and Vendors for the performance of that stated portion
of the Work specified in Attachment VII. Approval by Cheniere of any
Subcontractors or Vendors does not relieve Willbros of any responsibilities
under this Agreement. Unless Cheniere otherwise approves, each prospective
bidder list shall contain at least three (3) Subcontractors or Vendors from the
Approved Subcontractors and Vendors List in Attachment VII.
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3.5.2 Additional Proposed Subcontractors and Vendors: In the event that
Willbros is considering the selection of a Subcontractor or Vendor not listed on
Attachment VII, Willbros shall (i) notify Cheniere of its proposed Subcontractor
or Vendor as soon as possible during the selection process, including clearly
identifying such proposed Subcontractor or Vendor on the list of prospective
bidders provided in accordance with Paragraph 3.4, and furnish to Cheniere all
information reasonably requested by Cheniere with respect to Willbros’ selection
criteria, and (ii) notify Cheniere no less than seven (7) business days prior to
the execution of a subcontract or purchase order with a Subcontractor or Vendor
not listed on Attachment VII. Cheniere shall have the discretion, not to be
unreasonably exercised, to reject any proposed Subcontractor or Vendor not
listed on Attachment VII at any time. Willbros shall not enter into any
subcontract or purchase order with a proposed Subcontractor or Vendor that is
rejected by Cheniere in accordance with the preceding sentence. Cheniere shall
undertake in good faith to review the information provided by Willbros with
respect to such proposed Subcontractor or Vendor expeditiously and shall notify
Willbros of its decision to accept or reject a proposed Subcontractor or Vendor
as soon as practicable after such decision is made. Failure of Cheniere to
accept a proposed Subcontractor or Vendor within seven (7) business days shall
be deemed to be a rejection of such Subcontractor or Vendor.
4. WORK SITE RESPONSIBILITIES
4.1 Land Acquisition Plan: Willbros shall provide reasonable assistance to
Cheniere, as requested by Cheniere in writing, in finalizing Cheniere’s land
acquisition plan as necessary to permit land activities for the Project to
proceed in accordance with the FERC Certificate and in accordance with Paragraph
5.2. Such plan may include required rights of way, access roads, materials and
equipment storage facilities, office sites, vehicle parking areas, temporary
electrical supply locations and trash collection areas, including proposed
locations for each.
4.2 Provision of Facilities: Willbros shall provide warehousing, offices,
storage and related utilities in accordance with the terms of this Agreement and
the FERC Certificate for Willbros Equipment and such other materials and
equipment to be incorporated into the Work.
4.3 Maintenance of Work Sites: Willbros shall, to Cheniere’s satisfaction, at
all times keep the Work Site free from all waste materials or rubbish caused by
the activities of Willbros or any of its Subcontractors or Vendors. Without
limitation of the foregoing or limiting Willbros’ obligations, Willbros shall
clean up all such waste materials or rubbish at Cheniere’s request with
reasonable notice.
4.4
Compliance with Real Property Interests and Other Work Site Restrictions:
Willbros shall, in the performance of the Work, comply, and cause all
Subcontractors and Vendors to comply, with any agreement governing any easement,
lease, right-of-way or other
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property interests that affect or govern the Work Site or any other real
property used for the purposes of completing the Work, including any line list,
insurance or indemnification restrictions or obligations therein, to the extent
such easement, lease, right-of-way or other property interests relate to the
performance of the Work (but only to the extent that such indemnification
restrictions and obligations are consistent with Willbros indemnification
obligations agreed to herein). In addition, Willbros shall comply with any
one-call requirements imposed by Applicable Law (including local law) and
coordinate with owners or operators of all third-party utilities, including
those crossed by the Project or otherwise situated within the Work Site or
affected by the Work. Cheniere shall provide Willbros with copies of all
relevant portions of the agreements governing such easement, lease,
right-of-way, and other property interests to the extent that such agreements
impose restrictions or obligations on Willbros pursuant to this Paragraph 4.4.
To the extent that such agreements require Willbros to procure insurance in
addition to or in amounts in excess of that insurance required by this
Agreement, the Willbros shall be entitled a Change Order increasing the
Guaranteed Maximum Price to cover the cost of such additional insurance.
4.5 Coordination of Work: Willbros acknowledges that Cheniere and other
consultants and contractors may be working at the Work Site during the
performance of this Agreement and the Work or use of certain facilities may be
interfered with as a result of such concurrent activities, and Willbros agrees
to coordinate the performance of the Work with Cheniere and such other
consultants and contractors performing work at the Work Site so as not to
materially interfere with Cheniere or its other consultants or subcontractors
performing work at the Work Site.
5. CHENIERE’S OBLIGATIONS
In close cooperation and coordination with Willbros, and subject to the terms
and conditions of the Agreement, Cheniere shall:
5.1 Licenses and Permits: Provide, or cause to be provided, all approvals,
permits, licenses (other than Willbros’ or its Subcontractors’ or Vendors’
operating and professional licenses, including road bonding) and/or other
authorizations necessary for the Project from any Governing Authority, including
the FERC Certificate and all environmental agencies.
5.2 Work Site Access: Secure legal and reasonable access to the Work Site, in
accordance with the FERC Certificate, as necessary to permit Willbros to
commence Work in accordance with this Agreement by obtaining the rights of way,
pipe yards, ware yards, and all other land rights or property interests
necessary for the Work, all in accordance with Cheniere’s land acquisition plan.
5.3
Cheniere Provided Items: Cheniere shall provide: (i) hydrostatic test water;
(ii) natural gas or nitrogen and personnel to determine the achievement of
Start-up in accordance with Paragraphs 1.57 and 8.2; and (iii) environmental
inspection services during
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construction Work. In addition, Cheniere shall provide to Willbros the following
preliminary drawings which shall be updated by Willbros in accordance with this
Agreement: (y) preliminary drawings submitted to FERC, indicated by drawing
numbers CH-5763-D-1103 (Sheets 1 to 6), Rev. 0 and titled “Proposed 42-inch
Natural Gas Pipeline, Sabine Pass Pipeline Project, FERC Alignment Sheet,” and
(z) preliminary alignment drawings, indicated by drawing numbers CH-5763D-1101
to 1115, Rev. 1 and titled “Cheniere, Sabine to Johnson’s Bayou, Cameron Parish,
Louisiana.”
5.4 Payment: Remunerate Willbros as required by the Agreement.
5.4.1 Contract Amount: Subject to additions and deductions by Change Order,
Cheniere shall pay Willbros for performance of the Work to be performed by
Willbros for the Project as described in this Agreement and Schedule “B”, the
“Contract Amount” consisting of (i) the Cost of the Work, (ii) the Willbros
Management Fee, (iii) Contingency Costs, and (iv) Louisiana sales and use taxes
applicable to permanent materials and equipment to be incorporated into the
Project. The “Cost of the Work” shall mean those costs necessarily incurred by
Willbros in good faith in the proper performance of the Work.
5.4.2
Taxes: The Guaranteed Maximum Price includes any and all taxes, assessments,
levies, duties, fees, charges and withholding of any kind or nature whatsoever
and howsoever described, including value-added, sales and use taxes (except as
indicated herein), gross receipts, license, payroll, environmental, profits,
premium, franchise, property, excise, capital stock, import, stamp, transfer,
employment, occupation, generation, privilege, utility, regulatory, energy,
consumption, lease, filing, recording and activities taxes, levies, duties, fees
charges, imposts and withholding, together with any and all penalties, interests
and additions thereto in any way related to the Work (collectively, “Taxes”),
but not including Louisiana sales and use taxes applicable to permanent
materials and equipment to be incorporated into the Project, the cost of which
is not subject to the Guaranteed Maximum Price. With each invoice that requests
reimbursement for Louisiana sales and use taxes applicable to permanent
materials and equipment to be incorporated into the Project, Willbros shall
separately list in the invoice such Louisiana sales and use taxes. Subject to
the other provisions of this Agreement, Cheniere shall remit to Willbros the
payment of such Louisiana sales and use taxes within the time allowed for
payment of invoices under this Agreement. Willbros shall be responsible for
paying to the applicable Governing Authority all Taxes and Louisiana sales and
use taxes applicable to permanent materials and equipment to be incorporated
into the Project owed under Applicable Law with respect to the Work. IF AND TO
THE EXTENT CHENIERE HAS PAID TO WILLBROS THE APPLICABLE TAXES AND LOUISIANA
SALES AND USE TAXES APPLICABLE TO PERMANENT MATERIALS AND EQUIPMENT TO BE
INCORPORATED INTO THE PROJECT REQUIRED UNDER THIS PARAGRAPH, WILLBROS SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS THE CHENIERE GROUP FROM AND AGAINST ANY
CLAIMS
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BY ANY GOVERNING AUTHORITY FOR THE NON-PAYMENT OF SUCH TAXES AND SUCH LOUISIANA
SALES AND USE TAXES.
5.4.3 Invoicing: Willbros shall submit invoices to Cheniere as follows:
(i) twice per month for Project management, engineering and drafting,
procurement services, and construction management services performed during the
previous invoicing period. Charges shall be accumulated and invoiced on a rate
reimbursable basis reflecting man-hours expended as described in Paragraph 1.2
of Attachment I to the Letter Agreement;
(ii) for permanent materials as set forth in Paragraph 1.3 of Attachment I to
the Letter Agreement;
(iii) for the construction component of the Work as set forth in Paragraph 1.4
of Attachment I to the Letter Agreement;
(iv) for the Willbros Management Fee properly allocable to the completed Work.
The Willbros Management Fee allocable to the completed Work shall be determined
by multiplying the percentage completion of the Work by the total amount of the
Willbros Management Fee payable to Willbros for the Project; and
(v) for Willbros’ portion of any Shared Savings upon Project Completion.
5.4.4 Invoice Format: Invoices shall be complete with sufficient detail and
itemized to facilitate Cheniere’s confirmation and approval. Willbros’ invoices
shall be in a format and supported by such documentation as required by
Cheniere. Without limitation of the foregoing, Willbros shall, with each
invoice, submit payrolls, petty cash accounts, receipted invoices or invoices
with check vouchers attached, and any other evidence required by Cheniere to
demonstrate that cash disbursements already made by Willbros on account of the
Cost of the Work equal or exceed (i) progress payments already received by
Willbros; less (ii) that portion of those payments attributable to the Willbros
Management Fee; plus (iii) payrolls for the period covered by the present
invoice. Invoices shall show the percentage of completion of each portion of the
Work as of the end of the period covered by the invoice. The percentage of
completion shall be the lesser of: (1) the percentage of that portion of the
Work which has actually been completed; or (2) the percentage obtained by
dividing (a) the expense that has actually been incurred by Willbros on account
of that portion of the Work for which Willbros has made or intends to make
actual payment prior to the next invoice by (b) the share of the Guaranteed
Maximum Price allocated to that portion of the Work in the Schedule of Values.
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5.4.5 Payment Terms: Cheniere shall pay Willbros all undisputed amounts due
hereunder within fifteen (15) days after receipt of a complete and accurate
invoice for Work that is satisfactorily completed during that period.
5.4.6 Lien and Claim Waivers: Each progress invoice shall be accompanied by a
fully executed Willbros’ Interim Lien and Claim Waiver in the form of Attachment
X – Part 1, a fully executed Interim Lien and Claim Waiver in the form of
Attachment X – Part 3 for each Subcontractor and Major Vendor, and such other
evidence satisfactory to Cheniere to ensure that all amounts owed in connection
with performance of this Agreement, including amounts owed to all Subcontractors
and Vendors, have been paid. Waivers of liens and claims, however, will not be
required from Subcontractors or Vendors until they have performed Work or
furnished materials or equipment, and Willbros, Subcontractors and Major Vendors
will be required to submit waivers of liens and claims only if they have
performed Work or furnished materials or equipment not covered by a previous
waiver. Receipt of all Interim Lien and Claim Waivers under this Paragraph 5.4.6
or all Final Lien and Claim Waivers required to meet the requirements of
Paragraph 1.49, as applicable, is a condition precedent to payment of any
amounts under an invoice.
5.4.7 Final Invoice: Prior to submission of a final invoice, Willbros shall
perform an audit to determine the total Cost of the Work for the Project. Such
audit shall also take into consideration Contingency Costs expended and the
Willbros Management Fee in order to calculate the Actual Contract Amount in
accordance with Paragraph 2.2 of Attachment I to the Letter Agreement. Willbros
shall provide a copy of such audit report to Cheniere upon submission of
Willbros’ final invoice. Cheniere’s accountants will review and report in
writing on Willbros final audit within thirty (30) days after delivery thereof
by Willbros. If Cheniere’s accountants report the Cost of the Work and
Contingency Costs as substantiated by Willbros final audit to be less than
claimed by Willbros, and Willbros disagrees with Cheniere’s accountants
reporting of the Cost of the Work and Contingency Costs, Willbros has the right,
within seven (7) days of its receipt of the Cheniere’s accountants’ report, to
submit the Dispute for resolution in accordance with Paragraph 14. If Willbros
fails to submit the Dispute within such seven (7) day period, Willbros shall be
deemed to have agreed with Cheniere’s accountants report on the Cost of the Work
and Contingency Costs. Final payment shall not be made until resolution of a
Dispute under this Paragraph 5.4.7.
5.4.8
Unperformed Obligations: Project Completion and payments made hereunder shall
not in any way release Willbros or any surety of Willbros or its Subcontractors
from any unperformed obligations of the Agreement, including Warranties,
compliance with the Agreement, liabilities for which insurance is required or
any other responsibility of Willbros, including the payment of any and
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all fines and penalties assessed as a result of Willbros’ failure to comply with
Applicable Law or Applicable Codes and Standards.
5.4.9 Withholding: In addition to retainage and amounts withheld that are in
dispute, Cheniere may, in addition to any other rights at law, in equity or
under this Agreement, withhold amounts otherwise due by Cheniere to Willbros
without payment of interest on account of: (a) Defective Work not remedied by
Willbros in accordance with Paragraph 12; (b) the filing of claims or liens or
evidence indicating the probable filing of claims or liens against Cheniere, the
Project or the Work; (c) failure of Willbros to pay amounts when due for labor,
services or material used by Willbros in performing the Work or amounts due to
Subcontractors or Vendors as required in their respective subcontracts and
purchase orders; (d) the assessment of any fines or penalties against Cheniere
as a result of Willbros’ failure to comply with Applicable Law or Applicable
Codes and Standards; or (e) any other circumstance permitted under this
Agreement. If and when the cause, or causes, for withholding any such payment
shall be remedied or removed and satisfactory evidence of such remedy or removal
has been presented to Cheniere, the payments withheld shall be made to Willbros
in the next invoice and if the final invoice has been paid, within thirty
(30) days of such remedy or removal.
5.4.10 Payment Account Number: Payments to Willbros under this Agreement
shall be made by wire transfer to:
Southwest Bank of Texas
Houston, Texas
ABA#: 113-011-258
Beneficiary: Willbros USA, Inc.
Account Number: 127736
5.4.11 Address for Invoicing: Willbros shall submit invoices for payment to:
Cheniere Sabine Pass Pipeline
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Telephone: (713) 659-1361
E Mail abartz@cheniere.com
Facsimile: (713) 659-5459
Attention: Mr. Allan Bartz
Or such other addressee and location as Cheniere may direct in writing.
5.4.12
Payment of Shared Savings: Willbros shall be paid its share of the Shared
Savings within thirty (30) days of settlement and verification thereof by the
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Parties following Cheniere’s receipt of a final invoice and accounting report
from Willbros in accordance with Paragraphs 5.4.4 and 5.4.7.
5.4.13 Schedule of Values: Attachment IV of the Letter Agreement sets forth
the schedule of values allocating the entire Guaranteed Maximum Price among the
various portions of the Work as of the Effective Date of the Agreement
(“Schedule of Values”) to be used as a basis for reviewing the invoices.
Willbros shall periodically, upon award of various components of the Work to
Subcontractors and Vendors, submit to Cheniere for Cheniere’s written approval
an updated Schedule of Values allocating the entire Guaranteed Maximum Price
among the various portions of the Work, except that the Willbros Management Fee
shall be shown as a separate line item. The updated Schedule of Values shall be
prepared in such form and supported by such data to substantiate its accuracy as
Cheniere may require. Each Cheniere-approved, updated Schedule of Values shall
be incorporated into this Agreement by Change Order.
6. WORK PLAN AND REPORTS
6.1 Time for Performance: Willbros shall commence performance of the Work upon
the Effective Date and shall perform the Work in accordance with the Project
Schedule set forth in this Paragraph 6 and in Schedule “F”. TIME IS OF THE
ESSENCE with respect to Willbros’ performance of the Work. Willbros may not
commence a portion of the Work prior to the relevant commencement date, if any,
listed below:
6.1.1 Willbros shall commence Work related to ware yard preparation and
material receipt at the Work Site no earlier than January 01, 2007 (“Preparation
and Material Receipt Commencement Date”). The Preparation and Material Receipt
Commencement Date shall only be adjusted by Change Order as provided under this
Agreement.
6.1.2 Willbros shall commence Work related to the construction of the Project
at the Work Site no earlier than April 01, 2007 (“Construction Commencement
Date”). The Construction Commencement Date shall only be adjusted by Change
Order as provided under this Agreement.
6.1.3 Willbros shall achieve Mechanical Completion of the Project no later
than September 30, 2007 (“Scheduled Mechanical Completion Date”) based on an
April 1, 2007, release for construction. The Scheduled Mechanical Completion
Date shall only be adjusted by Change Order as provided under this Agreement.
6.2
Work Plan: On or before February 28, 2006, Willbros shall prepare and submit to
Cheniere’s Authorized Representative for review and written approval, a detailed
critical path method schedule in a format approved by Cheniere (“Work Plan”).
The Work Plan shall be based on and consistent with the Project Schedule,
including the Preparation and Material Receipt Commencement Date, the
Construction Commencement Date and the
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Scheduled Mechanical Completion Date, shall show the method and order in which
Willbros shall perform the Work, its subcontracting plan, and any other
information that Cheniere may consider useful. The Work Plan shall represent
Willbros’ best judgment as to how it shall achieve Mechanical Completion by the
Scheduled Mechanical Completion Date, and shall be a detailed graphic
representation of all significant aspects of the Work showing Willbros’ plans
for performance of the Work. Without limitation of the foregoing, the Work Plan
shall include separate activities for each portion of the Work, show the
duration, early/late start dates, early/late finish dates and available float
for each activity, show activity number, activity description and responsible
Subcontractor or Vendor, and show an uninterrupted critical path from
commencement of the Work through Project Completion.
6.3 Updated Work Plan: The Work Plan shall be used as the basis for progress
reporting, schedule control and schedule forecasting. As reasonably requested by
Cheniere, Willbros shall revise the Work Plan to include the effect of Change
Orders and Amendments and to reflect actual Work in progress as agreed with
Cheniere, provided, however, Willbros may not modify the Preparation and
Material Receipt Commencement Date, the Construction Commencement Date or the
Scheduled Mechanical Completion Date without a Change Order being executed in
accordance with this Agreement. Each updated Work Plan shall provide the same
details and form as required of the Work Plan. Willbros shall prepare schedule
and cash flow forecasts on a monthly basis or as requested by Cheniere that
reasonably predict the date for Mechanical Completion of the Project. Willbros
shall notify Cheniere of any anticipated or actual slippage in the performance
of the Work as compared to the Work Plan. Willbros shall provide to Cheniere
weekly reports, monthly summaries of such reports, and upon request, all other
relevant information concerning any circumstance or condition affecting the
Work.
6.4 Progress Meetings: Work progress meetings between Authorized Representatives
shall be held monthly between Cheniere and Willbros.
6.5
Recovery: If Willbros is responsible for any delays in the time and/or sequence
of the performance of the Work that is on the critical path of the Work Plan,
Willbros shall on its own initiative or at Cheniere’s written directive, employ
such additional forces, obtain such additional equipment, employ such additional
supervision, pay such additional overtime wages, and use such priority freight
as may be required to bring the Work back on schedule. If Willbros’ progress is
more than fourteen (14) days behind the critical path of the Work Plan, Cheniere
may, without prejudice to any other remedies available to it under this
Agreement, also require in writing that Willbros submit, within two (2) days of
Cheniere’s written notice and for Cheniere’s approval, a recovery plan to
Cheniere detailing Willbros’ proposal for bringing the Work back on schedule and
that the sequence of the performance of the Work be changed. In no event shall
such costs to bring the Work back on schedule cause the Guaranteed Maximum Price
to be exceeded. This Paragraph 6.5 shall not be construed to require that
Cheniere give Willbros a written notice to perform any of the acts listed
herein, and the Parties agree that Cheniere’s
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failure to give such written notice to Willbros shall not in any way relieve
Willbros of its obligation to perform the Work within the times set forth in the
Project Schedule.
6.6 Acceleration: Even if the Work is otherwise in compliance with the Work
Plan, Cheniere may, at any time, direct Willbros to accelerate the Work by,
among other things, establishing additional shifts, paying or authorizing
overtime or providing additional equipment. In the event of this directive,
Cheniere’s sole liability to Willbros shall be to pay Willbros for any
documented costs clearly and solely attributable to such acceleration. Such
costs may include any shift differential, premium, or overtime payments to
workers or field supervisors and other employees of Willbros dedicated to the
Work on a full-time basis actually incurred over and above Willbros’ normal
rates, overtime charges for equipment, amounts to account for lost efficiency of
workers and other costs agreed upon by Cheniere and Willbros in writing. Any
adjustment to the Guaranteed Maximum Price resulting from Cheniere’s directive
to accelerate the Work shall be implemented by Change Order.
7. INSPECTION AND TESTING
7.1 QA/QC Plan: On or before March 31, 2006, Willbros shall submit to Cheniere’s
Authorized Representative, for review and written approval thereof, a quality
assurance and quality control plan for materials procurement and for
construction (“QA/QC Plan”). Cheniere’s review and approval of the QA/QC Plan
shall in no way relieve Willbros of its responsibility for performing the Work
in compliance with this Agreement.
7.2 Willbros’ Inspection and Testing of Work: Willbros shall inspect and test
the overall and component parts of the Work, including that of its
Subcontractors or Vendors, to ensure conformity of such Work with Applicable
Codes and Standards, and all other obligations within this Agreement.
7.3 Cheniere Inspection of Work: All Work shall be subject to inspection by
Cheniere or its designee at all times and at Cheniere’s own expense, to
determine whether the Work conforms to the requirements of this Agreement.
Willbros shall furnish Cheniere with access to all locations where Work is in
progress, including locations not on the Work Site such as locations from where
equipment and material are being obtained, including pipe fabrication and
coating and factory testing of mainline valves.
7.4
Correction of Work Prior to Start-up: If, in the judgment of Cheniere, any Work
is Defective or any Work is determined to be Defective as a result of the
testing and inspections performed pursuant to Paragraph 7.2, then Willbros
shall, at its own expense, promptly correct such Defective Work, whether by
repair, replacement or otherwise. Subject to Willbros’ right to pursue a Dispute
under Paragraph 14, the decision of Cheniere shall be conclusive as to whether
the Work is conforming or Defective, and Willbros shall comply with the
instructions of Cheniere in all such matters while pursuing any such Dispute. If
it is later determined that the Work was not Defective, then Cheniere shall
reimburse Willbros for all costs incurred in connection with such repair or
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replacement and a Change Order shall be issued for such amount and shall address
any impact the repair or replacement may have had on the Project Schedule. If
Willbros fails, after a reasonable period of time not to exceed five (5) days,
to repair or replace any Defective Work, or to commence to repair or replace any
Defective Work and thereafter continue to proceed diligently to complete the
same, then Cheniere may repair or replace such Defective Work and the expense
thereof shall be paid by Willbros.
7.5 Notice to Cheniere and Cost of Disassembling: Willbros shall advise
Cheniere’s Authorized Representative of tests to be witnessed sufficiently in
advance to enable him or his designee to attend and witness such test at
Cheniere’s expense. Willbros shall likewise advise Cheniere’s Authorized
Representative in advance of any critical component of the Work to be closed or
covered. If such action is taken by Willbros before an opportunity to inspect or
witness has been provided to Cheniere, it must, if required by Cheniere, be
opened or uncovered for inspection or witnessing and recovered at Willbros’
expense. The cost of disassembling, dismantling or making safe finished Work for
the purpose of inspection, other than as set forth above, and reassembling such
portions (and any delay associated therewith) shall be borne by Cheniere if such
Work is found to conform with the requirements of this Agreement and by Willbros
if such Work is found to be Defective.
7.6 No Obligation to Inspect: Cheniere’s right to conduct inspections under this
Paragraph 7 shall not obligate Cheniere to do so. Neither the exercise of
Cheniere of any such right, nor any failure on the part of Cheniere to discover
or reject Defective Work shall be construed to imply an acceptance of such
Defective Work or a waiver of such Defect.
8. COMPLETION AND START-UP
8.1 Mechanical Completion: Willbros shall comply with all requirements for
Mechanical Completion, including as set forth in the definition of the term
Mechanical Completion and elsewhere in this Agreement. When Willbros believes
the Work is Mechanically Complete, Willbros shall certify to Cheniere in writing
in the form of the Mechanical Completion Certificate attached hereto as
Attachment III that all of the requirements for Mechanical Completion of the
Work have occurred, including all documentation required to establish that the
requirements for Mechanical Completion have been met. Within seven (7) days
after receipt of such notice Cheniere shall inspect the Work and either accept
the Work as being Mechanically Complete (which acceptance shall be evidenced by
Cheniere’s signature on such Mechanical Completion Certificate), or specify the
Exception Items which must be completed to achieve Mechanical Completion in a
written notice to Willbros. Upon completion or correction of such Exception
Items, Willbros shall so advise Cheniere. Within seven (7) days after receipt of
such notice, Cheniere shall either accept the Work as being Mechanically
Complete in the manner set forth above, or notify Willbros in writing of still
unfinished or uncorrected Exception Items. If Exception Items remain unfinished
or uncorrected, the foregoing procedure shall be repeated until the Work is
Mechanically Complete.
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8.2 Start-up: Willbros shall comply with all requirements needed to achieve
Start-up, including as set forth in the definition of the term Start-up and
elsewhere in this Agreement. When Willbros believes Start-up has been achieved,
Willbros shall certify to Cheniere in writing in the form of the Start-up
Certificate attached hereto as Attachment V that all of the requirements for
achieving Start-up have occurred, including all documentation required to
establish that the requirements for Start-up have been met. Within seven
(7) days after receipt of such notice Cheniere shall inspect the Work and either
accept the Work as having achieved Start-up (which acceptance shall be evidenced
by Cheniere’s signature on such Start-up Certificate), or specify the Exception
Items which must be completed to achieve Start-up in a written notice to
Willbros. Upon completion or correction of such Exception Items, Willbros shall
so advise Cheniere. Within seven (7) days after receipt of such notice, Cheniere
shall either approve the Start-up of the Work in the manner set forth above, or
notify Willbros in writing of still unfinished or uncorrected Exception Items.
If Exception Items remain unfinished or uncorrected, the foregoing procedure
shall be repeated until Start-up is achieved. Notwithstanding the foregoing, if
Cheniere has not commenced the introduction of either natural gas or nitrogen in
accordance with Paragraph 1.57 within thirty (30) days of achievement of
Mechanical Completion, then Start-up shall be deemed achieved upon the
expiration of such thirty (30) day period, provided that Willbros has fully
satisfied all other requirements for Start-up.
8.3 Project Completion: Willbros shall comply with all requirements for Project
Completion, including as set forth in the definition of the term Project
Completion and elsewhere in this Agreement. When Willbros believes it has
completed all obligations under this Agreement to achieve Project Completion,
Willbros shall certify to Cheniere in writing in the form of the Project
Completion Certificate as attached hereto as Attachment IV that all of the
requirements for achieving Project Completion have occurred, including all
documentation required to establish that the requirements of Project Completion
have been met. Within seven (7) days after receipt of such notice Cheniere shall
inspect the Work and either accept that Project Completion has been achieved
(which acceptance shall be evidenced by Cheniere’s signature on such Project
Completion Certificate), or specify the Exception Items which must be completed
to achieve Project Completion in a written notice to Willbros. Upon completion
or correction of such Exception Items, Willbros shall so advise Cheniere. Within
seven (7) days after receipt of such notice, Cheniere shall either accept the
Work as having achieved Project Completion in the manner set forth above, or
notify Willbros in writing of still unfinished or uncorrected Exception Items.
If Exception Items remain unfinished or uncorrected, the foregoing procedure
shall be repeated until Project Completion is achieved.
8.4
No Waiver: No acceptance by Cheniere of any or all of the Work or any other
obligations of Willbros under this Agreement, including acceptance of Mechanical
Completion, Start-up or Project Completion, nor any payment made hereunder,
whether an interim or final payment, shall in any way release Willbros or any
surety of Willbros or its Subcontractors from any obligations or liability
pursuant to this Agreement, including obligations with respect to unperformed
obligations of this Agreement, obligations
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regarding any remediation or other Work required pursuant to Paragraph 12,
correction of any Work that does not conform to the requirements of the
Agreement or other Warranty obligations, and any liabilities for which insurance
is required or any other responsibility of Willbros, including the payment of
any and all fines and penalties assessed as a result of Willbros’ failure to
comply with Applicable Law.
9. CHANGES
9.1 Change Orders Requested by Cheniere: At any time upon written notice to
Willbros from Cheniere, and without notice to the sureties, if any, Cheniere may
advise Willbros to make or agree with Willbros that there has been a Change to
the Work, including the time and/or sequence of performance, or the conditions
affecting the Work. All Work involved in a Change, as directed by a Change
Order, shall be performed in accordance with the terms and conditions of the
Agreement and shall not otherwise affect the existing rights or obligations of
the Parties (except as may be expressly stated in a Change Order). Cheniere
shall specify, in the Change Order, the amount and nature of Work to be done or
omitted, the materials to be used and the equipment to be furnished. Willbros
shall perform the Work as changed without delay.
9.2 Change Order Format: A Change in the Work shall be set forth in writing in a
Change Order, using the form provided in Attachment VI, and signed by both
Parties. Change Orders shall include the adjustment, if necessary, in the
Preparation and Material Receipt Commencement Date, the Scheduled Mechanical
Completion Date, Construction Commencement Date or the Guaranteed Maximum Price.
9.3 Change Orders Act as Accord and Satisfaction: The Parties agree that Change
Orders executed by Cheniere and Willbros shall constitute a full and final
settlement and accord and satisfaction of all effects of the Change upon any and
all respects of this Agreement and the Work and shall compensate Willbros fully.
Willbros expressly waives and releases any and all right to make a claim or
demand or to take any action or proceeding for any other consequences arising
out of, relating to, or resulting from the Change reflected in the Change Order,
whether the consequences result directly or indirectly from the Change reflected
in that Change Order.
9.4
Adjustment Only Through Change Order: Willbros shall not perform a Change of any
kind, except as authorized in a Change Order. Adjustments to the Guaranteed
Maximum Price, the Preparation and Material Receipt Commencement Date, the
Construction Commencement Date or the Scheduled Mechanical Completion Date shall
only be made by Change Order. No course of conduct or dealings between the
Parties, nor express or implied acceptance of additions, deletions, suspensions
or modifications to this Agreement, the Drawings or the Specifications,
including any Work, and no claim that Cheniere has been unjustly enriched by any
such addition, deletion, suspension or modification of this Agreement, the
Drawings or the Specifications, whether or not there is in fact any such unjust
enrichment, shall be the basis for any claim for an adjustment in the Guaranteed
Maximum Price, the Preparation and Material Receipt Commencement
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Date, the Construction Commencement Date, the Scheduled Mechanical Completion
Date or any other obligations of Willbros under this Agreement.
9.5 Change Orders Requested by Willbros: Willbros shall give written notice to
Cheniere of any requests, claims or proposals for adjustments to the Work, the
Guaranteed Maximum Price, the Preparation and Material Receipt Commencement
Date, the Construction Commencement Date or the Scheduled Mechanical Completion
Date for Changes directed by Cheniere or for circumstances otherwise permitted
by this Agreement within the time frame and in accordance with Paragraph 14.1.
9.6 Change Order Compensation: The cost or credit to Cheniere resulting from a
Change in the Work shall in each instance be determined in accordance with one
of more of the following methods and specified in the Change Order: (i) by
mutual acceptance of a properly itemized lump sum amount; or (ii) for Project
management, engineering and drafting, procurement services and construction
management services, by unit prices or hourly rates set forth in Attachment II
of the Letter Agreement or otherwise agreed upon by the Parties; or (iii) for
construction work performed by Willbros RPI, Inc. (if such entity is the
selected construction Subcontractor), by unit prices or hourly rates set forth
in Attachment III of the Letter Agreement or otherwise agreed upon by the
Parties. If any of the Changes provided for in a Change Order increase the lump
sum construction costs within the Guaranteed Maximum Price, such increase shall
be subject to Cheniere’s right to retainage as set forth in Paragraph 1.4.1 of
the Letter Agreement.
10. INDEMNITY, LIENS AND PATENTS
10.1 General Indemnifications Notwithstanding any other provision to the
contrary, Cheniere and Willbros agree as follows:
10.1.1 INJURIES TO WILLBROS GROUP PERSONNEL AND DAMAGE TO WILLBROS GROUP
PROPERTY: WILLBROS HEREBY RELEASES, AND AGREES TO DEFEND, INDEMNIFY, AND HOLD
THE CHENIERE GROUP HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS, DEMANDS,
CAUSES OF ACTION, SUITS, LIABILITIES, LOSSES, DAMAGES AND EXPENSES INCLUDING
COURT COSTS AND REASONABLE ATTORNEY’S FEES (COLLECTIVELY, “CLAIMS”) ARISING OUT
OF OR RESULTING FROM (1) INJURY TO OR DEATH OF THE WILLBROS GROUP PERSONNEL, OR
(2) DAMAGE TO OR DESTRUCTION OF THE WILLBROS GROUP PROPERTY, WHETHER OR NOT SUCH
CLAIMS ARE DUE TO AN ACT, OMISSION, NEGLIGENCE WHETHER CONTRIBUTORY, JOINT, OR
SOLE, FAULT OR STRICT LIABILITY OF THE CHENIERE GROUP, BUT EXCLUDING ONLY THOSE
CLAIMS DUE TO THE WILLFUL MISCONDUCT OF THE CHENIERE GROUP.
10.1.2
THIRD PARTY INDEMNIFICATION: WILLBROS HEREBY RELEASES, AND AGREES TO DEFEND,
INDEMNIFY, AND HOLD CHENIERE GROUP HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS
ARISING OUT OF OR RESULTING FROM DAMAGE TO OR DESTRUCTION OF PROPERTY OR
PERSONAL INJURY TO OR DEATH OF ANY THIRD PARTY (OTHER THAN A MEMBER OF THE
CHENIERE GROUP OR THE WILLBROS
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GROUP) TO THE EXTENT ARISING OUT OF OR RESULTING FROM WILLBROS’ OR ITS
SUBCONTRACTORS’ OR VENDORS’ PERFORMANCE OF THE WORK, INCLUDING THE BREACH OF
THIS AGREEMENT BY WILLBROS AND THE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF WILLBROS, ITS SUBCONTRACTORS, ITS VENDORS OR ANYONE EMPLOYED BY
THEM OR ANYONE FOR WHOSE ACTS THEY MAY BE LIABLE.
10.1.3 INJURIES TO CHENIERE GROUP PERSONNEL AND DAMAGE TO CHENIERE GROUP
PROPERTY: CHENIERE HEREBY RELEASES, AND AGREES TO DEFEND, INDEMNIFY, AND HOLD
THE WILLBROS GROUP HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS ARISING OUT OF
OR RESULTING FROM (1) INJURY TO OR DEATH OF THE CHENIERE GROUP PERSONNEL, OR
(2) DAMAGE TO OR DESTRUCTION OF THE CHENIERE GROUP PROPERTY (EXCLUDING THE WORK
OR THE PROJECT), WHETHER OR NOT SUCH CLAIMS ARE DUE TO AN ACT, OMISSION,
NEGLIGENCE WHETHER CONTRIBUTORY, JOINT, OR SOLE, FAULT OR STRICT LIABILITY OF
THE WILLBROS GROUP, BUT EXCLUDING ONLY THOSE CLAIMS DUE TO THE WILLFUL
MISCONDUCT OF THE WILLBROS GROUP.
10.1.4 HAZARDOUS SUBSTANCES INDEMNIFICATION: WILLBROS HEREBY RELEASES, AND
AGREES TO DEFEND, INDEMNIFY AND HOLD CHENIERE GROUP HARMLESS FROM ANY AND ALL
CLAIMS, FINES, PENALTIES OR REMEDIATION OBLIGATIONS ARISING OUT OF OR RESULTING
FROM (A) ACTUAL OR ALLEGED POLLUTION OR CONTAMINATION OF THE LAND, WATER OR AIR
ARISING FROM SPILLS, RELEASES, DISCHARGES OR OTHERWISE OF HAZARDOUS SUBSTANCES,
INCLUDING FUELS, LUBRICANTS, MOTOR OILS, PIPE DOPE, PAINTS, SOLVENTS, AND
GARBAGE, USED, HANDLED OR DISPOSED OF BY WILLBROS OR ITS SUBCONTRACTORS OR
VENDORS DURING THE PERFORMANCE OF THE WORK, AND (B) ANY ENVIRONMENTAL DAMAGE OF
ANY OTHER NATURE TO THE EXTENT RESULTING FROM THE PERFORMANCE OF THE WORK BY
WILLBROS OR ITS SUBCONTRACTORS OR VENDORS; PROVIDED, HOWEVER, THAT WILLBROS
SHALL HAVE NO LIABILITY OR RESPONSIBILITY FOR ANY POLLUTION, CONTAMINATION OR
ENVIRONMENTAL DAMAGE EXISTING AT THE WORK SITE PRIOR TO THE COMMENCEMENT OF THE
WORK.
10.1.5 COMPLIANCE WITH APPLICABLE LAW INDEMNIFICATION: WILLBROS HEREBY
RELEASES, AND AGREES TO DEFEND, INDEMNIFY AND HOLD CHENIERE GROUP HARMLESS FROM
ANY AND ALL CLAIMS, FINES, PENALTIES OR REMEDIATION OBLIGATIONS TO THE EXTENT
ARISING OUT OF OR RESULTING FROM WILLBROS’ OR ITS SUBCONTRACTORS’ OR VENDORS’
ACTUAL OR ALLEGED FAILURE TO COMPLY WITH APPLICABLE LAW OR APPLICABLE CODES AND
STANDARDS, OR ANY JUDICIAL ARBITRAL OR REGULATORY INTERPRETATION THEREOF.
10.1.6
WAIVER OF CONSEQUENTIAL DAMAGES: NOTWITHSTANDING ANY OTHER PROVISIONS IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL ANY ENTITY IN EITHER CHENIERE GROUP
OR THE WILLBROS GROUP BE LIABLE, ONE TO THE OTHER, FOR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES,
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INCLUDING LOSS OF PROFITS, LOSS OF USE OF ASSETS, OR BUSINESS INTERRUPTION UNDER
THIS AGREEMENT OR ANY CAUSE OF ACTION RELATED THERETO, PROVIDED THAT THE
LIMITATION OF LIABILITY SET FORTH IN THIS PARAGRAPH 10.1.6 SHALL NOT APPLY TO
(A) WILLBROS’ CONFIDENTIALITY OBLIGATIONS AS PROVIDED BY THIS AGREEMENT;
(B) WILLBROS’ INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS UNDER THIS
AGREEMENT; (C) THE AMOUNTS ENCOMPASSED WITHIN THE LIQUIDATED DAMAGES PROVIDED
FOR IN PARAGRAPH 21; OR (D) AS EXPRESSLY PERMITTED UNDER PARAGRAPH 21.2.
10.2 LIEN INDEMNIFICATION: WITHOUT IN ANY WAY LIMITING THE FOREGOING, SO LONG AS
CHENIERE REMITS UNDISPUTED PAYMENTS TO WILLBROS WHEN DUE UNDER THIS AGREEMENT,
WILLBROS HEREBY RELEASES, AND AGREES TO DEFEND, INDEMNIFY AND HOLD CHENIERE
GROUP HARMLESS FROM, AND SHALL KEEP THE WORK, THE WORK SITE AND THE PROJECT FREE
AND CLEAR OF, ANY AND ALL LIENS AND ENCUMBRANCES ASSERTED BY AN ENTITY ACTING
THROUGH WILLBROS, ANY SUBCONTRACTOR, ANY VENDOR OR ANY OTHER PERSON OR ENTITY
ACTING THROUGH OR UNDER ANY OF THEM. IF WILLBROS FAILS TO DISCHARGE SUCH LIEN OR
ENCUMBRANCE OR POST ADEQUATE SECURITY WITH RESPECT THERETO WITHIN THIRTY
(30) DAYS OF THE FILING OF SUCH LIEN OR ENCUMBRANCE, CHENIERE, IF IT SO ELECTS,
MAY DISCHARGE ANY SUCH LIENS OR ENCUMBRANCES, AND WILLBROS SHALL BE LIABLE TO
CHENIERE FOR ALL DAMAGES, COSTS, LOSSES, AND EXPENSES (INCLUDING ALL ATTORNEYS’
FEES, CONSULTANT FEES AND LITIGATION OR ARBITRATION EXPENSES) INCURRED BY
CHENIERE ARISING OUT OF OR RELATING TO SUCH DISCHARGE OR RELEASE. THEREAFTER,
CHENIERE MAY INVOICE WILLBROS FOR SUCH AMOUNT OWED (WHICH INVOICE SHALL BE PAID
BY WILLBROS WITHIN THIRTY (30) DAYS AFTER RECEIPT THEREOF) OR DEDUCT THE AMOUNT
SO PAID BY CHENIERE FROM SUMS DUE OR WHICH THEREAFTER BECOME DUE TO WILLBROS
HEREUNDER.
10.3
PATENT AND COPYRIGHT INDEMNIFICATION: WILLBROS HEREBY RELEASES, AND AGREES TO
DEFEND, INDEMNIFY AND HOLD CHENIERE GROUP HARMLESS FROM ANY CLAIMS TO THE EXTENT
ARISING FROM OR RELATING TO THE ACTUAL OR ALLEGED INFRINGEMENT OF ANY DOMESTIC
OR FOREIGN PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS
THAT MAY BE ATTRIBUTABLE TO WILLBROS OR ITS SUBCONTRACTORS OR VENDORS IN
CONNECTION WITH THE WORK. IN THE EVENT THAT ANY SUIT, CLAIM, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY INJUNCTION IS GRANTED IN CONNECTION WITH THIS
PARAGRAPH 10.3, WILLBROS SHALL, IN ADDITION TO ITS OBLIGATION ABOVE, MAKE EVERY
REASONABLE EFFORT, BY GIVING A SATISFACTORY BOND OR OTHERWISE, TO SECURE THE
SUSPENSION OF THE INJUNCTION OR RESTRAINING ORDER. IF, IN ANY SUCH SUIT OR
CLAIM, THE WORK, THE PROJECT OR ANY PART, COMBINATION OR PROCESS THEREOF, IS
HELD TO CONSTITUTE AN INFRINGEMENT AND ITS USE IS PRELIMINARILY OR PERMANENTLY
ENJOINED, WILLBROS SHALL PROMPTLY MAKE EVERY REASONABLE EFFORT TO SECURE FOR
CHENIERE A LICENSE, AT NO COST TO CHENIERE, AUTHORIZING CONTINUED USE OF THE
INFRINGING WORK. IF WILLBROS IS UNABLE TO SECURE SUCH A LICENSE WITHIN A
REASONABLE TIME, WILLBROS SHALL, AT ITS OWN EXPENSE AND WITHOUT IMPAIRING
PERFORMANCE REQUIREMENTS, EITHER REPLACE THE
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AFFECTED WORK, IN WHOLE OR PART, WITH NON-INFRINGING COMPONENTS OR PARTS OR
MODIFY THE SAME SO THAT THEY BECOME NON-INFRINGING.
10.4 ATTORNEYS’ FEES: EACH PARTY AGREES TO REIMBURSE THE PREVAILING PARTY FOR
ANY AND ALL NECESSARY EXPENSES, ATTORNEY’S FEES, AND RELATED COSTS INCURRED IN
THE ENFORCEMENT OF ANY PART OF THE INDEMNITY AGREEMENTS PROVIDED FOR HEREIN.
10.5 Enforceability:
10.5.1 Exclusions to Liability and Indemnity: Except as expressly provided
elsewhere in this Agreement, the exclusions of liability and indemnities herein
shall apply according to their terms to any such Claim, loss, damage, expense,
injury, illness or death, without regard to the cause thereof, including strict
liability, ultra hazardous activity, breach of express or implied warranty,
imperfection of material, defect or failure of equipment, defect or “ruin” or
other condition of premises, or the sole or concurrent negligence or other fault
of the party being indemnified.
10.5.2 CONCURRENT NEGLIGENCE: EXCEPT AS OTHERWISE SET FORTH IN PARAGRAPHS
10.1.1 AND 10.1.3, THE INDEMNITY, DEFENSE AND HOLD HARMLESS OBLIGATIONS FOR
PERSONAL INJURY OR DEATH OR PROPERTY DAMAGE UNDER THIS AGREEMENT SHALL APPLY
REGARDLESS OF WHETHER THE INDEMNIFIED PARTY WAS CONCURRENTLY NEGLIGENT (WHETHER
ACTIVELY OR PASSIVELY), IT BEING AGREED BY THE PARTIES THAT IN THIS EVENT, THE
PARTIES’ RESPECTIVE LIABILITY OR RESPONSIBILITY FOR SUCH DAMAGES, LOSSES, COSTS
AND EXPENSES UNDER THIS PARAGRAPH 10 SHALL BE DETERMINED IN ACCORDANCE WITH
PRINCIPLES OF COMPARATIVE NEGLIGENCE.
10.5.3 Louisiana Oilfield Anti-Indemnity Act: Willbros and Cheniere agree
that the Louisiana Oilfield Anti-Indemnity Act, LA. REV. STAT. § 9:2780, ET.
SEQ., is inapplicable to this Agreement and the performance of the Work.
Application of these code sections to this Agreement would be contrary to the
intent of the Parties, and each Party hereby irrevocably waives any contention
that these code sections are applicable to this Agreement or the Work. In
addition, it is the intent of the Parties in the event that the aforementioned
act were to apply that each Party shall provide insurance to cover the losses
contemplated by such code sections and assumed by each such Party under the
indemnification provisions of this Agreement, and Willbros agrees that the
payments made to Willbros hereunder compensate Willbros for the cost of premiums
for the insurance provided by it under this Agreement. The Parties agree that
each Party’s agreement to support their indemnification obligations by insurance
shall in no respect impair their indemnification obligations.
10.5.4
Conflict with Applicable Law: In the event that any indemnity provisions in this
Agreement are contrary to the law governing this Agreement, then the indemnity
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obligations applicable hereunder shall be applied to the maximum extent allowed
by Applicable Law.
11. INSURANCE
11.1 Willbros’ Insurance: All insurance obtained pursuant to this Agreement
shall: (1) be issued by insurers with an “A-X” or better A.M. Best Co. rating in
the current Property-Casualty Edition and authorized to do business in the state
in which the Project is located, and (2) be in all other respects acceptable to
Cheniere. Willbros shall carry and maintain or cause to be carried and
maintained in force at all times during the term of the Agreement the following
insurance:
11.1.1 Workers’ Compensation/Employers’ Liability
Workers’ compensation with appropriate longshoremen’s or harbor workers’
endorsement (if applicable) covering all Willbros Personnel in accordance with
the statutory requirements of the state of hire or country in which the Work is
to be performed, and if the Work includes the use of vessels, appropriate
maritime extensions. Employers’ liability insurance with the limit of One
Million United States Dollars (U.S. $l,000,000) per accident or illness.
11.1.2 Commercial General Liability
Commercial general liability insurance with contractual liability, products and
completed operations, and broad form property damage coverage included, which
shall provide for a combined single limit of One Million United States Dollars
(U.S. $1,000,000) for personal injury, death or property damage resulting from
each occurrence and covering all of Willbros’ Work under the Agreement;
provided, however, this coverage requirement may be satisfied by Willbros
through any combination of primary and excess liability insurance.
11.1.3 Automobile Liability
Automobile liability insurance covering owned, non-owned and hired motor
vehicles, with combined single limits of at least One Million United States
Dollars (U.S. $1,000,000) for personal injury, death, or property damage
resulting from each occurrence.
11.1.4 Aircraft Liability Insurance
Aircraft liability insurance, to the extent applicable, covering owned,
non-owned and hired aircraft with a combined single limit of Five Million United
States Dollars (U.S. $5,000,000) for bodily injury, death and property damage
resulting from each occurrence.
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11.1.5 Transportation Insurance
“All Risk” Insurance covering the full replacement cost of all supplies,
equipment and materials to be incorporated into the Work while in the course of
transit, including the land portion of any ocean or air shipments, and until
arrival at the final local Work Sites. Such transit insurance shall include
coverage against the perils of war, strikes, riots and civil commotion and shall
insure all general average and salvage charges for which named insureds are
responsible. Such insurance shall have a deductible of Fifty Thousand United
States Dollars (U.S. $50,000) per loss.
11.1.6 Builder’s Risk Insurance
Completed value form builder’s risk property insurance (subject to a deductible
per loss not to exceed $50,000) upon the entire Work for one hundred percent
(100%) of the full replacement cost value thereof (100% includes additional
costs of engineering services in the event of a loss). This policy shall include
the interests of Cheniere Group and Willbros Group in the Work as named
insureds, as their interests may appear, shall name Cheniere as the loss payee,
and shall be on an “All Risk” basis for physical loss or damage including fire,
flood, earthquake, subsidence, hail, theft, vandalism and malicious mischief and
shall include coverage for portions of the Work while it is stored off the Work
Site or is in transit (except as otherwise covered by Paragraph 11.1.5). This
policy shall provide, by endorsement or otherwise, that Willbros shall be solely
responsible for the payment of all premiums under the policy, and that the
Cheniere Group shall have no obligation for the payment thereof, notwithstanding
that the Cheniere Group are named insureds under the policy. Willbros shall be
responsible for any loss within the deductible of the policy for the liabilities
assumed by Willbros hereunder.
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11.1.7 Errors and Omissions Insurance
Errors and Omissions Professional Liability Insurance (“E&O Insurance”) having
minimum limits of Five Million United States Dollars (U.S.$5,000,000) per claim
and in the aggregate, with a deductible not in excess of Two Hundred Fifty
Thousand United States Dollars (U.S.$250,000) per claim and in the aggregate, on
a claims made basis. E&O Insurance shall cover liability arising out of or based
upon any negligent design, engineering or other professional services performed
by Willbros or any of its Subcontractors which is required as or associated with
any part of the Work. The E&O Insurance shall have a retroactive date prior to
the performance of any Work to be provided under this Agreement, shall have a
policy period or renewal period extending through the termination or expiration
of this Agreement and for two (2) years thereafter, and shall state that in the
event of cancellation or non-renewal, the discovery period for insurance claims
(tail coverage) shall be at least thirty-six (36) months.
11.1.8 Excess Liability Insurance
Umbrella or excess liability insurance, written on a “following form” basis and
providing coverage in excess of the coverages required to be provided by
Willbros for employer’s liability insurance, commercial general liability
insurance and automobile liability insurance, with limits of Twenty-Five Million
United States Dollars (U.S.$25,000,000) combined single limit each claim and in
the aggregate.
11.2 Notice: Willbros shall have the insurance carriers furnish to Cheniere,
upon the Effective Date and annually thereafter, insurance certificates
specifying the types and amounts of coverage in effect and the expiration dates
of each policy, and a statement that no insurance will be canceled or materially
changed without thirty (30) days prior written notice to Cheniere.
11.3 Waiver of Subrogation: All policies of insurance required to be provided by
Willbros under this Agreement shall include clauses providing that each
underwriter shall waive its rights of recovery, under subrogation or otherwise,
against the Cheniere Group for the liabilities assumed by Willbros hereunder.
Insurance policies pursuant to Paragraphs 11.1.2, 11.1.3, 11.1.4, 11.1.5, 11.1.6
and 11.1.8 shall designate Cheniere as additional insured for the liabilities
assumed by Willbros hereunder, and that the policies provided by Willbros shall
be primary and noncontributing to any insurance carried by Cheniere with regard
to the liabilities assumed by Willbros hereunder. The policies referred to in
Paragraphs 11.1.2 and 11.1.3 shall contain a cross-liability clause in respect
of third party claims so that Cheniere and Willbros are regarded as third
parties as to each other.
11.4
Obligations Not Relieved: Except as otherwise provided in this Agreement to the
contrary, the occurrence of any of the following shall in no way relieve
Willbros from any of its obligations under this Agreement: (i) failure by
Willbros to secure or maintain the insurance coverage required hereunder;
(ii) failure by Willbros to comply fully with any
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of the insurance provisions of this Agreement; (iii) failure by Willbros to
secure such endorsements on the policies as may be necessary to carry out the
terms and provisions of this Agreement; (iv) the insolvency, bankruptcy or
failure of any insurance company providing insurance to Willbros; (v) failure of
any insurance company to pay any claim accruing under its policy; or (vi) losses
by Willbros or any of its Subcontractors or Vendors not covered by insurance
policies.
11.5 Subcontractors’ and Vendors’ Insurance: If Willbros subcontracts any part
of the Work, Willbros shall obtain or require its Subcontractors and Vendors to
maintain, the same insurance coverage and amounts that Willbros is required to
maintain pursuant to this Paragraph 11, as applicable and appropriate to the
Work of such Subcontractor or Vendor.
11.6 Parent Guarantee: Willbros will guarantee the full and faithful performance
of all obligations of Willbros under this Agreement by providing Cheniere with a
parent guarantee in the form attached as Attachment I.
11.7 Performance and Payment Bonds: Prior to commencement of the construction
component of the Work and in any event no later than thirty (30) days prior to
Cheniere’s payment to Willbros of the down payment for such Work in accordance
with Paragraph 1.4.1(i) of Attachment I to the Letter Agreement, Willbros shall
cause the construction Subcontractor to provide to Cheniere and maintain
performance and payment bonds in the form of Attachment II and in an amount
equal to the amount of the cost of construction, as indicated in the Schedule of
Values. Such bonds shall be provided by a surety licensed to transact business
in the State of Louisiana, U.S. Department of Treasury listed and otherwise
approved by Cheniere, which approval shall not be unreasonably withheld. Each
bond shall also attach the respective dual obligee riders set forth in
Attachment II, naming Cheniere as a dual obligee under each bond. The premium of
such bonds shall be reimbursed to Willbros by Cheniere and shall be included in
the Guaranteed Maximum Price.
11.8
Limitation of Liability. Notwithstanding any other provision of this Agreement,
under no circumstance shall the liability of Willbros to Cheniere in connection
with the Work exceed in the cumulative aggregate fifteen percent (15%) of the
cost of construction, as indicated in the Schedule of Values and as may be
adjusted by Change Order, provided that, notwithstanding the foregoing, the
limitation of liability set forth in this Paragraph 11.8 shall not (i) apply in
the event of Willbros’ willful misconduct (including the willful refusal to
perform the Work, willful delay in performing the Work or abandonment of the
Work) or gross negligence; (ii) apply to Willbros’ indemnification obligations
under this Agreement; or (iii) include the payment of proceeds under any
insurance policy required to be provided by Willbros under Paragraph 11.1,
Cheniere or any Subcontractor or Vendor. In no event shall the limitation of
liability set forth in this Paragraph 11.8 be in any way deemed to limit
Willbros’ obligation to perform all Work required to achieve Mechanical
Completion, Start-up and Project Completion. The costs incurred by Willbros in
performing the Work (including Corrective Work and other Warranty
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obligations but excluding the payment of Liquidated Damages) shall not be
counted against the aggregate limitation of liability set forth in this
Paragraph 11.8.
12. WARRANTY
12.1 General: Any Work, or component thereof, that is not in conformity with any
warranties set forth in this Paragraph 12 and elsewhere in this Agreement
(collectively, the “Warranty” or “Warranties”) is defective (“Defective”) and
contains a defect (“Defect”). Willbros hereby warrants that the Work and each
component thereof shall be:
12.1.1 new, complete, fit for the purposes specified in this Agreement and of
suitable grade for the intended function and use;
12.1.2 in accordance with all of the requirements of this Agreement,
including in accordance with good engineering and construction practices,
Applicable Law and Applicable Codes and Standards;
12.1.3 free from encumbrances to title, as set forth in greater detail in
Paragraph 10.2; and
12.1.4 free from defects in design, material and workmanship and otherwise
conform to the standards and requirements contained in the Specifications and
elsewhere in this Agreement.
Willbros and its Subcontractors and Vendors shall exercise that high degree of
skill and judgment normally exercised by firms performing services of a similar
nature.
12.2 Correction of Work:
12.2.1 Prior to Start-up: Willbros’ obligations to correct Work prior to
Start-up are set forth in Paragraph 7.4.
12.2.2
After Start-up: If within twelve (12) months after Start-up (the “Defect
Correction Period”) any Work is found to be Defective, Willbros shall, at its
sole cost and expense, immediately and on an expedited basis correct such
Defective Work and any other portions of the Project damaged or affected by such
Defective Work, whether by repair, replacement or otherwise (“Corrective Work”)
and shall be liable for and pay to Cheniere any and all costs, losses, damages
and expenses incurred by Cheniere arising out of or relating to such Defective
Work. Cheniere shall provide Willbros with access to the Project sufficient to
perform its Corrective Work, so long as such access does not unreasonably
interfere with operation of the Project and subject to any reasonable security
or safety requirements of Cheniere. In the event Willbros utilizes spare parts
owned by Cheniere in the course of performing the Corrective Work, Willbros
shall supply Cheniere free of charge with new spare parts equivalent in quality
and quantity to
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all such spare parts used by Willbros as soon as possible following the
utilization of such spare parts.
12.2.3 Cheniere’s Right to Correct or Complete Defective Work: If Willbros
fails to commence the Corrective Work within a reasonable period of time not to
exceed forty-eight (48) hours, or does not complete such Corrective Work on an
expedited basis, then Cheniere, by written notice to Willbros, may (without
prejudice to any other remedies that it may have under this Agreement) correct
such Defective Work, and Willbros shall be liable to Cheniere for all costs,
losses, damages and expenses incurred by Cheniere in connection with correcting
such Defective Work and arising out of or relating to such Defective Work and
shall pay Cheniere (directly, or by offset, at Cheniere’s sole discretion) an
amount equal to such costs, losses, damages and expenses; provided, however, if
such Defective Work presents an imminent threat to the safety or health of any
person and Cheniere knows of such Defective Work, Cheniere may (without
prejudice to any other remedies that it has under this Agreement) correct such
Defective Work without giving prior written notice to Willbros, and, in that
event, Willbros shall be liable to Cheniere for all reasonable costs, losses,
damages and expenses incurred by Cheniere in connection with correcting such
Defective Work and arising out of or relating to such Defective Work and shall
pay Cheniere (directly or by offset, at Cheniere’s sole discretion) an amount
equal to such costs, losses, damages and expenses.
12.2.4 Extended Defect Correction Period for Corrective Work: With respect to
any Corrective Work performed, the Defect Correction Period for such Corrective
Work shall be extended for an additional twelve (12) months from the date of the
completion of such Corrective Work; provided, however, in no event shall the
Defect Correction Period for such Corrective Work be less than the original
Defect Correction Period. In no event shall the Defect Correction Period plus
any extended Defect Correction Period exceed a total period of twenty-four
(24) months.
12.2.5 Standards for Corrective Work: All Corrective Work shall be performed
subject to the same terms and conditions under this Agreement as the original
Work is required to be performed.
12.2.6
No Limitation: Nothing contained in this Paragraph 12.2 shall be construed to
establish a period of limitation with respect to other obligations which
Willbros might have under the Agreement. Establishment of the Defect Correction
Period relates only to the specific obligation of Willbros to perform Corrective
Work, and has no relationship to the time within which the obligation to comply
with this Agreement may be sought to be enforced, nor to the time within which
proceedings may be commenced to establish Willbros’ liability with respect to
Willbros’ obligations other than specifically to perform Corrective Work. In
addition, all representations, Warranties and obligations to perform Corrective
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Work set forth in this Agreement, including those in this Paragraph 12, shall be
in addition to and shall in no way limit Willbros’ obligation to perform all
Work necessary to achieve Project Completion.
12.2.7 Vendor Correction of Work Warranties for Materials or Equipment:
Notwithstanding anything to the contrary in this Agreement, with respect to any
materials or equipment procured by Willbros from a Vendor, Willbros’ liability
during the Defect Correction Period for such materials and equipment shall be
limited to “passing through” to Cheniere the benefits of any correction of Work
warranty received from the applicable Vendor, which correction of Work
obligation shall be deemed to run to the benefit of Cheniere. Willbros shall use
its best efforts to obtain a correction of Work warranty identical to Willbros’
correction of Work obligations set forth in Paragraph 12.2.2, but in no event
shall such correction of Work obligations be less than industry standard and
otherwise reasonable to protect Cheniere from Defective Work. Willbros shall use
its best efforts to cause such Vendors to perform their obligations under such
warranties, and shall cooperate with Cheniere’s efforts to enforce such
warranties with any such Vendors. Willbros shall assign in full, and without
cost to Cheniere, all such warranties from such Vendors. In the event of a
Dispute during the Defect Correction Period as to whether Defective Work relates
to a Defect in workmanship (and, therefore, is covered by Paragraph 12.2.2) or a
Defect in material or equipment provided by a Vendor (and, therefore, is covered
by this Paragraph 12.2.7), anything in this Paragraph notwithstanding, Willbros
shall, at Cheniere’s direction and subject to the dispute resolution procedure
set forth in Article 14, perform Corrective Work during the Defect Correction
Period unless Willbros successfully causes such Vendor to perform its correction
of Work obligations in accordance with the terms of the applicable purchase
order.
12.3
Assignment and Enforcement of Subcontractor Warranties: Willbros shall, without
additional cost to Cheniere, obtain Warranties from Subcontractors that meet or
exceed the requirements of this Agreement; provided, however, Willbros shall not
in any way be relieved of its responsibilities and liability to Cheniere under
this Agreement, regardless of whether such Subcontractor Warranties meet the
requirements of this Agreement, as Willbros shall be fully responsible and
liable to Cheniere for its Warranty and corrective Work obligations and
liability under this Agreement for all Work. All such Warranties shall be deemed
to run to the benefit of Cheniere and Willbros. Such Warranties, with duly
executed instruments assigning the Warranties to Cheniere, shall be delivered to
Cheniere upon Start-up. All Warranties provided by any Subcontractor shall be in
such form as to permit direct enforcement by Willbros or Cheniere against any
Subcontractor whose Warranty is called for, and Willbros agrees that:
(i) Willbros’ Warranty, as provided under this Paragraph 12 shall apply to all
Work regardless of the provisions of any Subcontractor Warranty, and such
Subcontractor Warranties shall be in addition to, and not a limitation of, such
Willbros Warranty; (ii) Willbros is jointly and severally liable with such
Subcontractor with respect to such Subcontractor Warranty; and (iii)
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service of notice on Willbros that there has been a breach of a Subcontractor
Warranty shall be sufficient to invoke the terms of the instrument.
12.4 Survival of Warranties: All representations and Warranties set forth in
this Agreement, including those in this Paragraph 12, shall survive Project
Completion or the earlier termination of this Agreement.
13. TITLE TO THE WORK AND TO WORK PRODUCT,
CONFIDENTIAL INFORMATION
13.1 Title: The title to all or any portion of the Work (other than Work
Product) shall pass to Cheniere upon the earlier of (a) payment by Cheniere
therefore, or (b) incorporation of such Work into the Work Site. Notwithstanding
the foregoing, title to all materials furnished by Cheniere, irrespective of the
location thereof, as between Cheniere and Willbros or any Subcontractor or
Vendor, shall be in Cheniere. Transfer of title to Work shall be irrespective of
the passage of risk of loss pursuant to Paragraph 13.2 and shall be without
prejudice to Cheniere’s right to reject Defective Work or any other right in
this Agreement.
13.2 Risk of Loss: Notwithstanding passage of title pursuant to Paragraph 13.1,
Willbros shall bear the risk of loss and damage to Work until the earlier of
Start-up or termination of this Agreement; provided that Cheniere shall at all
times bear the risk of physical loss and damage if and to the extent arising
from (i) war (whether declared or undeclared), civil war, act of terrorism,
sabotage, blockade, insurrection; or (ii) ionizing radiation, or contamination
by radioactivity from nuclear fuel, or from any nuclear waste from the
combustion of nuclear fuel properties of any explosive nuclear assembly or
nuclear component thereof. In the event that any physical loss or damage to the
Work arises from one or more of the events set forth in the preceding sentence,
and Cheniere elects to rebuild such physical loss or damage, Willbros shall be
entitled to a Change Order to the extent such event adversely affects
(i) Willbros’ costs of performance of the Work; (ii) Willbros’ ability to
perform the Work in accordance with the Work Plan or (iii) Willbros’ ability to
perform any material obligation under this Agreement; provided that Willbros
complies with the requirements set forth in Paragraphs 9.5 and 14.1.
13.3
Ownership of Work Product: Subject to Paragraph 13.4, all materials which
Willbros or any Subcontractor or Vendor is required to furnish, prepare or
develop in the performance and completion of Work hereunder (whether delivered
to Cheniere or not), including reports, plans, Drawings and Specifications,
calculations, maps, sketches, notes, data and samples (collectively, “Work
Product”), shall be “works for hire,” and all rights, title and interests to the
Work Product, including any and all copyrights in the Work Product, shall be the
sole and exclusive property of Cheniere without limitation (except Willbros may
retain a copy thereof in accordance with this Agreement), subject only to
Willbros’ right to use the same to perform the Work. Such Work Product
(including all copies thereof) shall, together with any materials furnished by
Cheniere hereunder, be delivered to Cheniere upon request and in any event upon
completion or termination of this
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Agreement. All such Work Product shall be considered to be Cheniere’s
Confidential Information and is subject to the confidentiality obligations in
Paragraph 13.6. If for any reason any part of or all of the Work Product is not
considered work for hire for Cheniere or if ownership of all right, title and
interest in the Work Product shall not otherwise vest in Cheniere, then Willbros
agrees that such ownership and copyrights in the Work Product, whether or not
such Work Product is fully or partially complete, shall be automatically
assigned from Willbros to Cheniere, without further consideration, and Cheniere
shall thereafter own all right, title and interest in the Work Product,
including all copyright interests.
13.4 Willbros Intellectual Property: As between Cheniere and Willbros, Willbros
shall retain ownership of any intellectual property rights owned by Willbros or
developed by Willbros outside this Agreement and prior to the Effective Date
(“Willbros’ Intellectual Property”). To the extent any Willbros’ Intellectual
Property is incorporated, in whole or in part, into the Work Product, Willbros
shall provide prior written notice thereof to Cheniere. Cheniere shall be
entitled to use Willbros’ Intellectual Property and Willbros hereby grants
Cheniere an irrevocable and royalty-free license to use and modify Willbros’
Intellectual Property for the sole purposes of: (i) operating and maintaining
the Project; (ii) assisting in the performance of the Work; or (iii) repairing,
replacing, expanding, completing or modifying any portion of the Work or the
Project. Cheniere shall be entitled to assign its rights in such license,
provided that such assignee shall only use such license for the purposes
specified in (i) through (iii) above.
13.5 Cheniere’s Use of the Work Product and Willbros’ Intellectual Property for
Other Projects: In addition to the license granted in Paragraph 13.4, Cheniere
shall be entitled to use the Work Product and Willbros hereby grants solely to
Cheniere an irrevocable and royalty-free license, non-transferable and
non-assignable (except as set forth below) to use Willbros’ Intellectual
Property embedded in the Work Product, in each case solely for the purpose of
developing other projects owned in whole or part by Cheniere, including the
Corpus Christi and Creole Trail projects, provided that (i) Cheniere shall first
remove all references to Willbros and the Project from the Work Product and
Willbros’ Intellectual Property embedded in the Work Product, (ii) the use of
any of Willbros’ Intellectual Property on such other projects shall be limited
to such Willbros’ Intellectual Property which is embedded in the Work Product;
and (iii) Cheniere shall not assign (except to an affiliated company of
Cheniere) such Work Product or license without Willbros’ consent, which consent
shall not be unreasonably withheld or delayed. CHENIERE SHALL DEFEND, INDEMNIFY
AND HOLD WILLBROS HARMLESS FROM AND AGAINST ALL DAMAGES, LOSSES, COSTS AND
EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS’ FEES AND LITIGATION OR ARBITRATION
EXPENSES) INCURRED BY WILLBROS AND CAUSED BY USE OF THE WORK PRODUCT OR
WILLBROS’ INTELLECTUAL PROPERTY IN CONNECTION WITH PROJECTS OTHER THAN THE
PROJECT WHICH IS THE SUBJECT OF THIS AGREEMENT.
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13.6 Willbros’ Confidentiality Obligations: Willbros hereby covenants and
warrants that Willbros and its employees and agents shall not (without in each
instance obtaining Cheniere’s prior written consent) disclose, make commercial
or other use of, or give or sell to any person or entity any of the following
information: (i) any Work Product other than to Subcontractors or Vendors as
necessary to perform the Work or (ii) any other information relating to the
business, products, services, research or development, clients or customers of
Cheniere or any member of the Cheniere Group, or relating to similar information
of a third party who has entrusted such information to Cheniere or any member of
the Cheniere Group (hereinafter individually or collectively, “Cheniere’s
Confidential Information”). Prior to disclosing any information in (i) of this
Paragraph 13.6 to any Subcontractor or Vendor as necessary to perform the Work,
Willbros shall bind such Subcontractor or Vendor to the confidentiality
obligations contained in this Paragraph 13.6 and to the term in Paragraph 13.11.
Nothing in this Paragraph 13.6 or this Agreement shall in any way prohibit
Willbros or any of its Subcontractors or Vendors from making commercial or other
use of, selling, or disclosing any of their respective Willbros’ Intellectual
Property.
13.7 Cheniere’s Confidentiality Obligations: Cheniere hereby covenants and
warrants that Cheniere and its employees and agents shall not (without in each
instance obtaining Willbros’ prior written consent) disclose, make commercial or
other use of, or give or sell to any person or entity any pricing methodologies
or pricing information (other than the Guaranteed Maximum Price or actual
expenditures made by Willbros under this Agreement) relating to the Work, which
is conspicuously marked and identified in writing as confidential by Willbros
(hereinafter individually or collectively, “Willbros’ Confidential
Information”). The Parties agree that Cheniere may disclose Willbros’
Confidential Information to any member of the Cheniere Group, underwriters, a
bona fide prospective purchaser of all or a portion of Cheniere’s or any member
of the Cheniere Group’s assets or ownership interests, a bona fide prospective
assignee of all or a portion of Cheniere’s interest in this Agreement, lender
and its representatives, rating agencies or any other party in relation to
project financing for the Project, provided that Cheniere binds such persons or
entity to the confidentiality obligations contained in this Paragraph 13.7 and
to the term in Paragraph 13.11.
13.8 Definitions: The term “Confidential Information” shall mean one or both of
Willbros’ Confidential Information and Cheniere’s Confidential Information, as
the context requires. The Party having the confidentiality obligations with
respect to such Confidential Information shall be referred to as the “Receiving
Party,” and the Party to whom such confidentiality obligations are owed shall be
referred to as the “Disclosing Party.”
13.9
Exceptions: Notwithstanding Paragraphs 13.6 and 13.7, Confidential Information
shall not include: (i) information which at the time of disclosure or
acquisition is in the public domain, or which after disclosure or acquisition
becomes part of the public domain without violation of this Paragraph 13;
(ii) information which at the time of disclosure or acquisition was already in
the possession of the Receiving Party or its employees or
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agents and was not previously acquired from the Disclosing Party or any of its
employees or agents directly or indirectly; (iii) information which the
Receiving Party can show was acquired by such entity after the time of
disclosure or acquisition hereunder from a third party without any
confidentiality commitment, if, to the best of Receiving Party’s or its
employees’ or agent’s knowledge, such third party did not acquire it, directly
or indirectly, from the Disclosing Party or any of its employees or agents;
(iv) information independently developed by the Receiving Party without benefit
of the Confidential Information, but specifically excluding the Work Product;
and (v) information which is required by Applicable Law or other agencies in
connection with the Project, to be disclosed; provided, however, that prior to
such disclosure, the Receiving Party gives reasonable notice to the Disclosing
Party of the information required to be disclosed so that the Disclosing Party
may attempt to seek an appropriate protective order or other remedy.
13.10 Equitable Relief. The Parties acknowledge that in the event of a breach
of any of the terms contained in this Paragraph 13, the Disclosing Party would
suffer irreparable harm for which remedies at law, including damages, would be
inadequate, and that the Disclosing Party shall be entitled to seek equitable
relief therefor by injunction, in addition to any and all rights and remedies
available to it at law and in equity, without the requirement of posting a bond.
13.11 Term. The confidentiality obligations of this Paragraph 13 shall survive
the expiration or termination of this Agreement for a period of five (5) years
following the expiration or earlier termination of this Agreement.
13.12 Disclosure and Filings. Willbros acknowledges that Cheniere may be
required from time to time to make filings in compliance with Applicable Law,
including filing a copy of this Agreement with the U.S. Securities and Exchange
Commission.
14. DISPUTE RESOLUTION
14.1 Time Requirements for Claims: Should Willbros desire to seek an adjustment
to the Guaranteed Maximum Price, the Project Schedule or any other modification
to any other obligation of Willbros under this Agreement for any circumstance
that Willbros has reason to believe may give rise to a right to request the
issuance of a Change Order, Willbros shall, with respect to each such
circumstance:
14.1.1
notify Cheniere in writing within fourteen (14) days of the date that Willbros
knew or reasonably should have known of the first occurrence or beginning of
such circumstance. In such notice, Willbros shall state in detail all known and
presumed facts upon which its claim is based, including the character, duration
and extent of such circumstance, the date Willbros first knew of such
circumstance, any activities impacted by such circumstance, the cost and time
consequences of such circumstance (including showing the impact of such
circumstance, if any, on the critical path of the Work Plan) and any other
details
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or information that are expressly required under this Agreement. Willbros shall
only be required to comply with the notice requirements of this Paragraph 14.1
once for continuing circumstances, provided the notice expressly states that the
circumstance is continuing and includes Willbros’ best estimate of the time and
cost consequences of such circumstance; and
14.1.2 submit to Cheniere a request for a proposed Change Order as soon as
reasonably practicable after giving Cheniere written notice but in no event
later than fourteen (14) days after the completion of each such circumstance,
together with a written statement (i) detailing why Willbros believes that a
Change Order should be issued, plus all documentation reasonably requested by or
necessary for Cheniere to determine the factors necessitating the possibility of
a Change Order and all other information and details expressly required under
this Agreement; and (ii) setting forth the effect, if any, which such proposed
Change Order would have for the Work on the Guaranteed Maximum Price and the
Project Schedule.
The Parties acknowledge that Cheniere will be prejudiced if Willbros fails to
provide the notice required under this Paragraph 14.1, and agree that such
requirement is an express condition precedent necessary to any right for an
adjustment in the Guaranteed Maximum Price, the Project Schedule, any Work or
any other modification to any other obligation of Willbros under this Agreement.
Oral notice, shortness of time, or Cheniere’s actual knowledge of a particular
circumstance shall not waive, satisfy, discharge or otherwise excuse Willbros’
strict compliance with this Paragraph 14.1.
14.2 Negotiation: In the event that any claim, dispute or controversy arising
out of or relating to this Agreement (including the breach, termination or
invalidity thereof, and whether arising out of tort or contract) (“Dispute”)
cannot be resolved informally within thirty (30) days after the Dispute arises,
either Party may give written notice of the Dispute (“Dispute Notice”) to the
other Party requesting that a representative of Cheniere’s senior management and
Willbros’ senior management meet in an attempt to resolve the Dispute. Each such
management representative shall have full authority to resolve the Dispute and
shall meet at a mutually agreeable time and place within fourteen (14) days
after receipt by the non-notifying Party of such Dispute Notice, and thereafter
as often as they deem reasonably necessary to exchange relevant information and
to attempt to resolve the Dispute. In no event shall this Paragraph 14.2 be
construed to limit either Party’s right to take any action under this Agreement,
including Cheniere’s termination rights. The Parties agree that if any Dispute
is not resolved within thirty (30) days after receipt of the Dispute Notice
given in this Paragraph 14.2, then either Party may by notice to the other Party
refer the Dispute to be decided by final and binding arbitration in accordance
with Paragraph 14.3.
14.3
Arbitration: Any arbitration held under this Agreement shall be held in Houston,
Texas, unless otherwise agreed by the Parties, shall be administered by the
Dallas, Texas office of the American Arbitration Association (“AAA”) and shall,
except as otherwise modified by this Paragraph 14.3, be governed by the AAA’s
Construction Industry
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Arbitration Rules and Mediation Procedures (including Procedures for Large,
Complex Construction Disputes) (the “AAA Rules”). The number of arbitrators
required for the arbitration hearing shall be determined in accordance with the
AAA Rules. The arbitrator(s) shall determine the rights and obligations of the
Parties according to the substantive law of the state of Texas, excluding its
conflict of law principles, as would a court for the state of Texas; provided,
however, the law applicable to the validity of the arbitration clause, the
conduct of the arbitration, including resort to a court for provisional
remedies, the enforcement of any award and any other question of arbitration law
or procedure shall be the Federal Arbitration Act, 9 U.S.C.A. § 2. Issues
concerning the arbitrability of a matter in dispute shall be decided by a court
with proper jurisdiction. The Parties shall be entitled to engage in reasonable
discovery, including the right to production of relevant and material documents
by the opposing Party and the right to take depositions reasonably limited in
number, time and place, provided that in no event shall any Party be entitled to
refuse to produce relevant and non-privileged documents or copies thereof
requested by the other Party within the time limit set and to the extent
required by order of the arbitrator(s). All disputes regarding discovery shall
be promptly resolved by the arbitrator(s). This agreement to arbitrate is
binding upon the Parties, Willbros’ surety (if any) and the successors and
permitted assigns of any of them. At Cheniere’s sole option, any other person
may be joined as an additional party to any arbitration conducted under this
Paragraph 14.3, provided that the party to be joined is or may be liable to
either Party in connection with all or any part of any Dispute between the
Parties. The arbitration award shall be final and binding, in writing, signed by
all arbitrators, and shall state the reasons upon which the award thereof is
based. The Parties agree that judgment on the arbitration award may be entered
by any court having jurisdiction thereof.
14.4 Continued Performance: Notwithstanding any Dispute, so long as Cheniere
continues to pay Willbros undisputed amounts in accordance with this Agreement,
it shall be the responsibility of Willbros to continue to prosecute all of the
Work diligently and in a good and workmanlike manner in conformity with this
Agreement. Except to the extent provided in Paragraph 18, Willbros shall have no
right to cease performance hereunder or to permit the prosecution of the Work to
be delayed. Cheniere shall, subject to its right to withhold or offset amounts
pursuant to this Agreement, continue to pay Willbros undisputed amounts in
accordance with this Agreement; provided, however, in no event shall the
occurrence of any negotiation or arbitration prevent or restrict Cheniere from
exercising its rights under this Agreement, at law or in equity, including
Cheniere’s right to terminate pursuant to Paragraphs 16 or 17.
15. SUSPENSION OF WORK
15.1
Suspension of Work: Cheniere may at any time, whether or not for cause, suspend
performance of the Work, or any part thereof, by a Change Order specifying the
Work to be suspended and the effective date of such suspension. Willbros shall
cease performance of such suspended Work on the effective date of suspension,
but shall continue to perform any unsuspended Work and shall take reasonable
steps to minimize
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any costs associated with such suspension. During any such suspension, Willbros
shall take all reasonably necessary actions to maintain and safeguard the
suspended Work in a manner as Cheniere may reasonably require. Except when such
suspension ordered by Cheniere is the result of or due to the fault or
negligence of Willbros or any Subcontractor or Vendor, Willbros shall be
entitled to the reasonable costs (including actual, but not unabsorbed,
overhead, contingency, risk and reasonable profit) of such suspension incurred
during the suspension period, including demobilization and remobilization costs
and costs incurred for Willbros Personnel and for Willbros Equipment, at the
standby rates, if any, specified in the Letter Agreement, if necessary, along
with appropriate supporting documentation to evidence such costs, and a time
extension to the Preparation and Material Receipt Commencement Date, the
Construction Commencement Date or the Scheduled Mechanical Completion Date if
and to the extent permitted under Paragraph 20.2. In no event shall Willbros be
entitled to any additional profits or damages due to such suspension.
15.2 Resumption of Work: Unless otherwise instructed by Cheniere, Willbros shall
during any such suspension maintain its staff and labor on or near the Work Site
and otherwise be ready to proceed expeditiously with the Work upon receipt of
Cheniere’s further instructions. Cheniere may, at any time, authorize resumption
of all or any part of the suspended Work by giving notice to Willbros specifying
the part of Work to be resumed and the effective date of such resumption.
Suspended Work shall be promptly resumed by Willbros after receipt of such
notice.
16. TERMINATION AT CHENIERE’S CONVENIENCE
16.1 Cheniere’s Rights to Terminate for Convenience: Cheniere may, at any time
and at its sole convenience, terminate the Agreement or any part of the Work by
giving notice to Willbros specifying the Work to be terminated and the effective
date of termination.
16.2 Obligations upon Termination for Convenience: Should Cheniere issue a
termination notice in accordance with Paragraph 16.1, Willbros shall stop
performance of the Work involved on the effective date of termination, unless
Cheniere directs Willbros to complete portions of the Work in progress. Such
termination shall be effective in the manner specified in the notice, and upon
receipt of such notice, Willbros shall, unless the notice directs otherwise,
comply with the obligations set forth in Paragraph 19. Upon such termination, it
is agreed that the obligations of this Agreement shall continue as to Work
already performed. It is further agreed in the event of such termination that
the amounts due Willbros in full and complete settlement of this Agreement shall
be the sum of the following:
16.2.1 The reasonable value of the Work satisfactorily performed prior to
termination (the basis of payment being based on the terms of this Agreement,
less previous payments, if any, paid to Willbros under this Agreement), plus
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16.2.2 Reasonable direct close-out costs, but in no event shall Willbros be
entitled to receive any amount for unabsorbed overhead, contingency or
anticipatory profit.
Willbros shall submit all reasonable direct close-out costs to Cheniere for
verification and audit within sixty (60) days following the effective date of
termination.
17. TERMINATION BY CHENIERE FOR CAUSE
17.1 Default by Willbros: Should Willbros at any time: (a) commit a material
breach of the Agreement; (b) cause, by any action or omission, any material
stoppage or delay of or interference with the work of Cheniere or its other
consultants or contractors; (c) fail to comply with Applicable Law or Applicable
Codes and Standards; or (d) become insolvent, have a receiver appointed, make a
general assignment or filing for the benefit of its creditors or file for
bankruptcy protection, in which such case of insolvency, receivership or
assignment the cure provisions found below shall not apply; then, in any such
event and without prejudice to any other rights available under this Agreement,
Cheniere may provide written notice to Willbros specifying the general nature of
the default and demanding cure thereof. If, within seven (7) days after receipt
of such notice Willbros has failed to cure such default, or if the default
cannot be cured with the exercise of reasonable diligence within such seven
(7) days but Willbros fails to commence corrective action and cure such
condition within an additional fourteen (14) days, Cheniere may, at its option:
(i) take such steps as are necessary to overcome the default or deficiency
stated in its notice, in which case Willbros shall be liable to Cheniere for all
related costs in connection therewith (including all attorneys’ fees, consultant
fees and litigation or arbitration expenses) which may be offset by Cheniere at
its option; or (ii) terminate for default Willbros’ performance of all or part
of the Work.
17.2 Additional Rights of Cheniere upon Default Termination: In the case of
termination for default, Cheniere may, at its option, either itself or through
others complete the Work by whatever method Cheniere may deem expedient,
including taking possession, for the purposes of completing the Work, of all
Willbros Equipment and materials and/or taking assignment of any or all of
Willbros subcontracts or purchase orders for the Project. In the event of
termination under this Paragraph 17, Willbros shall not be entitled to receive
any further payment until the Work shall be fully completed and accepted by
Cheniere, and Willbros shall be liable to Cheniere for all costs, damages,
losses and expenses (including all attorneys’ fees, consultant fees and
litigation or arbitration expenses) incurred by Cheniere in completing the Work,
either itself or through others, including all Liquidated Damages to the extent
payable pursuant to Paragraph 21 of this Agreement.
17.3 Conversion: If any termination for default by Cheniere pursuant to
Paragraph 17.1 is found to be not in accordance with the provisions of this
Agreement or is otherwise deemed to be unenforceable, then such termination
shall be deemed to be a termination for convenience as provided in Paragraph 16.
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18. TERMINATION BY WILLBROS
Should Cheniere fail to pay Willbros undisputed invoiced amounts when due under
this Agreement, Willbros may demand in writing that Cheniere comply with the
payment terms of this Agreement. If, within forty-five (45) days after
Cheniere’s receipt of such a demand, Cheniere has not taken satisfactory steps
to cure such failure, Willbros may, without prejudice to the exercise of any
other rights or remedies which may be available to it, terminate this Agreement
by giving Cheniere written notice to that effect. Such termination hereunder by
Willbros shall be effective on the date specified in Willbros’ termination
notice. In the event of termination under this Paragraph 18, Willbros have the
rights (and Cheniere shall make the payments) provided for in Paragraph 16 in
the event of a Cheniere termination for convenience. The right of Willbros to
terminate this Agreement for cause shall be without prejudice to, and not in
lieu of, any other remedies available to Willbros under this Agreement.
19. WILLBROS’ OBLIGATIONS UPON SUSPENSION OR TERMINATION
19.1 Willbros’ Obligations: If the Agreement or any portion of the Work is
suspended or terminated as provided in Paragraphs 15, 16, 17, or 18 and if
Cheniere so requests, Willbros shall:
19.1.1 immediately discontinue Work on the date and to the extent specified
in the notice;
19.1.2 place no further orders for subcontracts, materials, equipment, or any
other items or services except as may be necessary for completion of such
portion of the Work as is not discontinued, thereafter execute only that portion
of the Work not terminated (if any);
19.1.3 inventory, maintain and turn over to Cheniere all Willbros Equipment
or any other equipment or other items provided by Cheniere for performance of
the terminated Work;
19.1.4 promptly make every reasonable effort to procure cancellation upon the
best terms as are reasonably obtainable under the circumstances and which are
satisfactory to Cheniere of any or all subcontracts, purchase orders and rental
agreements to the extent they relate to the performance of the Work that is
discontinued unless Cheniere elects to take assignment of any such subcontracts,
purchase orders and rental agreements pursuant to Paragraph 19.2;
19.1.5 cooperate with Cheniere in the transfer of Work Product, including
Drawings, licenses and any other items or information and disposition of Work in
progress so as to mitigate damages;
19.1.6 comply with other reasonable requests from Cheniere regarding the
terminated Work;
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19.1.7 do whatever is necessary to preserve and protect Work in progress, to
protect materials, equipment and supplies in transit or at the Work Site for the
Project, to comply with any Applicable Law and any Applicable Codes and
Standards, and to minimize all costs to Cheniere and Willbros resulting from
such suspension or termination; and
19.1.8 perform all other obligations under Paragraph 17.2.
19.2 Assignment of Subcontracts and Other Agreements: If the Agreement or any
portion of the Work is suspended or terminated as provided in Paragraphs 15, 16,
17, or 18, Cheniere may, at its sole option, take assignment of any or all
subcontracts, purchase orders and rental agreements.
20. FORCE MAJEURE AND CHENIERE-CAUSED DELAY
20.1 Force Majeure:
20.1.1 Willbros Relief: If the commencement, prosecution or completion of any
Work is delayed by Force Majeure, then Willbros shall be entitled to an
extension to the Scheduled Mechanical Completion Date to the extent, if any,
permitted under Paragraph 20.1.1.1 and an adjustment to the Guaranteed Maximum
Price to the extent, if any, permitted under Paragraph 20.1.1.2, provided that
Willbros complies with the notice and Change Order request requirements in
Paragraph 14.1 and the mitigation requirements in Paragraph 20.4. All time
extensions to the Project Schedule and adjustments to the Guaranteed Maximum
Price for such delays shall be by Change Order implemented and documented as
required under Paragraph 9.
20.1.1.1 Willbros shall be entitled to an extension to the Scheduled Mechanical
Completion Date for delay that meets the requirements of Paragraph 20.1.1 if and
to the extent such delay affects the performance of any Work that is on the
critical path of the Work Plan and causes Willbros to achieve Mechanical
Completion beyond the Scheduled Mechanical Completion Date, but only if Willbros
is unable to proceed with other portions of the Work so as not to cause a delay
in the Scheduled Mechanical Completion Date.
20.1.1.2 Willbros shall be entitled to an adjustment to the Guaranteed Maximum
Price for any delay or prevention that meets the requirements of Paragraph
20.1.1, if such delay or prevention occurs for a continuous period of at least
five (5) days in any thirty (30) day period. If Willbros is entitled to such
adjustment to the Guaranteed Maximum Price, the adjustment to the Guaranteed
Maximum Price shall only include reimbursement for the standby time for
Willbros’ employees and Willbros Equipment and other standby expenses which are
incurred by Willbros after the expiration of such five (5) day period and which
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are caused by such Force Majeure and the effects thereof. Willbros shall take
all reasonable measures, pursuant to Paragraph 20.4, to mitigate the standby and
other Force Majeure costs it incurs, and shall cooperate with Cheniere to help
overcome such Force Majeure event. Reimbursement for such standby expenses and
other Force Majeure costs shall be subject to an aggregate amount of One Million
Five Hundred Thousand Dollars (U.S.$ 1,500,000).
20.1.2 Cheniere Relief. Subject to Paragraph 20.1.3, Cheniere’s obligations
under this Agreement shall be suspended to the extent that performance of such
obligations is delayed by Force Majeure, but only if Cheniere notifies Willbros
of the existence of such event of Force Majeure within fourteen (14) days after
its occurrence and complies with the mitigation requirements in Paragraph 20.4.
20.1.3 Payment Obligations: No obligation of a Party to pay moneys under or
pursuant to this Agreement shall be excused by reason of Force Majeure.
20.2 Cheniere-Caused Delay: Should Cheniere or any person or entity acting on
behalf of or under the control of Cheniere (including to any third party
contractors working in connection with the Project) delay the commencement,
prosecution or completion of the Work, and if such delay is not in any way
attributable to Willbros or its Subcontractors or Vendors but is caused by
(a) Cheniere’s or such person or entity’s active interference in the Work,
(b) Cheniere’s ordering a Change in the Work (provided that a Change Order has
been issued in accordance with Paragraph 9), or (c) Cheniere’s or such person or
entity’s failure to perform its material obligations pursuant to this Agreement,
including the failure to provide access to the Work Site in accordance with
Paragraph 5.2, then Willbros shall be entitled to an adjustment in the
Guaranteed Maximum Price and an extension to the Scheduled Mechanical Completion
Date if (i) such delay affects the performance of any Work that is on the
critical path of the Work Plan, (ii) such delay causes Willbros to complete the
Work beyond the Scheduled Mechanical Completion Date, (iii) Willbros is unable
to proceed with other portions of the Work so as not to cause a delay in the
Scheduled Mechanical Completion Date and (iv) Willbros complies with the notice
and Change Order request requirements in Paragraph 14.1 and the mitigation
requirements of Paragraph 20.4. Any adjustment to the Guaranteed Maximum Price
shall be for reasonable, additional direct costs incurred by Willbros for such
delay meeting the requirements of this Paragraph 20.2, and any adjustments to
the Guaranteed Maximum Price or the Project Schedule shall be recorded in a
Change Order.
20.3 Delay: For the purposes of Paragraph 20, the term “delay” shall include
hindrances, disruptions or obstructions, or any other similar term in the
industry and the resulting impact from such hindrances, disruptions or
obstructions, including inefficiency, impact, or lost production.
20.4 Obligation to Mitigate Delay: At all times in the event of a delay, the
Parties shall take reasonable actions to mitigate such delay.
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21. LIQUIDATED DAMAGES
21.1 Liquidated Damages: If Mechanical Completion occurs after the Scheduled
Mechanical Completion Date, Willbros shall pay Cheniere in amounts according to
the following schedule for each day of delay until Mechanical Completion occurs
(“Liquidated Damages”):
21.1.1 one (1) through thirty (30) days after the Scheduled Mechanical
Completion Date: Zero U.S. Dollars ($0) per day; and
21.1.2 thirty-one (31) days through sixty (60) days inclusive after the
Scheduled Mechanical Completion Date at Five Thousand Dollars ($5,000) per day;
21.1.3 sixty-one (61) days through ninety (90) days inclusive after the
Scheduled Mechanical Completion Date at Seven Thousand Dollars ($7,000) per day;
and
21.1.4 ninety-one (91) days and thereafter until Mechanical Completion is
achieved at Ten Thousand Dollars ($10,000) per day.
Provided, however, in no event shall such Liquidated Damages exceed the total
sum of Five Hundred Sixty Thousand Dollars ($560,000), provided that such
limitation of liability shall not be construed to limit Willbros’ other
obligations or liabilities under this Agreement (including its obligations
(i) to complete the Work for the compensation provided under this Agreement,
(ii) to perform all Work required to achieve Start-up and Project Completion,
and (iii) with respect to Warranties), nor shall such limitation of liability
apply in the event of Willbros’ willful misconduct (including the willful
refusal to perform the Work, willful delay in performing the Work or abandonment
of the Work) or gross negligence.
21.2 Liquidated Damages Not a Penalty: It is expressly agreed that Liquidated
Damages payable under this Agreement do not constitute a penalty and that the
Parties, having negotiated in good faith for such specific Liquidated Damages
and having agreed that the amount of such Liquidated Damages is reasonable in
light of the anticipated harm caused by the breach related thereto and the
difficulties of proof of loss and inconvenience or nonfeasibility of obtaining
any adequate remedy, are estopped from contesting the validity or enforceability
of such Liquidated Damages. In the event any Liquidated Damages are held to be
unenforceable due to the urging by or on behalf of any member of the Willbros
Group, Willbros specifically agrees to pay Cheniere all actual damages incurred
by Cheniere in connection with such breach, including any and all consequential
damages (such as loss of profits and revenues, business interruption, loss of
opportunity and use) and all costs incurred by Cheniere in proving the same.
21.3
Payment of Liquidated Damages: With respect to any Liquidated Damages that
accrue, Cheniere, at its sole discretion, may either (i) invoice Willbros for
such owed Liquidated Damages, and within thirty (30) days of Willbros’ receipt
of such invoice, Willbros shall
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pay Cheniere Liquidated Damages, or (ii) withhold from Willbros amounts that are
otherwise due and payable to Willbros in the amount of such Liquidated Damages.
In addition, with respect to the achievement of Mechanical Completion, Willbros
shall pay Cheniere all Liquidated Damages, if any, owed under this Agreement as
a condition precedent to achieving such Mechanical Completion.
22. PUBLICITY RELEASES
Should Willbros or any of its Subcontractors or Vendors desire to publish or
release any publicity or public relations materials of any kind relating to the
Agreement specifically or the Project generally, Willbros shall first submit
such material to Cheniere for review. Willbros shall not publish or release any
such material without Cheniere’s prior consent, such consent not to be
unreasonably withheld.
23. GOVERNING LAW
It is understood that the Agreement is governed by the laws of the State of
Texas except to the extent its conflict of law principles would refer to the law
of another jurisdiction, the Parties acknowledge that the laws of Louisiana
govern the rights and obligations of the Parties as to the validity and
enforcement of mechanics’ and materialmen’s liens. Only to the extent that
either Party may seek relief of the courts pursuant to this Agreement, Cheniere
and Willbros each hereby submit to the exclusive jurisdiction of the federal and
state courts located in Houston, Texas, and agree that service of process may be
affected upon them by delivery to the addresses given in the Signature Document.
24. GENERAL PROVISIONS
24.1 Assignment: The Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Parties to the Agreement. The Agreement may
neither be assigned nor transferred by either Party, either in whole or in part,
without first obtaining the written consent of the other Party, and any attempt
to make such an assignment shall be void; provided, however, that Willbros
reserves the right to pledge or assign its rights to payment under this
Agreement in accordance with its agreements with its lenders; provided further,
however, that in no event shall a pledge or assignment of rights to payment by
Willbros create or impose any additional obligation on Cheniere or otherwise
void or preclude any rights or privileges of Cheniere or any member of the
Cheniere Group under this Agreement. Notwithstanding the foregoing, Cheniere may
freely assign this Agreement, in whole or in part, without Willbros’ consent to
any affiliate or successor of Cheniere or to any third party making a loan to
Cheniere or purchasing the Project.
24.2
Ownership and Transfer: Cheniere represents that, once title is transferred as
provided in this Agreement, it is the sole owner of the Project. Cheniere
further agrees that any future transferee of any interest in the Project will be
subject to the releases and limitations of liability set forth in the Agreement
such that the total aggregate liability of Willbros to
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Cheniere and such recipients shall not exceed, relative to any transferee, the
limits of liability set forth in the Agreement.
24.3 No Waiver: No benefit or right accruing to either Party under the Agreement
shall be waived unless the waiver is reduced to writing and signed by both
Parties. The waiver, in one instance, of any act, condition or requirement
stipulated in the Agreement shall not constitute a continuing waiver or a waiver
of any act, condition or requirement or a waiver of the same act, condition or
requirement in other instances, unless specifically so stated.
24.4 Status of Willbros: Willbros shall be and always remain an independent
contractor with respect to the Work performed under the Agreement. Neither
Willbros, its Subcontractors, its Vendors, nor the Willbros Personnel shall be
deemed to be the servants, agents or employees of Cheniere. Willbros shall
exercise control, management and direction over the details and means of
performing the Work and shall be subject to the directions of Cheniere only with
respect to the scope and general results required.
24.5 Third Party Beneficiaries: This Agreement shall not be deemed for the
benefit of any third party nor shall it give any person not a Party to the
Agreement any right to enforce its provisions.
24.6 Survival: The provisions of Paragraphs 9.6, 10, 11, 12, 13, 14, 16, 17, 18,
19, 20 and 23 shall survive the final settlement or termination of the
Agreement, for whatever reason.
24.7 Severability: Any term or provision of the Agreement judicially determined
to be invalid or unenforceable to any entity or circumstance shall be deemed, to
such extent, invalid or unenforceable, but the remainder of the Agreement shall
remain unaffected and be enforceable according to its terms.
24.8 Headings: The headings hereof shall not be considered in interpreting the
text of the Agreement and are inserted for convenience of reference only.
24.9 Further Assurances: Each Party shall perform the acts and execute and
deliver the documents and give reasonable assurances necessary to give effect to
the provisions of the Agreement; provided that Cheniere shall only be required
to give any such assurances upon a material change in the creditworthiness of
Cheniere or upon any other significant adverse change to Cheniere. Any
assurances required under this Paragraph 24.9 shall not involve the assumption
of obligations greater than those provided for in this Agreement.
24.10
Entire Agreement: This Agreement supersedes all previous quotations, proposals,
letter agreements, contracts, agreements, understandings and correspondence
between the Parties regarding the Work, and constitutes the entire agreement
between the Parties concerning the Work. Notwithstanding the foregoing, the
Parties acknowledge that the Letter Agreement shall be simultaneously executed
with this Agreement. No promise, agreement, representation or modification to
the Agreement shall be of any force or effect
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between the Parties unless expressly set forth or provided for in the Agreement,
a Change Order or an Amendment.
24.11 Interpretation: The word “include” or “including” shall mean including
without limitation. The words “hereof”, “herein”, “hereunder” and “hereto” refer
to the Agreement as a whole, including the Schedules, and not to any particular
provision of the Agreement unless expressly indicated. Unless the context
clearly requires otherwise, references to the plural include the singular and
the singular the plural. References to “days” or a “day” shall mean a calendar
day, unless otherwise stated. Where a Party’s approval or acceptance is
required, such approval or acceptance shall not be unreasonably delayed.
24.12 Lender Requirements: In addition to other assurances provided in this
Agreement, Willbros acknowledges that Cheniere has obtained or may obtain
financing, which may be project financing, associated with the Work, and
Willbros agrees to cooperate with Cheniere and Cheniere’s lenders in connection
with such Project financing, including entering into direct agreements with such
lenders, as reasonably required by such lenders, covering matters that are
customary in project financings of this type such as lender assignment or
security rights with respect to this Agreement, consent agreements, opinions of
counsel, direct notices to lender and lender’s independent engineer,
step-in/step-out rights, access by lender’s representative, including lender’s
independent engineer, and other matters applicable to such Project financing.
Willbros shall cooperate with any independent engineer retained by Cheniere’s
lender(s) in the conduct of such independent engineers’ duties in relation to
the Project, including the Work. No review, approval or disapproval by any
independent engineer shall serve to reduce or limit the liability of Willbros to
Cheniere under this Agreement.
24.13 Counterparts: This Agreement may be signed in any number of counterparts
and each counterpart shall represent a fully executed original as if signed by
each of the Parties. Facsimile signatures shall be deemed as effective as
original signatures.
24.14 Priority. The documents that form this Agreement are listed below in order
of priority, with the document having the highest priority listed first and the
one with the lowest priority listed last. Subject to Paragraph 1.6 under the
definition of Applicable Codes and Standards regarding conflicts or
inconsistencies between any Applicable Codes and Standards, in the event of any
conflict or inconsistency between a provision in one document and a provision in
another document, the document with the higher priority shall control. In the
event of a conflict or inconsistency between provisions contained within the
same document, then the provision that requires the highest standard of
performance on the part of Willbros shall control. This Agreement is composed of
the following documents, which are listed in priority:
24.14.1 Change Orders or Amendments to this Agreement;
24.14.2 The Signature Document;
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24.14.3 This Schedule “A”; and
24.14.4 All other Schedules and Attachments to this Agreement.
END OF SCHEDULE “A”
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ATTACHMENT I
WILLBROS’ PARENT GUARANTEE
This GUARANTEE (this “Guarantee”) effective February 01, 2006, is made by
Willbros USA, Inc. organized under the laws of the State of Delaware
(“Guarantor”), in favor of Cheniere Sabine Pass Pipeline Company, a company
organized under the laws of the State of Delaware (“Owner,” and, together with
Guarantor, each a “Party” and, collectively, the “Parties”). Capitalized terms
used, but not otherwise defined, herein shall have the respective meanings
ascribed to such terms in the Agreement (as defined below).
RECITALS
WHEREAS, Owner has agreed to enter into the Agreement for the Engineering,
Procurement and Construction of the 42-inch Sabine Pass Pipeline dated
February 01, 2006, with Willbros Engineers, Inc. (“Willbros”) for the
engineering, procurement, construction, commissioning, start-up and testing of
the 42-inch Sabine Pass Pipeline Project (the “Project”) located in Cameron
Parish, Louisiana and a letter agreement dated February 01, 2006, with Willbros
(collectively, the “Agreement”), which are hereby incorporated by reference in
this Guarantee and made a part hereof; and
WHEREAS, Willbros is a subsidiary of Guarantor; and
WHEREAS, it is a condition to Owner and Willbros’ entering into the Agreement
that Guarantor execute and deliver this Guarantee.
NOW THEREFORE, in consideration of the promises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
1. Guarantee.
(a) On the terms and subject to the conditions contained herein, Guarantor
hereby unconditionally and irrevocably guarantees, to and for the benefit of
Owner, the full and punctual performance and payment, as and when each such
payment or performance becomes due (whether at the stated due date, by
acceleration or otherwise), by or on behalf of Willbros of any and all
obligations or amounts owed by Willbros to Owner in connection with and to the
extent provided for in the Agreement (the “Guaranteed Obligations”). The
Guaranteed Obligations of Guarantor hereunder are direct and primary
obligations.
(b) This Guarantee is an unconditional, present, and continuing guarantee of
performance and payment, and not of collection, is in no way conditioned or
contingent upon any attempt to collect from or enforce performance or payment by
Willbros or upon any other event, contingency or circumstance whatsoever, and
shall remain in full force and effect and be binding upon and against Guarantor
and its successors and permitted assigns (and shall inure to the benefit of
Owner and its successors, endorsees, transferees, and permitted assigns),
without
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regard to the validity or enforceability of the Agreement. If, for any reason,
Willbros shall fail or be unable duly, punctually, and fully to perform or pay,
as and when such performance or payment is due, any of the Guaranteed
Obligations, Guarantor shall promptly perform or pay, or cause to be performed
or paid, such Guaranteed Obligations.
(c) Guarantor agrees that any judgment from any litigation (or any award
resulting from any arbitration, if Owner and Willbros should agree to arbitrate)
between Willbros and Owner under the Agreement (whether in contested litigation
or arbitration, by default or otherwise) shall be conclusive and binding on the
Parties for the purposes of determining Guarantor’s obligations under the
Guarantee.
(d) Guarantor further agrees to pay to Owner any and all costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel), and damages which may be paid or incurred by Owner in enforcing any
rights with respect to this Guarantee, including, without limitation, collecting
against Guarantor under this Guarantee.
2. Obligations Unconditional, Continuing; Etc.
Guarantor agrees that the obligations of Guarantor set forth in this Guarantee
shall be direct obligations of Guarantor, and such obligations shall be
irrevocable and unconditional, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense (other than full and strict compliance with its obligations
hereunder) based upon any claim Guarantor or any other person may have against
Owner or any other person and shall remain in full force and effect without
regard to and shall not be released, discharged or in any way affected or
impaired by, any circumstance or condition whatsoever (other than full and
strict compliance by Guarantor with its obligations hereunder) (whether or not
Guarantor shall have any knowledge or notice thereof), including, without
limitation: (i) any amendment or modification of or supplement to or other
change in the Agreement or any other document, including, without limitation,
any change order, renewal, extension, acceleration or other changes to payment
terms thereunder; (ii) any failure, omission or delay on the part of Owner or
any other person to confirm or comply with any term of the Agreement, (iii) any
waiver, consent, extension, indulgence, compromise, release or other action or
inaction under or in respect of the Agreement or any other document or any
obligation or liability of Owner or any other person, or any exercise or
non-exercise of any right, remedy, power, or privilege under or in respect of
any such instrument or agreement or any such obligation or liability, other than
as expressly set forth in writing executed by Owner and Guarantor; (iv) any
bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation,
or similar proceeding with respect to Owner, Willbros or any other person or any
of their respective properties, or any action taken by any trustee or receiver
or by any court in any such proceeding; (v) any discharge, termination,
cancellation, invalidity or unenforceability, in whole or in part, of the
Agreement or any other document or any term or provision thereof; (vi) any
merger or consolidation of Guarantor or Willbros into or with any other person
or any sale, lease, or transfer of all or any of the assets of Guarantor or
Willbros; (vii) any change in the ownership of Guarantor or Willbros; (viii) any
winding up or dissolution of Willbros; or (ix) to the extent permitted under
Applicable Law, any other occurrence or circumstance whatsoever, whether similar
or dissimilar to the foregoing, which might otherwise constitute a legal or
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equitable defense or discharge of the liabilities of guarantor or surety or
which might otherwise limit recourse against Guarantor. Guarantor reserves the
right to (a) set-off against any payment that has become due and payable by the
Owner to Willbros under the Agreement and (b) assert defenses which Willbros may
have under or with respect to the Agreement to performance of any Guaranteed
Obligations other than defenses arising from the bankruptcy or insolvency of
Willbros or Willbros’ failure to have the authority to (x) execute or deliver
the Agreement or (y) perform its obligations under the Agreement. The Guaranteed
Obligations constitute the full recourse obligations of Guarantor enforceable
against it to the full extent of all its assets and properties. Without limiting
the generality of the foregoing, Guarantor agrees that repeated and successive
demands may be made and recoveries may be had hereunder as and when, from time
to time, Willbros shall fail to perform obligations or pay amounts owed by
Willbros under the Agreement and that notwithstanding the recovery hereunder for
or in respect of any given failure to so comply by Willbros under the Agreement,
this Guarantee shall remain in full force and effect and shall apply to each and
every subsequent such failure.
3. Reinstatement. Guarantor agrees that this Guarantee shall be automatically
reinstated with respect to any payment made by or on behalf of Willbros pursuant
to the Agreement if and to the extent that such payment is rescinded or must be
otherwise restored, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
4. Waiver of Demands, Notices; Etc. Guarantor hereby unconditionally waives, to
the extent permitted by Applicable Law: (i) notice of any of the matters
referred to in Paragraph 2 hereof; (ii) all notices which may be required by
Applicable Law, or otherwise, now or hereafter in effect, to preserve any rights
against Guarantor hereunder, including, without limitation, any demand, proof,
or notice of non-payment or non-performance of any Guaranteed Obligation;
(iii) any right to the enforcement, assertion, or exercise of any right, remedy,
power, or privilege under or in respect of the Agreement; (iv) notice of
acceptance of this Guarantee, demand, protest, presentment, notice of failure of
performance or payment, and any requirement of diligence; (v) any requirement to
exhaust any remedies or to mitigate any damages resulting from failure of
performance or payment by Willbros under the Agreement or by any other person
under the terms of the Agreement; and (vi) any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge, release, or
defense of a guarantor or surety, or which might otherwise limit recourse
against Guarantor.
5. No Subrogation. Notwithstanding any performance, payment or payments made by
Guarantor hereunder (or any set-off or application of funds of Guarantor by
Owner), Guarantor shall not be entitled to be subrogated to any of the rights of
Willbros or of any rights of Owner hereunder, or any collateral, security, or
guarantee or right of set-off held by Owner, for the performance or payment of
the obligations guaranteed hereunder, nor shall Guarantor seek or be entitled to
assert or enforce any right of contribution, reimbursement, indemnity or any
other right to payment from Willbros as a result of Guarantor’s performance of
its obligations pursuant to this Guarantee until all Guaranteed Obligations are
performed or paid in full. If any amount shall be paid to Guarantor on account
of such subrogation, contribution, reimbursement or indemnity rights at any time
when all of the Guaranteed Obligations and all amounts owing hereunder shall not
have been performed and paid in full, such amount shall be held by Guarantor in
trust for Owner, segregated from other funds of Guarantor, and shall, forthwith
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upon receipt by Guarantor, be turned over to Owner in the exact form received by
Guarantor (duly endorsed by Guarantor to Owner, if required), to be applied
against the Guaranteed Obligations, whether or not matured, in such order as
Owner may determine.
6. Representations and Warranties. Guarantor represents and warrants that:
(a) it is a corporation duly organized and validly existing under the laws of
the State of Delaware and has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Guarantee;
(b) the execution, delivery and performance of this Guarantee will not conflict
with, violate or breach the terms of any agreement of Guarantor;
(c) no authorization, approval, consent or order of, or registration or filing
with, any court or other governmental body having jurisdiction over Guarantor is
required on the part of Guarantor for the execution and delivery of this
Guarantee; and
(d) this Guarantee, when executed and delivered, will constitute a valid and
legally binding agreement of Guarantor, except as the enforceability of this
Guarantee may be limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and by general principles of equity as they apply to the Guarantor.
7. Miscellaneous.
(a) This Guarantee shall inure to the benefit of and be binding upon the Parties
hereto and their respective successors and permitted assigns. Guarantor may not
assign or transfer this Guarantee or any rights or obligations hereunder without
Owner’s prior written consent. Owner may assign this Guarantee, in whole or
part, to any of its affiliates or co-venturers or to any person jointly
controlled by Owner and any co-venturers. Furthermore, Owner may assign, pledge
and/or grant a security interest in this Guarantee to any lender without
Guarantor’s consent. Except as otherwise provided in this Paragraph 7, nothing
herein, express or implied, is intended or shall be construed to confer upon or
to give to any person other than the Parties hereto any rights, remedies, or
other benefits.
(b) This Guarantee shall be governed by, and construed in accordance with, the
laws of the state of Texas, without giving effect to the principles thereof
relating to conflicts of law.
(c) The Parties agree that any claim, dispute, controversy, difference,
disagreement, or grievance (of any and every kind or type, whether based on
contract, tort, statute, regulation or otherwise) arising out of, connected
with, or relating in any way to this Guarantee (including, without limitation,
the construction, validity, interpretation, termination, enforceability or
breach of this Guarantee, the relationship of the Parties established by this
Guarantee, or any dispute over arbitrability or jurisdiction) (“Dispute”) shall
be decided by final and binding arbitration. Any arbitration held under this
Guarantee shall be held in Houston, Texas, unless otherwise agreed by the
Parties, shall be administered by the Dallas, Texas office of the American
Arbitration Association (“AAA”) and shall, except as otherwise modified by this
Paragraph 7(c),
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be governed by the AAA’s Construction Industry Arbitration Rules and Mediation
Procedures (including Procedures for Large, Complex Construction Disputes) (the
“AAA Rules”). The number of arbitrators required for the arbitration hearing
shall be determined in accordance with the AAA Rules. The arbitrator(s) shall
determine the rights and obligations of the Parties according to the substantive
law of the state of Texas, excluding its conflict of law principles, as would a
court for the state of Texas; provided, however, the law applicable to the
validity of the arbitration clause, the conduct of the arbitration, including
resort to a court for provisional remedies, the enforcement of any award and any
other question of arbitration law or procedure shall be the Federal Arbitration
Act, 9 U.S.C.A. § 2. Issues concerning the arbitrability of a matter in dispute
shall be decided by a court with proper jurisdiction. The Parties shall be
entitled to engage in reasonable discovery, including the right to production of
relevant and material documents by the opposing Party and the right to take
depositions reasonably limited in number, time and place, provided that in no
event shall any Party be entitled to refuse to produce relevant and
non-privileged documents or copies thereof requested by the other Party within
the time limit set and to the extent required by order of the arbitrator(s). All
disputes regarding discovery shall be promptly resolved by the arbitrator(s).
This agreement to arbitrate is binding upon the Parties and the successors and
permitted assigns of any of them. At Owner’s sole option, any other person may
be joined as an additional party to any arbitration conducted under this
Paragraph 7(c), provided that the party to be joined is or may be liable to
either Party in connection with all or any part of any Dispute between the
Parties. The arbitration award shall be final and binding, in writing, signed by
all arbitrators, and shall state the reasons upon which the award thereof is
based. The Parties agree that judgment on the arbitration award may be entered
by any court having jurisdiction thereof.
(d) No modification or amendment of this Guarantee shall be of any force or
effect unless made in writing, signed by the Parties hereto, and specifying with
particularity the nature and extent of such modification or amendment. This
Guarantee constitutes the entire and only understanding and agreement among the
Parties hereto with respect to the subject matter hereof and cancels and
supersedes any prior negotiations, proposals, representations, understandings,
commitments, communications, or agreements, whether oral or written, with
respect to the subject matter hereof.
(e) All notices, requests and communications to a Party hereunder shall be in
writing (including telecopy and/or fax or similar writing) and shall be sent:
If to Owner:
Graham A. McArthur
Vice President and Treasurer
Cheniere Sabine Pass Pipeline
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Telephone: (713) 659-1361
Fax: (713) 659-5459
A-57
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If to Guarantor:
Gay S. Mayeux
Vice President and Assistant Treasurer
Willbros USA, Inc.
4400 Post Oak Parkway
Suite 1000
Houston, Texas 77027
Telephone: (713) 403-8147
Fax: (713) 403-8017
or to such other address or telecopy number and with such other copies, as such
Party may hereafter reasonably specify by notice to the other Parties. Each such
notice, request or communication shall be effective upon receipt, provided that
if the day of receipt is not a business day then it shall be deemed to have been
received on the next succeeding business day.
(f) The headings of the several provisions of this Guarantee are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Guarantee.
(g) No forbearance or delay by Owner in asserting rights against Willbros shall
affect or impair in any way Guarantor’s obligations hereunder or the rights of
Owner hereunder.
(h) In addition to other assurances provided in this Guarantee, Guarantor
acknowledges that Owner has obtained or may obtain project financing associated
with the Project and Guarantor agrees to cooperate with Owner and its lenders in
connection with such project financing, including, but not limited to, entering
into direct agreements with lenders, as required by such lenders, covering
matters that are customary in project financings of this type such as lender
assignment or security rights with respect to this Guarantee, consent
agreements, opinions of counsel, direct notices to lender and lender’s
independent engineer, step-in/step-out rights, access by lenders’
representative, including lender’s independent engineer, and other matters
applicable to such project financing.
(i) This Guarantee may be executed in any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed this Guarantee as of the
date first above written.
WILLBROS USA, INC. By: Name: Title:
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CHENIERE SABINE PASS PIPELINE COMPANY By: Name: Title:
A-59
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ATTACHMENT II - 1
PAYMENT BOND
Bond No.______________________________
KNOW ALL MEN BY THESE PRESENTS, that ____________________________ (hereinafter
“Principal”) and _______________________________________, incorporated in the
state of ________________ and duly authorized to do business in Louisiana,
(hereinafter “Surety”), are held and firmly bound unto Cheniere Sabine Pass
Pipeline Company (hereinafter “Obligee”), and its representatives, successors
and assigns, in the sum of _______________________________ Dollars
($___________) for the payment of which sum well and truly to be made the said
Principal and Surety bind themselves, and their respective heirs,
administrators, executors, successors and assigns jointly and severally, firmly
by these presents.
WHEREAS, Principal has been awarded a contract with Obligee for the project
known as the 42-inch Sabine Pass Pipeline Project in Cameron Parish, Louisiana
(hereinafter called the “Contract”) and which Contract is hereby referred to and
incorporated by express reference as if fully set forth herein.
NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that if the Principal
shall promptly make payment in full to all persons or entities supplying labor,
material, services, utilities and equipment, or any other things in the
prosecution of the work provided for in said Contract, and any and all
modifications of said Contract that may hereafter be made, and shall indemnify
and save harmless said Obligee of and from any and all loss, damage, and
expense, including costs and attorneys’ fees, which the said Obligee may sustain
by reason of Principal’s failure to do so, then this obligation shall be null
and void; otherwise it shall remain in full force and effect.
The Surety agrees that no change, extension of time, alteration, addition,
omission, waiver, or other modification of the terms of either the Contract or
in the work to be performed, or in the specifications, or in the plans, or in
the contract documents, or any forbearance on the part of either the Obligee or
Principal to the other, shall in any way affect its obligation on this Bond, and
Surety does hereby waive notice of any such changes, extensions of time,
alterations, additions, omissions, waivers, or other modifications.
The Principal and the Surety agree that this Bond shall inure to the benefit of
all persons or entities as supplying labor, material, services, utilities and
equipment, or any other things in the prosecution of the work provided for in
said Contract, as well as to the Obligee, and that any of such persons or
entities may maintain independent actions upon this Bond in the name of the
person or entities bringing any such action.
The parties executing this Bond on behalf of Principal and Surety represent and
warrant that they are duly authorized to bind the Principal and Surety
respectively.
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IN WITNESS WHEREOF, the above bounden parties have executed this instrument
under their several seals this _________ day of _________________, 200__ the
name and corporate seal of each corporate seal of each corporate party being
hereto affixed and these presents duly signed by its undersigned representative,
pursuant to authority of its governing body.
PRINCIPAL: By: Title: (Principal’s Address)
Witness
Or Secretary’s Attest
[SEAL]
SURETY: By: Title: (Surety’s Address)
Witness.
Or Secretary’s Attest
[SEAL]
[Attach Power of Attorney executed by attorney-in-fact on behalf of Surety]
A-61
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ATTACHMENT II - 2
DUAL OBLIGEE RIDER FOR PAYMENT BOND
This Rider is to be attached to and forms a part of Payment Bond No.
_____________________ issued by ____________________________ (hereinafter
referred to as “Surety”), as Surety, on the ______ day of ___________________,
20__ (“Payment Bond”).
WHEREAS, on or about the ____ day of __________, 200_, ________________________
(hereinafter called the “Principal”), entered into a written agreement with
(hereinafter called the “Primary Obligee”) for the construction of
_____________________ (hereinafter called the “Contract”); and
WHEREAS, the Principal and the Surety executed and delivered to said Primary
Obligee the Performance Bond No. _______ (“Performance Bond”) in connection with
the Contract; and
WHEREAS, the Primary Obligee has requested the Principal and the Surety to
execute and deliver this Dual Obligee Rider for Payment Bond and the Principal
and the Surety have agreed to do so.
NOW, THEREFORE, the undersigned hereby agree and stipulate that Cheniere Sabine
Pass Pipeline Company shall be a named obligee (hereinafter referred to as
“Additional Obligee”) to the Payment Bond, subject to the conditions set forth
below:
1. In the event of a material default in payment by the Primary Obligee to the
Principal under the terms of the Contract, the right of the Additional Obligee
to recover hereunder shall be subject to the condition that the Additional
Obligee remedies said material payment default and thereafter continues to make
payment to the Principal as required under the terms of the Contract.
2. The aggregate liability of the Surety under the Payment Bond, to any or all
of the obligees (Primary and Additional Obligees), as their interests may
appear, is limited to the total penal sum of the Payment Bond.
Signed, sealed and dated this ______ day of _____________________, 20__.
PRINCIPAL: By: Title: (Principal’s Address)
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Witness
Or Secretary’s Attest
[SEAL]
SURETY: By: Title: (Surety’s Address)
Witness.
Or Secretary’s Attest
[SEAL]
[Attach Power of Attorney executed by attorney-in-fact on behalf of Surety]
A-63
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ATTACHMENT II - 3
PERFORMANCE BOND
Bond No.________________________________
KNOW ALL MEN BY THESE PRESENTS, that ____________________________ (hereinafter
“Principal”) and ____________________________________, incorporated in the state
of and duly authorized to do business in Louisiana (hereinafter “Surety”), are
held and firmly bound unto Cheniere Sabine Pass Pipeline Company (hereinafter
“Obligee”), and its representatives, successors and assigns, in the sum of
__________ Dollars ($___________) for the payment of which sum well and truly to
be made the said Principal and Surety bind themselves, and their respective
heirs, administrators, executors, successors and assigns jointly and severally,
firmly by these presents.
WHEREAS, Principal has been awarded a contract with Obligee for the project
known as the 42-inch Sabine Pass Pipeline Project in Cameron Parish, Louisiana
(hereinafter called the “Contract”) and which Contract is hereby referred to and
incorporated by express reference as if fully set forth herein.
NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that if the above
bounden Principal shall well and truly perform all the work, undertakings,
covenants, terms, conditions, and agreements of said Contract within the time
provided therein and any extensions thereof that may be granted by Obligee, and
during the life of any obligation, guaranty or warranty required under said
Contract, and shall also well and truly perform all the undertakings, covenants,
terms, conditions, and agreements of any and all modifications of said Contract
that may hereafter be made, and shall indemnify and save harmless said Obligee
of and from any and all loss, damage, and expense, including costs and
attorneys’ fees, which the Obligee may sustain by reason of Principal’s failure
to do so, then this obligation shall be null and void; otherwise it shall remain
in full force and effect.
The Surety agrees that no change, extension of time, alteration, addition,
omission, waiver, or other modification of the terms of either the Contract or
in the work to be performed, or in the specifications, or in the plans, or in
the contract documents, or any forbearance on the part of either the Obligee or
Surety to the other, shall in any way affect said Surety’s obligation on this
Bond, and said Surety does hereby waive notice of any such changes, extensions
of time, alterations, additions, omissions, waivers, or other modifications. The
parties executing this Bond on behalf of Principal and Surety represent and
warrant that they are duly authorized to bind the Principal and Surety
respectively.
IN WITNESS WHEREOF, the above bounden parties have executed this instrument
under their several seals this _______ day of __________________, 200_, the name
and corporate seal of each corporate seal of each corporate party being hereto
affixed and these presents duly signed by its undersigned representative,
pursuant to authority of its governing body.
A-64
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PRINCIPAL: By: Title: (Principal’s Address)
Witness
Or Secretary’s Attest
[SEAL]
SURETY: By: Title: (Surety’s Address)
Witness.
Or Secretary’s Attest
[SEAL]
[Attach Power of Attorney executed by attorney-in-fact on behalf of Surety]
A-65
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ATTACHMENT II - 4
DUAL OBLIGEE RIDER FOR PERFORMANCE BOND
This Rider is to be attached to and forms a part of Performance Bond No.
___________________ issued by ____________________________ (hereinafter referred
to as “Surety”), as Surety, on the ______ day of ___________________, 20__
(“Performance Bond”).
WHEREAS, on or about the ____ day of __________, 200_,
____________________________ (hereinafter called the “Principal”), entered into
a written agreement with ____________________________ (hereinafter called the
“Primary Obligee”) for the construction of _____________________ (hereinafter
called the “Contract”); and
WHEREAS, the Principal and the Surety executed and delivered to said Primary
Obligee the Payment Bond No. ____________ (“Payment Bond”) in connection with
the Contract; and
WHEREAS, the Primary Obligee has requested the Principal and the Surety to
execute and deliver this Dual Obligee Rider for Performance Bond and the
Principal and the Surety have agreed to do so.
NOW, THEREFORE, the undersigned hereby agree and stipulate that Cheniere Sabine
Pass Pipeline Company shall be a named obligee (hereinafter referred to as
“Additional Obligee”) to the Performance Bond, subject to the conditions set
forth below:
1. In the event of a material default in performance by the Primary Obligee to
the Principal under the terms of the Contract, the right of the Additional
Obligee to recover hereunder shall be subject to the condition that the
Additional Obligee remedies said material performance default and thereafter
continues to perform as required under the terms of the Contract.
2. The aggregate liability of the Surety under the Performance Bond, to any or
all of the obligees (Primary and Additional Obligees), as their interests may
appear, is limited to the total penal sum of the Performance Bond.
Signed, sealed and dated this ______ day of _____________________, 20__.
PRINCIPAL: By: Title: (Principal’s Address)
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Witness
Or Secretary’s Attest
[SEAL]
SURETY: By: Title: (Surety’s Address)
Witness.
Or Secretary’s Attest
[SEAL]
[Attach Power of Attorney executed by attorney-in-fact on behalf of Surety]
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ATTACHMENT III
MECHANICAL COMPLETION CERTIFICATE
Date: ______________________________
Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Richard E. Keyser
Re: Mechanical Completion Certificate – Sabine Pass Pipeline Project Contract,
dated as of February 01, 2006 (the “Agreement”), by and between Cheniere Sabine
Pass Pipeline Company (“Cheniere”) and Willbros Engineers, Inc. (“Willbros”)
Pursuant to Paragraph 8.1 of the Agreement, Willbros hereby certifies that it
has completed all requirements under the Agreement for Mechanical Completion
with respect to the Sabine Pass Pipeline Project (“Project”), including: (a) the
Work is approved by Cheniere as being ready for pre-commissioning and/or
commissioning; (b) Willbros has delivered to Cheniere a set of original test and
inspection certificates, including hydrostatic test reports, materials
documentation, MAOP establish records, and internal geometry pig results;
(c) Willbros has completed all construction, procurement, fabrication, assembly,
erection, installation and testing, including final pipeline hydrostatic tests
for the pipeline and all appropriate appurtenances to ensure that such systems
were correctly constructed, procured, fabricated, assembled, erected, installed
and tested and are capable of being operated safely and reliably within the
requirements contained in this Agreement; (d) Willbros hereby delivers this
Mechanical Completion Certificate as required under Paragraph 8.1 of the
Agreement; (e) Willbros has dewatered and dried the pipeline to a dewpoint of
negative forty degrees Fahrenheit (-40ºF); (f) Willbros has completed all
Exception Items in accordance with Paragraph 8.1 of the Agreement; and
(g) Willbros has performed all other obligations required under the Agreement
for Mechanical Completion.
Willbros certifies that it achieved all requirements under the Agreement for
Mechanical Completion on , 200__.
Attached is all documentation required to be provided by Willbros under the
Agreement to establish that Willbros has achieved all requirements under the
Agreement for Mechanical Completion, including the required final pipeline
hydrostatic test reports, materials documentation, MAOP establish records, and
internal geometry pig results.
IN WITNESS WHEREOF, Willbros has caused this Mechanical Completion Certificate
to be duly executed by its authorized representative and delivered as of the
date first written above.
WILLBROS ENGINEERS, INC.
By:
Name:
Title:
Willbros’ Authorized Representative
Date:
cc: Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Allan Bartz
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ATTACHMENT IV
PROJECT COMPLETION CERTIFICATE
Date: ____________________________
Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Richard E. Keyser
Re: Project Completion Certificate – Sabine Pass Pipeline Project Contract,
dated as of February 01, 2006 (the “Agreement”), by and between Cheniere Sabine
Pass Pipeline Company (“Cheniere”) and Willbros Engineers, Inc. (“Willbros”)
Pursuant to Paragraph 8.3 of the Agreement, Willbros hereby certifies that it
has completed all requirements under the Agreement for Project Completion with
respect to the Sabine Pass Pipeline Project (“Project”), including: (a) the
successful achievement of Mechanical Completion of all systems for the Project;
(b) the successful achievement of Start-up of all systems for the Project;
(c) delivery by Willbros of all documentation required to be delivered under
this Agreement, including any Work Product, Cheniere’s Confidential Information
and other documentation; (d) delivery by Willbros to Cheniere of fully executed
Final Lien and Claim Waivers in the form of Schedule “A”, Attachment X – Part 2
of the Agreement; (e) removal from the Work Site all of Willbros Personnel,
supplies, waste, materials, rubbish and temporary facilities and restoration of
the Work Site to its natural conditions in accordance with this Agreement,
Applicable Law and Applicable Codes and Standards or any other requirements of
any Governing Authority; (f) Willbros hereby delivers this Project Completion
Certificate as required under Paragraph 8.3 of the Agreement; (g) delivery by
Willbros to Cheniere of evidence acceptable to Cheniere that all Subcontractors
and Vendors have been fully and finally paid, including fully executed Final
Lien and Claim Waivers from all Subcontractors and Major Vendors in the form of
Schedule “A”, Attachment X – Part 4 of the Agreement; (h) Willbros has completed
all Exception Items in accordance with Paragraph 8.3 of the Agreement; and
(i) performance of all other obligations required by the Agreement for Project
Completion.
Willbros certifies that it achieved all requirements under the Agreement for
Project Completion on , 200__.
Attached is all documentation required to be provided by Willbros under the
Agreement to establish that Willbros has achieved all requirements under the
Agreement for Project Completion, including the required Willbros,
Subcontractor, and Major Vendor Lien and Claim Waivers.
IN WITNESS WHEREOF, Willbros has caused this Project Completion Certificate to
be duly executed by its authorized representative and delivered as of the date
first written above.
WILLBROS ENGINEERS, INC.
By:
Name:
Title:
Willbros’ Authorized Representative
Date:
cc: Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Allan Bartz
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ATTACHMENT V
START-UP CERTIFICATE
Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Richard E. Keyser
Re: Start-up Certificate – Sabine Pass Pipeline Project Contract, dated as of
February 01, 2006 (the “Agreement”), by and between Cheniere Sabine Pass
Pipeline Company (“Cheniere”) and Willbros Engineers, Inc. (“Willbros”)
Pursuant to Paragraph 8.2 of the Agreement, Willbros hereby certifies that it
has completed all requirements under the Agreement for Start-up with respect to
the Sabine Pass Pipeline Project (“Project”), including: (a) the successful
achievement of Mechanical Completion of all systems for the Project;
(b) Cheniere has purged the Project with either natural gas or nitrogen with
assistance and support from Willbros as requested; (c) Willbros has completed
all Exception Items in accordance with Paragraph 8.2 of the Agreement; and
(d) performance of all other obligations required by the Agreement for Start-up.
Willbros certifies that it achieved all requirements under the Agreement for
Start-up on , 200__.
Attached is all documentation required to be provided by Willbros under the
Agreement to establish that Willbros has achieved all requirements under the
Agreement for Start-up, including documentation evidencing the completion of all
Exception Items required under Paragraph 8.2.
IN WITNESS WHEREOF, Willbros has caused this Start-up Certificate to be duly
executed by its authorized representative and delivered as of the date first
written above.
WILLBROS ENGINEERS, INC.
By:
Name:
Title:
Willbros’ Authorized Representative
Date:
cc: Cheniere Sabine Pass Pipeline Company
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: Allan Bartz
A-70
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ATTACHMENT VI
CHANGE ORDER FORM
PROJECT NAME: 42-inch Sabine Pass Pipeline Project COMPANY: Cheniere Sabine
Pass Pipeline Company CHANGE ORDER NUMBER: ________________ CONTRACTOR:
Willbros Engineers, Inc. DATE OF CHANGE ORDER: ________________ DATE OF
AGREEMENT: February 01, 2006
The Agreement between the Parties listed above is changed as follows: (attach
additional documentation if necessary)
Adjustment to price under the Agreement:
The original Guaranteed Maximum Price was
$ 67,670,200
Net change by previously authorized Change Orders (#________)
$ ______
The Guaranteed Maximum Price prior to this Change Order was
$ ______
The Guaranteed Maximum Price will be (increased) (decreased) (unchanged) by this
Change Order in the amount of
$ ______
The new Guaranteed Maximum Price including this Change Order will be
$ ______
Adjustment to dates:
The Preparation and Material Receipt Commencement Date will be
(increased)(decreased)(unchanged) by ________ (__) calendar days and as a result
of this Change Order is now: __________________, 20__.
The Construction Commencement Date will be (increased)(decreased)(unchanged) by
________ (__) calendar days and as a result of this Change Order is now:
__________________, 20__.
The Scheduled Mechanical Completion Date will be
(increased)(decreased)(unchanged) by ________ (__) calendar days and as a result
of this Change Order is now: __________________, 20__.
Other impacts to liability or obligation of Willbros or Cheniere under the
Agreement:
Upon execution of this Change Order by Cheniere and Willbros, the
above-referenced change shall become a valid and binding part of the original
Agreement without exception or qualification, unless noted in this Change Order.
Except as modified by this and any previously issued Change Orders, all other
terms and conditions of the Agreement shall remain in full force and effect.
This Change Order is executed by each of the Cheniere’s Authorized
Representative and Willbros’ Authorized Representative.
A-71
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CHENIERE SABINE PASS PIPELINE COMPANY WILLBROS ENGINEERS, INC.
Name
Name
Cheniere’s Authorized Representative
Willbros’ Authorized Representative
Title
Title
Date of Signing
Date of Signing
A-72
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ATTACHMENT VII
APPROVED SUBCONTRACTORS AND VENDORS LIST
The following Subcontractors and Vendors each having subcontracts or purchase
orders of any tier are approved Subcontractors and Vendors for the following
portions of the Work:
I. Subcontractors
Construction Subcontractors:
• Willbros RPI, Inc.
• Sunland Construction, Inc.
• Associated Pipe Line Contractors, Inc.
• Gregory & Cook Construction, Inc.
• U.S. Pipeline, Inc.
Geotechnical Investigation:
• Louis J. Capozzoli & Associates, Inc.
• Professional Service Industries, Inc. (PSI)
• Terracon Consultants, Inc.
• Tulonay-Wong Engineers, Inc.
Cathodic Protection System Design:
• Corrpro Co., Inc.
• Mears/CPG, LLC
• MESA Products, Inc.
Pipeline Civil Surveying:
• Charley Foster & Associates
• Lonnie Harper & Associates
II. Vendors
Pipe Mills, DSAW:
• Oregon Steel-Spiral Weld
• Oregon Steel/Campipe-DSAW Long Seam
• Europipe/Berg
A-73
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• ILVA (Taronto, Italy)
• IPSCO, Inc.
• Corinth Pipe Works S.A. (CPW)
Pipe Mills, ERW:
• American Steel Pipe
• Stupp/Manesmann
• LaBarge
• IPSCO, Inc.
• Lone Star
Valves, Ball Mainline:
• Cooper-Cameron/Grove/Modern Supply
• Delta Valve (Valvitralia Group-Italy)
• SISCO Specialty Products, Inc.
• Power Valve International
Valves, Control:
• Fisher
• Masoneilan
General Pipe, Valves and Fittings:
• McJunkin
• Wilson Supply
• Redman Supply
Bolts, Stud and Gaskets:
• McJunkin
• Wilson Supply
• Redman Supply
Fittings and Flanges (Hy Yield):
• SISCO
• LaBarge
• Wilson Supply
Bends, Induction:
• Bend Tec
A-74
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• Shaw
• International Piping Systems
• American Pipe Bending
Pig Signal:
• TD Williams
Launch/Receiver Package:
• Sagebrush
• Pickett
• Big Inch
Regulator Package:
• Sagebrush
• Pickett
• Big Inch
A-75
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ATTACHMENT VIII
ORGANIZATIONAL CHART
LOGO [g51199img_001.jpg]
A-76
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ATTACHMENT IX
CHENIERE’S HEALTH, SAFETY AND ENVIRONMENTAL POLICIES
1. General Guidelines
Health, safety and safeguarding of the environment are within Cheniere’s core
values. Willbros shall take into consideration health, safety and the
environment (“HSE”) throughout execution of the Work.
The minimum approach to the management of HSE issues is generally described in
this Attachment IX, and Willbros shall comply with such minimum requirements
and, to the extent possible, maintain the highest level of HSE stewardship for
Work of this nature during the execution of the Work. At a minimum, the Work and
Willbros’ HSE activities and plans shall comply with: (i) all Applicable Codes
and Standards; (ii) all Applicable Laws, including 29 C.F.R. Part 1910, CERCLA,
SARA, and all other applicable environmental laws, regulations and requirements;
(iii) the FERC Certificate, and (iv) the most current FERC-authorized Wetland
and Waterbody Construction and Mitigation Procedures and the Upland Erosion
Control, Re-vegetation, and Maintenance Plan.
2. Safety Management
Cheniere’s general HSE policies shall apply to Willbros and its Subcontractors
and Vendors performing Work at the Work Site, and shall apply to the fullest
extent practical at all other sites where Work is being performed for Cheniere
or where Cheniere personnel are involved.
Willbros shall pay the highest regard to safety and shall conform to all
safety-related requirements set forth in the Agreement, including this
Attachment IX and Schedule “D”.
Willbros shall be responsible for the safe performance of the Work under the
Agreement, including: (i) the safety of all of the employees, agents,
representatives and invitees of Willbros and its Subcontractors and Vendors
engaged in the performance of the Work; (ii) ensuring that all Willbros
Personnel are familiar with and will apply all applicable HSE rules and
regulations; (iii) providing safety incident reports to Cheniere in accordance
with the Agreement; (iv) providing a safe working environment at the Work Site;
(v) the safe performance of the Work by all Willbros Personnel; and
(vi) ensuring that awareness of the importance of safety is actively promoted at
the Work Site.
3. Environmental Management
Willbros shall pay the highest regard to protection of the environment and shall
carry out environmental management to ensure that the Work is performed in an
environmentally sound manner and in compliance with all provisions of the
Agreement, including this Attachment IX, regarding the environment and
Applicable Law.
A-77
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Willbros’ objective shall be to ensure, through the proper application of its
environmental protection procedures, that the Work is: (i) managed, planned and
engineered to minimize any impact upon the environment; (ii) performed and
completed without incidents detrimental to the environment; and (iii) performed
in full compliance with the environmental policy objectives.
4. Willbros HSE Plan
Willbros shall incorporate all health, safety and environmental requirements of
the Agreement, including this Attachment IX, into Willbros’ HSE plan which it
shall implement and adhere to during the performance of the Work.
Willbros HSE plan shall contain a full description of the safety and
environmental rules, procedures, guidelines, and Work instructions applicable at
the Work Site, which Willbros shall use to ensure the safe and environmentally
friendly management of the Work. The HSE plan shall cover all phases of the Work
and all activities through Final Acceptance and shall specifically describe
safety and environmental management at the Work Site.
The HSE plan shall address all safety and environmental matters relevant to the
Work, including the following: (i) safety meetings and safety events;
(ii) safety inspections; (iii) training schedule; (iv) safety reviews at the
Work Site; (v) construction safety reviews; (vi) all reasonable emergency
response plans, medical emergency plans; (vii) plans to control the possession
and use of firearms, alcohol and controlled substances; and (viii) a Spill
Prevent, Control and Countermeasure (SPCC) plan.
Cheniere, at its sole discretion, may audit Willbros’ performance of the Work to
ensure that the Agreement requirements for safety and the environment are being
satisfied in all respects. Any audits performed shall be based upon Willbros’
safety and environmental manual(s), procedures, and plans. Willbros, at its sole
cost, shall immediately correct any nonconformance identified by Cheniere or its
auditors.
A-78
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ATTACHMENT X – PART 1
WILLBROS’ INTERIM LIEN AND CLAIM WAIVER
(To be executed by Willbros with each invoice other than the final invoice)
STATE OF LOUISIANA
PARISH OF ___________________
The undersigned, Willbros Engineers, Inc. (“Willbros”), has been engaged under a
Pipeline Construction Contract with Cheniere Sabine Pass Pipeline Company
(“Cheniere”), to furnish certain materials, equipment, services, and/or labor
for the project known as 42-inch Sabine Pass Pipeline Project (the “Project”),
which is located in Cameron Parish, State of Louisiana described in more detail
as follows:
_______________________________________________________________________ (the
“Property”).
Upon receipt of the sum of U.S.$___________________ (amount in invoice submitted
with this Interim Lien and Claim Waiver), Willbros waives and releases any and
all liens or claims of liens against the Project and the Property and all
claims, demands, actions, causes of actions or other rights at law, in contract,
tort, equity or otherwise that Willbros has or may have against Cheniere through
the date of _______________________, 20___ (date of the invoice submitted with
this Interim Lien and Claim Waiver). Exceptions as follows:
_______________________________________________________________________________________________
_______________________________________________________________________________________________
(if no exception entry or “none” is entered above, Willbros shall be deemed not
to have reserved any claim.)
Willbros represents that all Subcontractors, Vendors, sub-subcontractors and
employees of Willbros have been paid for all work, materials, equipment,
services, labor and any other items performed or provided through ___________,
20__ (date of last prior invoice) for the Project. Exceptions as follows:
___________________________________________________________________________________.
(if no exception entry or “none” is entered above, all such payments have been
made )
This Interim Lien and Claim Waiver is freely and voluntarily given and Willbros
acknowledges and represents that it has fully reviewed the terms and conditions
of this Interim Lien and Claim Waiver, that it is fully informed with respect to
the legal effect of this Interim Lien and Claim Waiver, that it has voluntarily
chosen to accept the terms and conditions of this Interim Lien and Claim Waiver
in return for the payment recited above.
FOR WILLBROS:
Applicable to Invoice(s) No. ___
Signed:
(SEAL)
By:
Title:
Date:
AFFIDAVIT
On this day of , 20 , before me appeared the
above-signed, known or identified to me personally, who, being first duly sworn,
did say that s/he is the authorized representative of Willbros and that this
document was signed under oath personally and on behalf of Willbros.
Notary Public
My term expires (date):
A-79
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ATTACHMENT X – PART 2
WILLBROS’ FINAL LIEN AND CLAIM WAIVER
(To be executed by Willbros with the invoice for final payment)
STATE OF LOUISIANA
PARISH OF ___________________
The undersigned, Willbros Engineers, Inc. (“Willbros”), has been engaged under
an agreement with Cheniere Sabine Pass Pipeline Company (“Cheniere”), to furnish
certain materials, equipment, services, and/or labor for the project known as
the 42-inch Sabine Pass Pipeline Project (“Project”), which is located in
Cameron Parish, State of Louisiana and more particularly described as follows:
_______________________________________________________________________ (the
“Property”).
Upon receipt of the sum of U.S.$__________________ (amount in invoice for final
payment submitted with Willbros’ Final Lien and Claim Waiver), Willbros waives
and releases all liens or claims of liens against the Project and the Property
and all claims, demands, actions, causes of actions or other rights at law, in
contract, tort, equity or otherwise that Willbros has, may have had or may have
in the future against Cheniere arising out of the agreement or the Project,
whether or not known to Willbros at the time of the execution of this Final Lien
and Claim Waiver.
Willbros represents that all of its obligations, legal, equitable, or otherwise,
relating to or arising out of its work on the agreement, Project or subcontracts
have been fully satisfied (except for that work and obligations that survive the
termination or expiration of the agreement, including warranties and correction
of defective services), including, but not limited to payment to Subcontractors,
Vendors and employees and payment of taxes.
This Final Lien and Claim Waiver is freely and voluntarily given, and Willbros
acknowledges and represents that it has fully reviewed the terms and conditions
of this Final Lien and Claim Waiver, that it is fully informed with respect to
the legal effect of this Final Lien and Claim Waiver, and that it has
voluntarily chosen to accept the terms and conditions of this Final Lien and
Claim Waiver in return for the payment recited above. Willbros understands,
agrees and acknowledges that, upon payment, this document waives rights
unconditionally and is fully enforceable to extinguish all claims of Willbros as
of the date of execution of this document by Willbros.
FOR WILLBROS:
Applicable to Invoice No(s): ALL (If all, print “all”)
Signed:
(SEAL)
By:
Title:
Date:
AFFIDAVIT
On this day of , 20 , before me appeared the
above-signed, known or identified to me personally, who, being first duly sworn,
did say that s/he is the authorized representative of Willbros and that this
document was signed under oath personally and on behalf of Willbros.
Notary Public
My term expires (date):
A-80
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ATTACHMENT X – PART 3
SUBCONTRACTORS’ INTERIM LIEN AND CLAIM WAIVER
(To be executed by Subcontractor or Major Vendor [as applicable] with each
invoice other than the final invoice)
STATE OF LOUISIANA
PARISH OF ___________________
The undersigned, ___________________________ (“Subcontractor”) who has, under an
agreement with Willbros Engineers, Inc. (“Willbros”), furnished certain
materials, equipment, services, and/or labor for the project known as the
42-inch Sabine Pass Pipeline Project (the “Project”), which is located in
Cameron Parish, State of Louisiana described in more detail as follows:
_______________________________________________________________________(the
“Property”).
Upon receipt of the sum of U.S.$___________________ (“Current Payment”),
Subcontractor waives and releases any and all liens or claims of liens against
the Project and the Property and all claims, demands, actions, causes of action
or other rights at law, in contract, tort, equity or otherwise that
Subcontractor has or may have against Cheniere Sabine Pass Pipeline Company
(“Cheniere”) and Willbros through the date of _______________, 20___ (“Current
Date”). Exceptions as follows:
___________________________________________________________________________________.
(if no exception entry or “none” is entered above, Subcontractor shall be deemed
not to have reserved any claim.)
Subcontractor further represents that all employees, laborers, materialmen,
sub-subcontractors and subconsultants employed by Subcontractor in connection
with the Project have been paid for all work, materials, equipment, services,
labor and any other items performed or provided through _______________, 20__
(date of last prior Invoice). Exceptions as follows:
___________________________________________________________________________________.
(if no exception entry or “none” is entered above, all such payments have been
made)
This Subcontractor’s Interim Lien and Claim Waiver is freely and voluntarily
given and Subcontractor acknowledges and represents that it has fully reviewed
the terms and conditions of this Subcontractor’s Interim Lien and Claim Waiver,
that it is fully informed with respect to the legal effect of this
Subcontractor’s Interim Lien and Claim Waiver, that it has voluntarily chosen to
accept the terms and conditions of this Subcontractor’s Interim Lien and Claim
Waiver in return for the payment recited above.
FOR SUBCONTRACTOR :
Applicable to Invoice(s) No. ___
Signed:
(SEAL)
By:
Title:
Date:
AFFIDAVIT
On this day of , 20 , before me appeared the
above-signed, known or identified to me personally, who, being first duly sworn,
did say that s/he is the authorized representative of Subcontractor and that
this document was signed under oath personally and on behalf of Subcontractor.
Notary Public
My term expires (date):
A-81
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ATTACHMENT X – PART 4
SUBCONTRACTORS’ FINAL LIEN AND CLAIM WAIVER
(To be executed by Subcontractor or Major Vendor [as applicable] with the
invoice for final payment)
STATE OF LOUISIANA
PARISH OF ___________________
The undersigned, (“Subcontractor”), has, under an agreement with Willbros
Engineers, Inc. (“Willbros”), furnished certain materials, equipment, services,
and/or labor for the Project known as the 42-inch Sabine Pass Pipeline Project
(“Project”), which is located in Cameron Parish, State of Louisiana and more
particularly described as follows:
_______________________________________________________________________(the
“Property”).
Upon receipt of the sum of U.S.$ , Subcontractor waives and
releases any and all liens or claims of liens against the Project and the
Property, all claims, demands, actions, causes of action or other rights at law,
in contract, tort, equity or otherwise against Cheniere Sabine Pass Pipeline
Company (“Cheniere”) or Willbros, and any and all claims or rights against any
labor and/or material bond, which Subcontractor has, may have had or may have in
the future arising out of the agreement between Subcontractor and Willbros, the
Project or the Property, whether or not known to Subcontractor at the time of
the execution of this Subcontractor’s Final Lien and Claim Waiver.
Subcontractor represents that all of its obligations, legal, equitable, or
otherwise, relating to or arising out of the agreement between Willbros and
Subcontractor, the Project, the Property or sub-subcontracts have been fully
satisfied (except for that work and obligations that survive the termination or
expiration of the agreement between Subcontractor and Willbros, including
warranties and correction of defective services), including, but not limited to
payment to sub-subcontractors and employees of Subcontractor and payment of
taxes.
This Subcontractor’s Final Lien and Claim Waiver is freely and voluntarily given
and Subcontractor acknowledges and represents that it has fully reviewed the
terms and conditions of this Subcontractor’s Final Lien and Claim Waiver, that
it is fully informed with respect to the legal effect of this Subcontractor’s
Final Lien and Claim Waiver, and that it has voluntarily chosen to accept the
terms and conditions of this Subcontractor’s Final Lien and Claim Waiver in
return for the payment recited above. Subcontractor understands, agrees and
acknowledges that, upon payment, this document waives rights unconditionally and
is fully enforceable to extinguish all claims of Subcontractor as of the date of
execution of this document by Subcontractor.
FOR SUBCONTRACTOR:
Applicable to Invoice No(s). ALL (If all, print “all”)
Signed:
(SEAL)
By:
Title:
Date:
AFFIDAVIT
On this day of , 20 , before me appeared the
above-signed, known or identified to me personally, who, being first duly sworn,
did say that s/he is the authorized representative of Subcontractor and that
this document was signed under oath personally and on behalf of Subcontractor.
Notary Public
My term expires (date):
A-82
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SCHEDULE “B”
SCOPE OF WORK FOR THE PROJECT
TABLE OF CONTENTS
1. PROJECT MANAGEMENT AND ENGINEERING
B-2
2. MATERIAL PROCUREMENT
B-3
3. CONSTRUCTION MANAGEMENT
B-4
4. CONSTRUCTION
B-5
5. DELIVERABLES
B-6
ATTACHMENT I WORK SITE
B-7
ATTACHMENT II FLOW SCHEMATIC
B-8
B-1
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SCHEDULE “B”
SCOPE OF WORK FOR THE PROJECT
Willbros shall perform the Project management, engineering, material
procurement, construction management and construction for the Project as
described in the Agreement and herein, including providing all deliverables
described below.
1. PROJECT MANAGEMENT AND ENGINEERING
A Willbros project manager shall provide management and direction for the
Project. Project controls shall maintain a detailed Work Plan with activities
planned for the Work as set forth in Paragraph 6 of Schedule “A”. Following
construction, Willbros will assemble completion report data, hydrostatic test
records, non-destructive testing records, internal geometry pig results, Vendor
data and material certifications, MAOP establishment records, and other
inspection certificates.
Without limiting the generality of the foregoing, the Project management and
engineering portion of the Work to be performed by Willbros shall include:
1.1 Perform Project management, controls and reporting;
1.2 Prepare design basis document using the following design parameters:
Class Locations (to be field verified)
Class 1
MP 0 to MP 11
Class 3
MP 11 to MP 16 Design Pressure, psig 1440 Operating Temperature, ºF 20
- 100 Corrosion Allowance, inches nil Pipe Diameter, inches 42 Pipe W.T.
and Grade
F = 0.72
0.600” API 5L - X70
F = 0.60
0.700” API 5L - X70
F = 0.50
0.864” API 5L - X70 External Coatings
FBE
14 - 16 mils
Ruff Coat or equal
(for concrete coated pipe)
3 - 5 mils (in addition to FBE)
Abrasion Resistant Coating (for road bores)
32 mils
Internal Liquid Epoxy Coating
1.5 mils Minimum Bend Radius for Pigging 5 pipe diameters Concrete Weight
Coating 6” thick, 190 pcf (0.600” W.T. pipe)
5” thick, 190 pcf (0.864” W.T. pipe)
1.3 Perform population density analysis to finalize class locations;
B-2
--------------------------------------------------------------------------------
1.4 Perform field reconnaissance and gather site specific data at appurtenance
locations and crossings, including foreign pipeline crossings;
1.5 Provide engineering input for permit applications, in accordance with
Paragraph 2.3 of Schedule “A”;
1.6 Perform detailed design of the pipeline and all ancillary facilities of the
Project, with reference to the flow schematic located in Attachment II;
1.7 Prepare Drawings and Specifications with bills-of-materials and construction
typicals, in accordance with the Agreement, including Schedule “D”, and
Paragraphs 2.7 and 2.8 of Schedule “A”;
1.8 Modify, as required and in accordance with this Agreement, the
Cheniere-provided drawings listed in Paragraph 5.3 of Schedule “A”.
1.9 Perform geotechnical investigations at monitor-regulator and scraper
launcher site;
1.10 Perform cathodic protection system design;
1.11 Prepare construction Specifications with hydrostatic test plan, in
accordance with Schedule “D”;
1.12 Prepare job data books which will including hydrostatic test records,
welding records, as-built Drawings, certified Vendor Drawings, material
certifications, operating and maintenance instructions for purchased equipment,
spare parts lists, Warranties, as-built survey data and results of the internal
geometry pig results in an electronic format compatible with the GIS of
Cheniere’s choice;
1.13 Provide engineering support during construction, commissioning and Start-up
of the Project; and
1.14 Prepare construction bid solicitation packages, solicit bids, analyze bids
and award construction Work to a bidder , in accordance with Paragraphs 3.3,
3.4, and 3.5 of Schedule “A”.
2. MATERIAL PROCUREMENT
The procurement portion of the Work to be performed by Willbros shall include:
2.1 Develop major material Specifications, in accordance with Schedule “D”, and
solicit and evaluate bids for such materials;
2.2 Issue purchase orders for all permanent materials and provide shipping
instructions to Vendors;
2.3 Expedite and coordinate material shipments;
2.4 Review and approve Vendor Drawings and data submittals;
2.5 Obtain material certification records;
2.6 Process material receiving reports and Vendor invoices;
B-3
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2.7 Make timely and appropriate payments to Vendors;
2.8 Perform the following inspections at the Vendor’s plant before material
shipment:
2.8.1 Pipe mill (review manufacturing procedures, attend pre-production
meeting, and perform inspections during pipe manufacturing);
2.8.2 Fusion-bonded epoxy coating;
2.8.3 Concrete coating;
2.8.4 Launcher skid; and
2.8.5 Monitor regulator skid;
2.9 Receive, inspect and inventory materials at the Work Site; and
2.10 Provide recommended spare parts list for commissioning, operations and
maintenance (spare parts may, at Cheniere’s sole discretion, be purchased by
Cheniere); the cost of such spare parts is not included within the Guaranteed
Maximum Price.
3. CONSTRUCTION MANAGEMENT
A field office staffed with Willbros Personnel including a field project
manager, an office manager/assistant will be established at the Work Site in the
Johnson’s Bayou area, in accordance with Paragraph 4.2 of Schedule “A”.
Inspection services will be subcontracted to a qualified firm or self-performed
by Willbros in accordance with Paragraph 7 of Schedule “A”. The construction
survey will include a 5-man crew for construction staking and a 2-man and 3-man
crew for as-built surveys. These crews will by supervised by Willbros’ chief
supervisor.
Without limiting the generality of the foregoing, the construction management
portion of the Work to be performed by Willbros shall include:
3.1 Prepare digital alignment maps, showing the pipeline centerline, property
ownership and land base information;
3.2 Prepare road crossing permit Drawings;
3.3 Perform pre-construction staking for the pipeline, including sites for
scraper launcher, monitor regulator station, side valves, mainline valves and
other pipeline appurtenances;
3.4 Perform pre- and post-construction topographic civil surveys of the wetlands
crossed within the pipeline right-of-way between stations 62+35 and 480+34 to
confirm ground contour restoration at the conclusion of construction is in
accordance with the FERC certificate. The surveys will be conducted at the time
of restoration and used to ensure compliance prior to demobilization of the
construction Subcontractor. Drawing exhibits with the location of the surveys
and cross-sections of the pre- and post-construction transects will be prepared.
The pre- and post-construction ground elevation tolerance shall be minus zero
(0), plus six (6) inches;
B-4
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3.5 Perform as-built surveys and prepare as-built Drawings following
construction in accordance with Schedule “D” and Paragraphs 2.7 and 2.8 of
Schedule “A”. All survey information shall be geo-referenced. Survey data
processing will be performed so that all data collected is delivered in an
electronic format compatible with the GIS of Cheniere’s choice;
3.6 Perform construction inspection through a qualified independent third party
to ensure that construction meets the requirements of the Specifications,
Drawings, easements, Applicable Law, Applicable Codes and Standards, permit
provisions and all other requirements of construction included in the Agreement;
and
3.7 Provide commissioning and Start-up support, as required by Cheniere,
excluding gas handling services.
4. CONSTRUCTION
The construction portion of the Work to be performed by Willbros or its
Subcontractors shall include:
4.1 Perform pipeline construction, including clearing, grading, stringing,
bending, ditching, laying, welding, coating, tie-ins, lowering-in, backfilling,
testing and cleanup;
4.2 Install pipeline monitor regulator station, pig launcher, side valves,
mainline valves, and pipeline appurtenances (CP test stations and line markers).
The outlet end of the pipeline will have a weld cap with 2-inch coupling,
nipple, plug valve and plug;
4.3 Perform internal geometry pig survey on the completed pipeline construction
prior to the introduction of natural gas or nitrogen to verify that there are no
dents with dimensions greater than what 49 C.F.R. Part 192 or ASME B31.8 codes
allow;
4.4 Install pre-fabricated assemblies, including:
4.4.1 Monitor-regulator station (skid-mounted) on pile-supported platform;
4.4.2 Pig launcher (skid-mounted) on pile-supported platform; and
4.4.3 30-inch NGPL side tap;
4.4.4 42-inch mainline valve assembly; and
4.4.5 42-inch mainline valve and 42-inch side valve;
4.5 De-water, clean and dry the interior of the pipeline using a series of
displacement and cleaning pigs propelled by dry air to achieve a dew point of
negative forty degrees Fahrenheit (-40ºF) or less. After drying, the pipeline
will be shut-in and pressurized to five (5) psig with dry air.
4.6 Tie-in pipeline to liquefied natural gas terminal at launcher site; tie-in
at Johnson’s Bayou will be by others;
4.7 Perform site Work at the Work Site, including installation of chain link
fence with drive-through and walk gates, grading and installation of rock;
B-5
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4.8 Perform Non-destructive testing (NDT) through a qualified third party
inspector; radiography inspection shall be performed on 100-percent of girth
welds, and a NDT auditor shall be required; and
4.9 Cheniere shall provide Willbros access to and use of Cheniere’s dock at the
liquefied natural gas terminal for offloading pipe and major equipment skids
from barges. Cheniere shall also provide access to and use of a yard at the
liquefied natural gas terminal for staging and pipe storage. Willbros may, with
Cheniere’s prior written approval, use an alternate docking facility and/or yard
in the Work Site.
5. DELIVERABLES
The following deliverables are considered part of the Work and shall be provided
by Willbros during the development and execution of the Project:
5.1 Drawings (refer to Attachment I of Schedule “D”)
5.2 Specifications (refer to Attachment II of Schedule “D”)
5.3 Job Data Book
5.3.1 Hydrostatic tests
5.3.2 Material purchase orders
5.3.3 Material certifications
5.3.4 Certified Vendor Drawings
5.3.5 Operating and maintenance instructions for purchased equipment
5.3.6 Spare parts lists
5.3.7 Warranties
5.3.8 As-built Drawings (with GIS compatible data)
5.3.9 Welder qualifications
5.3.10 Welding procedure(s)
5.3.11 Weld records summary
5.3.12 Internal geometry pig results (with GIS compatible data)
5.4 Administrative
5.4.1 Monthly progress and cost status reports
5.4.2 Monthly Project Schedule updates
5.4.3 Monthly procurement status reports
5.4.4 Meeting notes
B-6
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ATTACHMENT I
WORK SITE
LOGO [g51199img_002.jpg]
Proposed 42” Natural Gas Pipeline Project
B-7
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ATTACHMENT I I
FLOW SCHEMATIC
B-8
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SCHEDULE “C”
INTENTIONALLY OMITTED
C-1
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SCHEDULE “D”
APPLICABLE CODES AND STANDARDS, DRAWINGS AND SPECIFICATIONS
TABLE OF CONTENTS
1. APPLICABLE CODES AND STANDARDS
D-2
2. DRAWINGS
D-3
3. SPECIFICATIONS
D-3
ATTACHMENT I DRAWINGS
D-4
ATTACHMENT II SPECIFICATIONS
D-5
D-1
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SCHEDULE “D”
APPLICABLE CODES AND STANDARDS, DRAWINGS AND SPECIFICATIONS
1. APPLICABLE CODES AND STANDARDS
During the execution of the Work, Willbros shall comply with the latest edition
of the following Applicable Codes and Standards, irrespective of the
specification of any earlier date or edition. In the event of a conflict between
the Applicable Codes and Standards and the Specifications, Willbros shall
promptly notify Cheniere of the conflict. The specific Applicable Codes and
Standards listed in this Schedule with respect to each organization (e.g., API)
are not meant to be an exclusive list of such Applicable Codes and Standards
that must be adhered to with respect to each such organization as they are
applicable to the Work.
The Project and all related facilities will be designed in accordance with Part
192, Title 49 of the Code of Federal Regulations “Transportation of Natural and
Other Gas By Pipeline: Minimum Federal Safety Standards” (latest edition).
AASHTO American Association of State Highway and Transportation Officials
AISC American Institute of Steel Construction ANSI American National
Standards Institute API American Petroleum Institute ASCE American Society
of Civil Engineers ASME American Society of Mechanical Engineers ASTM
American Society of Testing and Materials AWS American Welding Society EPA
Environmental Protection Agency FM Factory Mutual IEEE Institute of
Electrical and Electronics Engineers IES Illuminated Engineering Society ISA
Instrument Society of America MSS Manufacturers Standardization Society of
the Valve and Fitting Industry NACE National Association of Corrosion
Engineers NEMA National Electrical Manufacturers Association NFPA National
Fire Protection Association OSHA Occupational Safety and Health Act UBC
Uniform Building Code UL Underwriters Laboratories NEC National Electrical
Code (NFPA 70)
D-2
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2. DRAWINGS
Willbros shall provide the Drawings listed in Attachment I of this Schedule “D”
in accordance with this Agreement.
3. SPECIFICATIONS
The Specifications include the material/equipment specifications, design
specifications, construction specifications, and inspection specifications
included in Attachment II of this Schedule “D”.
END OF SCHEDULE “D”
D-3
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ATTACHMENT I
DRAWINGS
1. FERC Alignment Sheets
2. Construction Alignment Drawings
3. As-Built Alignment Drawings
4. Highway Crossing Plan/Profile
5. Typical Parish Road Crossing
6. Site Specific Wetland Construction Plan
7. Hydrostatic Test Profile
8. Foreign Pipeline Crossings
9. Construction Typicals
10. Notes and Legend Sheet
11. Scraper Launcher and Inlet Pressure Regulator Plot Plan
12. Side Valve Plan and Elevation
13. Mainline Valve Plan and Elevation
14. Scraper Launcher and Monitor Regulator Platforms
15. Pile and Pile Cap Details and Plot Plans
16. Fence Standard
17. Monitor Regulator Skid Layout
18. Scraper Launcher Skid Layout
19. Scraper Launcher Piping Hookup Details
20. Monitor Regulator Piping Hookup Details
21. Pipeline System P&ID
22. Valve Operator Details
D-4
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ATTACHMENT II
SPECIFICATIONS
1. Submerged Arc Welded Line Pipe Longitudinal Seam
2. Submerged Arc Welded Line Pipe Helical Seam
3. Stock Pipe Seamless, SAW and ERW
4. Handling, Storage and Shipment of Line Pipe
5. Yard Applied Pipe Coating
6. Yard Application of Concrete Coating to Pipe
7. Internal Coating of Line Pipe
8. Induction Bending of Line Pipe
9. High Strength Wrought Welding Fittings
10. Application of Protective Coating Systems
11. Valve Procurement (API 6D, 12-inch and larger)
12. Pneumatic Quarter Turn Valve Operators
13. Pressure Regulation Valves
14. Line Pipe Inspection
15. Geotechnical Investigation
16. Construction of Pipeline and Related Facilities
17. Hydrostatic Test Plan
18. Welding Procedures
19. As-Built Survey Procedure
D-5
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SCHEDULE “E”
INTENTIONALLY OMITTED
E-1
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SCHEDULE “F”
PROJECT SCHEDULE
F-1
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LOGO [g51199img_003.jpg]
F-2
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LOGO [g51199img_004.jpg]
F-3 |
EXHIBIT 10.4
AMENDMENT TO TERMINATION AGREEMENT
THIS AMENDMENT (the “Amendment”) to the Termination Agreement dated as of
, ___, as amended to date (the “Termination Agreement”),
between PetroQuest Energy, Inc., a Delaware corporation (the “Company”), and
(the “Executive”) is made and entered into this ___ day of
May, 2006 between the Company and the Executive. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Termination Agreement.
W I T N E S S E T H:
WHEREAS, the Company and the Executive entered into the Termination
Agreement providing for, among other things, the payment of severance benefits
to the Executive by the Company upon a Change in Control of the Company and
consequent actual or constructive termination of the Executive’s employment by
the Company (a “Change in Control Termination”); and
WHEREAS, the Company and the Executive desire to amend the Termination
Agreement.
NOW, THEREFORE, the Company and the Executive hereby amend the Termination
Agreement as follows:
1. Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Termination Agreement as defined therein
unless otherwise defined herein
2. The first paragraph of Section 5(c) is hereby amended and restated in
its entirety to read as follows:
In the event that the Executive becomes entitled to the severance benefits
described in Sections 5(a) and 5(b) or any other benefits or payments under this
Agreement or any other agreement, plan, instrument or obligation in whatever
form of the Company or its subsidiaries or affiliates (other than pursuant to
this Section) including by reason of the accelerated vesting of stock options or
restricted stock hereunder or thereunder (together, the “Total Benefits”), and
in the event that any of the Total Benefits will be subject to the Excise Tax,
the Company shall pay to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Benefits and any federal, state and local income
tax, Excise Tax and FICA and Medicare withholding taxes upon the payment
provided for by this Section, shall be equal to the Total Benefits.
3. Section 13 is hereby added to the Termination Agreement to read as
follows:
--------------------------------------------------------------------------------
13. Code Section 409A. This Agreement is not intended to be deferred
compensation under Code Section 409A under the Internal Revenue Code of 1986, as
amended, and the regulations, notices and rulings thereunder. The parties agree
to amend this Agreement to the extent necessary to insure that this Agreement is
not deferred compensation under Code Section 409A or to comply with Code
Section 409A in order to maintain the terms of the Agreement so that there is no
reduction in the total amounts payable to executive hereunder shall be reduced.
4. Except as amended by this Amendment, the Termination Agreement shall
remain in full force and effect and is hereby ratified and affirmed. In the
event of a conflict between the terms in this Amendment and the Termination
Agreement, the Amendment shall control.
5. In case of one or more of the provisions contained in this Amendment for
any reason shall be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Amendment, but this Amendment shall be construed as if such
invalid, illegal or unenforceable provisions had never been a part of this
Amendment.
6. This Amendment shall be binding upon and inure to the benefit of the
Company, its successors, legal representatives and assigns and upon the
Executive, his or her heirs, executors, administrators, and representatives. Any
reference to the Company herein shall mean the Company as well as any successors
thereto.
7. This Amendment may be executed in any number of counterparts with the
same effect as if all signatories had signed the same document. All counterparts
must be construed together to constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Amendment as of the date first written above.
PETROQUEST ENERGY, INC.
By:
Name:
Title:
EXECUTIVE:
[Name]
|
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of May 31, 2006, by and
among Ness Energy International, Inc., a Washington corporation (the “Company”),
and the subscribers identified on the signature page hereto (each a “Subscriber”
and collectively “Subscribers”).
WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the “1933 Act”).
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Subscribers, as
provided herein, and the Subscribers, in the aggregate, shall purchase up to
$1,022,727.29 (the "Aggregate Principal Amount") of principal amount of
promissory notes of the Company (“Note” or “Notes”), a form of which is annexed
hereto as Exhibit A, convertible into shares of the Company's common stock, no
par value (the "Common Stock") at a per share conversion price set forth in the
Note (“Conversion Price”); and share purchase warrants (the “Warrants”), in the
form annexed hereto as Exhibit B, to purchase shares of Common Stock (the
“Warrant Shares”). The Notes, shares of Common Stock issuable upon conversion of
the Notes (the “Shares”), the Warrants and the Warrant Shares are collectively
referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants
contemplated hereby shall be held in escrow pursuant to the terms of a Funds
Escrow Agreement to be executed by the parties substantially in the form
attached hereto as Exhibit C (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:
1. Conditions to Closing. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the principal
amount designated on the signature page hereto. The principal amount of the
Notes to be purchased by the Subscribers on the Closing Date shall, in the
aggregate, be equal to the Aggregate Principal Amount. The aggregate purchase
price for the Notes (“Aggregate Purchase Price”) shall equal to the result of
(x) divided by (y), where (x) equals the Aggregate Principal Amount and (y)
equals 1.136363.
2. Closing Date. The “Closing Date” shall be the date that subscriber funds
representing the net amount due the Company from the Closing Purchase Price of
the Offering [as defined in Section 8(b)] is transmitted by wire transfer or
otherwise to or for the benefit of the Company. The consummation of the
transactions contemplated herein for all Closings shall take place at the
offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New
York 10176, upon the satisfaction of all conditions to Closing set forth in this
Agreement.
3. Warrants. On the Closing Date, the Company will issue and deliver Warrants to
the Subscribers. One Class A Warrant will be issued for each one Share which
would be issued on the Closing Date assuming the complete conversion of the
Notes issued on the Closing Date at the Conversion Price in effect on the
Closing Date. The per Warrant Share exercise price to acquire a Warrant Share
upon exercise of a Class A Warrant shall be 108% of the average of the volume
weighted average price of the Common Stock as reported by Bloomberg L.P. for the
five trading days preceding the Closing Date. The Class A Warrants shall be
exercisable until three years after the Closing Date, or five years after the
Closing Date if the Registration Statement [as defined in Section 11.1(iv)] is
not declared effective by the Commission within one hundred and eighty days
after the Closing Date.
4. Subscriber's Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company only as to such
Subscriber that:
(a) Organization and Standing of the Subscribers. If the Subscriber is an
entity, such Subscriber is a corporation, partnership or other entity duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has the requisite
corporate power to own its assets and to carry on its business.
(b) Authorization and Power. Each Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the Notes and
Warrants being sold to it hereunder. The execution, delivery and performance of
this Agreement by such Subscriber and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or authorization of such
Subscriber or its Board of Directors, stockholders, partners, members, as the
case may be, is required. This Agreement has been duly authorized, executed and
delivered by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of the Subscriber enforceable
against the Subscriber in accordance with the terms thereof.
(c) No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by such Subscriber of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such
Subscriber’s charter documents or bylaws or other organizational documents or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument or obligation to which such Subscriber is a party or by
which its properties or assets are bound, or result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Subscriber or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on such Subscriber). Such Subscriber
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or to
purchase the Notes or acquire the Warrants in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, such
Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information on Company. The Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's Form 10-KSB for
the year ended December 31, 2005 and all periodic reports filed with the
Commission thereafter, but not later than five business days before the Closing
Date (hereinafter referred to as the "Reports"). In addition, the Subscriber has
received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Subscriber has
requested in writing (such other information is collectively, the "Other Written
Information"), and considered all factors the Subscriber deems material in
deciding on the advisability of investing in the Securities.
(e) Information on Subscriber. The Subscriber is, and will be at the time of the
conversion of the Notes and exercise of the Warrants, an "accredited investor",
as such term is defined in Regulation D promulgated by the Commission under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof. The information set forth on the signature page hereto
regarding the Subscriber is accurate.
(f) Purchase of Notes and Warrants. On the Closing Date, the Subscriber will
purchase the Notes and Warrants as principal for its own account for investment
only and not with a view toward, or for resale in connection with, the public
sale or any distribution thereof, but Subscriber does not agree to hold the
Notes and Warrants for any minimum amount of time.
(g) Compliance with Securities Act. The Subscriber understands and agrees that
the Securities have not been registered under the 1933 Act or any applicable
state securities laws, by reason of their issuance in a transaction that does
not require registration under the 1933 Act (based in part on the accuracy of
the representations and warranties of Subscriber contained herein), and that
such Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. From the date the Subscriber received a written
offer from the Company describing the Offering until the date of the public
announcement or Form 8-K filing described in Section 9(m), the Subscriber will
not have directly or indirectly purchased or sold Common Stock or Common Stock
equivalents except as part of the Offering. Notwithstanding anything to the
contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement. For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity. Affiliate when employed in
connection with the Company includes each Subsidiary [as defined in Section
5(a)] of the Company. For purposes of this definition, “control” means the power
to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
(h) Shares Legend. The Shares and the Warrant Shares shall bear the following or
similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Warrants Legend. The Warrants shall bear the following
or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS
ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(k) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(l) Authority; Enforceability. This Agreement and other agreements delivered
together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
(m) No Governmental Review. Each Subscriber understands that no United States
federal or state agency or any other governmental or state agency has passed on
or made recommendations or endorsement of the Securities or the suitability of
the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
(n) Correctness of Representations. Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing Date, shall be true and correct as of the Closing
Date.
(o) Survival. The foregoing representations and warranties shall survive the
Closing Date until three years after the Closing Date.
5. Company Representations and Warranties. The Company represents and warrants
to and agrees with each Subscriber that except as set forth in the Reports or
the Other Written Information and as otherwise qualified in the Transaction
Documents:
(a) Due Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business is disclosed in the Reports. The Company is duly qualified
as a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary, other than those jurisdictions in which the
failure to so qualify would not have a Material Adverse Effect. For purpose of
this Agreement, a “Material Adverse Effect” shall mean a material adverse effect
on the financial condition, results of operations, properties or business of the
Company taken individually, or in the aggregate, as a whole. For purposes of
this Agreement, “Subsidiary” means, with respect to any entity at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity) of which more than
50% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. All the Company’s Subsidiaries as of the
Closing Date are set forth on Schedule 5(a) hereto.
(b) Outstanding Stock. All issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable.
(c) Authority; Enforceability. This Agreement, the Note, the Warrants, the
Escrow Agreement, and any other agreements delivered together with this
Agreement or in connection herewith (collectively “Transaction Documents”) have
been duly authorized, executed and delivered by the Company and are valid and
binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) Additional Issuances. There are no outstanding agreements or preemptive or
similar rights affecting the Company's common stock or equity and no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of any shares of common stock or equity of the Company or other equity
interest in any of the Subsidiaries of the Company except as described on
Schedule 5(d). The Common stock of the Company on a fully diluted basis
outstanding as of the last trading day preceding the Closing Date is set forth
on Schedule 5(d).
(e) Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its Affiliates, any Principal Market (as defined in Section 9(b) of
this Agreement), nor the Company's shareholders is required for the execution by
the Company of the Transaction Documents and compliance and performance by the
Company of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities.
(f) No Violation or Conflict. Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a default (or
an event which with the giving of notice or the lapse of time or both would be
reasonably likely to constitute a default in any material respect) under (A) the
articles or certificate of incorporation, charter or bylaws of the Company, (B)
to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or over the
properties or assets of the Company or any of its Affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company or any of its Affiliates is a
party, by which the Company or any of its Affiliates is bound, or to which any
of the properties of the Company or any of its Affiliates is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its Affiliates is a party except the
violation, conflict, breach, or default of which would not have a Material
Adverse Effect; or
(ii) result in the creation or imposition of any lien, charge or encumbrance
upon the Securities or any of the assets of the Company or any of its
Affiliates; or
(iii) result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any current, former or future
creditor or equity holder of the Company, nor result in the acceleration of the
due date of any obligation of the Company; or
(iv) result in the activation of any piggy-back registration rights of any
person or entity holding securities or debt of the Company or having the right
to receive securities of the Company.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens, claims or
other encumbrances, subject to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the date of
conversion of the Notes and upon exercise of the Warrants, the Shares and
Warrant Shares will be duly and validly issued, fully paid and nonassessable
and, if registered pursuant to the 1933 Act and resold pursuant to an effective
registration statement, will be free trading and unrestricted;
(iii) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company;
(iv) will not subject the holders thereof to personal liability by reason of
being such holders provided Subscriber’s representations herein are true and
accurate and Subscribers take no actions or fail to take any actions required
for their purchase of the Securities to be in compliance with all applicable
laws and regulations; and
(v) will have been issued in reliance upon an exemption from the registration
requirements of and will not result in a violation of Section 5 under the 1933
Act.
(h) Litigation. Other than as described in the Reports, there is no pending or,
to the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates that would affect
the execution by the Company or the performance by the Company of its
obligations under the Transaction Documents. Except as disclosed in the Reports,
there is no pending or, to the best knowledge of the Company, basis for or
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i) Reporting Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934 (the “1934 Act”) and has a class of common shares registered pursuant to
Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934 Act, the
Company has timely filed all reports and other materials required to be filed
thereunder with the Commission during the preceding twelve months, except for
the report on Form 10-QSB for the quarter ended March 31, 2006 which was filed
on May 24, 2006.
(j) No Market Manipulation. The Company and its Affiliates have not taken, and
will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or resold, provided,
however, that this provision shall not prevent the Company from engaging in
investor relations/public relations activities consistent with past practices.
(k) Information Concerning Company. The Reports contain all material information
relating to the Company and its operations and financial condition as of their
respective dates and all the information required to be disclosed therein. Since
the last day of the fiscal year of the most recent audited financial statements
included in the Reports (“Latest Financial Date”), and except as modified in the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company's business, financial condition or affairs
not disclosed in the Reports. The Reports do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances when made. The Company has not provided to the Subscribers any
material non-public information.
(l) Stop Transfer. The Company will not issue any stop transfer order or other
order impeding the sale, resale or delivery of any of the Securities, except as
may be required by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its articles of incorporation
or bylaws. The Company is (i) not in default under or in violation of any other
material agreement or instrument to which it is a party or by which it or any of
its properties are bound or affected, which default or violation would have a
Material Adverse Effect, (ii) not subject to nor in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to the
Company’s knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse Effect.
(n) Not an Integrated Offering. Neither the Company, nor any of its Affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the OTC Bulletin Board
(“Bulletin Board”) which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. Nor will the Company or any of its Affiliates take any action or
steps that would cause the offer or issuance of the Securities to be integrated
with other offerings which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Securities, which would impair the exemptions relied upon in this Offering or
the Company’s ability to timely comply with its obligations hereunder.
(o) No General Solicitation. Neither the Company, nor any of its Affiliates, nor
to its knowledge, any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
(p) Listing. The Company's common stock is quoted on the Bulletin Board under
the symbol NESS. The Company has not received any oral or written notice that
the Common Stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that the Common Stock does not meet all requirements for the
continuation of such quotation. The Company satisfies all the requirements for
the continued quotation of the Common Stock on the Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, which are not disclosed in
the Reports and Other Written Information, other than those incurred in the
ordinary course of the Company’s businesses since the Latest Financial Date, and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed on Schedule 5(q).
(r) No Undisclosed Events or Circumstances. Since the Latest Financial Date, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of the Company
and Subsidiaries as of the date of this Agreement and the Closing Date (not
including the Securities) are set forth on Schedule 5(d). Except as set forth on
Schedule 5(d), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company or any of
its Subsidiaries. All of the outstanding shares of Common Stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable.
(t) Dilution. The Company's executive officers and directors understand the
nature of the Securities being sold hereby and recognize that the issuance of
the Securities will have a potential dilutive effect on the equity holdings of
other holders of the Company’s equity or rights to receive equity of the
Company. The board of directors of the Company has concluded, in its good faith
business judgment, that the issuance of the Securities is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Notes, and the Warrant Shares upon
exercise of the Warrants is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company or parties entitled to receive equity of the
Company.
(u) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.
(v) DTC Status/Transfer Agent. The Company’s transfer agent is eligible to
participate in and the Common Stock is eligible for transfer pursuant to the
Depository Trust Company Automated Securities Transfer Programs. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent are set forth on Schedule 5(v) hereto.
(w) Investment Company. Neither the Company nor any Affiliate is an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
(x) Subsidiary Representations. The Company makes each of the representations
contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m), (q), (r), (s),
(u) and (w) of this Agreement, as same relate to each Subsidiary of the Company,
with the same qualifications to each such representation.
(y) Correctness of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date.
(z) Survival. The foregoing representations and warranties shall survive until
three years after the Closing Date.
6. Regulation D Offering. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to Subscriber from the
Company's legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and issuance of the
Securities and other matters reasonably requested by Subscribers. A form of the
legal opinion is annexed hereto as Exhibit D. The Company will provide, at the
Company's expense, such other legal opinions in the future as are reasonably
necessary for the issuance and resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants pursuant to an effective
registration statement or an exemption from registration.
7.1. Conversion of Note.
(a) Upon the conversion of a Note or part thereof, the Company shall, at its own
cost and expense, take all necessary action, including obtaining and delivering,
an opinion of counsel acceptable to the Company’s transfer agent, so that the
Company's transfer agent shall issue stock certificates in the name of
Subscriber (or its nominee) or such other persons as designated by Subscriber
and in such denominations to be specified at conversion representing the number
of shares of Common Stock issuable upon such conversion. The Company warrants
that no instructions other than these instructions have been or will be given to
the transfer agent of the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the Shares,
provided the Subscriber represents that the Shares are or will be sold pursuant
to an effective registration statement covering the Shares or exemption from
registration, or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to exercise its right to convert
the Note, interest, any sum due to the Subscriber under the Transaction
Documents including Liquidated Damages, or part thereof by telecopying an
executed and completed Notice of Conversion (a form of which is annexed as
Exhibit A to the Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement. The Subscriber will not
be required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Company will itself or cause the Company’s transfer agent to transmit
the Company's Common Stock certificates representing the Shares issuable upon
conversion of the Note to the Subscriber via express courier for receipt by such
Subscriber within three (3) business days after receipt by the Company of the
Notice of Conversion (such third day being the "Delivery Date"). In the event
the Shares are electronically transferable, then delivery of the Shares must be
made by electronic transfer provided request for such electronic transfer has
been made by the Subscriber and the Subscriber has complied with all applicable
securities laws in connection with the sale of the Common Stock, including,
without limitation, the prospectus delivery requirements. A Note representing
the balance of the Note not so converted will be provided by the Company to the
Subscriber if requested by Subscriber, provided the Subscriber delivers the
original Note to the Company. In the event that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion, the
Subscriber hereby indemnifies the Company against any and all loss or damage
attributable to a third-party claim in an amount in excess of the actual amount
then due under the Note. “Business day” and “trading day” as employed in the
Transaction Documents is a day that the New York Stock Exchange is open for
trading for three or more hours.
(c) The Company understands that a delay in the delivery of the Shares in the
form required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively after the Delivery Date or the
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty) to
the Subscriber for late issuance of Shares in the form required pursuant to
Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
business day after the Delivery Date for each $10,000 of Note principal amount
being converted of the corresponding Shares which are not timely delivered. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Shares by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Subscriber may revoke all
or part of the relevant Notice of Conversion or rescind all or part of the
notice of Mandatory Redemption by delivery of a notice to such effect to the
Company whereupon the Company and the Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that the liquidated damages described above shall be payable through the date
notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document referred to herein or delivered
in connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends or damages
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscriber and thus refunded to the Company.
7.2. Mandatory Redemption at Subscriber’s Election. In the event (i) the Company
is prohibited from issuing Shares, (ii) the Company fails to timely deliver
Shares on a Delivery Date, (iii) upon the occurrence of any other Event of
Default (as defined in the Note or in this Agreement), any of the foregoing that
continues for more than twenty (20) business days, or (iv) of the liquidation,
dissolution or winding up of the Company, then at the Subscriber's election, the
Company must pay to the Subscriber ten (10) business days after request by the
Subscriber (“Calculation Period”), a sum of money determined by multiplying up
to the outstanding principal amount of the Note designated by the Subscriber by
the greater of (y) 120%, or (z) a fraction in which the numerator is the highest
closing price of the Common Stock during the Calculation Period and the
denominator is the lowest applicable Conversion Price during the Calculation
Period, together with accrued but unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Shares otherwise deliverable or within ten (10) business
days after request, whichever is sooner ("Mandatory Redemption Payment Date").
Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding. Liquidated
damages calculated pursuant to Section 7.1(c) hereof, that have been paid or
accrued for the ten day period prior to the actual receipt of the Mandatory
Redemption Payment by the Subscriber shall be credited against the Mandatory
Redemption Payment.
7.3. Maximum Conversion. The Subscriber shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of common stock beneficially owned by the Subscriber and its Affiliates on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a Conversion Date, which would result in beneficial ownership
by the Subscriber and its Affiliates of more than 4.99% of the outstanding
shares of common stock of the Company on such Conversion Date. Beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Subscriber shall not be limited to aggregate conversions of
only 4.99% and aggregate conversions by the Subscriber may exceed 4.99%. The
Subscriber may waive the conversion limitation described in this Section 7.3, in
whole or in part, upon and effective after 61 days prior written notice to the
Company to increase such percentage to up to 9.99%. The Subscriber may decide
whether to convert a Note or exercise Warrants to achieve an actual 4.99% or up
to 9.99% ownership position as described above.
7.4. Injunction Posting of Bond. In the event a Subscriber shall elect to
convert a Note or part thereof or exercise the Warrant in whole or in part, the
Company may not refuse conversion or exercise based on any claim that such
Subscriber or any one associated or affiliated with such Subscriber has been
engaged in any violation of law, or for any other reason, unless, an injunction
from a court, on notice, restraining and or enjoining conversion of all or part
of such Note or exercise of all or part of such Warrant shall have been sought
and obtained by the Company or at the Company’s request or with the Company’s
assistance, and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the outstanding principal and interest of
the Note, or aggregate purchase price of the Shares and Warrant Shares which are
sought to be subject to the injunction, which bond shall remain in effect until
the completion of arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber’s favor.
7.5. Buy-In. In addition to any other rights available to the Subscriber, if the
Company fails to deliver to the Subscriber such shares issuable upon conversion
of a Note by the Delivery Date and if after six (6) business days after the
Delivery Date the Subscriber or a broker on the Subscriber’s behalf, purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by such Subscriber of the Common Stock which the
Subscriber was entitled to receive upon such conversion (a "Buy-In"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.
7.6 Adjustments. The Conversion Price, Warrant exercise price and amount of
Shares issuable upon conversion of the Notes and exercise of the Warrants shall
be adjusted as described in this Agreement, the Notes and Warrants.
7.7. Redemption. The Securities shall not be redeemable or mandatorily
convertible except as described in the Note and Warrants.
8. Broker/Legal Fees.
(a) Broker’s Commission. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agrees to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or similar fees other than the entity identified on
Schedule 8, (the “Broker”) on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby and arising out of such party’s actions.
Anything in this Agreement to the contrary notwithstanding, each Subscriber is
providing indemnification only for such Subscriber’s own actions and not for any
action of any other Subscriber. The Company agrees that it will pay the Broker
the fee set forth on Schedule 8 (“Broker’s Fees”). The Company represents that
there are no other parties entitled to receive fees, commissions, or similar
payments in connection with the offering described in this Agreement except the
Broker.
(b) Legal Fees. The Company shall pay to Grushko & Mittman, P.C., a cash fee of
$25,000 (“Legal Fees”) (of which $10,000 has been paid) as reimbursement for
services rendered to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes and Warrants (the “Offering”). The Legal Fees and
reimbursement for estimated UCC search fees, if any, (less any amounts paid
prior to Closing) to be paid by the Company will be payable on the Closing Date
out of funds held pursuant to the Escrow Agreement.
9. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, within two hours after
the Company receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
(b) Listing. If applicable, the Company shall promptly secure the listing of the
shares of Common Stock and the Warrant Shares upon each national securities
exchange, or electronic or automated quotation system upon which they are or
become eligible for listing and shall maintain such listing so long as any Notes
or Warrants are outstanding. The Company will maintain the listing or quotation
of its Common Stock on the American Stock Exchange, Nasdaq Capital Market,
Nasdaq National Market System, Bulletin Board, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock (the “Principal Market”)), and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market, as applicable. The Company will provide
the Subscribers copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any Principal Market.
As of the date of this Agreement, the Bulletin Board is the Principal Market.
(c) Market Regulations. If applicable, the Company shall notify the Commission,
the Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to Subscriber.
(d) Filing Requirements. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will (A) cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all
respects with its reporting and filing obligations under the 1934 Act, (C)
voluntarily comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(g) of the 1934
Act, if Company is not subject to such reporting requirements, and (D) comply
with all requirements related to any registration statement filed pursuant to
this Agreement. The Company will use its best efforts not to take any action or
file any document (whether or not permitted by the 1933 Act or the 1934 Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said acts until two (2)
years after the Closing Date. Until the earlier of the resale of the Shares and
the Warrant Shares by each Subscriber or two (2) years after the Closing Date,
the Company will use its best efforts to continue the listing or quotation of
the Common Stock on a Principal Market and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market. The Company agrees to timely file a Form D with respect to
the Securities if required under Regulation D and to provide a copy thereof to
each Subscriber promptly after such filing.
(e) Use of Proceeds. The proceeds of the Offering will be employed by the
Company for the purposes set forth on Schedule 9(e) hereto. Except as set forth
on Schedule 9(e), the Purchase Price may not and will not be used for accrued
and unpaid officer and director salaries, payment of financing related debt,
redemption of outstanding notes or equity instruments of the Company, litigation
related expenses or settlements, brokerage fees, nor non-trade obligations
outstanding on a Closing Date. For so long as any Notes are outstanding, the
Company will not prepay any financing related debt obligations, nor redeem any
equity instruments of the Company.
(f) Reservation. Prior to the Closing Date, the Company undertakes to reserve,
pro rata, on behalf of the Subscribers from its authorized but unissued common
stock, a number of common shares equal to 200% of the amount of Common Stock
necessary to allow each Subscriber to be able to convert all Notes issuable
pursuant to this Agreement and interest thereon and reserve 100% of the amount
of Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 9(f) shall be a material
default of the Company’s obligations under this Agreement and an Event of
Default under the Note.
(g) Taxes. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company’s line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured less
reasonable deductible amounts; and the Company will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated and to the extent available
on commercially reasonable terms.
(i) Books and Records. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for value.
(l) Properties. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement (as defined in Section 11.1(ii) hereof) or pursuant to
Rule 144, without regard to volume limitations, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably be
expected to have a Material Adverse Effect.
(m) Confidentiality/Public Announcement. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement or as otherwise
required in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber, only to the extent required by law and then only upon five days
prior notice to Subscriber. In any event and subject to the foregoing, the
Company shall file a Form 8-K or make a public announcement describing the
Offering not later than the first business day after the Closing Date. In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of common stock outstanding immediately after the Closing. A form of the
proposed Form 8-K or public announcement to be employed in connection with the
Closing is annexed hereto as Exhibit E.
(n) Further Registration Statements. Except for a registration statement filed
on behalf of the Subscribers pursuant to Section 11 of this Agreement, and as
set forth on Schedule 11.1 hereto, the Company will not file any registration
statements, including but not limited to Forms S-8, with the Commission or with
state regulatory authorities without the consent of the Subscriber until the
expiration of the “Exclusion Period”, which shall be defined as the sooner of
(i) the Registration Statement shall have been current and available for use in
connection with the resale of the Registrable Securities (as defined in Section
11.1(i) for a period of 180 days, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by the Subscribers pursuant to the
Registration Statement or Rule 144(k) under the 1933 Act, without regard to
volume limitations. The Exclusion Period will be tolled during the pendency of
an Event of Default (as defined in the Note).
(o) Blackout. The Company undertakes and covenants that until the end of the
Exclusion Period, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current.
(p) Non-Public Information. The Company covenants and agrees that neither it nor
any other person acting on its behalf will provide any Subscriber or its agents
or counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto such Subscriber shall have agreed
in writing to receive such information. The Company understands and confirms
that each Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company. In any event, the Company
will offer to the Subscriber an opportunity to review and comment on the
Registration Statement thereto between three and five business days prior to the
proposed filing date thereof.
(q) Offering Restrictions. Until the expiration of the Exclusion Period and
during the pendency of an Event of Default, except for the Excepted Issuances,
the Company will not enter into an agreement to nor issue any equity,
convertible debt or other securities convertible into Common Stock or equity of
the Company nor modify any of the foregoing which may be outstanding at anytime,
without the prior written consent of the Subscriber, which consent may be
withheld for any reason. For so long as at least twenty-five percent (25%) of
the principal amount of the Notes is outstanding, the Company will not enter
into any equity line of credit or similar agreement, nor issue nor agree to
issue any floating or variable priced equity linked instruments nor any of the
foregoing or equity with price reset rights.
(r) Negative Covenants. So long as at least twenty-five percent (25%) of the
principal amount of the Notes issued on the Closing Date is outstanding and
during the pendency of an Event of Default (as defined in the Note), without the
consent of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:
(i) create, incur, assume or suffer to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
security title, mortgage, security deed or deed of trust, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Uniform Commercial
Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for (i) the Excepted
Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed by law
for taxes that are not yet due or are being contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property, or (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted Lien”) and (iii)
indebtedness for borrowed money which is not senior or pari passu in right of
payment to the payment of the Notes;
(ii) amend its certificate of incorporation, bylaws or its charter documents
so as to adversely affect any rights of the Subscriber;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire or
make any dividend or distribution in respect of any of its Common Stock,
preferred stock, or other equity securities other than to the extent permitted
or required under the Transaction Documents; or
(iv) engage in any transactions with any officer, director, employee or any
Affiliate of the Company, including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $10,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company,
(iii) for other employee benefits, including stock option agreements under any
stock option plan of the Company, and (iv) for mineral rights, or interest
previously owned by officers, directors, or employees of the Company as
described on Schedule 9(r).
(s) Limited Standstill. The Company will deliver to the Subscribers on or before
the Closing Date and enforce the provisions of irrevocable standstill agreements
(“Limited Standstill Agreements”) in the form annexed hereto as Exhibit F, with
the parties identified on Schedule 9(s) hereto, who comprise all owners
beneficially or otherwise, of 2.5% or more of the Company’s Common Stock and
options or rights to acquire Common Stock.
10. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or material breach of any warranty by Company in this Agreement or in
any Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any material
breach or default in performance by the Company of any covenant or undertaking
to be performed by the Company hereunder, or any other agreement entered into by
the Company and Subscriber relating hereto.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and defend the
Company and each of the Company’s officers, directors, agents, Affiliates,
control persons against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company or any such person which results, arises out of or is based
upon (i) any material misrepresentation by such Subscriber in this Agreement or
in any Exhibits or Schedules attached hereto, or other agreement delivered
pursuant hereto; or (ii) after any applicable notice and/or cure periods, any
material breach or default in performance by such Subscriber of any covenant or
undertaking to be performed by such Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber or permitted successor
hereunder or under any Transaction Document or other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of Registrable
Securities (as defined herein).
(d) The procedures set forth in Section 11.6 shall apply to the indemnification
set forth in Sections 10(a) and 10(b) above.
11.1. Registration Rights. The Company hereby grants the following registration
rights to holders of the Securities.
(i) On one occasion, for a period commencing one hundred and twenty-one (121)
days after the Closing Date, but not later than two (2) years after the Closing
Date, upon a written request therefor from any record holder or holders of more
than 50% of the Shares issued and issuable upon conversion of the outstanding
Notes and outstanding Warrant Shares, the Company shall prepare and file with
the Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder thereof.
For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not
include Securities which are (A) registered for resale in an effective
registration statement, (B) included for registration in a pending registration
statement, or (C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within ten
(10) days after the Company gives such written notice. Such other requesting
record holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
(ii) If the Company at any time proposes to register any of its securities under
the 1933 Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Subscribers or Holder
pursuant to an effective registration statement, each such time it will give at
least fifteen (15) days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written request of
the holder, received by the Company within ten (10) days after the giving of any
such notice by the Company, to register any of the Registrable Securities not
previously registered, the Company will cause such Registrable Securities as to
which registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent required to permit the sale or other disposition
of the Registrable Securities so registered by the holder of such Registrable
Securities (the “Seller” or “Sellers”). In the event that any registration
pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten
public offering of common stock of the Company, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced by
the managing underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.
(iii) If, at the time any written request for registration is received by the
Company pursuant to Section 11.1(i), the Company has determined to proceed with
the actual preparation and filing of a registration statement under the 1933 Act
in connection with the proposed offer and sale for cash of any of its securities
for the Company's own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of the
holders of Registrable Securities covered by such written request shall be
governed by Section 11.1(ii).
(iv) The Company shall file with the Commission a Form SB-2 registration
statement (the “Registration Statement”) (or such other form that it is eligible
to use) in order to register the Registrable Securities for resale and
distribution under the 1933 Act within thirty (30) calendar days after the
Closing Date (the “Filing Date”), and cause to be declared effective not later
than one hundred and twenty (120) calendar days after the Closing Date (the
“Effective Date”). The Company will register not less than a number of shares of
common stock in the aforedescribed registration statement that is equal to 200%
of the Shares issuable upon conversion of all of the Notes issuable to the
Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement
upon exercise of the Warrants (collectively the “Registrable Securities”). The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber and Warrant holder, pro rata, and not issued,
employed or reserved for anyone other than each such Subscriber and Warrant
holder. The Registration Statement will immediately be amended or additional
registration statements will be immediately filed by the Company as necessary to
register additional shares of Common Stock to allow the public resale of all
Common Stock included in and issuable by virtue of the Registrable Securities.
Except with the written consent of the Subscriber, no securities of the Company
other than the Registrable Securities will be included in the Registration
Statement. It shall be deemed a Non-Registration Event if at any time after the
date the Registration Statement is declared effective by the Commission (“Actual
Effective Date”) the Company has registered for unrestricted resale on behalf of
the Subscribers fewer than 125% of the amount of Common Shares issuable upon
full conversion of all sums due under the Notes and 100% of the Warrant Shares
issuable upon exercise of the Warrants.
11.2. Registration Procedures. If and whenever the Company is required by the
provisions of Section 11.1(i) or 11.1(ii) to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously as
possible:
(a) subject to the timelines provided in this Agreement, prepare and file with
the Commission a registration statement required by Section 11, with respect to
such securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the holders of the
Registrable Securities copies of all filings and Commission letters of comment
and notify Subscribers (by telecopier and by e-mail addresses provided by
Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com) on or before the first business day thereafter that the
Company receives notice that (i) the Commission has no comments or no further
comments on the Registration Statement, and (ii) the registration statement has
been declared effective (failure to timely provide notice as required by this
Section 11.2(a) shall be a material breach of the Company’s obligation and an
Event of Default as defined in the Notes and a Non-Registration Event as defined
in Section 11.4 of this Agreement);
(b) prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of two (2) years, and comply with the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the Sellers’ intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the Sellers, at the Company’s expense, such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement or make them electronically available;
(d) use its commercially reasonable best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or “blue sky” laws of New York and such jurisdictions as the Sellers
shall request in writing, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) if applicable, list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) notify the Subscribers within two hours of the Company’s becoming aware that
a prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or which
becomes subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the Registrable
Securities;
(g) provided same would not be in violation of the provision of Regulation FD
under the 1934 Act, make available for inspection by the Sellers, and any
attorney, accountant or other agent retained by the Seller or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement; and
(h) provide to the Sellers copies of the Registration Statement and amendments
thereto five business days prior to the filing thereof with the Commission.
11.3. Provision of Documents. In connection with each registration described in
this Section 11, each Seller will furnish to the Company in writing such
information and representation letters with respect to itself and the proposed
distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
11.4. Non-Registration Events. The Company and the Subscribers agree that the
Sellers will suffer damages if the Registration Statement is not filed by the
Filing Date and not declared effective by the Commission by the Effective Date,
and any registration statement required under Section 11.1(i) or 11.1(ii) is not
filed within 60 days after written request and declared effective by the
Commission within 120 days after such request, and maintained in the manner and
within the time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(A) the Registration Statement is not filed on or before the Filing Date, (B) is
not declared effective on or before the Effective Date, (C) due to the action or
inaction of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its attorneys of
a written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
(D) if the registration statement described in Sections 11.1(i) or 11.1(ii) is
not filed within 60 days after such written request, or is not declared
effective within 120 days after such written request, or (E) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective without being
succeeded within fifteen (15) business days by an effective replacement or
amended registration statement or for a period of time which shall exceed thirty
(30) days in the aggregate per year (defined as every rolling period of 365
consecutive days commencing on the Actual Effective Date (each such event
referred to in clauses A through E of this Section 11.4 is referred to herein as
a "Non-Registration Event"), then the Company shall deliver to the holder of
Registrable Securities, as Liquidated Damages, an amount equal to one percent
(1%) for each thirty (30) days (or such lesser pro-rata amount for any period of
less than thirty (30) days) of the Purchase Price of the outstanding Notes and
purchase price of Shares issued upon conversion of the Notes owned of record by
such holder which are subject to such Non-Registration Event. The Company must
pay the Liquidated Damages in cash. The Liquidated Damages must be paid within
ten (10) days after the end of each thirty (30) day period or shorter part
thereof for which Liquidated Damages are payable. In the event a Registration
Statement is filed by the Filing Date but is withdrawn prior to being declared
effective by the Commission, then such Registration Statement will be deemed to
have not been filed and Liquidated Damages will be calculated accordingly. All
oral or written comments received from the Commission relating to the
Registration Statement must be satisfactorily responded to within ten (10)
business days after receipt of comments from the Commission. Failure to timely
respond to Commission comments is a Non-Registration Event for which Liquidated
Damages shall accrue and be payable by the Company to the holders of Registrable
Securities at the same rate set forth above. Notwithstanding the foregoing, the
Company shall not be liable to the Subscriber under this Section 11.4 for any
events or delays occurring as a consequence of the acts or omissions of the
Subscribers contrary to the obligations undertaken by Subscribers in this
Agreement. Liquidated Damages will not accrue nor be payable pursuant to this
Section 11.4 nor will a Non-Registration Event be deemed to have occurred for
times during which Registrable Securities are transferable by the holder of
Registrable Securities pursuant to Rule 144(k) under the 1933 Act.
11.5. Expenses. All expenses incurred by the Company in complying with Section
11, including, without limitation, all registration and filing fees, printing
expenses (if required), fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or “blue sky”
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, and fees of transfer agents and registrars, are called “Registration
Expenses.” All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities are called "Selling Expenses." The Company will
pay all Registration Expenses in connection with the registration statement
under Section 11. Selling Expenses in connection with each registration
statement under Section 11 shall be borne by the Seller and may be apportioned
among the Sellers in proportion to the number of shares sold by the Seller
relative to the number of shares sold under such registration statement or as
all Sellers thereunder may agree.
11.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the 1933
Act pursuant to Section 11, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities under
the 1933 Act pursuant to Section 11, each Seller severally but not jointly will,
to the extent permitted by law, indemnify and hold harmless the Company, and
each person, if any, who controls the Company within the meaning of the 1933
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the 1933 Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act pursuant to Section 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in writing to the Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds actually
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the 1933 Act in any case in which either (i) a Seller, or
any controlling person of a Seller, makes a claim for indemnification pursuant
to this Section 11.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
11.7. Delivery of Unlegended Shares.
(a) Within four (4) business days (such fourth business day being the
“Unlegended Shares Delivery Date”) after the business day on which the Company
has received (i) a notice that Shares or Warrant Shares or any other Common
Stock held by a Subscriber have been sold pursuant to the Registration Statement
or Rule 144 under the 1933 Act, (ii) a representation that the prospectus
delivery requirements, or the requirements of Rule 144, as applicable and if
required, have been satisfied, and (iii) the original share certificates
representing the shares of Common Stock that have been sold, and (iv) in the
case of sales under Rule 144, customary representation letters of the Subscriber
and/or Subscriber’s broker regarding compliance with the requirements of Rule
144, the Company at its expense, (y) shall deliver, and shall cause legal
counsel selected by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legend
set forth in Section 4(i) above, reissuable pursuant to any effective and
current Registration Statement described in Section 11 of this Agreement or
pursuant to Rule 144 under the 1933 Act (the “Unlegended Shares”); and (z) cause
the transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the submitted Shares
certificate, if any, to the Subscriber at the address specified in the notice of
sale, via express courier, by electronic transfer or otherwise on or before the
Unlegended Shares Delivery Date.
(b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company’s transfer agent is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer program, upon request of a
Subscriber, so long as the certificates therefor do not bear a legend and the
Subscriber is not obligated to return such certificate for the placement of a
legend thereon, the Company shall cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber’s prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. Such
delivery must be made on or before the Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the delivery of the Unlegended
Shares pursuant to Section 11 hereof later than two business days after the
Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
As compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to redeem all or any
portion of the Shares and Warrant Shares subject to such default at a price per
share equal to the greater of (i) 120%, or (ii) a fraction in which the
numerator is the highest closing price during the aforedescribed thirty day
period and the denominator of which is the lowest conversion price during such
thirty day period, multiplied by the Purchase Price of such Common Stock and
Warrant Shares (“Unlegended Redemption Amount”). The amount of the
aforedescribed liquidated damages that have accrued or been paid for the ten day
period prior to the receipt by the Subscriber of the Unlegended Redemption
Amount shall be credited against the Unlegended Redemption Amount. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand.
(d) In addition to any other rights available to a Subscriber, if the Company
fails to deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within six (6) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "Buy-In"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.
(e) In the event a Subscriber shall request delivery of Unlegended Shares as
described in Section 11.7 and the Company is required to deliver such Unlegended
Shares pursuant to Section 11.7, the Company may not refuse to deliver
Unlegended Shares based on any claim that such Subscriber or any one associated
or affiliated with such Subscriber has been engaged in any violation of law, or
for any other reason, unless, an injunction or temporary restraining order from
a court, on notice, restraining and or enjoining delivery of such Unlegended
Shares or exercise of all or part of said Warrant shall have been sought and
obtained by the Company or at the Company’s request or with the Company’s
assistance, and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the amount of the aggregate purchase price
of the Common Stock and Warrant Shares which are subject to the injunction or
temporary restraining order, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment in
Subscriber’s favor.
12. (a) Right of First Refusal. Until one year after the Closing Date, the
Subscribers shall be given not less than seven (7) business days prior written
notice of any proposed sale by the Company of its common stock or other
securities or debt obligations, except in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of corporation or
other entity which holders of such securities or debt are not at any time
granted registration rights, (ii) the Company’s issuance of securities in
connection with strategic license agreements and other partnering arrangements
so long as such issuances are not for the purpose of raising capital which
holders of such securities or debt are not at any time granted registration
rights, (iii) the Company’s issuance of Common Stock or the issuances or grants
of options to purchase Common Stock pursuant to stock option plans and employee
stock purchase plans described on Schedule 5(d) hereto at prices equal to or
higher than the closing price of the Common Stock on the issue date of any of
the foregoing, (iv) as a result of the exercise of Warrants or conversion of
Notes which are granted or issued pursuant to this Agreement or that have been
issued prior to the Closing Date, the issuance of which has been disclosed in a
Report filed not less than five (5) days prior to the Closing Date, (v) the
payment of any interest on the Notes and liquidated damages or other damages
pursuant to the Transaction Documents or other securities instruments that have
been issued prior to the Closing Date, the issuance of which has been disclosed
in a Report filed not less than five days prior to the Closing Date, and (vi) as
described on Schedule 12(a) (collectively the foregoing are “Excepted
Issuances”). The Subscribers who exercise their rights pursuant to this Section
12(a) shall have the right during the seven (7) business days following receipt
of the notice to purchase such offered common stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Notes in the Offering. In the
event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the seven (7) business days following the notice of modification to
exercise such right.
(b) Favored Nations Provision. Other than in connection with the Excepted
Issuances, if at any time Notes or Warrants are outstanding, and as limited in
connection with the Warrants and Warrants Shares to the time periods set forth
in Section 3.4 of the Warrant, the Company shall offer, issue or agree to issue
any common stock or securities convertible into or exercisable for shares of
common stock (or modify any of the foregoing which may be outstanding) to any
person or entity at a price per share or conversion or exercise price per share
which shall be less than the Conversion Price in respect of the Shares, or if
less than the Warrant exercise price in respect of the Warrant Shares, without
the consent of each Subscriber holding Notes, Shares, Warrants, or Warrant
Shares, then the Company shall issue, for each such occasion, additional shares
of Common Stock to each Subscriber so that the average per share purchase price
of the shares of Common Stock issued to the Subscriber (of only the Common Stock
or Warrant Shares still owned by the Subscriber) is equal to such other lower
price per share and the Conversion Price and Warrant exercise price shall
automatically be reduced to such other lower price. The average Purchase Price
of the Shares and average exercise price in relation to the Warrant Shares shall
be calculated separately for the Shares and Warrant Shares. The foregoing
calculation and issuance shall be made separately for Shares received upon
conversion and separately for Warrant Shares. The delivery to the Subscriber of
the additional shares of Common Stock shall be not later than the closing date
of the transaction giving rise to the requirement to issue additional shares of
Common Stock. The Subscriber is granted the registration rights described in
Section 11 hereof in relation to such additional shares of Common Stock except
that the Filing Date and Effective Date vis-à-vis such additional common shares
shall be, respectively, the thirtieth (30th) and sixtieth (60th) date after the
closing date giving rise to the requirement to issue the additional shares of
Common Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the sooner of the agreement to or actual issuance of
such convertible security, warrant, right or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Conversion Price or Warrant exercise price in effect upon such issuance. The
rights of the Subscriber set forth in this Section 12 are in addition to any
other rights the Subscriber has pursuant to this Agreement, the Note, any
Transaction Document, and any other agreement referred to or entered into in
connection herewith. The Subscriber is also given the right to elect to
substitute any term or terms of any other offering in connection with which the
Subscriber has rights as described in Section 12(a), for any term or terms of
the Offering in connection with Securities owned by Subscriber as of the date
the notice described in Section 12(a) is required to be given to Subscriber.
(c) Maximum Exercise of Rights. In the event the exercise of the rights
described in Sections 12(a) and 12(b) would or could result in the issuance of
an amount of common stock of the Company that would exceed the maximum amount
that may be issued to a Subscriber calculated in the manner described in Section
7.3 of this Agreement, then the issuance of such additional shares of common
stock of the Company to such Subscriber will be deferred in whole or in part
until such time as such Subscriber is able to beneficially own such common stock
without exceeding the applicable maximum amount set forth calculated in the
manner described in Section 7.3 of this Agreement. The determination of when
such common stock may be issued shall be made by each Subscriber as to only such
Subscriber.
13. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Ness Energy International,
Inc., 4201 East Interstate 20, Willow Park, TX 76087, Attn: JF Hoover, CFO,
telecopier: (817) 597-4303, with a copy by telecopier only to: Kevin Woltjen,
Woltjen Law Firm, 4144 North Central Expressway, Suite 410, Dallas, TX 75204,
telecopier: (214) 742-5545, (ii) if to the Subscriber, to: the one or more
addresses and telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575,
and (iii) if to the Broker, to: the address and telecopier number set forth on
Schedule 8 hereto.
(b) Entire Agreement; Assignment. This Agreement and other documents delivered
in connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties. Neither the Company nor the Subscribers have relied on
any representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscribers.
(c) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile signature and delivered by facsimile transmission.
(d) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the civil or state courts of New York or in the federal
courts located in New York County. The parties and the individuals executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
(e) Specific Enforcement, Consent to Jurisdiction. To the extent permitted by
law, the Company and Subscriber acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 13(d) hereof, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(f) Damages. In the event the Subscriber is entitled to receive any liquidated
damages pursuant to the Transactions, the Subscriber may elect to receive the
greater of actual damages or such liquidated damages.
(g) Independent Nature of Subscribers. The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that each
Subscriber has represented that the decision of each Subscriber to purchase
Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company
acknowledges that each Subscriber shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out
of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience of
the Company and not because Company was required or requested to do so by the
Subscribers. The Company acknowledges that such procedure with respect to the
Transaction Documents in no way creates a presumption that the Subscribers are
in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
(h) Consent. As used in the Agreement, “consent of the Subscribers” or similar
language means the consent of holders of not less than 75% of the total of the
Shares issued and issuable upon conversion of outstanding Notes owned by
Subscribers on the date consent is requested.
(i) Equal Treatment. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of the Transaction
Documents unless the same consideration is also offered and paid to all the
parties to the Transaction Documents.
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
NESS ENERGY INTERNATIONAL, INC.
a Washington corporation
By:_________________________________
Name:
Title:
Dated: May _____, 2006
SUBSCRIBER
NOTE PRINCIPAL AMOUNT
PURCHASE PRICE
CLASS A WARRANTS
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
__________________________________
(Signature)
By:
--------------------------------------------------------------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
NESS ENERGY INTERNATIONAL, INC.
a Washington corporation
By:_________________________________
Name:
Title:
Dated: May _____, 2006
SUBSCRIBER
NOTE PRINCIPAL AMOUNT
PURCHASE PRICE
CLASS A WARRANTS
IROQUOIS MASTER FUND LTD.
641 Lexington Avenue
New York, NY 10022
Fax: (212)
__________________________________
(Signature)
By:
--------------------------------------------------------------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
NESS ENERGY INTERNATIONAL, INC.
a Washington corporation
By:_________________________________
Name:
Title:
Dated: May _____, 2006
SUBSCRIBER
NOTE PRINCIPAL AMOUNT
PURCHASE PRICE
CLASS A WARRANTS
BRISTOL INVESTMENT FUND, LTD.
Caledonian House, Jennett Street
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334
__________________________________
(Signature)
By:
--------------------------------------------------------------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
NESS ENERGY INTERNATIONAL, INC.
a Washington corporation
By:_________________________________
Name:
Title:
Dated: May _____, 2006
SUBSCRIBER
NOTE PRINCIPAL AMOUNT
PURCHASE PRICE
CLASS A WARRANTS
ELLIS INTERNATIONAL LTD.
53rd Street Urbanizacion Obarrio
Swiss Tower, 16th Floor, Panama
Republic of Panama
Fax: (516) 887-8990
__________________________________
(Signature)
By:
--------------------------------------------------------------------------------
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Escrow Agreement
Exhibit D Form of Legal Opinion
Exhibit E Form of Form 8-K or Public Announcement
Exhibit F Limited Standstill Agreement
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(q) Undisclosed Liabilities
Schedule 5(v) Transfer Agent
Schedule 8 Broker
Schedule 9(e) Use of Proceeds
Schedule 9(r) Officer and Director Mineral Rights
Schedule 9(s) Limited Standstill Providers
Schedule 12(a) Other Excepted Issuances
--------------------------------------------------------------------------------
EXHIBIT F
LIMITED STANDSTILL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ___ day of May, 2006, by the
signatories hereto (each a "Holder"), in connection with his ownership of shares
of Ness Energy International, Inc., a Washington corporation (the "Company").
NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt
of which consideration are hereby acknowledged, Holder agrees as follows:
1. Background.
a. Holder is the beneficial owner of the amount of shares of the Common Stock,
no par value, of the Company (“Common Stock”) designated on the signature page
hereto.
b. Holder acknowledges that the Company has entered into or will enter into an
agreement with each subscriber (“Subscription Agreement”) to the Company’s
convertible notes and warrants (the “Subscribers”), for the sale of an aggregate
of up to $1,000,000 of principal amount of convertible promissory notes and
warrants to the Subscribers (the “Offering”). Holder understands that, as a
condition to proceeding with the Offering, the Subscribers have required, and
the Company has agreed to assist the Subscribers in obtaining, an agreement from
the Holder to refrain from selling any securities of the Company from the date
of the Subscription Agreement and until the expiration of the Exclusion Period
(as defined in Section 9(n) of the Subscription Agreement (the "Restriction
Period").
2. Share Restriction.
a. Holder hereby agrees that during the Restriction Period, the Holder will not
sell or otherwise dispose of any shares of Common Stock or any options, warrants
or other rights to purchase shares of Common Stock or any other security of the
Company which Holder owns or has a right to acquire as of the date hereof and
the Closing Date (as defined in the Subscription Agreement), other than in
connection with an offer made to all shareholders of the Company or any merger,
consolidation or similar transaction involving the Company. Holder further
agrees that the Company is authorized to and the Company agrees to place "stop
orders" on its books to prevent any transfer of shares of Common Stock or other
securities of the Company held by Holder in violation of this Agreement.
b. Any subsequent issuance to and/or acquisition of shares or the right to
acquire shares by Holder will be subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restrictions on transfer, the Holder may, at
any time and from time to time during the Restriction Period, transfer the
Common Stock (i) as bona fide gifts or transfers by will or intestacy, (ii) to
any trust for the direct or indirect benefit of the undersigned or the immediate
family of the Holder, provided that any such transfer shall not involve a
disposition for value, (iii) to a partnership which is the general partner of a
partnership of which the Holder is a general partner, provided, that, in the
case of any gift or transfer described in clauses (i), (ii) or (iii), each donee
or transferee agrees in writing prior to the transfer, to be bound by the terms
and conditions contained herein in the same manner as such terms and conditions
apply to the undersigned. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than first cousin.
--------------------------------------------------------------------------------
3. Miscellaneous.
a. At any time, and from time to time, after the signing of this Agreement
Holder will execute such additional instruments and take such action as may be
reasonably requested by the Subscribers to carry out the intent and purposes of
this Agreement.
b. This Agreement shall be governed, construed and enforced in accordance with
the laws of the State of New York without regard to conflicts of laws principles
that would result in the application of the substantive laws of another
jurisdiction, except to the extent that the securities laws of the state in
which Holder resides and federal securities laws may apply. Any proceeding
brought to enforce this Agreement may be brought exclusively in courts sitting
in New York County, New York.
c. This Agreement contains the entire agreement of the Holder with respect to
the subject matter hereof.
d. This Agreement shall be binding upon Holder, its legal representatives,
successors and assigns.
e. This Agreement may be signed and delivered by facsimile and such facsimile
signed and delivered shall be enforceable.
f. The Company agrees not to take any action or allow any act to be taken which
would be inconsistent with this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Holder has
executed this Agreement as of the day and year first above written.
HOLDER:
________________________________
(Signature of Holder)
_________________________________
(Print Name of Holder)
_________________________________
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
NESS ENERGY INTERNATIONAL, INC.
By:______________________________
--------------------------------------------------------------------------------
Schedule 8
Broker
Broker: KMR CAPITAL, LLC, a division of MidAmerica Financial Services Inc.
353 East Mill Street
New Braunfels, TX 78130
Fax: (830) 626-7444
Cash Fee. The Company agrees that it will pay the Broker, on the Closing Date a
fee of seven percent (7%) of the Purchase Price (“Broker’s Cash Fee”). The
Company represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the Offering except the
Broker.
Broker’s Warrants. On the Closing Date, the Company will issue to the Broker,
share purchase warrants similar to and carrying the same rights as the Class A
Warrants issuable to the Subscribers (“Broker’s Warrants”) except that the
Broker’s Warrants will be exercisable for five years from the Closing Date at an
exercise price equal to the lesser of $0.155, or 100% of the closing bid price
of the Common Stock as reported by Bloomberg L.P. for the Principal Market for
the trading day preceding the Closing Date. The Broker will receive, in the
aggregate, five (5) Broker’s Warrants for each one hundred (100) Shares issuable
on the Closing Date.
All the representations, covenants, warranties, undertakings, remedies,
liquidated damages, indemnification, and other rights including but not limited
to reservation and registration rights made or granted to or for the benefit of
the Subscribers are hereby also made by the Company and granted to the holders
of the Broker’s Warrants.
|
Exhibit 10.7
NOTICE OF RSU NON-EMPLOYEE DIRECTOR
NYMEX HOLDINGS, INC.
NOTICE OF RESTRICTED STOCK UNIT AWARD
Conditioned upon the consummation of the initial public offering of NYMEX
Holdings, Inc. common stock, the
“Grantee”) has been granted an Award of Restricted Stock Units under the terms
of the NYMEX Holdings, Inc. 2006 Omnibus Long-Term Incentive Plan (the “Plan”),
which have been automatically converted into Deferred Stock Units (“DSUs”) in
accordance with the terms of the NYMEX Holdings, Inc. 2006 Non-Employee Director
Compensation Plan (“NDC Plan”), as follows:
Grant Date: November 17, 2006 Number of DSUs Awarded: 339
Vesting of DSUs: DSUs granted hereunder shall 100% vest upon the completion of
one year of service as a member of the NYMEX Holdings, Inc. Board of Directors,
with credit for service counted as of May 6 2006, or if earlier, upon the
Grantee’s death or Disability (as defined in the NDC Plan), or upon a Change in
Control.
By acceptance of this Notice and the Award hereunder, the Grantee hereby agrees
that the Award of DSUs is governed by this Notice, and by the provisions of the
Plan and the NDC Plan, both of which are incorporated herein and made a part of
this document. The Grantee acknowledges receipt of a copy of the Plan and the
NDC Plan, represents that the Grantee has read and is familiar with their
provisions, and hereby accepts the Award of DSUs subject to all of their terms
and conditions. Capitalized terms used in this Notice shall have the meaning
assigned in the Plan, unless otherwise indicated.
NYMEX HOLDINGS, INC. By:
Name: Title: Address: One North End Avenue World Financial Center New
York, NY 10282-1101
--------------------------------------------------------------------------------
TERMS AND CONDITIONS
Pursuant to the NYMEX Holdings, Inc. 2006 Omnibus Long-Term Incentive Plan (the
“Plan”), and conditioned upon the consummation of the initial public offering of
NYMEX Holdings, Inc. common stock, NYMEX Holdings, Inc., a Delaware corporation
(together with all successors thereto, the “Company”), hereby grants to the
person (the “Grantee”) named in the Notice of Restricted Stock Unit Award (the
“Notice”) to which these Terms and Conditions are attached, an Award of
Restricted Stock Units, which have been automatically converted to Deferred
Stock Units in accordance with the terms of the NYMEX Holdings, Inc.
Non-Employee Director Compensation Plan (“NDC Plan”) (together with the Notice,
referred to herein as the “Award”) to receive prior to the expiration date
specified in the Notice (the “Expiration Date”), or such earlier date as is
specified herein, all or any part of the number of shares of Stock of the
Company indicated in the Notice (the “Shares,” and such shares once issued shall
be referred to as the “Issued Shares,” each as adjusted pursuant to Section 15
of the Plan), subject to these Terms and Conditions, the Notice and the Plan.
All capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Notice and the Plan (as applicable).
1. Deferred Stock Units.
(a) Conditioned upon the consummation of the initial public offering of NYMEX
Holdings, Inc. common stock, as of the date of grant (the “Grant Date”), the
Company grants to the Grantee 339 Restricted Stock Units which shall be
automatically converted to Deferred Stock Units (the “Units”), which represent
shares of the Company’s common stock, par value $.01 per share (“Common Stock”).
The Units are subject to the restrictions set forth in Section 2 of these Terms
and Conditions and the provisions of the Notice and Plan and the NDC Plan.
(b) The Company’s obligations hereunder shall be unfunded and unsecured, and no
special or separate fund shall be established and no other segregation of assets
shall be made. The rights of a Grantee hereunder shall be no greater than those
of a general unsecured creditor of the Company. In addition, the Units shall be
subject to such restrictions as the Company may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which Common Stock is then listed, and any applicable
federal or state securities law.
(c) Except as otherwise provided in this Award, settlement of the Units in
accordance with the provisions of this Section 1 shall be delivered as soon as
practicable following satisfaction of all applicable conditions as to the Units
(including the payment by the Grantee of all applicable withholding taxes). At
such time, the Company shall deliver to the Grantee one share of Common Stock
for each Unit, or, if the Notice specifically provides, the cash equivalent to
the Fair Market Value of such Units, in accordance with Section 10.4.1 of the
Plan. Common Stock or cash issued to a Grantee for vested Units shall be issued
or paid within the time period set forth in Section 16.9.1 of the Plan, unless
otherwise specifically provided in the Notice, or as specifically provided in
the NDC Plan. The Company shall not be required to issue fractional shares for
an Award and the value of any fractional shares shall be paid in cash.
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2. Restrictions.
(a) The Grantee shall have no rights as a stockholder of the Company by virtue
of any Unit unless and until such Unit vests and is distributed to the Grantee
under the terms of the NDC Plan.
(b) None of the Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of prior to the receipt of Issued Shares.
(c) Any attempt to dispose of the Units or any interest in the Units in a manner
contrary to the restrictions set forth herein shall be void and of no effect.
(d) Units shall vest in accordance with the vesting schedule set forth in the
Notice. Unvested Units shall be subject to forfeiture and return to the Company,
except as specifically provided for in the Notice or the NDC Plan.
3. Subject to Plan.
Notwithstanding anything in these Terms and Conditions or the Notice to the
contrary, to the extent of any conflict between the terms of the Plan, these
Terms and Conditions and the Notice, the terms of the Plan and the NDC Plan
shall control.
4. Effect of Certain Transactions.
Upon the effectiveness of (i) a merger, reorganization or consolidation between
the Company and another person or entity (other than a holding company or parent
or subsidiary of the Company) as a result of which the holders of the Company’s
outstanding Common Stock immediately prior to the transaction hold less than a
majority of the outstanding voting stock of the surviving entity immediately
after the transaction, or (ii) the sale of all or substantially all of the
assets of the Company to an unrelated person or entity (in each case, a
“Transaction”), unless provision is made in connection with the Transaction for
the assumption of all outstanding Awards, or the substitution of such Awards
with new Awards of the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and, if appropriate, the per
share purchase prices, as provided in Section 15 of the Plan (an “Assumption”),
this Award shall terminate. In the event of such termination, the Grantee shall
receive Issued Shares or cash (if so provided in the Notice) prior to the
anticipated effective date of the Transaction to the extent the Unit is then
vested; provided, however, that the Grantee may, but will not be required to,
condition such award upon the effectiveness of the Transaction.
5. Lock-up Provision.
In connection with a public offering by the Company of its Common Stock, the
Grantee, if requested in good faith by the Company and the managing underwriter
of the Company’s securities, shall agree not to, directly or indirectly, offer,
sell, pledge, contract to sell (including any short sale), grant any option to
purchase or otherwise dispose of any securities of the Company held by them
(except for any securities sold pursuant to such registration statement) or
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enter into any Hedging Transaction (as defined below) relating to any securities
of the Company for a period to be determined by the managing underwriter. For
purposes of this Section 5, “Hedging Transaction” means any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including
without limitation, any put or call option) with respect to any security (other
than a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from the Company’s Common Stock.
6. Restrictive Covenant; Remedies.
(a) Non-Disparagement. The Grantee agrees not to make or solicit or encourage
others to make or solicit directly or indirectly any disparaging, derogatory or
negative statement or communication, oral or written, about the Company or any
of its Affiliates or any of their respective businesses, business practices,
programs, products, services, operations, policies, activities, current or
former officers, directors, managerial personnel, or other employees, or their
customers to any other person or entity; provided, however, that such
restriction shall not prohibit truthful testimony compelled by valid legal
process.
(b) Injunctive Relief. The Grantee hereby expressly acknowledges that any breach
or threatened breach of any of the terms and/or conditions set forth in this
Section 6 will result in substantial, continuing and irreparable injury to the
Company (and/or any of its Affiliates). Therefore, in addition to any other
remedy that may be available to the Company (and/or any of its Affiliates), the
Company (and/or any of its Affiliates) will be entitled to injunctive or other
equitable relief by a court of appropriate jurisdiction in the event of any
breach or threatened breach of the terms of this Section 6. The period during
which the covenants contained in this Section 6 will apply will be extended by
any periods during which the Grantee is found by a court to have been in
violation of such covenants.
(c) Forfeiture. If, at any time following the Grant Date, the Grantee’s Service
to the Company is terminated by the Company for Cause, or the Grantee violates
the terms of this Section 6, all Units shall immediately expire, and all Issued
Shares then-held by the Grantee shall be immediately forfeited to the Company
(and the Grantee hereby acknowledges and agrees that the Company may take any
and all actions it deems appropriate to effect such forfeiture); provided,
however, if the Grantee has sold or otherwise transferred the Issued Shares
prior to any required forfeiture hereunder, then the Grantee agrees to pay to
the Company an amount equal to the difference between the aggregate Fair Market
Value (determined as of the date of termination or breach, as applicable) of the
Issued Shares the Grantee held prior to such sale or transfer over the aggregate
Exercise Price for such Issued Shares.
(d) Survival of Acknowledgements and Agreements. The Grantee’s acknowledgements
and agreements set forth in this Section 6 will survive the termination of the
Award, Units, Issued Shares and/or the termination of the Grantee’s Service to
the Company for any reason or for no reason.
7. Miscellaneous Provisions.
(a) Integrated Agreement. The Notice, the Plan, the NDC Plan and these Terms and
Conditions constitute the entire understanding and agreement between the Grantee
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and the Company with respect to the subject matter contained herein and
supersedes any prior agreements, understandings, restrictions, representations,
or warranties among the Grantee and the Company with respect to such subject
matter except as provided for herein. To the extent contemplated herein, the
provisions of these Terms and Conditions shall survive the issuance of any
Issued Shares and shall remain in full force and effect.
(b) Change and Modifications. The Board may terminate or amend the Plan or the
terms of this Award at any time; provided, however, that except as provided in
Section 4 hereof in connection with a Transaction, no such termination or
amendment may adversely affect this Award without the consent of the Grantee
unless such termination or amendment is necessary to comply with any applicable
law, rule or regulation.
(c) Notices. All notices, requests, consents and other communications shall be
in writing and be deemed given when delivered personally, by facsimile
transmission or one (1) business day after deposit with a nationally recognized
expedited delivery service, such as Federal Express. Notices to the Company or
the Grantee shall be addressed to such address or addresses as may have been
furnished by such party in writing to the other.
5 |
Exhibit 10.36
REAL ESTATE PURCHASE AGREEMENT
THIS REAL ESTATE PURCHASE AGREEMENT (“Agreement”) is executed as of the
19th day of December, 2005 (the “Execution Date”), by DUKE REALTY Ohio, an
Indiana general partnership (“Seller”), and BUILD-A-BEAR WORKSHOP, INC., a
Delaware corporation (“Buyer”).
WITNESSETH:
1. Basic Terms. The following constitute the “Basic Terms” of this
Agreement.
A. Real Estate: The real estate and other property located in the Village
of Groveport, Franklin County, Ohio, consisting of approximately 22.6 acres and
more particularly described in the legal description attached hereto as
Exhibit A (the “Land”), together with (i) all right, title and interest of
Seller in any easements, rights-of-way or other interests in, on, under or to,
any land, highway, street, road, right-of-way or avenue, open or proposed, in,
on, under, across, in front of, abutting or adjoining the Land, and all right,
title and interest of Seller in and to any awards for damage thereto by reason
of a change of grade thereof, and (ii) all improvements situated thereon, and
(iii) all accessions, rights, privileges, appurtenances and all the estate and
rights of Seller in and to the foregoing or otherwise appertaining to any of the
property described in this paragraph (hereinafter collectively referred to as
the “Real Estate”).
B. Purchase Price: $2,216,000.
C. Earnest Money: $140,000.
D. Closing Date: December 28, 2005; provided, however, in the event that
the Environmental Report is no delivered to Buyer by December 22, 2005, then the
Closing Date shall be extended by one (1) day for each day after December 22,
2005 that the Environmental Report is actually delivered to Buyer hereunder.
E. Brokers: Duke Realty Services Limited Partnership for Seller and none
for Buyer.
F. Addresses for Notice:
Seller: Duke Realty Ohio
Attn: Art Makris
5600 Blazer Parkway, Suite 100
Dublin, Ohio 43017
Fax No.: (614) 932-6290
Copy to: Duke Realty Corporation
Attn: Jodie L. Edminster
600 East 96th Street, Suite 100
Indianapolis, IN 46240
Fax No.: (317) 808-6790
Buyer: Build-A-Bear Workshop, Inc.
Attn: Dennis Sheldon
1954 Innerbelt Business Center Drive
St. Louis, MO 63114
Fax No.: (314) 423-8188
Copy to: Victor H. Lewitt, Esq.
Blumenfeld, Kaplan & Sandweiss, P.C.
168 N. Meramec Avenue, Suite 400
St. Louis, MO 63105
Fax No.: (314) 863-9388
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2. Purchase and Sale. Seller agrees to sell, and Buyer agrees to purchase,
the Real Estate for the price and subject to the Basic Terms and all the
provisions hereinafter set forth.
3. Payment of Purchase Price. The Purchase Price shall be paid to Seller as
follows:
(a) Upon execution of this Agreement by both Buyer and Seller, Buyer shall
deposit the Earnest Money with the Title Company (as defined in Paragraph 6
below). Such Earnest Money shall be held, applied, returned or retained in
accordance with the terms of this Agreement.
(b) The remainder of the Purchase Price, plus or minus any prorations and
adjustments made pursuant to this Agreement, shall be paid by Buyer by wire
transfer or other immediately available funds at the Closing.
4. Escrow Terms. Upon receipt of the Earnest Money from Buyer, Title
Company shall invest the Earnest Money in an interest bearing, federally insured
account with a national bank or federal savings bank. All interest on the
Earnest Money shall be applied to the Purchase Price, or if the Closing does not
occur due to no default of Seller, remitted to Seller no later than December 30.
2005, as liquidated damages and in consideration of that certain indemnification
agreement by and between Duke Construction Limited Partnership and Build-A-Bear
Retail Management, Inc., dated December 1, 2005..
5. Inspection Period. At any time after the Execution Date, Buyer and its
agents shall have the right to enter upon the Real Estate and make all
engineering, environmental and other tests and inspections deemed necessary by
Buyer to satisfy Buyer as to the condition or suitability of the Real Estate.
All such tests shall be at Buyer’s cost and expense. Buyer agrees to immediately
repair any and all damage to the Real Estate arising or resulting from such
inspection by Buyer or its agents, and Buyer shall defend, indemnify and hold
Seller harmless from all claims arising or resulting from such inspection or
from the entry of Buyer or its agents onto the Real Estate for any purpose. The
provisions of this Paragraph 5 shall survive Closing or the termination of this
Agreement.
This Agreement and the obligations of Buyer hereunder are specifically made
contingent upon the following contingency for the benefit of Buyer:
(a) Receipt by Buyer, by December 22, 2005, from engineers and professional
environmental consultants of its choice, of reports, analyses, and/or written
certifications (the “Environmental Report”) satisfactory to Buyer in its sole
discretion that no Hazardous Materials (as hereinafter defined) exist on or
under the Real Estate, and the Real Estate is not in violation of any federal,
state or local law, ordinance or regulation relating to industrial hygiene or
the environmental conditions on or under the Real Estate , including, without
limitation, soil and groundwater conditions. “Hazardous Materials” shall mean
(i) substances defined as “hazardous substances”, “hazardous materials”, or
“toxic substances” in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §9601, et seq.; (ii) asbestos in
any form, urea formaldehyde foam insulation, transformers or other equipment
which contain dielectric fluid or other fluids containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million; and
(iii) any other chemical, material or substance, including, without limitation,
petroleum products, by-products and waste, exposure to which is prohibited,
limited or regulated by any governmental authority or may or could pose a hazard
to the health and safety of the occupants of the Real Estate, or to the soil or
groundwater, including without limitation, any such substances governed by
applicable Ohio law. The above contingency set forth in this Section 5 is for
the benefit of Buyer and may be waived by Buyer in whole or in part.
Should the contingency set forth in this Section 5 not be satisfied or
waived (as evidenced by Buyer’s failure to timely terminate the Agreement by
written notice to Seller within one day following actual receipt of the
Environmental Report) by Buyer within one day following actual receipt of the
Environmental Report, , then Buyer shall notify Seller of the non-satisfaction
of the above contingency, by written notice, at which time this Agreement will
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become null and void (except for those provisions which specifically survive the
termination hereof). Should Buyer fail to notify Seller of such non-satisfaction
or waiver, then the contingency in this Section 5 shall be deemed satisfied.
6. Title Report and Permitted Exceptions.
A. Seller, at its expense, has, prior to the Execution Date, delivered to
Buyer from Stewart Title Agency of Columbus (“Title Company”) a binder for an
owner’s policy of title insurance on the Real Estate (the “Title Commitment”)
and copies of all recorded documents reflected as exceptions thereon. All
exceptions listed on the Title Commitment shall be deemed “Permitted Exceptions”
(except for those conditions the Title Company will agree to eliminate upon
receipt of an affidavit from Seller, sufficient to delete the standard
exceptions, or upon receipt of a survey, and except for any mortgages, deeds of
trust or other liens or encumbrances on the Real Estate, all of which are to be
released prior to Closing). Seller agrees to pay all Title Company charges for
or in connection with the Title Commitment.
B. Buyer’s obligation to close under this Agreement is contingent upon the
Title Company issuing to Buyer at Closing an ALTA Owner’s Policy of Title
Insurance (the “Title Policy”) in the amount of the Purchase Price and
containing no exceptions other than the Permitted Exceptions and current taxes
and assessments not yet due and payable. All mortgages, deeds of trust or other
liens or encumbrances on the Real Estate shall be released prior to Closing and
shall not appear as exceptions to the Title Policy. The standard, preprinted
exceptions shall be deleted from the Title Policy. If Buyer is unable to obtain
a marked up and signed Title Commitment representing the Title Policy on the
Closing Date, Buyer may terminate this Agreement, and the parties shall be
released from all further obligations hereunder, except those which specifically
survive the termination hereof. Notwithstanding anything to the contrary
contained herein, Seller shall, at Closing, pay all premiums and charges, but
not endorsement charges, for or in connection with the Title Policy.
7. Survey. Seller has delivered to Buyer a staked boundary survey of the
Real Estate (the “Survey”) prepared by a registered land surveyor selected by
Seller. Buyer, at its expense, may update the Survey at its option (the “Updated
Survey”). The Updated Survey shall (a) be completed in accordance with the
minimum standard detail requirements for an ALTA/ACSM survey and be certified to
Seller, Buyer, Buyer’s lender and the Title Company by such surveyor; (b) have
one perimeter description of the Real Estate; (c) show all easements,
rights-of-way, setback lines, encroachments and other matters affecting the use
or development of the Real Estate; and (d) show the acreage of the Real Estate.
8. Cooperation of Seller. Seller shall assist Buyer and its
representatives, whenever reasonably requested by Buyer, in obtaining
information about the Real Estate, provided that Buyer shall reimburse Seller
for any expenses incurred by Seller in connection therewith.
9. Taxes and Assessments. Buyer will assume and agree to pay (i) so much of
the real estate taxes and assessments assessed against the Real Estate which
first become due and payable during the calendar year in which such closing
occurs as shall be allocable to Buyer for the period on and after the Closing,
and Seller shall pay the balance of such taxes for such calendar year, using,
for Closing purposes, the tax rate and valuation assessment existing at the
Closing Date if the applicable tax rate or assessment has not then been
determined, and all real estate taxes and assessments first becoming due and
payable after the year during which closing occurs. Seller shall pay all real
estate taxes not assumed by Buyer. Any taxes and assessments not assumed by
Buyer and not paid by Seller at or prior to Closing shall be allowed to Buyer as
a credit against the cash payment required on Closing, and Seller shall not be
further liable for such taxes or assessments. Seller shall pay any and all
transfer taxes imposed by the county, state or municipality in which the Real
Estate is located.
10. Representations, Warranties and Covenants by Seller. In order to induce
Buyer to purchase the Real Estate, Seller makes the following representations
and warranties, which representations and warranties shall survive the Closing
for a period of one year hereunder and shall inure to the benefit of Buyer, its
successors and permitted assigns, and shall be considered made as of the date
hereof and as of the Closing Date:
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A. Seller owns good and marketable fee title to the Real Estate and has all
requisite power and authority to execute this Agreement and the closing
documents described herein.
B. Seller has no actual knowledge of any action, litigation or condemnation
proceeding pending in any court or before any governmental agency by any person
affecting the Real Estate. If Seller receives actual knowledge of any such
proceedings between the date of this Agreement and the Closing Date, Seller
shall give Buyer written notice thereof, and thereupon Buyer shall have the
right, if there is a materially adverse impact on Buyer’s intended use or
development of the Real Estate as a result thereof, to terminate this Agreement.
C. To the best of Seller’s knowledge, all utility charges for the Real
Estate payable by Seller have been paid, and no utility is making any claims for
any due or past due statements. To the best of Seller’s knowledge, utilities are
or will be available to the Real Estate prior to development of the Real Estate,
and the Real Estate is zoned properly for Buyer’s intended development pursuant
to the construction contract (“Construction Contract”) to be signed by the
parties or their affiliates of even date herewith.
D. To the best of Seller’s knowledge, the conveyance of the Real Estate
pursuant hereto will not violate any applicable statute, ordinance, governmental
restriction or regulation or any private restriction or agreement.
E. To the best of Seller’s knowledge, there are no violations of any
federal, state, local or other governmental building, zoning, health, safety,
platting, subdivision, environmental, or other law, ordinance, regulation, or
private restriction affecting the Real Estate.
If Seller receives any such notice of violation between the date of this
Agreement and the Closing Date, Seller shall give Buyer written notice thereof,
and thereupon Buyer shall have the right, if there is a materially adverse
impact on Buyer’s intended use or development of the Real Estate as a result
thereof, to terminate this Agreement.
F. No notice of any special assessments against the Real Estate has been
received by Seller.
G. There are no parties in possession of any portion of the Real Estate as
lessees, tenants at sufferance or trespassers.
H. Other than this Agreement, there are no sale contracts, options to
purchase, leases, rights of first refusal or other agreements of sale or lease
for or affecting the Real Estate.
Buyer may elect to close the transaction described in this Agreement with
knowledge of a breach by Seller of one or more of the foregoing representations
and warranties without such election constituting a waiver or release by Buyer
of any claims due to such breach.
Buyer acknowledges that it has had or will have the opportunity to examine
the Real Estate. Seller (or any of its agents or representative) has not made
and does not make, and is unwilling to make under this Agreement, any
representations as to the physical condition, use or any other matter or thing
affecting or related to the Real Estate, except as may be expressly set forth
herein. Buyer acknowledges that no such representations have been made, and
Buyer agrees to take the Real Estate “AS IS”.
11. Damage, Destruction and Eminent Domain. Risk of loss to the Real Estate
shall remain in Seller until the Closing Date.
A. If, prior to the Closing Date, the Real Estate or any substantial part
thereof is damaged or destroyed by fire, the elements, or by any other cause of
whatever nature, Buyer shall have the option to either: (i) terminate this
Agreement by written notice delivered to Seller within thirty (30) days after
the date Buyer receives written notice from Seller notifying Buyer of such
damage; or (ii) proceed to close the transaction contemplated hereunder despite
said
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destruction or damage to the Real Estate, in which event Seller shall, at
Buyer’s election, either (x) repair such damage or destruction prior to the
Closing, at Seller’s sole expense, or (y) reimburse Buyer for the cost of
repairing the same by allowing Buyer to deduct such cost from the Purchase Price
payable to Seller at the Closing, or (z) assign to Buyer Seller’s right to make
claim under and receive the proceeds from all policies insuring Seller against
any such loss or damage.
B. If, prior to Closing, the Real Estate or any material part thereof shall
be taken by eminent domain, Buyer may, at its option, by written notice to
Seller, terminate this Agreement.. If, despite said material taking, Buyer
elects to proceed to close the transaction contemplated hereunder or if there is
less than a material taking, there shall be no reduction in or abatement of the
Purchase Price, and Seller shall assign to Buyer all of Seller’s right, title
and interest in and to any award made or to be made in the condemnation
proceeding.
12. Closing. The closing of the purchase and sale of the Real Estate (the
“Closing”) shall occur at the office of the Title Company or another location
selected by both Seller and Buyer on the Closing Date, unless Buyer and Seller
shall agree upon a different date for the Closing.
13. Closing Documents. At the Closing, Seller shall execute and deliver to
Buyer (a) a limited warranty deed conveying fee simple title to the Real Estate,
reserving an easement for signage and landscaping as described in Exhibit B
attached hereto, and subject to the Permitted Exceptions, to Buyer as required
under this Agreement; (b) a vendor’s affidavit in a form satisfactory to enable
the Title Company to delete the standard printed exceptions from the title
policy; (c) a Certification of Nonforeign Status pursuant to Section 1445(b)(2)
of the Internal Revenue Code; (d) a Transfer Tax Statement or return, if
applicable; (e) a closing statement; (f) an easement (satisfactory in form to
both Buyer and Seller) over Seller’s land described in Exhibit B, attached
hereto and made a part hereof, for the purpose of installation, use,
maintenance, replacement and repair of sanitary sewer lines; and (g) such other
instruments, certificates or affidavits as may be provided herein or as Buyer or
Title Company may reasonably request to effect the intention of the parties
hereunder. Buyer shall pay all recording fees. Any escrow or closing fees
charged by the Title Company shall be divided equally between Buyer and Seller.
Seller shall pay the cost of releasing fees or other costs related to Seller’s
obligations.
14. Possession. Possession of the Real Estate shall be delivered to Buyer
on the Closing Date in the same condition as it is now, free and clear of the
claims of any other party except as permitted hereunder.
15. Rights and Obligations. The rights and obligations of Seller and Buyer
herein contained shall inure to the benefit of and be binding upon the parties
hereto and their respective personal representatives, heirs, successors and
assigns.
16. Notices. All notices required or permitted to be given hereunder shall
be in writing and delivered either via telefax, in person or by certified or
registered first-class prepaid mail, return receipt requested, to Seller or
Buyer at their respective addresses set forth in the Basic Terms, or at such
other address, notice of which may have been given to the other party in
accordance with this Paragraph 16. Any notice given in accordance with this
paragraph shall be deemed to have been duly given or delivered on the date the
same is personally delivered to the recipient or received or refused by the
recipient as evidenced by the return receipt.
17. Assignment. Buyer shall not be entitled to assign this Agreement or its
rights hereunder without Seller’s prior written consent, which consent, with
respect to an assignment to an affiliate of Seller, shall not be unreasonably
withheld or delayed. In the event of any permitted assignment hereunder, Buyer
shall remain liable for the performance and observance of any terms, covenants
and conditions of this Agreement which are the responsibility of the Buyer.
18. Complete Agreement. This Agreement represents the entire agreement
between Seller and Buyer covering everything agreed upon or understood in this
transaction. There are
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no oral promises, conditions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the execution hereof or in
effect between the parties. No change or addition shall be made to this
Agreement except by a written agreement executed by Seller and Buyer.
19. Authorized Signatories. The persons executing this Agreement for and on
behalf of Buyer and Seller each represent that they have the requisite authority
to bind the entities on whose behalf they are signing.
20. Partial Invalidity. If any term, covenant or condition of this
Agreement is held to be invalid or unenforceable in any respect, such invalidity
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
21. Use of Brokers. Each party represents and warrants to the other that it
has dealt with no broker, finder or other person with respect to this Agreement
or the transactions contemplated hereby, except for the Broker(s) identified in
the Basic Terms. Seller shall pay a commission or fee to such Broker(s),
provided this transaction closes, pursuant to separate agreement. Seller and
Buyer each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, expense or claim incurred by reason of any brokerage
commission or finder’s fee alleged to be payable because of any act, omission or
statement of the indemnifying party other than to such Broker(s). Such indemnity
obligation shall be deemed to include the payment of reasonable attorneys’ fees
and court costs incurred in defending any such claim.
22. Attorneys’ Fees. In the event that either party shall bring an action
or legal proceeding for an alleged breach of any provision of this Agreement or
any representation, warranty, covenant or agreement herein set forth, or to
enforce, protect, determine or establish any term, covenant or provision of this
Agreement or the rights hereunder of either party, the prevailing party shall be
entitled to recover from the nonprevailing party, as a part of such action or
proceedings, or in a separate action brought for that purpose, reasonable
attorneys’ fees and costs, expert witness fees and court costs as may be fixed
by the court or jury.
23. Governing Law; Construction.
(a) This Agreement shall be interpreted and enforced according to the laws
of the state in which the Real Estate is located.
(b) All headings and sections of this Agreement are inserted for
convenience only and do not form part of this Agreement or limit, expand or
otherwise alter the meaning of any provisions hereof.
(c) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
(d) The provisions of this Agreement are intended to be for the sole
benefit of the parties hereto and their respective successors and assigns, and
none of the provisions of this Agreement are intended to be, nor shall they be
construed to be, for the benefit of any third party.
(e) Time is of the essence with respect to the duties and obligations of
the parties hereunder.
24. Like-Kind Exchange. Seller shall have the right to identify other real
estate of like kind which it desires to acquire in exchange for the Real Estate
(the “Replacement Real Estate”) in a transaction that Seller intends to qualify
as a tax-free exchange under Section 1031 of the Internal Revenue Code. Buyer
shall reasonably cooperate, at Seller’s cost, with Seller in order that Seller
may structure all or part of its sale of the Real Estate as such tax-free
exchange, provided that (i) the Closing Date hereunder is not delayed, and
(ii) Seller shall indemnify and hold Buyer harmless from and against any and all
liabilities, losses, damages,
-6-
--------------------------------------------------------------------------------
claims, costs, and expenses (including without limitation attorneys’ fees and
costs) incurred by Buyer as a result of or in connection with its cooperation.
If at the time of Closing of Buyer’s purchase of the Real Estate hereunder,
Seller has not identified or is not ready to acquire the Replacement Real
Estate, Seller shall have the right to assign all of its right, title and
interest in and to this Agreement to a qualified intermediary.
25. Contingencies. This Agreement is contingent upon the satisfaction of
the following matters:
Buyer entering into the Construction Contract with Seller’s affiliate, Duke
Construction Limited Partnership (“DCLP”), on or before the Closing Date
pursuant to which DCLP will construct an industrial building upon the Real
Estate, such contract to be in the form of Exhibit C attached hereto and
incorporated by reference herein.
Should the contingency set forth in this Section 25 not be satisfied or
waived within the time allowed above, then this Agreement will become null and
void (except for the provisions herein which expressly survive this Agreement).
26. Default.
A. If Seller defaults in its obligations hereunder, Buyer may, by notice to
Seller, terminate this Agreement, in which event the Earnest Money shall be
refunded to Buyer, or Buyer may exercise any and all remedies available at law
or in equity.
B. If Buyer defaults in the performance of any of its obligations
hereunder, Seller shall be entitled to terminate this Agreement, and may
exercise any and all remedies available at law or in equity.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
“BUYER”
BUILD-A-BEAR WORKSHOP, INC.,
By: /s/ Maxine Clark
Printed: Maxine Clark
Title: CEO
“SELLER:
DUKE REALTY OHIO an Indiana general partnership
By: Duke Realty Limited Partnership
its Managing Partner
By: Duke Realty Corporation
its general partner
By: /s/ James T. Clark
James T. Clark
Senior Vice President
Columbus
-7-
--------------------------------------------------------------------------------
STATE OF
Missouri )
) SS:
COUNTY OF
St. Louis )
Before me, a Notary Public in and for said County and State, personally
appeared Maxine Clark, by me known to be the CEO of Build-A-Bear Workshop, Inc.,
a Delaware corporation, who acknowledged execution of the foregoing “Agreement”
on behalf of said corporation.
WITNESS my hand and Notarial Seal this 20 day of December, 2005.
/s/ Donnene F. Smith
Notary Public
Donnene F. Smith
(Printed Signature)
My Commission Expires:
8/4/2008
My County of Residence:
St. Louis
STATE OF OHIO
)
) SS:
COUNTY OF
Franklin )
Before me, a Notary Public in and for said County and State, personally
appeared James T. Clark, by me known to be the Senior Vice President, Columbus
of Duke Realty Corporation, an Indiana corporation, the general partner of Duke
Realty Limited Partnership, an Indiana limited partnership, the Managing Partner
of Duke Realty Ohio, an Indiana general partnership, who acknowledged execution
of the foregoing “Real Estate Purchase Agreement” on behalf of said general
partnership.
WITNESS my hand and Notarial Seal this 20 day of December, 2005.
/s/ Aimee D’Amore
Notary Public
Aimee D’Amore
(Printed Signature)
My Commission Expires:
10-20-2009
My County of Residence:
Franklin
-8-
--------------------------------------------------------------------------------
EXHIBIT A
LEGAL DESCRIPTION OF REAL ESTATE
DESCRIPTION OF A 22.599 ACRE TRACT OF LAND
Situated in the State of Ohio, County of Franklin, Village of Groveport, located
in Section 29, Township 11, Range 21, Congress Lands and being all of that
22.599 acre tract as conveyed to Duke Realty Ohio by deed of record in
Instrument Number 200401160012598, said 22.599 acres being more particularly
bounded and described as follows:
Beginning at an iron pin set in the westerly right-of-way line of Green Pointe
Drive South, as shown of record in Plat Book 89, Pages 50 and 51, being the
southeasterly corner of lot 8 of that subdivision entitled “Green Pointe
Business Park” of record in Plat Book 85, Pages 100 and 101, as conveyed to
Meritex Green Pointe, LLC by deed of record in Instrument Number
200501100006000, and being in the half-section line of said Section 29;
Thence S 03° 45’ 45” W, with the westerly right-of-way line of said Green Pointe
Drive South, a distance of 101.38 feet to an iron pin set at a point of
curvature of a curve to the right;
Thence Southwesterly, continuing with the westerly right-of-way line of said
Green Pointe Drive South, with the arc of said curve (Delta = 28° 30’ 52”,
Radius = 1600.00 feet, Arc Length = 796.27 Feet) a chord bearing and distance of
S 18° 01’ 11” W, 788.08 feet to an iron pin set at the northeasterly corner of
that 8.299 acre tract as conveyed to Duke Realty Ohio by deed of record in
Instrument Number 200401160012598;
Thence N 86° 14’ 40” W, with the northerly line of said 8.299 acre tract, and
with a northerly line of that 4.846 acre tract as conveyed to GPS Consumer
Direct Inc. by deed of record in Instrument Number 200011020222617, a distance
of 1000.35 feet to a ¾” iron pin found at a corner thereof;
Thence N 03° 53’ 42” E, with an easterly line of said 4.846 acre tract, a
distance of 865.38 feet to an iron pin set in the southerly line of that 0.57
acre tract as conveyed to Melvin L. Eberwein Jr. by deed of record in Instrument
Number 200505250100720, being in the half-section line of said Section 29;
Thence S 86° 12’ 57” E, with the southerly line of said 0.57 acre tract, and
with the southerly line of that 37.68 acre tract as conveyed to Quentin F.
Schlaegel by deed of record in Deed Book 3440, Page 143, being the said
half-section line, a distance of 423.80 feet to an iron pin set at the
southwesterly corner of said lot 8, being the southeasterly corner of said 37.68
acre tract, and being the center of said Section 29;
Thence S 86° 14’ 40” E, with the southerly line of said lot 8, being the
half-section line of said Section 29, a distance of 768.63 feet to the True
Point of Beginning, and containing 22.599 acres of land, more or less, as
calculated by the above courses. Subject, however, to all legal highways,
easements, and restrictions of record. The above description was prepared by
Clark E. White, P.S. #7868 on December 14, 2005.
All iron pins set are ¾” diameter, 30” long with plastic cap inscribed “Advanced
7661”.
All references used in this description can be found at the Franklin County
Recorder’s Office, Franklin County, Ohio. The Basis of Bearings used in this
description was transferred from a GPS survey of Franklin County Monuments
“26-693” and “HAMILTON” published by the Franklin County Engineer’s Office, and
is based upon the NAD83 Ohio State Plane Coordinate System, South Zone, 1986
adjustment, and determines the bearing between said monuments as N 06° 55’ 29”
W.
ADVANCED CIVIL DESIGN, INC.
Clark E. White. Ohio P.S. #7868 Date:
|
Exhibit 10.19
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
SUPPLY AGREEMENT FOR STERITECH COMPOUND [ * ]
Agreement, effective as of July 18, 1994, by and between [ * ] , and STERITECH,
INC., a California corporation with offices at 2525 Stanwell Drive, Concord,
California 94520 (“Steritech”).
WITNESSETH:
WHEREAS, Steritech is the owner of certain intellectual property rights
respecting, and engages in certain research regarding the uses of, the compound
designated [ * ] (the “Compound”); and
WHEREAS, [ * ] is able to synthesize and supply the Compound, manufactured in
accordance with current U.S. Good Manufacturing Practices (“GMP”) standards and
meeting Food and Drug Administration (“FDA”) quality standards;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
1. Promptly upon mutual agreement regarding amount of Compound to be
manufactured as set forth in a requisition (sample shown in Exhibit A), [ * ]
shall commence, and thereafter, as expeditiously as possible, shall proceed with
the synthesis of Compound and shall deliver the completed Compound, meeting the
analytical specifications defined in Exhibit B, to Steritech within a maximum
time of ninety (90) days from date of requisition. [ * ] also agrees to deliver
to Steritech all batch records and analytical data confirming conformance to
specifications for each raw material, isolated intermediate and final product.
The first requisition shall be for a minimum of ten (10) kilograms of Compound
and future requisitioned amounts shall be within the limits of [ * ] present
manufacturing capacity.
2. In consideration of the supply by [ * ] of the Compound as provided in this
Agreement, Steritech agrees that it shall pay to [ * ] the amount agreed upon in
writing at the time of the request to manufacture. Such payment shall be made by
Steritech upon final delivery by [ * ] of the Compound conforming to agreed upon
specifications and all test and batch records relating to its preparation.
Steritech agrees to pay [ * ] sixty thousand dollars ($60,000) for the first
requisitioned material and future costs shall be commensurate allowing for
mutually agreed upon changes in process parameters.
3. In connection with the performance of this Agreement, [ * ] shall:
a. Purchase, test and release raw materials and intermediates as defined in
specifications agreed upon by both parties. Raw materials shall conform to
American Chemical Society (ACS), United States Pharmacopoeia / National
Formulary (USP/NF) or European Pharmacopoeia (EP) specifications. Any exceptions
to these specifications are shown in Exhibit C of this contract. All isolated
intermediates as well as the Compound shall be analyzed at each step by [ * ] to
adequately identify, characterize and assess purity of materials per attributes,
1
--------------------------------------------------------------------------------
limits and test methods specified by Steritech. Such test methods may include
spectral and/or chromatographic characterization and elemental analysis in
conformance with stringent elemental analyses established by the Journal of
Medicinal Chemistry or equivalent when requested by Steritech.
b. Prepare data sheets, spectral/chromatographic sheets, and description of
preparative methods for all materials. [ * ] shall utilize a data sheet format
that conforms to the requirements for a Batch Production Record as described in
Part 211 of Title 21 of the Code of Federal Regulations. Further, Steritech
reserves the right to review and approve all such records prior to their use in
the production of intermediates or bulk drug substances. The preparative methods
shall be sufficiently detailed for filing with the FDA as bulk manufacturing
processes. This includes details of sources, purities and lot numbers of all raw
materials and solvents used, their quantities, and detailed methodology of
isolation and/or purification procedures.
c. Retain samples of Compound for one year after manufacture. Samples of this
material will be made available to Steritech upon request.
d. Analyze Compound by test methods agreed upon by both parties that conform to
USP or EP methods. Upon Steritech’s request and approval, samples of Compound
shall be made available to a third party for analytical testing.
e. Provide Steritech with a copy of each data sheet or Batch Production Record
and all pertinent analytical data for its review and approval prior to delivery
of each batch of Compound.
f. Provide evidence of the use of validated cleaning methods for equipment as
per present manufacturing standards.
4. [ * ] shall also provide Steritech with samples of specified intermediates
defined in the requisition (Exhibit A) for monitoring purposes only. Results
obtained by such studies will have no effect on the acceptance and approval by
Steritech of the final Compound.
5. [ * ] shall comply with all Government health and safety regulations:
a. FDA: [ * ] shall be registered with the FDA as a manufacturer of bulk drug
substances. [ * ] shall inform Steritech of any facilities inspection or any
other FDA action relative to the continued approval of its facilities by FDA for
the manufacture of bulk drug substances and shall supply a copy of any FDA Form
483 or any other regulatory compliance letter or notice issued by the FDA to [ *
] during the term of this contract. Facilities shall meet FDA standards in
accordance with the current Good Manufacturing Practices (cGMP). If during the
course of the contract FDA inspections cite deficiencies which, in the opinion
of Steritech, are judged to compromise the purity and/or quality of materials to
be delivered, Steritech will have the right, by written notice to [ * ] and
without incurring liability, to terminate the contract, without limitation of
any other rights or remedies. An FDA facilities Drug Master File is available
and on file with the FDA and is updated annually as required by FDA regulations.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
--------------------------------------------------------------------------------
b. Occupational Safety and Health Administration (OSHA): [ * ] shall comply with
OSHA regulations.
c. Environmental Protection Agency (EPA): [ * ] shall comply with EPA
regulations regarding the discharge of water and air pollutants and for assuring
that disposal of all chemicals residues meet current EPA regulations.
d. Good laboratory safety controls and procedures shall be followed by [ * ] in
carrying out the activities for this project.
6. In connection with the performance of the Agreement, Steritech shall:
a. Furnish reference samples needed for the required analyses.
b. Retain samples of the Compound for internal use and to support a Compound
Drug Master File and Steritech’s Investigational New Drug (IND) application.
c. Approve all specifications and production records prior to manufacture of the
Compound.
7. Upon approval by Steritech, materials prepared shall be shipped as directed
by Steritech. Containers shall be previously approved by Steritech. Batch
records and required test samples must be received and approved prior to
acceptance of the bulk shipment. Compound that does not meet the agreed upon
specifications shall not be accepted under this agreement.
8. Steritech reserves the right to inspect [ * ] facilities, equipment, and
controls for the manufacture of Steritech’s compounds at dates and times that
are mutually acceptable. Steritech also reserves the right to delegate such
inspections to qualified third party auditors of its choosing as long as such
auditors are bound by the same confidentiality agreement currently in effect
between the two parties.
9. [ * ] further consents to the review by Steritech of [ * ] Master File for
the Compound and the facility’s Drug Master File. If requested by Steritech, [ *
] will provide such additional form of consent or authorization as the FDA may
require in connection with such review. Steritech may include this Agreement
and/or such additional form in Steritech’s IND application.
10. This agreement shall apply to all requisitions of the Compound within three
(3) years of the signing of this agreement unless superseded by a mutually
agreed upon in subsequent agreement. This agreement does not obligate Steritech
to request or pay for a specified number of batches or quantity of the Compound.
Recognizing that a timely supply of Compound is critical to the ability of
Steritech to proceed in its business, [ * ] shall give ninety (90) days notice
in writing if it does not intend to accept one or several future requests for
Compound under the terms of this agreement.
11. The Nondisclosure Agreement dated April 13, 1993 between the parties shall
be deemed incorporated herein by reference and apply to all information
disclosed by Steritech to [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
--------------------------------------------------------------------------------
and all information generated hereunder. The chemicals prepared or handled under
this contract shall be regarded as proprietary in nature. Under no circumstances
shall chemicals or any information associated with these chemicals be released
or divulged without prior approval of Steritech.
12. [ * ] will make prompt written disclosure to Steritech, will hold in trust
for the sole right and benefit of Steritech, and hereby assigns to Steritech all
right, title and interest in and to any inventions, developments, improvements
or trade secrets, including without limitation optimized procedures, which [ * ]
its employees or agents may solely or jointly conceive or reduce to practice, in
the course of or as a result of the work hereunder concerning the Compound
(including without limitation processes associated with its manufacture). [ * ]
will assist Steritech in every proper way to obtain and enforce United States
and foreign proprietary rights relating to any and all inventions, development,
improvements or trade secrets of Steritech in any and all countries. To that end
[ * ] will execute, verify and deliver such documents and perform such other
acts (including appearing as a witness) Steritech may reasonably request for use
in applying for, obtaining, perfecting, evidencing, sustaining and enforcing
such proprietary rights and the assignment thereof. In addition, [ * ] will
execute, verify and deliver assignments of such proprietary rights to Steritech
or its designee. Steritech shall compensate [ * ] at a reasonable rate for the
time actually spent by [ * ] at Steritech’s request on such assistance. In the
event Steritech is unable for any reason, after reasonable effort, to secure [ *
] signature on any document needed in connection with the actions specified in
the preceding paragraph, [ * ] hereby irrevocably designates and appoints
Steritech and its duly authorized officers and agents as its agent and
attorney-in-fact, to act for and in its behalf to execute, verify and file any
such documents and to do all other lawfully permitted acts to further the
purposes of the preceding paragraph with the same legal force and effect as if
executed by [ * ]
13. If any provision or clause of this Agreement, or portion thereof, shall for
any reason be held to be invalid, illegal or unenforceable, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such provision or clause,
or portion thereof, had never been contained in this Agreement, and there shall
be deemed substituted therefor such other provision or clause, or portion
thereof, as will most nearly accomplish the intent of the parties as expressed
in this Agreement to the fullest extent permitted by law.
14. This Agreement shall be governed by and construed and enforced under the
internal laws of the State of California (and not its principles of conflicts of
law). The parties consent and submit to the jurisdiction of the courts of the
State of California and of the United States for a judicial district within the
territorial limits of the State of California for all purposes with respect to
any action or proceeding in connection with this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered by their respective authorized representatives as of the effective
date first above written.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
--------------------------------------------------------------------------------
STERITECH, INC.
[ * ]
By:
/s/ Stephen Isaacs
By:
[ * ]
Name (Print):
Stephen Isaacs
Name (Print):
[ * ]
Title (Print):
President/CEO
Title (Print):
President
Date:
July 22, 1994
Date:
July 21, 1994
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
--------------------------------------------------------------------------------
EXHIBIT A
STERITECH, INC.
2525 Stanwell Dr., Suite 300
Concord, CA 94520
510-603-9071 FAX 510-603-9099
PAGE
NO. P.O. No. ORDER DATE VEND. 1 1695 7/15/94
PURCHASE ORDER
V
E
N
D
O
R
[ * ] S
H
I
P [ * ] T
O
ORDER DATE CANCELLATION DATE SHIP VIA F.O.B. TERMS 7/15/94
to be determined Net 30 days RESALE NO. RESPONSIBILITY BRANCH
ITEM NO.
MFG. NO.
DESCRIPTION
REG. DATE
LOCATION
QUANTITY
ORDERED
QUANTITY
BACK ORD.
QTY REC. UNIT PRICE EXTENSION [ * ]
[ * ] *
[ * ]
10 Kg $60,000
To be delivered to Steritech by Sept. 16, 1994.
Shipping requirements: Send 10g to Steritech plus one gram (1g) from each
additional container. Upon approval, send rest of order to [ * ] unless
specified otherwise.
Intermediates requested: Send to Steritech samples 1g of [ * ] [ * ] [ * ] and
[ * ] prepared and used for the manufacture of this lot of [ * ]
* As per agreement signed July 18, 1994. “Supply Agreement for Steritech
Compound [ * ]
SUBTOTAL $60,000 PURCHASE ORDER NO. 1695 TOTAL ORDER
VALUE
AUTHORIZED SIGNATURE
ORDER TERMS AND CONDITIONS
1. INVOICES must bear exact same prices and terms or authorization for changes
must be received from our company in writing prior to shipping.
2. Goods not in accordance with specifications will be rejected and held at
vendor’s risk awaiting disposal. Vendor must pay freight on all rejected
material.
3. The right is reserved, to cancel all or part of this order if not delivered
within the time specified.
4. Packing slips must accompany all shipments.
5. By acceptance of this order, vendor warrants that all merchandise shipped
under this order does comply with all laws and regulations of Federal and State
governments.
6. Back orders must be prepaid when less than a minimum freight shipment.
7. In the event of interruption of our business in whole or in part by reason of
fire, flood, windstorm, earthquake, war, strike, embargo, acts of God,
governmental action, or any causes beyond our control, we shall have the option
of canceling undelivered orders in whole or part.
8. Acceptance of the purchase order, or shipment of any part of it will
constitute an agreement to all of its specifications as to terms, delivery and
prices.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
--------------------------------------------------------------------------------
EXHIBIT B
Specifications for [ * ]
[ * ] [ * ]
I. Identity A. IR spectrum spectrum compares with reference
B. NMR spectrum compares with reference [ * ] II. Purity
A. HPLC [ * ] of reference standard by peak area [ * ] B.
Loss on Drying [ * ] by weight
For documentation purposes only, the following other analyses of purity shall
also be completed:
Elemental Analysis Analysis shall be [ * ] NMR Analysis shall be [ * ]
HPLC Analysis shall be [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
--------------------------------------------------------------------------------
EXHIBIT C
Raw materials to be used in the manufacture of Steritech’s [ * ] [ * ] [ * ]
that do not conform to ACS, USP/NF or EP specifications for these reagents, or
such specifications are not available:
[ * ]
Part Number and
Effective date
Description and Vendor Information
[ * ]
22 Feb 93
[ * ]
Vendor: [ * ]
[ * ]
28 Mar 94
[ * ]
Vendor: [ * ] (cat. no. [ * ] )
[ * ]
8 Feb 94
[ * ]
Vendor: [ * ] (cat. no. [ * ] or equivalent)
[ * ]
8 Feb 94
[ * ]
Vendor: [ * ] (cat. no. [ * ] or equivalent)
[ * ]
18 Feb 94
[ * ]
Vendor: [ * ] (cat. no. [ * ] or equivalent)
[ * ]
7 Mar 94
[ * ]
Vendor: [ * ] (cat. no. N/A), [ * ] (cat. no. [ * ] or equivalent)
[ * ]
8 Feb 94
[ * ]
Vendor: [ * ] (cat. no. N/A)
All other raw materials used in this manufacturing process are of ACS, USP/NF or
EP Grade.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. |
Kirkland’s, Inc.
805 North Parkway
Jackson, Tennessee 38305
(901) 668-2444
May 30, 2006
Via Hand Delivery
Robert E. Alderson, Esquire
Re: Severance Rights
Dear Robert:
On behalf of Kirkland’s, Inc. (the “Company”), this letter memorializes
certain severance commitments we have made to you. Specifically, if you
experience a separation from service with the Company after the date hereof for
any reason, you will be entitled to receive:
(1) a single sum payment equal to the discounted present value (discounted at
the highest interest rate in effect under any credit agreement to which the
Company is then a party, or if the Company is not then a party to any credit
agreement, at a rate equal to the then prevailing 60 day LIBOR rate plus 125
basis points) of 24 monthly payments each equal to one-twelfth of your annual
base salary (at the greater of the rate in effect immediately prior to your
separation from service or $363,500/year); and
(2) COBRA continuation of group health benefits for you (and, if covered under
the Company’s group health plan immediately prior to your separation from
service, your spouse) at a cost to you equal to the amount paid from time to
time by active employees for comparable coverage; and
(3) following expiration of your COBRA coverage, a further continuation of your
group health benefits until the earliest of: (A) the date the Company ceases to
maintain a group health plan, (B) the date the Company’s insurer or stop-loss
insurer declines to include you within the group of eligible participants (it
being understood that the Company will in good faith exercise reasonable efforts
to include you within its group coverage), (C) your attainment of age 72, or
(D) your failure, after ten days’ written notice from the Company, to pay your
share of the monthly cost of this coverage (as described below). Again, your
share of the cost of this coverage will be equal to the amount paid from time to
time by active employees for comparable coverage.
If payments owed to you hereunder are subject to the requirements of Prop.
Treas. Reg. § 1.409A-3(g)(2) (or any successor provision) at the time of your
separation from service, then notwithstanding any other provision of this
letter, those payments that are otherwise due within
--------------------------------------------------------------------------------
six months following your separation from service will be deferred (with
interest at a rate equal to the discount rate referenced above in (1)) and paid
to you in a lump sum immediately following that six month period. For purposes
of this letter, the term “separation from service” has the same meaning defined
in Prop. Treas. Reg. § 1.409A-1 (or any succeeding guidance).
Moreover, notwithstanding any other provision of this letter, no payment or
obligation will be owed by the Company hereunder unless and until: (i) you
execute and deliver to the Company a general release of claims in a form
reasonably prescribed by the Company, and (ii) that release becomes irrevocable.
Such release of claims will also include a parallel release by the Company of
claims against you, other than claims arising from criminality, other serious
misconduct, breach of fiduciary duty or material breach of any agreement with
the Company.
Notwithstanding any other provision of this letter, no payment or
obligation will be owed to you in connection with a voluntary resignation unless
you provide the Company with at least 90 days advance written notice of that
resignation.
The severance benefits described in this letter will be paid in lieu of,
and not in addition to, benefits payable under any other severance, termination
or similar arrangement maintained by the Company or its affiliates. If your
separation from service is due to your death or disability, the severance
benefits described in this letter will be offset by the amount of any benefits
payable to you or your beneficiaries pursuant to Company sponsored or funded
life or disability insurance contract, policy, plan or arrangement.
Finally, as soon as practicable following the execution of this letter (and
to the extent permitted under the terms of the policy and subject to any
required consents of the insurer), the Company agrees to assign to you ownership
of that certain $500,000 term life insurance policy presently maintained by the
Company for your benefit. Continued maintenance of that policy will be your
responsibility and the Company will have no obligation to pay or reimburse you
for the cost of premiums on that policy or to otherwise maintain any life
insurance for your benefit (although the Company from time to time maintains
group life insurance arrangements for its active employees generally and,
subject to the eligibility terms of such arrangements, you may continue to be
covered thereunder during your employment).
This letter represents our entire agreement regarding your rights to
severance benefits and life insurance coverage after the date hereof and merges
and supersedes all prior or contemporaneous discussions, agreements and
understandings between us relating to those topics (including Sections 3.4 and
6.1 of that certain Employment Agreement between you and the Company dated
June 1, 2002 (as amended by that certain letter agreement between you and the
Company dated November 23, 2005)). This letter may not be changed or modified,
except by an agreement in writing signed by you and an authorized representative
of the Company. This letter will be governed by, and enforced in accordance
with, the laws of the State of Tennessee without regard to the application of
the principles of conflicts or choice of laws.
[signature page follows]
-2-
--------------------------------------------------------------------------------
To acknowledge your agreement to all of the foregoing, please execute this
letter in the space provided below and return the executed copy to me.
Sincerely,
/s/ Lowell E. Pugh II Lowell E. Pugh II Vice President, General
Counsel and Secretary
Acknowledged and agreed on
May 30, 2006:
/s/ Robert E. Alderson Robert E. Alderson, Esquire
cc: Robert Walker, Esquire
-3-
|
Exhibit 10.1
Federal Home Loan Banks P&I Funding and Contingency Plan Agreement
This Federal Home Loan Banks P&I Funding and Contingency Plan Agreement
(“Agreement”) is entered into as of this 20th day of July, 2006 (the “Effective
Date”) by and among the Office of Finance (the “OF”) and each of the Federal
Home Loan Banks (“Banks”). The OF and the Banks are sometimes referred to herein
individually as a “party” and collectively as the “parties.” All references in
this Agreement to any of the parties to this Agreement include such party or any
successor entity.
WHEREAS, the Banks are jointly and severally liable for the payment of
consolidated obligations issued pursuant to Section 11 of the Federal Home Loan
Bank Act, as amended (12 U.S.C. §1431) (“COs”);
WHEREAS, the OF has the authority under 12 CFR § 985.6(a) to issue and service
(including making timely payments on principal and interest due, subject to 12
CFR §§ 966.8 and 966.9) consolidated obligations issued on behalf of the Banks
pursuant to, and in accordance with, the policies and procedures established by
the OF Board of Directors; and
WHEREAS, the Federal Reserve Board has announced a change in its Policy
Statement on Payments System Risk (as the same may be amended, modified or
supplemented, the “PSR Policy”) that will cause the PSR Policy to be applied to
the FHLBanks beginning July 20, 2006; and
WHEREAS, the OF and a task force of the Debt Management Sub-Committee of the
Financial Officers’ Conference of the Banks have developed P&I Funding and
Contingency Plan Procedures (as the same may be amended, modified, or
supplemented, the “Procedures”) to deal with the possibility that a Bank may not
make a payment of debt service on COs to the OF on a timely basis following the
application of the PSR Policy to the Banks; and
WHEREAS, the OF Board of Directors has approved the Procedures and determined
that the OF should obtain the written agreement of the Banks on several matters
relating to the Procedures, which matters are included in this Agreement; and
WHEREAS, the Federal Housing Finance Board (the “Finance Board”) has supported
the adoption of the Procedures by issuing the waiver attached hereto as Exhibit
A (as the same may be amended, modified or supplemented, the “Waiver”) of its
prohibition of the direct placement of COs with FHLBanks contained in 12 CFR §
966.8(c), to accommodate the implementation of the Procedures, based in part on
its view that timely payment of all principal and interest to investors in COs
is essential to maintain the confidence of investors and potential investors in
COs; and
WHEREAS, the Waiver provides that the interest rate paid by the Bank that has
not remitted all the funds to the OF by the agreed upon deadline on the CO
issued pursuant to the Waiver shall be at least 500 basis points above the
federal funds rate.
1
--------------------------------------------------------------------------------
NOW THEREFORE, in consideration of the mutual promises set forth herein and
other good and valuable consideration, the receipt and sufficiency of which the
parties acknowledge, the parties hereby agree as follows:
1. Authorization of Issuance of COs
Each Bank agrees that if it is a “Delinquent Bank” (as defined below), the OF
may cause one or more overnight “Plan COs” (as defined below) to be issued on
behalf of the Delinquent Bank for the benefit of one or more “Contingency Banks”
(as defined below), each such Plan CO to be issued to a Contingency Bank in the
principal amount equal to the amount of funds provided by that Contingency Bank
on behalf of that Delinquent Bank, to mature on the following Business Day (as
defined below), and to bear interest on such principal amount from the date of
issuance to but not including that maturity date, due and payable on that
maturity date, at the rate per annum (the “Base Cost”) equal to (a) the
overnight fed funds quote obtained by the OF from a recognized funds broker to
be paid for any available funds delivered to the OF by a Contingency Bank or
withheld from its “positive net position” as described in Section 2 of this
Agreement or (b) the actual cost if funds are purchased by that Contingency Bank
in the open market and delivered to the OF. All such interest shall be
calculated on an actual/360 basis based on the number of days the Plan CO is
outstanding, including non-Business Days. The Delinquent Bank shall also be
obligated to pay “Additional Interest” as set forth in Section 3 of this
Agreement, all or a portion of which will satisfy the obligation of the
Delinquent Bank under the Waiver to pay an interest rate on the Plan CO that is
at least 500 basis points above the federal funds rate.
The OF shall issue a Plan CO in physical form under those circumstances and
apply the proceeds therefrom on behalf of that Delinquent Bank as provided for
in the Procedures. Each Bank hereby authorizes the OF, and the OF hereby agrees,
to hold any Plan COs issued as agent for each such Bank when it acts as a
Contingency Bank.
For purposes of this Agreement,
a “Delinquent Bank” means a Bank that misses any funding time specified in the
Procedures, including a funding time for the repayment of Plan COs; and
a “Plan CO” means a CO issued on behalf of a Delinquent Bank to one or more
Contingency Banks. For the avoidance of doubt, although a Delinquent Bank is
primarily responsible for repayment of a Plan CO issued on its behalf, each Plan
CO is the joint and several obligation of all 12 Banks; and
a “Contingency Bank” means any Bank that provides funds for a Delinquent Bank
under the Procedures; and
“Business Day” means any day other than (i) a Saturday, (ii) a Sunday or
(iii) any day on which banking institutions in New York City are authorized or
required by law or executive order to close.
2
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2. Use of Proceeds to Purchase COs
Each Bank shall be obligated to provide and authorizes the OF to apply any
“positive net position” (i.e., the amount by which end-of-day proceeds received
by a Bank from sale of COs on one day exceed payments by that Bank on COs on the
same day) of that Bank to the purchase of a Plan CO issued on behalf of a
Delinquent Bank, thereby causing such Bank to become a Contingency Bank, based
on the priority established in the matrix attached hereto as Exhibit B
(“Contingency Funding Matrix”) and otherwise in accordance with the Procedures.
3. Additional Interest
Each Bank agrees that if it is a Delinquent Bank, then it will pay an amount
(“Additional Interest”) in accordance with the following schedule in addition to
interest equal to the Base Cost:
1st offense – 500 basis points per annum of the delinquent amount 2nd offense
– 750 basis points per annum of the delinquent amount
3rd and subsequent offense – 1,000 basis points per annum of the delinquent
amount
The Additional Interest will be calculated on an actual/360 basis based on the
actual number of days the related Plan CO is outstanding, including non-Business
Days, from the date of issuance to but excluding the stated maturity date. For
purposes of this calculation, Additional Interest attributable to a delinquent
amount that is not related to the principal amount of a Plan CO (i.e., because
the Delinquent Bank pays all or a portion of its delinquent amount after a
deadline but before a Contingency Bank is entitled to have a Plan CO issued for
its benefit on behalf of the Delinquent Bank with respect to such amount) will
be assessed on that delinquent amount assuming that a Plan CO was issued with a
principal amount equal to that delinquent amount and that the Plan CO would
mature on the next Business Day.
For purposes of calculating Additional Interest, each different time deadline
established under the Procedures will accrue its own separate count of the
number of offenses, so that a Delinquent Bank will pay a separate amount for
each such time deadline missed, and the step-up in Additional Interest for the
occurrence of a particular offense will only be measured with regard to offenses
that have occurred within the 36-month period ending on the date of that
particular offense (the “Delinquency Measurement Period”). For example, if a
Delinquent Bank twice misses a morning deadline and once misses an afternoon
deadline, all as established under the Procedures, within a Delinquency
Measurement Period, then the Delinquent Bank shall have been subject to
Additional Interest of 500 basis points with respect to the first morning
deadline missed, Additional Interest of 750 basis points with respect to the
second morning deadline missed, and Additional Interest of 500 basis points with
respect to the afternoon deadline missed.
Each Bank agrees that (i) for each Plan CO issued, the first 100 basis points of
the Additional Interest shall be assessed against the Delinquent Bank for the
benefit of the Contingency Bank that purchased the Plan CO as provided in
Section 1 of this
3
--------------------------------------------------------------------------------
Agreement, and the balance of the Additional Interest assessed against the
Delinquent Bank (i.e., 400 basis points, 650 basis points, or 900 basis points)
will be divided equally among the Banks (including the Contingency Banks) that
are not Delinquent Banks with respect to the same funding time specified in the
Procedures and (ii) for Additional Interest attributable to a delinquent amount
that is not related to a Plan CO, the Additional Interest will be divided
equally among the Banks that are not Delinquent Banks with respect to the same
funding time specified in the Procedures. Each of the Banks and the OF agree
that any Additional Interest will be allocated and paid through the monthly
assessment from the OF, and that the Additional Interest is not the joint and
several obligation of the Banks.
Notwithstanding anything in this Section 3 or Section 7(a) or (b) of this
Agreement to the contrary, and subject to Sections 5(a) and (d) below, each Bank
agrees that assessment of the Additional Interest shall be subject to the
appellate process contained in the Procedures and that the OF shall have the
authority to waive all or any portion of the Additional Interest or excuse the
occurrence of any offense as provided for in the Procedures. To the extent
permitted under the Waiver, the assessment of Additional Interest shall be
suspended pending completion of the appellate process.
4. Reallocation of COs
Each Bank agrees that if a Bank is a Delinquent Bank, with respect to each Plan
CO issued to a Contingency Bank on behalf of a Delinquent Bank, each Bank that
is a “Reallocation Bank” (as defined below) shall immediately have the
obligation to purchase that Reallocation Bank’s “Pro Rata Share” (as defined
below) of such Plan CO from that Contingency Bank, with such obligation to
purchase being effective immediately upon the issuance of the Plan CO , subject
to the proviso in the following paragraph.
Each Bank agrees that if it is a Reallocation Bank, it will wire to the
Contingency Bank that holds a Plan CO an amount equal to (i) its Pro Rata Share
of the principal amount of that Plan CO, plus (ii) accrued interest thereon from
the date of issue of the Plan CO until its stated maturity date equal to the
Base Cost, not later than 1:00 p.m., Eastern Time, on the second Business Day
following the date of issuance of that Plan CO; provided, however, that such
Reallocation Bank shall not be required to wire funds to the extent that it
determines in good faith such purchase will violate any rule, regulation or
binding policy of the Finance Board, and under those circumstances such
Reallocation Bank shall be excused from its obligation to make such payment to
the Contingency Bank, but not from its joint and several obligation, with
respect to such Plan CO. The wire shall be sent to the account identified by the
Contingency Bank for that purpose, and time is of the essence with respect to
the wire. In the event there are multiple Plan COs issued on a particular date,
Reallocation Banks shall not favor any Contingency Bank over any other
Contingency Bank, and shall purchase its Pro Rata Shares of such Plan COs on a
proportional basis. To the extent that a Plan CO is repaid prior to the
settlement of a Reallocation Bank’s obligations to purchase its Pro Rata Share,
that Pro Rata Share shall be reduced proportionally by the amount so repaid.
4
--------------------------------------------------------------------------------
Each Contingency Bank shall promptly notify the OF of its receipt of payment of
the Pro Rata Share amounts from the Reallocation Banks. Promptly following
receipt of that notice and confirmation of the payment from the Reallocation
Banks, the OF shall cancel such original outstanding physical Plan CO and shall
reissue replacement physical Plan COs with the principal amounts representing
the respective Pro Rata Shares of the Reallocation Banks that have paid for
their purchase of the Plan CO, along with a Plan CO representing the balance of
the principal amount of the original Plan CO that is retained by the Contingency
Bank. Each such reissued Plan CO remains a “Plan CO” for purposes of this
Agreement and the Procedures, but a Reallocation Bank will not be treated as the
Contingency Bank with respect thereto. Each Bank hereby authorizes the OF, and
the OF hereby agrees, to hold any such reissued Plan COs payable to such Bank as
agent for such Bank’s benefit, and to pay debt service on such CO to the record
owner of such Plan CO as reflected on the OF’s books following reissuance.
For purposes of this Section,
a “Reallocation Bank” with respect to a Plan CO means each Bank other than
(i) any Delinquent Bank on behalf of which that Plan CO or any other Plan CO was
originally issued on the same date, and (ii) the Contingency Bank that owns that
Plan CO;
“Pro Rata Share” of a Reallocation Bank means a fraction, the numerator of which
is the total amount of outstanding COs for which the Reallocation Bank is
primary obligor as of the Most Recent Measurement Date, and the denominator of
which is the total amount of outstanding COs for which all Reallocation Banks
and the Contingency Bank are primary obligor as of the Most Recent Measurement
Date; and
“Most Recent Measurement Date” means the most recent month-end data calculated
by the OF and available on the OF’s Debt Servicing System, which amount is not
adjusted for inter-bank ownership of COs.
The Banks agree that the provisions of this Section 4 shall not affect the
allocation of Additional Interest pursuant to the fourth paragraph of Section 3
of this Agreement, including without limitation the allocation of the first 100
basis points of Additional Interest pursuant to such paragraph to a Contingency
Bank that acquired the Plan CO at original issuance.
One or more Contingency Banks and Reallocation Banks may agree among themselves
to net their payments to each other that are due as a result of multiple Plan
COs having been issued and subject to reallocation on the same date.
Each Bank agrees that the formula for determining the Pro Rata Shares has been
agreed to by the Banks solely for the purpose of this Agreement and is not
intended to represent an agreed upon allocation of risk or responsibility for
any other purpose.
The provisions of this Section 4 shall survive any termination of this Agreement
with respect to any Plan CO issued prior to such termination.
5
--------------------------------------------------------------------------------
5. Acknowledgements
Each Bank acknowledges and agrees that:
(a) the Base Cost plus the Additional Interest assessed against a Delinquent
Bank may not be lower than the amount required to be paid by the Delinquent Bank
under the Waiver;
(b) the OF shall be required to provide any notice of issuance of a Plan CO
hereunder to the Office of Supervision of the Finance Board, which notice is
presently required by the Waiver to be provided no later than 5:00 P.M. eastern
time on the date of the issuance of the Plan CO;
(c) its agreement in Section 1 of this Agreement with respect to any Plan CO
issued on its behalf as a Delinquent Bank satisfies the regulatory requirement
contained in 12 CFR § 966.8(b) that provides that COs may be offered for sale
only in the event Banks are committed to take the proceeds;
(d) the appellate process referred to in the last paragraph of Section 3 of
this Agreement will be subject to the terms of the Waiver;
(e) no Bank will be entitled to a Plan CO in the amount of any positive net
position except to the extent its end-of-day positive net position is used to
purchase a Plan CO; and
(f) the Additional Interest will be calculated based on the principal amount
of a Plan CO, as well as any other delinquent amount paid late to the OF by the
Delinquent Bank.
6. Representations and Warranties of the Parties
As of the date of its execution and delivery of this Agreement, each party
represents and warrants to the other parties that:
(a) This Agreement is within such party’s powers and has been duly authorized by
all necessary corporate action.
(b) This Agreement has been duly executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party enforceable in
accordance with its terms.
7. Termination and Amendments
(a) This Agreement will be deemed to be effective as of the Effective Date and
will continue in full force until such time as (i) at least two-thirds (2/3) of
the Banks agree to its termination, (ii) the Finance Board rescinds the Waiver
or (iii) the Finance Board takes any action, including without limitation
modification of the Waiver, that makes compliance by the OF or the Banks with
this Agreement not commercially reasonable.
6
--------------------------------------------------------------------------------
(b) This Agreement may be amended only in a signed writing executed and
delivered by all of the Banks and the OF. Any such amendment shall be effective
as of the effective date set forth in the amendment.
(c) This Agreement shall also be subject to termination at 11:59 p.m. on
December 31, 2008, and at 11:59 p.m. on each third December 31 thereafter (e.g.
December 31, 2011, December 31, 2014, etc.) (“Expiration Time”) if at least
one-third ( 1/3) of the Banks provide notice of their respective election to
terminate to each other Bank and the OF at least one year prior to the
Expiration Time. Such notice shall identify with reasonable specificity the
reason or reasons such Bank wishes to terminate the Agreement at the next
Expiration Time. The Banks and the OF agree to negotiate in good faith toward
the resolution of the issues raised in the notices of termination with a view of
reaching agreement on a new agreement at or prior to the Expiration Time.
8. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the successors
and permitted and authorized assigns of each Bank and the OF.
9. Governing Law; Severability
This Agreement shall be governed by the statutory and common law of the United
States and, to the extent federal law incorporates or defers to state law, the
laws (exclusive of the choice of law provisions) of the State of New York. Any
term or provision of this Agreement that is determined to be invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement.
10. Notice
Except for any notices of payment delivered pursuant to Section 4 of this
Agreement, which shall be delivered promptly either telephonically or
electronically, any notice required or permitted to be given or made under this
Agreement, including a notice to effect a change in a party’s address for
notice, must be in writing and addressed to the other parties at the addresses
of such parties set forth beneath their signatures below, and will be deemed to
be properly given or made on the earliest of (i) actual delivery, (ii) two
(2) Business Days after being sent, with delivery charges paid by the sending
party, by a nationally recognized commercial courier service for delivery on the
next Business Day, and (iii) three (3) Business Days after being sent through
the United States Postal Service, certified mail, return receipt requested,
postage prepaid.
7
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11. Counterparts
This Agreement may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same agreement.
12. Entire Agreement; Conflicts
This Agreement constitutes the entire agreement of the parties and supersedes
all prior understandings or agreements, oral or written, among the parties on
the subjects addressed in this Agreement. Nothing in this Agreement, including
without limitation the right of Banks to terminate it or the right of Banks to
withhold approval of an amendment, shall be construed to (i) conflict with or
limit the authority of the OF to carry out its duties pursuant to law, including
without limitation Federal Housing Finance Board regulations; or (ii) alter the
Banks’ joint and several liability on COs, including the Plan COs issued
hereunder. This Agreement does not constitute “an agreement to obtain financial
assistance to meet a Bank’s current obligations… due during this quarter”, a
“consolidated obligation payment plan,” an “inter-Bank assistance agreement” or
“a payment on any [CO] on behalf of another Bank” as these terms are used in 12
CFR § 966.9. If any applicable provision contained in the Procedures
irreconcilably conflicts with any express provision of this Agreement, then such
express provision of this Agreement shall control.
13. No Third Party Rights Created
Nothing in this Agreement shall create or be deemed to create any rights in any
third party.
14. Suspension of Obligations
If the Finance Board issues any order or enters into or amends any written
agreement, including without limitation a written agreement within the meaning
of 12 USC § 1422b(a)(5), that prohibits or prevents a party to this Agreement
from either being a party to this Agreement, or from performing its obligations
under this Agreement, after the Effective Date, then that party’s duty to
perform its obligations under this Agreement shall be suspended while such order
by or agreement with the Finance Board is in effect.
[Signature Page to Follow]
8
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IN WITNESS WHEREOF, this Agreement has been executed, on the date(s) set forth
below, as of the day and year first above written.
Federal Home Loan Bank of Atlanta
Federal Home Loan Bank of Boston
By:
/s/ W. Wesley McMullan
President:
/s/ Michael A. Jessee
Name: W. Wesley McMullan
Date: 5-23-06
Title: Executive Vice President
Address for notice:
By:
/s/ D. Haddon Foster, II
111 Huntington Avenue
Name: D. Haddon Foster, II
Boston, MA 02199
Title: First Vice President
Date:
May 23, 2006
Address for notice:
1475 Peachtree Street, NE
Atlanta, GA 30309
Attention: Director, Financial Management
Federal Home Loan Bank of Chicago
Federal Home Loan Bank of Cincinnati
President:
/s/ Mike Thomas
President:
/s/ David H. Hehman
Date:
6/16/06
Date:
June 16, 2006
Address for notice:
Address for notice:
Federal Home Loan Bank of Chicago
Federal Home Loan Bank of Cincinnati
111 East Wacker Drive
221 East Fourth Street, Suite 1000
Chicago, Illinois 60601
Cincinnati, OH 45202
Attention: General Counsel
SVP/Treasurer:
/s/ Carole L. Cossé
Federal Home Loan Bank of Dallas
Federal Home Loan Bank of Des Moines
President:
/s/ Terry Smith
President:
/s/ Neil N. Fruechte
Date:
5/10/06
Date:
May 11, 2006
Address for notice:
Address for notice:
8500 Freeport Parkway South
907 Walnut
Suite 100
Des Moines, IA 50309
Irving, Texas 75063
Federal Home Loan Bank of Indianapolis
Federal Home Loan Bank of New York
President:
/s/ Martin L. Heger
President:
/s/ Alfred A. DelliBovi
Date:
June 1, 2006
Date:
May 22, 2006
Address for notice:
Address for notice:
8250 Woodfield Crossing Blvd.
101 Park Avenue, Floor 5
Indianapolis, IN 46240
New York, NY
Attention: Milton Miller, CFO
10178-0599
9
--------------------------------------------------------------------------------
Federal Home Loan Bank of Pittsburgh
Federal Home Loan Bank of San Francisco
President:
/s/ John R. Price
President:
/s/ Dean Schultz
Date: May 24, 2006
Date: April 27, 2006
Address for notice:
Address for notice:
601 Grant Street 600 California Street, 4th Floor Attn: Capital Markets
San Francisco, California 94108 Pittsburgh, PA 15219
Federal Home Loan Bank of Seattle
Federal Home Loan Bank of Topeka
President:
/s/ James E. Gilleran
President:
/s/ Andrew J. Jetter
Date: May 17, 2006
Date: May 12, 2006
Address for notice:
Address for notice:
1501 Fourth Ave., Ste. 1800
Federal Home Loan Bank of Topeka
Seattle, WA 98101-1693
One Security Benefit Place, Suite100
Topeka, KS 66606-2444
Attn: General Counsel
Office of Finance
Managing Director:
/s/ John K. Darr
Date: 5-22-06
Address for notice:
Two Fountain Square 11921 Freedom Drive Suite 1000 Reston, VA 20190
10
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EXHIBIT A
WAIVER
LOGO [g74986img.jpg]
Number:
Date:
2005-22
December 14, 2005
FEDERAL HOUSING FINANCE BOARD
Waiver Concerning the Direct Placement of Consolidated Obligations
WHEREAS, section 2A of the Federal Home Loan Bank Act (12 U.S.C. § 1422a(a)(3))
requires the Federal Housing Finance Board (Finance Board) to ensure that the
Federal Home Loan Banks (Banks) remain adequately capitalized and able to raise
funds in the capital markets to the extent consistent with ensuring the safe and
sound operation of the Banks;
WHEREAS, timely payment of all principal and interest to investors in
consolidated obligations (COs) is essential to maintain the confidence of
investors and potential investors in COs;
WHEREAS, the Federal Reserve Bank of New York will implement procedures that
will prevent a Bank or any other government sponsored enterprise from incurring
an overdraft in the accounts at the Federal Reserve Bank of New York used to pay
the principal and interest due on securities;
WHEREAS, the Banks Office of Finance (OF) serves as agent for each Bank in
remitting to the Federal Reserve Bank of New York all funds due for principal
and interest payments on COs;
WHEREAS, under 12 C.F.R. §§ 907.2 and 907.6, any party may request a waiver of a
provision, restriction, or requirement of the Finance Board regulations not
otherwise required by law if such waiver is not inconsistent with the law, does
not adversely affect any substantial existing rights and the Finance Board finds
that application of the restriction would adversely effect achievement of the
purposes of the Bank Act, or upon a showing of good cause;
WHEREAS, on October 18, 2005, the OF submitted to the Finance Board a request to
waive the prohibition on direct placement of COs in 12 C.F.R. § 966.8(c) when a
Bank has not provided to the OF by the agreed upon deadline all funds for
principal and interest payments due that day on COs, or portions of COs, for
which that Bank is the primary obligor; and
WHEREAS, Finance Board staff has reviewed the waiver request and determined that
it is consistent with the Bank Act, for good cause, and raises no legal or
safety and soundness concerns if the waiver is granted pursuant to the terms of
this resolution.
NOW, THEREFORE, IT IS RESOLVED that effective July 1, 2006, the Board of
Directors hereby waives 12 C.F.R. § 966.8(c) when direct placement of COs is
necessary to assure that the Federal Reserve Bank of New York has sufficient
funds to timely pay all principal and interest due that day on COs or portions
of COs;
A-1
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Resolution Number 2005-22
Page 2 of 2
IT IS FURTHER RESOLVED that the OF must notify the Office of Supervision no
later than 5:00 pm, eastern time, on any day it directly places a CO pursuant to
this waiver; and
IT IS FURTHER RESOLVED that the interest rate paid by the Bank that has not
remitted all the funds to the OF by the agreed upon deadline on the CO issued
pursuant to this waiver shall be at least 500 basis points above the federal
funds rate.
By the Board of Directors
of the Federal Housing Finance Board
/s/ Ronald A. Rosenfeld Ronald A. Rosenfeld Chairman
--------------------------------------------------------------------------------
EXHIBIT B
Contingency Funding Matrix
Priority
1
2
3
4
5
6
7
8
9
10
11
12
Jan
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
Feb
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
Mar
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
Apr
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
May
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
Jun
INDP
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
Jul
CHIC
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
Aug
DSMN
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
Sep
DALL
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
Oct
TPKA
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
Nov
SNFR
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
Dec
STTL
BOST
NWYK
PITT
ATLA
CINC
INDP
CHIC
DSMN
DALL
TPKA
SNFR
B-1 |
EXHIBIT 10.2
NESTOR, INC.
Incentive Stock Option Agreement
Granted Under 2004 Stock Incentive Plan
1.
Grant of Option.
This agreement evidences the grant by Nestor, Inc. a Delaware corporation (the
“Company”), on May 5, 2006 (the “Grant Date”) to Teodor Klowan, Jr., an employee
of the Company (the “Participant”), of an option to purchase, in whole or in
part, on the terms provided herein and in the Company’s 2004 Stock Incentive
Plan (the “Plan”), a total of 75,000 shares (the “Shares”) of common stock,
$.01 par value per share, of the Company (“Common Stock”) at $3.40 per Share.
Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time,
on May 5, 2014 (the “Final Exercise Date”).
It is intended that the option evidenced by this agreement shall be an incentive
stock option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the “Code”). Except as
otherwise indicated by the context, the term “Participant”, as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2.
Vesting Schedule.
Subject to Section 8 hereof, this option will become exercisable (“vest”) as to
20% of the original number of Shares upon the Grant Date, May 5, 2006, and as to
an additional 20% of the original number of Shares at the end of each successive
one-year period following the first anniversary of the Grant Date until the
fourth anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the option is
not exercised in any period to the maximum extent permissible it shall continue
to be exercisable, in whole or in part, with respect to all Shares for which it
is vested until the earlier of the Final Exercise Date or the termination of
this option under Section 3 hereof or the Plan.
3.
Exercise of Option.
(a) Form of Exercise. Each election to exercise this option shall be in writing,
signed by the Participant, and received by the Company at its principal office,
accompanied by this agreement, and payment in full (i) in cash, (ii) by (A)
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price and any required tax withholding or (B) delivery by the Participant to the
Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price and any required tax withholding, (iii) if
the fair market value of a share of Common Stock as determined by (or in a
manner approved by) the Board in good faith ("Fair Market Value") is greater
than the per share exercise price, by surrender of this Option in which event
the Company shall issue to the Participant a number of shares of Common Stock
equal to the product of the number of Shares as to which this Option is being
exercised multiplied by the quotient of the difference between the Fair Market
Value less the per share exercise price divided by the Fair Market Value, or
(iv) by any combination of the above permitted forms of payment. The Participant
may purchase less than the number of shares covered hereby, provided that no
partial exercise of this option may be for any fractional share or for fewer
than one hundred whole shares.
1
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(b) Continuous Relationship with the Company Required. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee or officer of, the Company or any
parent or subsidiary of the Company as defined in Section 424(e) or (f) of the
Code (an “Eligible Participant”).
(c) Termination of Relationship with the Company. If the Participant ceases to
be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall
terminate three months after such cessation (but in no event after the Final
Exercise Date), provided that this option shall be exercisable only to the
extent that the Participant was entitled to exercise this option on the date of
such cessation (except as limited by Section 8 hereof). Notwithstanding the
foregoing, if the Participant, prior to the Final Exercise Date, violates the
non-competition or confidentiality provisions of any employment contract,
confidentiality and nondisclosure agreement or other agreement between the
Participant and the Company, the right to exercise this option shall terminate
immediately such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or becomes
disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final
Exercise Date while he or she is an Eligible Participant and the Company has not
terminated such relationship for “cause” as specified in paragraph (e) below,
this option shall be exercisable, within the period of one year following the
date of death or disability of the Participant, by the Participant (or in the
case of death by an authorized transferee), provided that this option shall be
exercisable only to the extent that this option was exercisable by the
Participant on the date of his or her death or disability, and further provided
that this option shall not be exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise Date,
is discharged by the Company for “cause” (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. “Cause” shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for “Cause” if the Company determines, within
30 days after the Participant’s resignation, that discharge for cause was
warranted.
4.
Agreement in Connection with Public Offering.
The Participant agrees, in connection with the initial underwritten public
offering of the Company’s securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company’s securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
5.
Withholding.
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option. If the Company
exercises its right to pay to the Participant the Cash Value in lieu of issuing
Common Stock to the Participant, the Company shall withhold such taxes from the
payment to the Participant.
2
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6.
Nontransferability of Option.
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
7.
Provisions of the Plan.
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
8.
Limitation on First Exercise.
Notwithstanding any other provisions of the Plan, no option granted hereunder
can be exercised earlier than the earlier to occur of (i) the fourth anniversary
of the date hereof and (ii) the date that the Participant dies, becomes disabled
(within the meaning of Section 22(e)(3) of the Code) or ceases to be an Eligible
Participant for any reason, except as provided in paragraphs 3(e).
IN WITNESS WHEREOF, the Company has caused this option to be executed under its
corporate seal by its duly authorized officer. This option shall take effect as
a sealed instrument.
Dated: May 5, 2006
NESTOR, INC.
By:
/s/ Nigel P. Hebborn
Name: Nigel P. Hebborn
Title: Treasurer and Chief Financial Officer
PARTICIPANT’S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of the
Company’s 2004 Stock Incentive Plan.
NESTOR, INC.
By:
/s/ Teodor Klowan, Jr.
Name: Teodor Klowan, Jr.
Address: 286 Prospect Street
Franklin, MA 02038
3
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|
EXHIBIT 10.1
SECOND AMENDMENT TO THE HOMEBANC MORTGAGE CORPORATION
401(K) RETIREMENT PLAN
THIS SECOND AMENDMENT TO THE HOMEBANC MORTGAGE CORPORATION 401(K) RETIREMENT
PLAN (the “Plan”) is made effective on the date indicated below by HomeBanc
Corp.
W I T N E S S E T H:
WHEREAS, the Plan was adopted effective May 1, 2000 and amended and restated
effective April 1, 2005; and
WHEREAS, certain employees of HomeBanc Corp. and HomeBanc Mortgage Corporation
will be terminated and be immediately rehired by a joint venture created between
HomeBanc Mortgage Corporation and an unrelated third party (the “Joint
Venture”);
WHEREAS, subsequent to their termination of their employment, these individuals
will have their account balance transferred to the HMB Mortgage Partners LLC
401(k) Retirement Plan;
WHEREAS, HomeBanc Corp. desires to recognize services for eligibility and
vesting purposes for those individuals who return to employment with HomeBanc
Corp. or HomeBanc Mortgage Corporation following their transfer from and to a
Joint Venture; and
WHEREAS, HomeBanc Corp. now desires to amend the Plan to provide for such
transfers and for other reasons.
NOW, THEREFORE, the Plan is hereby amended as follows:
1.
A new Appendix A is hereby added to the Plan as follows:
“APPENDIX A
TRANSFERS OF PARTICIPANTS BETWEEN THIS PLAN
AND THE HMB 401(k) PLAN
1.01
Background. From time to time, it is anticipated that a Participant in this Plan
will transfer employment from an Employer to a Joint Venture employer. A Joint
Venture employer is not part of the Employer’s controlled group of corporations.
If the Joint Venture participates in the HMB 401(k) Plan, the provisions of this
Appendix A shall apply and shall supersede any conflicting provisions in this
Plan to the contrary.
1.02
Initial Joint Venture and Transfer of Employees. On July 10, 2006, certain
employees of HomeBanc Corp. and/or HomeBanc Mortgage Corporation terminated
employment and were immediately rehired by a joint venture between HomeBanc
Mortgage Corporation and an unrelated
--------------------------------------------------------------------------------
third party. HomeBanc Mortgage Corporation owns less than 80% of this joint
venture and accordingly, the joint venture is not part of the HomeBanc Mortgage
Corporation controlled group. Prior to the transfer of employment, such
individuals participated in this Plan. Subsequent to August 1, 2006, those
individuals who did not previously request a distribution of their vested
account balance from this Plan will have their account balance in this Plan
transferred from the HomeBanc Plan to this Plan in a trustee to trustee
transfer. The provisions of this Appendix A shall apply to the transfer of such
account balances.
1.03
Subsequent Joint Ventures. It is anticipated that additional Joint Ventures
shall be formed and Employees will be transferred from HomeBanc Corp., HomeBanc
Mortgage Corporation or their affiliates to the Joint Venture. The provisions of
this Appendix A shall apply to the transfer of such account balances.
1.04
Provisions Governing the Transfer of Employees
(a)
Transfers from the HomeBanc 401(k) Plan. An Eligible Employee who immediately
prior to his or her employment by a Joint Venture was employed by HomeBanc Corp.
or an Affiliated Employer and who participated in this Plan shall be known as a
“HomeBanc Transferee.” A HomeBanc Transferee (other than as provided in Section
1.02) shall not be permitted to receive a distribution of his or her Account
balance in this Plan. Instead, the assets and liabilities (including any plan
loan) from this Plan attributable to a HomeBanc Transferee shall be transferred
from the HomeBanc Plan to the HMB 401(k) Plan as determined by the plan
administrator of each plan. All amounts transferred to the HMB 401(k) Plan shall
become 100% immediately vested including amounts held in the Match Account and
the Profit Sharing Account. All amounts transferred shall be subject to the
terms and conditions of the HMB 401(k) Plan.
(b)
Transfers from the HMB 401(k) Plan to this Plan. An Eligible Employee who
immediately prior to his or her employment by an Employer was employed by a
Joint Venture or its affiliates and who participated in the HMB 401(k) Plan
shall be known as a “Joint Venture Transferee.” The assets and liabilities
(including any plan loan) from the HMB 401(k) Plan attributable to the Joint
Venture Transferee shall be transferred from the HMB 401(k) Plan to this Plan as
determined by the plan administrator of each plan. All amounts transferred shall
be subject to the terms and conditions of this Plan.
- 2 -
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(c)
Investments. The Plan shall accept trustee to trustee transfers from the HMB
Mortgage Partners LLC 401(k) Retirement Plan. All amounts shall initially be
invested in accordance with rules established by the Administrator.
(d)
Vesting. All amounts transferred from the HMB 401(k) Plan to this Plan shall
remain 100% vested.
(e)
Plan Administration. The Administrator may take such action as is necessary to
account for the amounts transferred from the HMB 401(k) Plan including, but not
limited to, the establishment of sub-accounts as the Administrator deems
appropriate.
(f)
Amendment. In addition to the amendment powers set forth in Section 13.02, the
Board of Directors delegates to any senior officer of HomeBanc Corp. the right
to approve and adopt, without approval of the Board of Directors, any amendment
to this Appendix A.
1.05 Break in Service. A Participant who formerly participated in the Plan
and who is reemployed by an Employer after having been employed by a Joint
Venture shall participate in the Plan immediately upon reemployment (if the
Participant is an Eligible Employee) and shall be treated as not having incurred
a Break in Service as a result of his or her employment with the Joint Venture.
In addition, Years of Service with a Joint Venture shall be recognized as Years
of Service for purposes of this Plan.
1.06 Limitations on In-Service Distributions. Amounts transferred from the
HMB 401(k) Plan to this Plan attributable to a Participant’s non-elective
contributions (e.g., profit sharing contributions required by a safe harbor
401(k) plan) may not be distributed in hardship distribution under this Plan.
1.07
Definitions.
(a)
“Joint Venture” means a joint venture between (i) HomeBanc Mortgage Corporation
or an Affiliated Employer and (ii) an unrelated third party in which HomeBanc
Mortgage Corporation or an Affiliated Employer owns less than 80% of the joint
venture and which joint venture participates in the HMB 401(k) Plan.
(b)
“HMB 401(k) Plan” means the HMB Mortgage Partners LLC 401(k) Retirement Plan
sponsored by HMB Mortgage Partners LLC and established August 1, 2006.”
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2.
Subsection 1.57(a) of the Plan is hereby amended by adding at the end of this
subsection the following sentence:
“For purposes of this definition, amounts that are not available to a
Participant in cash in lieu of group health coverage because the Employee is not
able to certify that he or she has other health coverage shall be treated as
amounts that were not includible in the gross income of such Participant by
reason of Code section 125, or as “deemed section 125 compensation;” provided,
however, that an amount is permitted to be treated as “deemed section 125
compensation” only if the Employer does not otherwise request or collect
information regarding the Participant’s other health coverage as part of the
enrollment process for the health plan.”
3.
Subsection 3.09(b) of the Plan is hereby deleted and a new subsection 3.09(b) is
replaced as follows:
“(b)
Correction of Excess Annual Additions. If for any Limitation Year, the amount to
be allocated to a Participant’s Account exceeds the limitation described in
subsection 3.09(a) (and for this purpose Employer Matching Contributions and
Profit Sharing Contributions shall be deemed to be allocated after After-Tax
Contributions and 401(k) Contributions), the excess will be disposed of as
follows. First, if the Participant’s Annual Additions exceed the limitation
described in subsection 3.09(a) as a result of (i) a reasonable error in
estimating the Participant’s Compensation, (ii) a reasonable error in estimating
the amount of After-Tax Contributions and 401(k) Contributions that the
Participant could make under Code section 415 or (iii) other facts and
circumstances that the Internal Revenue Service finds justifiable, the Fiduciary
Committee may direct the Trustee to return to the Participant his After-Tax
Contributions followed by his 401(k) Contributions for such Plan Year to the
extent necessary to reduce the excess amount. Such returned After-Tax
Contributions and 401(k) Contributions shall be ignored in performing the
discrimination tests of section 3.08 of the Plan. Second, any excess annual
additions (beginning with Employer Matching Contributions followed by Profit
Sharing Contributions) still remaining after the return of After-Tax
Contributions and 401(k) Contributions shall be reallocated as determined by the
Fiduciary Committee among the Participants whose accounts have not exceeded the
limit in the same proportion that the Compensation of each such Participant
--------------------------------------------------------------------------------
- 4 -
bears to the Compensation of all such Participants. If such reallocation would
result in an addition to another Participant’s Account which exceeds the
permitted limit, that excess shall likewise be reallocated among the
Participants whose Accounts do not exceed the limit. However, if the allocation
or reallocation of the excess amounts pursuant to these provisions causes the
limitations of Code section 415 to be exceeded with respect to each Participant
for the limitation year, then any such excess shall be held unallocated in a
suspense account. If the suspense account is in existence at any time during a
Limitation Year, other than the Limitation Year described in the preceding
sentence, all amounts in the suspense account shall be allocated and reallocated
to Participants’ Accounts (subject to the limitations of Code section 415)
before any Contributions which would constitute annual additions may be made to
the Plan for that limitation year.”
4.
Subsection 7.03(a) of the Plan is hereby deleted and a new subsection 7.03(a) is
added as indicated below. The purpose of this amendment is to delete the third
sentence to the former subsection 7.03(a).
“(a) Restrictions. A Participant shall not be permitted to make a
withdrawal unless he is employed by the Employer or an Affiliated Employer. The
minimum withdrawal permitted under Plan sections 7.01 and 7.02 shall be $100 or,
if less, the total value of the Participant’s vested Accounts available for a
withdrawal. A Participant may not obtain more than two in-service withdrawals
each under Plan section 7.01(a) and (b) in any Plan year.”
5.
Subsection 13.01(a) of the Plan is hereby deleted and a new subsection 13.01(a)
is added as indicated below. The purpose of this amendment is to add a new
sentence to the end of Section 13.01(a).
“(a) Authority to Amend. The Board of Directors reserves the right at any
time or from time to time, and for any reason, to modify, alter or amend, in
whole or in part, any or all of the provisions of the Plan or its concomitant
Trust agreement, prospectively or retroactively, if deemed necessary or
appropriate, by a majority vote of its members at a meeting, by unanimous
consent in lieu of a meeting, or in any other manner permissible under
applicable state law. In addition, the Board of Directors in its sole discretion
may delegate all or part of the authority to amend the Plan or its concomitant
Trusts to an appropriate officer or officers of HomeBanc Corp. Specifically, the
Board of Directors delegates to any senior officer of the Company the right to
approve and adopt, without approval of the Board, any amendment required by law
or necessary to maintain the tax qualified status of the Plan or any amendment
that does not materially increase the costs associated with the Plan.”
- 5 -
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6.
Section 13.02 of the Plan is hereby deleted and a new subsection 13.02 is added
as indicated below. The purpose of this amendment is to clarify that a senior
officer may act as the designee of the board of directors in certain specified
occasions.
“13.02.
Additional Employers
(a) Adoption of Plan. If any company is or becomes a subsidiary of or
associated with HomeBanc Corp., the Board of Directors or its delegate
(including any senior officer of HomeBanc Corp.) may authorize the employees of
that subsidiary or associated company to participate in the Plan upon
appropriate action by that company necessary to adopt the Plan. By adopting the
Plan, such subsidiary or associated company shall be deemed to have delegated to
the Board of Directors the sole authority to amend, merge or otherwise modify
the Plan, except to the extent such authority has been delegated to an
appropriate officer or officers of HomeBanc Corp. Such Employer’s employees
shall be subject to the terms of the Plan; provided, however, that by a written
addendum to the Plan certain employees employed in one or more specified
divisions, plants, locations or other identifiable employee groups may be
excluded from participation in the Plan; and provided, further, that the terms
and provisions of the Plan with respect to such employees may be modified or
supplemented as described in such written addendum.
(b) Termination of Participation. Each Employer reserves the right to
terminate its participation in the Plan prospectively or to prospectively
discontinue accruals under the Plan with respect to its otherwise eligible
employees by action of its board of directors and in accordance with applicable
law. Further, with the consent of the Board of Directors, or its delegate, any
entity participating in the Plan may, by action of its board of directors,
withdraw from the Plan by giving six months’ advance notice of its intention to
the Administrator, unless a shorter notice period shall be agreed to in writing
by the Board of Directors, or its delegate. The withdrawal of an Employer shall
be effected in accordance with such terms and conditions as may be agreed upon
by the Board of Directors, or its delegate, and the withdrawing Employer under
applicable law. Should the Board of Directors or its delegate, and the
withdrawing Employer not reach agreement, the accrued benefits of affected
Participants shall continue to be held under the Plan until distributed. For
purposes of this Section 13.02, the Board designates any senior officer of the
Company as its delegate.”
7.
The provisions of this Amendment shall be effective August 30, 2006.
IN WITNESS WHEREOF, the Board of Directors of HomeBanc Corp. has caused this
Second Amendment to be duly executed as of the day and year first above written.
HOMEBANC CORP.
By: /s/ CHARLES W. MCGUIRE
Its: Executive Vice President, General
Counsel and Secretary
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00000000urn:schemas-microsoft-com:office:smarttags013f
Loan Agreement
Loan Agreement entered into this 12`h day of August, 2005 by and between the
f)CI USA, Inc., (hereinafter "MIU"), a StateNew York corporation, and AMEREX
Companies, Inc. (hereinafter, an placeStateOklahoma corporation, according to
the recitals, terms and conditions recited below.
PARTIES
The Company: AMEREX Companies, Inc. (the "Company"), with an address at 406
South placeCityBoulder, Suite 820 Tulsa, OK 74103.
Investor:
DCl USA, inc. and/or nominee ("DCIU"), with an address at 2(] West 640 Street,
addressStreetSuite 34G, placeCityNew York, StateNew York PostalCode10023.
RECITALS
DCTU agrees to loan to the Company a total of $400.000, to be delivered in two
separate
transactions, as follows:
The First Loan: Upon execution of this Agreement the first loan will be in the
amount of $300,000, evidenced by a promissory note arid will be secured by a
first deed of trust on property located at Leigh, Texas ("the Texas Property").
The interest rate shall be 1.25% per month. The Company shall make monthly
interest only payments at the end each month with the first month prorated from
execution to the end of the month, and the principal amount shall be due one
year from the Closing. No pre-payment penalty.
The Company shall pay DCIU 3% of the total loan amount ($9,000) at the Closing
as a loan processing fee.
The Second Loan. DCIU will, subsequent to the first loan date and within twenty
(20) days. provide the Company with a second loan iii the amount of $100,000.
evidenced by a second promissory note and second wrap deed of trust, the
execution of which is contingent upon the Company drawing funds against the
$100,000. The interest rate on the second loan shall be 1.25% per month,
interest payable only if the loan is drawn against and payable only upon
retirement of the debt. Principal and interest shall he due one year from the
Closing. No pre-payment penalty. DCIU shall have the right to produce, in lieu
of cash, 6,667 shares of DCIU common stock, valued for these purposes at
$100,000. In such event, upon the second loan due date, the Company may, at its
sole discretion, either return the shares, in which case there shall be no
interest due on the second loan, or retain the shares and pay the principal
amount of $100,000 plus accrued interest.
The Company shall pay DCIU 3% of the total loan amount ($3,000) at the second
Closing as a loan processing fee, due at time of closing if funding; is cash or
due at time of usageiutilixation/exchange of stock shares for funding this note.
GENERAL TERMS
I. General Loan Conditions: The first and second loan documents, including but
not limited to the promissory notes and deeds of trust shall include standard
commercial rent estate provisions including but not limited to due on sale
provisions. It is understood by the parties that the Company has the right to
encumber the Property with subordinated liens up to a total amount of $500,400
beyond the amount of the First and Second Loans. The Company shall provide at
its cost a Lender's title insurance
AmerexfOCI Agreement R0.
JIO
Page l of 3
policy for both loans/deeds of trust in the full amount of the tare value of the
loans and interest. The Company will be responsible to pay all closing and
recording costs, fees and taxes. In addition, the Company shall pay DC1U $10,000
for legal expenses, $2500 of which has already been paid (non-refundable) and
the ba[mice at the Closing. DCIU shall have the right to freely assign either of
the notes andlor deeds of trust without prior notice or approval.
2.
Collateral Guarantees: [n addition to the recorded deeds of trust on the
Property securing the first and second loans, the Company shall provide the
following additional guarantees for the first and second loans: (a) Full
personal guarantee of Richard Coody and Ron Brewer; (h) pledge of all AMEREX
shares; (c) Assignment of any agreements to purchase assets or companies entered
into by the Company before the Closing; (d) filing of Texas UCC Certificate
covering all fixtures and improvements to the land. It is agreed by DUIU that
these assets will be released to additional funding sources on a shared
collateral basis as the events occur.
3.
Closing:
the Closing of the first and second loans will take place separately upon the
signing of the definitive loan agreements.
4.
Warrants:
At closing the Company will issue to DCIU warrants for the purchase of
common stock of $300,000 or $400,000 face value dependent upon the execution of
the second loan. The warrants will be valid for a period of five years from the
date of closing with an exercise price equal to 100°4 of the established price
of the enterprise value of the Company (asset value with debt) at the date of
completion of the next round of financing anticipated to be in the amount of
$5,000,000.
5.
Investment Right of First Refusal: DC1LJ shall have the right of first refusal
to invest tip to a maximum of 30% ($1,500,000.00) of the first $5 million raised
by the Company ("the investment") in the form of equity or debt. The right of
first refusal shall he based upon the best teens and conditions as granted to
any other investor participating in the Investment As each contribution
commitment from other investors is received, DCRl must commit its contribution
up to its maximum percentage, or waive contribution at that time. DCIU shall be
free to syndicate its portion of the investment.
6.
Required Parties to the Definitive Agreements:
The Company, the Company shareholders holding more than 5% of the Company (the
"Major Shareholders"), Mr. Coody, and .DCIU.
7.
Insurance:
The Company shall maintain commercially reasonable property and liability
insurance on the Property.
8.
Closing Conditions: Closing is subject to satisfaction of DClL's due diligence
requirements, including business, financial and legal diligence, and the
completion and execution of mutually acceptable definitive agreements (the
"Definitive Agreements") no later than two days from the date of the execution
of the Loan Agreement.
9.
Binding:
The terms and conditions contained in this Loan Agreement constitute binding
obligations on the part of the parties.
10.
Confidentiality: The terms and conditions described in this loan Agreement,
including its existence and including the fact that the parties are conducting
negotiations, shall be disclosed to third-parties only if' required by law or
agreed to in writing by the parties. In addition, DCIU agrees to execute and be
bound by a standard confidentiality agreement protecting the proprietary and
confidential intellectual property of the Company.
Amerex/CCI Agreement RC
JIO
Page 2 of 3
11, Related Documents: This Loan Agreement is orte of several related collateral
documents, which taken together reflect the purpose of the documents and the
intent of the parties to provide secured funding to Amerex. Taken together, the
Loan Agreements, Promissory Notes, Trust Deeds, Warrants, and any other
documents executed by the Parties to this Loan Agreement to affect the purpose
of capitalizing AMEREX Companies, Inc., are mutually incorporated by reference
and constitute one document of multiple parts.
IN WITNESS HEREOF, the undersigned have herein below set their hands this 31s`
day of August, 2005.
By: AMEREX Companies, Inc,
Richard L. Coody
President
By: DCI USA, Inc,
Jonathan Ilan (fir, CEO
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Exhibit 10.2(a)
FIDELITY BANKSHARES, INC.
CHANGE IN CONTROL AGREEMENT
FOR
RICHARD D. ALDRED
This CHANGE IN CONTROL AGREEMENT (“Agreement”) is made effective as of
December 20, 2005 by and between Fidelity Bankshares, Inc., a Delaware
corporation (the “Company”) with its principal office at 205 Datura Street, West
Palm Beach, Florida 33401, and Richard D. Aldred (the “Executive”).
WHEREAS, the Company and the Executive had previously entered into a Change in
Control Agreement, effective as of January 1, 2004; and
WHEREAS, the Executive has been elected to, and has agreed to serve in the
position of Executive Vice President, Chief Financial Officer and Treasurer for
the Fidelity Federal Bank and Trust (the “Bank”), the wholly-owned subsidiary of
the Company, a position of substantial responsibility; and
WHEREAS, the Company recognizes the substantial contribution the Executive has
made to the Bank and the Company and wishes to protect his position therewith
for the period provided in this Agreement; and
WHEREAS, the Executive is deemed a “Specified Employee” for purposes of new
Section 409A of the Internal Revenue Code (“Code”) and the payments under this
Agreement are deemed to be “deferred compensation,” such that the Agreement is
required to be modified to conform to the requirements of Code Section 409A.
NOW, THEREFORE, in consideration of the contribution of the Executive, and upon
the other terms and conditions hereinafter provided, the parties hereto agree as
follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement (“Anniversary Date”) and continuing at each Anniversary Date
thereafter, the Board of Directors of the Company (the “Board”) may extend the
Agreement for an additional year. The Board will conduct a performance
evaluation of the Executive for purposes of determining whether to extend the
Agreement, and the results thereof shall be included in the minutes of the
Board’s meeting.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL
(a) Upon the occurrence of a Change in Control of the Bank or the Company (as
herein defined) the provisions of Section 3 shall apply.
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(b) A “Change in Control” of the Bank or the Company shall mean (i) a change in
ownership of the Bank or the Company under paragraph (a) below, or (ii) a change
in effective control of the Bank or the Company under paragraph (b) below, or
(iii) a change in the ownership of a substantial portion of the assets of the
Bank or the Company under paragraph (c) below:
(a) Change in the ownership of the Bank or the Company. A change in the
ownership of the Bank or the Company shall occur on the date that any one
person, or more than one person acting as a group (as defined in Proposed
Treasury Regulation Section 1.409A-3(g)(5)(v)(B)), acquires ownership of stock
of the corporation that, together with stock held by such person or group,
constitutes more than 50 percent of the total fair market value or total voting
power of the stock of such corporation.
(b) Change in the effective control of the Bank or the Company. A change in
the effective control of the Bank or the Company shall occur on the date that
either (i) any one person, or more than one person acting as a group (as defined
in Proposed Treasury Regulation Section 1.409A-3(g)(5)(v)(B)), acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the corporation
possessing 35 percent or more of the total voting power of the stock of such
corporation; or (ii) a majority of members of the corporation’s Board of
Directors is replaced during any 12-month period by directors whose appointment
or election is not endorsed by a majority of the members of the corporation’s
Board of Directors prior to the date of the appointment or election, provided
that this sub-section (ii) is inapplicable where a majority shareholder of the
Bank or the Company is another corporation.
(c) Change in the ownership of a substantial portion of the Bank or the
Company’s assets. A change in the ownership of a substantial portion of the Bank
or the Company’s assets shall occur on the date that any one person, or more
than one person acting as a group (as defined in Proposed Treasury Regulation
Section 1.409A-3(g)(5)(v)(B)), acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) assets from the corporation that have a total gross fair market value
equal to or more than 40% of the total gross fair market value of (i) all of the
assets of the Bank or the Company, or (ii) the value of the assets being
disposed of, either of which is determined without regard to any liabilities
associated with such assets.
(d) For all purposes hereunder, the definition of Change in Control shall be
construed to be consistent with the requirements of Proposed Treasury Regulation
Section 1.409A-3(g), except to the extent that such proposed regulations are
superseded by subsequent guidance.
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(c) The Executive shall not have the right to receive benefits pursuant to
Section 3 hereof in the event of Termination for Cause prior to the Change in
Control. The term “Termination for Cause” shall mean termination because of the
Executive’s intentional failure to perform stated duties, personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order, or any
material breach of any material provision of this Agreement. In determining
incompetence, the acts or omissions shall be measured against standards
generally prevailing in the savings institution industry. For purposes of this
paragraph, no act or failure to act on the part of the Executive shall be
considered “willful” unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive’s action or omission
was in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to the Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
the Executive was guilty of conduct justifying Termination for Cause and
specifying the particulars thereof in detail. The Executive shall not have the
right to receive compensation or other benefits for any period after Termination
for Cause. Any stock options granted to Executive under any stock option plan of
the Company or any subsidiary or affiliate thereof, shall become null and void
effective upon Executive’s Termination for Cause and shall not be exercisable by
Executive at any time subsequent to such Termination for Cause.
3. CHANGE IN CONTROL BENEFITS
Upon the occurrence of a Change in Control, the Company shall be obligated to
pay the Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, the following:
(a) a payment equal to three times the sum of (i) the highest rate of base
salary, and (ii) highest rate of bonus awarded to the Executive during the prior
three years by the Bank and/or the Company, subject to applicable withholding
taxes. The payments shall be made in a lump sum on the effective date of the
Change in Control. Such payments shall not be reduced in the event Executive
obtains other employment following the Change in Control;
(b) for so long as Executive is employed by the Bank and/or Company, and
continuing for a period of thirty-six (36) months following termination of
employment, continued life insurance coverage for Executive and health care
coverage (including dental) for Executive and Executive’s dependents at the
Company’s own expense (at the end of which, Executive shall be entitled to elect
the maximum continued health care coverage available in accordance with the
COBRA provisions of Section 4980B of the Code) and such coverage shall be
substantially identical to the coverage maintained by the Bank or the Company
for the Executive prior to the Change in Control;
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(c) any outstanding unvested stock options or shares of restricted stock of the
Company that have been awarded to Executive shall become fully vested as of the
Change in Control;
(d) at the time of or within sixty (60) days (or within such shorter period to
the extent that information can be reasonably obtained) following the Change in
Control, a lump sum payment in an amount equal to the present value of the
Bank’s contributions that would be made on Executive’s behalf under the Bank’s
401(k) Plan and employee stock ownership plan (and any other defined
contribution plan maintained by the Bank) if he continued working for the Bank
for a thirty-six (36) month period following the Change in Control, earning the
base salary that would be achieved during the remaining unexpired term of this
Agreement (assuming, if a Change in Control has occurred, that the annual base
salary increases at the rate of six percent (6%) per year on each Anniversary
Date over the remaining unexpired term of the Agreement) and making the maximum
amount of employee contributions permitted, if any, under such plan or plans,
where such present values are to be determined using a discount rate of six
percent (6%) per year;
(e) at the time of or within sixty (60) days (or within such shorter period to
the extent that information can reasonably be obtained) following the Change in
Control, a lump sum payment in an amount equal to the excess, if any, of (A) the
present value of the benefits to which he would be entitled under the Fidelity
Federal Savings Bank of Florida Supplemental Executive Retirement Plan (and any
other deferred compensation plan for management or highly compensated employees
that are maintained by the Bank) if he continued working for the Bank for the
thirty-six (36) month period following the Change in Control at the base salary
and bonus that would be achieved during the remaining unexpired term of this
Agreement (assuming, if a Change in Control has occurred, that annual base
salary and bonus each increase at the rate of six percent (6%) per year on each
Anniversary Date for the remaining unexpired term of the Agreement) over (B) the
present value of the benefits to which he is actually entitled under any such
plan, as of the date of the Change in Control, where the present values are to
be determined using a discount rate of six percent (6%) and the mortality tables
prescribed under Section 72 of the Code;
(f) Payments under Section 3(d) and Section 3(e) above shall be made
irrespective of whether termination of employment has occurred. Notwithstanding
anything herein to the contrary, if termination of employment occurs
simultaneously with the effective date of the Change in Control, and such
termination is deemed a “Separation from Service” within the meaning of Code
Section 409A, then the payments required under this Section 3 shall be delayed
until the first day of the seventh month following such Separation from Service,
but only if required by Code Section 409A.
4. ADDITIONAL PAYMENTS RELATED TO A CHANGE IN CONTROL
(a) In each calendar year that Executive is entitled to receive payments or
benefits under the provisions of this Agreement, a Change in Control Agreement
between Executive and the Bank dated December 20, 2005 (“Bank Change in Control
Agreement”) and/or a Company or Bank sponsored employee benefit plan, the
independent accountants of the Company shall
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determine if an excess parachute payment (as defined in Section 4999 of the
Code) exists. Such determination shall be made after taking any reductions
permitted pursuant to Section 280G of the Code and the regulations thereunder.
Any amount determined to be an excess parachute payment after taking into
account such reductions shall be hereafter referred to as the “Initial Excess
Parachute Payment.” As soon as practicable in connection with a Change in
Control, the Initial Excess Parachute Payment shall be determined. For purposes
of this determination, Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income tax (including, but not limited to,
the Alternative Minimum Tax under Code Sections 55-59, if applicable) and state
and local income tax, if applicable, at the highest marginal rate of taxation in
the state and locality of Executive’s residence on the date such payment is
payable, net of the maximum reduction in the federal income taxes which could be
obtained from any available deduction of such state and local taxes. Any
determination by the independent accountants shall be binding on the Company and
Executive. Within five (5) days after such determination, the Company shall pay
Executive, subject to applicable withholding requirements under applicable state
or federal law an amount equal to:
(i) twenty (20) percent of the Initial Excess Parachute Payment (or such other
amount equal to the tax imposed under Section 4999 of the Code), and
(ii) such additional amount (tax allowance) as may be necessary to compensate
Executive for the payment by Executive of state and federal income and excise
taxes on the payment provided under Clause (i) and on any payments under this
Clause (ii). In computing such tax allowance, the payment to be made under
Clause (i) shall be multiplied by the “gross up percentage” (“GUP”). The GUP
shall be determined as follows:
GUP =
Tax Rate
1 - Tax Rate
The Tax Rate for purposes of computing the GUP shall be the highest marginal
federal and state income and employment-related tax rate, including any
applicable excise tax rate, applicable to Executive in the year in which the
payment under Clause (i) is made.
(c) Notwithstanding the foregoing, if it shall subsequently be determined in a
final judicial determination or a final administrative settlement to which
Executive is a party that the excess parachute payment as defined in
Section 4999 of the Code, reduced as described above, is different from the
Initial Excess Parachute Payment (such different amount being hereafter referred
to as the “Determinative Excess Parachute Payment”) then the Company’s
independent accountants shall determine the amount (the “Adjustment Amount”)
Executive must pay to the Company or the Company must pay to Executive in order
to put Executive (or the Company, as the case may be) in the same position as
Executive (or the Company, as the case may be) would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, the independent accountants shall
take into account any and all taxes (including any penalties and interest) paid
by or for Executive or refunded to Executive or for Executive’s benefit. As soon
as practicable after the Adjustment Amount has been so determined, the Company
shall pay the Adjustment Amount to Executive or
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Executive shall repay the Adjustment Amount to the Company, as the case may be.
The purpose of this paragraph is to assure that (i) Executive is not reimbursed
more for the golden parachute excise tax than is necessary to make him whole,
and (ii) if it is subsequently determined that additional golden parachute
excise tax is owed by him, additional reimbursement payments will be made to him
to make him whole for the additional excise tax.
(d) In each calendar year that Executive receives payments or benefits under the
Bank Change in Control Agreement and/or this Agreement and/or a Company or Bank
sponsored employee benefit plan, Executive shall report on his state and federal
income tax returns such information as is consistent with the determination made
by the independent accountants of the Company as described above. The Company
shall indemnify and hold Executive harmless from any and all losses, costs and
expenses (including without limitation, reasonable attorney’s fees, interest,
fines and penalties) that Executive incurs as a result of so reporting such
information. Executive shall promptly notify the Company in writing whenever
Executive receives notice of the institution of a judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under
Section 4999 of the Code of any amount paid or payable under this Section is
being reviewed or is in dispute. The Company shall assume control at its expense
over all legal and accounting matters pertaining to such federal tax treatment
(except to the extent necessary or appropriate for Executive to resolve any such
proceeding with respect to any matter unrelated to amounts paid or payable
pursuant to this contract). Executive shall cooperate fully with the Company in
any such proceeding. Executive shall not enter into any compromise or settlement
or otherwise prejudice any rights the Company may have in connection therewith
without prior consent of the Company.
5. SOURCE OF PAYMENTS
(a) All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Company. Notwithstanding any provision
herein to the contrary, to the extent that payments and benefits, as provided in
this Agreement, are paid to or received by Executive under the Bank Change in
Control Agreement, such compensation payments and benefits will be subtracted
from any amounts due simultaneously to Executive under similar provisions of
this Agreement.
(b) For financial statement purposes, Change in Control payments made pursuant
to the provisions of Section 3 of each of the Agreements shall be charged and
paid in accordance with the terms of Section 3(g) of the Bank Change in Control
Agreement and Section 4 of this Agreement.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties hereto and
supersedes any prior agreement between the Company and the Executive, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided. No provision
of this Agreement shall be interpreted to mean that the Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
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7. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect any such action shall be null, void, and of
no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, the
Executive, the Company and their respective successors and assigns.
8. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any act other than that specifically
waived.
9. REGULATORY PROVISIONS
Notwithstanding anything herein contained to the contrary, any payments to the
Executive by the Company are subject to and conditioned upon their compliance
with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part
359.
10. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
11. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
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12. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the State of Florida, unless preempted by
Federal law as now or hereafter in effect.
Except as otherwise expressly provided elsewhere in this Agreement, in the event
that any dispute should arise between the parties as to the meaning, effect,
performance, enforcement, or other issue in connection with this Agreement,
which dispute cannot be resolved by the parties, the dispute shall be decided by
final and binding arbitration of a panel of three arbitrators. Proceedings in
arbitration and its conduct shall be governed by the rules of the American
Arbitration Association (“AAA”) applicable to commercial arbitrations (the
“Rules”) except as modified by this Section. The Executive shall appoint one
arbitrator, the Company shall appoint one arbitrator, and the third shall be
appointed by the two arbitrators appointed by the parties. The third arbitrator
shall be impartial and shall serve as chairman of the panel. The parties shall
appoint their arbitrators within thirty (30) days after the demand for
arbitration is served, failing which the AAA promptly shall appoint a defaulting
party’s arbitrator, and the two arbitrators shall select the third arbitrator
within fifteen (15) days after their appointment, or if they cannot agree or
fail to so appoint, then the AAA promptly shall appoint the third arbitrator.
The arbitrators shall render their decision in writing within thirty (30) days
after the close of evidence or other termination of the proceedings by the
panel, and the decision of a majority of the arbitrators shall be final and
binding upon the parties, nonappealable, except in accordance with the Rules and
enforceable in accordance with the Florida Arbitration Code or any applicable
successor legislation. Any hearings in the arbitration shall be held in Palm
Beach County, Florida unless the parties shall agree upon a different venue, and
shall be private and not open to the public. Each party shall bear the fees and
expenses of its arbitrator, counsel, and witnesses, and the fees and expenses of
the third arbitrator shall be shared equally by the parties. The costs of the
arbitration, including the fees of AAA, shall be borne as directed in the
decision of the panel.
13. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by the Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Company if the Executive is successful on the merits
pursuant to a legal judgment, arbitration or settlement.
14. INDEMNIFICATION
The Company shall provide the Executive (including his heirs, executors and
administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense, or in lieu thereof, shall indemnify
the Executive (and his heirs, executors and administrators) to the fullest
extent permitted under federal law and as provided in the Company’s Charter and
Bylaws against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Company
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys’ fees and
the cost of reasonable settlements.
--------------------------------------------------------------------------------
15. SUCCESSOR TO THE COMPANY
The Company shall require any successor or assignee, whether direct or indirect,
by purchase, merger, consolidation or otherwise, to all or substantially all the
business or assets of the Company, expressly and unconditionally to assume and
agree to perform the Company’s obligations under this Agreement, in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place.
16. SIGNATURES
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Executive has signed this Agreement, on the day
and date first above written.
ATTEST: FIDELITY BANKSHARES, INC.
/s/ Elizabeth Cook
By:
/s/ Vince A. Elhilow
President WITNESS: EXECUTIVE
/s/ Elizabeth Cook
By:
/s/ Richard D. Aldred
Richard D. Aldred
|
Exhibit 10.2
NORFOLK SOUTHERN CORPORATION
LONG-TERM INCENTIVE PLAN AND
RESTRICTED STOCK UNIT PLAN
Waiver Agreement
This Waiver Agreement entered into as of January 27, 2006, by and
between Norfolk Southern Corporation (Corporation) and David R. Goode (Optionee)
modifies 66,000 Restricted Shares granted to Optionee on January 28, 2005, and
96,000 Restricted Shares on January 30, 2004, under the Norfolk Southern
Corporation Long-Term Incentive Plan and 44,000 Restricted Stock Units granted
on January 28, 2005, and 64,000 Restricted Stock Units on January 30, 2004,
under the Norfolk Southern Corporation Restricted Stock Unit Plan (collectively,
"Restricted Awards").
WHEREAS, under the existing terms of the Restricted Awards, if Optionee's
employment is terminated by reason of his or her Retirement before expiration of
the Restriction Period, the number of Restricted Shares and Restricted Stock
Units shall be reduced by the proportion of the Restriction Period remaining
after such Retirement (the "Proration Provision"). At that time, the
restrictions on the balance of such Restricted Awards (the "Vested Awards")
shall lapse on the date of the Optionee's Retirement and such Vested Awards
shall be distributed to Optionee. Optionee's Vested Award totaled 80,964
Restricted Shares and 53,976.4 Restricted Stock Units, which will be distributed
to Optionee after his Retirement.
WHEREAS, in accordance with the Proration Provision, 81,036 Restricted Shares
and 54,023.6 Restricted Stock Units (the "Non-Vested Award") would have been
subject to forfeiture upon Optionee's Retirement.
WHEREAS, the Compensation Committee of the Corporation's Board of
Directors has agreed to waive the Proration Provision on the Non-Vested Awards,
subject to the conditions set forth herein.
THEREFORE, in consideration of this waiver, Optionee agrees to the terms set
forth herein. These terms shall amend the existing terms of the Non-Vested
Awards and any outstanding agreements with respect to these Awards. All
remaining terms of the Non-Vested Awards and all terms of the Vested Awards
shall remain in full force and effect, and all other terms and conditions of the
Norfolk Southern Corporation Long-Term Incentive Plan and Norfolk Southern
Corporation Restricted Stock Unit Plan (collectively, "Plans") shall remain in
effect. Capitalized terms used in this Waiver Agreement but not defined herein
shall have the same meanings as in the Plans.
Optionee hereby agrees to the following terms:
1. Restriction Period Remains in Effect. The Restriction Period for the
Non-Vested Awards shall not lapse upon Optionee's Retirement but shall remain in
effect, and the Non-Vested Awards shall not be distributed to Optionee until the
earlier of January 29, 2007, with respect to the Restricted Shares and
Restricted Stock Units granted in 2004, and January 27, 2010, with respect to
the Restricted Shares and Restricted Stock Units granted in 2005, or the death
of the Optionee before the expiration of the Restriction Period.
2. Forfeiture Upon Breach of Non-Compete/Non-Solicitation Covenant. During the
Restriction Period, Optionee covenants and agrees not to work for or provide
services for any Competitor, on his or her own behalf or in the service of or on
behalf of others, including, but not limited to, as a consultant, independent
contractor, owner, officer, partner, joint venturer, or employee, at any time.
Optionee further covenants and agrees during the Restriction Period not to, on
his own behalf or in the service of or on behalf of others, including, but not
limited to, as a consultant, independent contractor, owner, partner, joint
venturer or employee, (i) solicit, recruit, entice or persuade any employee of
the Corporation or any of its subsidiaries or affiliates (other than persons
employed in a clerical or other nonprofessional position) to leave the
employment of the Corporation or any of its subsidiaries or affiliates, or
recommend or refer any employees of the Corporation or any of its subsidiaries
or affiliates for employment consideration to others, or (ii) solicit, entice,
persuade or induce any person or entity doing business with the Corporation or
any of its subsidiaries or affiliates to terminate or refrain from extending or
renewing such relationship. If the Optionee breaches this
non-compete/non-solicitation covenant, the Non-Vested Awards shall be forfeited
immediately and all rights of the Optionee to such Non-Vested Awards shall
terminate immediately without further obligation on the part of the Corporation
or any Subsidiary Company.
For purposes of this Waiver Agreement, "Competitor" shall mean any entity in the
same line of business as the Corporation in the North American markets in which
the Corporation competes, including, but not limited to, any North American
Class I rail carrier, any other rail carrier competing with the Corporation
(including without limitation a holding or other company that controls or
operates or is otherwise affiliated with any rail carrier competing with the
Corporation), and any other provider of transportation services competing with
the Corporation, including motor and water carriers.
3. Execution of Stock Power. Optionee agrees to endorse in blank a stock power
for the Restricted Shares portion of the Non-Vested Awards, a copy of which is
attached hereto, and return the signed stock power to the Corporation's
Corporate Secretary within ten days of receiving this Waiver Agreement.
IN WITNESS WHEREOF, this Waiver Agreement has been executed in duplicate on
behalf of the Corporation by its officer thereunto duly authorized, and by the
Optionee in acceptance of the above-mentioned waiver of the Proration Provision,
as of the day and year first above written.
NORFOLK
SOUTHERN CORPORATION
By:
/s/ John P. Rathbone
OPTIONEE
Dated: January 27, 2006 By: /s/
David R. Goode |
Exhibit 10.5.15
THE CALPINE INCENTIVE PROGRAM
The Calpine Incentive Program consists of four separate programs: (1) the
Emergence Incentive Plan; (2) the Management Incentive Plan; (3) the
Supplemental Bonus Plan and (4) the Discretionary Bonus Plan. These four
programs are set forth below.
1.
The Emergence Incentive Plan
a.
The Emergence Incentive Plan provides cash awards payable at emergence to
selected senior employees. Approximately 20 senior employees have been selected
for participation in the Emergence Incentive Plan, which includes primarily
executive vice presidents and a select group of senior vice presidents.
b.
The Emergence Incentive Plan provides for a variable cash award contingent upon
the achievement of certain performance metrics. These cash payments will not be
made until Debtors’ emergence from Chapter 11 and will be distributed among
eligible employees at the discretion of the chief executive officer. Employees
who terminate their employment voluntarily will not be eligible for any payment
under the Emergence Incentive Plan. If (i) the employee’s employment is
terminated involuntarily (and not for cause), (ii) the employee’s business unit
is sold prior to emergence or (iii) the employee dies or becomes disabled, then
he or she would remain eligible for payment under the plan. Such payments,
however, would be deferred until active participants receive their payment.
c.
The Emergence Incentive Plan consists of an incentive pool created according to
market adjusted enterprise value (“Market AEV”)1 and plan adjusted enterprise
value (“Plan AEV”)2. The Emergence Incentive Plan begins with an incentive
_________________________
1
Market-Based Adjusted Enterprise Value (“Market AEV”) shall be equal to:
The market value of debt that is primarily the obligation of reorganized Calpine
Corporation (“Calpine”) (i.e., debt other than all project-level debt and
guarantees thereon including, without limitation, notes payable, capital leases,
project loans, project-level preferred interests, and sale lease back
obligations (collectively, “Project-Level Debt”); plus the market value of
preferred equity at reorganized Calpine; minus cash on the balance sheet of
reorganized Calpine upon the effective date of a Plan of Reorganization (other
than any restricted cash held by direct or indirect subsidiaries of reorganized
Calpine, including but not limited to, project-level cash that is not readily
available for use by Calpine Corporation (e.g., project-level construction
accounts, project-level debt service reserves), collateral posted in favor of
trading counterparties, cash posted to collateralize letters of credit and
pre-petition asset sale proceeds in escrow); plus the market value of
reorganized Calpine's common stock (and any other equity-linked securities
including warrants) excluding non-vested equity (including options) issued as
part of the management incentive compensation pursuant to a Plan of
Reorganization. All market prices shall be calculated as a 10-day average
beginning on the 60th trading day following the consummation date and for the
following nine (9) trading days. Prices for debt and preferred equity shall be
calculated as an average price based on AdvantageData (ADI quote), Factset,
Markit Loans (LoanX) and Bloomberg. The average market price for any given debt,
preferred or convertible security on any given day shall be equal to the average
of the trade prices for all trades recorded on that day greater than or equal to
$1 million of said security. Any corporate-level debt, equity or equity-linked
security (“Corporate-Level Securities”) for which there is no publicly quoted
price shall be valued at face value. Volume weighted-average prices for common
equity shall be determined by reference to Bloomberg's AQR function. Market AEV
shall be further adjusted for the exclusion of any debt or other securities
issued at reorganized Calpine used to refinance Project-Level Debt.
2
Plan-Based Adjusted Enterprise Value (“Plan AEV”) shall be equal to:
Total Enterprise Value, as set forth in a confirmed Plan of Reorganization
and/or its accompanying Disclosure Statement, plus cash (excluding cash escrowed
from pre-petition asset sales) which will be distributed on or around the
effective date in accordance with said Plan of Reorganization (excluding any
cash raised through any and all post-petition and exit financing transactions);
minus the book value of all Project-Level Debt. Plan AEV shall be further
adjusted upward, to include (a) cash received from asset sales consummated
post-petition used to repay any Corporate-Level Securities prior to the
consummation of the Plan of Reorganization; and (b) corporate-level cash used to
repay Corporate-Level Securities during the pendency of the chapter 11 cases
(excluding any cash raised through all pre- or post-petition financing and cash
held in escrow from pre-petition asset sales).
pool of $5.45 million earned for the successful consummation of a plan of
reorganization and a threshold Plan AEV of at least $5.0 billion. The incentive
pool will then be increased by $285,000 for each incremental increase of $100
million to Market AEV above $5.0 billion.
2.
The Management Incentive Plan
a.
The Management Incentive Plan provides the opportunity for a bonus award for
approximately 600 of Debtors’ employees who occupy positions critical to the
operation of Calpine’s ongoing business as well as Debtors’ specific
reorganization goals. The Management Incentive Plan will consist of awards as
described below to be paid for performance for the calendar year 2006 and
beyond.
b.
The Management Incentive Plan will measure performance in separate six-month
performance periods. Each eligible employee’s bonus opportunity for a
performance period will equal one-half of his or her pre-petition annual bonus
opportunity.3 In general, expressed as a percentage of salary, the Management
Incentive Plan target awards for employees at various levels are as follows:
executive vice president (100%), senior vice president (40%), vice president
(30%), director (25%), and certain managers (20%).
c.
The first performance period will run from January 1, 2006 to June 30, 2006. The
second performance period would run from July 1, 2006 to December 31, 2006.
Performance will be measured relative to goals established by the Debtors in
consultation with the various creditor constituencies in these cases.
d.
Payments under the Management Incentive Plan will only be made if performance
objectives are achieved. Assuming that performance objectives are met, employees
at the level of director and below will receive their awards in the form of
semi-annual payments—one-third of the award will be paid mid-year and the
remaining two-thirds as soon as practical after year-end results. For employees
at the vice president level and above, payments of any Management Incentive Plan
award earned will be made once annually as soon as practical after year-end
results. Employees selected for participation must be employed on the date of
payment to receive any portion of their award.
3.
The Supplemental Bonus Plan
a.
Under the Supplemental Bonus Plan, applicable only for 2006, persons identified
by Debtors as performing a critical function and being at significant risk of
being hired away from the company will be provided with a supplemental cash
award. Only employees at the level of vice president and below are eligible for
participation in the Supplemental Bonus Plan. None of the persons selected for
participation in the Supplemental Bonus Plan will be “insiders” of the Debtors.
_________________________
3 If maximum performance goals are attained, participants are
eligible to receive 110% of their target Management Incentive Plan award.
Likewise, if minimum performance goals are attained, participants are eligible
to receive 90% of their target Management Incentive Plan award.
2
b.
Payment of the Supplemental Bonus Plan award will be made in two equal
installments—the first installment upon Court approval of the plan and the
second at year-end. Employees selected for participation must be employed on the
date of payment to receive the award. Any recipient of a Supplemental Bonus Plan
award who voluntarily terminates his or her employment before the second
installment at year-end forfeits the right to the second installment payment and
must refund a pro rata portion of the first installment payment. The pool
available for Supplemental Bonus payments is $6 million.
4.
The Discretionary Bonus Plan
a.
Under the Discretionary Bonus Plan, a pool in the amount of $500,000 will be
created annually from which individual bonus payments of no more than $25,000
per employee, per year, may be awarded at the sole discretion of Debtors’ chief
executive officer. Only employees at the level of director and below will be
eligible for discretionary bonus payments.
3
|
Exhibit 10.45
LETTER AGREEMENT
November 21, 2005
Julian Feneley
Dear Julian
As you know, BriteSmile, Inc. (the “Company”) has retained Piper Jaffrey as its
investment banker to explore alternatives to enhance shareholder value. Such
alternatives may involve a future sale of (i) all or substantially all of the
assets of the Company or (ii) a controlling interest in the outstanding shares
of common stock of the Company (a “Sale”).
In order to encourage you to remain in the employment of the Company, the
Company has determined that appropriate steps should be taken to provide you a
retention bonus (the “Retention Bonus”), a termination payment (the “Termination
Payment”) and other benefits (collectively with the Retention Bonus and
Termination Payment, the “Total Benefits”) under the circumstances described in
this Letter Agreement (the “Agreement”). Accordingly, this Agreement outlines
the terms and conditions of the payment to you of the Total Benefits, subject
only to court approval in the event that the Company elects to file a bankruptcy
proceeding prior to the consummation of a Sale or your termination.
1. Retention Bonus. The Company is willing to pay you a Retention Bonus under
one of the circumstances described below. You may be eligible for receipt of one
(1) Retention Bonus; you will receive Payment of a Retention Bonus under the
first to occur of the circumstances described in (a) or (b) below, but not both:
(a) If a Sale is consummated on or prior to May 5, 2006 (the “Expiration Date”),
and if you remain employed by the Company or any of its affiliates to the date
of consummation of such Sale (the “Consummation Date”), you shall receive from
the Company or its successor a Retention Bonus equal to twenty-five percent
(25%) of your annual base salary in effect as of the date of this letter. The
Retention Bonus shall be paid in a lump sum cash payment within ten (10) days
following the Consummation Date.
(b) In the event that, (i) prior to the Expiration Date, a sale of either the
Company’s associated center division or the Company’s center division is
consummated and you were employed by the Company on the date such sale is
consummated and (ii) if a Sale is consummated on or prior to the Expiration Date
and if you are not employed by the Company or any of its affiliates on the date
of
--------------------------------------------------------------------------------
consummation of such Sale (other than for reasons of Cause (as defined below)),
then you shall receive from the Company or its successor a Retention Bonus equal
to twenty-five percent (25%) of your annual base salary in effect as of the date
your employment with the Company terminated in a lump sum cash payment within
ten (10) days following the Consummation Date.
2. Termination of Employment. (a) In the event that, prior to the Expiration
Date, a Sale is consummated and as a result of such Sale your employment with
the Company and its affiliates is terminated by the Company (including for
Constructive Termination but not with New Employment, both as defined below)
other than for Cause, then you will receive from the Company or its successor a
Termination Payment equal to one month for each full year of employment (with
minimum of two months)(the “Termination Payment Severance Period”) multiplied by
your monthly base salary in effect as of the date of this letter. Payment of
this Termination Payment will be made in a cash lump sum within ten (10) days
following termination of your employment.
(b) In the event that, prior to the Expiration Date, a sale of either the
Company’s associated center division or the Company’s center division is
consummated and as a result of such sale your employment with the Company and
its affiliates is terminated by the Company (including for Constructive
Termination but not with New Employment) other than for Cause, and you have not
received a Retention Payment under paragraph 1, then you will receive from the
Company or its successor a Termination Payment equal to the sum of (i) the
Termination Payment Severance Period plus (ii) three (the “Termination Benefit
Amount”), multiplied by your monthly base salary in effect as of the date of
this letter. Payment of this Termination Payment will be made in a cash lump sum
within ten (10) days following termination of your employment.
(c) For purposes of this Agreement “Cause” shall mean (1) your willful and
continued failure to substantially perform you duties with the Company (other
than any such failure resulting from the incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to you
by the Company, which demand specifically identifies the manner in which the
Company believes that you have not substantially performed your duties, or
(2) your willful engaging in conduct which is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or otherwise. For
purposes of clauses (1) and (2) of this definition, no act, or failure to act,
on your part shall be deemed “willful” unless done, or omitted to be done, by
you not in good faith and without reasonable belief that your act, or failure to
act, was in the best interest of the Company.
(d) For purposes of this Agreement, “Constructive Termination” shall mean (i) a
material diminution in your title, (ii) a material diminution in your duties,
responsibilities or authority or (iii) the Company headquarters is moved such
that your one-way commute is increased by more than 20 miles from its current
distance, any of which occur without your prior consent. For purposes of this
Agreement, “New Employment” shall mean employment by the purchaser of the
Company’s associated
2
--------------------------------------------------------------------------------
center division and/or the Company’s center division following termination by
the Company.
3. Other Benefits. Following your termination pursuant to paragraph 2(a) or
2(b), the Company will provide, at its expense, continuation of medical, dental
and vision coverage for you and your current dependents as listed on your
current insurance coverage under the federal law known as COBRA for that number
of months which is equal to the Termination Benefit Amount. At the conclusion of
the period during which the Company pays for your medical, dental and vision
coverage pursuant to the foregoing sentence, you may elect to continue to
receive medical, dental and vision coverage under COBRA. However, if you elect
to do so, you will be required to pay the premiums for such coverage.
4. Amendment and Duration of this Agreement. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by you and the Company. No waiver by either party
hereto at any time of any breach of the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
5. Nontransferability. You shall not have the right to alienate, anticipate,
commute, pledge, encumber or assign any of the benefits or payments which you
may expect to receive, contingently or otherwise, under this Agreement.
6. No Right to Continued Employment. Neither the execution of this Agreement,
nor any modification thereof, nor the creation of any fund, trust or account,
nor the payment of any benefits shall be construed as giving you the right to be
retained in the service of the Company or its successor, and you shall remain
subject to discharge to the same extent as if this Agreement had never been
executed.
7. Successors. This Agreement shall be binding upon your heirs, executors,
administrators, successors and assigns, present and future, and any successor to
the Company.
8. Withholding Taxes. All amounts to be paid hereunder shall be paid net of the
amount of any taxes that the Company or its successor may be required to
withhold therefrom in respect of any federal, state, local or other income or
other taxes.
9. Governing Law. This Agreement shall be governed by the laws of the State of
Utah without giving effect to its principles of conflict of laws.
10. Confidentiality. All payments described herein are conditioned on you
maintaining complete confidentiality of the engagement by the Company of
investment bankers and other professionals to assist the Company in respect of
the Sale, the process of conducting and concluding the Sale and the terms of
this Agreement.
3
--------------------------------------------------------------------------------
If you understand and agree with the terms and conditions of this Agreement,
please sign below and return a copy of this Agreement. We thank you for your
continued loyal and valued services on the Company’s behalf.
BriteSmile, Inc.
LOGO [g48342sig2.jpg]
By:
Title: EUP, General Counsel
LOGO [g48342sig.jpg]
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[Employee] |
Exhibit 10.36(a)
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") is made
August 21, 2006, to be effective as indicated herein, by and between Steiner
Leisure Limited, a Bahamas international business company (the "Company"), and
Stephen Lazarus ("Employee").
W I T N E S S E T H:
WHEREAS
, the Company and Employee entered into an Employment Agreement dated June 27,
2003 (the "Prior Agreement"); and
WHEREAS
, the Prior Agreement by its terms expires on July 31, 2006; and
WHEREAS
, the Company and Employee desire to enter into this Agreement to provide for
the terms of the services to be performed by Employee for the Company for the
term hereof.
NOW, THEREFORE,
in consideration of the premises and mutual agreements hereinafter contained,
the parties hereto agree as follows:
Employment, Duties
Effective on the Effective Date (as defined in Section 2, below), the Company
hereby employs Employee as Executive Vice President and Chief Financial Officer
of the Company and Employee hereby accepts such employment. In that capacity,
Employee shall have such duties and responsibilities consistent with the
position as may be determined from time to time by the Board of Directors of the
Company (the "Board") or the Chief Executive Officer of the Company (the "CEO"),
including duties with respect to affiliates (as defined in Rule 405 under the
Securities Act of 1933, as amended) of the Company (each, an "Affiliate").
During the term of this Agreement, Employee shall devote all his business time
and effort to the conduct of his duties hereunder, provided that Employee may
(i) serve on corporate, civic and charitable boards or committees, (ii) provide
services on a pro bono basis to civic and charitable organizations and (iii)
attend to his personal investments, so long as such activities do not interfere
with the performance of Employee's responsibilities as an employee of the
Company in accordance with this Agreement and are consistent with the Company's
policies. The Company also agrees that Employee may receive compensation in
connection with his service on corporate boards, without set-off, adjustment or
diminution of his salary, bonus or any other rights hereunder.
Effective Date; Term
This Agreement is for a term commencing August 1, 2006 (the "Effective Date")
and terminating on July 31, 2011, unless terminated sooner in accordance with
the terms and conditions in Section 5, below.
Compensation
Salary and Bonus.
Except as otherwise provided herein, the Company (or any Affiliate) shall pay to
Employee during the term hereof compensation as described in this Section 3(a),
all of which shall be subject to such deductions as may be required by
applicable law or regulation:
Base Salary
. The Company shall pay to the Employee a base salary at the rate of not less
than Two Hundred Eighty Thousand Dollars (U.S. $280,000.00) per year for each
calendar year (a "
Year
") or portion thereof during the term of this Agreement, subject to review
annually and possible increase in the sole discretion of the Board, payable in
bi-monthly installments (the "
Base Salary
").
Incentive Bonus. Employee is eligible to receive a bonus (the "Incentive Bonus")
equal to fifty percent (50%) of Base Salary tied to achieved Company Budgeted
Net Earnings (as defined below) for the respective Year in the term. With
respect to each Year during the term hereof, the Incentive Bonus shall be based
on a budget for each Year hereunder, which budget includes an estimate of the
Net Earnings (as defined below) for such Year and which budget shall have been
approved for the purpose of the compensation payable hereunder by the
Compensation Committee of the Board (the "Budget"). At the end of the Year, if
the Company shall have met seventy-five percent (75%) of the Net Earnings set
forth in the Budget ("Budgeted Net Earnings") for the Year, Employee shall be
entitled to receive an amount equal to 0.250 times the Base Salary then in
effect for the Year in question. During the term of this Agreement, in the event
that at the end of any Year in question, the Company has exceeded seventy-five
percent (75%), up to and including one-hundred twenty-five percent (125%), of
Budgeted Net Earnings for such Year, then, for each one percent (1%) increase
over seventy-five percent (75%), up to one hundred twenty-five percent (125%),
the Employee shall be entitled to receive an additional amount equal to 0.010
times the Base Salary then in effect for the Year in question. In the event at
the end of any such Year the Company has exceeded one hundred twenty-five
percent (125%) of Budgeted Net Earnings for such Year, then for each one percent
(1%) increase over one hundred twenty-five percent (125%), Employee shall be
entitled to receive, in addition to the amounts payable for exceeding
seventy-five percent (75%) of Budgeted Net Earnings, an amount equal to 0.050
times the Base Salary then in effect for the Year in question. Notwithstanding
the foregoing, Employee shall not be entitled to receive any Incentive Bonus in
excess of two and one-half percent (2.5%) of the Budgeted Net Earnings pursuant
to this Section 3(a)(ii) for any such Year. Any amount which Employee is
entitled to receive herein shall be payable within sixty (60) days after the end
of the Year in question. For purposes of this Section 3(a)(ii), "Net Earnings"
shall mean earnings of the Company before taxes, interest, depreciation and
amortization determined in accordance with generally accepted accounting
principles consistently applied. With respect to the Incentive Bonus that would
otherwise be payable pursuant to the formula set forth above in this Section
3(a)(ii) for 2011, that Incentive Bonus shall be reduced to reflect Employee's
employment with the Company for only part of 2011, with the actual Incentive
Bonus payable for 2011 being the result of multiplying the Incentive Bonus
otherwise payable pursuant to the above formula by 0.581.
Except as otherwise provided in Sections 5(a), 5(b), 5(d), 5(e) and 5(f) below,
Employee shall only be entitled to receive an Incentive Bonus with respect to a
Year if, with respect to 2006 through 2010, Employee is employed by the Company
under this Agreement at the close of business on December 31st of that Year, and
with respect to 2011, Employee is employed by the Company on July 31, 2011.
Reduction in Bonus
. The Incentive Bonus payable pursuant to this Agreement may be subject to a
reduction of up to twenty-five percent (25%) in the discretion of the
Compensation Committee in the event that Employee commits a material violation
of a Company policy or consistently fails to follow a Company policy or policies
(collectively, a "Violation") and that Employee is required to promptly inform
the Chief Executive Officer of the Company of any Violation with respect to any
officer of the Company or any affiliate thereof of which Employee becomes aware.
Disability Insurance. During each Year during the term hereof, Employee shall be
paid an amount to be used toward the payment of the premium on a disability
insurance policy in the maximum amount obtainable by Employee (a "Policy")
covering Employee, upon delivery to the Company of evidence reasonably
satisfactory to the Company of the purchase by Employee of a Policy with an
annual premium due during such Year in an amount at least equal to the amount
requested by Employee under this Section 3(b) (the "Disability Payment Amount").
The Disability Payment Amount shall be payable in equal installments at the
times that the Base Salary is paid to Employee and shall be subject to such
deductions as may be required by applicable law or regulation.
Deferred Compensation. Employee may elect, in accordance with the provisions of
any deferred compensation plan or agreement that may be entered into between
Employee and the Company (a "Deferred Plan"), to defer all or a portion of the
amount of the Incentive Bonus payable to Employee. Any and all amounts that
Employee elects to defer shall be held and administered in accordance with the
terms and provisions of any such Deferred Plan, and must comply with the
requirements set forth in Section 409A of the Internal Revenue Code of 1986, as
amended (the "Code").
Restricted and Performance Shares and Share Options. On the date hereof and
except as provided below, Employee shall be granted 10,000 restricted shares of
the Company, which shall vest cumulatively at the rate of one-third thereof on
each of the first three anniversaries of the date of grant. In addition to such
restricted shares granted to Employee pursuant to this Agreement, Employee shall
also be granted a certain number of options ("Annual Options") and/or
performance shares (the "Performance Shares" and, together with the Annual
Options, the "Performance Shares/Options") annually as part of the Company's
annual grant of options or shares to officers and employees (as determined by
the Compensation Committee of the Board). The Annual Options shall vest
cumulatively at the rate of one-third thereof on each of the first three
anniversaries of the date of grant. The Performance Shares are subject to
certain vesting schedules, based on the attainment, over a specified period, of
company performance goals (the "Performance Goals") which are determined
annually by the Compensation Committee of the Board and are to be reflected in
the award agreements related to such awards, in all cases, any unvested portion
of the restricted shares and/or Performance Shares/Options (or any other grants
of shares and/or options made to Employee by the Compensation Committee of the
Board during the term hereof) shall be immediately forfeited in the event
Employee is terminated for cause or voluntarily resigns his employment; and
provided further, that any unvested portion shall vest immediately in the event
of: (i) Employee's death or Disability, (ii) Employee's retirement or early
retirement in accordance with the policies of the Company, (iii) Employee's
termination by the Company without Cause, (iv) Employee's termination by the
Company for Illness, or (v) Employee's termination of his employment for Good
Reason, including a Change in Control. All restricted stock and Performance
Shares/Options granted hereunder shall be granted in accordance with the
Company's 2004 Equity Incentive Plan or any successor plan.
Life Insurance. During each Year during the term hereof, the Company shall
provide Employee with term life insurance with a death benefit equal to two
times the then current Base Salary. The Company shall pay all premiums with
respect to such life insurance. Such life insurance may be provided either
through the Company's group life insurance programs, by an individual policy, or
by a combination of both group and individual policies.
Other Benefits. During the term hereof, the Company shall provide to Employee,
in amounts and otherwise of a nature commensurate with Employee's compensation
and position with the Company, all other benefits currently provided to the
executive officers (as defined for purposes of the Securities Exchange Act of
1934, as amended) of the Company, as well as those which the Company may, in the
future, provide to its executive officers, including, without limitation, life
insurance, medical coverage, benefits under any 401(k) plan of the Company or
any Affiliate, any contractual indemnification rights and eligibility to receive
awards under share option or similar plans applicable to executive officers of
the Company. The Company also shall provide Employee with a private office and
an annual allowance (the "Car Allowance") of Ten Thousand Dollars ($10,000) for
the use by Employee in purchasing or leasing an automobile and for the payment
of insurance, maintenance and other expenses in connection with such automobile
as reflected in the Budget. The Company acknowledges and agrees that for
services provided to the Company during the term of this Agreement, Employee
will be covered to the same extent as other directors and executive officers of
the Company by directors' and officers' liability insurance maintained by the
Company.
Expense Reimbursement; Relocation
.
The Company shall reimburse Employee for all ordinary and necessary business
expenditures made by Employee in connection with, or in furtherance of, his
employment hereunder upon presentation by Employee of expense statements,
receipts, vouchers or such other supporting information as may from time to time
be reasonably requested by the Board. When traveling for business of the
Company, Employee, at his sole discretion and at the Company's expense, shall
travel via first class accommodations. The Company shall not, without Employee's
prior written consent, relocate Employee more than 50 miles from the Company's
principal place of business in Miami-Dade County, Florida.
Vacation
Employee shall be entitled to (i) four (4) weeks paid vacation per Year (the
"Vacation Days") and (ii) additional Vacation Days on each day that is a United
States federal holiday. Employee shall use reasonable efforts to take at least
two (2) weeks of vacation per Year. The vacation provided for in this Section 4
shall be coextensive with, and not cumulative with, vacations allowed pursuant
to any employment agreements or other arrangements with any Affiliates of the
Company. With respect to the Vacation Days not taken by Employee during a Year,
the Company shall pay to Employee on or before January 30th of the following
Year, an amount representing the Base Salary (at the rate in effect for the Year
during which the Vacation Days were to have been taken) with respect to the
Vacation Days not taken by Employee during a Year (if any, the "Vacation
Payment"); provided, however, that no payment shall be made with respect to more
than ten (10) Vacation Days for any one Year (prorated for partial years
hereunder) and Employee may not use any unused Vacation Days in any subsequent
years.
Termination and Non-Renewal
Death. In the event of Employee's death during the term hereof, the Company
shall have no further obligations to make payments or otherwise under this
Agreement, except that the Company shall pay to Employee's estate (i) within ten
(10) days after the date of Employee's death (A) any unpaid accrued Base Salary
pursuant to Section 3(a)(i), above, and any unpaid accrued Incentive Bonus
pursuant to Section 3(a)(ii), above, in each case to which Employee was entitled
as of the date of death; (B) any amount due to Employee as of the date of death
as reimbursement of expenses under Section 3(g), above; and (C) any unpaid
accrued Vacation Payment to which Employee was entitled as of the date of death;
and (ii) within sixty (60) days after the end of the Year in which Employee
died, an amount equal to the Incentive Bonus, if any, that would have been
payable to Employee for the Year in which Employee died, determined as if
Employee had been employed by the Company on the last day of that Year. In
addition, the Company shall (i) pay to Employee's surviving spouse, or to
Employee's estate if there is no surviving spouse, (A) an amount equal to the
sum of (i) Base Salary, at the annual rate in effect on the date of Employee's
death, and (ii) the "Target Bonus" (as defined below), such sums to be payable
in equal bi-monthly installments for a period of one year following Employee's
death; and (ii) keep in place (or, at the option of the Company, pay to
Employee's surviving spouse, or to Employee's estate if there is no surviving
spouse, an amount equal to the cost of) any health and dental insurance as in
effect on the date of Employee's death covering Employee's spouse and family,
for a period of one (1) year after the date of such death. Employee's estate
shall be entitled to immediate vesting of the (i) restricted stock held by
Employee on the date of his death which was granted on or after the date hereof,
and (ii) any Performance Shares/Options held by Employee on the date of his
death which were granted on or after the date hereof, all of which shall remain
exercisable until the earlier of two years following the Employee's death or, if
applicable, the date (or dates) any such options would otherwise expire in the
absence of Employee's death. For purposes of this Agreement, the term "Target
Bonus" shall mean an amount equal to the Employee's Incentive Bonus that would
have been payable to Employee for the Year during which a termination of or by
Employee occurred, determined as if Employee had been employed by the Company at
the end of such Year.
Disability. If Employee becomes unable to engage in any substantial gainful
activity or receives benefits for at least three (3) months under the Company's
disability plan, if any, as the result of a medically determinable physical or
mental impairment that is expected to result in death or continue for at least
twelve (12) months (a "Disability"), the Company, at its option, may terminate
Employee's employment hereunder (the date of such termination, the "Disability
Date"), and, thereafter, Employee shall not be deemed to be employed hereunder
(except that Employee's obligations under Section 6, below, shall remain in full
force and effect) and the Company shall have no further obligations to make
payments or otherwise under this Agreement, except as provided in this Section
5(b). In determining Disability under this Section 5(b), the Company shall rely
upon the written opinion of the physician regularly attending Employee in
determining whether a Disability is deemed to exist. If the Company disagrees
with the opinion of such physician, the Company may choose a second physician,
the two (2) physicians shall choose a third physician, and the written opinion
of a majority of the three (3) physicians shall be conclusive as to Employee's
Disability. The expenses associated with the utilization of any physician other
than the physician regularly attending Employee shall be borne solely by the
Company. Employee hereby consents to any required medical examination and agrees
to furnish any medical information requested by the Company and to waive any
applicable physician/patient privilege that may arise because of such
determination. In the event of a Disability, the Company shall pay to Employee
(i) within ten (10) days after the Disability Date (A) any unpaid accrued Base
Salary pursuant to Section 3(a)(i), above, to which Employee was entitled as of
the Disability Date, (B) any unpaid accrued Incentive Bonus payable pursuant to
Section 3(a)(ii) above, to which Employee was entitled as of the Disability
Date, (C) any amount due to Employee as of the Disability Date as reimbursement
of expenses under Section 3(g) above, and (D) any unpaid accrued Vacation
Payment to which Employee was entitled as of the date of Disability Date, and
(ii) within sixty (60) days after the end of the Year in which the Disability
Date occurs, an amount equal to the Incentive Bonus, if any, that would have
been payable to Employee for the Year in which the Disability Date occurred,
determined as if Employee had been employed by the Company on the last day of
that Year. In addition, the Company shall pay Employee an amount equal to the
sum of (i) the Base Salary, at the annual rate in effect on the Disability Date,
(ii) the Target Bonus, and (iii) the cost of Employee's benefits (including
without limitation, life, health and dental insurance) provided by the Company
pursuant to Section 3(f), above, as in effect at the time of such termination
(the "Benefits Amount") for a period of one (1) year after the date of such
termination, with all such sums to be payable commencing sixty (60) days
following the Disability Date and thereafter payable in equal bi-monthly
installments for a period of one year following the Disability Date. Employee
shall also be entitled to immediate vesting of the (i) restricted stock held by
Employee on the Disability Date which was granted on or after the date hereof,
and (ii) any Performance Shares/Options held by Employee on the Disability Date
and which were granted on or after the date hereof, all of which shall remain
exercisable until the earlier of two years following Employee's Disability Date
and, if applicable, the date (or dates) any such options would otherwise expire
in the absence of Employee's Disability. Nothing in this Agreement is intended
to cause the Company to be in violation of the Americans with Disabilities Act.
For Cause by Company. The Company may at any time during the term hereof
terminate Employee's employment hereunder for Cause. For purposes of this
Agreement, "Cause" shall mean the occurrence of any of the following events: (i)
Employee's continued failure to substantially perform Employee's duties with the
Company (other than any such failure resulting from Employee's incapacity due to
physical or mental illness or injury); (ii) a violation by Employee of any
lawful written policy or directive of the Company or any Affiliate applicable to
Employee specifically, or to officers or employees of the Company or any
Affiliate generally, the violation of which policy or directive is materially
and demonstrably injurious to the Company; (iii) Employee's excessive alcoholism
or drug abuse that substantially impairs the ability of Employee to perform
Employee's duties hereunder; (iv) continued gross negligence by Employee in the
performance of his duties under this Agreement that results in material and
demonstrable damage to the Company or any Affiliate; (v) violation by Employee
of any lawful direction from the Board, provided such direction is not
inconsistent with Employee's duties and responsibilities to the Company or any
Affiliate hereunder; (vi) fraud, embezzlement or other criminal conduct by
Employee that results in material and demonstrable damage to the Company or any
Affiliate; (vii) intentional or reckless conduct that results in material and
demonstrable damage to the Company or any Affiliate; or (viii) the committing by
Employee of an act involving moral turpitude that results in material and
demonstrable damage to the Company; provided, however, that in the case of any
of the events described in clauses (i), (ii) (iv) (v) or (vii) above, such event
shall not constitute Cause hereunder unless and until there is given to Employee
by the Company a written notice which sets forth the specific respects in which
it believes that Employee's conduct constitutes Cause hereunder, which conduct
is not cured within ten (10) days of written notice thereof. If the Company
terminates Employee's employment under this Agreement pursuant to this Section
5(c), the Company shall have no further obligations to make payments or
otherwise under this Agreement, except that Employee shall be entitled to
receive any (i) unpaid accrued Base Salary pursuant to Section 3(a)(i), above,
through the date that is thirty (30) days after the date that the Company gives
written notice of such termination to Employee (the "Termination Notice Date"),
(ii) Incentive Bonus that is accrued and unpaid as of the date of such
termination and (iii) any other amounts due to Employee under this Agreement as
of the date of termination, including, but not limited to, reimbursement of
expenses under Section 3(f), above, in each case within sixty (60) days after
the Termination Notice Date. Notwithstanding the foregoing, Employee shall, for
all purposes, cease to be deemed to be employed by the Company as of the date of
any termination of Employee pursuant to this Section 5(c), irrespective of
whether written notice of termination is given on such date. In the event the
Company terminates the Employee for Cause, any unvested restricted shares and/or
Performance Shares/Options granted to the Employee on or after the date hereof
shall be immediately forfeited by the Employee as of the date of such
termination.
For Good Reason by Employee. Employee may at any time during the term hereof,
without any prior notice, terminate this Agreement for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean the occurrence of any of the
following events: (i) a material breach by the Company of this Agreement
(including, without limitation, the Company's relocation of Employee in breach
of Section 3(g) above; and the Company's failure to pay any compensation to
Employee more than thirty (30) days after the date such payment is due); (ii) a
reduction in Employee's Base Salary or any other compensation or benefits (other
than a reduction in the Incentive Bonus which is solely attributable to (A)
lower Net Earnings or (B) Employee's failure to follow a Company policy, or with
respect to a significant matter, pursuant to Section 3(a)(iii) above); (iii) a
material reduction in or interference with Employee's position, duties,
responsibilities or support with respect to his employment by the Company under
this Agreement without Employee's prior written consent; or (iv) a "Change in
Control" of the Company (as defined below).
For purposes of this Section 5(d), a "Change in Control" of the Company shall be
deemed to occur if (i) over a twelve (12) month period, a person or group of
persons acquires shares of the Company representing thirty-five percent (35%) of
the voting power of the Company or a majority of the members of the Board is
replaced by directors not endorsed by the members of the Board before their
appointment or (ii) a person or group of persons (other than a person or group
of persons controlled, directly or indirectly, by shareholders of the Company)
acquires forty percent (40%) or more of the gross fair market value of the
assets of the Company over a 12-week period. The interpretation of the meanings
of the terms in the preceding sentence shall be made in accordance with the
meanings ascribed to those terms under Section 409A of the Code, except that the
words "person," "persons" or "group" in the immediately preceding sentence shall
be interpreted in accordance with the meanings ascribed to those words under
Section 280(G) of the Code and the regulations thereunder.
In the event that Employee elects to terminate this Agreement upon or following
a Change in Control of the Company, then Employee shall provide written notice
thereof to the Board no more than one (1) year after the effective date of the
Change in Control.
In the event that Employee terminates this Agreement pursuant to the first
paragraph of this Section 5(d), then the Company shall pay to Employee (A)
within ten (10) days after the date of termination, an amount equal to (i) any
unpaid accrued Base Salary pursuant to Section 3(a)(i) above to which Employee
was entitled as of the date of such termination; (ii) any unpaid accrued
Incentive Bonus pursuant to Section 3(a)(ii) above to which Employee was
entitled as of the date of such termination; and (iii) any unpaid accrued
Vacation Payment to which Employee was entitled as of the date of such
termination; and (B) upon the later to occur of the date which is sixty (60)
days after the end of the Year in which such termination occurs or six (6)
months following such termination, a lump sum amount equal to (i) the aggregate
Base Salary (based on the Base Salary in effect on the date of the termination
of Employee's employment), with respect to a period equal to the longer of
twenty four (24) months or the remainder of the term of this Agreement which
would have occurred in the absence of such termination; (ii) the Target Bonus
for each full Year during the remainder of the term of this Agreement which
would have occurred in the absence of such termination and a ratable portion
thereof for any partial Year; and (iii) the cost of the Benefits Amount and Car
Allowance provided by the Company as in effect at the time of such termination
for the remainder of the term of this Agreement. The Company shall also pay to
Employee within ten (10) days after the date of such termination any other
amounts due to Employee as of the date of termination, including, but not
limited to, reimbursement of expenses under Section 3(g) above. In addition to
Employee's rights under share option or restricted/performance share agreements
outstanding prior to the date hereof, Employee shall also be entitled to
immediate vesting of the (i) restricted stock held by Employee on the date of
such termination which were granted on or after the date hereof, and (ii) any
Performance Shares/Options held by Employee on the date of such termination
which were granted on or after the date hereof, all of which shall remain
exercisable until the earlier of one year following the date of such termination
or, if applicable, the date any such options would otherwise expire in the
absence of such termination. The exercise of any rights under this Section would
be in lieu of any rights Employee might have under Section 5(h) below.
By Employee for Illness. In the event that during the term hereof Employee
becomes ill such that, in the written opinion of a physician reasonably
acceptable to the Company, it would not be advisable for Employee to continue
his employment with the Company hereunder, Employee may terminate his employment
hereunder upon reasonable notice to the Company and, in such event, Employee
shall not be deemed to have breached this Agreement as a result of such
termination. In the event of such termination by Employee, the Company shall
have no further obligations to make payments or otherwise under this Agreement,
except that the Company shall pay to Employee (i) within ten (10) days after the
date of such termination (A) any unpaid accrued Base Salary pursuant to Section
3(a)(i), above and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii),
above, in each case to which Employee is entitled on the date of such
termination, (ii) any amounts due to Employee as of the date of termination as
reimbursement of expenses under Section 3(f), above, (iii) any unpaid accrued
Vacation Payment to which Employee was entitled to as of the date of such
termination, and (iv) upon the later to occur of the date which is sixty (60)
days after the end of the Year in which such termination occurs or six (6)
months following such termination, an amount equal to (A) the Incentive Bonus
pursuant to Section 3(a)(ii) above, if any, which Employee would have been
entitled to receive for the Year in which Employee terminated employment
pursuant to this Section 5(e) had Employee been employed by the Company on the
last day of that Year, and (B) the cost of the Benefits Amount as in effect at
the time of such termination for a period of one (1) year after the date of such
termination. Employee shall also be entitled to immediate vesting of the (i)
restricted stock held by Employee on such termination date which was granted on
or after the date hereof, and (ii) any Performance Shares/Options held by
Employee on such termination date and which were granted on or after the date
hereof, all of which shall remain exercisable until the earlier of one year
following such termination date and, if applicable, the date (or dates) any such
options would otherwise expire in the absence of such termination.
Without Cause By Company
. In the event that during the term hereof, the Company terminates Employee's
employment hereunder other than for Cause or due to the death or Disability of
Employee, then the Company shall pay to Employee (A) within ten (10) days after
the date of termination, an amount equal to (i) any unpaid accrued Base Salary
pursuant to Section 3(a)(i) above to which Employee was entitled as of the date
of such termination; (ii) any unpaid accrued Incentive Bonus pursuant to Section
3(a)(ii) above to which Employee was entitled as of the date of such
termination; (iii) any other amounts due to Employee as of the date of
termination including, but not limited to, reimbursement of expenses under
Section 3(g) above; and (iv) any unpaid accrued Vacation Payment to which
Employee was entitled as of the date of such termination;
and (B) upon the earlier to occur of
Employee
's death or the date which is six (6) months following such termination, a lump
sum amount equal to the aggregate of the following: (i) Base Salary based on the
Base Salary in effect on the date of termination of Employee's employment with
respect to a period equal to two(2) years, (ii) an amount equal to two (2) times
the Target Bonus and (iii) the cost of the Benefits Amount and Car Allowances in
effect on the date of termination payable to Employee, with respect to a period
equal to two(2) years. In addition to Employee's rights under share option or
restricted stock agreements outstanding prior to the date hereof, Employee shall
also be entitled to immediate vesting of the (i) restricted stock held by
Employee on the date of termination which was granted on or after the date
hereof, and (ii) any Performance Shares/Options held by Employee on the date of
such termination which were granted on or after before the date hereof, all of
which shall remain exercisable until the earlier of one year following the date
of such termination or, if applicable, the date any such options would otherwise
expire in the absence of such termination. Any payment to Employee under this
Section 5(f) shall be in lieu of any payment that may be deemed to be payable to
Employee under Section 5(h), below.
No Offset - No Mitigation
.
Employee shall not be required to mitigate any damages under this Agreement by
seeking other comparable employment. The amount of any payment or benefit
provided for in this Agreement shall not be reduced by any compensation or
benefits earned by or provided to Employee as a result of his employment by
another employer.
Non-Renewal
. The Board of Directors of the Company will notify Employee whether the Company
will or will not be renewing this Agreement on terms no less favorable to
Employee than the terms of this Agreement within at least twelve (12) months
prior to the expiration of this Agreement (a "
Non-Renewal Notification
"), provided that nothing in this Section 5(h) shall be deemed to limit (i) the
ability of the Company to terminate Employee's employment with the Company
pursuant to Section 5(c) or (ii) the terms of any other provision of Section 5
which relate to the termination of Employee's employment hereunder prior to the
expiration date hereof.
In the event that the employment of Employee hereunder continues for the full
term of this Agreement and Employee's employment with the Company
is not renewed
by the Company as of the date of expiration of this Agreement on terms no less
favorable to Employee than the terms of this Agreement (regardless of whether
notification of such renewal or non-renewal was received by the Employee as
provided above), then (A) Employee shall be entitled to receive from the
Company, on the date which is six (6) months after the date of such expiration
(unless Employee shall have died prior to such six month period, then on the
date of Employee's death), an amount equal to (i) the Base Salary in effect as
of the date of expiration, and (ii) the Incentive Bonus payable with respect to
the year in which the Agreement expires
(in addition to any accrued and unpaid Incentive Bonus earned by Employee and
payable pursuant to Section 3(a)(ii) above on the date of expiration) and (B)
all (i) restricted share, performance share, share option and other equity
awards granted to Employee on or after the date hereof and prior to the date of
the Non-Renewal Notification (the "Notification Date") that provide for vesting
over a period of time and that have not fully vested as of the Notification
Date, shall vest as of July 31, 2011, but shall otherwise have the terms
provided for in the grant award therefor and (ii) restricted share and
performance share awards granted to Employee prior to the date hereof that
provide for vesting over a period of time (the "Existing Awards") and that have
not fully vested as of the Notification Date, shall vest as of July 31, 2011,
but shall otherwise have the terms provided for in the grant award therefor,
provided that such accelerated vesting of the Existing Awards shall not apply to
the extent that it would result in any adverse tax or accounting effect other
than the fact of accelerated expensing on the Company or would otherwise violate
any law, rule or regulation. Notwithstanding the foregoing, the accelerated
vesting of equity awards described in clause "(B)" of the immediately preceding
sentence shall not apply if Employee voluntarily terminates his employment with
the Company prior to July 31, 2011 other than for Good Reason pursuant to
Section 5(d), above, or if Employee's employment with the Company is terminated
by the Company pursuant to Section 5(c), above. The Company shall also pay to
Employee within ten (10) days after the date of expiration any other amounts due
to Employee as of the date of expiration, including, but not limited to,
reimbursement of expenses under Section 3(f), above. If the Board of Directors
of the Company elects to renew this Agreement and (i) the Employee does not
renew this Agreement with the Company prior to the expiration of this Agreement,
then Employee shall not be entitled to any payments hereunder, or (ii) the
Employee agrees to renew this Agreement but his employment with the Company is
terminated prior to the expiration of this Agreement as provided herein, then
Employee shall be entitled to receive the compensation, if any, related to such
a termination as provided in this Agreement. If Employee chooses not to renew
this Agreement and therefore does not receive the payment pursuant to this
Section 5(h), then he will be bound by a one year non-compete as provided in
Section 6(b) below (subject to the exceptions set forth in such Section).
Non-Competition; Confidentiality; etc.
All references to the "Company" in this Section 6 shall include all Affiliates
where the context permits.
Acknowledgment. Employee acknowledges and agrees that (i) in the course of
Employee's employment by the Company, it has been necessary, and, in the future,
it will continue to be necessary for Employee to acquire information which could
include, in whole or in part, information concerning the sales, products,
services, customers and prospective customers, sources of supply, computer
programs, system documentation, software development, manuals, formulae,
processes, methods, machines, compositions, ideas, improvements, inventions or
other confidential or proprietary information belonging to the Company or
relating to the affairs of the Company (collectively, the "Confidential
Information"), (ii) the restrictive covenants set forth in this Section 6 are
reasonable and necessary in order to protect and maintain such proprietary
interests and the other legitimate business interests of the Company and that
such restrictive covenants in this Section 6 shall survive the termination of
this Agreement for any reason and (iii) the Company would not have entered into
this Agreement unless such covenants were included herein.
Non-Competition. Employee covenants and agrees that during the term hereof and
for a period of one (1) year following the termination of Employee's employment
hereunder for any reason or expiration of this Agreement (or two (2) years
following (i) a non-renewal of the Agreement by the Company, and payment made to
Employee, as required in Section 5(h) above, or (ii) any termination, if the
Company elects to pay to Employee, in addition to all other amounts payable
under this Agreement, an amount equal to the sum of (A) one additional Year's
Base Salary at the rate then in effect and (B) the Target Bonus (calculated with
reference to the date of termination of Employee's employment hereunder), such
sum to be payable in bi-monthly installments during such second year), Employee
shall not, on any vessel or within one hundred (100) miles of any non-vessel
venue where, or from which, the Company is then conducting, or had in the then
preceding two (2) years conducted, any part of its business, engage, directly or
indirectly, whether as an individual, sole proprietor, or as a principal, agent,
officer, director, employer, employee, consultant, independent contractor,
partner or shareholder of any firm, corporation or other entity or group or
otherwise, in any Competing Business; provided, however, that if the Company
chooses not to renew this Agreement and does not pay Employee pursuant to
Section 5(h) hereof, then Employee will not be bound by any non-compete as
provided in this Section 6(b). For purposes of this Agreement, the term
"Competing Business" shall mean any individual, sole proprietorship,
partnership, firm, corporation or other entity or group which offers or sells or
attempts to offer or sell (i) spa services, skin or hair care products or degree
or non-degree educational programs in massage therapy, skin care or related
courses or (ii) any other services then offered or sold by the Company.
Notwithstanding the foregoing, Employee is not precluded from (i) maintaining a
passive investment in publicly held entities provided that employee does not
have more than a five percent (5%) beneficial ownership in any such entity; or
(ii) serving as an officer or director of any entity, the majority of the voting
securities of which is owned, directly or indirectly, by the Company
(collectively, a "Permitted Activity").
Non-Solicitation of Customers and Suppliers
. Employee agrees that during his employment hereunder, he shall not, whether as
an individual or sole proprietor, or as a principal, agent, officer, director,
employer, employee, consultant, independent contractor, partner or shareholder
of any firm, corporation or other entity or group or otherwise, directly or
indirectly, solicit the trade or business of, or trade, or conduct business
with, any customer, prospective customer, supplier, or prospective supplier of
the Company for any purpose other than for the benefit of the Company. Employee
further agrees that for one year following termination of his employment
hereunder for any reason, Employee shall not, whether as an individual or sole
proprietor, or as a principal, agent, officer, director, employer, employee,
consultant, independent contractor, partner or shareholder of any firm,
corporation or other entity or group or otherwise, directly or indirectly,
solicit the trade or business of, or trade, or conduct business with any
customers or suppliers, or prospective customers or suppliers, of the Company.
Notwithstanding the foregoing, Employee is not precluded from a Permitted
Activity.
Non-Solicitation of Employees, Etc
.
Employee agrees that during the term of his employment hereunder and thereafter
for a period of two (2) years, he shall not, directly or indirectly, as an
individual or sole proprietor or as a principal, agent, employee, employer,
consultant, independent contractor, officer, director, shareholder or partner of
any person, firm, corporation or other entity or group or otherwise without the
prior express written consent of the Company approach, counsel or attempt to
induce any person who is then in the employ of, or then serving as independent
contractor with, the Company to leave the employ of, or terminate such
independent contractor relationship with, the Company or employ or attempt to
employ any such person or persons who at any time during the preceding six (6)
months was in the employ of, the Company. Notwithstanding the foregoing,
Employee is not precluded from a Permitted Activity.
Non-Disclosure of Confidential Information
.
Employee agrees to hold and safeguard the Confidential Information in trust for
the Company, its successors and assigns and only use the Confidential
Information for purposes of performing his duties hereunder and agrees that he
shall not, without the prior written consent of the Board, misappropriate or
disclose or make available to anyone for use outside the Company at any time,
either during his employment hereunder or subsequent to the termination of his
employment hereunder for any reason, any of the Confidential Information,
whether or not developed by Employee, except as required in the performance of
Employee's duties to the Company or as required by applicable law. In the event
that Employee is requested or required by, or under applicable law or court, or
administrative order to disclose any of the Confidential Information, Employee
shall provide the Company with prompt written notice of any such request or
requirement so that the Company may seek a protective order or other appropriate
remedy. If Employee is legally compelled to disclose Confidential Information,
Employee shall disclose only that portion of the Confidential Information which
Employee is legally required to disclose.
Disclosure of Works and Inventions/Assignment of Patents
.
Employee shall disclose promptly to the Company any and all works, publications,
inventions, discoveries and improvements authored, conceived or made by Employee
during the period of his employment hereunder and related to the business or
activities of the Company (the "Rights"), and hereby assigns and agrees to
assign all his interest therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments which the Company shall deem
necessary to apply for and obtain Letters of Patent or Copyrights, or similar
documents or rights, of the United States or any foreign country or to otherwise
protect the Company's interest in the Rights. Such obligations shall continue
beyond the termination of Employee's employment hereunder for any reason with
respect to works, inventions, discoveries and improvements authored, conceived
or made by Employee during the period of Employee's employment under this
Agreement.
Return of Materials
.
Upon the termination of Employee's employment with the Company for any reason,
Employee shall promptly deliver to the Board all correspondence, drawings,
blueprints, manuals, letters, notes, notebooks, financial records, reports,
flowcharts, programs, proposals and any other documents concerning the Company's
business, including, without limitation, its customers or suppliers or
concerning its products, services or processes and all other documents or
materials containing or constituting Confidential Information; provided,
however, that nothing in this Section 6(g) shall require Employee to deliver to
the Board any property that is owned by Employee and that contains no
Confidential Information.
Limitation on Restrictions
. Notwithstanding anything to the contrary in this Section 6, the restrictions
set forth in Sections 6(a) through 6(g), above, shall not apply if Employee
terminates this Agreement under Section 5(d), above, unless Employee receives as
a result of such termination the amount required to be paid to Employee pursuant
to the fourth paragraph in Section 5(d), above, within six (6) months after the
date of such termination , in which case the restrictions in this Section 6
shall apply until the last date that this Agreement would have been in effect
had it not been terminated as aforesaid and (ii) Section 6(b) shall not apply if
Employee's employment is terminated after a Change in Control that is not
approved by the Board.
Non-Assignment; Successors; etc.
The Company may assign any of its rights, but not its obligations, under this
Agreement, without the prior written consent of Employee, which shall not be
unreasonably withheld. The successors of the Company shall be bound by the terms
hereof, and where the context permits, references to "Company" herein shall be
deemed to apply to any such successors. Employee may assign his rights, but not
his obligations, hereunder, and the obligations of Employee hereunder, other
than the obligations set forth in Section 1, above, shall continue after the
termination of his employment hereunder for any reason and shall be binding upon
his estate, personal representatives, designees or other legal representatives,
as the case may be ("Heirs"), and all of Employee's rights hereunder shall inure
to the benefit of his Heirs. All of the rights of the Company hereunder shall
inure to the benefit of, and be enforceable by the successors of the Company.
Notices
Except as set forth in Section 5(c), above, any notices or demands given in
connection herewith shall be in writing and deemed given when (i) personally
delivered, (ii) sent by facsimile transmission to a number provided in writing
by the addressee and a confirmation of the transmission is received by the
sender or (iii) three (3) days after being deposited for delivery with a
recognized overnight courier, such as FedEx, and addressed or sent, as the case
may be, to the address or facsimile number set forth below or to such other
address or facsimile number as such party may in writing designate:
If to Employee:
6894 Royal Orchid Circle
Delray Beach, FL 33446
Facsimile Number:
If to the Company:
Leonard Fluxman
c/o Steiner Management Services
770 South Dixie Highway, Suite #200
Coral Gables, FL 33146
Facsimile Number: (305) 358-7704
Entire Agreement; Certain Terms
This Agreement constitutes and contains the entire agreement of the parties with
respect to the matters addressed herein and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the parties
respecting the subject matter hereof, including, but not limited to, all other
agreements and arrangements relating to the payment of any compensation to
Employee with respect to any services performed, or to be performed, on behalf
of the Company or any Affiliate. Notwithstanding the preceding sentence, the
Company hereby agrees to provide Employee with any remaining amounts otherwise
payable to Employee pursuant to the terms of the Prior Agreement. No waiver of
any rights under this Agreement, nor any modification or amendment of this
Agreement shall be effective or enforceable unless in writing and signed by the
party to be charged therewith. When used in this Agreement, the terms "hereof,"
"herein" and "hereunder" refer to this Agreement in its entirety, including any
exhibits or schedules attached to this Agreement and not to any particular
provisions of this Agreement, unless otherwise indicated.
Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Governing Law, etc
This Agreement shall be governed by and construed in accordance with the laws of
Florida without regard to choice of law provisions and the venue for all actions
or proceedings brought by Employee arising out of or relating to this Agreement
shall be in the state or federal courts, as the case may be, located in
Miami-Dade County, Florida (collectively, the "Courts"). Employee hereby
irrevocably waives any objection which he now or hereafter may have to the
laying of venue of any action or proceeding arising out of or relating to this
Agreement brought in any of the Courts and any objection on the ground that any
such action or proceeding in any of the Courts has been brought in an
inconvenient forum. Nothing in this Section 11 shall affect the right of the
Company or an Affiliate to bring any action or proceeding against Employee or
his property in the courts of other jurisdictions. In the event of any
litigation between the parties hereto with respect to this Agreement, each party
shall bear his or its own costs and expenses ("Legal Costs and Expenses") in
connection with such litigation, including, but not limited to, reasonable
attorneys' fees at the trial and appellate court levels; provided, however, that
with respect to any litigation concerning whether a termination by Employee was
for Good Reason, the Company shall pay Employee's Legal Costs and Expenses
(regardless of whether Employee is the prevailing party), and provided, further,
that with respect to any litigation concerning whether a termination by the
Company was for Cause, Employee shall be entitled to recover his Legal Costs and
Expenses from the Company unless the Company is the prevailing party in any such
litigation as determined by a final and nonappealable decision or order.
Severability
It is the intention of the parties hereto that any provision of this Agreement
found to be invalid or unenforceable be reformed rather than eliminated. If any
of the provisions of this Agreement, or any part hereof, is hereinafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of such provision or the other provisions of this Agreement, which
shall be given full effect, without regard to the invalid portions. If any of
the provisions of Section 6, above, or any portion thereof, is held to be
unenforceable because of the duration of such provision or portions thereof, the
area covered thereby or the type of conduct restricted therein, the parties
hereto agree that the court making such determination shall have the power to
modify the duration, geographic area and/or, as the case may be, other terms of
such provisions or portions thereof, and, as so modified, said provisions or
portions thereof shall then be enforceable. In the event that the courts of any
one or more jurisdictions shall hold such provisions wholly or partially
unenforceable by reason of the scope thereof or otherwise, it is the intention
of the parties hereto that such determination not bar or in any way affect the
Company's rights provided for herein in the courts of any other jurisdictions as
to breaches or threatened breaches of such provisions in such other
jurisdictions, the above provisions as they relate to each jurisdiction being,
for this purpose, severable into diverse and independent covenants.
Non-Waiver
Failure by either the Company or Employee to enforce any of the provisions of
this Agreement or any rights with respect hereto, or the failure to exercise any
option provided hereunder, shall in no way be considered to be waiver of such
provisions, rights or options, or to in any way affect the validity of this
Agreement.
Headings
The headings preceding the text of the paragraphs of this Agreement have been
inserted solely for convenience of reference and neither constitute a part of
this Agreement nor affect its meaning, interpretation or effect.
15. Advice of Counsel
Employee acknowledges that during the negotiation of this Agreement, he has
retained or been advised to retain counsel of his choosing who has provided or
will provide advice to Employee in connection with his decision to enter into
this Agreement.
16. Survivorship
The following sections of this Agreement shall survive the expiration or
termination of this Agreement and shall survive Employee's termination of
employment from the Company for any reason: Section 5 (Termination and
Non-Renewal), Section 6 (Non-Competition, Confidentiality, etc.) and Section 11
(Governing Law, etc.). In addition, all sections of this Agreement that would,
by their terms, survive expiration or termination of this Agreement shall so
survive such expiration and termination and shall also survive termination for
any reason of Employee's employment with the Company.
IN WITNESS WHEREOF
, the parties have executed these presents as of the day and year first above
written.
STEINER LEISURE LIMITED
/s/ Stephen Lazarus
By:/s/ Leonard Fluxman
Stephen Lazarus Name: Leonard Fluxman
Title: President and CEO |
Exhibit 10.71
TCBY SYSTEMS, LLC
Distribution Service Agreement
with Kaleel Brothers, Inc.
March 1, 2006
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DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of March, 2006, by and
between TCBY Systems, LLC, a Delaware limited liability company (“COMPANY”) and
Kaleel Bros, INC., an Ohio Corporation (“DISTRIBUTOR”). DISTRIBUTOR will
commence distribution services under this Agreement on March 6, 2006 (the
“Effective Date”) unless otherwise mutually agreed upon by the parties.
RECITALS
A. The COMPANY is engaged in the worldwide
business of franchising or licensing retail TCBY Stores and other related
concepts (“Franchised Stores”). COMPANY also has several COMPANY-owned stores
that it supports directly (“Company Stores”). The Franchised Stores and or
individual franchisees (the “Franchisees”) function as independent companies and
are individually and solely responsible for the activities at each location,
including purchasing needed products and supplies, which includes responsibility
for purchasing from DISTRIBUTOR. COMPANY is responsible for activities at its
Company Stores. Company Stores and Franchised Stores are jointly referred to
herein as “Stores”, the Franchisees and individuals responsible for Company
Stores are jointly referred to as (“Operators”) and the combined efforts of the
COMPANY and its Franchisees is referred to as the “System”. COMPANY takes steps
to assist Stores to meet its purchasing needs and has the right to designate
distributors and suppliers for the System.
B. The DISTRIBUTOR is engaged in the business
of purchasing, selling, distributing and delivering food service products
(including the Products, as defined below). In connection therewith, the
DISTRIBUTOR manages, controls, prepares and furnishes reports to its customers
concerning the inventories of products and supplies the DISTRIBUTOR purchases,
manages and controls for sale, distribution and delivery to its customers.
C. COMPANY wishes to appoint DISTRIBUTOR as
a distributor of certain approved proprietary food and related products to the
Stores located within the Territory (as defined below), and DISTRIBUTOR wishes
to accept such appointment, all on the terms and conditions hereinafter set
forth.
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AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein set forth and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Appointment - Subject to all terms and
conditions of this Agreement, COMPANY hereby appoints DISTRIBUTOR as a
distributor of the products within the product categories listed in Schedule 1
(the “Products”), to the Stores in the territory serviced by DISTRIBUTOR’s
distribution center located in Youngstown, Ohio (the “Territory” as reflected in
the maps depicted in Schedule 2) and DISTRIBUTOR hereby accepts such
appointment. To the extent that conflicts arise between the maps and the
Territory description in Schedule 2, the maps shall prevail. Subject to Section
2.02, COMPANY may appoint DISTRIBUTOR as a distributor of Products to Stores
outside of the Territory and DISTRIBUTOR may agree to such designation.
2. Distribution of Products
2.01 Products - DISTRIBUTOR will maintain in its
inventory of Products the following: (i) Products designated by COMPANY that
contain the proprietary trademarks, service marks, logos or labels of COMPANY or
any of its affiliates or that are made pursuant to specifications provided by
COMPANY, its affiliates, or licensors for limited distribution to Operators
(defined below) or other entities licensed by COMPANY, its affiliates or
licensors (“TCBY Branded Products”), and (ii) other supplies or other national
or regional branded Products designated or contracted for by COMPANY to be
maintained in inventory by DISTRIBUTOR for distribution to COMPANY, its
affiliates and the Operators. (Collectively, Products described in clauses (i)
and (ii) are referred to as “Proprietary Products”). DISTRIBUTOR will also
maintain in its inventory non-proprietary Products which DISTRIBUTOR stocks in
its inventory for sale to COMPANY, its affiliates and its Operators. DISTRIBUTOR
shall not be required to maintain more than two hundred (200) Proprietary
Products in inventory at any time. All Coca Cola Products carried for COMPANY
shall be excluded from the calculation of the number of Proprietary Products.
2.02 Approved Operators - DISTRIBUTOR shall sell and
deliver to Franchisees and Operators of Stores approved by COMPANY and located
within the Territory such quantities of the Products (subject to minimum Product
order requirements) as the Operators may order from time to time during the term
of this Agreement. DISTRIBUTOR shall cease selling TCBY Branded Products to any
Operator not later than three (3) days following receipt of written notice from
COMPANY
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advising DISTRIBUTOR that such Operator is no longer approved by COMPANY and
shall, within such timeframe, further cease selling, under the terms of any
supplier agreement negotiated by COMPANY, all Proprietary Products to such
Operators referenced in such notice. In addition, DISTRIBUTOR shall have the
right to cease the sale and distribution of Products to any Operator (a) who is
in default of its obligations to DISTRIBUTOR, provided that DISTRIBUTOR has
given COMPANY at least three (3) business days notice of such default before
ceasing deliveries to such Operator, or (b) who has filed a voluntary petition
in bankruptcy or under any other similar insolvency or debtor relief law or who
has had such a petition filed against it, or who has made a general assignment
for the benefit of its creditors. COMPANY shall also have the right to reinstate
delivery to any Operator that COMPANY previously stopped selling by providing
written notice to DISTRIBUTOR and DISTRIBUTOR shall provide such delivery as
soon as mutually agreed between the parties.
A list of the present Operators with Stores located within the Territory and
approved by COMPANY and their respective Stores locations is attached hereto as
Schedule 3. During the term of this Agreement, COMPANY shall maintain and
provide to DISTRIBUTOR a current list of all Operators with Stores within the
Territory who have been approved by COMPANY for distribution of the Products
under this Agreement. DISTRIBUTOR shall have the right to rely upon such list,
as amended or modified by COMPANY in writing from time to time, in performing
its obligations under this Agreement. COMPANY shall notify DISTRIBUTOR of new
Stores within the Territory not less than seven (7) days prior to the desired
date of first shipment of Products to any such new Stores. In addition, provided
and to the extent that COMPANY and DISTRIBUTOR mutually agree in writing,
DISTRIBUTOR shall provide distribution services to Stores located outside the
Territory, as designated by COMPANY.
COMPANY represents and warrants that the terms of this Agreement, as and if
amended in the manner permitted under this Agreement, are binding upon and shall
govern DISTRIBUTOR and COMPANY’s obligations with respect to distribution
services performed by DISTRIBUTOR hereunder and that each Franchisee that is an
owner or operator of a Franchised Store within the System shall be bound by the
terms of this Agreement, as it may hereafter be amended, upon such Operator’s
purchase of Proprietary Products from DISTRIBUTOR.
2.02 Product Orders - All Product orders shall be
submitted by the Operators to DISTRIBUTOR and shall specify the location of the
Operator’s Stores, the type of Product, and the quantity desired. Operators may
place orders electronically (“Electronic Orders”) or by telephoning or faxing
DISTRIBUTOR’s customer service center in accordance with the guidelines detailed
below. All shipment expenses from DISTRIBUTOR’s distribution center to the
Operator’s location shall be
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at DISTRIBUTOR’s expense unless otherwise noted elsewhere in this Agreement.
Product order guides will be provided by DISTRIBUTOR to the Operators monthly
via DISTRIBUTOR’s website and with a hard copy delivered to each Store, with
availability of such order guides to be made prior to the beginning of the
month, but only after review and approval of the order guide by COMPANY. The
order guides will be organized by Product categories and will include, among
other things, the Product Sell Price (as defined herein), Product units and new
Products. DISTRIBUTOR will assign one product code number to each stock-keeping
unit (“SKU”) of each Product, which will be common throughout its entire
distribution system and will be used on all documents such as order guides,
invoices, monthly reports, etc. SKU’s, and, accordingly, the assigned product
code number, must differ for equivalent Products supplied by different
suppliers. Only Products approved for sale to its Operators by the COMPANY will
be listed on this order guide. Electronic Orders will be placed via telephone
modem or internet using DISTRIBUTOR’s automated order entry system. All orders
are subject to the standard order cut-off time of 4:00 p.m. two (2) days prior
to their scheduled delivery day. Operators will be notified prior to the time
of final order cut-off if a product is expected to be out of stock so that an
alternative may be ordered, subject to the provisions of Section 3.02.
Operators will have until 5:00 p.m, one (1) day before their order shipping day
to modify or add-on to their order (Friday at 5:00 p.m. for Stores whose
deliveries will leave DISTRIBUTOR’s facility on Monday). Where reasonably
possible, DISTRIBUTOR will schedule ordering days and delivery days that are
mutually agreed upon by and between DISTRIBUTOR and each Operator and will
provide notice to the affected Operator of at least fourteen (14) days before
routing changes. Wherever reasonably possible, DISTRIBUTOR will include no more
than three (3) “skip days” between the date of order and date of delivery. For
example, orders scheduled for delivery on Friday will be placed no earlier than
Monday. Orders scheduled for delivery on Tuesday will be placed on Friday. In
the event DISTRIBUTOR must include more than four (4) “skip days” between the
date of order and date of delivery it will notify COMPANY in advance. In no
event will there ever be more than four (4) “skip days” permitted without the
prior written approval of COMPANY. DISTRIBUTOR may schedule deliveries on any
day of the week. On an exception basis, DISTRIBUTOR will consider shortening
the permissible time frames for scheduled deliveries for those Operators that,
given unique and compelling business needs, require the same. Operator will be
notified of any Product shortages at the time of order placement or, in the case
of an Electronic Order, one (1) day prior to the loading of the delivery truck.
2.04 Deliveries. Delivery vehicles used by DISTRIBUTOR
will only display the marks of DISTRIBUTOR, except for locations that cannot
accommodate delivery by DISTRIBUTOR’S existing tractor trailers or in the
instances where recovery deliveries are made by outside services or DISTRIBUTOR
has the need for temporary short term rental equipment.
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Commencing ninety (90) days after the Effective Date, DISTRIBUTOR agrees that at
an overall average of 75% of all regularly scheduled deliveries will be made
within a four (4) hour window, meaning no earlier than two (2) hours before and
no later than two (2) hours after the scheduled delivery time. If a delivery is
anticipated to fall outside of this four (4) hour window, DISTRIBUTOR will
immediately notify the Operator. DISTRIBUTOR will provide an inside delivery to
each Operator in accordance with Company’s temperature store requirements as
detailed in Section 4.09, placing refrigerated and frozen Products into their
appropriate storage areas, but will not be responsible for stocking shelves or
rotating inventories.
All invoices for deliveries made during Store’s business hours will be signed
for by the Store’s store manager or other representative prior to DISTRIBUTOR’s
driver leaving the Store (provided that the driver is not unreasonably
delayed). Copies of invoices for deliveries made after the Store’s regular
business hours will be left at the Store.
The COMPANY agrees to use its commercially reasonable efforts to cause Operators
to provide keys and security codes for night deliveries where necessary. In the
event Operator refuses to provide keys and security codes, Operator will
promptly meet the delivery driver at the scheduled appointment time or at such
other time as Operator has been notified in the event of a late delivery. If
the Operator fails to meet the DISTRIBUTOR delivery at the appropriate time on
more than one occasion, the Operator shall be responsible for payment of a
penalty fee to DISTRIBUTOR for subsequent occurrences. The penalty fee will be
determined via mutual agreement between DISTRIBUTOR and COMPANY. In the event
of a Product shortage or delivery problem that occurs during an unattended
delivery, the authorized representative of the Stores will contact the
distribution center no later than the first Notification Deadline following such
unattended delivery. The “Notification Deadline” is the earlier of 12:00 p.m.
local time or one hour after the normal Store opening time each day for the
affected Stores.
2.05 Delivery Frequency/Routing - DISTRIBUTOR will
provide each Operator with a minimum delivery frequency based on annual case
volume as shown below as long as the Operator meets the minimum order
requirements set forth in Section 5 hereof:
Delivery Frequency
Annual Case Volume
Summer Routing
Winter Routing
Less than 1,000 cases
Every 4 weeks
Every 4 weeks
1,000-1,999 cases
Every 3 weeks
Every 4 weeks
2,000-3,499 cases
Every week
Every 2 weeks
Greater than 3,499 cases
Every week
Every week
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This schedule is intended to serve as a guideline only and DISTRIBUTOR agrees to
provide additional regular deliveries as requested by Operator and approved by
COMPANY in writing. COMPANY will provide DISTRIBUTOR with the initial delivery
frequency for each Store in Schedule 3. COMPANY and DISTRIBUTOR will mutually
agree on the exact date for routing changes from summer to winter and winter to
summer but each period will be approximately six (6) months with summer routing
from April through September and winter routing from October through March.
In the event an emergency delivery is required based upon the Operator’s needs
and not due to a delivery error by DISTRIBUTOR nor during the time periods
specified in Section 2.08, DISTRIBUTOR will accommodate the Operator’s request
with the most efficient available delivery method. All additional freight
expense will be at the Operator’s expense and will be billed upon DISTRIBUTOR’s
receipt of the invoice from the shipping agent. If DISTRIBUTOR is able to
schedule such an emergency delivery in conjunction with a nearby route, the
additional freight expense will be [CONFIDENTIAL](1). Where possible, a store
may order up to [CONFIDENTIAL](2) cases to be delivered to a nearby store, on
that store’s delivery day (and with that store’s consent) without an additional
charge. Products delivered to a nearby store will be billed on a separate
invoice.
Should the need arise for an emergency or special delivery due to supplier
error, DISTRIBUTOR and COMPANY will work with the supplier to remedy the
shortage at the supplier’s expense. If supplier fails to pay the additional
freight expense, COMPANY will be required to do so provided DISTRIBUTOR notifies
COMPANY immediately of supplier non-performance. If an emergency delivery is
necessary due to DISTRIBUTOR error, DISTRIBUTOR will arrange a special delivery
with any additional freight to be paid by DISTRIBUTOR.
DISTRIBUTOR will arrange its routes to insure that its delivery trucks will be
in all markets (SMSA’s of at least 250,000 population) within each Territory at
least once a week where at least twenty-five (25) Stores serviced by DISTRIBUTOR
under this Agreement are located.
2.06 Special Deliveries During Roll-Out and New Operator
Openings - DISTRIBUTOR and COMPANY recognize that during the initial roll-out
phase of the DISTRIBUTOR distribution program, many new processes will be in
place for each of COMPANY, the Operators and
--------------------------------------------------------------------------------
(1) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(2) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
7
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DISTRIBUTOR, including changes in the way the Operators order, the distance from
the DISTRIBUTOR distribution center to the Operators, and lead times from order
day to delivery day for the Operators. Therefore, DISTRIBUTOR will work
diligently with COMPANY and Operator to process emergency orders for all Stores
for the first thirty (30) days following the commencement of distribution
service at no additional charge from DISTRIBUTOR, subject to the minimum order
requirements and applicable handling fees, if any, as set forth in Section 5 of
this Agreement and any charges incurred from a 3rd party which will be paid by
Operator. In addition, during the term of this Agreement, DISTRIBUTOR will also
work diligently with COMPANY and Operator to process emergency orders for all
Operators’ newly added Stores within the first thirty (30) days following the
opening of the new Stores, subject only to minimum order requirements and
applicable handling fees, if any, as set forth in Section 5 of this Agreement
and any charges incurred from a 3rd party which will be paid by Operator.
2.07 Return of Products/Credits —Any Products ordered by
Operators which are returned to DISTRIBUTOR for any reason must be returned no
later than the next regularly scheduled delivery (except that, in the case of
Products to be returned as a result of concealed damage, within the remaining
shelf life of such Products) and all claims for Products to be returned must be
made either to the driver upon check-in of the order, by telephone by the
earlier of 12 p.m. or one hour after the normal Store opening on the day of
delivery following receipt of the Products if an unattended delivery or, in the
case of concealed damage, within twenty-four (24) hours of discovery of
concealed damage by the Operator. For attended deliveries, all cakes and pies
must be inspected at the time of delivery by Operator. DISTRIBUTOR will not be
obligated to issue subsequent credits for cakes and pies for such attended
deliveries unless reimbursed by the supplier. All returned items must be in
unmarked original packaging and must be in suitable condition for resale (unless
damaged or mis-marked Product was the reason for the return). Subject to the
foregoing, DISTRIBUTOR shall provide credit to the affected Operator for
defective, shorted or damaged Products within twenty-four (24) hours of the
driver’s return if brought to the driver’s attention or noticed by the driver
during delivery or, in any event, within forty-eight (48) hours of DISTRIBUTOR’s
receipt of the Operator’s claim of damaged, shorted or defective Products (or
receipt of product, if warranted) and will immediately provide documentation on
its website for Operator of such credit if the original order was placed
electronically or via fax or phone if the order was placed in some other
manner. Notwithstanding the foregoing, no returns will be permitted for cooler
or freezer items, or fresh produce due to misorder by the Operator. Products
refused by Operator at time of delivery for reasons other than damage,
DISTRIBUTOR error or remaining shelf life below agreed upon parameters will be
subject to a [CONFIDENTIAL](3) restocking charge to be paid by Operator. In the
event that the
--------------------------------------------------------------------------------
(3) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
8
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shorted, defective or damaged Product is a Kill Item, then DISTRIBUTOR will
remedy the situation in accordance with Section 3.02.
2.08 Limited Time Offers (“LTO’s”) - In order to allow
DISTRIBUTOR to maintain service levels to the Operators, COMPANY will provide
DISTRIBUTOR with at least twenty-eight (28) days prior written notice of any and
all LTO’s to be run by COMPANY (subject to availability of LTO Products from the
supplier within the twenty-eight (28) day period). Such written notices shall
include estimated usage for the Products to be promoted if such usage is
expected to deviate materially from historical levels or if a new Product.
Subject to the above, DISTRIBUTOR agrees to stock sufficient inventory for any
new Proprietary Products to be used in national LTO promotions and other key
items, as reasonably requested by COMPANY. Unless retained on the Operator’s
menu at the instruction of the COMPANY or mutually agreed to between COMPANY and
DISTRIBUTOR, all LTO Products must be removed from the DISTRIBUTOR distribution
centers no later than sixty (60) days after the completion of the LTO and
COMPANY shall purchase all remaining inventory of such LTO as provided in
Section 3.02. The sale of LTO Products by DISTRIBUTOR is final and LTO Products
may not be returned to DISTRIBUTOR, unless the return is necessitated due to a
DISTRIBUTOR error or due to Product damage not caused by the Operator.
3. Suppliers of Products; Inventory of Products.
3.01 Suppliers/Contracted Products - The Proprietary
Products to be distributed to the Operators under the terms and conditions of
this Agreement shall be purchased by DISTRIBUTOR, on its own account, from the
suppliers (including COMPANY) selected by COMPANY, pursuant to terms and
conditions as are agreed upon by and between DISTRIBUTOR and such suppliers
(including COMPANY). In the event COMPANY enters into direct contracts with
suppliers, the terms and conditions of such contracts that obligate DISTRIBUTOR
shall be provided to DISTRIBUTOR for its business and legal review and, if the
business and legal terms of the proposed contract that apply to DISTRIBUTOR are
reasonably acceptable to DISTRIBUTOR, DISTRIBUTOR will approve the supplier
contract. The guaranteed supplier price provided under such supplier contract
(net of billbacks by DISTRIBUTOR, if any), plus applicable freight if the
supplier price is not a delivered price, plus [CONFIDENTIAL](4) if any,
attributable to the Product, plus [CONFIDENTIAL](5), if any, attributable to the
Product, plus any applicable Sourcing Fees (defined below) shall be the “Cost”
of the Product. Products governed by such
--------------------------------------------------------------------------------
(4) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(5) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
9
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supplier contracts negotiated by COMPANY are referred to herein as “Contracted
Products.” The freight charges for Contracted Products will be an amount
negotiated with the supplier by COMPANY. DISTRIBUTOR agrees that Cost for any
Contracted Products will not include any unloading costs for palletized and
slipsheet loads.
3.02 Inventory - During the term of this Agreement,
DISTRIBUTOR shall maintain an inventory of the Products in quantities necessary
to provide the Operators with an adequate supply of such Products based upon
initial usage projections by COMPANY, future historical usage of such Products
by the Operators, and the fill rate performance requirements detailed below.
DISTRIBUTOR agrees to work with COMPANY, to attempt to maximize the quantities
of Products purchased to efficiently reduce the cost of Products purchased, and
to maximize Product inventory turns. In addition, DISTRIBUTOR agrees to order
Products in the quantities indicated on the inbound quantity matrix attached
hereto as Schedule 5, as amended by COMPANY to reflect the growth in the number
of Stores serviced by DISTRIBUTOR in the Territory from time to time. To further
insure DISTRIBUTOR’s ability to comply with the performance requirements
detailed later in this Section 3.02, DISTRIBUTOR will also maintain at each
distribution center servicing Operators “safety stock” of not less than
[CONFIDENTIAL](6)days historical usage for all Proprietary Products and will
also have an additional [CONFIDENTIAL](7) days historical usage of white
chocolate mousse, chocolate and vanilla frozen yogurt on the road at all times.
DISTRIBUTOR agrees that all Products delivered to Operators will have at least
one-third of their original shelf-life remaining as of the date of delivery.
COMPANY categorizes Products into three classes:
Proprietary Products that Operators must have (“Kill Items”), which Kill Items
will not number more than [CONFIDENTIAL](8) at any time, excluding beverage
Products and LTO items. COMPANY will provide a list of Kill Items and other
Proprietary Products to DISTRIBUTOR, which list will be updated by COMPANY from
time-to-time. The initial list of Kill Items is attached as Schedule 4.
Other Proprietary Products that can be substituted in an emergency.
Non-proprietary Products, including, any produce items that DISTRIBUTOR may
agree to provide.
--------------------------------------------------------------------------------
(6) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(7) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(8) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
10
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DISTRIBUTOR will achieve a 100% fill rate on Kill Items with overnight emergency
delivery, if requested, an overall aggregate “fill rate” for all Products of
[CONFIDENTIAL](9), and at least [CONFIDENTIAL](10) of all invoices issued by
DISTRIBUTOR to the Operators will be completely accurate at the time of initial
issuance, with all of the above measured quarterly. The “fill rate” equals the
percentage of Products or Kill Items, as the case may be, obtained by dividing
the total number of Products or Kill Items shipped by DISTRIBUTOR and received
by the Operators at the time of delivery for the month, by the total number of
Product or Kill Items ordered by the Operators from the DISTRIBUTOR for that
same month. All fill rate measurements (and invoice accuracy requirements) will
be net of supplier-related issues such as shortages and delayed deliveries to
DISTRIBUTOR, provided DISTRIBUTOR notifies COMPANY immediately in the event of
supplier non-performance. If emergency delivery is required due to supplier
(including COMPANY) error, costs of emergency delivery shall be at supplier
(including COMPANY) expense, provided that, if the supplier fails to absorb such
expense, such delivery costs shall be paid by the Operator provided DISTRIBUTOR
has notified COMPANY immediately in the event of such non-performance and
Operator has approved the additional expense in advance. If the emergency
delivery is due to DISTRIBUTOR error, then DISTRIBUTOR will remedy the situation
in as efficient manner as possible, which may include emergency deliveries and
special freight shipments, at DISTRIBUTOR’S sole expense. If the emergency
delivery is due to Operator error, the Operator shall pay delivery costs for
such emergency delivery. From the moment of receipt of the Products for storage
by DISTRIBUTOR until the Products have been accepted by Operator at the Store,
DISTRIBUTOR assumes all risk of loss or damage with respect thereto, shall be
directly liable to COMPANY for any such loss or damage to the Products and the
related costs and expenses for replacing the Products and agrees to obtain and
maintain adequate insurance coverage to insure against such loss or damage.
In the event of substitution of a Proprietary Product, the substituted Product
must have been previously approved by COMPANY in writing and, if the need for
substitution was caused due to DISTRIBUTOR error, the price of the substituted
Product will be determined based on the lower of the Cost (as hereinafter
defined) of the substituted Product or the Cost of the out-of-stock Product that
it replaces. In addition, DISTRIBUTOR will reimburse COMPANY to the extent that
COMPANY would have realized a difference between its selling price to
DISTRIBUTOR and the amount that COMPANY would have paid for the Proprietary
Product from its supplier, unless the substitution is due to COMPANY’s error.
Upon request, COMPANY shall provide to DISTRIBUTOR copies of invoices and other
documentation reasonably necessary to verify the amount of the difference
claimed by COMPANY. If substitution is due to supplier (including
--------------------------------------------------------------------------------
(9) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(10) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
11
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COMPANY) error, then COMPANY shall cause supplier to, or if COMPANY is the
supplier, COMPANY shall, reimburse DISTRIBUTOR for any reasonable losses
sustained due to such error.
To the extent that DISTRIBUTOR is unable to sell to the Operators quantities of
the Proprietary Products in DISTRIBUTOR’s inventory for any reason whatsoever,
including, but not limited to, Product discontinuation, slow-moving inventory,
unused LTO Products, promotional or seasonal Products or exceeded shelf life due
to sudden decline in Product movement and not due to DISTRIBUTOR error, COMPANY
will purchase, or cause a third party to purchase, all remaining inventory of
such Proprietary Products at DISTRIBUTOR’s cost, F.O.B. the DISTRIBUTOR
distribution centers plus DISTRIBUTOR’s handling and carrying charges, if
properly approved by COMPANY in advance as outlined below. In such event,
COMPANY will purchase or cause to be purchased all perishable Proprietary
Products within [CONFIDENTIAL](11) days after notice from DISTRIBUTOR or by the
expiration date of the Proprietary Products, whichever is earlier, and all
nonperishable Proprietary Products within [CONFIDENTIAL](12) days after notice
from DISTRIBUTOR. In addition, if the inventory re-purchase is necessitated for
any reason other than DISTRIBUTOR error, COMPANY shall reimburse to DISTRIBUTOR
all reasonable out-of-pocket costs and expenses (not to exceed an amount equal
to ten percent (10%) of the Product’s Cost unless DISTRIBUTOR receives COMPANY’S
prior written consent) incurred by DISTRIBUTOR in selling, returning or
otherwise disposing of such Products. DISTRIBUTOR shall provide COMPANY with
documentation or other proof that any such costs and expenses were incurred by
DISTRIBUTOR. In order to allow COMPANY to monitor the supply and usage of the
Proprietary Products, DISTRIBUTOR shall provide to COMPANY a monthly obsolete
and slow-moving inventory report.
3.03 Aged Inventory Notification-DISTRIBUTOR will
immediately notify COMPANY in writing in the event that any quantities of its
Proprietary Products are within [CONFIDENTIAL](13)days of expiration of product
life. If DISTRIBUTOR fails to do so, COMPANY shall not be required to comply
with the requirements set forth in Section 3.02.
3.04 Present DISTRIBUTOR’s Inventory - DISTRIBUTOR agrees
to purchase the existing merchantable and saleable inventory of Proprietary
Products from COMPANY’S present distributor located in Swedesboro, New Jersey
and Columbus, Ohio and in quantities not to
--------------------------------------------------------------------------------
(11) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(12) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(13) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
12
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exceed a [CONFIDENTIAL](14) supply of such Products, in the aggregate for each
location listed above, provided that DISTRIBUTOR and COMPANY have been given an
opportunity by the present distributor to inspect any such Product prior to
purchase pursuant to this Section 3.04. DISTRIBUTOR will pay, via check, the
present distributor for Products purchased from it, within [CONFIDENTIAL](15)
days of the later of DISTRIBUTOR’S receipt of the Products or the receipt of the
invoice approved by COMPANY for the Products. DISTRIBUTOR shall be responsible
for all freight and unloading costs associated with transporting such inventory
from the existing DISTRIBUTOR’s locations listed above. DISTRIBUTOR will not be
responsible for any handling or other fees charged by the current distributor in
connection with DISTRIBUTOR’s loading and transferring of such inventory.
COMPANY and the current distributor will be required to provide all reasonable
assistance and cooperation to DISTRIBUTOR in connection with the purchase,
loading and transportation of such inventory from the current distributor to the
DISTRIBUTOR distribution center, including the scheduling of mutually agreeable
inventory inspection and pick-up times.
In the event that the Cost of the Product, as purchased from the existing
distributor, exceeds or is less than the Cost that DISTRIBUTOR would otherwise
utilize in determining the Sell Price for such Products obtained through
suppliers, including COMPANY, DISTRIBUTOR shall utilize the Cost designated by
COMPANY in determining the Sell Price and shall invoice, pay to COMPANY or
charge the Operator, as directed by the COMPANY, in the amount of the
difference. In the event COMPANY directs DISTRIBUTOR to invoice the COMPANY,
COMPANY shall pay such invoiced amount, via check, so that it is received by
DISTRIBUTOR within [CONFIDENTIAL](16) days of the date of the invoice. In the
case of a rebate to COMPANY, DISTRIBUTOR shall pay the rebated amount within
[CONFIDENTIAL](17) days of its determination of the amount to be rebated.
4. Sell Price/Payment Terms/Financial Reporting
4.01 Sell Price - Beginning on the Effective Date and
throughout the entire term of this Agreement, the maximum purchase price at
which DISTRIBUTOR shall sell the Products, (the “Sell Price”), to the Operators
shall be determined by adding the “Cost” (as hereinafter defined) of the Product
plus [CONFIDENTIAL](18) per case for all deliveries (collectively, “Markup”),
subject to the other provisions of this Agreement. For purposes of this
Agreement, the “Cost” of a Product
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(14) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(15) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(16) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(17) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(18) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
13
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other than a Contracted Product shall be the sum of (a) the cost of the Product
as shown on the invoices to DISTRIBUTOR from the respective supplier, including
COMPANY, plus (b) if the invoiced cost of the Product is not a delivered price,
the applicable freight charges related to shipping the Product from the supplier
to DISTRIBUTOR’S distribution center, plus (c) the Sourcing Fees, if any,
attributable to the Product, less (d) promotional allowances reflected on
supplier invoices to DISTRIBUTOR. Applicable freight, in those cases where the
invoice cost to DISTRIBUTOR for non-proprietary Products is not a delivered
cost, means that DISTRIBUTOR has added a reasonable freight charge, agreed to in
advance and in writing by COMPANY for delivering such non-proprietary Products
from suppliers to DISTRIBUTOR. Applicable freight for any non-proprietary
Product will not exceed the rate charged by nationally recognized carriers
operating in the same market for the same type of freight service. Cost for any
non-proprietary Product will not be reduced by discounts for cash or prompt
payment available to DISTRIBUTOR, breakage allowances or by backhaul revenue.
Fuel or other transportation surcharges indicated on the manufacturer’s or
supplier’s invoice or on freight invoices will increase Cost. The Cost of a
Contracted Product shall be determined in accordance with Section 3.01. In no
event will the Cost of Contracted Products include amounts to be rebated to
DISTRIBUTOR and therefore, DISTRIBUTOR will not negotiate off-invoice
manufacturer rebates, labels/promotional allowances or any other “soft money”
received from supplier or freight carriers of Contracted Products. In order to
allow verification of the foregoing commitment, DISTRIBUTOR agrees to provide
documentation substantiating the Cost of items DISTRIBUTOR purchases from
suppliers and freight carriers. DISTRIBUTOR agrees to limit its collection of
such “soft money” to the manufacturers of non-proprietary Products. The Cost of
Contracted Products will not be reduced by discounts for cash or prompt payment
available to DISTRIBUTOR, breakage allowances or by backhaul revenue. Fuel or
other transportation surcharges indicated on the manufacturer’s or supplier’s
invoice or on freight invoices will increase Cost.
The invoice format to be used by DISTRIBUTOR will be approved by COMPANY and
will contain separate lines showing subtotals for various Product categories,
the total amount of [CONFIDENTIAL](19) invoiced to the Operator for that
particular delivery, applicable taxes, the date of the ACH debit and other
summary line items as detailed elsewhere in this Agreement.
DISTRIBUTOR may also charge a [CONFIDENTIAL](20) delivery surcharge fee for each
delivery made to an Operator in the states of Connecticut, Rhode Island, Maine,
Massachusetts, New Hampshire and Vermont as well as to Operators located in the
five (5) buroughs of New
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(19) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(20) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
14
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York City and on Long Island, New York and the portion of Indiana west of
Highways US 231/431 and south of US Highway 50. This [CONFIDENTIAL](21)
surcharge shall be shown as a separate line item on each applicable invoice.
Partial case shipments (also known as “splits”) shall be permitted for the malt,
maraschino cherries, chocolate sprinkles, assorted sprinkles in which individual
units of such Products are separately packaged within each case. Notwithstanding
anything else contained in this agreement to the contrary, the Markup for the
following items will be limited to [CONFIDENTIAL](22): malt, maraschino
cherries, medium spoons, taster spoons, straws, water, chocolate sprinkles and
assorted sprinkles.
In addition, DISTRIBUTOR agrees to reduce the Markup to each Operator any time
they place an order greater than [CONFIDENTIAL](23) cases according to the
following schedule (“Large Order Credit”):
Order Size
Large Order Credit
[CONFIDENTIAL](24)
This Large Order Credit shall be shown as a separate line item on the invoice.
4.02 “Cost” for Contracted Products/ True-Up Methodology
– In the case of Contracted Products, COMPANY agrees to notify DISTRIBUTOR as
soon as practical after a change in Cost has been agreed to with a supplier.
COMPANY shall have the right to adjust the Markup for individual Products (not
including the fuel surcharge or the [CONFIDENTIAL](25) mark-up on the items
listed in Section 4.01 above) from time to time to an amount that is more or
less than the agreed upon Markup per case. If COMPANY exercises its right to
lower DISTRIBUTOR’s Markup on any Products, it will simultaneously and
correspondingly increase the Markup on other Products so as to provide
DISTRIBUTOR continuously with an average overall Markup of [CONFIDENTIAL](26)
per case, again subject to the other provisions of this Agreement. DISTRIBUTOR
will provide a report by Tuesday of each week for all delivery activity of the
preceding week showing the total number of cases delivered for that week,
DISTRIBUTOR’s total case fees charged, the average case fee charged and the
difference for the week and quarter-
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(21) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(22) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(23) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(24) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(25) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(26) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
15
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to-date between the total case fees charged and the product obtained by
multiplying the total number of cases delivered by the Markup.
Following each calendar quarter, DISTRIBUTOR shall provide a cumulative report
that reflects: (i) the total number of cases of Products delivered to the Stores
under this Agreement during the preceding quarter (“x”); (ii) the total of the
Sell Prices charged for all Products delivered to the Stores under this
Agreement during the preceding quarter, excluding the effect of any Large Order
Credits given Operators during the quarter (“y”), (iii) the total of the Cost of
each Product delivered to the Stores during such quarter (“z”), and (iv) the
“Average Putative Markup” for Products delivered to the Stores, which shall be
calculated as follows: [(y-z)/x]. If the Average Putative Markup is less than
the Markup required pursuant to Section 4.01 (and as modified pursuant to the
other provisions of this Agreement), with such deficiency being referred to
herein as the “Markup Deficiency”, COMPANY shall remit to DISTRIBUTOR, an amount
equal to the number of cases delivered to the Stores under this Agreement during
the preceding quarter (“x”), multiplied by the Markup Deficiency. If the
Average Putative Markup exceeds the Markup required pursuant to Section 4.01
(and as modified pursuant to the other provisions of this Agreement), with such
excess being referred to as the “Markup Excess”, DISTRIBUTOR shall remit to
COMPANY an amount equal to the number of cases delivered to the Stores under
this Agreement during that quarter (“x”), multiplied by the Markup Excess.
Payments owed by either party under this Section 4.02 shall be made by such
party to the other party, via check, within ten (10) days of the determination
of the amounts owed and, in any case, within thirty (30) days following the end
of the applicable calendar quarter for which such payments are owed or by making
adjustments to the Sell Price as mutually agreed upon between COMPANY and
DISTRIBUTOR.
4.03 Fuel Cost Adjustments - If the operating costs of
DISTRIBUTOR are increased or decreased as a result of fuel cost increases or
decreases, DISTRIBUTOR may adjust the Markup (as and if otherwise adjusted
pursuant to the terms of this Agreement) for all Stores not subject to the $15
delivery surcharge described in Section 4.01 to compensate for such fluctuations
in fuel costs, on a quarterly basis. The amount of the adjustment computed in
accordance with this Section 4.03 shall also be added to or subtracted from, as
applicable, the specified price for Contracted Operator Sell Price Products
described in Section 4.11. The method for determining the fuel surcharge or
adjustment will be made monthly beginning April 1, 2006 and will be based on the
U.S. Weekly Retail On-Highway diesel fuel price which is compiled by the Energy
Information Administration. The Web site to access this information
electronically is as follows:
16
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http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_on_highway_diesel_prices/current/html/diesel.html
If such publication is no longer published or available, then the parties will
mutually agree upon an acceptable alternative source.
As fuel prices increase or decrease, the fuel cost adjustments will move
according to changes in the four or five (4 or 5) week average, as applicable,
for the U.S. fuel price bracket, and will take effect on the first day of the
calendar month following the applicable publication date. For example, the fuel
cost adjustment beginning the first day in July, if any, will be determined
based on the four or five (4 or 5) week average ending immediately prior to or
on June 30th.
Price Per Gallon Including Taxes
Per Case Surcharge/ Credit
[CONFIDENTIAL](27)
If the price per gallon, including taxes, exceeds [CONFIDENTIAL](28), the
surcharge will equal [CONFIDENTIAL](29) per case plus an additional
[CONFIDENTIAL](30) per case for each [CONFIDENTIAL](31) increment (or portion
thereof) that the price per gallon exceeds [CONFIDENTIAL](32). If the price per
gallon, including taxes, falls below [CONFIDENTIAL](33), a credit will be issued
in the amount of [CONFIDENTIAL](34) per case plus an additional
[CONFIDENTIAL](35) per case for each [CONFIDENTIAL](36) increment (or portion
thereof) that the price is less than [CONFIDENTIAL](37). Any such surcharge or
credit will be shown as a separate line item on the Operator’s invoice. The
fuel surcharge will be
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(27) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(28) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(29) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(30) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(31) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(32) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(33) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(34) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(35) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(36) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(37) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
17
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[CONFIDENTIAL](38)/case for all deliveries made between the Effective Date
through [CONFIDENTIAL](39).
For all Stores subject to the [CONFIDENTIAL](40) delivery surcharge described in
Section 4.01, DISTRIBUTOR will be entitled to increase this surcharge to reflect
increases in diesel fuel costs according to the same methodology as described
above, utilizing the published National fuel bracket, adjusted quarterly, except
that the adjustment will be made to the delivery surcharge itself by adding or
subtracting amounts from the basic [CONFIDENTIAL](41) delivery surcharge
according to the following schedule:
Price Per Gallon Including Taxes Adjustment to [CONFIDENTIAL](42) Delivery
Surcharge
[CONFIDENTIAL](43)
Adjustments based on fuel prices above and below the range outlined above will
be made at the rate of +/- [CONFIDENTIAL](44) per delivery for each ten cent
increment/decrement in costs. The initial delivery surcharge for applicable
Stores as described in Section 4.01 will be [CONFIDENTIAL](45) for all
deliveries made between the Effective Date through [CONFIDENTIAL](46).
4.04 Markup Adjustments due to Variances from
Projections.
The [CONFIDENTIAL](47) Markup during the first [CONFIDENTIAL](48) months after
the Effective Date is premised upon an average delivery size of
[CONFIDENTIAL](49) cases to the Stores serviced by DISTRIBUTOR.
After the first [CONFIDENTIAL](50) months of service and after each
[CONFIDENTIAL](51)
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(38) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(39) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(40) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(41) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(42) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(43) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(44) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(45) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(46) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(47) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(48) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(49) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(50) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(51) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
18
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month period thereafter the Markup for the next [CONFIDENTIAL](52) months will
be based on the actual average delivery size for the previous [CONFIDENTIAL](53)
months according to the following schedule:
Average Delivery Size for
Preceding [CONFIDENTIAL](54) Months Markup for Next [CONFIDENTIAL](55)
Months
[CONFIDENTIAL](56)
The average delivery size will be calculated by summing up all of the cases
delivered to the Stores serviced by DISTRIBUTOR in the Territory for the
previous [CONFIDENTIAL](57) months (with each partial case or “split” counting
as a full case) and dividing the total number of cases delivered by the total
number of deliveries made by DISTRIBUTOR as modified below. The number of
deliveries made by DISTRIBUTOR shall not include deliveries made by third
parties arranged by DISTRIBUTOR, nor deliveries to correct errors made by
DISTRIBUTOR or suppliers, nor shall it include deliveries for which DISTRIBUTOR
has received the [CONFIDENTIAL](58) special delivery fee in accordance with
Section 2.05.
In the event the average delivery size for the previous [CONFIDENTIAL](59)
months falls outside of the ranges described above, COMPANY and DISTRIBUTOR will
negotiate a new Markup for that DISTRIBUTOR facility in good faith. In the
event COMPANY and DISTRIBUTOR fail to agree on such a Markup adjustment within
[CONFIDENTIAL](60) days after the commencement of negotiations under this
Section 4.04, then both COMPANY and DISTRIBUTOR will have the right to terminate
this Agreement with [CONFIDENTIAL](61) days written notice to the other party in
accordance with Section 6.02 (b)(ii).
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(52) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(53) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(54) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(55) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(56) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(57) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(58) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(59) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(60) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(61) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
19
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4.05 Payment Terms/Markup Adjustments due to Payment
Methodology
(a) Standard Payment Terms. Except as noted below, DISTRIBUTOR and
COMPANY have agreed that payments to DISTRIBUTOR for Products delivered to the
Operators (including Contract Feeders as defined below) shall be received by ACH
debit entry initiated by DISTRIBUTOR, so that the amount is credited to
DISTRIBUTOR’s account on Friday of each week for all deliveries made for the
prior week and no Operator will be charged sooner than [CONFIDENTIAL](62) days
after the date of delivery. Operator’s who receive deliveries on Saturday or
Sunday will have their debit entry initiated by DISTRIBUTOR on the Friday
[CONFIDENTIAL](63) and [CONFIDENTIAL](64) days, respectively, following such
delivery. DISTRIBUTOR may also accept payment by check if so requested by
Operator and approved by DISTRIBUTOR. All new Operators will initially receive
credit terms of [CONFIDENTIAL](65) days, provided that they satisfy
DISTRIBUTOR’S credit criteria for such terms, as such criteria is uniformly
applied among all similarly situated Operators, in light of all relevant facts
and circumstances. Payment terms will be extended only to those Operators that
are creditworthy as shall have been solely determined by DISTRIBUTOR.
DISTRIBUTOR may, in its sole discretion, provide alternate payment terms to
those Operators not meeting DISTRIBUTOR’s standards for creditworthiness.
DISTRIBUTOR will provide email or fax notice to each Operator on Monday of each
week of the amount of the ACH debit entry to take place that following Friday
along with the invoice number and any credits posted during the prior
[CONFIDENTIAL](66) days.
Notwithstanding the foregoing, DISTRIBUTOR agrees to provide extended credit
terms to Operators performing as Contract Feeders (as defined below) in
non-traditional locations provided that they satisfy DISTRIBUTOR’s credit
criteria for such terms, as such criteria is uniformly applied among all
similarly situated Operators in light of all relevant facts and circumstances.
Payment terms will be extended only to those Operators that are creditworthy as
shall have been solely determined by DISTRIBUTOR. DISTRIBUTOR may, in its sole
discretion, provide alternate payment terms to those Operators not meeting
DISTRIBUTOR’s standards for creditworthiness. To qualify for such credit terms,
each location operated by a Contract Feeder in the Territory must be approved by
COMPANY in writing and the Contract Feeder must comply with these extended
credit terms. “Contract Feeders” are Operators who operate non-traditional food
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(62) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(63) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(64) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(65) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(66) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
20
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service locations in facilities such as airports, sports facilities, travel
plazas, universities, tech centers, etc.
(b) No Set-Off/Late Fees/Collection Costs. No
deductions or set offs from payments due to DISTRIBUTOR may be made by Operators
for any reason without the prior written authorization of DISTRIBUTOR. Failure
of the Operator to make any payment required when due shall result in
DISTRIBUTOR having the right to impose more stringent credit or payment terms,
such as, without limitation, cash in advance, cash on delivery, delivery of
acceptable letters of credit or third party guaranties, or additional
collateral, or, after three (3) business days’ prior notice to COMPANY and the
affected Operator, to suspend all deliveries, and declare the entire unpaid
balance of the Operator’s account immediately due and payable. The COMPANY shall
pay, and shall use its commercially reasonable efforts to cause each Operator to
pay, all reasonable costs of collection, including reasonable attorneys fees
incurred or paid by DISTRIBUTOR, but only to the extent related to their
respective accounts. DISTRIBUTOR will have the right to charge interest at the
maximum rate permitted by law but not exceeding [CONFIDENTIAL](67) percent per
month on all unpaid amounts due or owing by Operators and/or COMPANY to
DISTRIBUTOR.
(c) COMPANY’S Liability for Payments. COMPANY
agrees that it shall be liable for all liabilities of COMPANY expressly set
forth in this Agreement. COMPANY will not be liable for the debts or
obligations of Operators unless otherwise agreed to in writing by COMPANY.
(d) Payments to COMPANY as Supplier. COMPANY
purchases its frozen yogurt Products and resells them to DISTRIBUTOR after
adding the [CONFIDENTIAL](68) to the sell price. This [CONFIDENTIAL](69) varies
by Product and a schedule of the current [CONFIDENTIAL](70) for its frozen
yogurt Products is attached as Schedule 6. COMPANY reserves the right to alter
[CONFIDENTIAL](71) on its frozen yogurt Products in its discretion but no more
frequently than [CONFIDENTIAL](72). COMPANY will invoice DISTRIBUTOR for these
products as shipped from the manufacturer and will designate the
[CONFIDENTIAL](73) as separate line items for each
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(67) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(68) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(69) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(70) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(71) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(72) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(73) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
21
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Product. DISTRIBUTOR agrees to pay these invoices within [CONFIDENTIAL](74)
days of receipt.
COMPANY will also invoice DISTRIBUTOR for [CONFIDENTIAL](75) on its frozen cake
and pie Products at the maximum rate of [CONFIDENTIAL](76) for each Product as
shown on Schedule 7. Company reserves the right to alter [CONFIDENTIAL](77) on
its frozen cake and pie Products in its discretion but no more frequently than
[CONFIDENTIAL](78). Distributor shall pay all invoices for [CONFIDENTIAL](79)on
its frozen cake and pie Products when invoiced by the COMPANY within
[CONFIDENTIAL](80)days of invoice date, which date will be no earlier than the
date of receipt of the applicable Products by the DISTRIBUTOR.
Each month, DISTRIBUTOR will provide a report and invoice to COMPANY showing the
amount of [CONFIDENTIAL](81) billed to each Store compared with the amount paid
on these same Products by DISTRIBUTOR in accordance with Schedule 7 and the
amount owed to DISTRIBUTOR BY COMPANY. COMPANY agrees to pay this invoice
within [CONFIDENTIAL](82) days of receipt.
Notwithstanding the foregoing, DISTRIBUTOR shall not be responsible to reimburse
COMPANY for [CONFIDENTIAL](83) on any Products not billed and collected from the
Operators (for example due to Product damage or accounts receivable
uncollectibility) provided such loss is not due to DISTRIBUTOR negligence and,
in the case of account uncollectibility, DISTRIBUTOR has exhausted all
reasonable collection efforts and has written the entire accounts receivable off
of his books. [CONFIDENTIAL](84)
[CONFIDENTIAL](85)
4.06 Sourcing Fees. COMPANY may, from time to time,
collect compensation from the Operators for services that each of them provide
to such Operators, either by increasing the Cost of a
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(74) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(75) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(76) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(77) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(78) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(79) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(80) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(81) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(82) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(83) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(84) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(85) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
22
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Product supplied by either of them to DISTRIBUTOR for distribution under this
Agreement, or through the assessment of an additional fee (a “Sourcing Fee”)
that COMPANY instructs DISTRIBUTOR to add in the calculation of the Sell Price
of Products not purchased from COMPANY. Any changes in the Sourcing Fees shall
occur no more frequently than [CONFIDENTIAL](86). COMPANY specifically
represents and warrants that such Sourcing Fees (or increases in the invoiced
Cost) have been and will continue to be disclosed to all Operators, and that the
charging and collection of such Sourcing Fees (or increased Cost) is permitted
under its or its affiliates’ agreements with the Operators and does not violate
any applicable laws. COMPANY shall indemnify, defend and hold harmless
DISTRIBUTOR, its affiliates, and each of their respective officers, agents,
directors, shareholders, or employees for any claims, loss, liability or expense
(including reasonable attorney’s fees and disbursements) arising from a breach
of this representation and warranty.
DISTRIBUTOR shall pay all Sourcing Fees to COMPANY via initiation of an ACH
credit entry each Friday with respect to those Products delivered to the
Operators during the preceding week and on which a Sourcing Fee was assessed.
The COMPANY shall repay to DISTRIBUTOR any Sourcing Fees paid to the COMPANY by
DISTRIBUTOR that the Operators fail to pay DISTRIBUTOR. This repayment
obligation shall only apply to those Sourcing Fees incurred and unpaid by
Operators during the first [CONFIDENTIAL](87) day period from the point in time
that Operator was last current with DISTRIBUTOR. For example, if Operator fails
to pay DISTRIBUTOR for invoices/indebtedness incurred and unpaid over a
[CONFIDENTIAL](88) day period ([CONFIDENTIAL](89) deliveries), DISTRIBUTOR will
be liable for paying COMPANY the Sourcing Fees for those Products purchased for
the [CONFIDENTIAL](90).
4.07 Financial Information DISTRIBUTOR may request
balance sheets, income statements and such further financial information from
each Operator from time to time as will enable DISTRIBUTOR to accurately assess
the Operators’ financial condition. The COMPANY may require DISTRIBUTOR to
supply annual unaudited balance sheets and such further financial information
from time to time as will enable COMPANY to accurately assess DISTRIBUTOR’S
financial condition.
4.08 Price Verifications-Audit- COMPANY will be allowed
to perform electronic Purchase Price verifications for purchases made under this
Agreement on a weekly basis and
--------------------------------------------------------------------------------
(86) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(87) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(88) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(89) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(90) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
23
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DISTRIBUTOR will supply the necessary files and information to COMPANY for these
audit purposes on a timely basis and in a form acceptable to COMPANY and
DISTRIBUTOR. As part of this electronic auditing procedure, COMPANY may also
audit the payments made to it for accuracy as well. If any such audit reveals
net pricing, delivery surcharge or COMPANY payment errors (overcharges set off
by undercharges) in excess of [CONFIDENTIAL](91) in the aggregate during the
audited period (not to exceed a [CONFIDENTIAL](92)month period) COMPANY shall
have the right to conduct additional audits, at its option and at DISTRIBUTOR’S
reasonable expense, until the aggregate net pricing errors disclosed by an such
additional audits are less than [CONFIDENTIAL](93)for the applicable audit
period. For any audit conducted pursuant to this Section 4.08 that discloses
that Operators were either overcharged or undercharged for Products, or that
COMPANY was overpaid or overcharged during the audited period, DISTRIBUTOR and
COMPANY agree to correct the overcharge, undercharge, overpayment or
underpayment, as the case may be. The form and method for making these
adjustments will be mutually agreed upon by DISTRIBUTOR and COMPANY; provided,
however, in any event the remittance of any such adjustments shall be made by
either party within [CONFIDENTIAL](94) days from the final determination of the
undercharge or overcharge, as applicable.
4.09 DISTRIBUTOR Operator Support -DISTRIBUTOR agrees to
provide the following Operator support to COMPANY.
(a) DISTRIBUTOR will support the System by
participating in the supplier show at its own expense. In addition, DISTRIBUTOR
will pay COMPANY an annual support payment equal to [CONFIDENTIAL](95) payable
within [CONFIDENTIAL](96) days of written request by COMPANY. COMPANY may
submit such requests only once during each calendar year and a total of
[CONFIDENTIAL](97) such requests during the term of this Agreement.
(b) DISTRIBUTOR will support COMPANY in terms of
activating product recalls in accordance with DISTRIBUTOR’S standard product
recall policies.
--------------------------------------------------------------------------------
(91) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(92) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(93) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(94) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(95) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(96) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(97) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
24
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(c) DISTRIBUTOR will adhere to the following
HACCP requirements for monitoring of temperature controls for perishable
products both in the DISTRIBUTOR distribution center and in DISTRIBUTOR’S
transportation equipment.
ITEM
FORM
TEMPERATURE
REQUIREMENTS IN
DISTRIBUTION
CENTER
UPPER TEMP.
RANGE WHILE
TRANSPORTED TO
STORES
Soft Serve Frozen Yogurt
Frozen
0º or lower
0º
Hand-Dipped Frozen Yogurt
Frozen
-10º or lower
0º
Yogurt Cakes and Pies
Frozen
-10º or lower
0º
Various Toppings
Refrigerated
34º to 36º
38º
Nuts and Liquid Toppings
Frozen
0 or lower
0º
Various Toppings
Dry
Above 38
Above 38
(d) DISTRIBUTOR will provide COMPANY with periodic EDI file transfers to
include the following:
Weekly invoice register by store outlining the SKU’s and quantity purchased
Weekly inventory levels, age of inventory, sales and pending orders and delivery
dates by item
Weekly report of Current Stores
Weekly report of average drop sizes for each store
Monthly delivery performance report with on-time performance, fill rates and
clean invoice percentages
Daily out-of-stock report and stores so affected
Monthly costing detail on all Products used by the SYSTEM
Such additional reports as may be reasonable requested by the COMPANY
4.10 Taxes – Franchisees and COMPANY shall each be responsible
for their applicable sales and use taxes. DISTRIBUTOR shall collect applicable
taxes from each responsible party and be responsible for remitting all taxes to
the proper state and local taxing authorities. COMPANY shall only be
responsible for paying those taxes on the Stores under its control and
operation. DISTRIBUTOR agrees to indemnify and defend COMPANY pursuant to
Section 8.01 of this Agreement should Company receive a claim for the
25
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DISTRIBUTOR’s failure to pay taxes. Neither party will pay a claim which is
allegedly the responsibility of the other without first notifying the other and
giving the other the opportunity to contest the claim.
4.11 Special Pricing Arrangements - Products that are governed by
national billing agency or other programs for which the price at which the
DISTRIBUTOR must sell the Product to the Operator is prescribed by agreements
between COMPANY, or any other franchisor or group purchasing organization, on
the one hand, and the supplier or manufacturer of such Products, on the other,
are referred to in this Agreement as “Contracted Operator Sell Price Products”.
Notwithstanding Section 4.01, the Sell Price for Contracted Operator Sell Price
Products shall be the amount prescribed (or calculated in accordance with) the
above-described programs or agreements and COMPANY will receive full credit
under the true-up calculation required in Section 4.02 for all funds actually
received or which could have been received from the suppliers of such Contracted
Operator Sell Price Products as if DISTRIBUTOR maximized such funds, including
credit for all payment discounts whether or not actually taken by DISTRIBUTOR.
Contracted Operator Sell Price Products include, but are not limited to, soft
drink syrup products including, without limitation, the following Coca Cola
Products: Coke Bag in Box (“BiB”), Diet Coke BiB, Sprite BiB and
Barq’s Root Beer BIB.
5. Minimum Deliveries - The Operators will be required to order
Products in minimum quantities of [CONFIDENTIAL](98) cases of Products per
delivery unless due to DISTRIBUTOR or supplier error. In addition, Operator
will be required to pay DISTRIBUTOR a [CONFIDENTIAL](99) handling fee per order
for orders of less than [CONFIDENTIAL](100) cases and [CONFIDENTIAL](101)
handling fee per order for orders of less than [CONFIDENTIAL](102) cases but
equal to or greater than [CONFIDENTIAL](103) cases unless due to DISTRIBUTOR or
supplier including failure to fulfill the order in its entirety. Products with a
Markup of [CONFIDENTIAL](104) pursuant to section 4.01 will be counted as cases
for determining the applicability and amount of these handling fees. These
handling fees will be credited to COMPANY for purposes of the true-up
calculation required in Section 4.02. However, the [CONFIDENTIAL](105) special
delivery fees in Section 2.05 and the [CONFIDENTIAL](106) delivery surcharge fee
in Section 4.01 will not be credited to COMPANY for purposes of the true-up
calculation required in Section 4.02.
--------------------------------------------------------------------------------
(98) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(99) Confidential treatment has been requested for the
redacted portion. The confidential, redacted portions have been filed
separately with the SEC.
(100) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(101) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(102) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(103) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(104) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(105) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(106) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
26
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6. Term and Termination
6.01 Term - The initial term of this Agreement shall
commence on the Effective Date and shall continue until exactly three (3) years
after the commencement of full service to all Stores to be serviced in the
Territory (“Initial Term”), unless sooner terminated as provided in Section
6.02. This Agreement shall automatically renew for one (1) additional year upon
the completion of the Initial Term unless one party notifies the other in
writing at least one hundred eighty (180) days before the expiration of the
Initial Term of its desire to terminate the relationship.
6.02 Termination
(a) Either party shall have the right, upon prior written notice, to
immediately terminate this Agreement if the other party fails to make payment of
any amounts due and payable under this Agreement, and such failure shall have
continued for a period of ten (10) days from and after the date of written
notice to the defaulting party or in the event the other party files a voluntary
petition or consents to the filing of a petition against it in bankruptcy or any
similar insolvency or debtor relief action, or if the other party makes a
general assignment for the benefit of creditors, or in the event a receiver is
appointed or any proceeding is demanded or initiated by, for or against the
other party under any provision of the Federal Bankruptcy Act or any amendment
thereof.
(b) Either party shall have the right to terminate this Agreement upon
180 days written notice under any of the following conditions:
(i) Upon the occurrence of any material breach or material default by
the other party, which remains uncured after expiration of the applicable Cure
Period (as herein defined), of any of the terms, obligations, covenants,
representations and warranties under this Agreement (except for a default
specified in Section 6.02 (a) above) which is not waived in writing by the
non-defaulting party. In such case, the non-defaulting party shall notify the
other of such alleged beach or default and the other party shall have a period
of thirty (30) days to cure the same (the “Cure Period”). If the defaulting
party cures its breach or default within any applicable Cure Period to the
reasonable satisfaction of the non-defaulting party, the notice shall be void
and this Agreement shall continue; otherwise, it shall terminate in accordance
with the notice.
or
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(ii) In the event the parties fail to agree on a Markup adjustment
pursuant to Section 4.04.
6.03 Effect of Expiration/Termination - Upon expiration
or sooner termination of this Agreement, for any reason, COMPANY shall promptly
purchase or arrange for the purchase from DISTRIBUTOR at DISTRIBUTOR’s cost
(including freight costs), F.O.B. DISTRIBUTOR’s distribution center, all of
DISTRIBUTOR’s inventory of the Proprietary Products and any labeling and
packaging materials used in connection with the Proprietary Products. COMPANY
will purchase or cause to be purchased perishable Proprietary Products within
thirty (30) days after the effective date of termination of this Agreement or by
the expiration date of such Proprietary Product, whichever is earlier, and all
nonperishable Proprietary Products within thirty (30) days after the effective
date of termination of this Agreement. In addition, if this agreement is
terminated due to COMPANY’s breach or default, COMPANY shall reimburse to
DISTRIBUTOR all other reasonable out-of-pocket costs and expenses (not to exceed
an amount equal to 50% of the Markup on each Product unless DISTRIBUTOR receives
COMPANY’s prior written consent) incurred by DISTRIBUTOR in selling, returning
or otherwise disposing of such Proprietary Products. DISTRIBUTOR shall provide
COMPANY with documentation or other proof that any such costs and expenses were
incurred by DISTRIBUTOR. Termination of this Agreement shall not relieve either
party of any obligation or liability which accrues prior to the effective date
of termination (including, but not limited to, obligations related to the
payment of COMPANY’s accounts receivable or accounts payable and the purchase of
excess inventories). Notwithstanding the foregoing provisions of this Section
6.03 to the contrary, if this Agreement is terminated due to DISTRIBUTOR’s
breach or default or expires in accordance with the provisions of Section 6.01,
COMPANY shall have the obligation to purchase, or shall direct the replacing
distributor or other suitable purchaser to purchase, from DISTRIBUTOR only such
inventory of the Proprietary Products which is merchantable and saleable but
COMPANY shall have no obligation to reimburse DISTRIBUTOR for its out-of-pocket
costs and expenses related to selling, returning or otherwise disposing of such
Proprietary Products.
7. Trademarks and Trade Names - COMPANY
hereby represents and warrants that it is the owner of, or has the right to use
under license or sublicense, all trademarks, logos, trade names, and other
markings used on the Proprietary Product’s packaging and labels (the
“Trademarks”). COMPANY hereby grants to DISTRIBUTOR the right to use the
Trademarks solely in connection with the approved sale and distribution of the
Proprietary Products in accordance with the provisions of this Agreement and
only for as long as this Agreement remains in effect. COMPANY also grants to
DISTRIBUTOR the right and license to use the Trademarks in advertising and
promotional materials when the Trademarks are used
28
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therein to identify the Proprietary Products, subject to COMPANY’s prior written
approval of form and content. Provided DISTRIBUTOR is using the Trademarks in
accordance with the terms and provisions of this Agreement, COMPANY shall
indemnify, defend and hold DISTRIBUTOR and its subsidiaries, affiliates,
officers, shareholders, directors, employees, members, managers, agents,
successors and assigns harmless from and against any and all claims, demands,
liabilities, causes of action, damages, costs (including reasonable attorneys’
fees and disbursements) and judgments made or incurred by or found against any
of them resulting from or arising out of any claim or suit alleging infringement
by COMPANY or its affiliates, through any of the Trademarks or otherwise.
8. Indemnification
8.01 Indemnification by DISTRIBUTOR - DISTRIBUTOR agrees
to indemnify, defend and hold COMPANY, its subsidiaries, affiliates, officers,
directors, members, managers, stockholders, employees, agents, successors and
assigns harmless from and against any and all claims, demands, liabilities,
causes of action, damages, costs (including reasonable attorneys’ fees and
disbursements) and judgments made or incurred by or found against any of them,
resulting from or arising out of:
(a) Any breach or default by DISTRIBUTOR of any
term or provision of this Agreement; or
(b) Any negligent act or negligent omission or
willful misconduct of DISTRIBUTOR in respect of DISTRIBUTOR’s performance of its
obligations under this Agreement.
8.02 Indemnification by COMPANY – COMPANY agrees to
indemnify, defend and hold DISTRIBUTOR, it subsidiaries, affiliates, officers,
directors, members, managers, stockholders, employees, agents, successors and
assigns harmless from and against any and all claims, demands, liabilities,
causes of action, damages, costs (including reasonable attorney’s fees and
disbursements) and judgments made or incurred by or found against any of them
resulting from or arising out of:
(a) Any breach or default by COMPANY of any
term or provision of this Agreement.
(b) Any breach or default by COMPANY of any term
or provision of any agreement between COMPANY, on the one part, and an Operator
or a supplier of the Proprietary Products, on the other part, or any negligent
or willful act or omission of COMPANY, or any of its employees or agents, in
respect of the purchase, resale, distribution, storage or
29
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delivery of the Proprietary Products or the COMPANY’s performance of its
obligations under this Agreement; and
(c) Claims by any franchisee of COMPANY and/or
Operator that may arise from DISTRIBUTOR ceasing further sales to such
franchisee or other Operator under this Agreement at the direction of COMPANY.
(d) Claims by any franchisee of COMPANY and/or
Operator that may arise from COMPANY’s role in the distribution/product
procurement process or the use or allocation of funds collected by COMPANY from
DISTRIBUTOR.
8.03 Limitation of Liability; Disclaimer of Warranties -
NOTWITHSTANDING SECTIONS 8.01 AND 8.02 TO THE CONTRARY, NEITHER PARTY SHALL IN
ANY EVENT BE LIABLE IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, TO THE
OTHER PARTY OR ITS RESPECTIVE SUBSIDIARIES, AFFILIATES, FRANCHISEES OR OTHER
OPERATORS FOR ANY TYPE OF INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (SUCH
AS, BUT NOT LIMITED TO, LOSS OF PROFITS OR BUSINESS OPPORTUNITY) ARISING FROM A
PARTY’S PERFORMANCE OR FAILURE TO PERFORM UNDER ANY OF THE TERMS AND PROVISIONS
OF THIS AGREEMENT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES
ATTRIBUTABLE TO A BREACH OF ANY TERM OR PROVISION OF THIS AGREEMENT.
COMPANY ACKNOWLEDGES AND AGREES THAT DISTRIBUTOR IS NOT THE MANUFACTURER OR
PRODUCER OF THE PRODUCTS SUPPLIED BY DISTRIBUTOR. IN NO EVENT SHALL DISTRIBUTOR
BE LIABLE WITH RESPECT TO ANY CONDITIONS, DEFECTS, DEFICIENCIES, DANGERS, FAULTS
OR FAILURES, OF ANY KIND, IN OR RELATING TO ANY PRODUCTS SUPPLIED BY DISTRIBUTOR
EXCEPT, SUBJECT TO THE LIMITATIONS STATED IN THIS AGREEMENT, TO THE EXTENT OF
DISTRIBUTOR’S ACTUAL NEGLIGENCE IN ITS HANDLING OF SUCH PRODUCTS. EXCEPT AS
EXPLICITLY PROVIDED IN THIS AGREEMENT, DISTRIBUTOR MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE.
8.04 Third Party Claims - The indemnities in this Section
8 are contingent upon: (i) the indemnified party promptly notifying the
indemnifying party in writing of any action or other proceeding
30
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which may give rise to a claim for indemnification hereunder; unless such
failure to promptly notify does not materially prejudice the claim; (ii) the
indemnifying party being allowed to control the defense and settlement of such
claim; and (iii) the indemnified party reasonably cooperating with the
indemnifying party (at the indemnifying party’s expense) in providing
information relevant to the defense or settlement of a claim. The indemnified
party shall have the right, at its option and expense, to participate in the
defense of any action or proceeding through counsel of its own choosing.
9. Insurance
9.01 DISTRIBUTOR’s Insurance - During the term of this
Agreement and for a period of one (1) year thereafter, DISTRIBUTOR shall
purchase and maintain, at its sole cost and expense, the following insurance
coverages:
(a) commercial general liability insurance and
products liability coverage with broad form vendor endorsement, which
specifically insures all liabilities of DISTRIBUTOR to COMPANY and Operator
under this Agreement, to the extent afforded by normal ISO policy forms and
definitions, with all such insurance coverages providing for combined single
limit bodily injury/property damage liability of not less than
[CONFIDENTIAL](107) Dollars; and
(b) commercial automobile liability insurance
coverage providing for combined single limit bodily injury/property damage
liability of not less than [CONFIDENTIAL](108) Dollars.
All such insurance shall be provided by insurance companies which are licensed
and authorized to do business in the United States of America, shall be
occurrence based policies and which insurance companies are reasonably
satisfactory to COMPANY. DISTRIBUTOR agrees to deliver to COMPANY, on or prior
to the Effective Date, certificates of insurance evidencing the existence of all
the above insurance coverages and naming COMPANY as an additional insured under
such policies. The certificates shall contain an agreement by the insurance
carrier to notify COMPANY, in writing, at least thirty (30) days prior to the
date of any cancellation or change in such insurance coverage.
--------------------------------------------------------------------------------
(107) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
(108) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
31
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9.02 COMPANY’s Insurance - During the term of this
Agreement, and for a period of one (1) year thereafter, COMPANY shall purchase
and maintain, at its sole cost and expense, commercial general liability
insurance and products liability coverage, and a contractual liability
endorsement which specifically insures all liabilities of COMPANY to DISTRIBUTOR
under this Agreement, to the extent afforded by normal ISO policy forms and
definitions, with all such insurance coverages providing for combined single
limit bodily injury/property damage liability of not less than
[CONFIDENTIAL](109) Dollars. All such insurance shall be provided by insurance
companies which are licensed and authorized to do business in the United States
of America, and which are reasonably satisfactory to DISTRIBUTOR. COMPANY agrees
to deliver to DISTRIBUTOR, on or prior to the Effective Date, a certificate of
insurance evidencing the existence of all the above insurance coverages and
naming DISTRIBUTOR as an additional insured under such policies. The certificate
shall contain an agreement by the insurance carrier to notify DISTRIBUTOR, in
writing, at least thirty (30) days prior to the date of any change in such
insurance coverage.
10. Representations and Warranties
10.01 Representations and Warranties of DISTRIBUTOR -
DISTRIBUTOR hereby represents and warrants to COMPANY as follows:
(a) DISTRIBUTOR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. DISTRIBUTOR has the requisite power to own properties, to carry on its
business as now being conducted by it, and to execute, deliver and perform this
Agreement.
(b) This Agreement is, when executed and
delivered by DISTRIBUTOR and by the COMPANY, the valid and binding obligation of
DISTRIBUTOR enforceable against it in accordance with its terms, except as may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws affecting creditors’ rights generally, and further subject to
general equity principles.
(c) The execution, delivery and performance by
DISTRIBUTOR of this Agreement and the consummation of the transactions
contemplated hereby do not and will not violate, conflict with, result in a
breach or termination of, or constitute a default under (or an event which with
due notice or lapse of time, or both, would constitute a breach of or default
under), (i) the certificate of incorporation, as amended to date, of
--------------------------------------------------------------------------------
(109) Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed separately with
the SEC.
32
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DISTRIBUTOR, (ii) any judgment, order, decree, ruling or injunction applicable
to DISTRIBUTOR, or (iii) any contract or agreement between DISTRIBUTOR and any
third party.
(d) There is no action, suit or proceeding
pending or, to the knowledge of DISTRIBUTOR, threatened against DISTRIBUTOR
which, if decided adversely to DISTRIBUTOR, may prevent the consummation of the
transactions contemplated by this Agreement.
10.02 Representations and Warranties of COMPANY –COMPANY hereby
represents and warrants to DISTRIBUTOR as follows:
(a) COMPANY is a limited liability COMPANY duly
organized, validly existing in good standing under the laws of the State of
Delaware. COMPANY has the corporate power to own properties, to carry on its
business as now being conducted by it, and to execute, deliver and perform this
Agreement.
(b) This Agreement is, when executed and
delivered by COMPANY and DISTRIBUTOR, the valid and binding obligation of
COMPANY enforceable against it in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws affecting creditors’ rights generally, and further subject to
general equity principles.
(c) The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby do not and will not violate, conflict with, result in a breach or
termination of, or constitute a default under (or an event which with due notice
or lapse of time, or both, would constitute a breach of or default under), (i)
the certificate of formation or operating agreement, as amended to date, of
COMPANY, (ii) any judgment, order, decree, ruling or injunction applicable to
COMPANY, or (iii) any contract or agreement between COMPANY and any third party.
(d) There is no action, suit or proceeding
pending or, to the knowledge of COMPANY, threatened against COMPANY which, if
decided adversely to COMPANY, may prevent the consummation of the transactions
contemplated by this Agreement.
(e) The details of the purchasing arrangement,
including the purchase and resale of products by COMPANY, have been disclosed to
its Operators as required by law.
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11. Notices - Any notice or other communication to
be given under this Agreement by one party to the other shall be in writing and
delivered by overnight messenger service, or delivered by telecopy or facsimile
transmission, or sent by United States registered or certified mail, postage
prepaid, addressed as follows:
If to DISTRIBUTOR:
Kaleel Bros., Inc.
761 Bev Road
Youngstown, Ohio 44512
Attention: Ron Kaleel
President
FAX: (330) 758-1244
If to COMPANY:
TCBY Systems, LLC
2855 E. Cottonwood Parkway, Suite 400
Salt Lake City, UT 84121-7050
Attention: Purchasing Director
FAX: (801) 736-5941
or to such other addresses as may be communicated in writing by either party to
the other as provided hereunder. Notices shall be deemed to have been given
when received.
12. Force Majeure - Notwithstanding any term or
provision contained in this Agreement to the contrary, it is understood and
agreed that DISTRIBUTOR will not be responsible or liable in any manner
whatsoever for the failure by it to sell and/or deliver the Products or
otherwise perform any obligation under this Agreement or otherwise, and COMPANY
will not be responsible or liable in any manner whatsoever for the failure by it
to purchase and accept, the Products, if such failure is due to fire, strike,
accident, explosion, riot, rebellion, terrorist action or threat, flood,
embargo, war, interruption or delay in transportation, epidemic, pandemic,
shortage of raw materials, acts of God or government (including, but not limited
to, laws, regulations and restrictions of all kinds), or any other causes or
contingencies of any character (other than lack of funds) beyond the reasonable
control of DISTRIBUTOR or COMPANY. Nothing expressed or implied in this Section
12 shall excuse the non-performance or delay in performance of any payment
obligation of the COMPANY or DISTRIBUTOR, any affiliate or any Operator.
13. Relationship of Parties - This Agreement is
not intended and shall not be construed to constitute either party as the joint
venturer, partner, agent or legal representative of the other. Neither party
has any
34
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authority, whether express, implied, or apparent, to assume or create any
obligations on behalf of the other.
14. Entire Agreement; Modifications - This
Agreement and the Schedules attached hereto and made a part hereof, constitute
the entire agreement and understanding of the parties with respect to the
subject matter hereof, and supersede all prior proposals, negotiations,
communications, representations, written or oral agreements and understandings
between the parties with respect to the subject matter hereof. No modification
of any term or provision of this Agreement shall be enforceable unless embodied
in a writing executed by all parties to this Agreement.
15. Severability - The provisions of this
Agreement are severable, and the invalidity or unenforceability of any term or
provision hereof shall not operate to invalidate or render unenforceable the
remaining terms and provisions which are valid and enforceable.
16. Waivers - The waiver by either party hereto of
any of its rights or breaches of the other party under this Agreement in a
particular instance shall not be construed as a waiver of the same or different
rights or breaches in subsequent instances. All remedies, rights, undertakings
and obligations, hereunder shall be cumulative and none shall operate as a
limitation of any other remedy, right, undertaking or obligation hereof.
17. Assignment: Successors and Assigns - Except as
hereinafter set forth, neither of the parties may assign this Agreement without
the prior written consent of the other, except that either party shall have the
right to assign this Agreement to a parent, subsidiary or affiliated COMPANY, or
may assign this Agreement in conjunction with the sale or transfer of all or
substantially all of its stock or assets by way of a sale of stock or assets, a
merger or other business reorganization, without the prior consent of the other
party; provided, however, that any such assignment shall not relieve the
assigning party from any liability or obligation under this Agreement that
accrues prior to the assignment and notice thereof to the other party and
provided further, that in the event of a transfer of all or substantially all of
the stock or assets of a party or merger or other business reorganization, the
surviving entity or transferee is at least as financially strong as the
assigning or original party. The assigning party shall give notice of such
assignment to the other party. The provisions of this Agreement will be binding
upon and will inure to the benefit of the parties and their respective
successors and assigns. DISTRIBUTOR may assign its accounts receivables, and
related contract rights, in connection with its accounts receivable financing
and securitization.
35
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18. No Offer - The submission by DISTRIBUTOR to
COMPANY of this Agreement shall have no binding force or effect, shall not
constitute an offer to sell the Products, nor confer any right or impose any
obligation upon either party until executed by both parties.
19. Confidentiality - Any proprietary information
supplied by either party to the other party (whether set forth in writing, on
any data base or in any other medium), including, but not limited to information
on customer and supplier identity or any other customer or supplier information,
purchasing volumes and history, pricing, purchasing specifications, and product
market results (the “Confidential Information”), is and shall remain
confidential and proprietary information of the disclosing party, and valuable
trade secrets owned solely by the disclosing party. The recipient party of any
Confidential Information shall not disclose any such Confidential Information to
any third person or entity without the prior written consent of the disclosing
party in every instance, and shall not use any such Confidential Information,
nor permit any such Confidential Information to be used, for any reason other
than to fulfill the terms of this Agreement; provided, however, that either
party and its respective successors and assigns may (i) disclose any
Confidential Information to the extent compelled by law, regulation, rule,
subpoena, or other process of law and (ii) provide invoices, and any information
relating to historical payments or payments due or to become due from
franchisees or Operators hereunder to its auditors and legal counsel, and to
present and potential financing sources and rating agencies and their respective
auditors and legal counsel). The parties’ obligations under this Section 19
shall not apply to any of the Confidential Information delivered or made
available to them by the other party which the recipient of the Confidential
Information can reasonably establish (a) was known to the recipient party at the
time the Confidential Information was disclosed or made available to the
recipient party; (b) was known to the public at the time the Confidential
Information was disclosed or made available to the recipient party; (c) becomes
known to the public after the date the Confidential Information was disclosed or
made available to the recipient party through no fault or breach of this Section
19 by the recipient party; (d) is given to or made available to the recipient
party by a third party who has a lawful right to disclose the Confidential
Information to the recipient party; or, (e) is independently developed by the
Recipient party without reference to the Confidential Information.
20. Arbitration - All actions, disputes, claims or
controversy with the exception of seeking an injunction, now existing or
hereafter arising between DISTRIBUTOR and COMPANY, including, but not limited to
any action, dispute, claim or controversy arising out of this Agreement or the
delivery by DISTRIBUTOR of any Products to COMPANY (a “Dispute”) shall be
resolved by binding arbitration in Salt Lake City, Utah, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and, to the
maximum extent applicable, the Federal Arbitration Act. Arbitrations shall be
conducted before one arbitrator mutually agreeable to COMPANY and DISTRIBUTOR.
If the parties cannot agree on an arbitrator within thirty (30) days after the
request for an arbitration, then each party will select an arbitrator
36
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and the two arbitrators will select a third who shall act as the sole arbitrator
of the dispute. Judgment on any award rendered by an arbitrator may be entered
in any court having jurisdiction. All fees of the arbitrator and other costs
and expenses of the arbitration shall be paid by DISTRIBUTOR and COMPANY equally
unless otherwise awarded by the arbitrator. Disputes between DISTRIBUTOR and
any Operator other than COMPANY shall not be subject to arbitration under this
section 20.
21. Governing Law- This Agreement shall be deemed
executed in Salt Lake City, Utah and shall be governed by the construed in
accordance with the laws of the State of Utah as applicable therein.
22. Miscellaneous - The section and paragraph
headings contained in this Agreement are for reference only and shall not be
considered as substantial parts of this Agreement. The use of the singular or
plural from in this Agreement shall include the other form and the use of the
masculine, feminine or neuter gender shall include the other gender.
23. Counterparts; Facsimile- This agreement may be
executed in one or more counterparts, each of which shall constitute an original
but all of which, when taken together, shall constitute but one agreement
binding on all parties hereto, notwithstanding that all of the parties are not
signatory to an original or same counterpart. The parties may execute and
deliver this Agreement by facsimile transmission.
[Remainder of page intentionally blank. Signature page and Schedules follow.]
37
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and delivered by its duly authorized officers on the day and year first
above written.
TCBY SYSTEMS, LLC
By:
/s/ Michael Ward
Its: Executive Vice President
KALEEL BROS., INC.
By:
/s/ Ron Kaleel
Its: President
38
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Exhibit 10.55
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into on January 1, 2006 by and
between Cord Blood America, Inc., a Florida corporation (the "Company"), and
Matthew L. Schissler, an individual (the "Executive").
WITNESSETH:
WHEREAS, the Executive has served as the Chairman of the Board and
Chief Executive Officer of Cord Blood America, Inc., a Florida corporation
("CBA"), since its inception;
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, pursuant to the provisions contained in
this Employment Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premises, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
The following terms shall have the following respective meanings when
utilized in this Agreement:
"Agreement" means this Employment Agreement as it is now or hereafter
in effect.
"Approved Board" means a Board of Directors of the Company that, as of
a given date, is comprised of individuals at least a majority of whom have
continuously served as directors of the Company during the period of two years
ending on such date, unless the election of each director who was not a director
at the beginning of such two year period was approved in advance by the
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of such two year period.
"Approved Change in Control of the Company" means any transaction or
series of transactions which:
(a) results, or is reasonably anticipated to result, in a
Change in Control of the Company;
(b) is approved by the requisite vote of an Approved Board
pursuant to, and in accordance with, applicable law and the Articles of
Incorporation and Bylaws of the Company; and
--------------------------------------------------------------------------------
(c) if required by applicable law or the Articles of
Incorporation or Bylaws of the Company, is approved by the requisite vote of the
shareholders of the Company pursuant to, and in accordance with, applicable law
and the Articles of Incorporation and Bylaws of the Company.
"Bonus" means, as of a given date, the most recent annual performance
bonus awarded by the Company to the Executive.
"Cause" means any action by the Executive or any inaction by the
Executive which, after due consideration, is reasonably determined by the Board
of Directors of the Company to constitute:
(a) fraud, embezzlement, misappropriation, dishonesty or
breach of trust;
(b) a felony or moral turpitude;
(c) material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set forth in this
Agreement, other than as the result of the Executive's death or Disability;
(d) a willful or knowing failure or refusal by the Executive
to perform any or all of his material duties and responsibilities as an officer
of the Company, other than as the result of the Executive's death or Disability;
or
(e) gross negligence by the Executive in the performance of
any or all of his material duties and responsibilities as an officer of the
Company, other than as a result of the Executive's death or Disability;
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice delivered by
the Company to the Executive is any or all of the definitions of Cause set forth
in paragraphs (c), (d) or (e) of this definition, then, in such event, the
Executive shall have thirty (30) days from and after the date of his receipt of
such Termination Notice to present a reasonable plan to cure such action or
inaction specified in the Termination Notice, which plan may require more than
thirty (30) days to cure the specified action or inaction, but such plan shall
be reasonably satisfactory to the Company.
"Change in Control of the Company" means any change in control of the
Company of a nature which would be required to be reported (a) in response to
Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date of this
Agreement, promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (b) in response to Item 1 of the Current Report on Form
8-K, as in effect on the date of this Agreement, promulgated under the Exchange
Act, or (c) in any filing by the Company with the United States Securities and
Exchange Commission; provided, however, that, without limitation, a Change in
Control of the Company shall be deemed to have occurred if:
(a) subsequent to the date of this Agreement, any "person" (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
other than the Company, any subsidiary of the Company or any compensation,
retirement, pension or other employee
--------------------------------------------------------------------------------
benefit plan or trust of the Company or any subsidiary of the Company, becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the Company or any
successor to the Company (whether by merger, consolidation or otherwise)
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period of two consecutive years, the
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
of such Board of Directors, unless the election of each director who was not a
director at the beginning of such period has been approved in advance by the
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of such period;
(c) the Company shall merge or consolidate with or into
another corporation or other entity, or enter into a binding agreement to merge
or consolidate with or into another corporation or other entity, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving corporation or entity) not less than eighty percent (80%) of the
combined voting power of the voting securities of the Company or such surviving
corporation or entity outstanding immediately after such merger or
consolidation;
(d) the Company shall sell, lease, exchange or otherwise
dispose of all or substantially all of its assets, or enter into a binding
agreement for the sale, lease, exchange or other disposition of all or
substantially all of its assets, in one transaction or in a series of related
transactions; or
(e) the Company shall liquidate or dissolve, or any plan or
proposal shall be adopted for the liquidation or dissolution of the Company.
"Company" means Cord Blood America, Inc., a Florida corporation.
"CBA" means Cord Blood America, Inc., a Florida corporation.
"Compensation" means the sum of the Executive's Salary and Bonus.
"Disability" means any mental or physical illness, condition,
disability or incapacity which prevents the Executive from reasonably
discharging his duties and responsibilities as an officer of the Company. If any
disagreement or dispute shall arise between the Company and the Executive as to
whether the Executive suffers from any Disability, then, in such event, the
Executive shall submit to the physical or mental examination of a licensed
physician, who is mutually agreeable to the Company and the Executive, and such
physician shall determine whether the Executive suffers from any Disability. In
the absence of fraud or bad faith, the determination of such physician
--------------------------------------------------------------------------------
shall be final and binding upon the Company and the Executive. The entire cost
of such examination shall be paid for solely by the Company.
"Executive" means Matthew L. Schissler, an individual.
"Good Reason" means:
(a) the assignment by the Board of Directors of the Company to
the Executive, without his express written consent, of duties and
responsibilities which results in the Executive having less significant duties
and responsibilities or exercising less significant power and authority than he
had, or duties and responsibilities or power and authority not comparable to
that of the level and nature which he had, immediately prior to such assignment;
(b) the removal of the Executive from, or a failure to
reappoint the Executive to, his then current position with the Company or its
subsidiaries or affiliates, except (i) with the Executive's express written
consent or (ii) in connection with any termination of the Executive's employment
by the Company as the result of the Executive's Protracted Disability or for
Cause;
(c) the Company's failure to perform on a timely basis its
obligations under this Agreement;
(d) the Company's requiring the Executive, without his express
written consent, to travel on Company business to an extent substantially
greater than the Executive's business travel obligations immediately prior to
such time;
(e) the Company's requiring the Executive, without his express
written consent, to change his place of permanent residency; or
(f) the failure of the Company to obtain the express written
assumption of, and agreement to perform on a timely basis, the Company's
obligations under this Agreement by any successor to the Company as required by
Article X of this Agreement.
"Person" means any individual, person, firm, corporation, partnership,
association or other entity.
"Protracted Disability" means any Disability which prevents the
Executive from reasonably discharging his duties and responsibilities as an
officer of the Company for a period of twelve (12) consecutive months.
"Salary" means, as of a given date, the Executive's then current annual
salary.
"Successor Agreement" shall have the meaning set forth in Article X of
this Agreement.
"Termination Date" means a specific date not less than forty-five (45)
nor more than ninety (90) days from and after the date of any Termination Notice
upon which the Executive's employment by the Company shall be terminated in
accordance with the provisions of this Agreement.
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"Termination Notice" shall mean a written notice which sets forth (a)
the specific provision of this Agreement relied upon to terminate the
Executive's employment, (b) in reasonable detail the facts and circumstances
claimed to provide the basis for the termination of the Executive's employment,
and (c) a Termination Date.
"Territory" shall have the meaning set forth in Section 9.1(a) of this
Agreement.
ARTICLE II
EMPLOYMENT
----------
The Company employs the Executive and the Executive accepts such
employment. Subject to the direction of the Board of Directors, the Executive
shall serve as the Chairman of the Board and Chief Executive Officer of the
Company, CBA and each of the subsidiary corporations and other entities of the
Company and CBA. The Executive shall have such responsibilities, perform such
duties and exercise such power and authority as are inherent in, or incident to,
the offices of Chairman of the Board and Chief Executive Officer. The Executive
shall devote substantially all of his business time and attention and his best
efforts to the diligent performance of his duties as an employee of the Company.
ARTICLE III
TERM
----
Subject to the provisions of Article VII below, the term of this
Agreement shall be for a period of one (1) year, commencing on commencing on
January 1, 2006 and expiring on December 31, 2006. This contract also
immediately nullifies the previous employment contract signed by Executive on
April 29, 2004.
ARTICLE IV
SALARY
------
4.1 INITIAL SALARY. In full payment for the obligations to be performed
by the Executive during the term of this Agreement, the Company shall pay to the
Executive a salary (subject to applicable payroll and/or other taxes required by
law to be withheld) as follows:
1.
for the period from the date of this Agreement through December 31, 2006, the
amount of One hundred-fifty thousand dollars ($150,000)
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4.2 PAYMENT OF SALARY. Payments of salary shall be made to the
Executive in installments from time to time on the same dates payments of salary
are generally made to all senior management employees of the Company.
ARTICLE V
PERFORMANCE BONUS
-----------------
The Executive is entitled to receive a a net year-end performance bonus
of $25,000 in accordance with the schedule below:
1)
75% total revenue growth of Cord Blood America for the fiscal year ended 2006 as
compared to the fiscal year ended 2005
2)
Total revenue growth for each subsidiary for the fiscal year ended 2006 as
compared to the fiscal year ended 2005, including Cord Partners, Family
Marketing, RainMakers International, and Cord Blood America Professional
Services
3)
Bonus will be payable in Dec 2005
ARTICLE VI
CERTAIN FRINGE BENEFITS
-----------------------
6.1 GENERALLY. The Executive shall be entitled to receive such benefits
and to participate in such benefit plans as are generally provided from time to
time by the Company to its senior management employees; provided, however, that
nothing contained in this Section 6.1 shall be construed to obligate the Company
to provide any specific benefits to its employees generally.
6.2 VACATIONS. The Executive shall be entitled to vacation time on an
annual basis in accordance with such policies as are from time to time adopted
by the Company's Board of Directors with respect to its senior management
employees.
6.3 AUTOMOBILE. The Company shall provide the Executive an automobile
for use by the Executive in connection with the performance of his duties under
this Agreement. The Executive shall be entitled to receive reimbursement for
such automobile expenses as are incurred by the Executive in connection with the
performance of his duties under this Agreement. Such reimbursement shall include
the cost of operating the automobile, the cost for maintenance of such
automobile and the cost of insurance of such automobile.
6.4 STOCK OPTIONS. The Executive shall be entitled to participate in
the Company's stock option plans as may from time to time be in effect and to
receive such incentive or other stock options as may from time to time be
granted to him thereunder; provided, however, that nothing contained in this
Section 6.4 shall be construed to obligate the Company, its Board of Directors
or any committee of its Board of Directors to grant any incentive or other stock
option whatsoever to the Executive.
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6.5 BUSINESS, TRAVEL AND ENTERTAINMENT EXPENSES. Within a reasonable
time after the submission of appropriate receipts and other evidence by the
Executive, the Company shall pay, or reimburse the Executive for, all reasonable
business, travel and entertainment expenses incurred by the Executive in
connection with the performance of his duties and responsibilities on behalf of
the Company.
ARTICLE VII
TERMINATION OF EMPLOYMENT
-------------------------
7.1 TERMINATION OF EMPLOYMENT.
(a) Notwithstanding the provisions of Article III hereof, this
Agreement (i) shall automatically terminate upon the death of the Executive
pursuant to the provisions of Section 7.2 hereof, (ii) may be terminated at any
time by the Company pursuant to the provisions of Sections 7.3 or 7.4 hereof,
and (iii) may be terminated at any time by the Executive pursuant to the
provisions of Section 7.5 hereof.
(b) If either the Company or the Executive shall desire to
terminate the Executive's employment by the Company pursuant to any of the
provisions of Sections 7.3, 7.4, or 7.5 of this Agreement, then, in such event,
the party causing such termination shall provide a Termination Notice to the
other party.
(c) If this Agreement shall be terminated pursuant to any of
the provisions of this Article VII, the Company shall be discharged from all of
its obligations to the Executive under this Agreement upon the payment to the
Executive of the amount set forth in the Section of this Article VII pursuant to
which such termination shall occur. The Executive's sole and exclusive remedy
for the termination of this Agreement prior to December 31, 2006, regardless of
whether such termination shall be initiated by the Company or the Executive, and
regardless of whether such termination shall be with or without Cause, shall be
the payment by the Company to the Executive of the amount set forth in the
Section of this Article VII pursuant to which such termination shall occur.
7.2 DEATH OF EXECUTIVE. If during the term of this Agreement the
Executive shall die, then the employment of the Executive by the Company shall
automatically terminate on the date of the Executive's death. In such event, not
more than thirty (30) days after the date of the Executive's death, the Company
shall pay to the Executive's estate or as otherwise directed by the Executive's
personal representative or executor, an amount in cash equal to the Executive's
Compensation (subject to applicable payroll and/or other taxes required by law
to be withheld) determined as of the date of the Executive's death.
7.3 DISABILITY OF EXECUTIVE.
(a) In the event that at any time during the term of this
Agreement the Executive shall suffer any Disability, then the Company shall be
obligated to continue to pay in the ordinary and
--------------------------------------------------------------------------------
normal course of its business to the Executive or his legal representative, as
the case may be, the Executive's Compensation (subject to applicable payroll
and/or other taxes required by law to be withheld) from the date that the
Executive shall first suffer any such Disability to the date that the
Executive's employment by the Company shall be terminated pursuant to any of the
provisions of this Agreement.
(b) In the event that the Executive shall suffer any
Protracted Disability during the term of this Agreement, then the Company may
terminate the Executive's employment under this Agreement. In such event, in
addition to any other benefits which may have been provided by the Company to
the Executive or his legal representative, as the case may be, pursuant to the
provisions of Section 7.3(a) above, not later than the Termination Date
specified in the Termination Notice delivered by the Company to the Executive or
his legal representative, as the case may be, the Company shall pay to the
Executive or as otherwise directed by the Executive's legal representative an
amount in cash equal to the Executive's Compensation (subject to applicable
payroll and/or taxes required by law to be withheld) determined as of the date
of such Termination Notice. Subsequent to such Termination Date, the Executive
or his legal representative, as the case may be, shall also be entitled to
receive any benefits which may be payable under any disability insurance policy
or disability plan provided to the Executive by the Company.
7.4 TERMINATION OF EMPLOYMENT BY COMPANY.
(a) The Company may terminate this Agreement at any time with
Cause. In such event, the Company shall be obligated to continue to pay in the
ordinary and normal course of its business to the Executive only his Salary
(subject to applicable payroll and/or other taxes required by law to be
withheld) through the Termination Date set forth in the Termination Notice.
(b) The Company may terminate this Agreement at any time
without Cause. In such event, (i) not later than the Termination Date specified
in the Termination Notice, the Company shall pay to the Executive an amount in
cash equal to the sum of the Executive's Compensation (subject to applicable
payroll and/or other taxes required by law to be withheld) determined as of the
date of such Termination Notice through the remaining term of the Agreement
and(ii) the restrictions set forth in Section 9.1(b) hereof shall not be
applicable to the Executive.
7.5 TERMINATION OF EMPLOYMENT BY EXECUTIVE.
(a) The Executive may terminate this Agreement at any time
with Good Reason. In such event, (i) not later than the Termination Date
specified in the Termination Notice, the Company shall pay to the Executive an
amount in cash equal to the sum of the Executive's Compensation (subject to
applicable payroll and/or other taxes required by law to be withheld) determined
as of the date of such Termination Notice through the remaining term of the
Agreement and (ii) the restrictions set forth in Section 9.1(b) hereof shall not
be applicable to the Executive.
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(b) The Executive may terminate this Agreement at any time
without Good Reason. In such event, the Company shall be obligated to continue
to pay in the ordinary and normal course of its business to the Executive only
his Salary (subject to applicable payroll and/or other taxes required by law to
be withheld) through the Termination Date set forth in the Termination Notice.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
SUBSEQUENT TO A CHANGE IN CONTROL
OF THE COMPANY
--------------
8.1 TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
Articles III and VII of this Agreement, in the event that (a) there shall occur
any Change in Control of the Company, other than an Approved Change in Control
of the Company, and (b) at any time subsequent to the date of any such Change in
Control of the Company, either (i) the Company shall terminate the employment of
the Executive for any reason, other than as the result of the death or the
Protracted Disability of the Executive or for Cause, or (ii) the Executive shall
terminate his employment for Good Reason, then, in any such event, (A) not later
than the Termination Date specified in the Termination Notice delivered by the
Company to the Executive, or by the Executive to the Company,as the case may be,
the Company shall pay to the Executive an amount in cash equal to the
Executive's Compensation, determined as of the date of such Termination Notice,
multiplied by three (subject to applicable payroll and/or other taxes required
by law to be withheld), (B) the restrictions set forth in Section 9.1(b) hereof
shall not be applicable to the Executive, and (C) any and all stock options
granted to the Executive under any stock option plan or agreement of the Company
as may from time to time be in effect, which shall not by their terms have
vested on or before such Termination Date, shall vest on such Termination Date.
8.2 LIMITATION ON PAYMENT. Notwithstanding anything to the contrary set
forth in Section 8.1 above, the amount paid by the Company to the Executive
shall be limited to the maximum amount which will not constitute a "parachute
payment," as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended. This limitation shall first be applied to amounts
provided pursuant to clause (C) of Section 8.1 hereof (otherwise included in the
calculation of a parachute payment) to the extent thereof and then to amounts
provided pursuant to clause (A) of Section 8.1 hereof.
ARTICLE IX
CERTAIN RESTRICTIONS ON THE EXECUTIVE
-------------------------------------
9.1 CERTAIN RESTRICTIONS. The Executive covenants and agrees with the
Company as follows:
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(a) He shall not at any time, directly or indirectly, for
himself or any other Person which competes in any manner with the Company or any
of its subsidiaries or affiliates in the United States of America or its
territories and possessions or any other countries in which the Company as of
the date of termination of this Agreement conducts its business directly or
indirectly through any of its subsidiaries or affiliates (collectively, the
"Territory"), employ, attempt to employ or enter into any contractual
arrangement for employment with, any employee or former employee of the Company
or any of its subsidiaries or affiliates, unless such former employee shall not
have been employed by the Company or any of its subsidiaries or affiliates for a
period of at least one year.
(b) He shall not, during the term of this Agreement and for a
period of one year from and after the date of termination of this Agreement,
directly or indirectly, (i) acquire or own in any manner any interest in, or
loan any amount to, any Person which competes in any manner with the Company or
any of its subsidiaries or affiliates in the Territory, (ii) be employed by or
serve as an employee, agent, officer, or director of, or as a consultant to, any
Person, other than the Company and its subsidiaries and affiliates, which
competes in any manner with the Company or its subsidiaries or affiliates in the
Territory, or (iii) compete in any manner with the Company or its subsidiaries
or affiliates in the Territory. The foregoing provisions of this Section 9.1(b)
shall not prevent the Executive from acquiring and owning not more than five
percent (5%) of the equity securities of any Person whose securities are listed
for trading on a national securities exchange or are regularly traded in the
over-the-counter securities market.
(c) In the course of the Executive's employment by the
Company, the Executive will have access to confidential or proprietary
information of the Company and its subsidiaries and affiliates. The Executive
shall not at any time divulge or communicate to any Person, or use to the
detriment of the Company or its subsidiaries or affiliates, any such
confidential or proprietary information. The term "confidential or proprietary
information" shall mean information not generally available to the public,
including without limitation personnel information, financial information,
customer lists, supplier lists, marketing plans and analyses, trade secrets,
computer software and source and object codes and procedures and techniques of
operating and managing the business of the Company and its subsidiaries and
affiliates.
9.2 REMEDIES. It is recognized and acknowledged by each of the Company
and the Executive that a breach or violation by the Executive of any or all of
his covenants and agreements contained in Section 9.1 of this Agreement will
cause irreparable harm and damage to the Company and its subsidiaries and
affiliates in a monetary amount which would be virtually impossible to ascertain
and, therefore, will deprive the Company of an adequate remedy at law.
Accordingly, if the Executive shall breach or violate any or all of his
covenants and agreements set forth in Section 9.1 hereof, then the Company and
its subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
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9.3 INTENT. It is the intent of the parties that the restrictions set
forth in Section 9.1 hereof shall be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which enforcement of
such restrictions may be sought. If any provision contained in Section 9.1
hereof shall be adjudicated by a court of competent jurisdiction to be invalid
or unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or both
to such extent as to make it valid and enforceable in the jurisdiction where
such court is located, and in all other respects shall remain in full force and
effect.
ARTICLE X
SUCCESSOR TO THE COMPANY
------------------------
The Company shall require any successor, whether direct or
indirect, and whether by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or properties and assets of the Company, to
execute and deliver to the Executive, not later than the date of the
consummation of any such purchase, merger, consolidation or other transaction, a
written instrument in form and in substance reasonably satisfactory to the
Executive and his legal counsel pursuant to which any such successor shall agree
to assume and to perform on a timely basis or to cause to be performed on a
timely basis all of the Company's covenants, agreements and obligations set
forth in this Agreement (a "Successor Agreement"). The failure of the Company to
cause any such successor to execute and deliver a Successor Agreement to the
Executive shall (a) constitute a breach of the provisions of this Agreement by
the Company and (b) be deemed to constitute a termination by the Executive of
his employment hereunder (as of the date upon which any such successor shall
succeed to all or substantially all of the business or properties and assets of
the Company) for Good Reason.
ARTICLE XI
ATTORNEYS' FEES
---------------
In the event that any litigation shall arise between the
Company and the Executive based, in whole or in part, upon this Agreement or any
or all of the provisions contained herein, then, in any such event, the
prevailing party in any such litigation shall be entitled to recover from the
non-prevailing party, and shall be awarded by a court of competent jurisdiction,
any and all reasonable fees and disbursements of trial and appellate counsel
paid, incurred or suffered by such prevailing party as the result of, arising
from, or in connection with, any such litigation.
--------------------------------------------------------------------------------
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
12.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida,
without giving effect to the principles of the conflict of laws thereof.
12.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
mail, by registered or certified mail, postage prepaid, return receipt
requested, to the respective parties at the following respective addresses:
If to the Company: Cord Blood America, Inc.
9000 W. Sunset Blvd.
Suite 400
Los Angeles, California 90069
If to the Executive: Matthew L. Schissler
9000 W. Sunset Blvd.
Suite 400
Los Angeles, California 90069
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 12.2.
12.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
12.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
12.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of, and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
12.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law. Except as otherwise provided in Section 9.3 above, if any one or more of
the words, phrases, sentences, clauses or sections contained in this Agreement
shall be declared invalid by any court of competent jurisdiction, then, in any
such event, this Agreement shall be construed as if such invalid word
--------------------------------------------------------------------------------
or words, phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted.
12.7 NO WAIVERS. The waiver by either party of a breach or violation of
any provision of this Agreement by any other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
12.8 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of any or all of the provisions hereof.
12.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement on the date first written above.
CORD BLOOD AMERICA, INC.
By:______________________________
Sandra D. Smith
Chief Financial Officer
EMPLOYEE:
___________________________________
Matthew L. Schissler
Chairman & Chief Executive Officer
|
Exhibit 10.2
THRIFT PLAN RESTORATION PLAN
FOR SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC.
1. Introduction
The following are the provisions of the THRIFT PLAN RESTORATION PLAN FOR
SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC. (hereinafter referred to as the
“Restoration Plan”) which is being established by Lufkin Industries, Inc.
(hereinafter referred to as the “Company”), effective as of January 1, 1991, in
order to provide for the payment of retirement and retirement related benefits
to a certain select group of highly compensated employees who are participants
in the THRIFT PLAN FOR SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC.
(hereinafter referred to as the “Basic Plan”) as in effect from time to time on
and after the effective date hereof and whose contributions and benefits under
the Basic Plan are restricted by application of the limitations of any of the
following sections of the Internal Revenue Code of 1986, as amended (hereinafter
referred to as the “Code”): Section 401(a)(l7), Section 401(k)(3),
Section 401(m), Section 402(g) or Section 415. The Company intends and desires
by the adoption of this Restoration Plan to recognize the value to the Company
of the past and present services of its employees covered by the Restoration
Plan and to encourage and assure their continued service to the Company by
making more adequate provision for their future retirement security.
2. Definitions
As used herein, the term “Participant” means an individual who has become a
participant in this Restoration Plan in accordance with the provisions of
Section 4 hereof and whose interest hereunder has not been fully paid. The term
“Employer” shall include the Company and any other incorporated or
unincorporated trade or business which may adopt this Restoration Plan in
accordance with the provisions of Section 17 hereof. The term “Compensation”
shall have the meaning assigned in the Basic Plan except that it shall be
determined without regard to the dollar limit required by Section 401(a)(l7) of
the Code and before any deferred cash contributions under this Restoration Plan.
All other terms used in this Restoration Plan shall have the same meaning
assigned to them under the provisions of the Basic Plan unless otherwise
qualified by the context.
3. Administration
This Restoration Plan shall be administered by a committee appointed by the
Board of Directors of the Company from time to time (hereinafter referred to as
the “Committee”). The Committee shall administer the Restoration Plan in a
manner consistent with the administration of the Basic Plan, as from time to
time amended and in effect, except that this Restoration Plan shall be
administered as an unfunded plan that is not intended to meet the qualification
requirements of Section 401 of the Code. The Committee shall have full power and
authority to interpret, construe, and administer this Restoration Plan and the
Committee’s interpretations and construction thereof, and actions thereunder,
including the amount or recipient of the payment to be made therefrom, shall be
binding and conclusive on all persons for all purposes, subject to any rights of
the Participant to make a claim under Title I of the Employee Retirement Income
Security Act of 1974.
4. Eligibility
A Salaried Employee of an Employer that has adopted this Restoration Plan,
(a) who is a “highly compensated employee” (within the meaning of Section 414(q)
of the Code) for the applicable Plan Year, (b) who is a Participant in the Basic
Plan and (c) whose Salary Deferral Contributions and/or allocated portion of the
Employer Contributions under the Basic Plan are limited for such Plan Year due
to the provisions of either Section 401(a)(17), Section 40l(k)(3),
Section 401(m), Section 402(g) or Section 415 of the Code, shall be eligible to
participate in this Restoration Plan for such Plan Year. In no event shall an
Employee who is not a Participant in the Basic Plan be eligible to participate
under this Restoration Plan.
--------------------------------------------------------------------------------
5. Participant’s Salary Deferral Contributions
Each eligible Employee may become a Participant by electing to defer a portion
of his Compensation under this Restoration Plan for the Plan Year by entering
into a salary deferral agreement with his Employer under which he agrees to
defer a portion of his future Compensation. The amount of Compensation that is
deferred by the Participant pursuant to such agreement (herein referred to as
the Participant’s “Restoration Salary Deferral Contributions”) shall be subject
to a maximum equal to the excess, if any, of (i) 12% of his Compensation for the
applicable month of the Plan Year over (ii) the maximum Salary Deferral
Contribution that he is entitled to make under the Basic Plan for such month of
the Plan Year. A Participant may at any time change the specified amount of his
future deferrals of Compensation under this Restoration Plan, subject to the
above maximum rate, by entering into a new salary deferral agreement with his
Employer with respect to such future deferrals.
6. Employer’s Matching Contribution Amount
The Employer shall provide a matching contribution amount for each Participant
in this Restoration Plan as of each Valuation Date subsequent to the effective
date of the Restoration Plan in an amount equal to the excess of (a) the amount
of the Employer Contributions that would have been credited to the Employer
Contribution Account of the Participant under the Basic Plan as of such
Valuation Date if (i) contributions to the Basic Plan were not restricted due to
the limitations imposed by Sections 401(a)(17), 401(k)(3), 401(m), 402(g), and
415 of the Internal Revenue Code and (ii) the Restoration Plan Salary Deferral
Contributions of the Participant were added to his Salary Deferral Contributions
under the Basic Plan for the valuation period just ended over (b) the amount of
the Employer Contributions that are allocated to his Employer Contribution
Account under the Basic Plan as of such Valuation Date.
7. Establishment of Reserve Accounts
An Employer shall establish and maintain on its books and records for each of
its Salaried Employees who is a Participant in this Restoration Plan two
separate liability accounts, called the “Salary Deferral Contribution Reserve
Account” and the “Employer Contribution Reserve Account,” respectively. Such
accounts shall be identified on the books and records of the Employer as a
contingent liability of the Employer to the Participant. Each separate liability
account shall be divided into separate investment fund reserve subaccounts as
are required to reflect the applicable Interest Accumulation Factors described
below.
The Employer shall credit the amount of the Restoration Plan Salary Deferral
Contributions of a Participant to his Salary Deferral Contribution Reserve
Account no later than the Valuation Date next following the applicable payroll
period for which his Compensation was reduced. The Restoration Plan Salary
Deferral Contributions shall be credited among the investment fund reserve
subaccounts in accordance with the Participant’s current Investment Fund
election for Salary Deferral Contributions under the Basic Plan. After crediting
the amount of the Restoration Plan Salary Deferral Contributions for the
valuation period just ended, the investment fund reserve subaccounts in the
Salary Deferral Contribution Reserve Account shall also be credited as of such
Valuation Date with an amount determined by multiplying the average account
balance during the valuation period just ended by the applicable Interest
Accumulation Factor that applies on the current Valuation Date.
The Interest Accumulation Factor (herein referred to as the “Interest
Accumulation Factor”) that applies on any given Valuation Date to an investment
fund reserve subaccount shall be equal to the rate of return that would have
been earned by such contributions as of such Valuation Date for the valuation
period just ended under the Investment Fund that would have applied under the
Basic Plan if such contributions had been invested in the Investment Fund being
maintained under the Basic Plan on the Valuation Date on which the contributions
are credited under this Restoration Plan.
The Employer shall credit to the Employer Contribution Reserve Account of the
Participant as of each Valuation Date an amount equal to the matching
contribution amount to which he is entitled as determined under Section 6 hereof
as of such Valuation Date. The Employer Contribution shall be credited among the
investment fund reserve subaccounts in accordance with the Participant’s current
Investment Fund election for Employer Contributions under the Basic Plan. After
crediting the Employer Contribution Reserve Account with the matching
contribution amount for the valuation period just ended, the Employer
Contribution Reserve Account shall be credited as of such Valuation Date with an
amount determined by multiplying the average account balance during the
valuation period just ended by the applicable Interest Accumulation Factor that
applies on the current Valuation Date.
--------------------------------------------------------------------------------
8. Excess Contributions Refunded Under Basic Plan
In the event that a Participant receives a distribution under the Basic Plan due
to an “excess contribution” (as such term is defined in the Code), the
Participant may enter into a salary deferral agreement with his Employer under
which he agrees to reduce his Compensation each payroll period by a specified
amount until the total is equal to the amount of such distribution that he
received from the Basic Plan. If the Participant makes such an election, an
amount equal to such amount by which his Compensation is reduced shall be
credited to his Salary Deferral Contribution Reserve Account under this
Restoration Plan as of the Valuation Date following the applicable payroll
period for which his Compensation was reduced but the salary reductions credited
to such subaccount shall be ignored or excluded from Restoration Plan Salary
Deferral Contributions for the purposes of determining the amount to be credited
to the Employer Contribution Reserve Account under Section 6 above. The salary
deferral contribution shall be credited among the investment fund reserve
subaccounts in accordance with the Participant’s current Investment Fund
election for Salary Deferral Contributions under the Basic Plan. After crediting
the amount of the salary reductions attributable to “excess contributions”
distributed to the Participant for the valuation period just ended, the
investment fund reserve subaccounts in the Salary Deferral Contribution Reserve
Account shall also be credited as of such Valuation Date with an amount
determined by multiplying the average account balance during the valuation
period just ended by the applicable Interest Accumulation Factor that applies on
the current Valuation Date.
The maximum percentage of Compensation that may be deferred by the Participant
pursuant to a salary deferral agreement described in Section 5 hereof shall be
determined without regard to the percentage of Compensation that is deferred by
the Participant pursuant to this Section 8.
--------------------------------------------------------------------------------
9. Amount of Benefit
The benefit payable to Participant or his Beneficiary or Beneficiaries under
this Restoration Plan shall be an amount equal to the sum of:
(1) 100% of the balance in his Salary Deferral Contribution Reserve Account as
of the Valuation Date coincident with or next following the date of termination
of his service; and
(2) an amount equal to the vested interest, if any, of the balance in his
Employer Contribution Reserve Account, determined as follows:
(a) if the Participant had attained the age of 65 years as of the date of
termination of his service or if his service is terminated as a result of his
death or Total and Permanent Disability, his vested interest in his Employer
Contribution Reserve Account shall be equal to:
(i) 100%;
multiplied by
(ii) the balance in his Employer Contribution Reserve Account as of the
Valuation Date coincident with or next following the date of termination of his
service; or
(b) if the Participant had not attained the age of 65 years as of the date of
termination of his service and his service is terminated for any reason other
than his death or Total and Permanent Disability, his vested interest in his
Employer Contribution Reserve Account shall be equal to the product of:
(i) the Participant’s Vested Percentage as specified in the schedule below
based upon his number of years of “Vesting Service” (as defined in the Basic
Plan) as of the date of termination of his service;
multiplied by
(ii) the balance in his Employer Contribution Reserve Account as of the
Valuation Date coincident with or next following the date of termination of his
service:
Number of Years of Vesting
Service as of Date of
Termination of Service
--------------------------------------------------------------------------------
Vested
Percent
age
--------------------------------------------------------------------------------
Less than 3
0 %
3
20 %
4
40 %
5
60 %
6
80 %
7 or more
100 %
The noninvested interest, if any, in a Participant’s Employer Contribution
Reserve Account to which he is not entitled as of the date of termination of his
service because his Vested Percentage as determined above is less than
--------------------------------------------------------------------------------
100% shall be debited from his Employer Contribution Reserve Account and
forfeited. All forfeitures shall be considered as an advance upon the Employer’s
obligations under Section 6 hereof, or if no further contributions are to be
made thereunder by the Employer, shall be credited to the Employer.
10. Payment of Benefits
The benefits payable to a Participant or, if the Participant is not living, to
his Beneficiary, under this Restoration Plan shall be paid as soon as
administratively feasible following the Valuation Date coincident with or next
following the date of the Participant’s retirement or other termination of
service and shall be paid in cash in accordance with the Participant’s
irrevocable election made under such agreement either (i) in a single-sum amount
or (ii) in quarterly or annual installments over a period not to exceed 10
years. The Beneficiary or Beneficiaries of a Participant under the Basic Plan
shall be the Beneficiary or Beneficiaries of such Participant under this
Restoration Plan unless a specific designation of Beneficiary is made with
respect to the benefits payable under this Restoration Plan in accordance with
such procedures as may be specified by the Committee. For the purposes of this
Restoration Plan, a Participant’s service with an Employer shall not be
considered to have terminated so long as such Participant is in the employment
of a Controlled Group Member.
No in-service withdrawals or Participant loans are available under this
Restoration Plan.
All benefits payable under this Restoration Plan to or on behalf of Participants
who are Employees of a particular Employer shall be paid from the general assets
of that Employer. An Employer shall not be required to set aside any funds to
discharge its obligations hereunder, but the Employer may set aside such funds
if it chooses to do so. Any and all funds so set aside shall remain subject to
the claims of the general creditors of the Employer, present and future. No
Employee, his Beneficiary or Beneficiaries, or any other person shall have,
under any circumstances, any interest whatever in any particular property or
assets of the Employer by virtue of this Restoration Plan, and the rights of the
Employee, his Beneficiary or Beneficiaries, or any other person who may claim a
right to receive benefits under this Restoration Plan shall be no greater than
the rights of an unsecured general creditor of the Employer.
11. Merger, Consolidation, or Acquisition
In the event of a merger, consolidation, or acquisition where the Employer is
not the surviving corporation, unless the successor or acquiring corporation
shall elect to continue and carry on this Restoration Plan, this Restoration
Plan shall terminate with respect to that Employer.
12. Amendment and Termination
The Board of Directors of the Company may at any time amend or terminate this
Restoration Plan. If this Restoration Plan should be amended or terminated, each
Employer shall remain liable for any benefits accrued by its Employees under
this Restoration Plan (determined in the case of a Participant in the active
service of the Employer on the basis of such Participant’s presumed termination
of employment as of the date of such amendment or termination) as of the date of
such action.
--------------------------------------------------------------------------------
13. Restrictions on Assignment
The benefits provided hereunder are intended for the personal security of
persons entitled to payment under this Restoration Plan and are not subject in
any manner to the debts or other obligations of the persons to whom they are
payable. The interest of a Participant or his Beneficiary or Beneficiaries may
not be sold, transferred, assigned, or encumbered in any manner, either
voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be null and void;
neither shall the benefits hereunder be liable for or subject to the debts,
contracts, liabilities, engagements, or torts of any person to whom such
benefits or funds are payable, nor shall they be subject to garnishment,
attachment, or other legal or equitable process nor shall they be an asset in
bankruptcy, except that no amount shall be payable hereunder until and unless
any and all amounts representing debts or other obligations owed to any Employer
or any affiliate of any Employer by the Employee with respect to whom such
amount would otherwise be payable shall have been fully paid and satisfied.
14. Continued Employment
Nothing contained in this Restoration Plan shall be construed as conferring upon
any employee the right to continue in the employment of the Employer in any
capacity.
15. Liability of Committee
Unless resulting from his own fraud or willful misconduct, no member of the
Committee shall be liable for any loss arising out of any action taken or
failure to act by the Committee or a member thereof in connection with this
Restoration Plan. The Committee and any individual member of the Committee and
any agent thereof shall be fully protected in relying upon the advice of the
following professional consultants or advisors employed by the Employer or the
Committee: any attorney insofar as legal matters are concerned, any accountant
insofar as accounting matters are concerned, and any actuary insofar as
actuarial matters are concerned.
16. Indemnification
The Employers hereby jointly and severally indemnify and agree to hold harmless
the members of the Committee and all directors, officers and employees of an
Employer against any loss, claim, cost, expense (including attorneys’ fees),
judgment or liability arising out of any action taken or failure to act by the
Committee or such individual in connection with this Restoration Plan; provided,
however, that this indemnity shall not apply to an individual if such loss,
claim, cost, expense, judgment or liability is due to such individual’s fraud or
willful misconduct.
17. Rights of Other Employers to Participate
The Company has adopted this Restoration Plan effective as of January 1, 1991 on
behalf of the Company. Any other Employer which may be a participating Employer
in the Basic Plan may, in the future, adopt this Restoration Plan by formal
action on its part and with the approval of the Board of Directors of the
Company. The administrative powers and control of the Company, as provided in
this Restoration Plan, shall not be deemed diminished under this Restoration
Plan by reason of the participation of any other Employer and the administrative
powers and control granted hereunder to the Company and to the Committee shall
be binding upon any Employer adopting this Restoration Plan. Each Employer
adopting this Restoration Plan shall have the obligation to pay the benefits to
its employees hereunder and no other Employer shall have such obligation and any
failure by a particular Employer to live up to its obligations under this
Restoration Plan shall have no effect on any other Employer. Any Employer may
terminate this Restoration Plan at any time by formal action on its part subject
to the provisions of Section 12 hereof.
--------------------------------------------------------------------------------
18. Change in Employment Status
Notwithstanding any provision herein to the contrary, in the event that the
Company, in its sole discretion, determines that any Participant in this
Restoration Plan is, at any time prior to his date of termination of employment,
no longer eligible for participation in this Restoration Plan because of a
change in his employment classification, such Participant shall cease to be a
Participant in this Restoration Plan as of the date such determination is made
by the Company and no contributions shall be made by him or on his behalf to
this Restoration Plan during such period while he is in an ineligible status and
prior to the date, if any, on which he subsequently becomes eligible for
participation in this Restoration Plan. In the event his employment is
terminated while he is in an ineligible status, his benefit under Section 9
hereof shall be determined as of the date of his termination and paid in
accordance with the provisions of Section 10 hereof.
19. Law Governing
This Restoration Plan shall be construed in accordance with and governed by the
laws of the State of Texas.
20. Effective Date
This Restoration Plan shall be effective as of January 1, 1991.
IN WITNESS WHEREOF, LUFKIN INDUSTRIES, INC. has caused this instrument to be
executed by its duly authorized officers on the l6th day of November, 1990, to
be effective as of January 1, 1991.
ATTEST: COMPANY LUFKIN INDUSTRIES, INC.
/s/ C. J. Haley Jr.
--------------------------------------------------------------------------------
By:
/s/ F. B. Stevenson
--------------------------------------------------------------------------------
Secretary Title: President
--------------------------------------------------------------------------------
AMENDMENT ONE TO
THRIFT PLAN RESTORATION PLAN
FOR SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC.
WHEREAS, effective as of January 1, 1991, the THRIFT PLAN RESTORATION PLAN FOR
SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC. (hereinafter referred to as the
“Restoration Plan”) was adopted by Lufkin Industries, Inc. (hereinafter referred
to as the “Company”), in order to provide for the payment of retirement and
retirement related benefits to a certain select group of highly compensated
employees; whose contributions and benefits under the Thrift Plan for Salaried
Employees of Lufkin Industries, Inc. are restricted by application of the
limitations of the Internal Revenue Code.
WHEREAS, it is deemed desirable to amend the Restoration Plan in order to allow
certain highly compensated employees of the Company to participate prior to the
date they become eligible to participate in the Thrift Plan for Salaried
Employee of Lufkin Industries, Inc.
NOW, THEREFORE, the Restoration Plan is hereby amended effective as of
January 1, 1993, as follows:
1. A new paragraph shall be added to Section 1 of the Restoration Plan to read
as follows:
“Effective as of January 1, 1993, the Restoration Plan has been extended to
include a select group of highly compensated employees of the Company who have
not met the service requirement for participation in the Basic Plan, but who
would otherwise qualify for participation in the Restoration Plan.”
2. Section 4 of the Restoration Plan shall be amended in its entirety to read as
follows:
“4. Eligibility
A Salaried Employee of an Employer that has adopted this Restoration Plan,
(a) who is a ‘highly compensated employee’ (within the meaning of Section 414(q)
of the Code) for the applicable Plan Year, (b) who either (i) is a Participant
in the Basic Plan or (ii) is ineligible to participate in the Basic Plan but
would be eligible to participate in the Basic Plan if the service requirement
for such plan were to be waived, and (c) whose Salary Deferral Contributions
and/or allocated portion of the Employer Contributions under the Basic Plan are
limited, or would be limited if he were eligible to participate in the Basic
Plan, for such Plan Year due to the provisions of either Section 40l(a)(17),
Section 401(k)(3), Section 401(m), Section 402(g) or Section 415 of the Code,
shall be eligible to participate in this Restoration Plan for such Plan Year. In
no event shall an Employee who is eligible to participate in the Basic Plan, but
has declined to participate, be eligible to participate under this Restoration
Plan.”
3. Section 6 of the Restoration Plan shall be amended in its entirety to read as
follows:
“6. Employer’s Matching Contribution Amount
The Employer shall provide a matching contribution amount for each Participant
in this Restoration Plan as of each Valuation Date subsequent to the effective
date of the Restoration Plan in an amount equal to the excess of (a) the amount
of the Employer Contributions that would have been credited to the Employer
Contribution Account of the Participant under the Basic Plan as of such
Valuation Date if (i) contributions to the Basic Plan were not restricted due to
the limitations imposed by Sections 401(a)(17), 401(k)(3), 401(m), 402(g), and
415 of the Internal Revenue Code, (ii) in the case of a Participant who is
ineligible to participate in the Basic Plan, the Participant had been a
participant in the Basic Plan as of such Valuation Date, (iii) the Restoration
Plan Salary Deferral Contributions of the Participant had been included as
Salary Deferral Contributions under the Basic Plan for the valuation period just
ended over (b) the amount of the Employer Contributions, if any, that are
actually allocated to his Employer Contribution Account under the Basic Plan as
of such Valuation Date.”
--------------------------------------------------------------------------------
4. The second paragraph of Section 7 of the Restoration Plan shall be amended in
its entirety to read as follows:
“The Employer shall credit the amount of the Restoration Plan Salary Deferral
Contributions of a Participant to his Salary Deferral Contribution Reserve
Account no later than the Valuation Date next following the applicable payroll
period for which his Compensation was reduced. The Restoration Plan Salary
Deferral Contributions shall be credited among the investment fund reserve
subaccounts in accordance with either (i) the Participant’s current Investment
Fund election for Salary Deferral Contributions under the Basic Plan or (ii) in
the case of a Participant who is ineligible to participate in the Basic Plan, as
he may elect in writing, among the Investment Funds available under the Basic
Plan (and assuming for this purpose that the restrictions for Investment Fund
election in the Basic Plan apply to such election). After crediting the amount
of the Restoration Plan Salary Deferral Contributions for the valuation period
just ended, the investment fund reserve subaccounts in the Salary Deferral
Contribution Reserve Account shall also be credited as of such Valuation Date
with an amount determined by multiplying the average account balance during the
valuation period just ended by the applicable Interest Accumulation Factor that
applies on the current Valuation Date.”
5. The fourth paragraph of Section 7 of the Restoration Plan shall be amended in
its entirety to read as follows:
“The Employer shall credit to the Employer Contribution Reserve Account of the
Participant as of each Valuation Date an amount equal to the matching
contribution amount to which he is entitled as determined under Section 6 hereof
as of such Valuation Date. The Employer Contribution shall be credited among the
investment fund reserve subaccounts in accordance with either (i) the
Participant’s current Investment Fund election for Employer Contributions under
the Basic Plan or (ii) in the case of a Participant who is ineligible to
participate in the Basic Plan, as he may elect in writing, among the Investment
Funds available under the Basic Plan (and assuming for this purpose that the
restrictions for Investment Fund election in the Basic Plan apply to such
election). After crediting the Employer Contribution Reserve Account with the
matching contribution amount for the valuation period just ended, the Employer
Contribution Reserve Account shall be credited as of such Valuation Date with an
amount determined by multiplying the average account balance during the
valuation period just ended by the applicable Interest Accumulation Factor that
applies on the current Valuation Date.”
IN WITNESS WHEREOF, LUFKIN INDUSTRIES, INC. has caused this instrument to be
executed by its duly authorized officers on the 18th day of January, 1993, to be
effective as of January 1, 1993.
ATTEST: COMPANY LUFKIN INDUSTRIES, INC.
/s/ C. J. Haley Jr.
--------------------------------------------------------------------------------
By:
/s/ H. J. Green
--------------------------------------------------------------------------------
Secretary Title: Executive Vice President
--------------------------------------------------------------------------------
AMENDMENT TWO TO THE
THRIFT PLAN RESTORATION PLAN
FOR SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC.
WHEREAS, effective as of January 1, 1991, the THRIFT PLAN RESTORATION PLAN FOR
SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC. (the “Plan”) was adopted by Lufkin
Industries, inc. (the “Company”) to provide for the payment of retirement and
retirement related benefits to a certain select group of highly compensated
employees whose contributions and benefits under The Thrift Plan for Salaried
Employees of Lufkin Industries, Inc. are restricted by application of the
limitations of the Internal Revenue Code; and
WHEREAS, the Company desires to amend the Plan to clarity the manner in which
participants may elect to defer compensation under the Plan and to change the
procedure by which a participant may elect a form of distribution from the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows effective as of
January 31, 2001:
1. Section 5 of the Plan is hereby amended in its entirety to read as follows:
“5. Participant’s Salary Deferral Contributions
Each eligible Employee may become a Participant by irrevocably electing to defer
a portion of his Compensation under this Restoration Plan for the Plan Year by
entering into a salary deferral agreement with his Employer under which he
agrees to defer a portion of his future Compensation. Any such salary deferral
agreement must be completed prior to the date specified by .the Committee, but
in any event prior to the period of service for which the Compensation is
payable. The amount of Compensation that is deferred by the Participant pursuant
to such agreement (herein referred to as the Participant’s “Restoration Salary
Deferral Contributions”) shall be subject to a maximum equal to the excess, if
any, of (i) 12% of his Compensation (or such other amount as the Committee may
authorize in its discretion) for the applicable month of the Plan Year over
(ii) the maximum Salary Deferral Contribution that he is entitled to make under
the Basic Plan for such month of the Plan Year. A Participant may, at the times
and in the manner designated by the Committee, change the specified amount of
his future deferrals of Compensation under this Restoration Plan, subject to the
above maximum rate, by entering .into a new salary deferral agreement with his
Employer with respect to such future deferrals; provided that any such new
salary deferral agreement must be completed prior to the period of service for
which the Compensation is payable.”
2. The first paragraph of Section 10 of the Plan is hereby amended in its
entirety to read as follows:
The benefits payable to a Participant or, if the Participant is not living, to
his Beneficiary, under this Restoration Plan shall commence to be paid as soon
as administratively practicable following the Valuation Date coincident with or
next following the date of the Participant’s retirement or other termination of
service. For purposes of this Restoration Plan a Participant’s service with an
Employer shall not be considered to have terminated so long as such Participant
is in the employment of a Controlled Group Member.
A Participant may elect in accordance with procedures established by the
Committee to receive his benefit under this Restoration Plan (i) in the form of
a single cash lump sum payment or (ii) in the form of quarterly or annual cash
installments over a period of five (5) or ten (10) years. In either case, to be
effective, such election must be made prior to (x) the date a Participant
becomes a Participant or (y) the beginning of the one-year period ending on the
date the Participant (or his Beneficiary if the Participant is not living) first
becomes entitled to receive such benefit hereunder (provided that in no event
shall an election under this subparagraph (y) be effective in the same calendar
year in which the election is made). If a Participant does not choose a method
of payment in accordance with the Committee’s procedures, or fails to elect the
payment option in accordance with the above time limitations, payment to the
Participant (or his Beneficiary if the Participant is not living) shall be made
in the form of a single cash lump sum. If a benefit is to be paid in
installments, each installment payment shall equal the Participant’s total
remaining benefit divided by the number of installment payments remaining to be
paid in the installment payment period
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chosen by the Participant. The Participant’s death shall not affect any such
installment payment election, and in such case any remaining installments shall
be paid to the Participant’s Beneficiary. Notwithstanding the foregoing, the
Committee may establish procedures by which a Participant may elect a form of
benefit payment for the period beginning after January 31, 2001 and ending on
the effective date of a new election made in accordance with the foregoing;
provided that a Participant who fails to make an election in accordance with
such interim procedures and who becomes (or whose Beneficiary becomes) entitled
to receive a benefit during such period shall receive such benefit in the form
of a single cash lump sum.
The Participant’s Beneficiary (or Beneficiaries) under this Restoration Plan
shall be the Beneficiary (or Beneficiaries) of the Participant under the Basic
Plan unless the Participant makes a specific designation of Beneficiary for
purposes of this Restoration Plan in accordance with procedures established by
the Committee.
3. Except as hereinabove amended, the provisions of the Plan as previously
amended shall remain in fall force and effect.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officer on this 31 day of January, 2001.
ATTEST: COMPANY LUFKIN INDUSTRIES, INC.
/s/ P. G. Perez.
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By:
/s/ D. V. Smith
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Secretary Title: President & Chief Executive Officer
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AMENDMENT THREE
THRIFT PLAN RESTORATION PLAN
FOR SALARIED EMPLOYEES OF LUFKIN INDUSTRIES, INC.
WHEREAS, effective as of January 1, 1991, Lufkin Industries, Inc. (hereinafter
referred to as the “Company”) heretofore established the Thrift Plan Restoration
Plan for Salaried Employee so Lufkin Industries, Inc. (the “Plan”) for the
benefit of certain highly compensated employees; and
WHEREAS, the Company desires to amend the Plan to comply with the requirements
of section 409A of the Internal Revenue Code of 1986 as amended (the “Code”);
NOW, THEREFORE, The Plan is hereby amended as follows effective as of January 1,
2005:
1. Section 2 of the Plan is hereby amended by adding the following at the end
thereof:
“The term “Performance Pay” shall mean any Compensation that is determined to be
performance-based compensation within the meaning of section 409A of the Code
and which is attributable to services performed over a performance period of at
least twelve months. The term “Plan Year” shall mean the calendar year in which
Compensation deferred under the Plan is earned.”
2. Section 5 of the Plan is hereby amended in its entirety to read as follows:
“5. Participant’s Salary Deferral Contributions
Each eligible Employee may become a Participant by irrevocably electing to defer
a portion of his Compensation under this Restoration Plan for the Plan Year by
entering into a salary deferral agreement with his Employer under which he
agrees to defer a portion of his future Compensation. Any such salary deferral
agreement must be completed prior to the date specified by the Committee, but in
any event prior to the last day of the calendar year prior to the Plan Year in
which the services are performed giving rise to the Compensation.
Notwithstanding the foregoing, however, an Eligible Employee may elect to defer
any Compensation which is determined by the Committee to be Performance Pay at
any time prior to the date specified by the Committee but not later than six
months prior to the end of the performance period over which such Performance
Pay is earned. An Employee who first becomes an eligible Employee after the
commencement of a Plan year, may make a deferral election with respect to the
portion of Compensation earned in such Plan year after the date of the election,
provided that such eligible Employee makes such deferral election prior to the
date specified by the Committee but not later than thirty days after first
becoming eligible to participate. The amount of compensation that may be
deferred by the Participant pursuant to such agreement (herein referred to as
the Participant’s “Restoration Salary Deferral Contributions”) shall be subject
to a maximum equal to the excess, if any , of (12% of his Compensation (or such
other amount as the Committee may authorize in its discretion) for the
applicable Plan Year over (ii) the maximum Salary Deferral Contribution that he
is entitled to make under the Basic Plan for such Plan Year. The salary deferral
election made pursuant to this section shall be irrevocable as of the last day
of the calendar year prior to the Plan Year for which it is made. A Participant
may, at the times and in the manner designated by the Committee, change or
terminate a salary deferral election to be effective as of the next following
Plan Year.”
3. The first and second paragraphs of Section 10 of the Plan (as amended by
Amendment Two) are hereby amended in their entirety to read as follows:
“The benefits payable to a Participant or, if the Participant is not living, to
his Beneficiary, under this Restoration Plan shall be paid or commence to be
paid as soon as administratively practicable following the Valuation Date
coincident with or next following the date of the Participant’s retirement or
other termination of service. For purposes of this Restoration Plan a
Participant’s service with an Employer shall not be considered to have
terminated so long as such Participant is in the employment of a Controlled
Group Member. Notwithstanding the foregoing, however, in the event that a
Participant is determined by the Committee to be a “key employee” (as defined in
section 416(i) of the Code without regard to paragraph (5) thereof) as of the
last day of the Plan Year prior to the year Participant’s distributions under
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this Restoration Plan would be paid or commence, Participant’s distributions
shall not be paid or commence until the date that is the earlier of
(i) Participant’s date of death or (ii) six (6) months following such separation
from service. If such Participant would have received installment payments
during such six-month period but for the immediately preceding sentence,
Participant’s installment payments shall be accumulated during such six-month
period and paid as soon as administratively feasible after such six-month
period.
A Participant may elect at the time of his or her initial deferral election in
accordance with procedures established by the Committee to receive his benefit
under this Restoration Plan (i) in the form of a single cash lump sum payment or
(ii) in the form of quarterly or annual cash installments over a period of five
(5) or ten (10) years. In either case, to be effective, such election must be
made prior to the effective date of the Participant’s first deferral election
and except as provided below shall be irrevocable. If a Participant does not
choose a method of payment in accordance with the Committee’s procedures,
payment to the Participant (or his Beneficiary if the Participant is not living)
shall be made in the form of a single cash lump sum. If a Participant is to be
paid in installments, each installment payment shall equal the Participant’s
total remaining benefit divided by the number of installments payments remaining
to be paid in the installment payment period chosen by the Participant. The
Participant’s death shall not affect any such installment payment election, and
in such case any remaining installments shall be paid to the Participant’s
Beneficiary. Notwithstanding the foregoing, the Participant may elect to
postpone a scheduled distribution and have such amount paid out during a sixty
(60) day period commencing immediately after an allowable alternative
distribution date designated by the Participant in accordance with this Section
provided that such payment election change complies with the requirements
imposed by the Committee and each of the following requirements:
(a) Such payment election change must be submitted to and accepted by the
Committee in its sole discretion at least twelve (12) months prior to the
Participant’s previously designated scheduled distribution commencement date;
and
(b) The new scheduled distribution commencement date selected by the
Participant must be at least five years after the previously designated
scheduled distribution date; and
(c) The election of the new scheduled distribution commencement date shall
have no effect until at least twelve (12) months after the date on which the
election is made.”
4. Except as hereinabove amended, the provision of the Plan as previously
amended shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officer on this 2nd day of November, 2005.
ATTEST: COMPANY LUFKIN INDUSTRIES, INC.
/s/ P. G. Perez.
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By:
/s/ R. D. Leslie
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Secretary Title: Vice President/Treasurer/Chief Financial Officer |
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of the 31st day of August, 2004, by and
between G&K Services, Inc., a Minnesota corporation with (“Employer”); and
Richard L. Marcantonio, a resident of the State of Minnesota (“Executive”).
INTRODUCTION
A. Employment and Protection of Employer. Employer has employed Executive in the
capacity of President and Chief Executive Officer under that Executive
Employment Agreement effective as of June, 2002, and now wishes to make
available to Executive certain new benefits and rights under this new Executive
Employment Agreement (the “Agreement”), which will fully supercede all previous
agreements between them except as specifically set forth herein. Employer
further wishes to obtain Executive’s promises related to Notice of Termination
as set forth in this Agreement, as well as Executive’s promises not to harm
Employer following execution of this Agreement, particularly with respect to
Employer’s Confidential Information, as more fully described in Article 7. In
Executive’s position with Employer, Executive will be a valued employee of
Employer and Employer will benefit from Executive’s continued employment as its
President and Chief Executive Officer, and further Executive will have access to
and control over Employer’s Confidential Information, which Employer has
developed at great expense, time and effort. As a result, voluntary termination
by Executive without adequate notice, or disclosure of any Confidential
Information, could cause irreparable harm to Employer, and Employer is not
willing to extend to Executive the additional benefits, rights and
responsibilities under this Agreement unless Executive agrees, as set forth in
this Agreement, to provide Employer with reasonable notice of voluntary
termination of his employment, reasonable protection for its Confidential
Information, and assurances to protect Employer in other ways set forth in
Article 7.
B. Employment and Benefits. For these purposes, Employer is willing to
retain Executive as President and Chief Executive Officer and to grant to
Executive benefits to which Executive is not otherwise entitled, consisting of
the right to receive certain separation compensation, lump sum payments, and
outplacement benefits (as described in Articles 5 and 6), if Executive’s
employment with Employer terminates under certain circumstances, including
without limitation in connection with a Change in Control (as defined in
Article 6).
C. Other Intentions. Executive desires to accept Employer’s offer to be
retained as President and Chief Executive Officer and additional benefits set
forth in this Agreement, to which Executive is not otherwise entitled.
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Executive agrees, as a condition of Employer’s offer of additional benefits
set forth in this Agreement, to sign this Agreement in order that Employer may
have reasonable protections against the disclosure of its Confidential
Information, other conduct of Executive prohibited under Article 7 of this
Agreement, and certain protections related to Notice of Termination as set forth
in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the facts recited above, which are a
part of this Agreement, and the parties’ mutual promises contained in this
Agreement, Employer and Executive agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used generally in this Agreement will have their defined
meaning throughout the Agreement. The following terms will have the meanings set
forth below; unless the context clearly requires otherwise.
1.1 “Agreement” means this Agreement, as it may be amended from time to
time.
1.2 “Base Salary” means the total annual cash compensation payable to
Executive on a regular periodic basis under Section 3.1, without regard to any
voluntary salary deferrals or reductions to fund employee benefits.
1.3 “Board” means the Board of Directors of Employer.
1.4 “Cause” has the meaning set forth in Section 5.2.
1.5 “Date of Termination” has the meaning set forth in Section 5.4(b).
1.6 “Disability” means the unwillingness or inability of Executive to
perform the essential functions of Executive’s position as President and Chief
Executive Officer (with or without reasonable accommodation) under this
Agreement for a period of ninety (90) days (consecutive or otherwise) within any
period of six (6) consecutive months because of Executive’s incapacity due to
physical or mental illness, bodily injury or disease. For purposes of this
Agreement, Executive will be deemed to have a Disability if he is incapacitated
and, within ten (10) days after a Notice of Termination is thereafter given by
Employer, Executive will not have returned to the full-time performance of the
Executive’s duties; provided, however, that if Executive does not agree with a
determination of the existence of a Disability (or the existence of a physical
or mental illness or bodily injury or disease), the determination will be may by
the certification of a qualified medical doctor mutually agreed to by Employer
and Executive (or, in the event of the Executive’s incapacity to designate a
doctor, the Executive’s legal representative). In the absence of such agreement,
each party will nominate a qualified medical doctor and the two doctors will
select a third doctor, who
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will make the determination as to Disability. The decision of the designated
physician will be binding upon the parties. In all matters related to the
incapacity or disability of Executive, the Executive may act through a legal
representative properly appointed for that purpose.
1.7 “Employer” means G&K Services, Inc., as well as any of its Subsidiaries
and any Successor organization.
1.8 “Executive” means Richard L. Marcantonio, a Minnesota resident.
1.9 “Notice of Termination” has the meaning set forth in Section 5.6(a).
1.10 “Plan” means any bonus or incentive compensation agreement, plan,
program, policy or arrangement sponsored, maintained or contributed to by
Employer, to which Employer is a party or under which employees of Employer are
covered, including, without limitation, (a) any stock option, restricted stock
or any other equity-based compensation plan; (b) any annual or long-term
incentive (bonus) plan; (c) any employee benefit plan, such as a thrift,
pension, profit sharing, deferred compensation, medical, dental, disability
income, accident, life insurance, automobile allowance, perquisite, fringe
benefit, vacation, sick or parental leave, severance or relocation plan or
policy and (d) any other agreement, plan, program, policy or arrangement
intended to benefit employees or executive officers of Employer.
1.11 “Subsidiary” means any corporation or other business entity that is
controlled by Employer.
1.12 “Successor” has the meaning set forth in Section 9.1(a).
ARTICLE 2
EMPLOYMENT AND DUTIES
2.1 Employment. Upon the terms and conditions set forth in this Agreement,
Employer hereby employs Executive for an indefinite term, and Executive accepts
such employment as President and Chief Executive Officer of Employer. For the
term of this Agreement, Executive at all times shall be, and shall have the
responsibilities and privileges of, President and Chief Executive Officer of
Employer. This Agreement and Executive’s employment by Employer may be
terminated at any time as set forth in Article 5.
2.2 Duties. While Executive is employed hereunder, and excluding any
periods of vacation, sick, disability or other leave to which Executive is
entitled, Executive agrees to devote substantially all of Executive’s attention
and time during normal business hours to the legal and ethical business and
affairs of Employer, and to act in the best interests of Employer, its
shareholders and employees and, to the extent necessary to discharge the
responsibilities assigned to Executive under this Agreement and under Employer’s
bylaws, to use Executive’s reasonable best efforts to perform faithfully and
efficiently all responsibilities of the position.
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Executive will comply with Employer’s policies and procedures; provided,
however, that to the extent these policies and procedures are inconsistent with
this Agreement, the provisions of this Agreement will control.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 Base Salary. Commencing as of the effective date of this Agreement,
Employer will pay Executive a Base Salary at a minimum annual rate of Six
Hundred Thousand Dollars ($600,000.00). Executive’s Base Salary may be adjusted
and determined periodically by Employer’s Board of Directors; provided, however,
that a Base Salary established under this Agreement will remain in effect until
the Board has completed its next annual review of Executive’s performance.. The
Base Salary will be paid in substantially equal regular periodic payments in
consistent with Employer’s regular payroll practices. If Executive’s Base Salary
is changed at any time during Executive’s employment by Employer, the changed
amount will become the Base Salary under this Agreement, subject to any
subsequent changes.
3.2 Other Compensation and Benefits. While Executive is employed by
Employer under this Agreement:
(a) Executive will be permitted to participate in all Plans for which
Executive is or becomes eligible under their respective terms.
(b) Employer may, in its sole discretion, amend or terminate any Plan that
provides benefits generally to its employees or its executive officers;
provided, however, that in the event that Employer terminates its health, dental
or life Plan offered to Executive, without replacing the Plan, Executive will be
entitled to receive as additional compensation an amount equal to the cash
equivalent of any terminated benefits.
(c) Executive will also be entitled to participate in or receive benefits
under any Plan made available by Employer in the future to its executives and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of these Plans and the preceding
provisions of this Section 3.2.
(d) Executive shall be entitled to a minimum incentive pay under the Annual
Management Incentive Plan in effect at Employer from time to time. Executive’s
minimum target incentive, as a percentage of Base Salary, is 70%, with an
unlimited maximum incentive opportunity, based on achievement by Employer of
Company Financial Measures for Earnings Per Share (55% of incentive opportunity)
and Total Revenue Growth (25% of incentive opportunity), as well as Key
Initiatives/Department or Individual Objectives (20% of incentive opportunity).
Executive’s incentive pay may be adjusted and determined periodically by
Employer’s Board of Directors; provided, however, that incentive pay established
under this Agreement will remain in effect until the Board has completed its
next annual review of Executive’s performance.
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(e) Executive will continue to have the rights, benefits and
responsibilities set forth in that Promissory Note in the original principal
amount of Four Hundred Thousand Dollars ($400,000.00. ), an unexecuted copy of
which is attached hereto as Exhibit C, and that related Stock Pledge Agreement,
an unexecuted copy of which is attached hereto as Exhibit D, the originals of
which were made and entered into by Executive with Employer as of July 2002, and
each of which are current as of the date of this Agreement.
(f) Executive will have the use of a personal automobile leased by Employer
under its Executive Automobile Program with a value up to the greater of
(i) Seventy-Five Thousand Dollars ($75,000.00), (ii) the value set forth in the
Employer’s Executive Automobile Program, or (iii) such other value as the Board
of Directors or it Compensation Committee may determine for Executive.
(g) Executive will have available annual financial planning and tax
preparation benefits with a value up to the greater of (i) Five Thousand Dollars
($5,000.00), (ii) the value set forth in the Employer’s plans for such services,
or (iii) such other value as the Board of Directors or it Compensation Committee
may determine for Executive.
(h) Executive will be entitled to up to six (6) weeks of vacation annually,
or such greater period of time as the Board of Directors or its Compensation
Committee may determine from time to time.
ARTICLE 4
RESTRICTED STOCK GRANT
4.1 Restricted Stock Agreement. Employer and Executive previously entered
into a Restricted Stock Agreement dated as of June, 2002, an unexecuted copy of
which is attached to this Agreement as Exhibit A. This Agreement continues in
full force and effect, and is incorporated into this Agreement, granting
Executive the right to purchase Employer Stock (as defined below) in the amount,
at the price and on the terms set forth in the Restricted Stock Agreement.
4.2 Employer Stock. “Employer Stock” means the voting common stock of
Employer described in the Restricted Stock Agreement attached as Exhibit A.
ARTICLE 5
TERMINATION
5.1 Termination. This Article 5 sets forth the terms for termination of
Executive’s employment under this Agreement, subject to the respective
continuing rights and obligations of the parties under this Agreement. In
general, this Agreement and Executive’s employment with
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the Employer may be terminated by Employer upon thirty (30) days advance written
notice to Executive and by Executive upon ninety (90) days advance written
notice to Employer, for any reason or no reason, or at any time by mutual
written agreement of the parties. For purposes of this section, the ninety
(90) advance written notice required for termination by Executive is necessary
so that Employer may have the opportunity to find a suitable replacement for
Executive. This Agreement and Executive’s employment under this Agreement will
terminate in the event of Executive’s death or Disability, as of the applicable
Date of Termination.
In any such case, this Agreement will terminate as of the applicable Date
of Termination, except for the rights and obligations of the parties under this
Agreement that survive beyond Executive’s termination of employment.
5.2 Termination by Employer for Cause. Employer may terminate this
Agreement at any time for Cause, with or without advance notice (except as
otherwise provided in this Section 5.2). For purposes of this Agreement, “Cause”
means any of the following, with respect to Executive’s position of employment
with Employer:
(a) Executive’s failure or refusal to perform the duties and
responsibilities set forth in Section 2.2, if the failure or refusal (i) is not
due to a Disability or a physical or mental illness or bodily injury or disease;
or (ii) is not due to Executive’s reasonable best efforts to perform faithfully
and efficiently the responsibilities of his position with Employer, acting in
good faith in the interests of Employer, its shareholders and employees; and
(iii) is not cured within thirty (30) days after written notice of the failure
or refusal is received by Executive from Employer;
(b) any drunkenness or use of drugs that interferes with the performance of
Executive’s obligations under this Agreement; and continues for more than five
(5) days after a written notice to Executive; provided, however, that Employer
will have the right to prevent Executive from performing any duties under this
Agreement and from entering the premises of Employer during any such period;
(c) Executive’s indictment for or conviction of (including entering a
guilty plea or plea of no contest to) a felony or any crime involving moral
turpitude, fraud, dishonesty or theft;
(d) any material dishonesty of Executive involving or affecting Employer;
(e) any gross negligence or other willful or intentional act or omission of
Executive having the effect or reasonably likely to have the effect of injuring
the reputation, business or business relationships of Employer in a material
way; provided, however, that if an action or omission giving rise to Cause is
curable, Employer first will have given prior written notice to the Executive
specifying the action or omission with reasonable particularity and, within
thirty (30) days after such notice, the Executive will not have cured the action
or omission;
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(f) any willful or intentional breach by Executive of a fiduciary duty to
Employer;
(g) Except as otherwise specifically provided in this Section 5.2,
Executive’s material violation or breach of Employer’s standard business
practices and policies, including, without limitation, policies against racial
or sexual discrimination or harassment; provided, however, that if in the
Employer’s discretion, such breach or violation is curable, Employer first will
have given prior written notice to the Executive specifying the violation or
breach with reasonable particularity and, within thirty (30) days after such
notice, the Executive will not have cured the violation or breach giving rise to
such Cause;
(h) any material breach (not covered by any of the above clauses
(a) through (g)) of any material term, provision or condition of this Agreement,
if such breach is not cured (to the extent curable) within thirty (30) days
after written notice thereof is received by Executive from Employer.
For purposes of this Section 5.2, no act, or failure to act, on Executive’s
part will be considered “dishonest,” “willful” or “intentional” unless done, or
omitted to be done, by Executive in bad faith and without reasonable belief that
Executive’s action or omission was in or not opposed to the best interest of
Employer. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of counsel for
Employer will be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of Employer. Furthermore, the
term “Cause” will not include ordinary negligence or failure to act, whether due
to an error in judgment or otherwise, if Executive has exercised substantial
efforts in good faith to perform the duties reasonably assigned or appropriate
to the position.
5.3 Termination by Executive. Executive may voluntarily resign from
employment under this Agreement with or without Good Reason (as such term is
defined in Section 6.1(f)) provided he gives Employer ninety (90) calendar days
advance written Notice of Termination.
5.4 Notice of Termination and Date of Termination.
(a) For purposes of this Agreement, a “Notice of Termination” will mean a
written notice that will indicate the specific termination provisions in this
Agreement relied upon and will set forth in reasonable detail the facts and
circumstances claimed to provide the basis for the termination. Any termination
by Employer or by Executive under this Agreement (other than Executive’s death,
or a termination by mutual agreement) will be communicated by written Notice of
Termination to the other party.
(b) For purposes of this Agreement, “Date of Termination” will mean: (i) if
Executive’s employment is terminated due to death, the date of Executive’s
death; (ii) if Executive’s employment is terminated for Disability, thirty
(30) calendar days after the Notice of Termination is given; (iii) if
Executive’s employment is terminated by Employer for Cause or by Executive for
Good Reason, the date specified in the
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Notice of Termination; (iv) if Executive’s employment is terminated by mutual
agreement of the parties, the termination date specified by the agreement; or
(v) if Executive’s employment is terminated for any other reason, the date
specified in the Notice of Termination, provided that if Executive voluntarily
terminates his employment the date specified may be no earlier than ninety
(90) calendar days after the date on which the Notice of Termination is given
unless an earlier date has been expressly agreed to by Employer and Executive in
writing.
5.5 Compensation during Disability and upon Termination.
(a) During any period in which Executive fails to perform Executive’s
duties under this Agreement as a result of a Disability, Executive will continue
to receive all Base Salary and other compensation and benefits to which
Executive is otherwise entitled under this Agreement and under any Plan through
Executive’s Date of Termination. To the extent the Executive has not received
the Base Salary and other compensation and benefits referenced in the preceding
sentence prior to the 90th day of a Disability, Executive will receive such Base
Salary and other compensation and benefits.
(b) Except as otherwise provided in Article 6 or under a mutual agreement
of the parties, if Executive’s employment under this Agreement is terminated
(i) by Executive’s death, (ii) voluntarily by Executive without Good Reason,
(iii) by Employer for Cause, or (iv) by mutual agreement of the parties, then
Employer will pay Executive the Base Salary through the Date of Termination,
plus any amounts to which the Executive is entitled under any Plan (in
accordance with the terms of such Plan). Employer will also pay any retirement
benefits to which Executive is or becomes entitled under any Plan, except to the
extent any such benefits are forfeited under the terms of the Plan.
(c) Except in the case of a termination for Disability, if either
(i) Employer terminates Executive’s employment under this Agreement without
Cause; or (ii) Executive voluntarily terminates his employment under this
Agreement for Good Reason, as that term is defined at Section 6.1(f) without
regard to whether or not it is associated with a Change of Control; and if
Executive executes a written release substantially in the form attached hereto
as Exhibit B and consistent with this Section 5.5(d) (a “Release Agreement”),
then Employer will pay to Executive, as separation pay, which Executive has not
earned and to which he is not otherwise entitled, an amount equal to twelve
(12) months of Executive’s monthly Base Salary, plus the full, unprorated target
incentive compensation payable to Executive under the Annual Management
Incentive Plan in effect as of the Date of Termination without regard to actual
achievement of incentive objectives Such payment will be made to the Executive
in weekly payments beginning sixteen days after Executive’s execution of the
Release Agreement, provided that the Executive has not exercised his rights to
revoke or rescind his release of claims under to the Release Agreement. Further,
Employer will pay to Executive cash equal to the greater of lease costs and
expenses under the Executive Automobile Program or Fifteen Thousand Dollars
($15,000.00), such payment to be made in a lump sum on or about the sixteenth
day following Executive’s execution of the Release Agreement.
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(d) In the event that Executive provides the ninety (90) day Notice of
Termination for a voluntary separation and retires from his employment with
Employer, (i) at any time following his sixtieth birthday, Executive will be
entitled to the continued vesting of all unvested restricted stock and stock
options granted by Employer prior to the Date of Termination, and (ii) at any
time up to and including Executive’s sixtieth birthday, Executive may be
entitled to the continued vesting of all unvested restricted stock and stock
options granted by Employer prior to the Date of Termination at the discretion
of Employer’s Board of Directors, with all the rights and privileges set forth
under the Restricted Stock Agreement or Employer’s 1998 Stock Option and
Compensation Plan.
Executive will not be required to mitigate Employer’s payment obligations
under this Article 5 by making any efforts to secure other employment; and
Executive’s commencement of employment with another employer will not reduce the
obligations of Employer under to this Article 5.
ARTICLE 6
CHANGE IN CONTROL
6.1 Definitions Relating to a Change in Control. The following terms will
have the meanings set forth below; unless the context clearly requires
otherwise:
(a) “1934 Act” will mean the Securities Exchange Act of 1934, as amended
(or any successor provision), and the regulations promulgated under that Act.
(b) “Beneficial Ownership” by a person or group of persons will be
determined in accordance with Regulation 13D (or any similar successor
regulation) promulgated by the Securities and Exchange Commission under the 1934
Act. Beneficial Ownership of an equity security may be established by any
reasonable method, but will be presumed conclusively as to any person who files
a Schedule 13D report with the Securities and Exchange Commission reporting such
ownership.
(c) “Change of Control” means the occurrence of any of the following
events:
(i) any person or group of persons attains Beneficial Ownership (as defined
below) of 30% or more of any equity security of Employer entitled to vote for
the election of directors;
(ii) a majority of the members of the Board is replaced within the period
of less than two years by directors not nominated and approved by the Board; or
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(iii) the stockholders of Employer approve an agreement to merge or
consolidate with or into another corporation, or an agreement to sell or
otherwise dispose of all or substantially all of Employer’s assets (including a
plan of liquidation).
(d) “Continuing Directors” are (i) directors who were in office prior to
the time any events described in paragraphs (c)(i), (c)(ii) or (c)(iii) of this
Section 6.1 occurred, or any person publicly announced an intention to acquire
20% or more of any equity security of Employer; (ii) directors in office for a
period of more than two years; and (iii) directors nominated and approved by the
Continuing Directors.
(e) “Change in Control Termination” will mean that a Change in Control of
Employer has occurred, and either of the following events also occurs within one
(1) year after the Change in Control: (i) Employer terminates the Executive’s
employment or this Agreement for any reason other than for Cause, Executive’s
death or Executive’s Disability; or (ii) Executive terminates his employment for
Good Reason.
(f) “Good Reason” will mean, with respect to a voluntary termination of
employment by Executive, any of the following:
(i) an adverse involuntary change in Executive’s status or position as
President and Chief Executive Officer of Employer, including, without
limitation, (A) any adverse change in Executive’s status or position as a result
of a material diminution in Executive’s duties, responsibilities or authority;
(B) the assignment to Executive of any duties or responsibilities that, in
Executive’s reasonable judgment, are significantly inconsistent with Executive’s
status or position; or (C) any removal of Executive from, or any failure to
reappoint or reelect Executive to, such position (except in connection with a
termination of Executive’s employment for Cause in accordance with Article 5, or
as a result of Executive’s Disability or death);
(ii) in the event that following a Change in Control, Executive, in
performing the duties of his employment, does not report directly to the Board,
or if Employer is not an ultimate parent entity following such Change in
Control, the board of directors of such ultimate parent entity;
(iii) in the event of a Change in Control, either (A) a reduction by
Employer in Executive’s Base Salary, or (B) a termination or adverse change in
Executive’s incentive-based compensation package that materially and adversely
effects Executive’s compensation as a whole;
(iv) the taking of any action by Employer that would materially and
adversely affect the physical conditions existing as of the date of the Change
of Control, and under which Executive performs employment duties for Employer;
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(v) Employer’s requiring Executive to be based anywhere other than where
Executive’s office is located as of the effective date of this Agreement, except
for required travel on Employer’s business to an extent substantially consistent
with business travel obligations;
(vi) in the event of a Change in Control, any failure by Employer to obtain
from any Successor an assumption of this Agreement as contemplated by Section
9.1; or
(vii) any purported termination by Employer or by a successor to the
Employer either of this Agreement or of the employment of the Executive that is
not expressly authorized by this Agreement; or any breach of this Agreement by
Employer at any time, other than an isolated, insubstantial and inadvertent
failure that does not occur in bad faith and is remedied by Employer within a
reasonable period after Employer’s receipt of notice thereof from Executive.
6.2 Benefits Upon a Change in Control Termination. If a Change in Control
Termination occurs with respect to Executive, Executive will be entitled to the
following benefits; provided, however, that to the extent Executive has already
received the same type of benefits under Article 5 as a result of Executive’s
Change in Control Termination, Executive’s benefits under this Section 6.2 will
be offset by such other benefits, to the extent necessary to prevent duplication
of benefits under this Agreement:
(a) all of the payments and benefits that Executive would have been
entitled to receive if the Change in Control Termination were described in
Section 5.5(c), except that in lieu of any further Base Salary payments to
Executive for periods subsequent to the Date of Termination, Employer will pay
to Executive an amount equal to twenty-four (24) months of (i) Executive’s
monthly Base Salary, plus (ii) the Employer-paid portion of health and welfare
benefits coverage, plus (iii) the full, unprorated target incentive compensation
payable to Executive under the Annual Management Incentive Plan in effect as of
the Date of Termination without regard to actual achievement of incentive
objectives, plus (iv) the greater of lease costs and expenses under the
Executive Automobile Program or a lump sum of Thirty Thousand Dollars
($30,000.00); all such payments to be made in a single lump sum on or about the
sixteenth day following Executive’s execution of the Release Agreement;
(b) all terms and conditions of that Change of Control Agreement dated as
of November 12, 2002 between Employer and Executive, a copy of which is attached
to this Agreement as Exhibit E, shall continue in full force and effect, and is
incorporated into this Agreement, granting to Executive the acceleration of
incentives provided under Employer’s 1998 Stock Option and Compensation Plan;
and
(c) for a period of not less than six (6) months following Executive’s Date
of Termination, Employer will reimburse Executive for all reasonable expenses
incurred by Executive (excluding any arrangement by which Executive prepays
expenses for a period of
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greater than thirty (30) days) in seeking employment with another employer,
including the fees of a reputable outplacement organization selected by
Employer, but not to exceed $12,000.00 in the aggregate.
Executive will not be required to mitigate Employer’s payment obligations
under this Article 6 by making any efforts to secure other employment; and
Executive’s commencement of employment with another employer will not reduce the
obligations of Employer under this Article 6.
6.3 Limitation on Severance Payment. Notwithstanding any provision
contained herein to the contrary, if any amount or benefit to be paid or
provided under this Article 6, or any other plan or agreement between Executive
and Employer would be an “Excess Parachute Payment,” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), or
any successor provision thereto, but for the application of this sentence, then
the payments and benefits to be paid or provided under this Article 6 will be
reduced to the minimum extent necessary (but in no event to less than zero) so
that no portion of any such payment or benefit, as so reduced, constitutes an
Excess Parachute Payment; provided, however, that the foregoing reduction will
be made only if and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided to Executive,
determined on an after-tax basis (taking into account the excise tax imposed
pursuant to Section 4999 of the Code, or any successor provision thereto, any
tax imposed by any comparable provision of state law, and any applicable
federal, state and local income taxes). If requested by Executive or Employer,
the determination of whether any reduction in such payments or benefits to be
provided under this Article 6 or otherwise is required pursuant to the preceding
sentence will be made by an independent accounting firm that is a “Big-4
Accounting Firm” (or other accounting firm mutually acceptable to Executive and
Employer) not then-engaged as Employer’s independent public auditor, at the
expense of Employer, and the determination such independent accounting firm will
be final and binding on all parties. In making its determination, the
independent accountant will allocate a reasonable portion of the severance
payment to the value of any personal services rendered following the Change in
Control and the value of any noncompetition agreement or similar agreements to
the extent that such items reduce the amount of the parachute payment. In the
event that any payment or benefit intended to be provided under this Article 6
or otherwise is required to be reduced pursuant to this Section 6.3, Executive
(in his sole discretion) will be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this Section. Employer will
provide Executive with all information reasonably requested by Executive to
permit Executive to make such designation. In the event that Executive fails to
make such designation within ten (10) business days of receiving such
information, Employer may effect such reduction in any manner it deems
appropriate.
ARTICLE 7
PROTECTION OF EMPLOYER
7.1 Confidential Information. For purposes of this Article 7, “Confidential
Information” means information that is proprietary to Employer or proprietary to
others and entrusted to Employer; whether or not such information includes trade
secrets. Confidential Information includes, but is not limited to, information
relating to Employer’s business plans and to its business as conducted or
anticipated to be conducted, and to
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its past or current or anticipated products and services. Confidential
Information also includes, without limitation, information concerning Employer’s
customer lists or routes, pricing, purchasing, inventory, business methods,
training manuals or other materials developed for Employer’s employee training,
employee compensation, research, development, accounting, marketing and selling.
All information that Executive has a reasonable basis to consider as
confidential will be Confidential Information, whether or not originated by
Executive and without regard to the manner in which Executive obtains access to
this and any other proprietary information of Employer.
Executive will not, during or after the termination of Executive’s
employment under this Agreement, (a) directly or indirectly use for Executive’s
own benefit; or (b) disclose any Confidential Information to, or otherwise
permit access to Confidential Information by, any person or entity not employed
by Employer or not authorized by Employer to receive such Confidential
Information, without the prior written consent of Employer. Executive will use
reasonable and prudent care to safeguard and protect and prevent the
unauthorized use and disclosure of Confidential Information. Furthermore, except
in the usual course of Executive’s duties for Employer, Executive will not at
any time remove any Confidential Information from the offices of Employer,
record or copy any Confidential Information or use for Executive’s own benefit
or disclose to any person or entity directly or indirectly competing with
Employer any information, data or materials obtained from the files or customers
of Employer, whether or not such information, data or materials are Confidential
Information.
Upon any termination of Executive’s employment, Executive will collect and
return to Employer (or its authorized representative) all original copies and
all other copies of any Confidential Information acquired by Executive while
employed by Employer.
The obligations contained in this Section 7.1 will survive for as long as
Employer, in its sole judgment, considers the information to be Confidential
Information. The obligations under this Section 7.1 will not apply to any
Confidential Information that is now or becomes generally available to the
public through no fault of Executive or to Executive’s disclosure of any
Confidential Information required by law or judicial or administrative process.
7.2 Non-Competition. Executive agrees that, while employed by Employer and
for a period of eighteen (18) months following the date of Executive’s
termination of employment for any reason, Executive will not, directly or
indirectly, alone or as an officer, director, shareholder, partner, member,
employee or consultant of any other corporation or any partnership, limited
liability company, firm or other business entity:
(a) engage in, have any ownership interest in, financial participation in,
or become employed by, any business or commercial activity in competition
(i) with any part of Employer’s business, as conducted anywhere within the
geographic area in which Employer has conducted its business within the three
(3) years before such date, or (ii) with any part of Employer’s contemplated
business with respect to which
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Executive has Confidential Information governed by Section 7.1. For purposes of
this paragraph, “ownership interest” will not include beneficial ownership of
less than one percent (1%) of the combined voting power of all issued and
outstanding voting securities of a publicly held corporation whose stock is
traded on a major stock exchange or quoted on NASDAQ;
(b) call upon, solicit or attempt to take away any customers or accounts of
Employer;
(c) solicit, induce or encourage any supplier of goods or services to Employer
to cease its business relationship with Employer, or violate any term of any
contract with Employer; or
(d) solicit, induce or encourage any other employee of Employer to cease
employment with Employer, or otherwise violate any term of such employee’s
contract of employment with Employer.
The restrictions set forth in this Section 7.2 will survive any termination of
this Agreement or other termination of Executive’s employment with Employer, and
will remain effective and enforceable for the full 18-month period; provided,
however, that this period will be automatically extended and will remain in full
force for an additional period equal to any period in which Executive is proven
to have violated any such restriction.
7.3 Protection of Reputation. Executive will, both during and after the
termination of Executive’s employment under this Agreement, refrain from
communicating to any person, including without limitation any employee of
Employer, any statements or opinions that are negative in any way about Employer
or any of its past, present or future officials. In return, whenever Employer
sends or receives any Notice of Termination of Executive’s employment under this
Agreement, Employer will advise the members of its operating committee and
executive committee (or any successors to such committees), to refrain from
negative communications about Executive to third parties.
7.4 Remedies. The parties declare and agree that it is impossible to
accurately measure in money the damages that will accrue to Employer by reason
of Executive’s failure to perform any of Executive’s obligations under this
Article 7; and that any such breach will result in irreparable harm to Employer,
for which any remedy at law would be inadequate. Therefore, if Employer
institutes any action or proceeding to enforce the provisions of this Article 7,
Executive hereby waives the claim or defense that such party has an adequate
remedy at law, Executive will not assert in any such action or proceeding the
claim or defense that such party has an adequate remedy at law, and Employer
will be entitled, in addition to all other remedies or damages at law or in
equity, to temporary and permanent injunctions and orders to restrain any
violations of this Article 7 by Executive and all persons or entities acting for
or with Executive.
7.5 Survival. The provisions and obligations of Article 7 of this Agreement
will survive the termination of this Agreement or the termination of the
Executive’s employment with Employer, and will remain in full force and effect
thereafter.
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7.6 Continuation. Executive and Employer acknowledge that the terms and
conditions of this Article 7 restate and continue terms and conditions
previously agreed to between then as a condition for Executive’s first
employment with Employer. To the extent that any portion of this Article 7 may
be deemed invalid for a failure of Employer to provide new consideration to
Executive, then that portion of this Article 7 will be deemed to have been
supported by the previous agreements between Executive and Employer as a
condition for his first employment with Employer.
ARTICLE 8
GENERAL PROVISIONS
8.1 Successors and Assigns; Beneficiary.
(a) For purposes of this Agreement, “Successor” will mean any corporation,
individual, group, association, partnership, limited liability company, firm,
venture or other entity or person that, subsequent to the effective date of this
Agreement, succeeds to the actual or practical ability to control (either
immediately or with the passage of time) substantially all of Employer and/or
Employer’s business and/or assets, directly or indirectly, by merger,
consolidation, recapitalization, purchase, liquidation, redemption, assignment,
similar corporate transaction, operation of law or otherwise.
(b) This Agreement will be binding upon and inure to the benefit of any
Successor of Employer and each Subsidiary, and any such Successor will
absolutely and unconditionally assume all of Employer’s and any Subsidiary’s
obligations hereunder. Upon Executive’s written request, Employer will seek to
have any Successor, by agreement in form and substance satisfactory to
Executive, assent to the fulfillment by Employer of their obligations under this
Agreement. Failure to obtain such assent prior to the time a person or entity
becomes a Successor (or where Employer does not have advance notice that a
person or, entity may become a Successor, within one (1) business day after
having notice that such person or entity may become or has become a Successor)
will constitute Good Reason for termination of employment by Executive pursuant
to Article 6.
(c) This Agreement and all rights of Executive hereunder will inure to the
benefit of and be enforceable by Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees and any assignees permitted hereunder. If Executive dies while any
amounts would still be payable to Executive hereunder if Executive had continued
to live, all such amounts, unless otherwise provided herein, will be paid in
accordance with the terms of this Agreement to Executive’s Beneficiary.
Executive may not assign this Agreement, in whole or in any part, without the
prior written consent of Employer.
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(d) For purposes of this Section 9.1, “Beneficiary” means the person or
persons designated by Executive (in writing to Employer) to receive benefits
payable after Executive’s death pursuant to Section 9.1(c). In the absence of
any such designation or in the event that all of the persons so designated
predecease Executive, Beneficiary means the executor, administrator or personal
representative of Executive’s estate.
8.2 Litigation Expense. If any party is made or will become a party to any
litigation (including arbitration) commenced by or against the other party
involving the enforcement of any of the rights or remedies of such party, or
arising on account of a default of the other party in its performance of any of
the other party’s obligations hereunder, then the parties will bear their own
expenses and attorneys’ fees.
8.3 No Offsets. In no event will any amount payable to Executive pursuant
to this Agreement be reduced for purposes of offsetting, either directly or
indirectly, any indebtedness or liability of Executive to Employer.
8.4 Notices. All notices, requests and demands given to or made pursuant
hereto will, except as otherwise specified herein, be in writing and be
personally delivered or mailed postage prepaid, registered or certified U. S.
mail, to any party as its address set forth on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed address. Any notice
hereunder will be deemed effectively given and received: (a) if personally
delivered, upon delivery; or (b) if mailed, on the registered date or the date
stamped on the certified mail receipt.
8.5 Captions. The various headings or captions in this Agreement are for
convenience only and will not affect the meaning or interpretation of this
Agreement. When used herein, the terms “Article” and “Section” mean an Article
or Section of this Agreement, except as otherwise stated.
8.6 Governing Law. The validity, interpretation, construction, performance,
enforcement and remedies of or relating to this Agreement, and the rights and
obligations of the parties hereunder, will be governed by the substantive laws
of the State of Minnesota (without regard to the conflict of laws rules or
statutes of any jurisdiction), and any and every legal proceeding arising out of
or in connection with this Agreement will be brought in the appropriate courts
of the State of Minnesota, each of the parties hereby consenting to the
exclusive jurisdiction of said courts for this purpose.
8.7 Construction. Wherever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
8.8 Waiver. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder will operate as a waiver
thereof; nor will any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by any related document or by law.
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8.9 Modification. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto.
8.10 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters herein
agreed upon. This Agreement replaces in full all prior employment agreements or
understandings of the parties hereto, including that Executive Employment
Agreement between them effective as of June, 2002, except as otherwise provided
in this Agreement, and any and all such prior agreements or understandings are
hereby rescinded by mutual agreement.
8.11 Survival. The parties expressly acknowledge and agree that the
provisions of this Agreement which by their express or implied terms extend
(a) beyond the termination of Executive’s employment hereunder (including
without limitation provisions relating to severance compensation and effects of
a Change in Control); or (b) beyond the termination of this Agreement,
including, without limitation Article 7 (relating to confidential information,
non-competition and non-solicitation), will continue in full force and effect
notwithstanding Executive’s termination of employment hereunder or the
termination of this Agreement, respectively.
8.12 Voluntary Agreement. Executive has entered into this Agreement
voluntarily, after having the opportunity to consult with an advisor chosen
freely by Executive.
IN WITNESS WHEREOF, the parties hereto have caused this Executive
Employment Agreement to be duly executed and delivered on the day and year first
above written, but effective retroactively as of the effective date of this
Agreement.
EMPLOYER: G&K SERVICES, INC.
By
Richard Fink
Its Chairman of the Board of Directors
EXECUTIVE:
Richard L. Marcantonio
Executive’s Address: 5995 Opus Parkway Minnetonka, MN
55343
Signature Page — Executive Employment Agreement
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EXHIBIT A
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT (the “Agreement”) made effective January 2, 2002 by
and between G&K Services, Inc., a Minnesota corporation, having a place of
business at G&K Services, Inc., 5995 Opus Parkway, Suite 500, Minnetonka, MN
55343 (the “Company”), and (“Employee”).
WITNESSETH:
WHEREAS, the Company has adopted the G&K Services, Inc. 1998 Stock Option and
Compensation Plan (the “Plan”) to increase stockholder value and to advance the
interests of the Company by furnishing a variety of economic incentives designed
to attract, retain and motivate employees; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company
(the “Committee”) believes that entering into this Agreement with Employee is
consistent with the stated purposes for which the Plan was adopted.
NOW, THEREFORE, it is agreed as follows:
1. Grant of Stock.
Subject to the terms and provisions of this Agreement and the Plan, the Company
hereby sells to Employee the number of shares of Class A Common Stock, $0.50 par
value, of the Company (the “Stock”) for the purchase price set forth at the end
of this Agreement after “Number of Shares” and “Purchase Price”, respectively.
The Stock will be transferred of record to Employee and a certificate or
certificates representing the Stock will be issued in the name of Employee upon
the execution of this Agreement, the payment of the Purchase Price set forth at
the end of this Agreement, if any, and the execution and delivery by Employee to
the Company of a stock power endorsed in blank. Each such certificate will bear
a legend in the form provided for in the Plan. The Stock, together with a stock
power endorsed in blank by employee, will be deposited with the Company.
Employee will not be entitled to delivery of certificates representing the Stock
until the expiration of the restrictions set forth in paragraph 3 of this
Agreement.
2. Rights of Employee
Upon the execution of this Agreement and issuance of the certificates for the
Stock, Employee will become a stockholder with respect to the Stock and will
have all of the rights of a stockholder with respect to all such shares,
including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares, provided, however, that such
shares will be subject to the restrictions set forth in paragraph 3 of this
Agreement.
Notwithstanding the preceding paragraph, the Committee may, in its discretion,
instruct the Company to withhold any stock dividends or stock splits issued on
or with respect to shares that are subject to the restrictions provided for in
Paragraph 3 of this Agreement.
3. Restrictions
Employee agrees that at all times prior to the vesting of the Stock as
contemplated by Paragraph 4 hereof:
a) Employee will not sell, transfer, pledge, hypothecate or otherwise
encumber the Stock; and b) If Employee’s employment with the Company is
voluntarily or involuntarily terminated for any reason whatsoever, or Employee
violates the terms of any confidentiality agreement, non-solicitation covenant
or covenant not to compete, however delineated, subject to paragraph 4 hereof,
Employee will forfeit and transfer to the Company all shares of Stock, and the
Company will pay Employee an amount equal to the Purchase Price of $.50 par
value paid by Employee, if any, with respect to the shares of Stock so
forfeited.
A-1
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c) If the Employee is transferred out of an eligible-level position, the
employee will receive any shares vesting within nine months of transfer. Any
remaining shares will be forfeited and the Company will pay the Employee an
amount equal to the Purchase Price of $.50 par value paid by the Employee with
respect to the shares of Stock forfeited.
4. Lapse of Restrictions
Subject to Section 11.12 of the Plan, the restrictions set forth in Paragraph 3
of this Agreement will lapse on one-fifth of the Stock on January 2, 2003, and
one-fifth of the Stock on each of the next four successive anniversaries of such
date. The Company will deliver certificates representing the shares of Stock
upon which the restrictions have lapsed and have become vested, free and clear
of all restrictions, except as provided in Section 11.5 of the Plan, within
30 days after the date such shares of Stock have become vested.
5. Securities Act
The Company will have the right, but not the obligation, to cause the shares of
Stock issuable hereunder to be registered under the appropriate rules and
regulations of the Securities and Exchange Commission.
Employee hereby represents and warrants to the Company that Employee is
acquiring the shares for investment and not with a view to the sale or
distribution thereof.
If shares of Stock or other securities issuable hereunder have not been
registered under the Securities Act of 1933, as amended, or other applicable
federal or state securities law or regulations, such shares will bear a legend
restricting the transferability thereof, such legend to be substantially in the
following form:
“The shares represented by this certificate have not been registered or
qualified under federal or state securities laws. The shares may not be offered
for sale, sold, pledged or otherwise disposed of unless so registered or
qualified, unless an exemption exists or unless such disposition is not subject
to the federal or state securities laws, and the availability of any exemption
or the inapplicability of such securities laws must be established by an opinion
of counsel, which opinion and counsel will both be reasonably satisfactory to
the Company.”
6. Copy of Plan
By the execution of this Agreement, Employee acknowledges receipt of a copy of
the Plan, the terms and conditions of which are hereby incorporated herein by
reference and made a part hereof by reference as if set forth in full.
7. Administration
This Agreement will at all times be subject to the terms and conditions of the
Plan. The Committee will have the sole and complete discretion with respect to
all matters reserved to it by the Plan and decisions of the Committee with
respect thereto and to this Agreement will be final and binding upon Employee.
In the event of any conflict between the terms and conditions of this Agreement
and the Plan, the provisions of the Plan will govern and control.
8. Continuation of Employment
This Agreement will not confer upon Employee, and will not be construed to
confer upon Employee, any right to continue in the employ of the Company for any
period of time, and will not limit the rights of the Company in their sole
discretion, to terminate the employment of Employee at any time, with or without
cause, for any reason or no reason, or to change Employee’s assignment or rate
of compensation.
A-2
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9. Section 83(b) Election
Employee understands that he (and not the Company) will be responsible for his
own federal, state, local or foreign tax liability and any of his other tax
consequences that may arise as a result of the transactions contemplated by this
Agreement. Employee will rely solely on the determinations of his tax advisors
or his own determinations, and not on any statements or representations by the
Company or any of its agents, with regard to all such tax matters. Employee
understands that Section 83 of the Internal Revenue Code of 1986, as amended
(the “Code”), taxes as ordinary income the difference between the amount paid
for the Stock and the fair market value of the Stock as of the date any
restrictions on the Stock lapse. In this context, “restriction” includes without
limitation the vesting restrictions set forth in paragraph 3 hereof. In the
event the Company has registered any of its shares under the Securities Exchange
Act of 1934, “restriction” with respect to officers, directors and ten percent
(10%) shareholders also means the period after the purchase of the Stock during
which such officer, director and ten percent (10%) shareholders could be subject
to suit under Section 16(b) of the Securities Exchange Act of 1934. Employee
understands that Employee may elect to be taxed at the time the shares of Stock
are purchased rather than when and as the restrictions on the Stock lapse or
expire by filing an election under Section 83(b) of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase. In the event
Employee files an election under Section 83(b) of the Code, such election will
contain all information required under the applicable treasury regulation(s) and
Employee will deliver a copy of such election to the Company contemporaneously
with filing such election with the Internal Revenue Service. EMPLOYEE
ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO
FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF EMPLOYEE
REQUESTS THAT THE COMPANY OR ITS REPRESENTATIVES MAKE THIS FILING ON EMPLOYEE’S
BEHALF.
10. Governing Law
This Agreement, in its interpretation and effect, will be governed by the laws
of the State of Minnesota applicable to contracts executed and to be performed
therein.
11. Amendments
This Agreement may be amended only by a written agreement executed by the
Company and Employee.
12. Entire Agreement
This Agreement embodies the entire agreement made between the parties hereto
with respect to matters covered herein and will not be modified except in
accordance with paragraph 11 of this Agreement.
13. Counterparts
This Agreement may be executed in any number of counterparts, each of which will
be deemed an original, but all of which will constitute but one and the same
agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as of
the date first written above.
G&K Services, Inc.
By:
Its: Chief Executive Officer
Name
Number of Shares: 15,000
Purchase Price: $.50 per share
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EXHIBIT B
SEPARATION AGREEMENT AND GENERAL RELEASE
Definitions. All the words used in this Separation Agreement and General Release
have their plain meaning in ordinary English. Specific terms used in this
Separation Agreement and General Release have the following meanings:
1. Words such as I and me include both me and anyone who has or obtains any
legal rights or claims through me. My name is ___. 2. “G&K” means G&K
Services, Inc., and its past or present managers, agents, officers, directors,
employees, shareholders, committees, insurers, indemnitors, successors or
assigns of any of the foregoing entities.
G&K’s Promises. In exchange for My Promises, as set forth below, G&K has
promised to extend the following consideration to me, but only if I have not
exercised my rights to rescind as provided in this agreement:
1. Pay me, as separation pay which I have not earned, and to which I am not
otherwise entitled, (___) months of my monthly Base Salary
in effect as of the Date of Termination, less any separation pay amounts to
which I am entitled under any written Plan generally applicable to management
employees of G&K. Payment of the separation pay will be made sixteen days after
I sign this agreement, and only if I have not exercised my rights to revoke or
rescind as provided in this agreement. These payments will be subject to
applicable federal and state income tax and FICA withholding.
My Claims. The claims I am releasing include all of my rights to any relief of
any kind from G&K including but not limited to:
1. All claims I have now, whether or not I now know about the claims; 2.
All claims for attorney’s fees; 3. All claims, through the date this
document is executed, for alleged discrimination against me and any other rights
and claims, the Minnesota Human Rights Act (“MHRA”), the federal Age
Discrimination in Employment Act (“ADEA”) or any other federal, state, or local
law; 4. All claims arising out of my offer of employment, employment or my
separation from employment with G&K including, but not limited to, any alleged
breach of contract, wrongful termination, defamation or intentional infliction
of emotional distress; 5. All claims for any other alleged unlawful
employment practices arising out of or relating to my employment or my
separation from employment; and 6. All claims for any other form of pay,
for example unaccrued holiday pay, vacation pay and sick pay.
My Promises. In exchange for receiving the payments and other consideration set
forth in this Separation Agreement and General Release, I promise to give up all
my claims against G&K. I fully and finally release, give up, and otherwise
relinquish all of my rights and claims against G&K, including for example rights
and claims under the MHRA and ADEA. I will not bring any lawsuits or make any
other demands against
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G&K, except if necessary to enforce the provisions of this Separation Agreement
and General Release. The money and benefits I will receive as set forth in this
Separation Agreement and General Release are full and fair payment for the
release of all my rights and claims. G&K does not owe me anything in addition to
what I will receive under this Separation Agreement and General Release. The
consideration extended by G&K in this agreement in return for my release of
rights and claims is more than anything of value to which I am already entitled.
Additional Agreements and Understandings.
1. G&K does not admit that it is responsible or legally obligated to me, and
in fact G&K denies that it is responsible or legally obligated to me even though
it has paid me to release my claims. 2. My last day of employment is
. 3. This Agreement replaces,
supersedes and nullifies any prior oral or written agreements between G&K and
me, with the exception of the provisions set forth in Article 7 of the Executive
Employment Agreement between me and G&K, and the terms of any written Plan
generally applicable to management employees of G&K.
Rights to Consider, Revoke and Rescind.
1. I understand that I am advised by G&K to consult an attorney prior to
signing this Separation Agreement and General Release. 2. I further
understand that I have twenty-one (21) days to consider this Separation
Agreement and General Release of age discrimination claims under the ADEA,
beginning , the date on which I received
this Separation Agreement and General Release. If I sign this Separation
Agreement and General Release, I understand that I will then be entitled to
revoke my release of any rights and claims of age discrimination under the ADEA
within seven (7) days of executing it, and the release of my ADEA rights and
claims will not become effective or enforceable until the seven-day period has
expired. 3. I further understand that I have the right to rescind this
general release of discrimination rights and claims under the MHRA within
fifteen (15) calendar days of the date upon which I sign it. I understand that,
if I desire to rescind my general release of discrimination rights and claims
under the MHRA, I must put my rescission request in writing and deliver it to
G&K by hand or by mail within 15 calendar days of the date of execution of this
Separation Agreement and General Release by me. If I deliver my rescission
request by mail, it must be:
a. postmarked within 15 calendar days of the day on which I sign this
Separation Agreement and General Release; b. addressed to Mary Anderson,
Director of Compensation & Benefits, G&K Services, Inc., 5995 Opus Parkway,
Suite 500, Minnetonka, Minnesota 55343 and,
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c. sent by certified mail, return receipt requested.
I understand that if I revoke or rescind this Separation Agreement and
General Release, all of G&K’s obligations under this agreement will immediately
cease, and G&K will not pay me any of the money or benefits in this agreement.
I have read this Separation Agreement and General Release carefully and
understand all of its terms. I have had the opportunity to discuss this
Separation Agreement and General Release with my own attorney prior to signing
it. In agreeing to sign this Separation Agreement and General Release, I have
not relied on any statements or explanations made by G&K, its agents or its
attorneys.
(Name)
Subscribed and sworn to
before me this day
of , 20 .
Notary Public
G&K SERVICES, INC.
By
Its
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EXHIBIT C
PROMISSORY NOTE
$400,000 Minneapolis, Minnesota June ___, 2002
FOR VALUE RECEIVED, Richard L. Marcantonio (“Maker”), promises to pay to G&K
Services, Inc., a Minnesota corporation (the “Company” or “Holder”) at its
office at 5995 Opus Parkway, Suite 500, Minnetonka, Minnesota 55343, or at such
other place as the holder hereof may from time to time designate in writing, in
lawful money of the United States of America, the principal sum equal to Four
Hundred Thousand Dollars ($400,000) (the “Principal Sum”), upon the terms and
subject to the conditions set forth herein.
No interest shall accrue on the unpaid Principal Sum during the term of this
Note.
Subject to the forgiveness of certain amounts of the Principal Sum, as
provided below, the Principal Sum shall be payable in five (5) annual
installments, each in the amount set forth under the caption “Amount Payable” in
the table below, commencing on the one-year anniversary of the date hereof and
continuing on each of the next four (4) successive anniversaries thereof (each a
“Payment Date”). For so long as Maker continues to be employed by Holder, the
amount of the Principal Sum set forth under the caption “Amount Subject To
Forgiveness” in the table below shall be forgiven by Holder on the applicable
anniversary of the date hereof.
Amount Subject Anniversary Amount Payable ($) to
Forgiveness ($)
1st Year
80,000 40,000
2nd Year
80,000 40,000
3rd Year
80,000 40,000
4th Year
80,000 40,000
5th Year
80,000 40,000
In addition to any amounts forgiven pursuant to the terms hereof, the
amount payable by Maker to Holder on each Payment Date shall be further reduced
by an amount (the “Gross-Up Amount”) equal to any federal, state and local
income imposed on Maker as a result of the forgiveness of portions of the
Principal Sum hereunder or the interest-free nature of this Note. For purposes
of determining the Gross-Up Amount, Maker shall be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the calendar year
of the applicable Payment Date and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Maker’s residence in
the calendar year of the applicable Payment Date, net of the maximum reduction
in federal income taxes that may be obtained from the deduction of such state
and local taxes.
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This Note may be prepaid in whole or in part at any time without payment of
any prepayment penalty or fee. Any prepayment shall not accelerate forgiveness
of the Amounts Subject to Forgiveness as detailed above.
The Maker shall remain liable for the payment of this Note, and any other
charges payable hereunder, notwithstanding any extension or extensions of time
for payment or any indulgence of any kind that Holder may grant to Maker.
The occurrence of either of the following events shall constitute an event
of default under this Note (each such event is hereinafter referred to as an
“Event of Default”):
(a) Voluntary termination not for “Good Reason” (as defined in Maker’s
employment agreement with Holder) by Maker of his employment with Holder at any
time prior to the five-year anniversary of the commencement of Maker’s
employment with Holder; or (b) Termination for “Cause” (as defined
in Maker’s employment agreement with Holder) by Holder of Maker’s employment
with Holder at any time prior to the five-year anniversary of the commencement
of Maker’s employment with Holder.
Upon the occurrence of an Event of Default, Holder may, at its sole and
absolute discretion declare the outstanding amount of the Principal Sum to be
immediately due and payable in full without demand. Upon the occurrence of an
Event of Default hereunder Holder may, at its sole and absolute discretion,
deduct any amounts then due hereunder from any money due or to become to Maker
from Holder.
The Maker agrees to pay on demand the costs of collection, including,
without limitation, reasonable attorneys’ fees incurred by Holder in collecting
or attempting to collect any amount under this Note that is not paid when due or
to enforce its rights under this Note. All such costs of collection shall bear
interest, payable on demand, from the date of payment thereof by Holder until
paid in full by Maker at the lesser of (i) the highest rate permitted by law or
(ii) eight (8%) percent.
Holder shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver is in writing and
signed by an authorized officer of Holder and then only to the extent
specifically set forth therein. A waiver on one occasion shall not be construed
to be a continuing waiver of such right or remedy on any other occasion.
Every person who is at any time liable for the payment of the debt
evidenced by this Note hereby waives presentment for payment, demand, notice of
nonpayment of this Note, protest and notice of protest, and the right to trial
by jury in any litigation arising out of, relating to, or connected with this
Note or with any instrument given as security herefor, and hereby agrees that
Holder may extend, without affecting their liability hereon, the time for
payment of any part of or the whole of the debt evidenced by this Note, at any
time, at the request of any other person or entity liable for said debt.
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This Note is given and accepted as evidence of indebtedness only and not in
payment of or in satisfaction of any indebtedness or obligation.
The form and essential validity of this Note shall be governed by the laws
of the State of Minnesota applicable to contracts made and to be performed
wholly within Minnesota, without giving effect to conflicts of laws principles.
All lawsuits and judicial proceedings regarding the interpretation of this Note,
any dispute arising hereunder or the collection of any amount due under this
Note shall be brought and heard in the District Court, State of Minnesota,
Fourth Judicial District, and Maker hereby consents to such jurisdiction. If any
portion of this Note is unenforceable, the remainder of this Note shall continue
in full force and effect.
Time is of the essence with respect to all of Maker’s obligations and
agreements under this Note.
This Note and all the provisions, conditions, promises and covenants hereof
shall inure to the benefit of Holder, its successors and assigns, and shall be
binding upon the Maker, his personal representatives, heirs, successors and
assigns.
This Note is not an employment contract for a definite term. This Note is
not intended to modify the at-will employment relationship between Maker and
Holder.
IN WITNESS WHEREOF, the Maker has caused this Note to be signed on his
behalf on the day and year first above written.
Richard L. Marcantonio
Subscribed and sworn to
before me this day
of , 20 .
Notary Public
G&K SERVICES, INC.
By
Its
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EXHIBIT D
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT is made and entered into as of the ___day of
, 2002, by and between Richard L. Marcantonio, a resident of
the State of Minnesota (the “Pledgor”) and G&K Services, Inc., a Minnesota
corporation (“Pledgee”).
INTRODUCTION
A. Promissory Note. Pledgor has issued a Promissory Note in the original
principal amount of Four Hundred Thousand Dollars ($400,000) (the “Principal
Sum”).
B. Security. To induce Pledgee to enter into the transactions described
above, and as security for payments due under the Note, Pledgor has agreed to
pledge shares of , a
corporation (the “Shares”), which Shares have a value of at
least 130% of the Principal Sum.
AGREEMENT
NOW, THEREFORE, in order to secure payment of all amounts due and owing
Pledgee under the Note (collectively, the “Obligations”), and in consideration
of the facts recited above (which are a part of this Agreement) and the promises
set forth below, it is agreed:
1. Pledge. As collateral for the payment of the Obligations, Pledgor hereby
grants a security interest to Pledgee and deposits with Pledgee (accompanied by
a stock power in blank) the Shares (which Shares, as adjusted from time to time
as provided herein, shall hereinafter to be referred to as the “Pledged Stock”),
and Pledgor agrees to perform the obligations set forth herein. Pledgor hereby
appoints Pledgee as attorney-in-fact to arrange for the transfer of the Pledged
Stock on the books of the Company into the name of Pledgee if an Event of
Default (as defined below) occurs as set forth herein. The Pledged Stock shall
be held and disposed of pursuant to the terms of this Agreement.
2. Further Assurances. Pledgor agrees at any time, and from time to time,
to execute such other instruments as Pledgee may reasonably request to
establish, maintain and perfect the security interest in the Pledged Stock
conveyed by this Agreement.
3. Rights of Pledgor. Prior to the occurrence of an Event of Default:
(a) Pledgor shall have the right to exercise all voting and other powers
pertaining to the Pledged Stock for all purposes; and
(b) All dividends or other distributions with respect to the Pledged Stock
shall be payable to Pledgor; provided, however, that following an Event of
Default, all dividends or other distributions with respect to the Pledged Stock
shall be payable to Pledgee.
D-1
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4. Representations and Warranties. Pledgor represents and warrants as
follows:
(a) Pledgor will not sell or otherwise dispose of any Pledged Stock or any
interest therein without the prior written consent of the Pledgee; and
(b) Throughout the term of this Agreement, Pledgor will keep the Pledged
Stock free and clear of all security interests, liens, and encumbrances, except
the security interest granted hereunder.
5. Adjustment. If during the term of this Agreement any share dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of the Company, then all new, substituted, and additional
shares, or other securities issued by reason of original issuance of the Pledged
Stock shall be subject to the terms of this Agreement in the same manner as, and
as a part of, the Pledged Stock.
6. Release of Shares; Termination. On each Payment Date (as such term is
defined in the Note), Pledgee agrees to release Shares of Pledged Stock to the
extent that the remaining Shares have an aggregate value of 130% of the
Obligations, and Pledgee shall transfer to Pledgor such released Shares and
deliver any assignments separate from certificate for cancellation relating
thereto. Upon full performance of all of the Obligations, Pledgee shall transfer
to Pledgor all of the Pledged Stock and deliver any assignments separate from
certificate for cancellation, and all rights received by Pledgee under this
Agreement shall terminate.
7. Events of Default. An event of default under this Agreement (“Event of
Default”) shall occur when an Event of Default occurs under the Note, and
remains uncured for thirty (30) days after written notice of such default is
given by Pledgee to Pledgor.
8. Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, Pledgee may exercise any one or more of the following rights or
remedies:
(a) exercise all voting rights, rights to receive dividends and other
distributions, and other rights as a holder of the Pledged Stock;
(b) exercise and enforce any or all rights and remedies available upon
default to a secured party under the Uniform Commercial Code, including (i) the
right to offer and sell the Pledged Stock privately to purchasers who will agree
to take the Pledged Stock for investment and not with a view to distribution,
and who will agree to the imposition of restrictive legends on any certificates
representing the Pledged Stock, and (ii) the right to arrange for a sale that
would otherwise qualify as exempt from registration under the Securities Act of
1933, as amended; and, if notice to Pledgor of any intended disposition of the
Pledged Stock or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given at least
twenty (20) calendar days prior to the date of intended disposition or other
action; and
(c) exercise or enforce any or all other rights or remedies available to
Pledgee by law or agreement against the Pledged Stock, against Pledgor or
against any other person or property.
9. Application of Proceeds. The proceeds of any sale of all or a part of
the Pledged Stock shall be applied as follows:
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(a) First, to the payment of all costs and expenses incurred by Pledgee in
enforcing its rights under this Agreement, including without limitation, the
reasonable fees of attorneys or other agents employed by Pledgee in connection
therewith;
(b) Second, to the payment of all of the Obligations then due and owing;
and
(c) Third, any surplus remaining after application of the proceeds pursuant
to subparagraphs (a) and (b) above shall be paid to Pledgor or the successors or
assigns thereof.
Pledgor shall remain liable to Pledgee for any deficiency.
10. Miscellaneous. The parties agree as follows:
(a) No waiver of any of the provisions or conditions of this Agreement
shall be effective unless such waiver is in writing and signed by the party
claimed to have given, or consented to, such waiver.
(b) No failure on the part of Pledgee to exercise, and no delay on the part
of Pledgee in exercising, any right, power, or remedy pursuant to this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise by
Pledgee of any right, power, or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. The
remedies herein provided are cumulative and shall not be exclusive of any other
remedies provided by law or agreement.
(c) The terms and conditions of this Agreement shall inure to the benefit
of, and be binding upon, the respective legal representatives, successors and
permitted assigns of the parties; provided, however, that neither party may
assign this Agreement or its obligations, duties, or liabilities hereunder
without the express prior written consent of the other party.
(d) This Agreement is delivered and is intended to be performed in the
State of Minnesota and should be construed and enforced in accordance with the
laws of such State, without regard to conflict of law principles.
(e) All notices, requests, demands, and other communications hereunder
shall be in writing, and shall be deemed to have been duly given three days
after mailed if sent by registered mail, return receipt requested, postage
prepaid, to the parties at the following addresses (or to any other address
given to the other party pursuant to the provisions of this subsection):
If to Pledgor: If to Pledgee:
G&K Services, Inc.
5995 Opus Parkway, Suite 5500
Minnetonka, MN 55343
Attention: Chief Financial Officer
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(f) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) This Agreement may not be amended except by written agreement executed
by all parties hereto.
(h) If any provision or application of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect, and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby.
(i) All representations and warranties contained in this Agreement shall
survive the execution, delivery, and performance of this Agreement and any other
documents or instruments executed or delivered in connection with or pursuant to
any of the foregoing.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PLEDGOR:
Richard L. Marcantonio
PLEDGEE:
G&K SERVICES, INC.
By:
Name:
Title:
B-1 |
Exhibit 10.15
EMPLOYMENT AGREEMENT
FOR
MARK YEAGER
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Table of Contents
1.
Employment
1
2.
Employment Period
1
3.
Services / Place of Employment
3
4.
Compensation and Benefits
3
5.
Termination of Employment and Change in Control
6
6.
Compensation Upon Termination of Employment By the Company for Cause or By
Executive without Good Reason
9
7.
Compensation Upon Termination of Employment Upon Death or Disability
9
8.
Compensation Upon Termination of Employment By the Company Without Cause or By
Executive for Good Reason
11
9.
Change in Control
12
10.
Mitigation / Effect on Employee Benefit Plans and Programs
14
11.
Confidential Information
14
12.
Return of Documents
16
13.
Noncompete
16
14.
Remedies
17
15.
Indemnification/Legal Fees
17
16.
Successors and Assigns
19
17.
Timing of and No Duplication of Payments
20
18.
Modification or Waiver
20
19.
Notices
21
20.
Governing Law
21
21.
Severability
22
22.
Legal Representation
22
i
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23.
Counterparts
22
24.
Headings
22
25.
Entire Agreement
22
26.
Survival of Agreements
23
ii
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MARK YEAGER EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of May 9, 2006,
by and between Mark Yeager, an individual residing at 72 Fernwood Road, Summit,
New Jersey 07901 (“Executive”), and Mack-Cali Realty Corporation, a Maryland
corporation with offices at 11 Commerce Drive, Cranford, New Jersey 07016 (the
“Company”).
RECITALS
WHEREAS, the Company has acquired the membership interests in a group of
companies referred to collectively as The Gale Service Companies and a portfolio
of assets referred to collectively as the New Jersey Bellemead Portfolio; and
WHEREAS, the Company desires to employ Executive in the capacity of Executive
Vice President of the Company, and Executive desires to be employed by the
Company in this capacity, pursuant to the terms set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ Executive, and Executive hereby agrees to
accept such employment during the period and upon the terms and conditions set
forth in this Agreement.
2. EMPLOYMENT PERIOD.
(a) Except as otherwise provided in this Agreement to the contrary,
the terms and conditions of this Agreement shall be and remain in effect during
the period of employment (the “Employment Period”) established under this
Paragraph 2. The initial Employment Period
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shall be for a term commencing on the Effective Date and ending on the third
(3rd) anniversary of the Effective Date provided, however, that commencing on
the third (3rd) anniversary of the Effective Date and on each day thereafter,
the Employment Period shall be extended automatically for one additional day so
that a constant one (1) year Employment Period shall be in effect unless the
Company or Executive elects not to extend the term of this Agreement by giving
written notice to the other party not less than six (6) months prior to the
designated expiration date, in which case, the term of this Agreement shall
become fixed for the balance of the designated term. Any extension of this
Agreement shall not create an obligation of the Company to issue new awards to
Executive hereunder. The “Effective Date” shall be the “Closing Date” as defined
in Section 2.03 of the Membership Interest Purchase and Contribution Agreement
dated March 7, 2007 by and among Mr. Stanley C. Gale, SCG Holding Corp.,
Mack-Cali Realty Acquisition Corp., and Mack-Cali Realty L.P.
(b) Notwithstanding anything contained herein to the contrary:
(i) Executive’s employment with the Company may be terminated by the Company or
Executive during the Employment Period subject to the terms and conditions of
this Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive’s employment following the expiration of the
Employment Period upon such terms and conditions as the Board of Directors of
the Company (the “Board”) and Executive may mutually agree.
(c) If Executive’s employment with the Company is terminated, for
purposes of this Agreement the term “Unexpired Employment Period” shall mean the
period commencing on the date of such termination and ending on the last day of
the Employment Period.
2
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3. Services / Place of Employment.
Services. During the Employment Period, Executive shall hold the position of
Executive Vice President of the Company. Executive shall devote his best efforts
and substantially all of his business time, skill and attention to the business
of the Company and its affiliates (other than absences due to vacation, illness,
disability or approved leave of absence), and shall perform such duties as are
customarily performed by similar executive officers and as may be more
specifically enumerated from time to time by the Chief Executive Officer;
provided, however, that the foregoing is not intended to (a) preclude Executive
from (i) owning and managing personal investments, including real estate
investments, subject to the restrictions set forth in Paragraph 13 hereof or
(ii) engaging in charitable activities and community affairs, or (b) restrict or
otherwise limit Executive from conducting real estate development, acquisition
or management activities with respect to, and/or additional investment in, those
properties described in Schedule A attached hereto (the “Excluded Properties”)
provided that the performance of the activities referred to in clauses (a) and
(b) does not prevent Executive from devoting substantially all of his business
time to the Company.
4. COMPENSATION AND BENEFITS.
(a) Salary. During the Employment Period, the Company shall pay
Executive a minimum annual base salary in the amount of $370,000 (the “Annual
Base Salary”) payable in accordance with the Company’s regular payroll
practices. Executive’s Annual Base Salary shall be reviewed annually in
accordance with the policy of the Company from time to time and may be subject
to upward adjustment based upon, among other things, Executive’s performance, as
determined in the sole discretion of the Chief Executive Officer. In no event
shall Executive’s Annual Base Salary in effect at a particular time be reduced
without his prior written consent.
3
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(b) Incentive Compensation/Bonuses. In addition, Executive shall be
eligible for incentive compensation payable each year in such amounts as may be
determined by the Option and Executive Compensation Committee of the Board (the
“Compensation Committee”). Executive shall be entitled to receive such bonuses,
restricted share awards and options to purchase shares of common stock, par
value $0.01 per share, of the Company (the “Common Stock”) as the Board or the
Compensation Committee as the case may be shall approve, in its sole discretion,
including, without limitation, options, restricted share awards and bonuses
contingent upon Executive’s performance and the achievement of specified
financial and operating objectives. In addition to the foregoing, Company shall
pay Executive an Initial Year Bonus on or before December 31, 2006, so long as
the Executive’s employment has not been terminated by the Company for Cause or
by Executive without Good Reason on or before such date. For the purposes of the
foregoing, “Initial Year Bonus” shall mean a single cash payment in an amount
equal to $350,000.
(c) Restricted Share Award/Tax Gross-Up Payment. Pursuant to the 2000
Employee Stock Option Plan of Mack-Cali Realty Corporation, which was effective
as of September 11, 2000 (the “SOP”), Executive will be awarded a restricted
share award of ten thousand (10,000) shares of Common Stock (collectively, the
“Restricted Shares”) as of the Effective Date, five thousand (5,000) shares of
which will have a Vesting Date of January 1, 2007 and the remaining five
thousand (5,000) shares of which will have a Vesting Date of January 1, 2008,
subject to the terms of the Restricted Share Award Agreement between Company and
Executive. Upon vesting of each portion of the Restricted Shares, Executive
shall be entitled to receive a tax gross-up payment (the “Tax Gross-Up Payment”)
from the Company with respect to each tax year in which Restricted Shares
granted pursuant to the Restricted Share
4
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Awards vest and are distributed to him. Each Tax Gross-Up Payment shall be a
dollar amount equal to forty-three (43%) percent of the fair market value of the
Restricted Shares at time of vesting, exclusive of dividends. In the event
vesting occurs with respect to any Restricted Shares as a result of the
achievement of the required performance goals, such payment shall be made as
soon as practicable after a determination that the performance goals have been
achieved but in no event later than the 90th day of the fiscal year of the
Company immediately following the fiscal year as to which the performance goals
were achieved. In the event vesting occurs for any other reason, including,
without limitation, termination of Executive’s employment by the Company without
Cause or by Executive for Good Reason (but excluding a termination by the
Company for Cause or a voluntary quit without Good Reason by Executive), such
payment shall be made as soon as practicable after the date of vesting but in no
event later than the tenth (10th) business day following such vesting.
(d) Taxes and Withholding. The Company shall have the right to deduct
and withhold from all compensation all social security and other federal, state
and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld.
(e) Additional Benefits. In addition to the compensation specified
above and other benefits provided pursuant to this Paragraph 4, Executive shall
be entitled to the following benefits:
(I) PARTICIPATION IN THE SOP, THE MACK-CALI
REALTY CORPORATION 401(K) SAVINGS AND RETIREMENT PLAN (SUBJECT TO STATUTORY
RULES AND MAXIMUM CONTRIBUTIONS AND NON-DISCRIMINATION REQUIREMENTS APPLICABLE
TO 401(K) PLANS) AND SUCH OTHER BENEFIT PLANS AND PROGRAMS, INCLUDING BUT NOT
LIMITED TO RESTRICTED STOCK, PHANTOM STOCK AND/OR UNIT AWARDS, LOAN PROGRAMS AND
ANY OTHER INCENTIVE COMPENSATION PLANS OR PROGRAMS (WHETHER OR NOT EMPLOYEE
BENEFIT
5
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PLANS OR PROGRAMS), AS MAINTAINED BY THE COMPANY FROM TIME TO TIME AND MADE
GENERALLY AVAILABLE TO EXECUTIVES OF THE COMPANY WITH SUCH PARTICIPATION TO BE
CONSISTENT WITH REASONABLE COMPANY GUIDELINES;
(II) PARTICIPATION IN ANY HEALTH INSURANCE,
DISABILITY INSURANCE, PAID VACATION, GROUP LIFE INSURANCE OR OTHER WELFARE
BENEFIT PROGRAM MADE GENERALLY AVAILABLE TO EXECUTIVES OF THE COMPANY; AND
(III) REIMBURSEMENT FOR REASONABLE BUSINESS
EXPENSES INCURRED BY EXECUTIVE IN FURTHERANCE OF THE INTERESTS OF THE COMPANY
INCLUDING A MONTHLY ALLOWANCE OF ONE THOUSAND TWO HUNDRED ($1,200) DOLLARS WHICH
IS INTENDED TO COVER THE COST OF LOCAL BUSINESS-RELATED TRAVEL EXPENSES
EXCLUSIVE OF AMOUNTS PAID TO THIRD-PARTIES (E.G. TAXI SERVICE).
5. TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL.
(a) Executive’s employment hereunder may be terminated during the
Employment Period under the following circumstances:
(I) CAUSE. THE COMPANY SHALL HAVE THE RIGHT
TO TERMINATE EXECUTIVE’S EMPLOYMENT FOR CAUSE UPON EXECUTIVE’S: (A) WILLFUL AND
CONTINUED FAILURE TO USE BEST EFFORTS TO SUBSTANTIALLY PERFORM HIS DUTIES
HEREUNDER (OTHER THAN ANY SUCH FAILURE RESULTING FROM EXECUTIVE’S INCAPACITY DUE
TO PHYSICAL OR MENTAL ILLNESS) FOR A PERIOD OF THIRTY (30) DAYS AFTER WRITTEN
DEMAND FOR SUBSTANTIAL PERFORMANCE IS DELIVERED BY THE COMPANY SPECIFICALLY
IDENTIFYING THE MANNER IN WHICH THE COMPANY BELIEVES EXECUTIVE HAS NOT
SUBSTANTIALLY PERFORMED HIS DUTIES; (B) WILLFUL MISCONDUCT AND/OR WILLFUL
VIOLATION OF PARAGRAPH 11 HEREOF, WHICH IS MATERIALLY ECONOMICALLY INJURIOUS TO
THE COMPANY, ITS AFFILIATES, OR THE PARTNERSHIP TAKEN AS A WHOLE; (C) THE
WILLFUL VIOLATION OF THE PROVISIONS OF PARAGRAPH 13 HEREOF; OR (D) CONVICTION
OF, OR PLEA OF GUILTY TO A FELONY. FOR PURPOSES OF THIS SUB-PARAGRAPH 5(A), NO
ACT, OR FAILURE TO ACT, ON EXECUTIVE’S PART SHALL BE CONSIDERED “WILLFUL” UNLESS
DONE, OR OMITTED TO BE DONE, BY HIM (I) NOT IN GOOD FAITH AND (II) WITHOUT
REASONABLE BELIEF THAT HIS ACTION OR OMISSION WAS IN FURTHERANCE OF THE
INTERESTS OF THE COMPANY.
(II) DEATH. EXECUTIVE’S EMPLOYMENT HEREUNDER
SHALL TERMINATE UPON HIS DEATH.
(III) DISABILITY. THE COMPANY SHALL HAVE THE RIGHT
TO TERMINATE EXECUTIVE’S EMPLOYMENT DUE TO “DISABILITY” IN THE EVENT THAT THERE
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IS A DETERMINATION BY THE COMPANY, UPON THE ADVICE OF AN INDEPENDENT QUALIFIED
PHYSICIAN, REASONABLY ACCEPTABLE TO EXECUTIVE, THAT EXECUTIVE HAS BECOME
PHYSICALLY OR MENTALLY INCAPABLE OF PERFORMING HIS DUTIES UNDER THIS AGREEMENT
AND SUCH DISABILITY HAS DISABLED EXECUTIVE FOR A CUMULATIVE PERIOD OF ONE
HUNDRED EIGHTY (180) DAYS WITHIN A TWELVE (12) MONTH PERIOD.
(IV) GOOD REASON. EXECUTIVE SHALL HAVE THE RIGHT TO
TERMINATE HIS EMPLOYMENT FOR “GOOD REASON”: (A) UPON THE OCCURRENCE OF ANY
MATERIAL BREACH OF THIS AGREEMENT BY THE COMPANY WHICH SHALL INCLUDE BUT NOT BE
LIMITED TO AN ASSIGNMENT TO EXECUTIVE OF DUTIES MATERIALLY AND ADVERSELY
INCONSISTENT WITH EXECUTIVE’S STATUS AS EXECUTIVE VICE PRESIDENT OF THE COMPANY,
OR A MATERIAL ADVERSE ALTERATION IN THE NATURE OF A DIMINUTION IN EXECUTIVE’S
DUTIES AND/OR RESPONSIBILITIES, REPORTING OBLIGATIONS, TITLES OR AUTHORITY;
(B) UPON A REDUCTION IN EXECUTIVE’S ANNUAL BASE SALARY OR A MATERIAL REDUCTION
IN OTHER BENEFITS (EXCEPT FOR BONUSES OR SIMILAR DISCRETIONARY PAYMENTS) AS IN
EFFECT AT THE TIME IN QUESTION, A FAILURE TO PAY SUCH AMOUNTS WHEN DUE OR ANY
OTHER FAILURE BY THE COMPANY TO COMPLY WITH PARAGRAPH 4 HEREOF; OR (C) UPON ANY
PURPORTED TERMINATION OF EXECUTIVE’S EMPLOYMENT FOR CAUSE WHICH IS NOT EFFECTED
PURSUANT TO THE PROCEDURES OF SUB-PARAGRAPH 5(A)(I) (AND FOR PURPOSES OF THIS
AGREEMENT, IN THE EVENT OF SUCH FAILURE TO COMPLY, NO SUCH PURPORTED TERMINATION
SHALL BE EFFECTIVE).
(V) WITHOUT CAUSE. THE COMPANY SHALL HAVE THE
RIGHT TO TERMINATE THE EXECUTIVE’S EMPLOYMENT HEREUNDER WITHOUT CAUSE SUBJECT TO
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
(VI) WITHOUT GOOD REASON. THE EXECUTIVE SHALL HAVE
THE RIGHT TO TERMINATE HIS EMPLOYMENT HEREUNDER WITHOUT GOOD REASON SUBJECT TO
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
(VII) CHANGE IN CONTROL. FOR PURPOSES OF THIS
AGREEMENT “CHANGE IN CONTROL” SHALL MEAN THAT ANY OF THE FOLLOWING EVENTS HAS
OCCURRED: (A) ANY “PERSON” OR “GROUP” OF PERSONS, AS SUCH TERMS ARE USED IN
SECTIONS 13 AND 14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
“EXCHANGE ACT”), OTHER THAN ANY EMPLOYEE BENEFIT PLAN SPONSORED BY THE COMPANY,
BECOMES THE “BENEFICIAL OWNER”, AS SUCH TERM IS USED IN SECTION 13 OF THE
EXCHANGE ACT, (IRRESPECTIVE OF ANY VESTING OR WAITING PERIODS) OF (I) COMMON
STOCK OR ANY CLASS OF STOCK CONVERTIBLE INTO COMMON STOCK AND/OR (II) COMMON OP
UNITS OR PREFERRED UNITS OR ANY OTHER CLASS OF UNITS CONVERTIBLE INTO COMMON OP
UNITS, IN AN AMOUNT EQUAL TO TWENTY (20%) PERCENT OR MORE OF THE SUM TOTAL OF
THE COMMON STOCK AND
7
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THE COMMON OP UNITS (TREATING ALL CLASSES OF OUTSTANDING STOCK, UNITS OR OTHER
SECURITIES CONVERTIBLE INTO STOCK UNITS AS IF THEY WERE CONVERTED INTO COMMON
STOCK OR COMMON OP UNITS AS THE CASE MAY BE AND THEN TREATING COMMON STOCK AND
COMMON OP UNITS AS IF THEY WERE A SINGLE CLASS) ISSUED AND OUTSTANDING
IMMEDIATELY PRIOR TO SUCH ACQUISITION AS IF THEY WERE A SINGLE CLASS AND
DISREGARDING ANY EQUITY RAISE IN CONNECTION WITH THE FINANCING OF SUCH
TRANSACTION; (B) ANY COMMON STOCK IS PURCHASED PURSUANT TO A TENDER OR EXCHANGE
OFFER OTHER THAN AN OFFER BY THE COMPANY; (C) THE DISSOLUTION OR LIQUIDATION OF
THE COMPANY OR THE CONSUMMATION OF ANY MERGER OR CONSOLIDATION OF THE COMPANY OR
ANY SALE OR OTHER DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS, IF THE
SHAREHOLDERS OF THE COMPANY AND UNITHOLDERS OF THE PARTNERSHIP TAKEN AS A WHOLE
AND CONSIDERED AS ONE CLASS IMMEDIATELY BEFORE SUCH TRANSACTION OWN, IMMEDIATELY
AFTER CONSUMMATION OF SUCH TRANSACTION, EQUITY SECURITIES AND PARTNERSHIP UNITS
POSSESSING LESS THAN FIFTY (50%) PERCENT OF THE SURVIVING OR ACQUIRING COMPANY
AND PARTNERSHIP TAKEN AS A WHOLE; OR (D) A TURNOVER, DURING ANY TWO (2) YEAR
PERIOD, OF THE MAJORITY OF THE MEMBERS OF THE BOARD, WITHOUT THE CONSENT OF THE
REMAINING MEMBERS OF THE BOARD AS TO THE APPOINTMENT OF THE NEW BOARD MEMBERS.
(b) Notice of Termination. Any termination of Executive’s employment
by the Company or any such termination by Executive (other than on account of
death) shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the
provision so indicated. In the event of the termination of Executive’s
employment on account of death, written Notice of Termination shall be deemed to
have been provided on the date of death.
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6. Compensation Upon Termination of
Employment By the Company for Cause or By Executive without Good Reason.
In the event the Company terminates Executive’s employment for Cause or
Executive terminates his employment without Good Reason, the Company shall pay
Executive any unpaid Annual Base Salary at the rate then in effect accrued
through and including the date of termination, Expense Reimbursement (as
hereinafter defined) and amounts payable under Company programs in accordance
with their terms (“Applicable Benefits”). In addition, in such event, Executive
shall be entitled (i) to receive any earned but unpaid incentive compensation or
bonuses and (ii) to exercise any options which have vested and are exercisable
in accordance with the terms of the applicable option grant agreement or plan,
and (iii) to retain and/or receive any Restricted Shares which have vested as of
the last day of the Company’s fiscal year coincident or immediately preceding
Executive’s termination of employment and the corresponding Tax Gross-Up Payment
(irrespective of whether the determination is made after Executive’s termination
of employment).
Except for any rights which Executive may have to unpaid salary amounts through
and including the date of termination (“Accrued Salary”), Expense Reimbursement,
Applicable Benefits, earned but unpaid incentive compensation or bonuses, vested
options, vested Restricted Shares and the corresponding Tax Gross-Up Payment,
the Company shall have no further obligations hereunder following such
termination. The aforesaid amounts shall be payable in full immediately upon
such termination.
7. COMPENSATION UPON TERMINATION OF
EMPLOYMENT UPON DEATH OR DISABILITY.
In the event of termination of Executive’s employment as a result of either
Executive’s death or Disability, the Company shall pay to Executive, his estate
or his personal representative
9
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the aggregate of (i) a cash payment of one million dollars ($1,000,000) in full
immediately upon such termination (the “Fixed Amount”) and (ii) reimbursement of
expenses incurred prior to date of termination (“Expense Reimbursement”).
Executive (and Executive’s dependents) shall also receive continuation of health
coverage through the end of the Unexpired Employment Period on the same basis as
health coverage is provided by the Company for active employees and as may be
amended from time to time (“Medical Continuation”).
In addition, all (A) incentive compensation payments or programs of any nature
whether stock based or otherwise that are subject to a vesting schedule
including, without limitation, the Restricted Share Awards or any other
restricted stock, phantom stock, units and any loan forgiveness arrangements
granted to Executive (“Incentive Compensation”) shall immediately vest as of the
date of such termination (“Vested Incentive Compensation”), (B) options granted
to Executive shall immediately vest as of the date of such termination (the
“Vested Options”) and Executive shall be entitled at the option of Executive,
his estate or his personal representative, within one (1) year of the date of
such termination, to exercise the Vested Options and/or other options which have
vested (including, without limitation, all other options which have previously
vested in accordance with any applicable option grant agreement or plan) (the
“Total Vested Options”) and are exercisable in accordance with the terms of the
applicable option grant agreement or plan and/or any other methods or procedures
for exercise applicable to optionees or to require the Company (upon written
notice delivered within one hundred eighty (180) days following the date of
Executive’s termination) to repurchase all or any portion of Executive’s vested
options to purchase shares of Common Stock at a price equal to the difference
between the Repurchase Fair Market Value (as hereinafter defined) of the shares
of Common Stock for which the options to be repurchased are exercisable and the
exercise price of
10
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such options as of the date of Executive’s termination of employment (the
“Vested Option Exercise Election”), and (C) the Tax Gross-Up
Payment(s) applicable to the Restricted Share Awards shall vest and be paid to
Executive at such time as provided in sub-paragraph 4(c) above (the “Vested Tax
Gross-Up Payments”). In the event of a conflict between any Incentive
Compensation grant agreement or program or any option grant agreement or plan
and this Agreement, the terms of this Agreement shall control.
Except for any rights which Executive or Executive’s estate in the event of
Executive’s death may have to all of the above including the Fixed Amount,
Vested Incentive Compensation, Total Vested Options and the Vested Option
Exercise Election, the Vested Tax Gross-Up Payment, Accrued Salary, Accrued
Benefits, Expense Reimbursement and Medical Continuation (which, in the event of
Executive’s death, shall be provided to Executive’s dependents), the Company
shall have no further obligations hereunder following such termination.
For purposes of this Agreement, “Repurchase Fair Market Value” shall mean the
average of the closing price on the New York Stock Exchange (or such other
exchange on which the Common Stock is primarily traded) of the Common Stock on
each of the trading days within the thirty (30) days immediately preceding the
date of termination of Executive’s employment.
8. COMPENSATION UPON TERMINATION OF
EMPLOYMENT BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON.
In the event the Company terminates Executive’s employment for any reason other
than Cause or Executive terminates his employment for Good Reason, the Company
shall pay to Executive and Executive shall be entitled to receive the aggregate
of (i) the Fixed Amount and (ii) Vested Incentive Compensation, Total Vested
Options and the Vested Option Exercise Election, the Vested Tax Gross-Up
Payment, Expense Reimbursement and Medical
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Continuation. In the event of a conflict between any incentive Compensation
grant agreement or program or any option grant agreement or plan and this
Agreement, the terms of this Agreement shall control. Executive understands that
any options exercised more than ninety (90) days following the date of his
termination of employment which were granted as incentive stock options shall
automatically be converted into non-qualified options.
Except for any rights which Executive may have to the Fixed Amount, Vested
Incentive Compensation, Total Vested Options and the Vested Option Exercise
Election, the Vested Tax Gross-Up Payment, Accrued Salary, Accrued Benefits,
Expense Reimbursement and Medical Continuation, the Company shall have no
further obligations hereunder following such termination. The parties both agree
that the agreement to make these payments was consideration and an inducement to
obtain Executive’s consent to enter into this Agreement. The payments are not a
penalty and neither party will claim them to be a penalty. Rather, the payments
represent a fair approximation of reasonable amounts due to Executive for the
Employment Period.
9. CHANGE IN CONTROL.
(a) Options. Any Incentive Compensation and options granted to
Executive that have not vested as of the date of a Change in Control shall
immediately vest upon the date of the Change in Control. Neither the occurrence
of a Change in Control, nor the vesting in any options as a result thereof shall
require Executive to exercise any options. In the event of a conflict between
any Incentive Compensation grant agreement or program or any option grant
agreement or plan and this Agreement, the terms of this Agreement shall control.
(b) Excise Tax Gross Up. If it is determined by an independent
accountant mutually acceptable to the Company and Executive that as a result of
any payment in the nature of compensation made by the Company to (or for the
benefit of) Executive pursuant to this
12
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Agreement or otherwise, an excise tax may be imposed on Executive pursuant to
Section 4999 of the Internal Revenue Code (or any successor provisions), the
Company shall pay Executive in cash an amount equal to X determined under the
following formula: (the “Excise Tax Gross Up”):
E x P
X = __________________________________
1-[(FI x (1-SLI)) + SLI + E + M]
where
E
=
the rate at which the excise tax is assessed under Section 4999 of the Code (or
any successor provisions);
P
=
the amount with respect to which such excise tax is assessed, determined without
regard to the Excise Tax Gross Up;
FI
=
the highest effective marginal rate of income tax applicable to Executive under
the Code for the taxable year in question (taking into account any phase-out or
loss of deductions, personal exemptions or other similar adjustments);
SLI
=
the sum of the highest effective marginal rates of income tax applicable to
Executive under all applicable state and local laws for the taxable year in
question (taking into account any phase-out or loss of deductions, personal
exemptions and other similar adjustments); and
M
=
the highest marginal rate of Medicare tax applicable to Executive under the Code
for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement or otherwise and
on which an excise tax under Section 4999 of the Code (or any successor
provisions) may be assessed, the payment determined under this sub-paragraph
9(c) shall be paid to Executive at the time of the Change in Control but prior
to the consummation of the transaction with any successor. It is the intention
of the parties that the Company provide Executive with a full tax Gross-Up under
the provisions
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of this sub-paragraph, so that on a net after-tax basis, the result to Executive
shall be the same as if the excise tax under Section 4999 of the Code (or any
successor provisions) had not been imposed. The Excise Tax Gross Up may be
adjusted if alternative minimum tax rules are applicable to Executive.
10. MITIGATION / EFFECT ON EMPLOYEE BENEFIT PLANS
AND PROGRAMS.
(a) Mitigation. Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment. Amounts owed to Executive under this Agreement shall
not be offset by any claims the Company may have against Executive and such
payment shall not be affected by any other circumstances, including, without
limitation, any counterclaim, recoupment, defense, or other right which the
Company may have against Executive or others.
(b) Effect on Employee Benefit Programs. The termination of
Executive’s employment hereunder, whether by the Company or Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Company’s (i) welfare benefit plans including, without limitation, Medical
Continuation as provided for herein and, health coverage thereafter but only to
the extent required by law, and on the same basis applicable to other employees
and (ii) 401(k) Plan but only to the extent required by law and pursuant to the
terms of the 401(k) Plan.
11. CONFIDENTIAL INFORMATION.
(a) Executive understands and acknowledges that during his employment
with the Company, he will be exposed to Confidential Information (as defined
below), all of which is proprietary and which will rightfully belong to the
Company. Executive shall hold in a fiduciary
14
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capacity for the benefit of the Company such Confidential Information obtained
by Executive during his employment with the Company and shall not, directly or
indirectly, at any time, either during or after his employment with the Company,
without the Company’s prior written consent, use any of such Confidential
Information or disclose any of such Confidential Information to any individual
or entity other than the Company or its employees, attorneys, accountants,
financial advisors, consultants, or investment bankers except as required in the
performance of his duties for the Company or as otherwise required by law.
Executive shall take all reasonable steps to safeguard such Confidential
Information and to protect such Confidential Information against disclosure,
misuse, loss or theft.
(b) The term “Confidential Information” shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors, but shall not include information in the
public domain through no wrongdoing of Executive or information given to
Executive by a third party under no duty of confidentiality to the Company. For
purposes of this Paragraph 11, the Company shall be deemed to include any entity
which is controlled, directly or indirectly, by the Company and any entity of
which a majority of the economic interest is owned, directly or indirectly, by
the Company.
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12. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g., daily
business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of Executive’s employment or at any
time as requested by the Company.
13. NONCOMPETE.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive’s employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the continental United States, engage
in, or own, invest in, manage or control any venture or enterprise primarily
engaged in any office-service, flex, or office property development, acquisition
or management activities without regard to whether or not such activities
compete with the Company. Nothing herein shall prohibit Executive from being a
passive owner of not more than five percent (5%) of the outstanding stock of any
class of securities of a corporation or other entity engaged in such business
which is publicly traded, so long as he has no active participation in the
business of such corporation or other entity. Moreover, the foregoing
limitations shall not be deemed to restrict or otherwise limit Executive from
conducting real estate development, acquisition or management activities with
respect to, or additional investment in, the Excluded Properties, if any,
provided that during the Employment
16
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Period the performance of such activities does not prevent Executive from
devoting substantially all of his business time to the Company.
(b) If, at the time of enforcement of this Paragraph 13, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable, the parties agree that reasonable maximum duration, scope, area or
other restrictions may be substituted by such court for the stated duration,
scope, area or other restrictions and upon substitution by such court, this
Agreement shall be automatically modified without further action by the parties
hereto.
(c) For purposes of this Paragraph 13, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
14. REMEDIES.
The parties hereto agree that the Company would suffer irreparable harm from a
breach by Executive of any of the covenants or agreements contained in
Paragraphs 11, 12 or 13 of this Agreement. Therefore, in the event of the actual
or threatened breach by Executive of any of the provisions of Paragraphs 11, 12
or 13 of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
15. INDEMNIFICATION/LEGAL FEES.
(a) Indemnification. In the event the Executive is made party or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a “Proceeding”), by reason of
Executive’s employment with or serving as an officer or director of the Company,
whether or not the basis of such Proceeding is alleged action
17
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in an official capacity, the Company shall indemnify, hold harmless and defend
Executive to the fullest extent authorized by Maryland law, as the same exists
and may hereafter be amended, against any and all claims, demands, suits,
judgments, assessments and settlements including all expenses incurred or
suffered by Executive in connection therewith (including, without limitation,
all legal fees incurred using counsel reasonably acceptable to Executive) and
such indemnification shall continue as to Executive even after Executive is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors, and administrators. Expenses incurred by Executive in connection with
any Proceeding shall be paid by the Company in advance upon request of Executive
that the Company pay such expenses; but, only in the event that Executive shall
have delivered in writing to the Company an undertaking to reimburse the Company
for expenses with respect to which Executive is not entitled to indemnification.
The provisions of this Paragraph shall remain in effect after this Agreement is
terminated irrespective of the reasons for termination. The indemnification
provisions of this Paragraph shall not supersede or reduce any indemnification
provided to Executive under any separate agreement, or the by-laws of the
Company since it is intended that this Agreement shall expand and extend the
Executive’s rights to receive indemnity.
(b) Legal Fees. If any contest or dispute shall arise between the
Company and Executive regarding or as a result of any provision of this
Agreement, the Company shall reimburse Executive for all legal fees and expenses
reasonably incurred by Executive in connection with such contest or dispute, but
only if Executive is successful in respect of substantially all of Executive’s
claims pursued or defended in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the resolution of
such contest or dispute (whether or not appealed).
18
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16. Successors and Assigns.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
such succession shall be a breach of this Agreement and shall entitle Executive
to compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if Executive terminated his employment hereunder
for Good Reason except that for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the date of
termination. In the event of such a breach of this Agreement, the Notice of
Termination shall specify such date as the date of termination. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to all or substantially all of its business and/or its assets as
aforesaid which executes and delivers the agreement provided for in this
Paragraph 16 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. Any cash payments owed to Executive pursuant
to this Paragraph 16 shall be paid to Executive in a single sum without discount
for early payment immediately prior to the consummation of the transaction with
such successor.
(b) This Agreement and all rights of Executive hereunder may be
transferred only by will or the laws of descent and distribution. Upon
Executive’s death, this Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive’s beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such
19
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person succeeds to Executive’s interests under this Agreement. Executive shall
be entitled to select and change a beneficiary or beneficiaries to receive any
benefit or compensation payable hereunder following Executive’s death by giving
the Company written notice thereof. If Executive should die following the date
of termination while any amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to such person or persons
so appointed in writing by Executive, including, without limitation, under any
applicable plan, or otherwise to his legal representatives or estate.
17. TIMING OF AND NO DUPLICATION OF PAYMENTS.
All payments payable to Executive pursuant to this Agreement shall be paid as
soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
18. MODIFICATION OR WAIVER.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of the Company or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by the Company or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or
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remedy on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any other occasion.
The respective rights and obligations of the parties hereunder shall survive the
Executive’s termination of employment and termination of this Agreement to the
extent necessary for the intended preservation of such rights and obligations.
19. NOTICES.
All notices or other communications required or permitted hereunder shall be
made in writing and shall be deemed to have been duly given if delivered by hand
or delivered by a recognized delivery service or mailed, postage prepaid, by
express, certified or registered mail, return receipt requested, and addressed
to the Chief Executive Officer of the Company or Executive, as applicable, at
the address set forth above (or to such other address as shall have been
previously provided in accordance with this Paragraph 19).
20. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the laws of
the State of New Jersey except as to Paragraph 15(a), without regard to
principles of conflicts of laws thereunder.
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21. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 13(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
22. LEGAL REPRESENTATION.
Each of the Company and Executive have been represented by counsel with respect
to this Agreement.
23. COUNTERPARTS.
This Agreement may be executed in separate counterparts, each of which is deemed
to be an original and both of which taken together shall constitute one and the
same agreement.
24. HEADINGS.
The headings of the Paragraphs of this Agreement are inserted for convenience
only and shall not be deemed to constitute a part hereof and shall not affect
the construction or interpretation of this Agreement.
25. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
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26. Survival of Agreements.
The covenants made in Paragraphs 5 through 15 and 21 each shall survive the
termination of this Agreement.
* * * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
MACK-CALI REALTY CORPORATION
By: /s/
Mitchell E. Hersh
Mitchell E. Hersh
President and Chief Executive Officer
/s/ Mark Yeager
Mark Yeager
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CONTRACT OF SALE
BETWEEN
THE ENTITIES LISTED ON EXHIBIT A HERETO
AND
THE ENTITIES LISTED ON EXHIBIT B HERETO
DATED AS OF MAY 5, 2006
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CONTRACT OF SALE
THIS CONTRACT OF SALE (this "Agreement"), dated as of May 5, 2006, is between
THE ENTITIES LISTED ON EXHIBIT A HERETO (collectively, "Sellers") and THE
ENTITIES LISTED ON EXHIBIT B HERETO (collectively, "Buyers").
1. Sale and Purchase of Properties.
1.1. Subject to the conditions and upon the terms of this Agreement, Sellers
shall sell and transfer to Buyers, and Buyers shall purchase from Sellers,
Sellers' rights, title and interests in and to all of the Real Estate, Buildings
and Personalty constituting the Facilities described on Exhibit C hereto
(individually, a "Property" and, collectively, the "Properties").
1.2. For purposes of this Agreement, the following capitalized terms have the
following meanings:
1.2.1. "Agreement" as defined in the first paragraph hereof and including all
Exhibits and Schedules attached hereto and made a part hereof.
1.2.2. "Bills of Sale" means, collectively, the Bills of Sale, each dated as of
the Closing Date, to be provided from Sellers to Buyers, transferring the
Personalty from Sellers to Buyers.
1.2.3. "Buildings" as defined in Section 1.2.54 hereof.
1.2.4. "Buyers" as defined in the first paragraph hereof.
1.2.5. "Buyers Indemnified Parties" as defined in Section 15.1 hereof.
1.2.6. "Buyers' Knowledge" means the actual knowledge of C. Taylor Pickett and
Daniel J. Booth.
1.2.7. "Buyers Transaction Documents" means, collectively, this Agreement, the
Bills of Sale, the Peak Assignment Agreement, the Peak Guaranty Assignment, the
L/C Agreement, and all other documents and agreements now or hereafter to be
executed and delivered by Buyers pursuant to this Agreement.
1.2.8. "Claims" as defined in Section 15.1 hereof.
1.2.9. "Closing" as defined in Section 9.1.1 hereof.
1.2.10. "Closing Date" as defined in Section 9.1.1 hereof.
1.2.11. "Commitments" as defined in Section 7.3.1 hereof.
1.2.12. "Deeds" means, collectively, the special warranty deeds or the
equivalent versions of special warranty deeds as may be utilized under
applicable
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state law for any Properties, each dated as of the
Closing Date, to be provided from Sellers to Buyers, transferring the Real
Estate from Sellers to Buyers.
1.2.13. "Environmental Claim" means the violation or alleged violation of an
Environmental Law or the existence, presence or Release of any Hazardous
Substances in connection with or based on any occurrence, event or condition at
or relating to the use, possession, operation or management of the Properties.
1.2.14. "Environmental Laws" means the rules and regulations of the
Environmental Protection Agency and all applicable rules and regulations of
federal, state and local laws, including statutes, regulations, ordinances,
codes, rules, as amended, relating to the discharge of air pollutants, water
pollutants or process waste water or Hazardous Substances or toxic substances
including, but not limited to, the Federal Toxic Substances Act, the Federal
Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water
Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
each as amended, regulations of the Environmental Protection Agency, regulations
of the Nuclear Regulatory Agency, and regulations of any state department of
natural resources or state environmental protection agency in effect at the
Closing.
1.2.15. "Facility" or "Facilities" means the skilled nursing facilities and
independent living facility listed as Facilities on Exhibit C hereto.
1.2.16. "Government Entity" means the United States of America or any state or
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government.
1.2.17. "Guarantors" means, collectively, each Guarantor as defined in the
Member Guarantees.
1.2.18. "Hazardous Substances" means any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants
or contaminants, including without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws. "Hazardous Substances" includes polychlorinated biphenyls
(PCBs), asbestos, lead-based paints, infectious wastes, radioactive materials
and wastes and petroleum and petroleum products.
1.2.19. "HQM" means Home Quality Management, Inc.
1.2.20. "HQM Master Lease" means the Master Lease Agreement, dated as of
October 31, 2002, between LIC and the affiliate Tenants of HQM described as
Tenant therein.
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1.2.21. "HQM-Omega Master Lease" means the Amended and Restated Master Lease,
dated as of the Closing Date, between NRS and the affiliate Tenants of HQM.
1.2.22. "HQM Option Agreement" means the Purchase Option Agreement, dated as of
October 31, 2002, between LIC and the affiliate Tenants of HQM described as
Buyer therein.
1.2.23. "HQM Termination Agreement" means the Termination Agreement, dated as
of the Closing Date, between LIC and the affiliate Tenants of HQM.
1.2.24. "Inspection Period" as defined in Section 8.1.3(a) hereof.
1.2.25. "Land" as defined in Section 1.2.54.
1.2.26. "L/C Agreement" means the Letter of Credit Agreement, dated as of the
Closing Date, between Sellers and Buyers.
1.2.27. "Letter of Credit" means the Letter of Credit, as defined in the L/C
Agreement, in the amount of Three Million Dollars ($3,000,000), caused to be
provided by Sellers to Buyers.
1.2.28. "LIC" means Litchfield Investment Company, L.L.C.
1.2.29. "Litchfield Master Leases" means, collectively, the Nexion Master
Lease, the HQM Master Lease and the Peak Master Lease.
1.2.30. "Material Adverse Change" means any changes that materially and
adversely impacts any of the businesses, operations or financial condition of
the Tenants or the Facilities, whether taken as a whole or as a group under the
Nexion Master Lease, the HQM Master Lease or the Peak Master Lease, which are
directly caused by any Acts of God, acts of public enemies or terrorists, war,
other military conflicts, blockades, insurrections, riots, epidemics, quarantine
restrictions, landslides, lightning, earthquake, fires, conflagration, storms,
floods, washouts, civil disturbances, or any actions of any Governmental Entity.
1.2.31. "McGee" means Michael S. McGee.
1.2.32. "Nexion" means Nexion Health, Inc.
1.2.33. "Nexion Master Lease" means the Master Lease Agreement, dated as of
November 1, 2002, between the Sellers described as Landlord therein and the
affiliate Tenants of Nexion described as Tenant therein.
1.2.34. "Nexion-Omega Master Lease" means the Amended and Restated Master
Lease, dated as of the Closing Date, between OHI-LA and the affiliate Tenants of
Nexion.
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1.2.35. "Nexion Termination Agreement" means the Termination Agreement, dated
as of the Closing Date, between the applicable Sellers and the affiliate Tenants
of Nexion.
1.2.36. "NRS" means NRS Ventures, L.L.C.
1.2.37. "OHI-CO" means OHI Asset (CO), LLC.
1.2.38. "OHI-LA" means OHI Asset (LA), LLC.
1.2.39. "Omega" means Omega Healthcare Investors, Inc., a Maryland corporation.
1.2.40. "Omega Master Leases" means, collectively, the Nexion-Omega Master
Lease and the HQM-Omega Master Lease.
1.2.41. "Peak Assignment Agreement" means the Assignment and Assumption
Agreement with respect to the Peak Master Lease, dated as of the Closing Date,
between OHI-CO and the applicable Sellers.
1.2.42. "Peak First Refusal Agreement" means the Right of First Refusal
Agreement, dated as of October 31, 2002, between the applicable Sellers
described as Seller therein and Peak No. 2.
1.2.43. "Peak Guaranty" means the Guaranty, entered into as of October 31,
2002, by Peak Medical for the benefit of the applicable Sellers described as
Landlord therein.
1.2.44. "Peak Guaranty Assignment" means the Assignment Agreement with respect
to the Peak Guaranty, dated as of the Closing Date, between OHI-CO and the
applicable Sellers, with the written consent thereto from Peak Medical.
1.2.45. "Peak Master Lease" means the Master Lease Agreement, dated as of
October 31, 2002, between the Sellers described as Landlord therein and Peak
No. 2.
1.2.46. "Peak Medical" means Peak Medical Corporation.
1.2.47. "Peak No. 2" means Peak Medical Colorado No. 2, Inc.
1.2.48. "Peak Properties" as defined in Section 3 hereof.
1.2.49. "Permitted Exceptions" as defined in Section 7.1 hereof.
1.2.50. "Personalty" means, collectively, all fixtures, machinery, furniture,
equipment, beds, and other tangible personal property owned by Sellers that is
attached to, located at or used in the physical occupancy or operation of the
Facilities and the Properties.
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1.2.51. "Property" or "Properties" as defined in Section 1.1 hereof.
1.2.52. "Property Licenses" as defined in Section 6.1.5 hereof.
1.2.53. "Purchase Price" as defined in Section 5.1 hereof.
1.2.54. "Real Estate" or "Premises" means, collectively, all of the land
situated at the addresses listed on Exhibit C hereto and more particularly
described in the legal descriptions attached hereto as Exhibit D (collectively,
the "Land"), together with and including Sellers' rights, title and interests in
and to all of the rights, privileges, easements, transferable consents,
authorizations, variances or waivers, licenses, permits and approvals,
hereditaments and other appurtenances relating to the Land, and together with
Sellers' rights, title and interests in and to all of the buildings,
improvements and fixtures now or hereafter erected or located on the Land
(collectively, the "Buildings").
1.2.55. "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the environment, including the movement of any Hazardous Substance or other
substance through or in the air, soil, surface water, groundwater, or property.
1.2.56. "Relevant Date" means, with respect to any Material Adverse Change
impacting the business, operations or financial condition of the Tenants or the
Facilities, July 27, 2006.
1.2.57. "Remedial Action" means any action required under any Environmental
Laws to (a) clean up, remove, treat, or in any other way address any Hazardous
Substance or other substance in the environment, (b) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Substance or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the environment, or (c) perform pre-remedial studies
and investigations and post-remedial monitoring and care.
1.2.58. "Rosen" means Eugene H. Rosen.
1.2.59. "Sellers" as defined in the first paragraph hereof.
1.2.60. "Sellers Indemnified Parties" as defined in Section 15.3 hereof.
1.2.61. "Sellers Transaction Documents" means, collectively, this Agreement,
the Deeds, the Bills of Sale, the Peak Assignment Agreement, the Peak Guaranty
Assignment, the L/C Agreement, and all other documents and agreements now or
hereafter to be executed and delivered by Sellers pursuant to this Agreement;
provided, however, that the HQM Termination Agreement and the Nexion Termination
Agreement shall not be included as Sellers Transaction Documents.
1.2.62. "Sellers' Office" means the notice address listed for Sellers in
Section 14.17 hereof.
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1.2.63. "Sellers' Knowledge" means the actual knowledge of Rosen, Weinstein and
McGee.
1.2.64. "Surveys" means the existing land surveys with respect to the
Properties.
1.2.65. "Survival Termination Date" as defined in Section 17 hereof.
1.2.66. "Tenants" means the affiliates of Nexion, the affiliates of HQM, and
Peak, which are listed as Tenants on Exhibit C hereto.
1.2.67. "Title Company" as defined in Section 5.1 hereof.
1.2.68. "Transaction Documents" means, collectively, the Buyers Transaction
Documents and the Sellers Transaction Documents.
1.2.69. "Weinstein" means Bruce Weinstein.
2. Delivery of Omega Master Leases, Nexion Termination Agreement, HQM
Termination Agreement, Peak Assignment Agreement, Peak Guaranty Assignment, L/C
Agreement and Exhibits and Schedules to this Agreement. On or before May 31,
2006, (a) Buyers shall deliver to Sellers the fully executed Omega Master
Leases, (b) Sellers shall deliver to Buyers the fully executed HQM Termination
Agreement and Nexion Termination Agreement, (c) the applicable Sellers and
OHI-CO shall execute and deliver the Peak Assignment Agreement, (d) the
applicable Sellers, OHI-CO and Peak Medical shall execute and deliver the Peak
Guaranty Assignment, and (e) Sellers and Buyers shall execute and deliver the
L/C Agreement. On or before May 15, 2006, Sellers shall deliver to Buyers
Exhibits C and D and Schedules 6.1.2, 6.1.3, 6.1.6, 6.1.7 and 15.1(c) hereto.
3. Peak First Refusal Agreement. On or before May 25, 2006, the applicable
Sellers shall provide written evidence to OHI-CO that they have complied with
their obligations under the Peak First Refusal Agreement, resulting in Peak No.
2 exercising or failing to exercise its right to acquire those Properties
covered by the Peak First Refusal Agreement (collectively, the "Peak
Properties"). If Peak No. 2 exercises its right under the Peak First Refusal
Agreement, then the Peak Properties shall be removed from being subject to sale
and purchase under this Agreement and the Purchase Price shall be reduced by the
amount associated with the Peak Properties on Exhibit C hereto; provided,
however, if Peak No. 2 does not consummate its acquisition of the Peak
Properties at the Closing, then the Closing shall be postponed and this
Agreement shall be automatically extended for up to thirty (30) days so that
Buyers shall acquire the Properties with the Peak Properties included and the
Purchase Price shall be increased by the amount associated with the Peak
Properties on Exhibit C hereto. It is expressly understood by the parties hereto
that at the Closing, Sellers will sell all (and in no event some) of the
Properties to Buyers and, if applicable, Peak No. 2.
4. HQM Option Agreement. The HQM Termination Agreement shall include provisions
for the termination of the HQM Option Agreement.
5. Purchase Price; Disbursement of Purchase Price and Closing Documents at
Closing.
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5.1. Purchase Price. The total purchase price payable by Buyers to Sellers for
the Properties shall be the sum of One Hundred Seventy Million Dollars
($170,000,000) (the "Purchase Price"), which Purchase Price shall be allocated
among the Properties in accordance with Exhibit C hereto. At the Closing, an
amount equal to the Purchase Price shall be deposited by Buyers with First
American Title Insurance Company of New York (the "Title Company") by wire
transfer of same day funds.
5.2. Disbursement of Purchase Price and Closing Documents at Closing. Upon
written notice from Sellers and Buyers to the Title Company that all conditions
to Closing set forth in this Agreement have been satisfied or, as to any
condition not satisfied, waived in writing by the party intended to be benefited
thereby, on the Closing Date the Title Company shall distribute the following
documents and funds in the following manner:
5.2.1. cause the Deeds delivered by Sellers pursuant to Section 9.2.1 hereof to
be recorded in the official records of the applicable counties where the
Properties are located;
5.2.2. cause the mortgage discharges and UCC-3 Termination Statements delivered
by Sellers pursuant to Section 9.2.2 hereof to be recorded in the official
records of the applicable counties and states where the Properties are located;
5.2.3. deliver to Buyers all documents that are required to be delivered by
Sellers to Buyers pursuant to Section 9.2 hereof; and
5.2.4. deliver to Sellers (a) all documents that are required to be delivered
by Buyers to Sellers pursuant to Section 9.3 hereof and (b) the Purchase Price
and such other funds, if any, as may be due to Sellers by reason of credits
under this Agreement, less the items chargeable to Sellers under this Agreement.
6. Representations and Warranties.
6.1. Representations and Warranties by Sellers. Sellers each represent and
warrant to Buyers as follows:
6.1.1. Organization. Sellers are each a limited liability company duly
organized and validly existing under the laws of the state noted for each of
Sellers on Exhibit A hereto.
6.1.2. Power and Authority. Except as set forth on Schedule 6.1.2 hereto,
Sellers have the right, power, and authority to execute and deliver this
Agreement and the other Sellers Transaction Documents and to perform all
Sellers' obligations arising under this Agreement and under the other Sellers
Transaction Documents. Except as set forth on Schedule 6.1.2 hereto, this
Agreement and the other Sellers Transaction Documents do and will each
constitute legal, valid, and binding obligations of Sellers, enforceable in
accordance with their respective provisions, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity. Except as set forth on Schedule 6.1.2
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hereto, Sellers have duly and properly taken or obtained or
caused to be taken or obtained all action necessary for Sellers (a) to enter
into and to deliver this Agreement, the other Sellers Transaction Documents and
any and all other documents and agreements executed by Sellers in connection
herewith and therewith and (b) to carry out the terms of this Agreement and the
other Sellers Transaction Documents and the transaction contemplated by them.
6.1.3. No Conflict. Except as set forth on Schedules 6.1.2 and 6.1.3 hereto,
Sellers' execution, delivery, and performance of this Agreement and the other
Sellers Transaction Documents do not and will not (a) contravene any provision
of any existing law or regulation, judgment, order, decree, or injunction, or
other legal requirement, (b) result in a breach of or require consent pursuant
to any lease, indenture, mortgage, agreement, guaranty, or other document by
which Sellers or the Premises is bound or otherwise affected, or (c) require a
filing or registration with, or the consent or approval of, any Government
Entity other than with respect to any applicable state licensing agencies.
6.1.4. Title to the Properties. To Sellers' Knowledge, Sellers have not engaged
in any act or omission to act so as to cause any encumbrances or restrictions to
affect or relate to the Real Estate or the Properties other than the Permitted
Exceptions and those mortgages, liens, encumbrances and security interests to be
released or satisfied in accordance with Section 7 hereof; provided, however,
that issuance of the Title Insurance Policies by the Title Company to Buyers at
the Closing, as described in Section 8.1.4 hereof, shall be deemed to satisfy
the obligations of Sellers with respect to title to the Properties under Section
7.1 hereof and, as such, the representation in this Section 6.1.4 shall not
survive the Closing.
6.1.5. Licenses and Accreditations. To Sellers' Knowledge, based solely on the
lack of receipt of written notices addressed to Sellers' Office to the contrary,
there is not currently pending or threatened (a) any action or proceeding to
revoke, withdraw or suspend any of the Property Licenses or (b) any judicial or
administrative agency judgment or decision not to renew any of the Property
Licenses. As used herein, the term "Property Licenses" shall mean all local,
state and federal licenses and Medicare and Medicaid accreditations necessary to
operate the Facilities.
6.1.6. Real Estate. Except as set forth on Schedule 6.1.6 hereto, to Sellers'
Knowledge, Sellers have received no written notices that any part of the Real
Estate is currently subject to condemnation proceedings and no such condemnation
or taking is threatened or contemplated. To Sellers' Knowledge, Sellers have
received no written notices of any public improvements which may result in
special assessments against or otherwise affect the Real Estate. Other than
Permitted Exceptions, the matters disclosed on the Surveys, and as set forth on
Schedule 6.1.6 hereto, to Sellers' Knowledge, based solely upon the lack of
receipt of written notice addressed to Sellers' Office to the contrary, there
are no facts that would adversely affect the possession, use or occupancy of the
Real Estate.
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6.1.7. Litigation. Except as set forth on Schedule 6.1.7 hereto, (a) Sellers
are not currently (i) a party to any lawsuits, claims, administrative
proceedings or other pending proceedings, or (ii) bound by any orders,
judgments, injunctions, decrees or settlement agreements under which Sellers may
have continuing obligations as of the date of this Agreement or as of the date
of Closing, any or all of which under subsections (i) or (ii) are likely to
restrict or affect in any material respect the ownership of the Properties,
(b) to Sellers' Knowledge, based solely on the lack of receipt of written
notices addressed to Sellers' Offices to the contrary, there (i) exists no
violation by Sellers or against the Real Estate of any law, rule, regulation,
ordinance or order of any court or governmental department, commission, board,
bureau, agency or instrumentality, or (ii) are no lawsuits, claims,
administrative proceedings or other proceedings now pending or threatened
involving Sellers or the Properties, any or all of which under subsections (i)
or (ii) are likely to restrict or affect in any material respect the ownership
of the Properties. To Sellers' Knowledge, the right or ability of Sellers to
consummate the transactions contemplated by this Agreement has not been
challenged by any Governmental Entity or any other person. Notwithstanding
anything contained in this Section 6.1.7, this section shall not be deemed to
apply to, relate to, or involve any litigation, claim or proceeding (threatened
or pending) (1) to which any of the Tenants is a party and none of Sellers is a
party, or (2) that relates solely to the operations or leasing of the Facilities
on or after November 1, 2002.
6.1.8. Representations and Warranties as of the Closing. The representations
and warranties made by Sellers pursuant to this Section 6.1 shall be true and
correct in all material respects on and as of the date of the Closing as though
such representations and warranties had been made on and as of the date of the
Closing.
6.2. Representations and Warranties by Buyers. Buyers represent and warrant to
Sellers as follows:
6.2.1. Organization. Buyers are each a limited liability company duly organized
and validly existing under the laws of the state noted for each of Buyers on
Exhibit B hereto.
6.2.2. Power and Authority. Buyers have the right, power, and authority to
execute and deliver this Agreement and the other Buyers Transaction Documents
and to perform all Buyers' obligations arising under this Agreement and under
the Buyers Transaction Documents. This Agreement and the other Buyers
Transaction Documents do and will each constitute legal, valid, and binding
obligations of Buyers, enforceable in accordance with their respective
provisions, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity. Buyers have
duly and properly taken or obtained or caused to be taken or obtained all action
necessary for Buyers (a) to enter into and to deliver this Agreement, the other
Buyers Transaction Documents and any and all other documents and agreements
executed by Buyers in connection herewith and
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therewith and (b) to carry out the terms of this Agreement and
the other Buyers Transaction Documents and the transaction contemplated by them.
6.2.3. No Conflict. Buyers' execution, delivery, and performance of this
Agreement and the other Buyers Transaction Documents do not and will not
(a) contravene any provision of any existing law or regulation, judgment, order,
decree, injunction or other legal requirement, (b) result in a breach of or
require consent pursuant to any lease, indenture, mortgage, agreement, guaranty
or other document by which Buyers are bound or otherwise affected, or (c)
require a filing or registration with, or the consent or approval of, any
Governmental Entity.
6.2.4. Solvency. To Buyers' Knowledge, Omega is not insolvent nor will Omega be
rendered insolvent by the consummation of the transactions contemplated by this
Agreement.
6.2.5. Governmental Entity Challenges. To Buyers' Knowledge, the right or
ability of Buyers to consummate the transactions contemplated by this Agreement
has not been challenged by any Governmental Entity or any other person.
6.2.6. Representations and Warranties as of the Closing. The representations
and warranties made by Buyers pursuant to this Section 6.2 shall be true and
correct in all material respects on and as of the date of the Closing as though
such representations and warranties had been made on and as of the date of the
Closing.
7. Title.
7.1. Permitted Exceptions. The Properties are sold and are to be conveyed
subject to the matters listed on Schedule 7.1 hereto (collectively, the
"Permitted Exceptions"). It is a condition precedent to the obligation of Buyers
to consummate the transactions hereunder at the Closing that Sellers shall
convey good, indefeasible and insurable fee simple title to the Real Estate to
Buyers at the Closing, free and clear of all liens, mortgages and security
interests and subject only to the Permitted Exceptions. The Personalty shall be
conveyed to Buyers at the Closing free and clear of all liens and security
interests, subject, however, to Tenants' compliance under the applicable terms
of the Litchfield Master Leases.
7.2. Standard. Sellers shall give and Buyers shall accept such title as the
Title Company shall approve and insure under the usual form of policy, at
regular rates, subject to the usual title-policy exclusions and exceptions and
the Permitted Exceptions.
7.3. Evidence of Title; Surveys and Environmental Reports; Omega Board
Approval.
7.3.1. Title Reports and Commitments. After delivery of all the documents
described in Section 2 hereof, Buyers may order title reports and commitments
(collectively, the "Commitments"), including appropriate UCC and litigation
searches of Sellers and the Properties, zoning letters, and also requesting
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legible copies of all title exceptions referred to in the Commitments,
from the Title Company and shall cause copies of the Commitments, UCC and
litigation searches, zoning letters, and supporting documentation to be promptly
forwarded to Sellers and Sellers' counsel.
7.3.2. Title Insurance Policies. The premiums for the Title Insurance Policies
to be issued to Buyers at the Closing shall be paid by Sellers.
7.3.3. Surveys and Environmental Reports. After execution of this Agreement,
Sellers shall provide Buyers with copies of all the existing Surveys and
environmental reports for the Properties in Sellers' possession. After delivery
of all the documents described in Section 2 hereof, Buyers shall order new
updated Surveys and new environmental reports (and Buyers shall cause such
environmental reports to acknowledge that Sellers are deemed to be third party
beneficiaries of such environmental reports). The cost to update the Surveys
shall be paid by Sellers (provided, however, in the event that the transactions
contemplated by this Agreement are not consummated as a result of Buyers
terminating this Agreement for reasons other than under subsection (i) of
Section 10.1 hereof, then Buyers shall reimburse Sellers for the cost to update
the Surveys) and the cost to update the environmental reports shall be paid by
Buyers. Consistent with the terms of the Litchfield Master Leases, Sellers shall
cooperate with Buyers with respect to obtaining, re-certifying or updating the
Surveys and the environmental reports.
7.4. Title Matters and Updated Surveys. Subject to the terms of this
Section 7.4 and Buyers' standard of conduct described in Section 8.3 hereof,
Buyers shall have until (a) July 17, 2006 to notify Sellers of any objections
that Buyers may have to matters described in those Commitments and updated
Surveys received by Buyers before July 10, 2006 and (b) the Closing to notify
Sellers of any objections that Buyers may have to matters described in (i) those
Commitments and updated Surveys received by Buyers on or after July 10, 2006, or
(ii) any new matters described in any amendments, supplements or modifications
to those Commitments and updated Surveys received before July 10, 2006, and not
previously disclosed to Buyers. Any title encumbrances or exceptions which are
set forth in the marked up Commitments delivered by the Title Company at the
Closing and in the final updated Surveys shall be included as Permitted
Exceptions. In the event that, within the time period described above, Buyers
object to any matters described in the Commitments and the updated Surveys, then
Sellers shall have until the Closing in which to satisfy Buyers' objections;
provided, however, that Sellers may elect to extend the date of Closing for up
to fifteen (15) days in order to satisfy those objections from Buyers covered by
subsection (b) above. In the event that Sellers shall be unable or unwilling (it
being acknowledged that Sellers only obligation is to comply with the standard
of conduct described in Section 8.3 hereof; provided, however, Sellers shall
have no obligation to expend any monies to cure any objections) to satisfy
Buyers' objections, then Buyers shall have the option to either (i) waive
Buyers' objections and purchase the Properties at the Closing, in which case the
waived objections shall become Permitted Exceptions or (ii) elect to terminate
this Agreement. Upon election to terminate this Agreement, this Agreement shall
be deemed canceled and neither party shall have any further obligations to
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the other under this Agreement, except those specifically stated to
survive the termination of this Agreement.
7.5. Removal of Mortgages, Liens and Other Encumbrances. If at the Closing
there are any mortgages, liens or other encumbrances that Sellers are obligated
to pay and discharge, then Sellers shall use a portion of the Purchase Price to
satisfy the same and shall concurrently deliver to Buyers at the Closing
instruments in recordable form sufficient to satisfy such mortgages, liens and
encumbrances of record (and sufficient for the Title Company to omit the same
from Buyers' Title Insurance Policies), together with the cost of recording or
filing those instruments. The existence of any such mortgages, liens and other
encumbrances shall not be considered objections to title if Sellers shall have
complied with the foregoing requirements.
7.6. Payment of Purchase Price. Buyers shall provide all funds to be paid at
the Closing pursuant to Section 5 hereof through wire transfer of immediately
available funds to the Title Company.
7.7. Omega Board of Directors Resolutions. Within forty-five (45) days after
execution of this Agreement by Sellers and Buyers, Buyers shall provide Sellers
with a copy of the resolutions of the Board of Directors of Omega approving the
transactions contemplated by this Agreement.
8. Conditions Precedent.
8.1. For Buyers. The obligations of Buyers under this Agreement are subject to
the satisfaction on or prior to the Closing Date of the following conditions,
any one or more of which may be waived in writing by Buyers to the extent
permitted by applicable law:
8.1.1. Representations and Warranties. The representations and warranties of
Sellers set forth in this Agreement and the other Sellers Transaction Documents
shall be true and correct in all material respects on and as of the date of the
Closing as though made on and as of the date of the Closing, except to the
extent any such representation or warranty expressly is made as of an earlier
date or with respect to a particular period, in which case such representation
or warranty shall have been true and correct in all material respects as of such
date or with respect to such period.
8.1.2. Performance. Sellers shall have performed or complied in all material
respects with all covenants and agreements required by this Agreement and the
other Sellers Transaction Documents to be performed or complied with by Sellers
on or prior to the date of the Closing.
8.1.3. Due Diligence. Buyers shall be satisfied in their sole discretion with
the results of all due diligence with respect to the Properties, including the
financial condition and operating history of the Tenants and the Facilities, the
state of title for the Properties and the environmental and physical condition
of the Properties.
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(a) Buyers shall have the period from the date this Agreement is signed by
Sellers and Buyers until July 27, 2006 (the "Inspection Period"), in which to
conduct due diligence with respect to the financial condition and operating
history of Tenants and the Properties, the environmental and physical condition
of the Properties, determine the appraised value of the Properties, and review
other matters affecting Tenants and the Properties, including, but not limited
to, the following: (i) obtain access to and review all books and records of
Tenants and the Properties in the custody or control of Sellers and Tenants as
may be reasonably required by Buyers, (ii) order new environmental reports
(Phase I and, if required, Phase IIs) for the Properties, (iii) order new
property condition assessments and engineering reports for the Properties, (iv)
obtain copies of Tenants' current insurance policies and certificates, (v) order
new MAI appraisals of the Properties, (vi) confirm the licensure, certificate of
need and Medicare/Medicaid reimbursement status of Tenants and the Facilities,
(vii) confirm any licensure or certificate of need change of ownership issues in
Colorado, Florida, Idaho, Louisiana or Texas resulting from the sale of the
Properties and the execution of the Omega Master Leases and the Peak Assignment
Agreement, and (viii) such other due diligence activities materials and
information as Buyers may conduct, obtain or otherwise reasonably request from
Sellers and/or Tenants.
(b) During the Inspection Period, and thereafter until the Closing hereof, so
long as this Agreement has not been terminated, Sellers shall provide (or cause
Tenants to provide, consistent with the terms of the Litchfield Master Leases)
Buyers, their officers, employees, members, agents, contractors, engineers,
consultants, licensees and assignees (i) access to all the books, contracts, and
other records of Sellers (as they relate to the Tenants, the Facilities and the
Properties), the Tenants, the Facilities and the Properties as Buyers may
reasonably request and require in connection with the due diligence activities
described in subsection (a) above and (ii) access to the Properties for the
purpose of making any and all examinations and investigations of the Properties
as Buyers may reasonably request and require in connection with the due
diligence activities described in subsection (a) above; provided, however, that
access to the Properties by Buyers must be approved, in advance, by the
applicable Tenant of such Property being accessed, which approvals Sellers shall
obtain for Buyers, consistent with the terms of the Litchfield Master Leases.
Buyers covenant that the due diligence activities shall be undertaken in a
manner as to not interfere in any material respect with the operations of the
Properties.
(c) Buyers shall not suffer or permit the filing of any mechanic's liens as a
result of Buyers' due diligence activities under this Section 8.1.3 (and to the
extent such mechanic's liens are or may be filed as a result of such due
diligence activities, such mechanic's liens, or the right to file such liens,
shall be deemed Permitted Exceptions). In the event Buyers fail to close the
transactions contemplated by this Agreement, Buyers shall be liable to Sellers
for the repair of any damage to the Properties occurring as a result of any such
due diligence activities.
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8.1.4. Title Insurance Policies. The Title Company shall have issued the Title
Insurance Policies to Buyers with respect to the Properties in the form of the
marked up Commitments signed and delivered at the Closing.
8.1.5. Delivery of Sellers Closing Items. Sellers shall have delivered or
caused to be delivered at the Closing the items described in Section 9.2 hereof.
8.2. For Sellers. The obligations of Sellers under this Agreement are subject
to the satisfaction on or prior to the Closing Date of the following conditions,
any one or more of which may be waived in writing by Sellers to the extent
permitted by applicable law:
8.2.1. Representations and Warranties. The representations and warranties of
Buyers set forth in this Agreement and the other Buyers Transaction Documents
shall be true and correct in all material respects on and as of the date of the
Closing as though made on and as of the date of the Closing, except to the
extent any such representation or warranty expressly is made as of an earlier
date or with respect to a particular period, in which case such representation
or warranty shall have been true and correct in all material respects as of such
date or with respect to such period.
8.2.2. Performance. Buyers shall have performed or complied in all material
respects with all covenants and agreements required by this Agreement and the
other Buyers Transaction Documents to be performed or complied with by Buyers on
or prior to the date of the Closing.
8.2.3. Delivery of Buyers Closing Items. Buyers shall have delivered or caused
to be delivered at the Closing the items described in Section 9.3 hereof.
8.3. Buyers' and Sellers' Due Diligence and Commercially Reasonable Efforts in
Satisfying Conditions Precedent. Buyers must use due diligence and commercially
reasonable efforts in seeking to satisfy all the conditions precedent set forth
in Section 8.1 hereof. In addition, except as otherwise specifically set forth
in Section 7.4, Sellers must use due diligence and commercially reasonable
efforts in seeking to satisfy all the conditions precedent set forth in Section
8.2 hereof.
9. The Closing.
9.1. Closing and Closing Date.
9.1.1. The closing of the transaction under this Agreement (the "Closing"),
shall take place on a date mutually agreed upon by Sellers and Buyers in
accordance with the procedure described in Section 5.2 hereof, by delivery of
the appropriate Closing documents and funds to the Title Company, but in no
event shall the Closing occur later than August 1, 2006, unless such date is
extended by mutual agreement of Sellers and Buyers. Upon consummation of the
transactions contemplated by this Agreement, the Closing shall be deemed to be
effective and the transfer of the Property shall be deemed to have occurred as
of 12:01 a.m. local time on the actual Closing date agreed to by Sellers and
Buyers (the "Closing Date").
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9.2. Sellers' Deliveries. At the Closing, Sellers shall deliver or cause to be
delivered in accordance with Section 5.2 hereof to Buyers the following, all in
form and substance reasonably acceptable to Sellers and Buyers:
9.2.1. The Deeds for the Real Estate, duly executed and acknowledged by Sellers
and in proper form for recording, so as to convey to Buyers fee simple title to
the Real Estate, free of all encumbrances other than the Permitted Exceptions;
9.2.2. Mortgage discharges and UCC-3 Termination Statements in respect of all
mortgages, liens or other encumbrances on the Properties in proper form for
recording;
9.2.3. The Bills of Sale, duly executed and acknowledged by Sellers,
transferring to Buyers all of the Personalty;
9.2.4. The Letter of Credit, in the amount of Three Million Dollars
($3,000,000), for the benefit of Buyers;
9.2.5. A legal opinion from counsel to Sellers regarding the matters described
in Sections 6.1.1, 6.1.2 and 6.1.3 hereof;
9.2.6. Such affidavits as the Title Company shall reasonably require in order
to omit from its Title Insurance Policies all exceptions, except for standard
exceptions, judgments, bankruptcies or other returns against persons or entities
whose names are the same as or similar to Sellers' name;
9.2.7. A certification of non-foreign status, in form required by the Internal
Revenue Code Section 1445 and the regulations issued thereunder, duly executed
by Sellers under penalty of perjury. Sellers understand that such certification
will be retained by Buyers and will be made available to the Internal Revenue
Service on request;
9.2.8. A certificate of Sellers to the effect that the representations and
warranties of Sellers set forth in this Agreement and the other Sellers
Transaction Documents, are true and correct in all material respects as of the
date of Closing;
9.2.9. The original certificates of title to any motor vehicles included within
the Personalty relating to the Properties;
9.2.10. A copy of the written notice of the Peak Assignment Agreement provided
by the applicable Sellers to Peak No. 2; and
9.2.11. Such other documents as Buyers may reasonably request in order to
further the purposes of this Agreement, duly executed and, where appropriate,
acknowledged, and in recordable form.
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9.3. Buyers' Deliveries. At the Closing, Buyers shall deliver to Sellers the
following or cause to be delivered in accordance with Section 5.2 hereof to
Sellers the following, all in form and substance reasonably acceptable to
Sellers and Buyers:
9.3.1. The Purchase Price;
9.3.2. A certificate of Buyers to the effect that the representations and
warranties of Buyers set forth in this Agreement and the other Buyers
Transaction Documents, are true and correct as of the date of Closing;
9.3.3. Such other documents as Sellers may reasonably request in order to
further the purposes of this Agreement, duly executed and, where appropriate,
acknowledged, and in recordable form; and
9.3.4. A legal opinion from counsel to Buyers regarding the matters described
in Sections 6.2.1, 6.2.2 and 6.2.3 hereof.
9.4. Possession. At the Closing, Sellers shall deliver to Buyers possession of
the Properties, free and clear of all leases, purchase options, rights of first
refusal, tenancies, and/or other rights of occupancy or acquisition of any kind
(other than the Omega Master Leases, the Peak Master Lease and any resident
leases), and otherwise in the condition required by this Agreement, together
with all of the Personalty located at the Properties. Sellers covenant that they
will not remove any Personalty from the Properties after the date of this
Agreement and through the Closing Date, except items replaced or upgraded with
items of equal or greater value.
9.5. Transfer Costs; Tax and Information Returns.
9.5.1. All real property transfer taxes, sales taxes, and any other similar
taxes with respect to the transfer of the Properties and the Personalty shall be
paid for at the Closing by Sellers.
9.5.2. Sellers and Buyers shall duly execute, acknowledge where appropriate,
and deliver all tax returns and information returns necessary and proper in
connection with this transaction.
9.5.3. The provisions of this Section 9.5 shall survive the Closing.
9.6. Concurrent Conditions. All deliveries, exchanges, and other actions to be
taken at the Closing shall be deemed to occur simultaneously, and the
performance of all such actions shall be concurrent conditions to all other such
actions.
10. Remedies.
10.1. Right to Terminate this Agreement. In addition to the termination right
set forth in Section 7.4 hereof, this Agreement and the transactions
contemplated hereby may be terminated by written notice given in accordance with
Section 14.17 hereof, as follows:
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(a) by the mutual written agreement of Buyers and Sellers at any time prior to
the Closing;
(b) by either Buyers or Sellers if the requirements in the first sentence of
Section 2 hereof are not satisfied on or before May 31, 2006 or by Buyers if the
requirements in the second sentence of Section 2 hereof are not satisfied on or
before May 15, 2006;
(c) by Buyers if the requirements under Section 3 hereof are not satisfied on
or before May 25, 2006; provided, however, in no event may Buyers terminate this
Agreement under this subsection (c) as a result of Peak No. 2 exercising its
rights to acquire the Peak Properties under the Peak First Refusal Agreement;
(d) by Buyers if the requirements under Section 4 hereof are not satisfied;
(e) by either Sellers or Buyers if the Closing shall not have occurred at or
before 11:59 p.m. EDT on August 1, 2006, unless such date is extended by mutual
agreement of Sellers and Buyers;
(f) by Buyers if a Material Adverse Change occurs or is found to have occurred
after the Relevant Date;
(g) by Buyers or Sellers if the Board of Directors of Omega fails to approve
the transactions contemplated by this Agreement and in the timeframe set forth
in Section 7.7 hereof;
(h) by Buyers prior to 11:59 p.m. EDT on July 27, 2006 as a result of the
examinations and investigations of Tenants and the Properties described in
Section 8.1.3(a) hereof and conducted during the Inspection Period;
(i) by Buyers, by reason of the breach, inaccuracy or non-fulfillment of any
representation, warranty, covenant, obligation or agreement by Sellers under
this Agreement; or
(j) by Sellers, by reason of the breach, inaccuracy or non-fulfillment of any
representation, warranty, covenant, obligation or agreement by Buyers under this
Agreement.
10.2. Liability for Agreement Termination. If the parties terminate this
Agreement pursuant to subsections (a) through (h) of Section 10.1 hereof, then
neither party shall have any further obligations to the other under this
Agreement, except those specifically stated to survive the termination of this
Agreement. Notwithstanding the foregoing, in the event that this Agreement is
terminated under subsections (i) or (j) of Section 10.1 hereof, then the
terminating party, if successful in proving its right to terminate under the
applicable subsection, may recover its actual damages (but in no event
consequential (e.g., profits alleged to have been realized had the transactions
contemplated
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herein been consummated according to their terms), incidental, special,
punitive or exemplary damages) incurred as a result of such termination.
11. Closing Date Prorations.
11.1. Items to be Prorated at Closing. If the Closing Date occurs on any date
other than the first day of a calendar month, then all Rent as defined in and
with respect to the Peak Master Lease shall be prorated between the applicable
Sellers and OHI-CO as of the Closing Date, with appropriate credits or charges
made at the Closing in accordance with Section 5.2.4 hereof.
11.2. Errors. Any errors in calculations, apportionments or payments of Rent as
defined in and with respect to the Peak Master Lease shall be corrected,
adjusted and paid as soon as practicable after discovery, whether before or
after the Closing Date. This Section 11.2 shall survive the Closing and any
payments made by Sellers or OHI-CO under this Section 11 shall not be included
in calculating the limitations on damages under Sections 16.3 or 16.7 hereof, as
applicable.
12. Further Assurances. The parties shall do such other and further acts and
things, and to execute and deliver such instruments and documents, as either may
reasonably request from time to time, whether at or after the Closing, in
furtherance of the purposes of this Agreement and the other Transaction
Documents. The obligation under this Section 12 shall survive the Closing.
13. Brokers. Sellers and Buyers represent and warrant to each other that each
has dealt with no broker or finder in connection with this Agreement or any of
the transactions contemplated hereby, and knows of no broker or finder entitled
to or claiming a fee, commission, or other similar compensation in connection
with this Agreement or any of the transactions contemplated hereby. Sellers and
Buyers shall indemnify and hold harmless each other and any affiliates or
representatives of the other from and against liabilities, damages, and costs
(including reasonable attorneys' fees) arising out of any claim for commissions
or other compensation made by any broker or finder who shall claim to have dealt
with the indemnifying party in connection with this Agreement or any of the
transactions contemplated hereby. The provisions of this Section 13 shall
survive the Closing or any termination of this Agreement.
14. Miscellaneous.
14.1. Complete Agreement; No Other Representations, Warranties or Covenants.
This Agreement and the other Transaction Documents constitute the entire
agreement between the parties with respect to the transactions contemplated
hereunder and shall supersede all prior oral or written agreements and all
contemporaneous oral negotiations, commitments and understandings. Neither
Buyers nor Sellers shall be deemed to have made to the other any representations
or warranties that are not expressly set forth in this Agreement or the other
Transaction Documents.
14.2. No Reliance. Each party hereto expressly disclaims reliance upon any
facts, promises, undertakings or representations made by any other party, or its
agents, representatives or attorneys prior to the execution of this Agreement.
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14.3. Amendment. This Agreement may not be amended, waived, superseded,
renewed, extended or terminated orally, but only by an agreement in writing
signed by each party or, in the case of a waiver, by the party waiving
compliance.
14.4. Captions. The captions or headings contained in this Agreement are for
convenience and reference only and shall not affect the interpretation of this
Agreement.
14.5. Governing Law; Jurisdiction. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE LAWS OF THE STATE OF MARYLAND, WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICTS OF LAW PROVISION OR RULE THAT WOULD
CAUSE THE APPLICATION OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER
JURISDICTION. SELLERS AND BUYERS HEREBY ABSOLUTELY AND IRREVOCABLY CONSENT AND
SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF BALTIMORE COUNTY, MARYLAND
AND/OR, IF APPLICABLE, ANY FEDERAL COURT LOCATED IN SUCH COUNTY IN THE STATE OF
MARYLAND, IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT. IN SUCH ACTION OR PROCEEDING, SELLERS AND BUYERS
HEREBY ABSOLUTELY AND IRREVOCABLY WAIVE ANY OBJECTION TO VENUE.
14.6. Certain Definitions.
14.6.1. The words "hereof," "herein," and "hereunder," and words of similar
import, shall be construed to refer to this Agreement as a whole, and not to any
particular Section or provision, unless otherwise expressly provided.
14.6.2. The word "person" when used in this Agreement shall mean any natural
person, partnership, limited liability company, trust, corporation, or other
form of business or legal entity.
14.6.3. The word "mortgage" shall be deemed to mean either a mortgage or deed
of trust.
14.6.4. The word "including" shall be construed as being followed by the words
"but not limited to" or "without limitation."
14.7. Number/Gender. All words or terms used in this Agreement, regardless of
the number or gender in which they are used, shall be deemed to include any
other number and any other gender as the context may require.
14.8. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of Sellers and Buyers and their respective successors and
permitted assigns. Neither this Agreement, nor any rights, interests or
obligations hereunder, may be assigned or transferred, in whole or in part, by
operation of law or otherwise by Buyers or Sellers without the prior written
consent of the other party and any such assignment that is not consented to
shall be null and void.
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14.9. Counterparts. This Agreement may be executed in multiple counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall evidence a single agreement.
14.10. Exhibits and Schedules. All Exhibits and Schedules referred to in this
Agreement are incorporated into this Agreement by reference and shall be deemed
part of this Agreement for all purposes as if set forth at length in this
Agreement.
14.11. No Joint Venture, Partnership, Agency, Etc. This Agreement shall not be
construed as in any way establishing a partnership, joint venture, express or
implied agency, or employer-employee relationship between Sellers and Buyers.
14.12. No Third-Party Beneficiaries. This Agreement is for the sole benefit of
Sellers and Buyers and their respective successors and permitted assigns, and no
other person or entity shall be entitled to rely upon , enforce, or receive any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision hereof.
14.13. No Waiver. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right, power or privilege, nor any single
or partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
14.14. Remedies. Subject to the terms and conditions of Section 16 hereof, all
of the rights and remedies of either party under this Agreement and the other
Transaction Documents are intended to be distinct, separate, and cumulative, and
no such right or remedy herein or therein mentioned is intended to be in
exclusion of or a waiver of any other rights or remedies that either party may
otherwise have at law or in equity.
14.15. No Presumption. This Agreement is the result of extensive negotiations
between the parties, which were all represented by counsel. The parties
acknowledge and agree that in the event that any dispute arises regarding the
interpretation or construction of this Agreement, this Agreement shall not be
strictly construed against any party hereto by reason of the rule of
construction that a document is to be construed more strictly against the party
which drafted the agreement.
14.16. Invalidity. If any term, provision, covenant or restriction of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be held by a court of competent jurisdiction to be invalid, void or
unenforceable, Sellers and Buyers shall direct that such court interpret and
apply the remainder of this Agreement in the manner that it determines most
closely effectuates their intent in entering into this Agreement, and in doing
so particularly take into account the relative importance of the term,
provision, covenant or restriction being held invalid, void or unenforceable.
14.17. Notices. All notices, requests, demands, waivers and other
communications required or to be permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given: (a) if
delivered personally or sent by facsimile or e-mail, on the date
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received, (b) if delivered by overnight courier, on the date received, and
(c) if mailed, three (3) days after mailing with postage prepaid. Any such
notice shall be sent as follows:
If to Sellers: Litchfield Investment Company, L.L.C.
24 Bank Street
New Milford, Connecticut 06776
Attention: Bruce Weinstein
Telephone: 800-350-0725
E-mail: bruce@litchfieldcompanies.com
With a copy to: Owens, Clary & Aiken, L.L.P.
700 North Pearl Street, Suite 1600
Dallas, Texas 75201
Attention: Leighton Aiken, Esq.
Telephone: 214-698-2103
E-mail: laiken@oca-law.com
If to Buyers: c/o Omega Healthcare Investors, Inc.
9690 Deereco Road, Suite 100
Timonium, Maryland 21093
Attention: Daniel J. Booth
Telephone: 410-427-8824
E-mail: dbooth@omegahealthcare.com
With a copy to: LeBoeuf, Lamb, Greene & MacRae LLP
125 West 55th Street
New York, New York 10019
Attention: John R. Fallon, Jr., Esq.
Telephone: 212-424-8279
E-mail: jrfallon@llgm.com
or to such other person and/or address as shall have been specified by either
party in a notice given to the other; provided, that such notice shall be
effective only upon receipt.
14.18. No Recordation of this Agreement. Neither Buyers nor Sellers shall
record this Agreement or a memorandum of this Agreement.
14.19. Time Periods. If the time period by which any acts or payments required
hereunder must be performed or paid expires on a Saturday, Sunday or legal
holiday, then such time period shall be automatically extended to the close of
business on the next regularly scheduled business day.
14.20. Legal and Transaction Costs. Without regard to whether (a) the
transaction closes or (b) if the transaction does not close, the reason why it
does not close, the responsibility for transaction costs and expenses, as
between Sellers and Buyers shall be as follows: Sellers and Buyers shall pay for
their own legal counsel fees and expenses, Sellers shall pay the premium costs
for the title insurance to be issued to Buyers and the costs and expenses to
update the Surveys, and Buyers shall pay all other due diligence
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costs, including appraisals, UCC and litigation searches, zoning letters,
and environmental and property condition reports. All real property transfer
taxes, sales taxes and other taxes regarding transfer of the Properties shall be
paid by Sellers and, in accordance with Section 11.1 hereof, all Rent as defined
in and with respect to the Peak Master Lease shall be prorated between the
applicable Sellers and OHI-CO as of the Closing Date. The provisions of this
Section 14.20 shall survive any termination of this Agreement or the Closing.
14.21. Prevailing Party. In the event of a dispute between Sellers and Buyers
with respect to the interpretation, enforcement, construction or operation of
the terms and conditions of this Agreement and the other Transaction Documents,
the prevailing party in connection with the resolution of such dispute, whether
in a court proceeding, arbitration or otherwise, shall be entitled to collect
from the other party its reasonable attorneys' fees, costs and expenses,
including its costs, fees and expenses in connection with any appeals or
enforcement of an attorney's fee award.
14.22. Confidentiality. From the date of this Agreement, Sellers and Buyers
agree to keep the contents of this Agreement and any discussions between the
parties relating to this matter confidential and not to disclose the contents of
this Agreement or such discussions to any third-party (except Sellers' lender,
the Tenants, the attorneys, accountants or consultants hired by Sellers and
Buyers and except for required SEC or other governmental agency disclosures)
without the prior written consent of Sellers or Buyers, as applicable, except as
may be required to enforce a party's rights hereunder or as a party may be
legally required. Either Buyers' or Sellers' breach of the provisions of this
Section 14.22 shall entitle the other to seek judicial or equitable remedies,
including, but not limited to, injunctive relief.
14.23. Exclusivity. Sellers, on behalf of themselves and their respective
affiliates, agree not to enter into discussions or negotiations with, or furnish
any information to, any party regarding a transaction relating to the sale,
financing, managing or leasing of the Properties, unless this Agreement is
terminated.
15. Sellers' and Buyers' Indemnifications.
15.1. Sellers' Indemnification. Subject to the limitations on liability and
damages set forth in Section 16 hereof, Sellers shall jointly and severally
indemnify and hold harmless Buyers and their respective affiliates, officers,
members, directors, shareholders, employees, agents and assigns (collectively,
the "Buyers Indemnified Parties") from and against any and all damages, losses,
liabilities, obligations, claims, actions, suits, proceedings, investigations,
demands, assessments, judgments, penalties, sanctions, costs, expenses, and
disbursements (including, without limitation, reasonable attorneys' and
consultants' fees and expenses), whether or not subject to litigation
(collectively, "Claims") of any kind or character imposed upon, arising out of,
in connection with, incurred or in any way attributed to or relating to (a) the
breach or failure of any representation, warranty, covenant or obligation of
Sellers that is contained in this Agreement or any other Sellers Transaction
Documents, (b) the use, operation, ownership or management of the Properties
covered by the HQM Master Lease and the Nexion
23
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Master Lease accruing or arising prior to November 1, 2002, (c) except for any
matters described on Schedule 15.1(c) hereto, provided Sellers have Sellers'
Knowledge regarding the following having accrued or arose prior to November 1,
2002, (i) any of the Properties not being in compliance in all material respects
with any applicable Environmental Laws, (ii) Hazardous Substances being located
on or at any of the Properties, (iii) Environmental Claims being made against
any of the Properties, (iv) Remedial Action being taken in respect of any of the
Properties and (v) any written notice or written complaint from any Governmental
Entity or third-party alleging the failure of any of the Properties to comply
with any Environmental Laws, (d) except for any matters described on Schedule
15.1(c) hereto, provided Sellers have Sellers' Knowledge obtained solely by
virtue of written notice received by Sellers at Sellers' Office regarding the
following having accrued or arose after November 1, 2002, (i) any of the
Properties not being in compliance in all material respects with any applicable
Environmental Laws, (ii) Hazardous Substances being located on or at any of the
Properties, (iii) Environmental Claims being made against any of the Properties,
(iv) Remedial Action being taken in respect of any of the Properties and (v) any
written notice or written complaint from any Governmental Entity or third-party
alleging the failure of any of the Properties to comply with any Environmental
Laws, (e) any and all Claims asserted by The ARBA Group (including any
affiliates or owners of The ARBA Group), (f) any indemnification obligations of
the applicable Sellers as Landlord under Section 15.10 of the Peak Master Lease
accruing or arising prior to the date of Closing, and (g) Claims asserted by
Peak No. 2 with respect to the renewal provisions in Section 2.2 of the Peak
Master Lease; provided, however, that Sellers indemnification obligations with
respect to this subsection (g) shall be limited to payment of the first Two
Hundred Fifty Thousand Dollars ($250,000) of litigation costs and expenses
incurred by OHI-CO in the defense of any lawsuit filed against OHI-CO by Peak
No. 2 arising from any renewal obligations that OHI-CO may have as Landlord
under Section 2.2 of the Peak Master Lease; provided, further, that any
indemnification payments by Sellers under this subsection (g) shall be excluded
from Sellers' limitation for damages under Section 16.3 hereof.
15.2. Sellers' Indemnification Procedure. If the Buyers Indemnified Parties
assert that Sellers are subject to a Claim for indemnification pursuant to
Section 15.1, the Buyers Indemnified Parties shall promptly notify Sellers in
writing of the Claim and shall describe in such notice the Claim in sufficient
detail in order to permit Sellers to evaluate the nature and cause of the Claim.
Sellers covenant and agree to defend, through counsel retained by Sellers, which
retention shall be reasonably approved by Buyers, the Buyers Indemnified Parties
on account of any of said Claims and to pay any judgment against the Buyers
Indemnified Parties, or any other amount that is indicated in Section 15.1,
along with all reasonable costs and expenses relative to any Claims, including
attorneys' fees and expenses; provided, that the Buyers Indemnified Parties
shall, nevertheless, have the right, if they so elect and at their sole cost and
expense, to participate (with counsel of their choosing, which counsel must be
approved by Sellers, which approval may not be unreasonably withheld) in the
defense of any such Claims in which they may be a party without relieving
Sellers of the obligation to defend same. To the extent applicable, the Buyers
Indemnified Parties covenant not to settle or compromise any Claims without the
prior written consent of Sellers, which consent may not be unreasonably
withheld. Failure to comply with the preceding covenant shall be deemed a
complete waiver of any rights
24
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that the Buyers Indemnified Parties have or may have under Sections 15.1 and
15.2. Any required indemnification payment shall be made within fifteen (15)
days after liability for and the amount of the indemnification payment is
finally determined.
15.3. Buyers' Indemnification. Subject to the limitations on liability and
damages set forth in Section 16 hereof, Buyers shall jointly and severally
indemnify and hold harmless Sellers and their respective affiliates, officers,
members, directors, shareholders, employees, agents and assigns (collectively,
the "Sellers Indemnified Parties") from and against any and all Claims of any
kind or character imposed upon, arising out of, in connection with, incurred or
in any way attributed to or relating to (a) the breach or failure of any
representation, warranty, covenant or obligation of Buyers that is contained in
this Agreement or any other Buyers Transaction Documents, (b) any activities
conducted at or upon the Properties involving due diligence activities by or for
Buyers under this Agreement, except if such Claims are caused by the gross
negligence or willful misconduct of Tenants and (c) any indemnification
obligations of OHI-CO as Landlord under Section 15.10 of the Peak Master Lease
accruing or arising on or after the date of Closing.
15.4. Buyers' Indemnification Procedure. If the Sellers Indemnified Parties
assert that Buyers are subject to a Claim for indemnification pursuant to
Section 15.3, the Sellers Indemnified Parties shall promptly notify Buyers in
writing of the Claim and shall describe in such notice the Claim in sufficient
detail in order to permit Buyers to evaluate the nature and cause of the Claim.
Buyers covenant and agree to defend, through counsel retained by Buyers which
retention shall be reasonably approved by Sellers, the Sellers Indemnified
Parties on account of any of said Claims and to pay any judgment against the
Sellers Indemnified Parties, or any other amount that is indicated in
Section 15.3, along with all reasonable costs and expenses relative to any
Claims, including attorneys' fees and expenses; provided, that the Sellers
Indemnified Parties shall, nevertheless, have the right, if they so elect and at
their sole cost and expense, to participate (with counsel of their choosing,
which counsel must be approved by Buyers, which approval may not be unreasonably
withheld) in the defense of any such Claims in which they may be a party without
relieving Buyers of the obligation to defend same. To the extent applicable, the
Sellers Indemnified Parties covenant not to settle or compromise any Claims
without the prior written consent of Buyers, which consent may not be
unreasonably withheld. Failure to comply with the preceding covenant shall be
deemed a complete waiver of any rights that the Sellers Indemnified Parties have
or may have under Sections 15.3 and 15.4. Any required indemnification payment
shall be made within fifteen (15) days after liability for and the amount of the
indemnification payment is finally determined.
16. Limitations on Liability and Payment Obligations.
16.1. Sellers' Limitation on Liability. Under no circumstances whatsoever shall
Sellers be liable for any loss of profits, loss of revenue, loss of business or
other incidental, consequential, indirect, special, exemplary or punitive
damages of any kind, arising out of or in connection with any and all Claims
under Section 15.1 hereof, any and all other liabilities under this Agreement
and the other Transaction Documents, and/or any of the transactions contemplated
by this Agreement and the other Transaction Documents.
25
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16.2. No Personal Liability of Sellers' Members. All representations,
warranties, covenants, duties, obligations and liabilities of Sellers shall be
the sole responsibility of Sellers and shall be recourse solely to Sellers and
their assets; provided, that Buyers' sole recourse is the Letter of Credit with
respect to those Claims under Section 15.1 hereof and those breaches under this
Agreement and the other Transaction Documents for which Sellers' liability for
damages is limited under Section 16.3 hereof. Under no circumstances whatsoever
shall any member, manager, officer, director, shareholder, employee or
representative of Sellers be deemed personally liable, in contract, tort or
otherwise, for any such representations, warranties, covenants, duties,
obligations and liabilities arising out of or under this Agreement or the other
Transaction Documents.
16.3. Limitation on Sellers' Liability for Damages. EXCEPT FOR ANY BREACH OF
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 6.1.1, 6.1.2, 6.1.3 AND
6.1.7 HEREOF AND CLAIMS UNDER SECTIONS 15.1(b), 15.1(c), 15.1(d) AND 15.1(e)
HEREOF, SELLERS' MAXIMUM AGGREGATE LIABILITY FOR DAMAGES WITH RESPECT TO CLAIMS
UNDER SECTION 15.1 HEREOF AND ANY BREACH OF A REPRESENTATION, WARRANTY,
COVENANT, OBLIGATION, TERM OR CONDITION UNDER THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS IS EXPRESSLY LIMITED TO THE SUM OF THREE MILLION DOLLARS
($3,000,000) IN THE EVENT THE CLOSING TAKES PLACE. EXCEPT FOR ANY BREACH OF THE
RERESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 6.1.1, 6.1.2, 6.1.3 AND
6.1.7 HEREOF AND CLAIMS UNDER SECTIONS 15.1(b), 15.1(c), 15.1(d) AND 15.1(e)
HEREOF, IT IS HEREBY AGREED TO BY SELLERS AND BUYERS THAT THIS SECTION 16.3 IS,
AND SHALL SERVE AS, A LIMITATION ON SELLERS' LIABILITY FOR DAMAGES IN RESPECT OF
CLAIMS UNDER SECTION 15.1 HEREOF AND ANY OTHER BREACHES DESCRIBED IN THIS
SECTION 16.3.
16.3.1. Buyers' Recourse Against Letter of Credit. As set forth
in this Section 16.3.1 and in the L/C Agreement, it is hereby agreed to by the
parties that the Letter of Credit shall be the sole recourse for any obligation
or liability owed by Sellers (or any one of them) to Buyers (or any one of them)
with respect to those Claims under Section 15.1 hereof and those breaches of any
representation, warranty, covenant, obligation, term or condition under this
Agreement and the other Transaction Documents for which Sellers' liability for
damages is limited under Section 16.3 hereof, and no other assets of Sellers
(and Sellers' members) can be utilized or executed upon to satisfy or pay any
liability or obligation owed by Sellers to Buyers with respect to those Claims
under Section 15.1 hereof and those breaches under this Agreement and the other
Transaction Documents for which Sellers' liability for damages is limited under
Section 16.3 hereof.
16.4. Intentionally Deleted.
16.5. Buyers' Limitation on Liability. Under no circumstances whatsoever shall
Buyers be liable for any loss of profits, loss of revenue, loss of business, or
other incidental, consequential, indirect, special, exemplary or punitive
damages of any kind, arising out of or in connection with all Claims under
Section 15.3 hereof, all other
26
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liabilities under this Agreement and the other Transaction Documents, and/or
any of the transactions contemplated by this Agreement and the other Transaction
Documents.
16.6. No Personal Liability of Buyers' Officers. All representations,
warranties, covenants, duties, obligations and liabilities of Buyers shall be
the sole responsibility of Buyers and shall be recourse solely to Buyers and
their assets. Under no circumstances whatsoever shall any member, manager,
officer, director, shareholder, employee or representative of Buyers be deemed
personally liable, in contract, tort or otherwise, for any such representations,
warranties, covenants, duties, obligations and liabilities arising out of or
under this Agreement or the other Transaction Documents.
16.7. Limitation on Buyers' Liability for Damages. EXCEPT AS OTHERWISE PROVIDED
IN SECTION 16.8 HEREOF, BUYERS' MAXIMUM AGGREGATE LIABILITY FOR DAMAGES WITH
RESPECT TO CLAIMS UNDER SECTION 15.3 HEREOF AND ANY BREACH OF A REPRESENTATION,
WARRANTY, COVENANT, OBLIGATION, TERM OR CONDITION UNDER THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS IS EXPRESSLY LIMITED TO THE SUM OF THREE MILLION
DOLLARS ($3,000,000) IN THE EVENT THE CLOSING TAKES PLACE. EXCEPT AS OTHERWISE
PROVIDED IN SECTION 16.8 HEREOF, IT IS HEREBY AGREED TO BY SELLERS AND BUYERS
THAT THIS SECTION 16.7 IS, AND SHALL SERVE AS, A LIMITATION ON BUYERS' LIABILITY
FOR DAMAGES IN RESPECT OF CLAIMS UNDER SECTION 15.3 HEREOF AND ANY OTHER
BREACHES DESCRIBED IN THIS SECTION 16.7.
16.8. Exceptions to Limitation on Buyers' Liability for Damages. BUYERS'
MAXIMUM AGGREGATE LIABILITY FOR DAMAGES WITH RESPECT TO ANY BREACH OF THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 6.2.1, 6.2.2, 6.2.3 AND
6.2.4 HEREOF IS EXPRESSLY LIMITED TO THE SUM OF THE PURCHASE PRICE; PROVIDED,
HOWEVER, THAT IN ANY SUCH ACTIONS INITIATED BY SELLERS AGAINST BUYERS, SELLERS
WILL NOT OBJECT TO BUYERS' INSTITUTION OF A THIRD-PARTY ACTION.
17. Survival of Indemnifications, Obligations, Representations and Warranties.
Except as otherwise provided in Section 6.1.4 hereof, the indemnifications,
obligations, representations and warranties contained in this Agreement and the
other Transaction Documents shall survive the Closing and remain operative and
in full force for a period of two (2) years from the date of Closing
(the "Survival Termination Date"); provided, however, that any Claim, demand,
lawsuit or other action must be made or asserted in writing to Sellers or
Buyers, as the case may be, prior to the Survival Termination Date for such
indemnifications and other liabilities and obligations of Sellers and Buyers, as
the case may be, to survive the Survival Termination Date. Then, in such event,
such Claim, demand, lawsuit or other action shall survive the Survival
Termination Date until finally resolved.
SIGNATURE PAGE FOLLOWS
27
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IN WITNESS WHEREOF, the parties have duly executed and delivered this Contract
of Sale as of the date first above written.
SELLERS:
LARAMIE ASSOCIATES, LLC
CASPER ASSOCIATES, LLC
NORTH 12TH STREET ASSOCIATES, LLC
NORTH UNION BOULEVARD ASSOCIATES, LLC
JONES AVENUE ASSOCIATES, LLC
LITCHFIELD INVESTMENT COMPANY, L.L.C.
USTICK ROAD ASSOCIATES, LLC
WEST 24TH STREET ASSOCIATES, LLC
NORTH THIRD STREET ASSOCIATES, LLC
MIDWESTERN PARKWAY ASSOCIATES, LLC
NORTH FRANCIS STREET ASSOCIATES, LLC
WEST NASH STREET ASSOCIATES, LLC
By: /s/ Bruce Weinstein
Name: Bruce Weinstein
Title: Vice President and Member
BUYERS:
OHI ASSET (LA), LLC
NRS VENTURES, L.L.C.
OHI ASSET (CO), LLC
By:
Omega Healthcare Investors, Inc., as the Sole Member of each of the companies
By: /s/ Daniel J. Booth
Name: Daniel J. Booth
Title: Chief Operating Officer
28
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SCHEDULES AND EXHIBITS
Exhibit A
Sellers
Exhibit B
Buyers
Exhibit C
Descriptions of Facilities
Exhibit D
Legal Descriptions of Land
Schedule 6.1.2
Power and Authority
Schedule 6.1.3
No Conflict
Schedule 6.1.6
Real Estate
Schedule 6.1.7
Litigation
Schedule 7.1
Permitted Exceptions
Schedule 15.1(c)
Environmental Matters
EXHIBIT A
SELLERS
SELLERS
STATE OF ORGANIZATION
Laramie Associates, LLC
Colorado
Casper Associates, LLC
Colorado
North 12th Street Associates, LLC
Colorado
North Union Boulevard Associates, LLC
Colorado
Jones Avenue Associates, LLC
Colorado
Litchfield Investment Company, L.L.C.
Connecticut
Ustick Road Associates, LLC
Idaho
West 24th Street Associates, LLC
Texas
North Third Street Associates, LLC
Texas
Midwestern Parkway Associates, LLC
Texas
North Francis Street Associates, LLC
Texas
West Nash Street Associates, LLC
Texas
--------------------------------------------------------------------------------
EXHIBIT B
BUYERS
BUYERS
STATE OF ORGANIZATION
OHI Asset (LA), LLC
Delaware
NRS Ventures, L.L.C.
Kentucky
OHI Asset (CO), LLC
Delaware
--------------------------------------------------------------------------------
EXHIBIT C
DESCRIPTIONS OF PROPERTIES/FACILITIES
PROPERTIES/
FACILITIES
SELLERS
TENANTS
BUYERS
PROPERTY/FACILITY ADDRESSES
PURCHASE PRICE
Cheyenne Mountain Care Center
Laramie Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
835 Tenderfoot Hill Road
Colorado Springs, Colorado 80906
719-576- 8380
719-576-5691 (fax)
$9,622,000
Cheyenne Place Retirement Center
Casper Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
945 Tenderfoot Hill Road
Colorado Springs, Colorado 80906
719-576-2122
719-576-1352 (fax)
$5,880,000
Mesa Manor Care Center
North 12th Street Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
2901 North 12th Street
Grand Junction, Colorado 81506
970-243-7211
970-245-5104 (fax)
$5,239,000
Pikes Peak Care Center
North Union Boulevard Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
2719 North Union Boulevard
Colorado Springs, Colorado 80906
719-636-1676
719-636-9168 (fax)
$11,225,000
Pueblo Extended Care Center
Jones Avenue Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
2611 Jones Avenue
Pueblo, Colorado 81004
719-564-1735
719-564-1501 (fax)
$9,034,000
Fort Myers Care & Rehabilitation Center
Litchfield Investment Company, L.L.C.
HQM of Ft. Myers, LLC
NRS Ventures, L.L.C.
13755 Gulf Club Parkway
Fort Myers, Florida 33919
941-482-2848
941-482-1370 (fax)
$7,021,000
Heritage Park Care & Rehabilitation Center
Litchfield Investment Company, L.L.C.
HQM of Bradenton, LLC
NRS Ventures, L.L.C.
2302 59th Street West
Bradenton, Florida 34209
941-792-8480
941-794-8905 (fax)
$7,874,000
HQM of Orange Park
Litchfield Investment Company, L.L.C.
HQM of Orange Park, LLC
NRS Ventures, L.L.C.
2029 Professional Center Drive
Orange Park, Florida 32073
904-272-6194
904-272-2085 (fax)
$6,889,000
HQM of Palm Bay
Litchfield Investment Company, L.L.C.
HQM of Palm Bay, LLC
NRS Ventures, L.L.C.
1515 Port Malabar Boulevard
Palm Bay, Florida 32905
407-723-1235
407-951-2630 (fax)
$7,874,000
HQM of Port Charlotte
Litchfield Investment Company, L.L.C.
HQM of Port Charlotte, LLC
NRS Ventures, L.L.C.
4033 Beaver Lane
Port Charlotte, Florida 33952
941-625-3200
941-624-2358 (fax)
$10,760,000
Kenilworth Care & Rehabilitation Center
Litchfield Investment Company, L.L.C.
HQM of Sebring, LLC
NRS Ventures, L.L.C.
3011 Kenilworth Boulevard
Sebring, Florida 33870
863-382-2153
863-382-2039 (fax)
$6,824,000
Winter Park Care & Rehabilitation Center
Litchfield Investment Company, L.L.C.
HQM of Winter Park, LLC
NRS Ventures, L.L.C.
2970 Scarlet Road
Winter Park, Florida 32792
407-671-8030
407-671-3746 (fax)
$6,758,000
Capitol Care Center
Ustick Road Associates, LLC
Peak Medical Colorado No. 2, Inc.
OHI Asset (CO), LLC
8211 Ustick Road
Boise, Idaho 83704
208-375-3700
208-322-0390 (fax)
$5,000,000
Gonzales Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Gonzales, Inc.
OHI Asset (LA), LLC
905 W. Cornerview Road
Gonzales, Louisiana 70737
504-647-7841
504-644-8409 (fax)
$3,720,000
Kaplan Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Kaplan, Inc.
OHI Asset (LA), LLC
1300 West 8th Street
Kaplan, Louisiana 70548
318-643-2300
318-643-1579 (fax)
$3,600,000
Lafayette Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Lafayette, Inc.
OHI Asset (LA), LLC
325 Bacque Crescent Drive
Lafayette, Louisiana 70503
318-232-0299
318-237-8162 (fax)
$1,800,000
Many Healthcare North
Litchfield Investment Company, L.L.C.
Nexion Health at Many North, Inc.
OHI Asset (LA), LLC
120 Natchitoches Highway 6 East
Many, Louisiana 71449
318-256-9233
318-256-0739 (fax)
$3,840,000
Many Healthcare South
Litchfield Investment Company, L.L.C.
Nexion Health at Many South, Inc.
OHI Asset (LA), LLC
255 Middle Creek Road
Many, Louisiana 71449
318-256-6281
318-256-0741 (fax)
$1,800,000
Marrero Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Marrero, Inc.
OHI Asset (LA), LLC
5301 August Lane
Marrero, Louisiana 70072
504-341-3658
504-347-3754 (fax)
$4,020,000
Meadowview Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Minden, Inc.
OHI Asset (LA), LLC
400 Meadowview Drive
Minden, Louisiana 71055
318-377-1011
318-377-9814 (fax)
$6,900,000
New Iberia Manor North
Litchfield Investment Company, L.L.C.
Nexion Health at New Iberia North, Inc.
OHI Asset (LA), LLC
1803 Jane Street
New Iberia, Louisiana 70560
318-365-2466
318-365-2460 (fax)
$3,630,000
New Iberia Manor South
Litchfield Investment Company, L.L.C.
Nexion Health at New Iberia South, Inc.
OHI Asset (LA), LLC
600 Bayard Street
New Iberia, Louisiana 70562
318-365-3441
318-365-0879 (fax)
$2,400,000
Claiborne Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Claiborne, Inc.
OHI Asset (LA), LLC
1536 Claiborne Avenue
Shreveport, Louisiana 71101
318-631-3426
318-636-4936 (fax)
$2,580,000
Thibodaux Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Thibodaux, Inc.
OHI Asset (LA), LLC
1300 LaFourche Drive
Thibodaux, Louisiana 70301
504-446-1332
504-446-3974 (fax)
$1,740,000
Vivian Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Vivian, Inc.
OHI Asset (LA), LLC
912 S. Pecan Street
Vivian, Louisiana 71082
318-375-2203
318-375-2866 (fax)
$2,400,000
Pierremont Healthcare Center
Litchfield Investment Company, L.L.C.
Nexion Health at Pierremont, Inc.
OHI Asset (LA), LLC
725 Mitchell Lane
Shreveport, Louisiana 71106
318-868-2789
318-868-6375 (fax)
$5,880,000
Plainview Healthcare Center
West 24th Street Associates, LLC
Nexion Health at Plainview, Inc.
OHI Asset (LA), LLC
2510 West 24th Street
Plainview, Texas 79072-1884
806-296-5584
806-296-9757 (fax)
$5,293,000
Iowa Park Healthcare Center
North Third Street Associates, LLC
Nexion Health at Iowa Park, Inc.
OHI Asset (LA), LLC
1109 North 3rd Street
Iowa Park, Texas 76367
817-592-4139
817-592-4799 (fax)
$3,739,000
Midwestern Healthcare Center
Midwestern Parkway Associates, LLC
Nexion Health at Wichita Falls, Inc.
OHI Asset (LA), LLC
601 Midwestern Parkway
Wichita Falls, Texas 76302-2499
817-723-0885
817-723-0634 (fax)
$5,828,000
Terrell Manor
North Francis Street Associates, LLC
Nexion Health at Terrell Manor, Inc.
OHI Asset (LA), LLC
1800 North Frances Street
Terrell, Texas 75160
972-563-2652
972-563-0828 (fax)
$4,565,000
Terrell Healthcare Center
West Nash Street Associates, LLC
Nexion Health at Terrell, Inc.
OHI Asset (LA), LLC
204 West Nash Street
Terrell, Texas 75160-2607
972-563-7668
972-563-2769 (fax)
$6,265,000
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EXHIBIT D
LEGAL DESCRIPTIONS OF LAND
SEE ATTACHED
--------------------------------------------------------------------------------
SCHEDULE 6.1.2
POWER AND AUTHORITY
SEE ATTACHED
--------------------------------------------------------------------------------
SCHEDULE 6.1.3
NO CONFLICT
SEE ATTACHED
--------------------------------------------------------------------------------
SCHEDULE 6.1.6
REAL ESTATE
SEE ATTACHED
--------------------------------------------------------------------------------
SCHEDULE 6.1.7
LITIGATION
SEE ATTACHED
--------------------------------------------------------------------------------
SCHEDULE 7.1
PERMITTED EXCEPTIONS
Zoning, use, and building laws, codes, regulations, and ordinances, and all
other similar legal requirements, applicable to the Properties.
The state of facts the final updated Surveys and personal inspections of the
Properties would show and are not objected to by Buyers under Section 7.4
hereof.
Real estate taxes, water charges, and sewer rents that become due and payable
after the date of the Closing (which shall be subject to the apportionment
provided for in this Agreement).
Unpaid installments of assessments that become due and payable after the date of
the Closing.
All covenants, conditions, restrictions, and easements of record applicable to
the Properties and not objected to by Buyers under Section 7.4 hereof.
Rights of utility companies to lay, maintain, install, and repair pipes, poles,
conduits, cable boxes and similar and related utility facilities and equipment
on, over, and under the Properties.
Rights, if any, of third-parties with respect to any portion of the Properties
lying within the boundaries of a public or private road (subject to amendment or
deletion upon approval of the final updated Surveys).
All matters described in the Commitments and the updated Surveys that are not
objected to by Buyers in accordance with Section 7.4 hereof or are waived or are
deemed waived by Buyers as a result of the purchase of the Properties at the
Closing.
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SCHEDULE 15.1(C)
ENVIRONMENTAL MATTERS
SEE ATTACHED
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|
Exhibit 10.1
WARNER MUSIC GROUP CORP.
DIRECTOR RESTRICTED STOCK AWARD AGREEMENT
THIS DIRECTOR RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”), is made,
effective as of the 2nd day of March, 2006 (hereinafter the “Date of Grant”),
between Warner Music Group Corp., a Delaware corporation, (the “Company”), and
Michele J. Hooper (the “Director”).
R E C I T A L S:
WHEREAS, the Company has adopted the Warner Music Group Corp. 2005 Omnibus Award
Plan (the “Plan”), pursuant to which awards of restricted shares of the
Company’s Common Stock may be granted to persons including members of the Board
of Directors of the Company (the “Board”); and
WHEREAS, the Board has determined that it is in the best interests of the
Company and its stockholders to grant the restricted stock award provided for
herein (the “Restricted Stock Award”) to the Director in connection with the
Director’s services to the Company, such grant to be subject to the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:
1. Incorporation by Reference, Etc. The provisions of the Plan are hereby
incorporated herein by reference. Except as otherwise expressly set forth
herein, this Agreement shall be construed in accordance with the provisions of
the Plan and any capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Plan. The Board shall have final authority
to interpret and construe the Plan and this Agreement and to make any and all
determinations under them, and its decision shall be binding and conclusive upon
the Director and his legal representative in respect of any questions arising
under the Plan or this Agreement.
2. Grant of Restricted Stock Award. The Company hereby grants on the Date of
Grant to the Director a Restricted Stock Award consisting of 3,842 shares of
Common Stock (hereinafter called the “Restricted Shares”), on the terms and
conditions set forth in this Agreement and as otherwise provided in the Plan.
The Restricted Shares shall vest in accordance with Section 3(a) hereof.
3. Terms and Conditions.
(a) Vesting. Except as otherwise provided in the Plan and this Agreement, and
contingent upon the Director’s continued membership on the Board, one hundred
percent (100%) of the Restricted Shares shall vest and become non-forfeitable on
the first anniversary of the Award Date (such anniversary, the “Vesting Date”).
The “Award Date” shall be February 23, 2006.
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(b) Taxes. The Director shall pay to the Company promptly upon request, and in
any event at the time the Director recognizes taxable income in respect of the
Restricted Stock Award, an amount equal to the taxes, if any, the Company
determines it is required to withhold under applicable tax laws with respect to
the Restricted Shares. Such payment shall be made in the form of cash.
(c) Certificates. Certificates evidencing the Restricted Shares shall be issued
by the Company and shall be registered in the Director’s name on the stock
transfer books of the Company promptly after the date hereof, but shall remain
in the physical custody of the Company or its designee at all times prior to, in
the case of any particular Restricted Shares, the applicable Vesting Date. As a
condition to the receipt of this Restricted Stock Award, the Director shall
deliver to the Company a stock power, duly endorsed in blank, relating to the
Restricted Shares.
(d) Effect of Termination of Services.
(i) Except as provided in subsection (ii) of this Section 3(d), unvested
Restricted Shares shall be forfeited without consideration by the Director at
any time prior to the Vesting Date upon the Director’s cessation of Board
membership.
(ii) Upon the Director’s cessation of Board membership due to death or
Disability, any remaining unvested Restricted Shares shall vest on the date of
such termination.
(e) Rights as a Stockholder; Dividends. The Director shall be the record owner
of the Restricted Shares unless and until such shares are forfeited pursuant to
Section 3(d) hereof or sold or otherwise disposed of, and as record owner shall
be entitled to all rights of a common stockholder of the Company, including,
without limitation, voting rights, if any, with respect to the Restricted
Shares; provided that any cash or in-kind dividends paid with respect to
unvested Restricted Shares shall be withheld by the Company and shall be paid to
the Director, without interest, only when, and if, such Restricted Shares shall
become vested. As soon as practicable following the vesting of any Restricted
Shares, certificates for such vested Restricted Shares and any cash dividends or
in-kind dividends credited to the Director’s account with respect to such
Restricted Shares shall be delivered to the Director or the Director’s
beneficiary along with the stock power relating thereto.
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(f) Restrictive Legend. All certificates representing Restricted Shares shall
have affixed thereto a legend in substantially the following form, in addition
to any other legends that may be required under federal or state securities
laws:
TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED
PURSUANT TO THE TERMS OF THE WARNER MUSIC GROUP CORP. 2005 OMNIBUS AWARD PLAN
AND A RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF MARCH 2, 2006, BETWEEN
WARNER MUSIC GROUP CORP. AND MICHELE J. HOOPER. A COPY OF SUCH PLAN AND
AGREEMENT IS ON FILE AT THE OFFICES OF WARNER MUSIC GROUP CORP.
(g) Transferability. The Restricted Shares may not at any time prior to the
Vesting Date (as to any particular Restricted Share) be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the Director
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company;
provided, that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
4. Miscellaneous.
(a) Notices. Any notice, consent, request or other communication made or given
in accordance with this Agreement shall be in writing and shall be deemed to
have been duly given when actually received or, if mailed, three days after
mailing by registered or certified mail, return receipt requested, or one
business day after mailing by a nationally recognized express mail delivery
service with instructions for next-day delivery, to those persons listed below
at their following respective addresses or at such other address or person’s
attention as each may specify by notice to the others:
To the Company:
Warner Music Group Corp.
75 Rockefeller Plaza
New York, New York 10019
Attention: General Counsel
To the Director:
The most recent address for the Director in the records of the Company. The
Director hereby agrees to promptly provide the Company with written notice of
any change in the Director’s address for so long as this Agreement remains in
effect.
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(b) Bound by Plan. By signing this Agreement, the Director acknowledges that he
has received a copy of the Plan and has had an opportunity to review the Plan
and agrees to be bound by all the terms and provisions of the Plan.
(c) Beneficiary. The Director may file with the Board a written designation of a
beneficiary on such form as may be prescribed by the Board and may, from time to
time, amend or revoke such designation. If no designated beneficiary survives
the Director, the executor or administrator of the Director’s estate shall be
deemed to be the Director’s beneficiary.
(d) Successors. The terms of this Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns, and of the Director and
the beneficiaries, executors, administrators, heirs and successors of the
Director.
(e) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties hereto with respect to the subject matter contained
herein and supersedes all prior communications, representations and negotiations
in respect thereto. No change, modification or waiver of any provision of this
Agreement shall be valid unless the same be in writing and signed by the parties
hereto.
(f) GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE. ANY ACTION TO
ENFORCE THIS AGREEMENT MUST BE BROUGHT IN A COURT SITUATED IN, AND THE PARTIES
HEREBY CONSENT TO THE JURISDICTION OF, COURTS SITUATED IN NEW YORK COUNTY, NEW
YORK. EACH PARTY HEREBY WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.
(g) JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A
JURY TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT IS LITIGATED OR HEARD IN ANY COURT.
(h) Headings. The headings of the Sections hereof are provided for convenience
only and are not to serve as a basis for interpretation or construction, and
shall not constitute a part, of this Agreement.
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(i) Signature in Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. The parties hereto confirm
that any facsimile copy of another party’s executed counterpart of this
Agreement (or its signature page thereof) will be deemed to be an executed
original thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
Warner Music Group Corp.
/s/ David H. Johnson
By: David H. Johnson Title: EVP & General Counsel
/s/ Michele Hooper
Michele J. Hooper |
GUARANTY
The undersigned, for value received, unconditionally and absolutely guarantee(s)
to Comerica Bank ("Bank") and to the Bank's successors and assigns, payment when
due, whether by stated maturity, demand, acceleration or otherwise, of all
existing and future indebtedness to the Bank of Akeena Solar, Inc. ("Borrower")
or any successor in interest, including without limit any debtor-in-possession
or trustee in bankruptcy which succeeds to the interest of this party or person
(jointly and severally the "Borrower"), however this Indebtedness has been or
may be incurred or evidenced, whether absolute or contingent direct or indirect,
voluntary or involuntary, liquidated or unliquidated, joint or several, and
whether or not known to the undersigned at the time of this Guaranty or at the
time any future indebtedness is incurred (the "Indebtedness").
The indebtedness guaranteed includes without limit: (a) any and all direct
indebtedness of the Borrower to the Bank, including indebtedness evidenced by
any and all promissory notes; (b) any and all obligations or liabilities of the
Borrower to the Bank arising under any guaranty where the Borrower has
guaranteed the payment of indebtedness owing to the Bank from a third party; (c)
any and all obligations or liabilities of the Borrower to the Bank arising from
applications or agreements for the issuance of letters of credit; (d) any and
all obligations or liabilities of the Borrower to the Bank arising out of any
other agreement by the Borrower including without limit any agreement to
indemnity the Bank for environmental liability or to clean up hazardous waste;
(e) any and all indebtedness, obligations or liabilities for which the Borrower
would otherwise be liable to the Bank were it not for the invalidity,
irregularly or unenforceability of them by reason of any bankruptcy, insolvency
or other law or order of any kind, or for any other reason, including without
limit liability for interest and attorneys' fees on, or in connection with, any
of the indebtedness from and after the filing by or against the Borrower of a
bankruptcy petition whether an involuntary or voluntary bankruptcy case,
including, without limitation, all attorneys' fees and costs incurred in
connection with motions for relief from stay, cash collateral motions,
nondischargeability motions, preference liability motions, fraudulent conveyance
liability motions, fraudulent transfer liability motions and all other motions
brought by Borrower, Guarantor, Bank or third parties in any way relating to
Bank's rights with respect to such Borrower, Guarantor, or third party and/or
affecting any collateral securing any obligation owed to Bank by Borrower,
Guarantor, or any third party, probate proceedings, on appeal or otherwise; (f)
any and all amendments, modifications, renewals and/or extensions or any of the
above, including without limit amendments, modifications, renewals and/or
extensions which are evidenced by new or additional instruments, documents or
agreements; and (g) all costs of collecting indebtedness, including without
limit reasonable attorneys' fees and costs.
The undersigned waive(s) notice of acceptance of this Guaranty and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default, notice of intent to accelerate or demand payment of any indebtedness,
and diligence in collecting any indebtedness, and agree(s) that the Bank may
modify the terms of any indebtedness, compromise, extend, increase, accelerate,
renew or forbear to enforce payment of any or all indebtedness, or permit the
Borrower to incur additional indebtedness, all without notice to the undersigned
and without affecting in any manner the unconditional obligation of the
undersigned under this Guaranty. The undersigned further waive(s) any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledge(s) and agree(s) that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by the Bank of any
remedy the Bank may have against the Borrower or any other person or any
security. No invalidity, irregularity or unenforceability of any part or all of
the indebtedness or any documents evidencing the same, by reason of any
bankruptcy, insolvency or other law or order of any kind or for any other
reason, and no defense or setoff available at any time to the Borrower, shall
impair, affect or be a defense or setoff to the obligations of the undersigned
under this Guaranty.
The undersigned deliver(s) this Guaranty based solely on the undersigned's
independent investigation of the financial condition of the Borrower and is
(are) not relying on any information furnished by the Bank. The undersigned
assume(s) full responsibility for obtaining any further information concerning
the Borrower's financial condition, the status of the indebtedness or any other
matter which the undersigned may deem necessary or appropriate from time to
time. The undersigned waive(s) any duty on the part of the Bank, and agree(s)
that it is not relying upon nor expecting the Bank to disclose to the
undersigned any fact now or later known by the Bank, whether relating to the
operations or condition of the Borrower, the existence, liabilities or financial
condition of any co-guarantor of the indebtedness, the occurrence of any default
with respect to the indebtedness, or otherwise, notwithstanding any effect these
facts may have upon the undersigned's risk under this Guaranty or the
undersigned's rights against the Borrower. The undersigned knowingly accept(s)
the full range of risk encompassed in this Guaranty, which risk includes without
limit the possibility that the Borrower may incur indebtedness to the Bank after
the financial condition of the Borrower, or its ability to pay its debts as they
mature, has deteriorated.
The undersigned represent(s) and warrant(s) that: (a) the Bank has made no
representation to the undersigned as to the creditworthiness of the Borrower;
and (b) the undersigned has (have) established adequate means of obtaining from
the Borrower on a continuing basis financial and other information pertaining to
the Borrower's financial condition. The undersigned agree(s) to keep adequately
informed of any facts, events or circumstances which might in any way affect the
risks of the undersigned under this Guaranty.
The undersigned grant(s) to the Bank a security interest in and the right of
setoff as to any and all property of the undersigned now or later in the
possession of the Bank. The undersigned subordinate(s) any claim of any nature
that the undersigned now or later has (have) against the Borrower to and in
favor of all indebtedness and agree(s) not to accept payment or satisfaction of
any claim that the undersigned now or later may have against the Borrower
without the prior written consent of the Bank. Should any payment, distribution,
security, or proceeds, be received by the undersigned upon or with respect to
any claim that the undersigned now or may later have against the Borrower, the
undersigned shall immediately deliver the same to the Bank in the form received
(except for endorsement or assignment by the undersigned where required by the
Bank) for application on the indebtedness, whether matured or unmatured, and
until delivered the same shall be held in trust by the undersigned as the
property of the Bank. The undersigned further assign(s) to the Bank as
collateral for the obligations of the undersigned under this Guaranty all claims
of any nature that the undersigned now or later has (have) against the Borrower
(other than any claim under a deed of trust or mortgage covering real property)
with full right on the part of the Bank, in its own name or in the name of the
undersigned, to collect and enforce these claims.
The undersigned agree(s) that no security now or later held by the Bank for the
payment of any indebtedness, whether from the Borrower, any guarantor, or
otherwise, and whether in the nature of a security interest, pledge, lien,
assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise,
shall affect in any manner the unconditional obligation of the undersigned under
this Guaranty, and the Bank, in its sole discretion, without notice to the
undersigned, may release, exchange, enforce and otherwise deal with any security
without affecting in any manner the unconditional obligation of the undersigned
under this Guaranty. The undersigned acknowledges(s) and agree(s) that the Bank
has no obligation to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personality, to secure payment of the indebtedness,
and the undersigned is (are) not relying upon any asset(s) in which the Bank has
or may have a lien or security interest for payment of the indebtedness.
The undersigned acknowledge(s) that the effectiveness of this Guaranty is not
conditioned on any or all of the indebtedness being guaranteed by anyone else.
Until the indebtedness is irrevocably paid in full, the undersigned waive(s) any
and all rights to be subrogated to the position of the Bank or to have the
benefit of any lien, security interest or other guaranty now or later held by
the Bank for the indebtedness or to enforce any remedy which the Bank now or
later has against the Borrower or any other person. Until the indebtedness is
irrevocably paid in full, the undersigned shall have no right of reimbursement,
indemnity, contribution or other right of recourse to or with respect to the
Borrower or any other person. The undersigned agree(s) to indemnity and hold
harmless the Bank from and against any and all claims, actions, damages, costs
and expenses, including without limit reasonable attorneys' fees, incurred by
the Bank in connection with the
1
undersigned's exercise of any right of subrogation, contribution,
indemnification or recourse with respect to this Guaranty. The Bank has no duty
to enforce or protect any rights which the undersigned may have against the
Borrower or any other person and the undersigned assume(s) full responsibility
for enforcing and protecting these rights.
Notwithstanding any provision of the preceding paragraph or anything else in
this Guaranty to the contrary, if any of the undersigned is or becomes "an
"insider" or "affiliate" (as defined in Section 101 of the Federal Bankruptcy
Code, as it may be amended) with respect to the Borrower, then that undersigned
irrevocably and absolutely waives any and all rights of subrogation,
contribution, indemnification, recourse, reimbursement and any similar rights
against the Borrower (or any other guarantor) with respect to this Guaranty,
whether such rights arise under an express or implied contract or by operation
of law. It is the intention of the parties that the undersigned shall not be (or
be deemed to be) a "creditor" (as defined in Section 101 of the Federal
Bankruptcy Code, as it may be amended) of the Borrower (or any other guarantor)
by reason of the existence of this Guaranty in the event that the Borrower
becomes a debtor in any proceeding under the Federal Bankruptcy Code. This
waiver is given to induce the Bank to enter into certain written contracts with
the Borrower included in the Indebtedness. The undersigned warrant(s) and
agree(s) that none of Bank's rights, remedies or interests shall be directly or
indirectly impaired because of any of the undersigned's status as an "insider"
or "affiliate" of the Borrower, and undersigned shall take any action, and shall
execute any document, which the Bank may request in order to effectuate this
warranty to the Bank.
If any indebtedness is guaranteed by two or more guarantors, the obligation of
the undersigned shall be several and also joint, each with all and also each
with any one or more of the others, and may be enforced at the option of the
Bank against each severally, any two or more jointly, or some severally and some
jointly. The Bank, in its sole discretion, may release any one or more of the
guarantors for any consideration which it deems adequate, and may fall or elect
not to prove a claim against the estate of any bankrupt, insolvent, incompetent
or deceased guarantor; and after that, without notice to any other guarantor,
the Bank may extend or renew any or all indebtedness and may permit the Borrower
to incur additional indebtedness, without affecting in any manner the
unconditional obligation of the remaining guarantor(s). This action by the Bank
shall not, however, be deemed to affect any right to contribution which may
exist among the guarantors.
Any of the undersigned may terminate their obligation under this Guaranty as to
future indebtedness (except as provided below) by (and only by) delivering
written notice of termination to an officer of the Bank and receiving from an
officer of the Bank written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the fifth
(5th) day following written acknowledgement of delivery. Any termination shall
not affect in any way the unconditional obligations of the remaining
guarantor(s), whether or not the termination is known to the remaining
guarantor(s). Any termination shall not affect in any way the unconditional
obligations of the terminating guarantor(s) as to any indebtedness existing at
the effective date of termination or any indebtedness created after that
pursuant to any commitment or agreement of the Bank or any Borrower loan with
the Bank existing at the effective date of termination (whether advances or
readvances by the Bank are optional or obligatory), or any modifications,
extensions or renewals of any of this indebtedness, whether in whole or in part,
and as to all of this indebtedness and modifications, extensions or renewals of
it, this Guaranty shall continue effective until the same shall have been fully
paid. The Bank has no duty to give notice of termination by any guarantor(s) to
any remaining guarantor(s). The undersigned shall indemnify the Bank against all
claims, damages, costs and expenses, including without limit reasonable
attorneys' fees and costs, incurred by the Bank in connection with any suit,
claim or action against the Bank arising out of any modification or termination
of a Borrower loan or any refusal by the Bank to extend additional credit in
connection with the termination of this Guaranty.
Notwithstanding any prior revocation, termination, surrender or discharge of
this Guaranty (or of any lien, pledge or security interest securing this
Guaranty) in whole or part, the effectiveness of this Guaranty, and of all
liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
(a) any payment received or credit given by the Bank in respect of the
indebtedness is returned, disgorged or rescinded as a preference, impermissible
setoff, fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Guaranty, and all liens, pledges
and security interests securing this Guaranty, shall be enforceable against the
undersigned as if the returned, disgorged or rescinded payment or credit had not
been received or given by the Bank, and whether or not the Bank relied upon this
payment or credit or changed its position as a consequence of it; or (b) any
liability is imposed, or sought to be imposed, against the Bank relating to the
environmental condition of, or the presence of hazardous or toxic substances on,
in or about, any property given as collateral to the Bank by the Borrower,
whether this condition is known or unknown, now exists or subsequently arises
(excluding only conditions which arise after any acquisition by the Bank of any
such property, by foreclosure, in lieu of foreclosure or otherwise, to the
extent due to the wrongful act or omission of the Bank), in which case this
Guaranty, and all liens, pledges and security interests securing this Guaranty,
shall be enforceable against the undersigned to the extent of all liability,
costs and expenses (including without limit reasonable attorneys' fees and
costs) incurred by the Bank as the direct or indirect result of any
environmental condition or hazardous or toxic substances. In the event of
continuation or reinstatement of this Guaranty and the liens, pledges and
security interests securing it, the undersigned agree(s) upon demand by the Bank
to execute and deliver to the Bank those documents which the Bank determines are
appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of the undersigned to do so
shall not affect in any way the reinstatement or continuation. If the
undersigned do(es) not execute and deliver to the Bank upon demand such
documents, the Bank and each Bank officer is irrevocably appointed (which
appointment is coupled with an interest) the true and lawful attorney of the
undersigned (with full power of substitution) to execute and deliver such
documents in the name and on behalf of the undersigned. For purpose of this
Guaranty, "environmental condition" includes, without limitation, conditions
existing with respect to the surface or ground water, drinking water supply,
land surface or subsurface and the air; and "hazardous or toxic substances"
shall include any and all substances now or subsequently determined by any
federal, state or local authority to be hazardous or toxic, or otherwise
regulated by any of these authorities.
Although the intent of the undersigned and the Bank is that California law shall
apply to this Guaranty, regardless of whether California law applies, the
undersigned further agree(s) as follows: With respect to the limitation, if any,
stated in the Additional Provisions below on the amount of principal guaranteed
under this Guaranty, the undersigned agree(s) that (a) this limitation shall not
be a limitation on the amount of Borrower's indebtedness to the Bank; (b) any
payments by the undersigned shall not reduce the maximum liability of the
undersigned under this Guaranty unless written notice to that effect is actually
received by the Bank at or prior to the time of the payment; and (c) the
liability of the undersigned to the Bank shall at all times be deemed to be the
aggregate liability of the undersigned under this Guaranty and any other
guaranties previously or subsequently given to the Bank by the undersigned and
not expressly revoked, modified or invalidated in writing.
The undersigned waive(s) any right to require the Bank to: (a) proceed against
any person, including without limit the Borrower; (b) proceed against or exhaust
any security held from the Borrower or any other person; (c) pursue any other
remedy in the Bank's power; or (d) make any presentments or demands for
performance, or give any notices of nonperformance, protests, notices of
protest, or notices of dishonor in connection with any obligations or evidences
of indebtedness held by the Bank as security, in connection with any other
obligations or evidences of indebtedness which constitute in whole or in part
indebtedness, or in connection with the creation of new or additional
indebtedness.
The undersigned authorize(s) the Bank, either before or after termination of
this Guaranty, without notice to or demand on the undersigned and without
affecting the undersigned's liability under this Guaranty, from time to time to:
(a) apply any security and direct the order or manner of sale of it, including
without limit, a nonjudicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as the Bank in its direction may
determine; (b) release or substitute any one or more of the endorsers or any
other guarantors of the indebtedness; and (c) apply payments received by the
Bank from the Borrower to any indebtedness of the Borrower to the Bank, in such
order as the Bank shall determine in its sole discretion, whether or not this
indebtedness is covered by this Guaranty, and the undersigned waive(s) any
provision of law regarding application of payments which specifies otherwise.
The Bank may without notice assign this Guaranty in whole or in part. Upon the
Bank's request, the undersigned agree(s) to provide to the Bank copies of the
undersigned's financial statements.
2
The undersigned waive(s) any defense based upon or arising by reason of (a) any
disability or other defense of the Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of the Borrower which is a corporation, partnership or other
type of entity, any defect in the formation of the Borrower; (d) the application
by the Borrower of the proceeds of any indebtedness for purposes other than the
purposes represented by the Borrower to the Bank or intended or understood by
the Bank or the undersigned; (e) any act or omission by the Bank which directly
or indirectly results in or aids the discharge of the Borrower or any
indebtedness by operation of law or otherwise; or (f) any modification of the
indebtedness, in any form whatsoever including without limit any modification
made after effective termination, and including without limit, the renewal,
extension, acceleration or other change in time for payment of the indebtedness,
or other change in the terms of any indebtedness, including without limit
increase or decrease of the interest rate. The undersigned understands that,
absent this waiver, Bank's election of remedies, including but not limited to
its decision to proceed to nonjudicial foreclosure on any real property securing
the indebtedness, could preclude Bank from obtaining a deficiency judgment
against Borrower and the undersigned pursuant to California Code of Civil
Procedure sections 580a, 580b, 580d or 726 and could also destroy any
subrogation rights which the undersigned has against Borrower. The undersigned
further understands that, absent this waiver, California law, including without
limitation, California Code of Civil Procedure sections 580a, 580b, 580d or 726,
could afford the undersigned one or more affirmative defenses to any action
maintained by Bank against the undersigned on this Guaranty.
The undersigned waives any and all rights and provisions of California Code of
Civil Procedure sections 580a, 580b, 580d and 726, including, but not limited to
any provision thereof that: (i) may limit the time period for Bank to commence a
lawsuit against Borrower or the undersigned to collect any indebtedness owing by
Borrower or the undersigned to Bank; (ii) may entitle Borrower or the
undersigned to a judicial or nonjudicial determination of any deficiency owned
by Borrower or the undersigned to Bank, or to otherwise limit Bank's right to
collect a deficiency based on the fair market value of such real property
security; (iii) may limit Bank's right to collect a deficiency judgment after a
sale of any real property securing the indebtedness; (iv) may require Bank to
take only one action to collect the indebtedness or that may otherwise limit the
remedies available to Bank to collect the indebtedness.
The undersigned waives all rights and defenses arising out of an election of
remedies by Bank even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the undersigned's rights of subrogation and reimbursement against Borrower by
the operation of Section 580d of the Code of Civil Procedure or otherwise.
Without limiting the generality of any other waiver or other provision set forth
in this Guaranty, each undersigned Guarantor waives all rights and defenses that
any such undersigned Guarantor may have because the indebtedness is secured by
real property. This means, among other things:
(1) Bank may collect from any undersigned Guarantor without first foreclosing
on any real or personal property collateral pledged by any Borrower to
secure the indebtedness.
(2) If Bank forecloses on any real property collateral pledged by any Borrower
to secure the indebtedness;
(a) the amount of the indebtedness may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(b) Bank may collect from any undersigned Guarantor even if Bank, by
foreclosing on the real property pledged as collateral, has destroyed
any right that the undersigned Guarantor may have to collect from
Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses each
undersigned Guarantor may have because the indebtedness is secured by Real
Property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure.
WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH
IN THIS GUARANTY, EACH UNDERSIGNED GUARANTOR HEREBY WAIVES, TO THE MAXIMUM
EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL BENEFITS, DEFENSES TO
PAYMENT OR PERFORMANCE, OR ANY RIGHT TO PARTIAL OR COMPLETE EXONERATION ARISING
DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS
2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2847,
2848, 2849, AND 2850.
The undersigned acknowledges and agrees that this is a knowing and informed
waiver of the undersigned's rights as discussed above and that Bank is relying
on this waiver in extending credit to Borrower.
The undersigned acknowledge(s) that the Bank has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Bank may disclose any documents and
information which the Bank now or later acquires relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agree(s) that the Bank may disclose these documents and
information to the Borrower. The undersigned agree(s) that the Bank may provide
information relating to this Guaranty or to the undersigned to the Bank's
parent, affiliates, subsidiaries and service providers.
The total obligation under this Guaranty shall be UNLIMITED unless specifically
limited in the Additional Provisions of this Guaranty, and this obligation
(whether unlimited or limited to the extent indicated in the Additional
Provisions) shall include, IN ADDITION TO any limited amount of principal
guaranteed, any and all interest on all indebtedness and any and all costs and
expenses of any kind, including without limit reasonable attorneys' fees and
costs, incurred by the Bank at any time(s) for any reason in enforcing any of
the duties and obligations of the undersigned under this Guaranty or otherwise
incurred by the Bank in any way connected with this Guaranty, the Indebtedness
or any other guaranty of the indebtedness (including without limit reasonable
attorneys' fees and other expenses incurred in any suit involving the conduct of
the Bank, the Borrower or the undersigned). All of these costs and expenses
shall be payable immediately by the undersigned when incurred by the Bank,
without demand, and until paid shall bear interest at the highest per annum rate
applicable to any of the indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Guaranty to attorneys' fees shall be
deemed a reference to fees, charges, costs and expenses of both in-house and
outside counsel and paralegais, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorneys'
fees or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise. Any reference in
the Additional Provisions or elsewhere (a) to this Guaranty being secured by
certain collateral shall NOT be deemed to limit the total obligation of the
undersigned under this Guaranty or (b) to this Guaranty being limited in any
respect shall NOT be deemed to limit the total obligation of the undersigned
under any prior or subsequent guaranty given by the undersigned to the Bank.
The undersigned unconditionally and irrevocably waive(s) each any every defense
and setoff of any nature which, under principles of guaranty or otherwise, would
operate to impair or diminish in any way the obligation of the undersigned under
this Guaranty, and acknowledge(s) that each such waiver is by this reference
incorporated into each security agreement, collateral assignment, pledge and/or
other document from the undersigned now or later securing this Guaranty and/or
the indebtedness, and acknowledge(s) that as of the date of this Guaranty no
such defense or setoff exists. The undersigned acknowledge(s) that the
effectiveness of this Guaranty is subject to no conditions of any kind.
This Guaranty shall remain effective with respect to successive transactions
which shall either continue the indebtedness, increase or decrease it, or from
time to time create new indebtedness after all or any prior indebtedness has
been satisfied, until this Guaranty is terminated in the manner and to the
extent provided above.
The undersigned warrant(s) and agree(s) that each of the waivers set forth above
are made with the undersigned's full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law if any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective only to the extent permitted by law.
3
This Guaranty constitutes the entire agreement of the undersigned and the Bank
with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or the Bank unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of the Bank
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigned's heirs, legal representatives, successors and
assigns including, without limit, any debtor in possession or trustee in
bankruptcy for any of the undersigned. The undersigned has (have) knowingly and
voluntarily entered into this Guaranty in good faith for the purpose of inducing
the Bank to extend credit or make other financial accommodations to the
Borrower, and the undersigned acknowledge(s) that the terms of this Guaranty are
reasonable. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
Additional Provisions (if any):
See Addendum "A" attached hereto and made a part of this Guaranty.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO
THE EXTEND PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED
TO, THIS GUARANTY OR THE INDEBTNESS.
IN WITNESS WHEREOF, the undersigned has (have) signed this Guaranty on December
15, 2006.
GUARANTOR(S)
By: /s/ Barry Cinnamon
------------------------------------
Signature of Barry Cinnamon
WITNESS: Its: N/A
-------------------------------
(If Applicable)
/s/ Reed Geisreiter By:
------------------------------------- ------------------------------------
Signature of Signature of
Its:
-------------------------------
(If Applicable)
BORROWER(S):
Akeena Solar, Inc.
4
ADDENDUM "A" TO GUARANTY
This Addendum "A" to Guaranty ("Addendum") is attached to, and by this
reference shall be a part of and is hereby incorporated by this reference into
that certain Guaranty dated December 15, 2006 executed by BARRY CINNAMON
("Guarantor") in favor of COMERICA BANK ("Bank"). Except as otherwise noted,
the terms not defined herein shall have the meaning set forth in the Guaranty.
Notwithstanding anything to the contrary contained in the Guaranty,
Guarantor and Bank agree that the provisions set forth herein shall be amended
as follows:
Anything contained in the forgoing to the contrary notwithstanding, the maximum
liability of the undersigned to Bank pursuant to this Guaranty shall not exceed
Five Hundred Thousand and no/100 Dollars ($500,000.00) under any circumstances,
plus the costs and expenses (including reasonable attorney's fees) incurred by
Bank in enforcing this Guaranty. No payment by any person or entity other than
the undersigned (Including, without limitation, Borrower or any other guarantor
of the Indebtedness) with respect to the Indebtedness shall reduce the
obligations of the undersigned to Bank hereunder unless and until the
Indebtedness are fully and indefeasable satisfied in cash and Bank has no
further obligation to make loans or otherwise extend credit to Borrower. No
application of any collateral or proceeds thereof (including, without
limitation, any collateral given by the undersigned, Borrower or any other
person or entity) with respect to the Indebtedness shall reduce the obligations
of the undersigned to bank hereunder unless and until the Indebtedness fully and
indefeasable satisfied in cash and Bank has no further obligation to make loans
or otherwise extend credit to Borrower.
COMERCIA BANK
By: /s/ Reed Geisreiter
-------------------------------------
Reed Geisreiter
First Vice President - Western Market
/s/ Barry Cinnamon
-----------------------------------------
Barry Cinnamon
|
EXHIBIT 10.1
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GENERAL TERMS AGREEMENT
between
Spirit AeroSystems, Incorporated
Tulsa Facility
and
LMI Aerospace, Incorporated
Spirit AeroSystems-GTA-T5P2-YB001851
Amendment 1
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TABLE OF CONTENTS
TITLE PAGE
TABLE OF CONTENTS
AMENDMENT PAGE
RECITAL PAGE
1.0
DEFINITIONS
6
2.0
ORDERING
7
2.1
Issuance of Orders
7
2.2
Acceptance of Orders
7
2.3
Written Authorization to Proceed
7
3.0
TITLE AND RISK OF LOSS
8
4.0
DELIVERY
8
4.1
Schedule
8
4.2
Reserved
9
4.3
Notice of Labor Negotiations
9
5.0
ON-SITE REVIEW AND RESIDENT REPRESENTATIVES
9
5.1
Review
9
5.2
Resident Representatives
9
6.0
CREDIT OFFICE VISIBILITY
10
7.0
PACKING AND SHIPPING
10
7.1
General
10
7.1.1
Shipping Documentation
11
7.1.2
Insurance
11
7.1.3
Shipping Container Labels
11
7.1.4
Carrier Selection
11
7.1.5
Invoices
11
7.1.6
Noncompliance
11
7.2
Barcode Marking and Shipping
12
8.0
QUALITY ASSURANCE, INSPECTION, REJECTION, & ACCEPTANCE
12
8.1
Controlling Document
12
8.2
Seller's Inspection
12
8.2.1
Seller's Disclosure
12
8.2.2
Seller’s Acceptance
13
8.3
Spirit AeroSystem, Inc. Inspection and Rejection
13
8.4
Rights of Spirit AeroSystem's Customers and Regulators to Perform Inspections,
Surveillance, and Testing
14
8.5
Retention of Records
14
8.6
Inspection
15
8.7
Reserved
15
8.8
Regulatory Approvals
15
2
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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9.0
EXAMINATION OF RECORDS
16
10.0
CHANGES
16
10.1
Changes Clause
16
11.0
GENERAL & INTERNATIONAL REQUIREMENTS
17
11.1
Language
17
11.2
Currency
17
11.3
Import/Export
18
12.0
TERMINATION FOR CONVENIENCE
19
12.1
Basis for Termination; Notice
19
12.2
Termination Instructions
19
12.3
Seller's Claim
20
12.4
Failure to Submit a Claim
20
12.5
Partial Termination
20
12.6
Product Price
20
12.7
Exclusions or Deductions
21
12.8
Partial Payment/Payment
21
12.9
Seller's Accounting Practices
21
12.10
Records
21
13.0
CANCELLATION FOR DEFAULT
21
13.1
Events of Default
21
13.2
Remedies
22
14.0
EXCUSABLE DELAY
24
15.0
SUSPENSION OF WORK
25
16.0
TERMINATION OR WRONGFUL CANCELLATION
25
17.0
ASSURANCE OF PERFORMANCE
25
18.0
RESPONSIBILITY FOR PROPERTY
26
19.0
LIMITATION OF SELLER'S RIGHT TO ENCUMBER ASSETS
26
20.0
PROPRIETARY INFORMATION AND ITEMS
27
21.0
COMPLIANCE
28
21.1
Compliance With Laws
28
21.2
Government Requirements
28
21.3
Ethic Requirements/Code of Conduct
28
22.0
INTEGRITY IN PROCUREMENT
29
23.0
UTILIZATION OF SMALL BUSINESS CONCERNS
29
3
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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24.0
SPIRIT AEROSYSTEMS' RIGHTS IN SELLER'S PATENTS, COPYRIGHTS, TRADE SECRETS, AND
TOOLING
29
25.0
TERMINATION OF AIRPLANE PROGRAM
30
25.1
Program Termination
30
25.2
Termination Liability
31
26.0
PUBLICITY
31
27.0
PROPERTY INSURANCE
31
27.1
Insurance
31
27.2
Certificate of Insurance
32
27.3
Notice of Damage or Loss
32
28.0
RESPONSIBILITY FOR PERFORMANCE
32
28.1
Subcontracting
33
28.2
Reliance
33
28.3
Assignment
33
29.0
NON-WAIVER/PARTIAL INVALIDITY
33
30.0
HEADINGS
34
31.0
RESERVED
34
32.0
RESERVED
34
33.0
DISPUTES
34
34.0
RESERVED
34
35.0
TAXES
34
35.1
Inclusion of Taxes in Price
34
35.2
Litigation
35
35.3
Rebates
35
36.0
INDUSTRIAL PARTICIPATION
35
4
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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AMENDMENTS
Amend
Number
Description
Date
Approval
1
Revised Seller’s name on Cover Page, Pages 6 and 36 and Footer (Was: Leonard’s
Metal, Incorporated; Is: LMI Aerospace, Incorporated)
Revised Section 28.3, Page 33 & 34
03-28-06
03-28-06
KEL/RKF
KEL/RKF
5
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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GENERAL TERMS AGREEMENT
RELATING TO
Spirit AeroSystems, Incorporated
Tulsa Facility
THIS GENERAL TERMS AGREEMENT (“GTA”) is entered into as of 14 October 2005, by
and between LMI Aerospace, Incorporated, a Missouri State corporation, with its
principal office in St. Louis, MO, ("Seller"), and Spirit AeroSystems,
Incorporated (Spirit AeroSystems) a Delaware corporation . Hereinafter, the
Seller and Spirit AeroSystems may be referred to jointly as “Parties” hereto.
Now, therefore, in consideration of the mutual covenants set forth herein, the
Parties agree as follows
AGREEMENTS
1.0 Definitions
The definitions set forth below shall apply to this GTA, any Order, and any
related Special Business Provisions ("SBP") (collectively "the Agreement").
Words importing the singular shall also include the plural and vice versa.
A.
"Customer" means any manufacturer, owner, lessee or operator of an aircraft or
commodity, or designee of such manufacturer, owner, lessee or operator.
B.
"FAA" means the United States Federal Aviation Administration or any successor
agency thereto.
C.
"FAR" means the Federal Acquisition Regulations in effect on the date of this
Agreement.
D.
"Procurement Representative" means the individual designated by Spirit
AeroSystems as being primarily responsible for interacting with Seller regarding
this Agreement or any Order.
E.
"Order" means each purchase contract and purchase order issued by Spirit
AeroSystems and either accepted by Seller under the terms of this GTA and SBP or
issued within Spirit AeroSystems’ authority under this GTA and SBP.
6
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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F.
"Product" means goods, including components and parts thereof, services,
documents, data, software, software documentation and other information or items
furnished or to be furnished to Spirit AeroSystems under any Order, including
Tooling, except for Rotating Use Tooling.
G.
"Tooling" means all tooling, used in production or inspection of Products,
either provided to Seller or supplied by Seller whereby Spirit AeroSystems
agrees to pay Seller for the manufacture of the tooling.
2.0 Ordering
2.1 Issuance of Orders
Spirit AeroSystems may issue Orders to Seller from time to time. Each Order
shall contain a description of the Products ordered, a reference to the
applicable specifications, drawings or supplier part number, the quantities and
prices, the delivery schedule, the terms and place of delivery and any special
conditions.
Each Order shall be governed by and be deemed to include the provisions of this
GTA and SBP. Any other Order terms and conditions, which conflict with this
Agreement, do not apply unless specifically agreed to in writing by the Parties.
2.2 Acceptance of Orders
Each Order is Spirit AeroSystems’ offer to Seller and acceptance is strictly
limited to its terms, unless specifically agreed to in writing by the
Procurement Representative of Spirit AeroSystems. Spirit AeroSystems objects to,
and is not bound by, any terms or condition that differs from or adds to the
Order. Seller's commencement of performance or acceptance of the Order in any
manner shall conclusively evidence Seller's acceptance of the Order as written.
Any rejection by Seller of an Order shall specify the reasons for rejection and
any changes or additions that would make the Order acceptable to Seller;
provided, however, that Seller may not reject any Order for reasons inconsistent
with the provisions of this Agreement or the applicable SBP.
2.3 Written Authorization to Proceed
7
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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Spirit AeroSystems’ Procurement Representative may give written or electronic
authorization to Seller to commence performance before Spirit AeroSystems issues
an Order. If Spirit AeroSystems’ authorization specifies that an Order will be
issued, Spirit AeroSystems and Seller shall proceed as if an Order had been
issued. This Agreement, the applicable SBP and the terms stated in the
authorization shall be deemed to be a part of Spirit AeroSystems’ offer and the
Parties shall promptly and in good faith agree on any open Order terms. If
Spirit AeroSystems does not specify in its authorization that an Order shall be
issued, Spirit AeroSystems’ obligation is strictly limited to the terms of the
authorization.
If Seller commences performance before an Order is issued or without receiving
Spirit AeroSystems’ prior authorization to proceed, such performance shall be at
Seller's risk and expense.
3.0 Title and Risk of Loss
Except as otherwise agreed to by the Parties, title to and risk of any loss of
or damage to the Products shall pass at the F.O.B. or INCOTERM point as
specified in the applicable Order, except for loss or damage thereto resulting
from Seller's fault or negligence.
4.0 Delivery
4.1 Schedule
Seller shall strictly adhere to the shipment, delivery or completion schedules
specified in the Order. In the event of any anticipated or actual delay,
including but not limited to delays attributed to labor disputes, Seller shall:
(i) promptly notify Spirit AeroSystems in writing of the reasons for the delay
and the actions being taken to overcome or minimize the delay; and (ii) provide
Spirit AeroSystems with a written recovery schedule. If Spirit AeroSystems
requests, Seller shall, at Seller’s expense, ship via air or other expedited
routing to avoid the delay or minimize it as much as possible. Seller shall not
deliver Products prior to the scheduled delivery dates unless authorized by
Spirit AeroSystems.
Spirit AeroSystems shall, at no additional cost to Spirit AeroSystems, retain
goods furnished in excess of the specified quantity or in excess of any
allowable overage unless, within forty-five (45) days of shipment, Seller
requests return of such excess. In the event of such request, Seller shall
reimburse Spirit AeroSystems for reasonable costs associated with storage and
return of excess.
If Products are manufactured with reference to Spirit AeroSystems Proprietary
Information or Materials, Seller agrees that pursuant to the Proprietary
Information and Items article of this Agreement, it will not sell or offer such
Products for sale to anyone other than Spirit AeroSystems without Spirit
AeroSystems prior written consent.
8
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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4.2 Reserved
4.3 Notice of Labor Negotiations
When requested by Spirit AeroSystems, Seller will provide status on labor
contracts and pending negotiations, including that of Seller’s subcontractors or
suppliers, except as may be prohibited by law.
5.0 On-Site Review and Resident Representatives
5.1 Review
Seller hereby grants, and shall cause any of its subcontractors or suppliers to
grant, to Spirit AeroSystems the right to visit the facility of Seller or any of
its subcontractors or suppliers during operating hours to review progress and
performance with respect to production, schedule, cost, quality and protection
of Spirit AeroSystems’ proprietary rights under any Order. Any Spirit
AeroSystems representative shall be allowed access to all areas used for the
performance of the Agreement. Such access shall be subject to the regulations of
any governmental agency regarding admissibility and movement of personnel on the
premises of Seller or any of its subcontractors or suppliers.
Spirit AeroSystems shall notify Seller prior to any visit. Such notice shall
contain the names, citizenship and positions of the visiting personnel and the
duration and purpose of such visit.
5.2 Resident Representatives
Spirit AeroSystems may, in its sole discretion, and for such period, as it deems
necessary, locate resident personnel ("Resident Team") at Seller's facility to
assist or support Seller. The Resident Team shall function under the direction
of a resident Spirit AeroSystems manager, if appropriate, or a manager located
at Spirit AeroSystems who will supervise Resident Team activities.
The Resident Team shall be allowed access to or to review, as the case may be,
all work areas, program status reports and management reviews used for or
relating to Seller's performance of the Agreement.
Seller shall supply the Resident Team with office space, desks, facsimile
machines, telephones, high-speed access to internet services (if available from
local providers), stationery supplies, filing cabinets, communication
facilities, secretarial services and
9
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
--------------------------------------------------------------------------------
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any other items reasonably requested by Spirit AeroSystems. A reasonable portion
of the Resident Team's working area shall be dedicated to space for private
telephone calls, meetings and similar Spirit AeroSystems activities. All costs
and expenses for such facilities and services, if required, shall be paid by
Seller.
Notwithstanding such access and review, Seller remains solely responsible for
performing in accordance with each Order.
6.0 Credit Office Visibility (Parent Company Guarantee?)
If requested, Seller shall provide financial data, on a quarterly basis, or as
requested to the Boeing Corporate Credit Office for credit and financial
condition reviews. Said data shall include but not be limited to balance sheets,
schedule of accounts payable and receivable, major lines of credit, creditors,
income statements (profit and loss), cash flow statements, firm backlog, and
headcount. Copies of such data are to be made available within 72 hours of any
written request by Boeing’s Corporate Credit Office. Spirit AeroSystems and
Boeing shall treat all such information as confidential.
7.0 Packing and Shipping
7.1 General
Seller shall pack the Products to prevent damage and deterioration taking into
account method of shipment, location of shipment and destination of receipt, as
well as time associated with shipment. Seller shall comply with carrier tariffs.
Unless the Order specifies otherwise, the price for Products sold place of
destination shall include shipping charges. Unless otherwise specified in the
Order, Products sold place of origin or shipment shall be forwarded collect. For
Products shipped domestically, Seller shall make no declaration concerning the
value of the Products shipped, except on the Products where the tariff rating is
dependent upon released or declared value. In such event, Seller shall release
or declare such value at the maximum value within the lowest rating. Spirit
AeroSystems may charge Seller for damage to or deterioration of any Products
resulting from improper packing or packaging. Seller shall comply with any
special instructions stated in the applicable Order. Upon Spirit AeroSystems’
request, Seller will identify packaging charges showing material and labor costs
for container fabrication.
10
General Terms Agreement
LMI Aerospace, Inc.
Pro-Forma dated 07-01-05
SPIRIT AEROSYSTEMS-GTA-T5P2-YB-001851
INITIALS: KEL
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7.1.1 Shipping Documentation
Shipments by Seller or its subcontractors or suppliers must include packing
sheets. Each packing sheet must include at a minimum the following: a) Seller's
name, address, phone number; and supplier code number b) Order and item number;
c) ship date for the Products; d) total quantity shipped and quantity in each
container, if applicable; e) legible packing slip number; f) nomenclature; g)
unit of measure; h) “ship to” information if other than Spirit AeroSystems; i)
warranty data and certification, as applicable; j) rejection tag, if applicable;
k) Seller's certification that Products comply with Order requirements; and, l)
identification of optional material used, if applicable. A shipment containing
hazardous and non-hazardous materials must have separate packing sheets for the
hazardous and non-hazardous materials. Items shipped on the same day will be
consolidated on one bill of lading or airbill, unless Spirit AeroSystems’
Procurement Representative authorizes otherwise. The shipping documents will
describe the material according to the applicable classification or tariff
rating. The total number of shipping containers will be referenced on all
shipping documents. Originals of all government bills of lading will be
surrendered to the origin carrier at the time of shipment.
7.1.2 Insurance
Seller will not insure any shipment designated origin or place of shipment
unless authorized by Spirit AeroSystems.
7.1.3 Shipping Container Labels
Seller will label each shipping container with the Order number and the number
that each container represents of the total number being shipped (e.g., Box 1 of
2, Box 2 of 2).
7.1.4 Carrier Selection
Spirit AeroSystems will select the carrier and mode of transportation for all
shipments where freight costs will be charged to Spirit AeroSystems.
7.1.5 Invoices
Seller will include copies of documentation supporting prepaid freight charges
(e.g., carrier invoices or shipping log/manifest), if any, with its invoices.
7.1.6 Noncompliance
If Seller is unable to comply with the shipping instructions in an Order, Seller
will contact Spirit AeroSystems’ Traffic Management Department or Spirit
AeroSystems’ Procurement Representative.
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7.2 Barcode Marking and Shipping
For Orders from Spirit AeroSystems locations that have approved Seller to
utilize barcode labeling for shipping and packaging, Seller shall mark and
package such shipments in accordance with the applicable barcode requirements
for that location. Where approved and pursuant to applicable specifications,
Seller will utilize barcoding technology for part marking Products.
8.0 QUALITY ASSURANCE, INSPECTION, REJECTION, & ACCEPTANCE
8.1 Controlling Document
The controlling quality assurance document for Orders shall be as set forth in
the SBP.
8.2 Seller's Inspection
Seller shall inspect or otherwise verify that all Products, including those
components procured from or furnished by subcontractors or suppliers or Spirit
AeroSystems, comply with the requirements of the Order prior to shipment. Seller
shall be responsible for all tests and inspections of the Product during
receiving, manufacture and Seller's final inspection. Seller agrees to furnish
copies of test and/or control data upon request from Spirit AeroSystems’
Procurement Representative.
8.2.1 Seller's Disclosure
Seller shall provide written notification to Spirit AeroSystems within one
business day when a nonconformance is determined to exist, or is suspected to
exist, on Product already delivered to Spirit AeroSystems under any Order and
the following is known:
A.
Affected process or Product number and name
B.
Description of the problem (i.e., what it is and what it should be);
C.
Quantity and dates delivered
D.
Suspect/affected serial number(s) or date codes, when applicable.
The Seller shall notify the Spirit AeroSystems Procurement Representative and
the Spirit AeroSystems Procurement Quality Assurance Field Representative for
the Spirit AeroSystems location where the Product was delivered.
If the nonconforming condition has been previously identified by Spirit
AeroSystems, using a Nonconformance Record or other equivalent means and
requesting a corrective action response, the Seller shall notify the Spirit
AeroSystems investigator identified on the corrective action request that
additional Product is affected.
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8.2.2 Seller’s Acceptance
Seller shall provide with all shipments the following evidence of acceptance by
its quality assurance department: (a) certified physical and metallurgical or
mechanical test reports where required by controlling specifications, or (b) a
signed, dated statement on the packing sheet certifying that its quality
assurance department has inspected the Products and they adhere to all
applicable drawings and/or specifications.
8.3 Spirit AeroSystems’ Inspection and Rejection
Spirit AeroSystems will accept the Products or give Seller notice of rejection
or revocation of acceptance (“rejection” herein), notwithstanding any payment,
prior test or inspection, or passage of title. No inspection, test delay or
failure to inspect or test or failure to discover any defect or other
nonconformance shall relieve Seller of any obligations under any Order or impair
any right or remedy of Spirit AeroSystems.
If Seller delivers non-conforming Products, Spirit AeroSystems may at its option
and at Seller’s expense (i) return the Products for credit or refund; (ii)
require Seller to promptly correct or replace the Products; (iii) correct the
Products; or, (iv) obtain replacement Products from another source. These
remedies are in addition to any remedies Spirit AeroSystems may have at law or
equity.
Seller shall not redeliver corrected or rejected goods without disclosing the
former rejection or requirement for correction. Seller shall disclose any
corrective action taken. Repair, replacement and other correction and redelivery
shall be completed within the original delivery schedule or such later time as
Procurement Representatives of Spirit AeroSystems may reasonably direct.
All costs and expenses and loss of value incurred as a result of or in
connection with nonconformance and repair, replacement or other correction may
be recovered from Seller by equitable price reduction or credit against amounts
that may be owed to Seller under this Agreement or otherwise.
Acceptance of any Product by Spirit AeroSystems following any repair or rework
pursuant to this Section 8.3 shall not alter or affect the obligations of Seller
or the rights of Spirit AeroSystems under SBP Section 6.1.
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8.4 Rights of Spirit AeroSystems’ Customers and Regulators to Perform
Inspections, Surveillance, and Testing
Spirit AeroSystems’ rights to perform inspections, surveillance and tests and to
review procedures, practices, processes and related documents related to quality
assurance, quality control, flight safety, and configuration control shall
extend to the Customers of Spirit AeroSystems that are departments, agencies or
instrumentalities of the United States Government and to the FAA and any
successor agency or instrumentality of the United States Government. Spirit
AeroSystems may also, at Spirit AeroSystems’ option, by prior written notice
from Spirit AeroSystems’ Procurement Representative, extend such rights to other
Customers of Spirit AeroSystems and to agencies or instrumentalities of other
governments equivalent in purpose to the FAA. Seller shall cooperate with any
such United States Government or Spirit AeroSystems directed inspection,
surveillance, test or review without additional charge to Spirit AeroSystems.
Nothing in any Order shall be interpreted to limit United States Government
access to Seller's facilities pursuant to law or regulation.
Where Seller is located in or subcontracts with a supplier or subcontractor
located in a country which does not have a bilateral airworthiness agreement
with the United States, Seller will obtain and maintain on file and require its
affected supplier(s) or subcontractor(s) to obtain and maintain on file, subject
to review by Spirit AeroSystems, a letter from the applicable government where
the Product or subcontracted element is to be manufactured stating that Spirit
AeroSystems and the FAA will be granted access to perform inspections,
surveillance and tests and to review procedures, practices, processes and
related documents related to quality assurance, quality control, flight safety,
and configuration control.
8.5 Retention of Records
Seller shall maintain, on file at the seller’s facility, Quality records
traceable to the conformance of product/part numbers delivered to Spirit
AeroSystems. Seller shall make such records available to regulatory authorities
and Spirit AeroSystems’ authorized representatives. Seller shall retain such
records for a period of not less than (7) seven years from the date of shipment
under each applicable order for all product/part numbers unless otherwise
specified on the order. Seller shall maintain all records related to the current
first article inspection (FAI) for (7) seven years past final delivery of the
last Product covered by the FAI.
At the expiration of such period, Spirit AeroSystems reserves the right to
request delivery of such records. In the event Spirit AeroSystems chooses to
exercise this right, Seller shall promptly deliver such records to Spirit
AeroSystems at no additional cost on media agreed to by both parties.
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8.6 Inspection
At no additional cost to Spirit AeroSystems, Products may be subject to
inspection, surveillance and test at reasonable times and places, including
Seller’s subcontractors’ or suppliers’ locations. Spirit AeroSystems will
perform inspections; surveillance and tests so as not to unduly delay the work.
Seller shall maintain an inspection system acceptable to Spirit AeroSystems for
the Products purchased under any Order.
If Spirit AeroSystems performs an inspection or test on the premises of Seller
or its subcontractors or suppliers, Seller shall furnish and require its
subcontractors or suppliers to furnish, without additional charge, reasonable
facilities and assistance for the safe and convenient performance of these
duties.
Seller's documentation accompanying the shipment must reflect evidence of this
inspection.
8.7 Reserved
8.8 Regulatory Approvals
For aircraft regulated by the FAA or non-U.S. equivalent agency, regulatory
approval may be required for Seller to make direct sales (does not include
“direct ship” sale through Spirit AeroSystems) of modification or replacement
parts to owners/operators of type-certificated aircraft. Regulatory approval,
such as Parts Manufacturer Approval (PMA), is granted by the FAA or appropriate
non-U.S. equivalent regulatory agency. Seller agrees not to engage in any such
direct sales of Products under this Agreement without regulatory approval. Any
breach of this provision will be deemed a material breach of this Agreement. For
Seller proprietary parts, Seller agrees to notify Spirit AeroSystems of
application for PMA or other applicable regulatory approval and subsequent
approval or denial of same. Upon receipt of proof of PMA or other applicable
regulatory approval, Spirit AeroSystems may list Seller in the Illustrated Parts
Catalog as seller of that part.
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9.0 EXAMINATION OF RECORDS
Seller shall maintain complete and accurate records showing the sales volume of
all Products. Such records shall support all services performed, allowances
claimed and costs incurred by Seller in the performance of each Order, including
but not limited to those factors which comprise or affect direct labor hours,
direct labor rates, material costs, burden rates and subcontracts. Such records
and other data shall be capable of verification through audit and analysis by
Spirit AeroSystems and be available to Spirit AeroSystems at Seller's facility
for Spirit AeroSystems’ examination, reproduction, and audit at all reasonable
times from the date of the applicable Order until three (3) years after final
payment under such Order. Seller shall provide assistance to interpret such data
if requested by Spirit AeroSystems. Such examination shall provide Spirit
AeroSystems with complete information regarding Seller's performance for use in
price negotiations with Seller relating to existing or future orders for
Products, including but not limited to negotiation of equitable adjustments for
changes and termination/obsolescence claims pursuant to GTA Section 10.0. Spirit
AeroSystems shall treat all information disclosed under this GTA Section as
confidential, unless required by U.S. Government contracting regulation(s).
10.0 CHANGES
10.1 Changes Clause
Spirit AeroSystems Procurement Representative may, without notice to sureties,
in writing direct changes within the general scope of this Agreement or an Order
in any of the following: (i) technical requirements and descriptions,
specifications, statement of work, drawings or designs; (ii) shipment or packing
methods; (iii) place of delivery, inspection or acceptance; (iv) reasonable
adjustments in quantities or delivery schedules or both; (v) amount of Spirit
AeroSystems-furnished property; and, if this contract includes services, (vi)
description of services to be performed; (vii) time of performance (i.e., hours
of the day, days of the week, etc.); and (viii) place of performance. Seller
shall comply immediately with such direction.
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If such change increases or decreases the cost or time required to perform this
contract, Spirit AeroSystems and Seller shall negotiate an equitable adjustment
in the price or schedule, or both, to reflect the increase or decrease. Unless
otherwise agreed in writing, Seller must assert any claim for adjustment to
Spirit AeroSystems’ Procurement Representative in writing within twenty-five
(25) days and deliver a fully supported proposal to Spirit AeroSystems’
Procurement Representative within 60 days after Seller’s receipt of such
direction. SPIRIT AEROSYSTEMS shall modify the Order in writing accordingly.
Spirit AeroSystems may, at its sole discretion, consider any claim regardless of
when asserted. If Seller’s claim includes the cost of property made obsolete or
excess by the change, Spirit AeroSystems may direct the disposition of the
property. Spirit AeroSystems may examine Seller’s pertinent books and records to
verify the amount of Seller’s claim. Failure of the Parties to agree upon any
adjustment shall not excuse Seller from performing in accordance with Spirit
AeroSystems’ direction.
If Seller considers that Spirit AeroSystems’ conduct constitutes a change,
Seller shall notify Spirit AeroSystems’ Procurement Representative immediately
in writing as to the nature of such conduct and its effect upon Seller’s
performance. Pending direction from Spirit AeroSystems’ Procurement
Representative, Seller shall take no action to implement any such change.
11.0 GENERAL & INTERNATIONAL REQUIREMENTS
11.1 Language
The Parties hereto have agreed that this Agreement be written in American
English only. Where Seller resides in Quebec, Canada, les parties aux presentes
tes ont convenu de rediger ce contrat en Anglais seulement. All contractual
documents and all correspondence, invoices, notices and other documents shall be
submitted in American English. Any necessary conversations shall be held in
English. Spirit AeroSystems shall determine whether measurements will be in the
English or Metric system or a combination of the two systems. When furnishing
documents to Spirit AeroSystems, Seller shall not convert measurements, which
Spirit AeroSystems has stated in an English measurement system into the Metric
system.
11.2 Currency
Unless specified elsewhere herein, all prices shall be stated in and all
payments shall be made in the currency of the United States of America (U.S.
Dollars). No adjustments to any prices shall be made for changes to or
fluctuations in currency exchange rates.
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11.3 Import/Export
A.
In performing the obligations of this Agreement, both Parties will comply with
United States export control and sanctions laws, regulations, and orders, as
they may be amended from time to time, applicable to the export and re-export of
goods, software, technology, or technical data (“Items”) or services, including
without limitation the Export Administration Regulations (“EAR”), International
Traffic in Arms Regulations (“ITAR”), and regulations and orders administered by
the Treasury Department’s Office of Foreign Assets Control (collectively,
“Export Control Laws”).
B.
The Party conducting the export shall be responsible for obtaining the required
authorizations. The Party conducting the re-export shall be responsible for
obtaining the required authorizations. Each Party shall reasonably cooperate and
exercise reasonable efforts to support the other Party in obtaining any
necessary licenses or authorizations required to perform its obligations under
this Agreement.
C.
The Party providing any Items under this Agreement shall, upon request, notify
the other Party of the Items’ Export Control Classification Numbers (“ECCNs”) as
well as the ECCNs of any components or parts thereof if they are different from
the ECCN of the Item at issue.
D.
Each Party represents that (i) the Items, and the parts and components thereof,
it is providing under this Agreement are not “defense articles” as that term is
defined in 22 C.F.R. § 120.6 of the ITAR and (ii) the services it is providing
under this Agreement are not “defense services” as that term is defined in 22
C.F.R. § 120.9 of the ITAR. The Parties acknowledge that this representation
means that an official capable of binding the Party providing such Items knows
or has otherwise determined that such Items, and the parts and components
thereof, are not on the ITAR’s Munitions List at 22 C.F.R. §121.1. Each Party
agrees to reasonably cooperate with the other in providing, upon request of the
other Party, documentation or other information that supports or confirms this
representation.
E.
To the extent that such Items, or any parts or components thereof, were
specifically designed or modified for a military end use or end user, the Party
providing such Items shall notify the other Party of this fact and shall also
provide the other Party with written confirmation from the United States
Department of State that such Items, and all such parts or components thereof,
are not subject to the jurisdiction of the ITAR.
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12.0 TERMINATION FOR CONVENIENCE
12.1 Basis for Termination; Notice
Spirit AeroSystems may, from time to time terminate all or part of any Order
issued hereunder, by written notice to Seller. Any such written notice of
termination shall specify the effective date and the extent of any such
termination.
12.2 Termination Instructions
On receipt of a written notice of termination pursuant to GTA Section 12.1,
unless otherwise directed by Spirit AeroSystems, Seller shall:
A.
Immediately stop work as specified in the notice;
B.
Immediately terminate its subcontracts and purchase orders relating to work
terminated;
C.
Settle any termination claims made by its subcontractors or suppliers; provided,
that Spirit AeroSystems shall have approved the amount of such termination
claims in writing prior to such settlement;
D.
Preserve and protect all terminated inventory and Products;
E.
At Spirit AeroSystems’ request, transfer title (to the extent not previously
transferred) and deliver to Spirit AeroSystems or Spirit AeroSystems’ designee
all supplies and materials, work-in-process, Tooling and manufacturing drawings
and data produced or acquired by Seller for the performance of this Agreement
and any Order, all in accordance with the terms of such request;
F.
Be compensated for such items to the extent provided in GTA Section 12.3 below;
G.
Take all reasonable steps required to return, or at Spirit AeroSystems’ option
and with prior written approval to destroy, all Spirit AeroSystems provided
Proprietary Information and Items, as set forth in GTA Section 20.0, in the
possession, custody or control of Seller or any of its subcontractors or
suppliers;
H.
Take such other action as, in Spirit AeroSystems’s reasonable opinion, may be
necessary, and as Spirit AeroSystems shall direct in writing, to facilitate
termination of the Order; and
I.
Complete performance of the work not terminated.
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12.3 Seller's Claim
If Spirit AeroSystems terminates an Order in whole or in part pursuant to GTA
Section 12.1 above, Seller shall have the right to submit a written termination
claim to Spirit AeroSystems in accordance with the terms of this GTA Section
12.3. Such termination claim shall be asserted toSpirit AeroSystems within
forty-five (45) days and all documentation supporting said claim must be
asserted not later than six (6) months after Seller's receipt of the termination
notice and shall be in the form prescribed by Spirit AeroSystems. Such claim
must contain sufficient detail to explain the amount claimed, including detailed
inventory schedules and a detailed breakdown of all costs claimed separated into
categories (e.g., materials, purchased parts, finished components, labor,
burden, general and administrative), and to explain the basis for allocation of
all other costs. In no event shall claims for non-recurring engineering be
considered or paid by Spirit AeroSystems to Seller. With regard to the amount
compensatable to Seller under a termination pursuant to GTA Section 12.1 above,
Seller shall be entitled to compensation in accordance with and to the extent
allowed under the terms of FAR 52-249-2 paragraphs (e)-(i), (Sept 96) (as
published in 48 CFR § 52.249-2 approval 1996; without Alternates, unless
alternate clause date is called out on the Order) which is incorporated herein
by reference except "Government" and "Contracting Officer" shall mean Spirit
AeroSystems, "Contractor" shall mean Seller and "Contract" shall mean Order.
Seller shall indemnify Spirit AeroSystems and hold Spirit AeroSystems harmless
from and against (i) any and all claims, suits and proceedings against Spirit
AeroSystems by any subcontractor or supplier of Seller in respect of any such
termination and (ii) any and all costs, expenses, losses and damages incurred by
Spirit AeroSystems in connection with any such claim, suit or proceeding.
12.4 Failure to Submit a Claim
Notwithstanding any other provision of this GTA Section 12.0, if Seller fails to
submit a termination claim within the time period set forth above, Seller shall
be barred from submitting a claim and Spirit AeroSystems shall have no
obligation for payment to Seller under this GTA Section 12.0 except for those
Products previously delivered and accepted by Spirit AeroSystems.
12.5 Partial Termination
Any partial termination of an Order shall not alter or affect the terms and
conditions of the Order or any Order with respect to Products not terminated.
12.6 Product Price
Termination under this GTA Section 12.0 shall not result in any change to unit
prices for Products not terminated.
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12.7 Exclusions or Deductions
The following items shall be excluded or deducted from any claim submitted by
Seller:
A.
All unliquidated advances or other payments made by Spirit AeroSystems to Seller
pursuant to a terminated Order;
B.
Any claim which Spirit AeroSystems has against Seller;
C.
The agreed price for scrap allowance;
D.
Except for normal spoilage and any risk of loss assumed by Spirit AeroSystems,
the agreed fair value of property that is lost, destroyed, stolen or damaged.
12.8 Partial Payment/Payment
Payment, if any, to be paid under this GTA Section 12.0 shall be made thirty
(30) days after settlement between the parties or as otherwise agreed to between
the parties. Spirit AeroSystems may make partial payments and payments against
costs incurred by Seller for the terminated portion of the Order. If the total
payments exceed the final amount determined to be due, Seller shall repay the
excess to Spirit AeroSystemsupon demand.
12.9 Seller's Accounting Practices
Spirit AeroSystems and Seller agree that Seller's "normal accounting practices"
used in developing the price of the Product(s) shall also be used in determining
the allocable costs at termination. For purposes of this GTA Section 12.9,
Seller's "normal accounting practices" refers to Seller's method of charging
costs as a direct charge, overhead expense, general administrative expense, etc.
12.10 Records
Unless otherwise provided in this Agreement or by law, Seller shall maintain all
financial records and documents relating to the terminated portion of the Order
for three (3) years after final settlement of Seller's termination claim.
13.0 CANCELLATION FOR DEFAULT
13.1 Events of Default
The occurrence of any one or more of the following events shall constitute an
"Event of Default".
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A.
Any failure by Seller to deliver, when and as required by this Agreement or any
Order, any Product, except as provided in GTA Section 14.0; or
B.
Any failure by Seller to provide an acceptable Assurance of Performance within
the time specified in GTA Section 17.0, or otherwise in accordance with
applicable law; or,
C.
Any failure by Seller to perform or comply with any obligation set forth in GTA
Section 20.0;or,
D.
Seller is or has participated in the sale, purchase or manufacture of airplane
parts without the required approval of the FAA or appropriate non-U.S.
equivalent regulatory agency; or
E.
Spirit AeroSystems revokes Seller’s Quality Assurance System approval, if
applicable; or,
F.
Any failure by Seller to perform or comply with any obligation (other than as
described in the foregoing GTA Sections (13.1.A, 13.1.B, 13.1.C, 13.1.D and
13.1.E) set forth in this Agreement and such failure shall continue unremedied
for a period of ten (10) days or more following receipt by Seller of notice from
Spirit AeroSystems specifying such failure; or
G.
(1) the suspension, dissolution or winding-up of Seller's business, (2) Seller's
insolvency, or its inability to pay debts, or its nonpayment of debts, as they
become due, (3) the institution of reorganization, liquidation or other such
proceedings by or against Seller or the appointment of a custodian, trustee,
receiver or similar Person for Seller's properties or business, (4) an
assignment by Seller for the benefit of its creditors, or (5) any action of
Seller for the purpose of effecting or facilitating any of the foregoing.
13.2 Remedies
If any Event of Default shall occur:
A.
Cancellation
Spirit AeroSystems may, by giving written notice to Seller, immediately cancel
any Order, any SBP or the Agreement, in whole or in part, and Spirit AeroSystems
shall not be required after such notice to accept the tender by Seller of any
Products subject to the cancellation.
B.
Cover
Spirit AeroSystems may manufacture, produce or provide, or may engage any other
persons to manufacture, produce or provide, any Products in substitution for the
Products to be delivered or provided by Seller. In addition to any other
remedies or damages available to Spirit AeroSystems hereunder or at law or in
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equity, Spirit AeroSystems may recover from Seller the difference between the
price for each such Product and the aggregate expense, including, without
limitation, administrative and other indirect costs, paid or incurred bySpirit
AeroSystems to manufacture, produce or provide, or engage other persons to
manufacture, produce or provide, each such Product
C.
Rework or Repair
Where allowed by the applicable regulatory authority, Spirit AeroSystems or its
designee may rework or repair any Product in accordance with GTA Section 8.3;
D.
Setoff
Spirit AeroSystems shall, at its option, have the right to set off against and
apply to the payment or performance of any obligation, sum or amount owing at
any time to Spirit AeroSystems hereunder or under any Order, all deposits,
amounts or balances held by Spirit AeroSystems for the account of Seller and any
amounts owed by Spirit AeroSystems to Seller, regardless of whether any such
deposit, amount, balance or other amount or payment is then due and owing.
E.
Tooling and other Materials
As partial compensation for the additional costs which Spirit AeroSystems will
incur as a result of the transfer of production capabilities from Seller to
Spirit AeroSystems or Spirit AeroSystems’ designee, Seller shall upon the
request of Spirit AeroSystems, transfer and deliver to Spirit AeroSystems
orSpirit AeroSystems‘ designee title to any or all (i) Tooling, (ii) Spirit
AeroSystems -furnished material, (iii) raw materials, parts, work-in-process,
incomplete or completed assemblies, and all other Products or parts thereof in
the possession or under the effective control of Seller or any of its
subcontractors or suppliers (iv) Proprietary Information and Materials of Spirit
AeroSystems including without limitation planning data, drawings and other
Proprietary Information and Materials relating to the design, production,
maintenance, repair and use of Tooling, in the possession or under the effective
control of Seller or any of its subcontractors or suppliers, in each case free
and clear of all liens, claims or other rights of any person.
Seller shall be entitled to receive from Spirit AeroSystems reasonable
compensation for any item accepted by Spirit AeroSystems which has been
transferred to Spirit AeroSystems pursuant to this GTA Section 13.2.E (except
for any item the price of which has been paid to Seller prior to such transfer);
provided, however, that such compensation shall not be paid directly to Seller,
but shall be accounted for as a setoff against any damages payable by Seller
toSpirit AeroSystems as a result of any Event of Default.
F.
Remedies Generally
No failure on the part of Spirit AeroSystems in exercising any right or remedy
hereunder, or as provided by law or in equity, shall impair, prejudice or
constitute
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a waiver of any such right or remedy, or shall be construed as a waiver of any
Event of Default or as acquiescence therein. No single or partial exercise of
any such right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy. No acceptance of partial payment or
performance of any of Seller's obligations hereunder shall constitute a waiver
of any Event of Default or a waiver or release of payment or performance in full
by Seller of any such obligation. All rights and remedies of Spirit AeroSystems
hereunder and at law and in equity shall be cumulative and not mutually
exclusive and the exercise of one shall not be deemed a waiver of the right to
exercise any other. Nothing contained in this Agreement shall be construed to
limit any right or remedy of Spirit AeroSystems now or hereafter existing at law
or in equity.
14.0 EXCUSABLE DELAY
If delivery of any Product is delayed by unforeseeable circumstances beyond the
control and without the fault or negligence of Seller or of its suppliers or
subcontractors (any such delay being hereinafter referred to as "Excusable
Delay"), the delivery of such Product shall be extended for a period to be
determined by Spirit AeroSystems after an assessment by Spirit AeroSystems of
alternative work methods. Excusable Delays may include, but are not limited to,
acts of God, war, terrorist acts, riots, acts of government, fires, floods,
epidemics, quarantine restrictions, freight embargoes, strikes or unusually
severe weather, but shall exclude Seller's noncompliance with any legal
requirement as required by GTA Section 21.0 “Compliance with Laws”. However, the
above notwithstanding, Spirit AeroSystems expects Seller to continue production,
recover lost time and support all schedules as established under this Agreement
or any Order. Therefore, it is understood and agreed that (i) delays of less
than two (2) days duration shall not be considered to be Excusable Delays unless
such delays shall occur within thirty (30) days preceding the scheduled delivery
date of any Product and (ii) if delay in delivery of any Product is caused by
the default of any of Seller's subcontractors or suppliers, such delay shall not
be considered an Excusable Delay unless the supplies or services to be provided
by such subcontractor or supplier are not obtainable from other sources in
sufficient time to permit Seller to meet the applicable delivery schedules. If
delivery of any Product is delayed by any Excusable Delay for more than three
(3) months, Spirit AeroSystems may, without any additional extension, cancel all
or part of any Order with respect to the delayed Products, and exercise any of
its remedies in accordance with GTA Section 13.2, provided however, that Spirit
AeroSystems shall not be entitled to monetary damages or specific performance to
the extent Seller's breach is the result of an Excusable Delay.
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15.0 SUSPENSION OF WORK
Spirit AeroSystems may at any time, by written order to Seller, require Seller
to stop all or any part of the work called for by any Order for up to one
hundred twenty (120) days hereafter referred to as a "Stop Work Order" issued
pursuant to this GTA Section 15.0. On receipt of a Stop Work Order, Seller shall
promptly comply with its terms and take all reasonable steps to minimize the
occurrence of costs arising from the work covered by the Stop Work Order during
the period of work stoppage. Within the period covered by the Stop Work Order
(including any extension thereof) Spirit AeroSystems shall either (i) cancel the
Stop Work Order or (ii) terminate or cancel the work covered by the Stop Work
Order in accordance with the provisions of GTA Section 12.0 or 13.0. In the
event the Stop Work Order is canceled by Spirit AeroSystems or the period of the
Stop Work Order (including any extension thereof) expires, Seller shall promptly
resume work in accordance with the terms of the Agreement.
16.0 TERMINATION OR WRONGFUL CANCELLATION
Spirit AeroSystems shall not be liable for any loss or damage resulting from any
termination pursuant to GTA Section 12.1, except as expressly provided in GTA
Section 12.3 or any cancellation under GTA Section 13.0 except to the extent
that such cancellation shall have been determined to have been wrongful, in
which case such wrongful cancellation shall be deemed a termination pursuant to
GTA Section 12.1 and therefore, Spirit AeroSystems’ liability shall be limited
to the payment to Seller of the amount or amounts identified in GTA Section
12.3.
17.0 ASSURANCE OF PERFORMANCE
A.
Seller to Provide Assurance
If Spirit AeroSystems determines, at any time or from time to time, that it is
not sufficiently assured of Seller's full, timely and continuing performance
hereunder, or if for any other reason Spirit AeroSystems has reasonable grounds
for insecurity, Spirit AeroSystems may request, by notice to Seller, written
assurance (hereafter an "Assurance of Performance") with respect to any specific
matters affecting Seller's performance hereunder, that Seller is able to perform
all of its respective obligations under any Order when and as specified herein.
Each Assurance of Performance shall be delivered by Seller to Spirit AeroSystems
as promptly as possible, but in any event no later than ten (10) calendar days
following Spirit AeroSystems’ request therefore and each Assurance of
Performance shall be accompanied by any information, reports or other materials,
prepared by Seller, as Spirit AeroSystems may reasonably request. Except as to
payment for accepted goods, Spirit AeroSystems may suspend all or any part of
Spirit AeroSystems’ performance hereunder until Spirit AeroSystems receives an
Assurance of Performance from Seller satisfactory in form and substance to
Spirit AeroSystems.
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B.
Meetings and Information
Spirit AeroSystems may request one or more meetings with senior management or
other employees of Seller for the purpose of discussing any request by Spirit
AeroSystems for Assurance of Performance or any Assurance of Performance
provided by Seller. Seller shall make such persons available to meet with
representatives of Spirit AeroSystems as soon as may be practicable following a
request for any such meeting by Spirit AeroSystems and Seller shall make
available to Spirit AeroSystems any additional information, reports or other
materials in connection therewith as Spirit AeroSystems may reasonably request.
18.0 RESPONSIBILITY FOR PROPERTY
Seller shall clearly mark, maintain an inventory of, and keep segregated or
identifiable all of Spirit AeroSystems’ property and all property to which
Spirit AeroSystems has acquired an interest. Seller assumes all risk of loss,
destruction or damage of such property while in Seller’s or its subcontractors’
or suppliers’ possession, custody or control. Upon request, Seller shall provide
Spirit AeroSystems with adequate proof of insurance against such risk of loss.
Seller shall not use such property other than in performance of an Order without
prior written consent from Spirit AeroSystems. Seller shall notify Spirit
AeroSystems’ Procurement Representative if Spirit AeroSystems’ property is lost,
damaged or destroyed. As directed by SPIRIT Spirit AeroSystems, upon completion,
termination or cancellation of the agreement or any Order, Seller shall deliver
such property, to the extent not incorporated in delivered end products, to
Spirit AeroSystems in good condition subject to ordinary wear and tear and
normal manufacturing losses. Nothing in this GTA Section 18.0 limits Seller’s
use, in its direct contracts with the Government, of property in which the
Government has an interest.
19.0 LIMITATION OF SELLER'S RIGHT TO ENCUMBER ASSETS
Seller warrants to Spirit AeroSystems that it has good title to all inventory,
work-in-process, tooling and materials to be supplied by Seller in the
performance of its obligations under any Order. Pursuant to the provisions of
such Order, Seller will transfer to Spirit AeroSystems title to such inventory,
work-in-process, tooling and materials whether transferred separately or as part
of any Product delivered under the Order, free of any liens, charges,
encumbrances or rights of others.
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20.0 PROPRIETARY INFORMATION AND ITEMS
Spirit AeroSystems and Seller shall each keep confidential and protect from
disclosure all (a) confidential, proprietary, and/or trade secret information;
(b) tangible items containing, conveying, or embodying such information; and (c)
tooling obtained from and/or belonging to the other in connection with this
Agreement or any Order (collectively referred to as "Proprietary Information and
Materials"). Spirit AeroSystems and Seller shall each use Proprietary
Information and Materials of the other only in the performance of and for the
purpose of this Agreement and/or any Order. Provided, however, that despite any
other obligations or restrictions imposed by this GTA Section 20.0, Spirit
AeroSystems shall have the right to use, disclose and copy Seller's Proprietary
Information and Materials for the purposes of testing, certification, use, sale,
or support of any item delivered under this Agreement, an Order, or any airplane
including such an item; and any such disclosure by Spirit AeroSystems shall,
whenever appropriate, include a restrictive legend suitable to the particular
circumstances. The restrictions on disclosure or use of Proprietary Information
and Materials by Seller shall apply to all materials derived by Seller or others
from Spirit AeroSystems provided Proprietary Information and Materials.Upon
Spirit AeroSystems’ request at any time, and in any event upon the completion,
termination or cancellation of this Agreement, Seller shall return all of Spirit
AeroSystems provided Proprietary Information and Materials, and all materials
derived from Spirit AeroSystems provided Proprietary Information and Materials
to Spirit AeroSystems or Spirit AeroSystems’ designee unless specifically
directed otherwise in writing by Spirit AeroSystems. Seller shall not, without
the prior written authorization of Spirit AeroSystems, sell or otherwise dispose
of (as scrap or otherwise) any parts or other materials containing, conveying,
embodying, or made in accordance with or by reference to any Proprietary
Information and Materials. Prior to disposing of such parts or materials as
scrap, Seller shall render them unusable. Spirit AeroSystems shall have the
right to audit Seller's compliance with this GTA Section 20.0. Seller may
disclose Proprietary Information and Materials of Spirit AeroSystems to its
subcontractors or suppliers as required for the performance of an Order,
provided that each such subcontractor first assumes, by written agreement, the
same obligations imposed upon Seller under this GTA Section 20.0 relating to
Proprietary Informations and Materials; and Seller shall be liable to Spirit
AeroSystems for any breach of such obligation by such subcontractor. The
provisions of this GTA Section 20.0 are effective in lieu of, and will apply
notwithstanding the absence of, any restrictive legends or notices applied to
Proprietary Informations and Materials; and the provisions of this GTA Section
20.0 shall survive the performance, completion, termination or cancellation of
this Agreement or any Order. This GTA Section 20.0 supersedes and replaces any
and all other prior agreements or understandings between the parties to the
extent that such agreements or understandings relate to Spirit AeroSystems’
obligations relative to confidential, proprietary, and/or trade secret
information, or tangible items containing, conveying, or embodying such
information, obtained from Seller and related to any Product, regardless of
whether disclosed to the receiving party before or after the effective date of
this Agreement.
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21.0 COMPLIANCE
21.1 Compliance With Laws
Seller shall be responsible for complying with all legal requirements,
including, but not limited to the provisions of any statute, ordinance, rule,
regulation, judgment, decree, order, permit, approval, license or registration
applicable to its performance under this Agreement. Seller shall notify Spirit
AeroSystems of any aspect of Seller’s performance that is prohibited under any
legal requirements, at the earliest opportunity, but in all events sufficiently
in advance of Seller performance of such obligation, so as to identify and
implement alternative methods of performance. Seller shall notify Spirit
AeroSystems in writing at the earliest possible opportunity of any aspect of its
performance, which becomes subject to any additional legal requirement after the
date of execution of this Agreement or which Seller reasonably believes will
become subject to additional regulation during the term of this Agreement.
Seller agrees to indemnify and to hold harmless Spirit AeroSystems from any
failure by Seller to comply with any legal requirement.
21.2 Government Requirements
If any of the work to be performed under this Agreement is performed in the
United States, Seller shall, via invoice or other form satisfactory to Spirit
AeroSystems, certify that the Products covered by the Order were produced in
compliance with Sections 6, 7, and 12 of the Fair Labor Standards Act (29 U.S.C.
201-291), as amended, and the regulations and orders of the U.S. Department of
Labor issued there under. In addition, the following Federal Acquisition
Regulations are incorporated herein by this reference except "Contractor" shall
mean "Seller": Other Government clauses, if any, are incorporated herein either
by attachment to this document or by some other means of reference.
FAR 52.222-26 "Equal Opportunity"
FAR 52.222-35 "Affirmative Action for Disabled Veterans and Veterans of the
Vietnam Era”
FAR 52.222-36 "Affirmative Action for Workers with Disabilities”
FAR 52.247-64 “Preference for Privately Owned U.S.-Flagged Commercial Vessels”
21.3 Ethic Requirements/Code of Conduct
Spirit AeroSystems is committed to conducting its business fairly, impartially,
and in an ethical and proper manner. Spirit AeroSystems expectation is that
Seller will also conduct its business fairly, impartially and in an ethical and
proper manner. Spirit AeroSystems further expects that Seller will have (or
will develop) and adhere to a code of ethical standards. If Seller has cause to
believe that Spirit AeroSystems or any
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employee or agent of Spirit AeroSystems has behaved improperly or unethically
under this contract, Seller shall report such conduct to Spirit AeroSystems.
Although Spirit AeroSystems will not use the failure to report improper or
unethical behavior as a basis for claiming breach of contract by Seller, Seller
is encouraged to exert reasonable efforts to report such behavior when
warranted.
22.0 INTEGRITY IN PROCUREMENT
Seller warrants that neither it nor any of its employees, agents or
representatives have offered or given, or will offer or give any gratuities to
Spirit AeroSystems’ employees, agents or representatives for the purpose of
securing any Order or securing favorable treatment under any Order.
23.0 UTILIZATION OF SMALL BUSINESS CONCERNS
Seller agrees to actively seek out and provide the maximum practicable
opportunities for small businesses, small disadvantaged businesses, women-owned
small businesses, minority business enterprises, historically black colleges and
universities and minority institutions, historically underutilized business zone
small business concerns and U.S. veteran and service-disabled veteran owned
small business concerns to participate in the subcontracts Seller awards to the
fullest extent consistent with the efficient performance of this contract.
24.0 SPIRIT AEROSYSTEMS’ RIGHTS IN SELLER'S PATENTS, COPYRIGHTS, TRADE SECRETS,
AND TOOLING
Seller hereby grants to Spirit AeroSystems an irrevocable, nonexclusive, paid-up
worldwide license to practice and/or use, and license others to practice and/or
use on Spirit AeroSystems’ behalf, all of Seller's patents, copyrights, trade
secrets (including, without limitation, designs, processes, drawings, technical
data and tooling), industrial designs, semiconductor mask works, and tooling
(collectively hereinafter referred to as "Licensed Property") related to the
development, production, maintenance or repair of Products. Spirit AeroSystems
hereafter retains all of the aforementioned license rights in Licensed Property,
but Spirit AeroSystems hereby covenants not to exercise such rights except in
connection with the making, having made, using and selling of Products or
products of the same kind provided that such Product cannot, in Spirit
AeroSystems’ sole determination, be reasonably obtained in the required time
frame at a reasonable price from commercially available sources (including
Spirit AeroSystems) without the use of Seller’s Licensed Property and if one or
more of the following situations occur:
A.
Seller discontinues or suspends business operations or the production of any or
all of the Products;
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B.
Seller is acquired by or transfers any or all of its rights to manufacture any
Product to any third party, whether or not related, without Spirit AeroSystems’
prior written concurrence;
C.
Spirit AeroSystems cancels this Agreement or any Order for cause pursuant to GTA
Section 13.0 herein;
D.
In Spirit AeroSystems’ judgment it becomes necessary, in order for Seller to
comply with the terms of this Agreement or any Order, for Spirit AeroSystems to
provide support to Seller (in the form of design, manufacturing, or on-site
personnel assistance) substantially in excess of that which Spirit AeroSystems
normally provides to its suppliers;
E.
Seller's trustee in bankruptcy (or Seller as debtor in possession) fails to
assume this Agreement and all Orders by formal entry of an order in the
bankruptcy court within sixty (60) days after entry of an order for relief in a
bankruptcy case of the Seller, or Spirit AeroSystems elects to retain its rights
to Licensed Property under the bankruptcy laws;
F.
Seller is at any time insolvent (whether measured under a balance sheet test or
by the failure to pay debts as they come due) or the subject of any insolvency
or debt assignment proceeding under state or non-bankruptcy law; or
G.
Seller voluntarily becomes a debtor in any case under bankruptcy law or, in the
event an involuntary bankruptcy petition is filed against Seller, such petition
is not dismissed within thirty (30) days.
As a part of the license granted under this GTA Section 24.0, Seller shall, at
the written request of Spirit AeroSystems and at no additional cost to SPIRIT
AEROSYSTEMS, promptly deliver to Spirit AeroSystems any and all Licensed
Property considered by Spirit AeroSystems to be necessary to satisfy Spirit
AeroSystems’ requirements for Products and their substitutes.
25.0 TERMINATION OF AIRPLANE PROGRAM
25.1 Program Termination
The parties acknowledge and agree that Spirit AeroSystems may, in its sole
discretion, terminate all or part of this Agreement, including any Order issued
hereunder, by written notice to Seller, if Spirit AeroSystems’ Customer decides
not to initiate or continue production of the program which the Product
supports, by reason of SPIRIT AEROSYSTEMS’ Customer’s determination that there
is insufficient business basis for proceeding with such program. In the event of
such a termination, Spirit AeroSystems shall have no liability to Seller except
as expressly provided in GTA Section 25.2 below.
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25.2 Termination Liability
In the event of a termination of the program as described in 25.1 above, Spirit
AeroSystems shall have no liability whatsoever to Seller, except to the extent
of any Orders issued prior to the date of the written notice to Seller
identified in 25.1 above. Termination of such Orders shall be governed by GTA
Section 12.0 herein.
26.0 PUBLICITY
Without Spirit AeroSystems’ prior written approval, Seller shall not, and shall
require that its subcontractors or suppliers shall not, release any publicity,
advertisement, news release or denial or confirmation of the same, regarding any
Order or Products, or the program to which they may pertain. Seller shall be
liable to Spirit AeroSystems for any breach of such obligation by any
subcontractor or supplier.
27.0 PROPERTY INSURANCE
27.1 Insurance
Seller shall obtain and maintain continuously in effect a property insurance
policy covering loss or destruction of or damage to all property in which Spirit
AeroSystems does or could have an insurable interest pursuant to this Agreement,
including but not limited to Tooling, Spirit AeroSystems furnished property, raw
materials, parts, work-in-process, incomplete or completed assemblies and all
other products or parts thereof, and all drawings, specifications, data and
other materials relating to any of the foregoing in each case to the extent in
the possession or under the effective care, custody or control of Seller or any
agent, employee, affiliate, subcontractor or supplier of Seller, in the amount
of full replacement value thereof providing protection against all perils
normally covered in an "all risk" property insurance policy (including without
limitation fire, windstorm, explosion, riot, civil commotion, aircraft,
earthquake, flood or other acts of God). Any such policy shall be with insurers
reasonably acceptable to Spirit AeroSystems and shall (i) provide for payment of
loss there under to Spirit AeroSystems, as loss payee, as its interests may
appear and (ii) contain a waiver of any rights of subrogation against Spirit
AeroSystems, its subsidiaries, and their respective directors, officers,
employees and agents
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27.2 Certificate of Insurance
Upon written request from Spirit AeroSystems, Seller shall provide to Spirit
AeroSystems’ Procurement Representative Certificates of Insurance reflecting
full compliance with the requirements set forth in GTA Section 27.1. Such
certificates shall be kept current and in compliance throughout the period of
this Agreement and shall provide for thirty (30) days advanced written notice to
Spirit AeroSystems’ Procurement Representative in the event of cancellation,
non-renewal or material change adversely affecting the interests of Spirit
AeroSystems.
27.3 Notice of Damage or Loss
Seller shall give prompt written notice to Spirit AeroSystems’ Procurement
Representative of the occurrence of any damage or loss to any property required
to be insured herein. If any such property shall be damaged or destroyed, in
whole or in part, by an insured peril or otherwise, and if no Event of Default
shall have occurred and be continuing, then Seller may, upon written notice to
Spirit AeroSystems, settle, adjust, or compromise any and all such loss or
damage not in excess of Two Hundred Fifty Thousand Dollars ($250,000) in any one
occurrence and Five Hundred Thousand Dollars ($500,000) in the aggregate. Seller
may settle, adjust or compromise any other claim by Seller only after Spirit
AeroSystems has given written approval, which approval shall not be unreasonably
withheld.
28.0 RESPONSIBILITY FOR PERFORMANCE
Seller shall be responsible for performance of its obligations under this
Agreement. Seller shall bear all risks of providing adequate facilities and
equipment to perform each Order in accordance with the terms thereof. If any use
of any facilities or equipment contemplated by Seller for use in performing
Orders will not be available for any reason, Seller shall be responsible for
arranging for similar facilities and equipment at no cost to Spirit AeroSystems,
and any failure to do so shall not relieve Seller from its obligations.
Seller shall notify and obtain written approval from Spirit AeroSystems prior to
moving work to be performed under this Agreement between Seller’s various
facilities. Seller shall include as part of its subcontracts those elements of
the Agreement that protect Spirit AeroSystems’ rights including but not limited
to right of entry provisions, proprietary information and rights provisions and
quality control provisions. In addition, Seller shall provide to its
subcontractor's sufficient information to document clearly that the work being
performed by Seller's subcontractor is to facilitate performance under this
Agreement or any Order. Sufficient information may include but is not limited to
Order number, GTA number or the name of Spirit AeroSystems’ Procurement
Representative.
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28.1 Subcontracting
Seller shall maintain complete and accurate records regarding all subcontracted
items and/or processes. Seller’s use of subcontractors or suppliers shall comply
with Seller’s quality assurance system approval for said subcontractors or
suppliers. Unless Spirit AeroSystems’ prior written authorization or approval is
obtained, Seller may not purchase completed or substantially completed Products.
For purposes of this GTA Section and this GTA Section only, completed or
substantially completed Products shall not include components of assemblies or
subassemblies. No subcontracting by Seller shall relieve Seller of its
obligation under the applicable Order. Utilization of a Spirit AeroSystems
approved source does not constitute a waiver of Seller's responsibility to meet
all specification requirements.
28.2 Reliance
Entering into this Agreement is in part based upon Spirit AeroSystems’ reliance
on Seller's ability, expertise and awareness of the intended use of the
Products. Seller agrees that Spirit AeroSystems and Spirit AeroSystems’
Customers may rely on Seller as an expert, and Seller will not deny any
responsibility or obligation hereunder to Spirit AeroSystems or Spirit
AeroSystems’ Customers on the grounds that Spirit AeroSystems or Spirit
AeroSystems’ Customers provided recommendations or assistance in any phase of
the work involved in producing or supporting the Products, including but not
limited to Spirit AeroSystems’ acceptance of specifications, test data or the
Products.
28.3 Assignment
*
29.0 NON-WAIVER/PARTIAL INVALIDITY
Any failures, delays or forbearances of Spirit AeroSystems in insisting upon or
enforcing any provisions of any Order, or in exercising any rights or remedies
under this Agreement, shall not be construed as a waiver or relinquishment of
any such provisions, rights or remedies; rather, the same shall remain in full
force and effect. If any provision of any Order is or becomes void or
unenforceable by law, the remainder shall be valid and enforceable.
_______________________
*The text noted by asterisks has been redacted in connection with a request to
the Securities and Exchange Commission for confidential treatment of such text
pursuant to Rule 24b-2. A copy of this Agreement including the redacted
information has been submitted to the Securities and Exchange Commission as part
of such request.
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30.0 HEADINGS
Section headings used in this Agreement are for convenient reference only and do
not affect the interpretation of the Agreement.
31.0 RESERVED
32.0 RESERVED
33.0 DISPUTES
Spirit AeroSystems and Seller shall use their best reasonable efforts to resolve
any and all disputes, controversies, claims or differences between Spirit
AeroSystems and Seller, arising out of or relating in any way to this GTA or its
performance, including, but not limited to, any questions regarding the
existence, validity or termination hereof ("Disputes"), through negotiation. If
a Dispute cannot be resolved by the functional representatives of Spirit
AeroSystems and Seller, it shall be referred up through management channels of
the Parties or their respective designees, for further negotiation.
Any dispute that arises under or is related to this Agreement that cannot be
settled by mutual agreement of the parties shall be resolved only as provided in
SBP Section 5. Pending final resolution of any dispute, Seller shall proceed
with performance of this Agreement according to Spirit AeroSystems’ instructions
so long as Spirit AeroSystems continues to pay amounts not in dispute.
34.0 RESERVED
35.0 TAXES
35.1 Inclusion of Taxes in Price
Unless this Agreement, specifies otherwise, the price of this contract includes,
and Seller is liable for and shall pay, all taxes, impositions, charges and
exactions imposed on or measured by this Agreement and the Orders issued
hereunder, except for sales or use taxes on sales to Spirit AeroSystems ("Sales
Taxes") for which Spirit AeroSystems specifically agrees to pay and which are
separately stated on Seller’s invoice. Prices shall not include any taxes,
impositions, charges or exactions for which Spirit AeroSystems has furnished a
valid exemption certificate or other evidence of exemption.
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35.2 Litigation
In the event that any taxing authority has claimed or does claim payment for
sales taxes, Seller shall promptly notify Spirit AeroSystems, and Seller shall
take such action as Spirit AeroSystems may direct to pay or protest such taxes
or to defend against such claim. The actual and direct expenses, without the
addition of profit and overhead, of such defense and the amount of such taxes as
ultimately determined as due and payable shall be paid directly by Spirit
AeroSystems or reimbursed to Seller. If Seller or Spirit AeroSystems is
successful in defending such claim, the amount of such taxes recovered by
Seller, which had previously been paid by Seller and reimbursed by Spirit
AeroSystems or paid directly by Spirit AeroSystems, shall be immediately
refunded to Spirit AeroSystems.
35.3 Rebates
If any taxes paid by Spirit AeroSystems are subject to rebate or reimbursement,
Seller shall take the necessary actions to secure such rebates or reimbursement
and shall promptly refund to Spirit AeroSystems any amount recovered
36.0 INDUSTRIAL PARTICIPATION
To the exclusion of all others, Spirit AeroSystems or its assignee shall be
entitled to all industrial participation benefits or offset credits which might
result from this Agreement or Order. Seller shall provide documentation or
information, which Spirit AeroSystems or its assignee may reasonably request to
substantiate claims for industrial benefits or offset credits. Seller agrees to
use reasonable efforts to identify the foreign content of goods, which Seller
either produces itself or procures from other companies for work directly
related to this Agreement. Promptly after selection of a non-U.S. subcontractor
or supplier for work under this Agreement, Seller shall notify Spirit
AeroSystems of the name, address, subcontract point of contact (including
telephone number) and dollar value of the subcontract.
EXECUTED in duplicate as of the date and year first set forth above by the duly
authorized representatives of the Parties.
Spirit AeroSystems SELLER
Spirit AeroSystems, Inc. LMI Aerospace, Inc.
_______________________________
_______________________________
Name: K. E. Lyons
Name:
Title: Procurement Agent, V
Title:
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Date:
Date:
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|
Exhibit 10.17
TWO PARAGON CENTRE
AMENDED AND RESTATED LEASE AGREEMENT
BY AND BETWEEN
PARAGON CENTRE HOLDINGS, LLC, AS LANDLORD AND
TEXAS ROADHOUSE HOLDINGS LLC, AS TENANT
January 1, 2006
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LEASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I.
Basic Lease Provisions
ARTICLE X.
Section 10.1
Subordination
ARTICLE II.
Section 10.2
Estoppel Certificate or Three-Party Agreement
Section 2.1
Premises
Section 10.2
Notices
Section 2.2
Term
Section 2.3
Use
ARTICLE XI.
Section 11.1
Right to Relocate Tenant
ARTICLE III.
Section 11.2
Rights and Remedies Cumulative
Section 3.1
Rental Payments
Section 11.3
Legal Interpretation
Section 3.2
Additional Rent
Section 11.4
Tenant’s Authority
Section 3.3
Security Deposit
Section 11.5
No Brokers
Section 11.6
Consents by Landlord
ARTICLE IV.
Section 11.7
Joint and Several Liability
Section 4.1
Services
Section 11.8
Independent Covenants
Section 4.2
Keys and Locks
Section 11.9
Attorneys’ Fees and Other Expenses
Section 4.3
Graphics and Building Directory
Section 11.10
Recording
ARTICLE V.
Section 11.11
Disclaimer; Waiver of Jury Trial
Section 5.1
Occupancy of Premises
Section 11.12
No Access to Roof
Section 5.2
Entry for Repairs and Inspection
Section 11.13
Parking
Section 5.3
Hazardous Materials
Section 11.14
No Accord or Satisfaction
Section 11.15
Acceptance
ARTICLE VI.
Section 11.16
Waiver of Counterclaim
Section 6.1
Leasehold Improvements
Section 11.17
Time Is of the Essence
Section 6.2
Repairs by Landlord
Section 11.18
Counterparts
Section 6.3
Repairs by Tenant
Section 11.19
Execution and Delivery of Lease
Section 6.4
Liens
Section 11.20
Real Estate Investment Trust
Section 6.5
Indemnification
EXHIBITS
ARTICLE VII.
Exhibit A
Land
Section 7.1
Condemnation
Exhibit B
Floor Plan(s) of Premises
Section 7.2
Force Majeure
Exhibit C
Special Stipulations
Section 7.3
The or Other Casualty
Exhibit D
INTENTIONALLY OMITTED
Section 7.4
Insurance
Exhibit E
Work Letter Agreement
Section 7.5
Waiver of Subrogation Rights
Exhibit F
Building Rules and Regulations
ARTICLE VIII.
Section 8.1
Default by Tenant
Section 8.2
Landlord’s Remedies
Section 8.3
Duty to Relet or Mitigate
Section 8.4
Reentry
Section 8.5
Rights of Landlord in Bankruptcy
Section 8.6
Waiver of Certain Rights
Section 8.7
NonWaiver
Section 8.8
Holding Over
Section 8.9
Abandonment of Personal Property
ARTICLE IX.
Section 9.1
Transfers
Section 9.2
Assignment by Landlord
Section 9.3
Limitation of’ Landlord’s Liability
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AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”) is made and entered
into as of the 1st day of January, 2006, by and between PARAGON CENTRE HOLDINGS,
LLC, a Kentucky limited liability company (“Landlord”), whose address is 6060
Dutchmans Lane, Louisville, Kentucky 40205, and TEXAS ROADHOUSE HOLDINGS LLC, a
Kentucky limited liability company (“Tenant”), whose address is 6040 Dutchmans
Lane, Suite 200, Louisville, Kentucky 40205; Attn: Sheila C. Brown, Esq.,
General Counsel. Subject to all of the terms, provisions, covenants and
conditions of this Lease, and in consideration of the mutual covenants,
obligations and agreements contained in this Lease, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Landlord and Tenant agree as follows:
ARTICLE I.
BASIC LEASE PROVISIONS
As of the Commencement Date (as defined below), this Lease shall be a
replacement for and shall operate to terminate that certain Lease Agreement
dated August 15, 2003 by and between Tenant and Paragon Centre Associates, LLC
as assigned to Landlord pursuant to (i) that certain Assignment of Lease and
Security Deposit, Assumption Agreement dated January 28, 2004 by and between
Paragon Centre Associates, LLC and Landlord and Tenant’s Consent dated January
28, 2004 by and between Landlord and Tenant, together with all amendments
thereto that may have been made from time to time by, and between the parties
and (ii) that certain Agreement Regarding Satellite Antenna dated November 6,
2001, (collectively, the “Prior Lease”). Landlord, for and in consideration of
the rents and all other charges and payments hereunder and of the covenants,
agreements, terms, provisions and conditions to be kept and performed hereunder
by Tenant hereby directly renews, demises and leases to Tenant and Tenant hereby
directly renews, hires, leases and takes from Landlord, the premises described
below, subject to all matters hereinafter set forth and upon and subject to the
covenants, agreements, terms, provisions and conditions of this Lease for the
term hereinafter stated. For purposes of this Lease, the following terms shall
have the meanings ascribed to them below:
Building shall mean the approximately 61,704 square feet of Rentable Area
(hereinafter defined) situated upon the Land (hereinafter defined) commonly
known as Two Paragon Centre located at 6040 Dutchmans Lane, Louisville,
Jefferson County, Kentucky 40205, as the same currently exists or as it may from
time to time hereafter be expanded or modified.
Commencement Date shall mean January 1, 2006.
Complex shall mean the Project together with that certain office building known
as One Paragon Centre located at 6060 Dutchmans Lane, Louisville, Kentucky, the
Land upon which the Building and One Paragon Centre are located, and all
improvements and additional facilities serving or benefiting the Building and
One Paragon Centre from time to time.
Expense Stop shall mean $6.00 per rentable square foot.
Expiration Date shall mean December 31, 2020.
Guarantor (whether one or more) shall mean None.
Land shall mean that certain tract of land situated in Jefferson County,
Kentucky, and more particularly described on Exhibit A attached hereto and
hereby made a part hereof.
Lease Year shall mean each consecutive twelve (12) month period during the Term
commencing with the Commencement Date.
Project shall mean the Building, together with the Land, the parking garage or
parking area serving the Building, if any, all other improvements situated on
the Land or directly benefiting the Building, and all additional facilities or
improvements directly benefiting the Building that may be constructed in
subsequent years.
Security Deposit shall mean $24,702.13, currently being held by Landlord under
the Prior Lease.
ARTICLE II.
Section 2.1 Premises. The Premises demised by this Lease shall
initially consist of a total 46,746 square feet of Rentable Area (as hereinafter
defined) known as Suite 400 (16,023 square feet of Rentable Area), Suite 100
(3,082 square feet of Rentable Area), Suite 110 (2,416 square feet of Rentable
Area), Suite 120 (2,994 square feet of Rentable Area), Suite 130 (2,313 square
feet of Rentable Area), Suite 140 (1,334 square feet of Rentable Area), Suite
150 (3,317 square feet of Rentable Area), Suite 200 (8,040 square feet of
Rentable Area), Suite 300 (4,334 square feet of Rentable Area), Suite 305 (1,488
square feet of Rentable Area), and Suite 310 (1,405 square feet of Rentable
Area) on Floors 4, 1, 2, and 3 of the Building (collectively, the “Premises”).
The Premises are outlined on Exhibit B attached hereto and hereby made a part
hereof. All square footage (the “Rentable Area”) utilized in this Lease has
been, or will be as to future space, made by measuring the gross area within the
inside surface of the outer glass of the exterior walls of the Premises, to the
mid-point of any walls separating portions of the Premises from Common Areas and
Services Areas, subject to the following: (a) Rentable Area shall not include
any Service Area; (b) Rentable Area shall include a pro rata portion of the
Common Areas in the Building, such pro ration based upon the ratio of the
Rentable Area within the Premises to the total Rentable Area in the Building,
both determined without regard to the Common Areas; and (c) Rentable Area shall
include
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columns and/or projection(s) which protrude into the Premises and/or the Common
Areas. For purposes of the foregoing, “Service Areas” shall mean those areas of
the Building within the outside walls used for elevator mechanical rooms,
building stairs, fire towers, elevator shafts, flue, vents, stacks, pipe shafts
and vertical ducts (but shall not include any such areas for the use of any
particular tenant); and “Common Areas” shall mean those areas of the Building
devoted to corridors, elevator foyers, atria, restrooms, mechanical rooms,
janitorial closets, electrical and telephone closets, vending areas and other
facilities provided for the common use or benefit of tenants generally and/or
the public. For all other purposes of this Lease except the foregoing
calculation of Rentable Area, the term “Common Areas” shall also mean all other
areas and facilities, including lobbies, parking facilities, sidewalks,
landscapings, driveways, restrooms and similar improvements, serving the
Building and/or the Project. Unless otherwise specifically designated, all
references to square footage or square feet in this Lease are to Rentable Area.
Section 2.2 Term. The Term of this Lease shall begin on the
Commencement Date set forth above and shall expire on the Expiration Date unless
extended or sooner terminated in accordance with the provisions of this Lease;
provided however, that Tenant’s obligation to pay Base Rent and Tenant’s Pro
Rata Share of Operating Expenses (hereinafter defined) for Suite 150 commences
on March 1, 2006.
Section 2.3 Use. The Premises are to be used only for general office
purposes and for no other business or purpose without the prior written consent
of Landlord. No act shall be done in or about the Premises that is unlawful or
that will increase the existing rate of insurance on the Building. In the event
of a breach of this covenant, Tenant shall immediately cease the performance of
such unlawful act or such act that is increasing or has increased the existing
rate of insurance and shall pay to Landlord any and all increases in insurance
premiums resulting from such breach. Tenant shall not commit or allow to be
committed any waste upon the Premises, or any public or private nuisance or
other act or thing which disturbs the quiet enjoyment of any other tenant in the
Building. If any of Tenant’s office machines or equipment unreasonably disturb
any other tenant in the Building, then Tenant shall provide adequate insulation,
or take such other action as may be necessary to eliminate the noise or
disturbance at its sole cost and expense. Tenant shall not without Landlord’s
prior consent install any equipment, machine, device, tank or vessel which is
subject to any federal, state or local permitting requirement. Tenant at its
expense, shall comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements governing the installation, operation and
removal of any such equipment, machine, device, tank or vessel. Tenant at its
expense, shall comply with all laws, statutes, ordinances, governmental rules,
regulations or requirements, and the provisions of any recorded documents now
existing or hereafter in effect relating to its use, operation or occupancy of
the Premises and shall observe such reasonable rules and regulations as may be
adopted and made available to Tenant by Landlord from time to time for the
safety, care and cleanliness of the Premises or the Building and for the
preservation of good order therein. The current rules and regulations for the
Building are attached hereto as Exhibit F. Without limiting the foregoing,
Tenant agrees to be wholly responsible at Tenant’s sole cost and expense for any
accommodations or alterations which need to be made to the Premises, subject to
Landlord approval, to comply with the provisions of the Americans With
Disabilities Act of 1990, as amended.
ARTICLE III.
Section 3.1 Rental Payments.
(a) Base Rent. Commencing on the Commencement Date for the Premises
and continuing thereafter throughout the Term, Tenant shall pay the Base Rent
described in this paragraph, which is due and payable each Lease Year during the
Term hereof in twelve (12) equal installments on the first (1st) day of each
calendar month during the Term, and Tenant shall make such installments to
Landlord at Landlord’s address specified in this Lease (or such other address as
may be designated by Landlord from time to time) monthly in advance. Base Rent
during the Term for the Premises shall be as follows:
Term
Premises
Base Rent
Per Rentable
Square Foot
Total
Base Rent
Base Rent
Monthly
1/1/06—2/28/06
400, 100, 110, 120,
130, 140, 200, 300,
305, 310
$ 17.54
$ 761,744.66
$ 63,478.72
3/1/06—12/31/06
400, 100, 110, 120,
130, 140, 150, 200,
300, 305, 310
$ 17.54
$ 819,924.84
$ 68,327.07
1/1/07-12/31/15
400, 100, 110, 120,
130, 140, 150, 200,
300, 305, 310
$ 18.34
$ 857,321.64
$ 71,443.47
1/1/16—12/31/20
400, 100, 110, 120,
130, 140, 150, 200,
300, 305, 310
95% Fair Market Rent (as defined in Exhibit C,
Special Stipulations)
The foregoing Base Rent includes the Expense Stop. So long as Tenant is not then
in default under this Lease, in the event Tenant has paid Landlord any Prepaid
Rent such Prepaid Rent shall be applied to the first (1st) monthly installment
of Base Rent due hereunder.
(b) Partial Month. If the Commencement Date is other than the first
(1st) day of a calendar month or if this Lease expires or terminates on a day
other than the last day of a calendar month, then the installments of Base Rent
for such
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month or months shall be prorated based upon multiplying the applicable Base
Rent by a fraction, the numerator of which shall be the number of days of the
Term occurring during said commencement or termination month, as the case may
be, and the denominator of which shall be the number of days in such month.
(c) Payment; Late Charge; Past Due Rate. The Base Rent, the Additional
Rent (hereinafter defined), any Prepaid Rent and any and all other payments
which Tenant is obligated to make to Landlord under this Lease shall constitute
and are sometimes hereinafter collectively referred to as “Rent.” Tenant shall
pay all Rent and other sums of money as shall become due from and payable by
Tenant to Landlord in lawful money of the United States of America at the times
and in the manner provided in this Lease, without demand, deduction, abatement,
setoff, counterclaim or prior notice. Tenant hereby acknowledges that late
payment to Landlord of Rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. If any Rent or other sum due from Tenant is
not received on or before its due date, then Tenant shall pay to Landlord
immediately upon Landlord’s demand therefor a late charge in an amount equal to
five percent (5%) of such overdue amount plus any attorneys’ fees and costs
incurred by Landlord by reason of Tenant’s failure to pay Rent and other charges
when due hereunder. Additionally, all Rent under this Lease shall bear interest
from the date due until paid at the lesser of twelve percent (12%) or the
maximum non-usurious rate of interest then permitted by the applicable laws of
the state in which the Building is located or the United States of America,
whichever shall permit the higher non-usurious rate, such interest being in
addition to and cumulative of any other rights and remedies which Landlord may
have with regard to the failure of Tenant to make any such payments under this
Lease.
Section 3.2 Additional Rent.
(a) Definitions:
(i) “Base Operating Expenses” is calculated by multiplying the
Expense Stop by the Rentable Area of the Premises. At the applicable
Commencement Date for each suite under this Lease, and in the event that this
Lease is later modified to further increase or to decrease the amount of
rentable square feet in the Premises demised hereby, the total amount of Base
Operating Expenses shall be adjusted, as appropriate, based upon the Expense
Stop, to reflect the new square footage of the Premises unless the amendment or
other written agreement modifying this Lease specifies otherwise.
(ii) “Operating Expenses” means all expenses, costs and disbursements
of every kind and nature relating to or incurred or paid in connection with the
ownership and operation of the Project computed on an accrual basis in
accordance with generally accepted accounting principles consistently applied,
including but not limited to the following:
(A) wages and salaries of all persons engaged in the operation,
maintenance, security or access control of the Project including all taxes,
insurance and benefits relating thereto;
(B) the cost of all supplies, tools, equipment and materials used in
the operation and maintenance of the Project including rental fees for the same,
if such items are not purchased and amortized pursuant to this Section 3.2
below;
(C) the cost of all utilities for the Project, including but not
limited to the cost of water and power, heating, lighting, air conditioning and
ventilating (excluding those costs billed to specific tenants) of the Building
and Project;
(D) the cost of all maintenance and service agreements for the Project
and the equipment therein, including but not limited to alarm service, security
service, access control, landscaping, window cleaning, pest control, elevator
maintenance and janitorial service;
(E) the cost of repairs and general maintenance, excluding (y) repairs
and general maintenance paid by proceeds of insurance, by Tenant or by other
third parties, and (z) alterations attributable solely to tenants of the
Building;
(F) amortization (together with reasonable financing charges) of the
cost of capital investment items which are installed for the purpose of reducing
operating expenses, promoting safety, complying with governmental requirements
or maintaining the quality of the Building;
(G) the cost of all insurance relating to the Project including, but
not limited to, the cost of property insurance, casualty, rental loss and
liability insurance applicable to the Project and Landlord’s personal property
used in connection therewith and the cost of deductibles paid on claims made by
Landlord;
(H) Landlord’s and/or Landlord’s managing agent’s accounting and audit
costs and attorneys’ fees applicable to the Project;
(I) all property management fees for the Project; and
(J) all taxes, assessments and governmental charges, whether or not
directly paid by Landlord, whether federal, state, county or municipal and
whether they are imposed by taxing districts or authorities currently taxing the
Project or by others subsequently created or otherwise, and any other taxes and
assessments, assessed against or attributable to the Project or its operation,
excluding, however, federal and state taxes on income, death taxes, franchise
taxes and any taxes imposed or measured on or by the income of Landlord from the
operation of the Project or
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imposed in connection with any change of ownership of the Project together with
the reasonable cost (including attorneys, consultants and appraisers) of any
negotiation, contest or appeal pursued by Landlord in an effort to reduce any
such tax, assessment or charge, and all of Landlord’s administrative costs in
relation to the foregoing (“Real Estate Taxes”); provided, however, that if at
any time during the Term the present method of taxation or assessment shall be
so changed that the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed or imposed on real estate and the
improvements thereof shall be changed and as a substitute therefor, or in lieu
of or in addition thereto, taxes, assessments, levies, impositions or charges
shall be levied, assessed or imposed wholly or partially as a capital levy or
otherwise on the rents received from the Project or the rents reserved herein or
any part thereof, then such substitute or additional taxes, assessments, levies,
impositions or charges, to the extent so levied, assessed or imposed, shall be
deemed to be included within the Real Estate Taxes to the extent that such
substitute or additional tax would be payable if the Project were the only
property of the Landlord subject to such tax.
(iii) “Adjustment Period” means each calendar year occurring during the
Term beginning with calendar year 2005, which shall be the first Adjustment
Period.
(iv) “Tenant’s Pro Rata Share” means the percentage calculated by
dividing the rentable area of the Premises (numerator) by the rentable area of
the Building (denominator), and expressing the fraction as a percentage.
(b) Gross-Up Adjustment if the Building is less than fully occupied or
if Building Standard Landlord Services are not provided to the entire Building
during any Adjustment Period, then Operating Expenses for such Adjustment Period
shall be “grossed up” by Landlord to that amount of Operating Expenses that
using reasonable projections, would normally be expected to be incurred during
the Adjustment Period if the Building was ninety-five percent (95%) occupied and
receiving Building Standard Landlord Services during the Adjustment Period, as
determined under generally accepted accounting principles consistently applied.
(c) Payment by Tenant. If Tenant’s Pro Rata Share of the Operating
Expenses for any Adjustment Period exceeds the Base Operating Expenses (any such
excess being known collectively as the “Expense Increase”), then Tenant agrees
to pay Landlord as additional rent (the “Additional Rent”) such Expense
Increase.
(d) Manner of Payment.
(i) Landlord may give Tenant notice of Landlord’s estimate of amounts
payable under this Section 3.2 for each Adjustment Period based upon generally
accepted accounting principles consistently applied. By the first day of each
month during the Adjustment Period, Tenant shall pay Landlord one-twelfth
(1/12th) of the estimated amount. If for any reason the estimate is not given
before the Adjustment Period begins, Tenant shall continue to pay on the basis
of the previous year’s estimate, if any, until the month after the new estimate
is given.
(ii) Within one hundred twenty (120) days after each Adjustment Period
ends, or as soon thereafter as reasonably practical, Landlord shall give Tenant
a statement (the “Statement”) showing the: (A) actual Operating Expenses for the
Adjustment Period; (B) Base Operating Expenses; (C) the Expense Increase for the
Adjustment Period; (D) the amount of Tenant’s Pro Rata Share of the Expense
Increase; (E) the amount if any, paid by Tenant during the Adjustment Period
towards the Expense Increase; and (F) the amount Tenant owes towards the Expense
Increase or the amount Landlord owes as a refund. Delay by Landlord in providing
to Tenant any Statement shall not relieve Tenant from the obligation to pay any
Expense Increase upon the rendering of such Statements.
(iii) If the Statement shows that the actual amount Tenant owes for the
Adjustment Period is less than any estimated Expense Increase paid by Tenant
during the Adjustment Period, Landlord shall return the difference (the
“Overpayment”). If the Statement shows that the actual amount Tenant owes is
more than any estimated Expense Increase paid by Tenant during the Adjustment
Period, Tenant shall pay the difference (the “Underpayment”). The Overpayment or
Underpayment shall be paid within thirty (30) days after the Statement is
delivered to Tenant.
(iv) During any Adjustment Period in which this Lease is not in effect
for a complete calendar year, unless it was ended due to Tenant’s default,
Tenant’s obligation for Additional Rent for those Adjustment Periods shall be
prorated by multiplying the Additional Rent for the Adjustment Period by a
fraction expressed as a percentage, the numerator of which is the number of days
of the Adjustment Period included in the Term and the denominator of which is
365.
Section 3.3 Security Deposit. As security for its full and faithful
performance of this Lease, Tenant has paid to Landlord and Landlord acknowledges
receipt of a security deposit in the amount of Twenty Four Thousand Seven
Hundred Two and 13/100 Dollars ($24,702.13) (the “Security Deposit”), which
Security Deposit is currently being held by Landlord under the Prior Lease. If
Tenant defaults with respect to any covenant or condition of this Lease,
including but not limited to the payment of Rent or any other payment due under
this Lease, Landlord may apply all or any part of the Security Deposit to the
payment of any sum in default or any other sum which Landlord may be required to
or deem necessary to spend or incur by reason of Tenant’s default. In such
event, Tenant shall, upon demand, deposit with Landlord the amount so applied to
replenish the Security Deposit. Within thirty (30) days of the expiration or
sooner termination of this Lease, Landlord will refund Tenant the Security
Deposit less any amounts necessary to cure any default of Tenant under this
Lease.
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ARTICLE IV.
Section 4.1 Services.
(a) Services Provided. So long as no default by Tenant under this
Lease has occurred and is continuing, Landlord shall furnish to Tenant while
Tenant is occupying the Premises:
(i) Hot and cold domestic water in common use restrooms and toilets
in locations provided for general use and as reasonably deemed by Landlord to be
in keeping with the Project standards.
(ii) Heating and air conditioning in season from 8:00 a.m. to 6:00
p.m. on Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday, excluding
the hereinafter defined Holidays, subject to curtailment as required by
governmental laws, rules or regulations, in such amounts as are considered by
Landlord to be standard, but such service at times during weekdays other than
the hours stated above, and on Saturdays, Sundays and Holidays, shall be
furnished only upon request of Tenant and for such service Tenant shall pay
Landlord upon demand an amount equal to the rate Landlord at that time is
charging for such service.
(iii) Electric lighting service for all public areas and special
service areas of the Building in the manner and to the extent deemed by Landlord
to be standard.
(iv) Janitor service on a five (5) day week basis in a manner
considered by Landlord to be standard; provided, however, if Tenant’s floor
coverings or other improvements require special care, Tenant shall pay the
additional cleaning cost attributable thereto. In the event that Tenant elects
to provide its own janitorial services to the Premises or any specific Suite
within the Premises, Landlord shall ensure that the Tenant’s Pro Rata Share of
Operating Expenses is appropriately credited for the amounts not expended by
Landlord.
(v) Access control for the Project comparable as to coverage, control
and responsiveness (but not necessarily as to means for accomplishing same) to
other similarly situated multi-tenant office buildings in the vicinity;
provided, however, Landlord shall have no responsibility to prevent and shall
not be liable to Tenant for, any liability or loss to Tenant its agents,
employees and visitors arising out of losses due to theft, burglary, or damage
or injury to persons or property caused by persons gaining access to the
Premises, and Tenant hereby releases Landlord from all liability for such
losses, damages or injury.
(vi) Sufficient electrical capacity to operate (i) incandescent lights,
typewriters, calculating machines, photocopying machines and other machines of
similar low voltage electrical consumption (120/208 volts), provided that the
total rated electrical design load for said lighting and machines of low
electrical voltage shall not exceed two (2.00) watts per square foot of rentable
area; and (ii) lighting and equipment of high voltage electrical consumption
(277/480 volts), provided that the total rated electrical design load for said
lighting and equipment of high electrical voltage shall not exceed two (2.00)
watts per square foot of rentable area (each such rated electrical design load
to be hereinafter referred to as the “Building Standard rated electrical design
load”). Tenant shall be allocated Tenant’s pro rata share of the Building
Standard circuits provided on the floor(s) Tenant occupies.
Should Tenant’s fully connected electrical design load exceed the Building
Standard rated electrical design load for either low or high voltage electrical
consumption, or if Tenant’s electrical design requires low voltage or high
voltage circuits in excess of Tenant’s share of the Building Standard circuits,
Landlord will (at Tenant’s expense) install one (1) additional high voltage
panel and/or one (1) additional low voltage panel with associated transformer,
space for which has been provided in the base building electrical closets based
on a maximum of two (2) such additional panels per floor for all tenants on the
floor (which additional panels and transformers shall be hereinafter referred to
as the “additional electrical equipment”). If the additional electrical
equipment is installed because Tenant’s low or high voltage rated electrical
design load exceeds the applicable Building Standard rated electrical design
load, then a meter shall also be added (at Tenant’s expense) to measure the
electricity used through the additional electrical equipment. For purposes
herein “Building Standard” means the quantity and quality of materials,
finishes, and workmanship from time to time specified as such by Landlord for
the Building.
The design and installation of any additional electrical equipment (or related
meter) required by Tenant shall be subject to the prior approval of Landlord
(which approval shall not be unreasonably withheld). All expenses incurred by
Landlord in connection with the review and approval of any additional electrical
equipment shall also be reimbursed to Landlord by Tenant. Tenant shall also pay
on demand the actual metered cost of electricity consumed through the additional
electrical equipment (if applicable), plus any actual accounting expenses
incurred by Landlord in connection with the metering thereof.
If any of Tenant’s electrical equipment requires conditioned air in excess of
Building Standard air conditioning, the same shall be installed by Landlord (on
Tenant’s behalf), and Tenant shall pay all design, installation, metering and
operating costs relating thereto.
If Tenant requires that certain areas within the Premises must operate in excess
of the normal Building operating hours set forth above, the electrical service
to such areas shall be separately circuited and metered by Landlord at Tenant’s
sole cost and expense such that Tenant shall be billed the costs associated with
electricity consumed during hours other than Building operating hours.
(vii) All fluorescent bulb and ballast replacement for Building Standard
lighting in all areas and all incandescent bulb replacement in public areas,
toilet and restroom areas and stairwells.
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(viii) Nonexclusive operatorless passenger elevator service to the
Premises twenty-four (24) hours per day; provided, that Landlord may reasonably
limit the number of elevators in operation on weekdays after normal business
hours and on Saturdays, Sundays and Holidays.
(b) Cessation of Services. To the extent the services described in
Section 4.1(a) of this Lease require electricity, gas and water supplied by
public utilities, Landlord’s covenants thereunder shall only impose on Landlord
the obligation to use its best efforts to cause the applicable public utilities
to furnish the same. Failure by Landlord to furnish the services described in
this Section 4.1 to any extent, or any cessation thereof, shall not render
Landlord in default hereunder or liable in any respect for damages to either
person or property, or be construed as an eviction of Tenant or work an
abatement of Rent, or relieve Tenant from fulfillment of any covenant or
agreement hereof. In addition to the foregoing, should any of the equipment or
machinery break down, cease to function properly for any cause, or be
intentionally turned off for testing or maintenance purposes, Tenant shall have
no claim for abatement or reduction of Rent or damages on account of an
interruption in service occasioned thereby or resulting there from; provided,
however, Landlord agrees to use diligent efforts to repair said equipment or
machinery and to restore said services.
(c) Holidays. The following dates shall collectively be known as
“Holidays” and individually known as a “Holiday”: New Year’s Day; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; Friday following
Thanksgiving Day; Christmas Day; and any other holiday recognized and taken by
tenants occupying at least one-half
(1/2) of the rentable area of office space of the Building. If in the case of
any Holiday, a different day shall be observed
than the respective day above described, then that day which constitutes the day
observed by national banks in the city or
proximate area in which the Building is located, on account of such Holiday,
shall constitute the Holiday under this Lease.
Section 4.2 Keys and Locks. Landlord shall initially furnish Tenant
with a reasonable number of keys for the standard corridor doors serving the
Premises. Additional keys will be furnished by Landlord upon an order signed by
Tenant and at Tenant’s expense. All such keys shall remain the property of
Landlord. Without the prior written consent of Landlord, no additional locks
shall be allowed on any door of the Premises, and Tenant shall not make or
permit to be made any duplicate keys, except those furnished by Landlord. Upon
termination or expiration of this Lease or a termination of possession of the
Premises by Tenant, Tenant shall surrender to Landlord all keys to any locks on
doors entering or within the Premises.
Section 4.3 Graphics and Building Directory. Landlord shall provide
and install, at Tenant’s expense, all letters or numerals at the entrance to the
Premises, and a strip containing a listing of Tenant’s name on the Building
directory board to be placed in the main lobby of the Building. All such letters
and numerals shall be in Building Standard graphics. Landlord shall not be
liable for any inconvenience or damage occurring as a result of any error or
omission in any directory or graphics. No signs, numerals, letters or other
graphics shall be used or installed by Tenant on the exterior of, or which may
be visible from outside, the Premises, unless approved in writing by Landlord.
ARTICLE V
Section 5.1 Occupancy of Premises. Tenant shall throughout the Term
of this Lease, at its own expense, maintain the Premises and all improvements
thereon and keep them free from waste, damage or nuisance, and shall deliver up
the Premises in a clean and sanitary condition at the expiration or termination
of this Lease or the termination of Tenant’s right to occupy the Premises by
Tenant in good repair and condition, reasonable wear and tear excepted. In the
event Tenant should neglect to maintain and/or return the Premises in such
manner, Landlord shall have the right, but not the obligation, to cause repairs
or corrections to be made, and any reasonable costs therefor shall be payable by
Tenant to Landlord within ten (10) days of demand therefor by Landlord. Upon the
expiration or termination of this Lease or the termination of Tenant’s right to
occupy the Premises by Tenant, Landlord shall have the right to reenter and
resume possession of the Premises. No act or thing done by Landlord or any of
Landlord’s agents (hereinafter defined) during the Term of the Lease shall be
deemed an acceptance of a surrender of the Premises, and no agreement to accept
a surrender of the Premises shall be valid unless the same be made in writing
and executed by Landlord. Tenant shall notify Landlord at least fifteen (15)
days prior to vacating the Premises and shall arrange to meet with Landlord for
a joint inspection of the Premises. If Tenant fails to give such notice or to
arrange for such inspection, then Landlord’s inspection of the Premises shall be
deemed correct for the purpose of determining Tenant’s responsibility for repair
and restoration of the Premises.
Section 5.2 Entry for Repairs and Inspection. Tenant shall permit
Landlord and its agents to enter the Premises at all reasonable times to inspect
the same; to show the Premises to prospective tenants (within nine (9) months of
the expiration of the Term of this Lease), or interested parties such as
prospective lenders and purchasers; to exercise its rights under this Lease; to
clean, repair, alter or improve the Premises or the Building; to discharge
Tenant’s obligations when Tenant has failed to do so within the time required
under this Lease or within a reasonable time after written notice from Landlord,
whichever is earlier; to post notices of non-responsibility and similar notices
and “For Sale” signs at any time and to place “For Lease” signs upon or adjacent
to the Building or the Premises at any time within nine (9) months of the
expiration of the Term of this Lease. Tenant shall permit Landlord and its
agents to enter the Premises at any time in the event of an emergency. When
reasonably necessary, Landlord may temporarily close entrances, doors,
corridors, elevators or other facilities without liability to Tenant by reason
of such closure.
Section 5.3 Hazardous Materials.
(a) As-used in this Lease, the term “Hazardous Materials” shall mean
and include any substance that is or contains petroleum, asbestos,
polychlorinated biphenyls, lead, or any other substance, material or waste which
is now or is
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hereafter classified or considered to be hazardous or toxic under any federal,
state or local law, rule, regulation or ordinance relating to pollution or the
protection or regulation of human health, natural resources or the environment
(collectively “Environmental Laws”) or poses or threatens to pose a hazard to
the health or safety of persons on the Premises or any adjacent property.
(b) Tenant agrees that during its use and occupancy of the Premises it
will not permit Hazardous Materials to be present on or about the Premises
except in a manner and quantity necessary for the ordinary performance of
Tenant’s business and that it will comply with all Environmental Laws relating
to the use, storage or disposal of any such Hazardous Materials.
(c) If Tenant’s use of Hazardous Materials on or about the Premises
results in a release, discharge or disposal of Hazardous Materials on, in, at,
under, or emanating from, the Premises or the property in which the Premises are
located, Tenant agrees to investigate, clean up, remove or remediate such
Hazardous Materials in full compliance with (a) the requirements of (i) all
Environmental Laws and (ii) any governmental agency or authority responsible for
the enforcement of any Environmental Laws; and (b) any additional requirements
of Landlord that are reasonably necessary to protect the value of the Premises
or the property in which the Premises are located, Landlord shall also have the
right but not the obligation, to take whatever action with respect to any such
Hazardous Materials that it deems reasonably necessary to protect The value of
the Premises or the property in which the Premises are located. All costs and
expenses paid or incurred by Landlord in the exercise of such right shall be
payable by Tenant upon demand.
(d) Upon reasonable notice to Tenant, Landlord may inspect the
Premises for the purpose of determining whether there exists on the Premises any
Hazardous Materials or other condition or activity that is in violation of the
requirements of this Lease or of any Environmental Laws. The right granted to
Landlord herein to perform inspections shall not create a duty on Landlord’s
part to inspect the Premises, or liability on the part of Landlord for Tenant’s
use, storage or disposal of Hazardous Materials, it being understood that Tenant
shall be solely responsible for all liability in connection therewith.
(e) Tenant shall surrender the Premises to Landlord upon the
expiration or earlier termination of this Lease free of debris, waste or
Hazardous Materials placed on or about the Premises by Tenant or its agents,
employees, contractors or invitees, and in a condition, which complies with all
Environmental Laws.
(f) Tenant agrees to indemnity and hold harmless Landlord from and
against any and all claims, losses (including, without limitation, loss in value
of the Premises or the property in which the Premises are located), liabilities
and expenses (including reasonable attorney’s fees) sustained
by Landlord attributable to (i) any Hazardous Materials placed on or about the
Premises by Tenant or its agents, employees, contractors or invitees or (ii)
Tenant’s breach of any provision of this Section.
(g) The provisions of this Section shall survive the expiration or
earlier termination of this Lease.
ARTICLE VI
Section 6.1 Leasehold Improvements.
(a) Acceptance of Premises. Tenant has made a complete inspection of
the Premises and shall accept the Premises and the Project in their “AS IS,”
“WHERE IS,” and “WITH ALL FAULTS” condition on the applicable Commencement Date
without recourse to Landlord. Except as expressly provided in this Lease,
Landlord shall have no obligation to furnish, equip or improve the Premises or
the Project or provide an allowance, abatement or concession with respect to the
Premises, except that Landlord shall provide the Tenant Improvement Allowance
(as that term is defined in Exhibit E hereto) for the Suite 150 Premises, which
shall be disbursed in accordance with Exhibit E attached hereto. The taking of
possession of the Premises by Tenant shall be conclusive evidence against Tenant
that (i) Tenant accepts the Premises and the Project as being suitable for its
intended purpose and in a good and satisfactory condition, (ii) acknowledges
that the Premises and the Project comply fully with Landlord’s covenants and
obligations under this Lease and (iii) waives any defects in the Premises and
its appurtenances and in all other parts of the Project.
(b) Improvements and Alterations. Tenant shall not make or allow to be
made (except as otherwise provided in this Lease) any improvements, alterations
or physical additions (including fixtures) in or to the Premises or the Project,
without first obtaining the written consent of Landlord, including Landlord’s
written approval of Tenant’s contractor(s) and of the plans, working drawings
and specifications relating thereto, which consent shall not be unreasonably
withheld, conditioned or delayed, so long as such improvements, alterations or
physical additions do not affect the Building’s structure or the mechanical,
electrical or plumbing components of the Building. If Landlord does not respond
in writing with reasonable specificity to Tenant’s request for approval of plans
and specifications within ten (10) business days after submission of Tenant’s
plans, Landlord’s approval therefor shall be deemed granted. Approval by
Landlord of any of Tenant’s drawings and plans and specifications prepared in
connection with any alterations, improvements, modifications or additions to the
Premises or the Project shall not constitute a representation or warranty of
Landlord as to the adequacy or sufficiency of such drawings, plans and
specifications, or alterations, improvements, modifications or additions to
which they relate, for any use, purpose or conditions, but such approval shall
merely be the consent of Landlord as required hereunder. Any and all furnishing,
equipping and improving of or other alteration and addition to the Premises
shall be: (i) made at Tenant’s sole cost, risk and expense, and Tenant shall pay
for Landlord’s actual out-of-pocket third-party costs incurred in connection
with and as a result of such alterations or additions; (ii) performed in a
prompt good and workmanlike manner with labor and materials of such quality as
Landlord may reasonably require; (iii) constructed substantially in accordance
with all plans and specifications approved in writing by Landlord prior to the
commencement of
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any such work; (iv) prosecuted diligently and continuously to completion so as
to minimize interference with the normal business operations of other tenants in
the Building, the performance of Landlord’s obligations under this Lease or any
mortgage or ground lease covering or affecting all or any part of the Building
or the Land and any work being done by contractors engaged by Landlord with
respect to or in connection with the Building; and (iv) performed by contractors
approved in writing by Landlord. Tenant shall have no (and hereby waives all)
rights to payment or compensation for any such item. Tenant shall notify
Landlord upon completion of such alterations, improvements, modifications or
additions and Landlord shall inspect same for workmanship and compliance with
the approved plans and specifications. Tenant and its contractors shall comply
with all reasonable requirements Landlord may impose on Tenant or its
contractors with respect to such work (including but not limited to, insurance,
indemnity and bonding requirements), and, to the extent any changes or change
orders have been made to or in connection with the plans and specifications
which were approved by Landlord, (A) such changes or change orders shall be
subject to Landlord’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, and (B) Tenant shall deliver to
Landlord a complete copy of the “as-built” or final plans and specifications for
all alterations or physical additions so made in or to the Premises within
thirty (30) days of completing the work. Tenant shall not place safes, vaults,
filing cabinets or systems, libraries or other heavy furniture or equipment
within the Premises without Landlord’s prior written consent.
(c) Title to Alterations. All alterations, physical additions,
modifications or improvements in or to the Premises (including fixtures) shall,
when made, become the property of Landlord and shall be surrendered to Landlord
upon termination or expiration of this Lease or termination of Tenant’s right to
occupy the Premises, whether by lapse of time or otherwise, without any payment
reimbursement or compensation therefor; provided, however, that Tenant shall
retain title to and shall remove from the Premises movable equipment or
furniture owned by Tenant and Tenant repairs any damage caused thereby and
Tenant returns the Premises to their preexisting condition. Notwithstanding any
of the foregoing to the contrary, Landlord may require Tenant to remove all
alterations, additions or improvements to the Premises that are other than
Building Standard including, without limitation, any cabling or other computer,
satellite or telecommunications equipment or hardware, whether or not such
alterations, additions, or improvements are located in the Premises upon the
expiration or earlier termination of this Lease or the termination of Tenant’s
right to possession of the Premises and restore the same to Building Standard
condition, reasonable wear and tear excepted. The rights conferred to Landlord
under this Section 6.1(c) shall be in addition to (and not in conflict with) any
other rights conferred on Landlord by this Lease, in equity or at law.
(d) Personal Property Taxes; Sales, Use and Excise Taxes. Tenant shall
be responsible for and shall pay ad valorem taxes and other taxes, assessments
or charges levied upon or applicable to Tenant’s personal property, the value of
Tenant’s leasehold improvements in the Premises in excess of Building Standard
(and if the taxing authorities do not separately assess Tenant’s leasehold
improvements, Landlord may make a reasonable allocation of the taxes assessed on
the Project to give effect to this Section 6.1(d)) and all license fees and
other fees or charges imposed on the business conducted by Tenant on the
Premises before such taxes, assessments, charges or fees become delinquent.
Tenant shall also pay to Landlord with all Rent due and owing under this Lease
an amount equal to any sales, rental, excise and use taxes levied, imposed or
assessed by the State or any political subdivision thereof or other taxing
authority upon any amounts classified as rent.
Section 6.2 Repairs by Landlord. All repairs, alterations or
additions that affect the Project’s structural components or major mechanical,
electrical or plumbing systems shall be made by Landlord or its contractors
only, and, in the case of any damage to such components or systems caused by
Tenant or Tenant’s agents, shall be paid for by Tenant in an amount equal to
Landlord’s costs plus fifteen percent (15%) as an overhead expense. Unless
otherwise provided herein, Landlord shall not be required to make any
improvements to or repairs of any kind or character to the leasehold
improvements located in the Premises during the Term, except such repairs as
Landlord deems necessary for normal maintenance operations of the Building.
Section 6.3 Repairs by Tenant. Subject to Section. 6.2 of this Lease,
Tenant shall be responsible, at its own cost and expense, for all repair or
replacement of any damage to the leasehold improvements in the Premises,
together with any damage to the Project or any part thereof caused by Tenant or
any of Tenant’s agents. Except insofar as Landlord is expressly obligated under
this Lease to maintain and repair the Building, in addition to the maintenance
and repair obligations of Tenant otherwise expressly set forth in this Lease,
Tenant is also obligated to perform, at Tenant’s own cost and expense and risk,
all other maintenance and repairs necessary or appropriate to cause the Premises
to be maintained in good condition and suitable for Tenant’s intended commercial
purpose.
Section 6.4 Liens. Tenant shall keep the Premises and the Building
free from any liens, including but not limited to liens filed against the
Premises by any governmental agency, authority or organization, arising out of
any work performed, materials ordered or obligations incurred by or on behalf of
Tenant, and Tenant hereby agrees to indemnify and hold Landlord, its agents,
employees, independent contractors, officers, directors, partners, and
shareholders harmless from any liability, cost or expense for such liens. Tenant
shall cause any such lien imposed to be released of record by payment or posting
of the proper bond within thirty (30) days after the earlier of imposition of
the lien or written request by Landlord. Tenant shall give Landlord written
notice of Tenant’s intention to perform work on the Premises, which might result
in any claim of lien, at least ten (10) days prior to the commencement of such
work to enable Landlord to post and record a notice of non-responsibility or
other notice deemed proper before commencement of any such work. Tenant’s notice
of intent to perform work may be given contemporaneously with Tenant’s submittal
of plans for Landlord’s approval. If Tenant fails to remove any lien within the
prescribed thirty (30) day period, then Landlord may do so at Tenant’s expense
and Tenant’s reimbursement to Landlord for such amount including attorneys’ fees
and costs, shall be deemed Additional Rent. Tenant shall have no power to do any
act or make any contract, which may create or be the foundation for any lien,
mortgage or other encumbrance upon the reversion or other estate of Landlord, or
of any interest of Landlord in the Premises.
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Section 6.5 Indemnification. Tenant shall defend, indemnify and hold
harmless Landlord, its agents, employees, officers, directors, partners and
shareholders (“Landlord’s Related Parties”) from and against any and all
liabilities, judgments, demands, causes of action, claims, losses, damages,
costs and expenses, including reasonable attorneys’ fees and costs, arising out
of the use, occupancy, conduct, operation, or management of the Premises by, or
the willful misconduct or negligence of, Tenant, its officers, contractors,
licensees, agents, servants, employees, guests, invitees, or visitors in or
about the Building or Premises or arising from any breach or default under this
Lease by Tenant or arising from any accident, injury, or damage, howsoever and
by whomsoever caused, to any person or property, occurring in or about the
Building or Premises. This indemnification shall survive termination or
expiration of this Lease. This provision shall not be construed to make Tenant
responsible for loss, damage, liability or expense resulting from injuries to
third parties caused by the sole negligence or willful misconduct of Landlord,
or its officers, contractors, licensees, agents, employees, or invitees.
ARTICLE VII
Section 7.1 Condemnation.
(a) Total Taking. In the event of a taking or damage related to the
exercise of the power of eminent domain, by any agency, authority, public
utility, person, corporation or entity empowered to condemn property (including
without limitation a voluntary conveyance by Landlord in lieu of such taking or
condemnation) (individually, a “Taking”) of (i) the entire Premises, (ii) so
much of the Premises as to prevent or substantially impair its use by Tenant
during the Term of this Lease or (iii) portions of the Building or Project
required for reasonable access to, or reasonable use of, the Premises
(individually, a “Total Taking”), the rights of Tenant under this Lease and the
leasehold estate of Tenant in and to the Premises shall cease and terminate as
of the date upon which title to the property taken passes to and vests in the
condemnor or the effective date of any order for possession if issued prior to
the date title vests in the condemnor (“Date of Taking”).
(b) Partial Taking. In the event of a Taking of only a part of the
Premises or of a part of the Project which does not constitute a Total Taking
during the Term of this Lease (individually, a “Partial Taking”), the rights of
Tenant under this Lease and the leasehold estate of Tenant in and to the portion
of the property taken shall cease and terminate as of the Date of Taking, and an
adjustment to the Rent shall be made based upon the reduced area of the
Premises.
(c) Termination by Landlord. In the event of a Taking of the Building
(other than the Premises) such that, Landlord’s reasonable opinion, the Building
cannot be restored in a manner that makes its continued operation practically or
economically feasible, Landlord may terminate this Lease by giving notice to
Tenant within ninety (90) days after the date notice of such Taking is received
by Landlord.
(d) Rent Adjustment. If this Lease is terminated pursuant to this
Section 7.1, Landlord shall refund to Tenant any prepaid unaccrued Rent and any
other sums due and owing to Tenant (less any sums then due and owing Landlord by
Tenant), and Tenant shall pay to Landlord any remaining sums due and owing
Landlord under this Lease, each prorated as of the Date of Taking where
applicable.
(e) Repair. If this Lease is not terminated as provided for in this
Section 7.1, then Landlord at its expense shall promptly repair and restore the
Building, Project and/or the Premises to approximately the same condition that
existed at the time Tenant entered into possession of the Premises, wear and
tear excepted (and Landlord shall have no obligation to repair or restore
Tenant’s improvements to the Premises or Tenant’s Property), except for the part
taken, so as to render the Building or Project as complete an architectural unit
as practical, but only to the extent of the condemnation award received by
Landlord for the damage.
(f) Awards and Damages. Landlord reserves all rights to damages and
awards paid because of any Partial or Total Taking of the Premises or the
Project. Tenant assigns to Landlord any right Tenant may have to the damages or
award. Further, Tenant shall not make claims against Landlord or the condemning
authority for damages. Notwithstanding, Tenant may claim and recover from the
condemning authority a separate award for Tenant’s moving expenses, business
dislocation damages, Tenant’s Property and any other award that would not reduce
the award payable to Landlord.
Section 7.2 Force Majeure. Neither Landlord nor Tenant shall be
required to perform any, term, provision, agreement condition or covenant in
this Lease (other than the obligations of Tenant to pay Rent as provided herein)
so long as such performance is delayed or prevented by “Force Majeure,” which
shall mean acts of God, strikes, injunctions, lockouts, material or labor
restrictions by any governmental authority, civil riots, floods, fire, theft,
public enemy, insurrection, war, court order, requisition or order of
governmental body or authority, and any other cause not reasonably within the
control of Landlord or Tenant and which by the exercise of due diligence
Landlord or Tenant is unable, wholly or in part, to prevent or overcome. Neither
Landlord nor any mortgagee shall be liable or responsible to Tenant for any loss
or damage to any property or person occasioned by any Force Majeure, or for any
damage or inconvenience, which may arise through repair or alteration of any
part of the Project as a result of any Force Majeure.
Section 7.3 Fire or Other Casualty Damage. If any portion of the
Premises shall be destroyed or damaged by fire or any other casualty, Tenant
shall immediately give notice thereof to Landlord. If any portion of the
Premises or Project shall be destroyed or damaged by fire or any other casualty
then, at the option of Landlord, Landlord may restore and repair the portion of
the Premises or Project damaged and, if the Premises are rendered untenantable
in whole or in part by reason of such casualty as determined by Landlord in its
commercially reasonable judgment, Tenant shall be entitled to an equitable
abatement of the Rent hereunder (subject to the limitation in Section 7.3(b)
below) until
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such time as the damaged portion of the Premises (exclusive of any of Tenant’s
Property or Tenant’s improvements) are repaired or restored by Landlord to The
extent required hereby or Landlord may terminate this Lease whereupon all Rent
accrued up to the time of such damage or destruction and any other sums due and
owing shall be paid by Tenant to Landlord (less any sums then due and owing
Tenant by Landlord) and any remaining sums due and owing by Landlord to Tenant
shall be paid to Tenant In no event shall Landlord have any obligation to repair
or restore any such destruction or damage.
(a) Repair. Landlord shall give Tenant written notice of its
decisions, estimates or elections under this Section 7.3 within sixty (60) days
after any such damage or destruction. If Landlord has elected to repair and
restore the Premises or other portion of the Project this Lease shall continue
in full force and effect, and the repairs will be made within a reasonable time
thereafter (not to exceed one (1) year), subject to the provisions of Section
7.2 of this Lease. Should the repairs not be completed within that period,
Tenant shall have the option of terminating this Lease by written letter of
termination. If this Lease is terminated as herein permitted, Landlord shall
refund to Tenant any prepaid Rent (unaccrued as of the date of damage or
destruction) and any other sums due and owing by Landlord to Tenant (less any
sums then due and owing Landlord by Tenant) and any remaining sums due and owing
by Tenant to Landlord shall be paid to Landlord. If Landlord has elected to
repair and reconstruct the Premises or other portion of the Project to the
extent stated above, the Term will be extended for a time equal to the period
from the occurrence of such damage to the completion of such repair and
reconstruction. If Landlord elects to rebuild the Premises or other portion of
the Project, Landlord shall be obligated to restore, or rebuild the Premises or
other portion of the Project to substantially the same condition as existed at
the time Tenant entered into possession of the Premises (except for any work
paid for by Tenant), wear and tear excepted and not be required to rebuild,
repair or replace any part of Tenant’s Property or Tenant’s leasehold
improvements. Notwithstanding anything contained in this Lease to the contrary,
if Landlord shall elect to repair and restore the Premises or other portion of
the Project pursuant to this Section 7.3, in no event shall Landlord be required
to expend under this Article VII any amount in excess of the proceeds actually
received from the insurance carried by Landlord pursuant to Section 7.4(a) of
this Lease. Landlord shall not be liable for any inconvenience or annoyance to
Tenant or injury to the business of Tenant resulting in any way from such damage
or destruction or the disregard of the repair thereof.
(b) Negligence of Tenant. Notwithstanding the provisions of Section
7.3(a) of this Lease, if the Premises, the Project or any portion thereof, are
damaged by fire or other casualty resulting from the fault or negligence of
Tenant or any of Tenant’s agents, the Rent under this Lease will not be abated
during the repair of that damage, and Tenant will be liable to Landlord for the
cost and expense of the repair and restoration of the Premises, the Project or
any part thereof, caused thereby to the extent that cost and expense is not
covered by insurance proceeds (including without limitation the amount of any
insurance deductible).
Section 7.4 Insurance.
(a) Landlord shall maintain, or cause to be maintained, standard fire
and extended coverage insurance on the Buildings and Building Standard tenant
improvements (excluding leasehold improvements by Tenant in excess of Building
Standard and Tenant’s Property) on a full replacement cost basis. The insurance
required to be obtained by Landlord may be obtained by Landlord through blanket
or master policies insuring other entities or properties owned or controlled by
Landlord.
(b) Tenant shall at its sole cost and expense, procure and maintain
during the Term of this Lease all such policies of insurance as Landlord may
reasonably require, including without limitation commercial general liability
insurance (including personal injury liability, premises/operation, property
damage, independent contractors and broad form contractual coverage in support
of the indemnifications of Landlord by Tenant under this Lease) in amounts of
not less than a combined single limit, of $2,000,000; comprehensive automobile
liability insurance; business interruption insurance; contractual liability
insurance; property insurance with respect to Tenant’s Property, and all
leasehold improvements, alterations and additions in excess of Building
Standard, to be written on an “all risk” basis for full replacement cost;
worker’s compensation and employer’s liability insurance; and comprehensive
catastrophe liability insurance; all maintained with companies, on forms and in
such amounts as Landlord may, from time to time, reasonably require and endorsed
to include Landlord as an additional insured, with the premiums fully paid on or
before the due dates. The insurer must be licensed to do business in the state
in which the Building is located. Tenant and not Landlord, will be liable for
any costs or damages in excess of the statutory limit for which Tenant would, in
the absence of worker’s compensation, be liable. In the event that Tenant fails
to take out or maintain any policy required by this Section 7.4 to be maintained
by Tenant, such failure shall be a defense to any claim asserted by Tenant
against Landlord by reason of any loss sustained by Tenant that would have been
covered by such policy, notwithstanding that such loss may have been proximately
caused solely or partially by the negligence or willful misconduct of Landlord
or any of Landlord’s Related Parties. If Tenant does not procure insurance as
required, Landlord may, upon advance written notice to Tenant cause this
insurance to be issued and Tenant shall pay to Landlord the premium for such
insurance within ten (10) days of Landlord’s demand, plus interest at the past
due rate provided for in Section 3.1(c) of this Lease until repaid by Tenant.
All policies of insurance required to be maintained by Tenant shall specifically
make reference to the indemnifications by Tenant in favor of Landlord under this
Lease and shall provide that Landlord shall be given at least thirty (30) days’
prior written notice of any cancellation or non-renewal of any such policy. A
certificate evidencing each such policy shall be deposited with Landlord by
Tenant on or before the Commencement Date, and a replacement certificate
evidencing each subsequent policy shall be deposited with Landlord at least ten
(10) days prior to the expiration of the preceding such policy. All insurance
policies obtained by Tenant shall be written as primary policies (primary over
any insurance carried by Landlord), not contributing with and not in excess of
coverage, which Landlord may carry, if any. The insurance required by this
Lease, at the option of Tenant may be effected by blanket and/or umbrella
policies issued to Tenant covering the Premises and other properties owned or
leased by Tenant, provided that the policies otherwise comply with the
provisions of this Lease and allocate to the Premises the specified coverage,
without possibility of reduction or coinsurance by reason of, or damage to, any
other premises
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named therein, and if the insurance required by thus Lease shall be effected by
any such blanket or umbrella policies; Tenant shall furnish to Landlord or
lender or mortgagee, if any, certified copies or duplicate originals of such
policies in place of the originals, with schedules hereto attached showing the
amount of insurance afforded by such policies applicable to the Premises.
Section 7.5 Waiver of Subrogation Rights. Each party hereto waives
all rights of recovery, claims, actions or causes of actions arising in any
manner in its (the “Injured Party’s”) favor and against the other party for loss
or damage to the Injured Party’s property located within or constituting a part
or all of the Project to the extent the loss or damage: (a) is covered by the
Injured Party’s insurance; or (b) would have been covered by the insurance the
Injured Party is required to carry under this Lease, whichever is greater,
regardless of the cause or origin, including the sole, contributory, partial,
joint comparative or concurrent negligence of the other party, This waiver also
applies to each party’s directors, officers, employees, shareholders, partners,
representatives and agents. All insurance carried by either Landlord or Tenant
covering the losses and damages described in this Section 7.5 shall provide for
such waiver of rights of subrogation by the Injured Party’s insurance carrier to
the maximum extent that the same is permitted under the laws and regulations
governing the writing of insurance within the state in which the Building is
located. Both parties hereto are obligated to obtain such a waiver and provide
evidence to the other party of such waiver. The waiver set forth in this Section
7.5 shall be in addition to, and not in substitution for, any other waivers,
indemnities or exclusions of liability set forth in this Lease.
ARTICLE VIII
Section 8.1 Default by Tenant. The occurrence of any one or more of
the following events shall constitute a default by Tenant under this Lease:
(a) Tenant shall fail to pay to Landlord any Rent or any other
monetary charge due from tenant hereunder on or before ten (10) days after
written notice thereof from Landlord to Tenant provided that Landlord shall not
be required to provide such notice more than twice during any twelve month
period with respect to nonpayment of Rent, the third such nonpayment
constituting a default without the requirement of notice;
(b) Tenant breaches or fails to comply with any term, provisions,
conditions or covenant of this Lease, other than as described in Section 8.1(a),
or with any of the Building rules and regulations now or hereafter established
to govern the operation of the Project;
(c) A Transfer (hereinafter defined) shall occur, without the prior
written approval of Landlord;
(d) The interest of Tenant under this Lease shall be levied on under
execution or other legal process;
(e) Any petition in bankruptcy or other insolvency proceedings shall
be filed by or against Tenant or any petition shall be filed or other action
taken to declare Tenant a bankrupt or to delay, reduce or modify Tenant’s debts
or obligations or to reorganize or modify Tenant’s capital structure or
indebtedness or to appoint a trustee, receiver or liquidator of Tenant or of any
property of Tenant, or any proceeding or other action shall be commenced or
taken by any governmental authority for the dissolution or liquidation of Tenant
and, within thirty (30) days hereafter, Tenant fails to secure a discharge
thereof;
(f) Tenant shall become insolvent or Tenant shall make an assignment
for the benefit of creditors, or Tenant shall make a transfer in fraud of
creditors, or a receiver or trustee shall be appointed for Tenant or any of its
properties;
(g) Tenant shall abandon the Premises or any substantial portion
thereof; or
(h) Tenant shall do or permit to be done anything, which creates a
lien upon the Premises or the Project, which is not released or secured as
provided in Section 6.4.
Section 8.2 Landlord’s Remedies. Upon occurrence of any default by
Tenant under this Lease and (i) if the event of default described in Section
8.1(a) is not cured within ten (10) days after written notice from Landlord of
such default (provided, however, Landlord shall not be obligated to notify
Tenant more than twice in any 12-month period; thereafter, Tenant shall
immediately be in default upon Tenant’s failure to pay Rent as and when due); or
(ii) the events described in Sections 8.1(b), (d), (f) and (g) are not cured
within thirty (30) days after written notice from Landlord of such default
(there being no notice and cure period for events of defaults described in
Sections 8.1(c), (e) and (h) except as otherwise set forth herein), the Landlord
shall have the option to do and perform any one or more of the following in
addition to, and not in limitation of, any other remedy or right permitted it by
law or in equity or by this Lease:
(a) Continue this Lease in full force and effect, and this Lease shall
continue in full force and effect as long as Landlord does not terminate this
Lease, and Landlord shall have the right to collect Rent, Additional Rent and
other charges when due.
(b) Terminate this Lease, and Landlord may forthwith repossess the
Premises and be entitled to recover as damages a sum of money equal to the total
of (i) the cost of recovering the Premises, (ii) the cost of removing and
storing Tenant’s or any other occupant’s property, (iii) the unpaid Rent and any
other sums accrued hereunder at the date of termination, (iv) a sum equal to the
amount if any, by which the present value of the total Rent and other benefits
which would have accrued to Landlord under this Lease for the remainder of the
Term, if the terms of this Lease had been fully complied with by Tenant
discounted at five percent (5%) per annum exceeds the total fair market value of
the Premises for
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the balance of the Term (it being the agreement of the parties hereto that
Landlord shall receive the benefit of its bargain), (v) the cost of reletting
the Premises including, without limitation, the cost of restoring the Premises
to the condition necessary to rent the Premises at the prevailing market rental
rate, normal wear and tear excepted, (vi) any increase in insurance premiums
caused by the vacancy of the Premises, (vii) the amount of any unamortized
improvements to the Premises paid for by Landlord, (viii) the cost of any
increase in insurance premiums caused by the termination of possession of the
Premises, (ix) the amount of any unamortized brokerage commission or other costs
paid by Landlord in connection with the leasing of the Premises and (ix) any
other sum of money or damages owed by Tenant to Landlord. In the event Landlord
shall elect to terminate this Lease, Landlord shall at once have all the rights
of reentry upon the Premises, without becoming liable for damages, or guilty of
trespass.
(c) Terminate Tenant’s right of occupancy of the Premises and re-enter
and repossess the Premises by entry, forcible entry or detainer suit or
otherwise, without demand or notice of any kind to Tenant and without
terminating this Lease, without acceptance of surrender of possession of the
Premises, and without becoming liable for damages or guilty of trespass, in
which event Landlord may, but shall be under no obligation to, relet the
Premises or any part thereof for the account of Tenant (nor shall Landlord be
under any obligation to relet the Premises before Landlord relets or leases any
other portion of the Project or any other property under the ownership or
control of Landlord) for a period equal to or lesser or greater than the
remainder of the Term of the Lease on whatever terms and conditions Landlord, at
Landlord’s sole discretion, deems advisable. Tenant shall be liable for and
shall pay to Landlord all Rent payable by Tenant under this Lease (plus interest
at the past due rate provided in Section 3.1(c) of this Lease if in arrears)
plus an amount equal to (i) the cost of recovering possession of the Premises,
(ii) the cost of removing and storing any of Tenant’s or any other occupant’s
property left on the Premises or the Project after reentry, (iii) the cost of
decorations, repairs, changes, alterations and additions to the Premises and the
Project, (iv) the cost of any attempted reletting or reletting and the
collection of the rent accruing from such reletting, (v) the cost of any
brokerage fees or commissions payable by Landlord in connection with any
reletting or attempted reletting, (vi) any other costs incurred by Landlord in
connection with any such reletting or attempted reletting, (vii) the cost of any
increase in insurance premiums caused by the termination of possession of the
Premises, (viii) the amount of any unamortized improvements to the Premises paid
for by Landlord, (ix) the amount of any unamortized brokerage commissions or
other costs paid by Landlord in connection with the leasing of the Premises and
(x) any other sum of money or damages owed by Tenant to Landlord at law, in
equity or hereunder, all reduced by any sums received by Landlord through any
reletting of the Premises; provided, however, that in no event shall Tenant be
entitled to any excess of any sums obtained by reletting over and above Rent
provided in this Lease to be paid by Tenant to Landlord. For the purpose of such
reletting Landlord is authorized to decorate or to make any repairs, changes,
alterations or additions in or to the Premises that may be necessary. Landlord
may file suit to recover any sums falling due under the terms of this Section
8.2(c) from time to time, and no delivery to or recovery by Landlord of any
portion due Landlord hereunder shall be any defense in any action to recover any
amount not theretofore reduced to judgment in favor of Landlord. No reletting
shall be construed as an election on the part of Landlord to terminate this
Lease unless a written notice of such intention is given to Tenant by Landlord.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous default and/or
exercise its rights under Section 8.3(b) of this Lease.
(d) Enter upon the Premises and do whatever Tenant is obligated to do
under the terms on this Lease; and Tenant agrees to reimburse Landlord on demand
for any reasonable expenses which Landlord may incur in effecting compliance
with Tenant’s obligations under this Lease plus fifteen percent (15%) of such
cost to cover overhead plus interest at the past due rate provided in this
Lease, and Tenant further agrees that Landlord shall not be liable for any
damages resulting to Tenant from such action. No action taken by Landlord under
this Section 8.2(d) shall relieve Tenant from any of its obligations under this
Lease or from any consequences or liabilities arising from the failure to
perform such obligations.
(e) Without waiving such default, apply all or any part of the
Security Deposit and/or Prepaid Rent, if any, to cure the default or to any
damages suffered as a result of the default to the extent of the amount of
damages suffered. Tenant shall reimburse Landlord for the amount of such
depletion of the Security Deposit and/or any Prepaid Rent on demand.
(f) Change all door locks and other security devices of Tenant at the
Premises and/or the Project, and Landlord shall not be required to provide the
new key to the Tenant except during Tenant’s regular business hours, and only
upon the condition that Tenant has cured any and all defaults hereunder and in
the case where Tenant owes Rent to the Landlord, reimbursed Landlord for all
Rent and other suits due Landlord hereunder. Landlord, on terms and conditions
satisfactory to Landlord in its sole discretion, may upon request from Tenant’s
employees, enter the Premises for the purpose of retrieving there from personal
property of such employees, provided, Landlord shall have no obligation to do
so.
(g) Exercise any and all other remedies available to Landlord in this
Lease, at law or in equity.
Section 8.3 Duty to Relet or Mitigate. Notwithstanding anything
contained herein to the contrary, Tenant and Landlord agree that Landlord shall
use commercially reasonable efforts to relet the Premises or otherwise mitigate
damages under this Lease. However, Tenant agrees that Landlord shall not be
liable, nor shall Tenant’s obligations hereunder be diminished, because of
Landlord’s failure to relet the Premises after using commercially reasonable
efforts, or Landlord’s failure to collect rent due with respect to such
reletting. Landlord and Tenant agree that any such duty to mitigate shall be
satisfied and Landlord shall be deemed to have used commercially reasonable
efforts to fill the Premises by doing the following: (a) posting a “For Lease”
sign on the Premises; (b) advising Landlord’s leasing agent of the availability
of the Premises; and (c) advising at least one outside commercial brokerage
entity of the availability of the Premises; provided, however, that Landlord
shall not be obligated to relet the Premises before leasing any other unoccupied
portions of the Project and any other property under the ownership or control of
Landlord, if Landlord receives any payments from the reletting of the Premises,
any such payment shall first be applied to any costs or expenses incurred by
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Landlord as a result of Tenant’s Default under this Lease.
Section 8.4 Reentry. If Tenant fails to allow Landlord to reenter and
repossess the Premises, Landlord shall have full and free license to enter into
and upon the Premises with process of law for the purpose of repossessing the
Premises, expelling or removing Tenant and any others who may be occupying or
otherwise within the Premises, removing any and all property there from and
changing all door locks of the Premises. Landlord may take these actions without
being deemed in any manner guilty of trespass, eviction or forcible entry or
detainer, without accepting surrender of possession of the Premises by Tenant,
and without incurring any liability for any damage resulting there from,
including without limitation any liability arising under applicable state law
and without relinquishing Landlord’s right to Rent or any other right given to
Landlord hereunder or by operation of law or in equity, Tenant hereby waiving
any right to claim damage for such reentry and expulsion, including without
limitation any rights granted to Tenant by applicable state law, unless such
damage is due to the gross negligence or willful misconduct of Landlord.
Section 8.5 Rights of Landlord in Bankruptcy. Nothing contained in
this Lease shall limit or prejudice the right of Landlord to prove for and
obtain in proceedings for bankruptcy or insolvency, by reason of the expiration
or termination of this Lease or the termination of Tenant’s right of occupancy,
an amount equal to the maximum allowed by any statute or rule of law in effect
at the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater, equal to, or less than the amount
of the loss or damages referred to in this Section 8.5. In the event that under
applicable law, the trustee in bankruptcy or Tenant has the right to affirm this
Lease and continue to perform the obligations of Tenant hereunder, such trustee
or Tenant shall, in such time period as may be permitted by the bankruptcy court
having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the
date of the affirmance of this Lease and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued performance
of Tenant’s obligations under this Lease.
Section 8.6 Waiver of Certain Rights. Tenant hereby expressly waives
any and all rights Tenant may have under applicable state law to its right to
recover possession of the Premises. Tenant hereby waives any and all liens
(whether statutory, contractual or constitutional) it may have or acquire as a
result of a breach by Landlord under this Lease. Tenant also waives and releases
any statutory lien and offset rights it may have against Landlord, including
without limitation the rights conferred upon applicable state law.
Section 8.7 NonWaiver. Failure on the part of Landlord to complain of
any action or non-action on the part of Tenant no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord of any of its rights
under this Lease. Further, it is covenanted and agreed that no waiver at any
time of any of the provisions hereof by Landlord shall be construed as a waiver
of any of the other provisions hereof and that a waiver at any time of any of
the provisions hereof shall not be construed as a waiver at any subsequent time
of the same provisions. The consent or approval by Landlord to or of any action
by Tenant requiring Landlord’s consent or approval shall not be deemed to waive
or render unnecessary Landlord’s consent or approval to or of any subsequent
similar act by Tenant.
Section 8.8 Holding Over. In the event Tenant remains in possession
of the Premises after the expiration or termination of this Lease without the
execution of a new lease, then Tenant at Landlord’s option, shall be deemed to
be occupying the Premises as a tenant at will at a base rental equal to one
hundred fifty percent (150%) of the then applicable Base Rent, and shall
otherwise remain subject to all the conditions, provisions and obligations of
this Lease insofar as the same are applicable to a tenancy at will, including
without limitation the payment of all other Rent; provided, however, nothing
contained herein shall require Landlord to give Tenant more than thirty (30)
days prior written consent to terminate Tenant’s tenancy-at-will. No holding
over by Tenant after the expiration or termination of this Lease shall be
construed to extend or renew the Term or in any other manner be construed as
permission by Landlord to hold over. Tenant shall indemnify Landlord (y) against
all claims for damages by any other tenant to whom Landlord may have leased all
or any part of the Premises effective upon the termination or expiration of this
Lease, and (z) for all other losses, costs and expenses, including reasonable
attorneys’ fees, incurred by reason of such holding over.
Section 8.9 Abandonment of Personal Property. Any personal property
left in the Premises or any personal property of Tenant left about the Project
at the expiration or termination of this Lease, the termination of Tenant’s
right to occupy the Premises or the abandonment, desertion or vacating of the
Premises by Tenant shall be deemed abandoned by Tenant and may, at the option of
Landlord, be immediately removed from the Premises or such other space by
Landlord and stored by Landlord at the full risk, cost and expense of Tenant.
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. In the event Tenant does not reclaim any such personal
property and pay all costs for any storage and moving thereof within thirty (30)
days after the expiration or termination of this Lease, the termination of
Tenant’s right to occupy the Premises or the abandonment, desertion or vacating
of the Premises by Tenant, Landlord may dispose of such personal property in any
way that it deems proper. If Landlord shall sell any such personal property, it
shall be entitled to retain from the proceeds the amount of any Rent or other
expenses due Landlord, together with the cost of storage and moving and the
expense of the sale. Notwithstanding anything contained herein to the contrary,
in addition to the rights provided herein with respect to any such property,
Landlord shall have the option of exercising any of its other rights or remedies
provided in the Lease or exercising any rights or remedies available to Landlord
at law or in equity.
ARTICLE IX
Section 9.1 Transfers. Tenant shall not by operation of law or
otherwise, (a) assign, transfer, mortgage, pledge, hypothecate or otherwise
encumber this Lease, the Premises or any part of or interest in this Lease or
the Premises, (b) grant any concession or license within the Premises, (c)
sublet all or any part of the Premises or any right or privilege appurtenant to
the Premises, or (d) permit any other party to occupy or use all or any part of
the Premises (collectively, a
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“Transfer”), without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, conditioned or delayed. This prohibition against a
Transfer includes, without limitation, (i) any subletting or assignment which
would otherwise occur by operation of law, merger, consolidation,
reorganization, transfer or other change of Tenant’s corporate or proprietary
structure; (ii) an assignment or subletting to or by a receiver or trustee in
any federal or state bankruptcy, insolvency, or other proceedings; (iii) the
sale, assignment or transfer of all or substantially all of the assets of Tenant
with or without specific assignment of Lease; or (iv) the change in control in
a partnership. If Tenant requests Landlord’s consent to any Transfer, then
Tenant shall provide Landlord with a written description of all terms and
conditions of the proposed Transfer, copies of the proposed documentation, and
the following information about the proposed transferee: name and address;
reasonably satisfactory information about its business and business history; its
proposed use of the Premises; a copy of the proposed sublease or assignment
agreement; banking, financial and other credit information; and general
references sufficient to enable Landlord to determine the proposed transferee’s
creditworthiness and character. Landlord’s consent to a Transfer shall not
release Tenant from performing its obligations under this Lease, but rather
Tenant’s transferee shall assume all of Tenant’s obligations under this Lease in
a writing satisfactory to Landlord, and Tenant and its transferee shall be
jointly and severally liable therefor. Landlord’s consent to any Transfer shall
not waive Landlord’s rights as to any subsequent Transfer. While the Premises or
any part thereof are subject to a Transfer, Landlord may collect directly from
such transferee all rents or other sums relating to the Premises becoming due to
Tenant or Landlord and apply such rents and other sums against the Rent and any
other sums payable hereunder. If the aggregate rental, bonus or other
consideration paid by a transferee for any such space exceeds the sum of (y)
Tenant’s Rent to be paid to Landlord for such space during such period and (z)
Tenant’s costs and expenses actually incurred in connection with such Transfer,
including reasonable brokerage fees, reasonable costs of finishing or renovating
the space affected and reasonable cash rental concessions, which costs and
expenses are to be amortized over the term of the Transfer, then fifty percent
(50%) of such excess shall be paid to Landlord within fifteen (15) days after
such amount is earned by Tenant. Such arrearage amounts in the case of a
sublease shall be calculated and adjusted (if necessary) on a Lease Year (or
partial Lease Year) basis, and there shall be no cumulative adjustment for the
Term. Landlord shall have the right to audit Tenant’s books and records relating
to the Transfer. Tenant authorizes its transferees to make payments of rent and
any other sums due and payable, directly to Landlord upon receipt of notice from
Landlord to do so. Any attempted Transfer by Tenant in violation of the terms
and covenants of this Article IX shall be void. In the event that Tenant
requests that Landlord consider a sublease or assignment hereunder, Tenant shall
pay (i) Landlord’s reasonable and documented expenses, not to exceed Five
Hundred and No/l00 Dollars ($500.00) per transaction, actually incurred in
connection with the consideration of such request and (ii) all reasonable
attorneys’ fees and costs incurred by Landlord in connection with the
consideration of such request or such sublease or assignment.
Notwithstanding any provision to the contrary, Tenant may assign this Lease or
sublet the Premises without Landlord’s consent (i) to any corporation or other
entity that controls, is controlled by or is under common control with Tenant;
(ii) to any corporation or other entity resulting from a merger, acquisition,
consolidation or reorganization of or with Tenant; (iii) in connection with the
sale of all or substantially all of the assets of Tenant so long as Tenant
provides evidence to Landlord in writing that such assignment or sublease
complies with the, criteria set forth in (i), (ii) or (iii) above and provided
the following conditions are met: (1) the net worth of the transferee is equal
to or greater than the Tenant’s net worth on the date of this Lease, (2) if
Tenant remains in existence as a separate legal entity following the transfer,
it shall not be released from liability under this Lease, (3) the transferee
shall assume in a writing delivered to Landlord all of Tenant’s obligations
under the Lease effective upon the consummation of this transfer, and (4) Tenant
shall give written notice to Landlord of the proposed transfer at least fifteen
(15) days in advance of the consummation thereof. Any transferee that meets the
criteria in this paragraph shall hereinafter be referred to as a “Permitted
Transferee”.
Section 9.2 Assignment by Landlord. Landlord shall have the right at
any time to sell, transfer or assign, in whole or in part, by operation of law
or otherwise, its rights, benefits, privileges, duties, obligations or interests
in this Lease or in the Premises, the Building, the Land, the Project and all
other property referred to herein, without the prior consent of Tenant and such
sale, transfer or assignment shall be binding on Tenant. After such sale,
transfer or assignment, Tenant shall attorn to such purchaser, transferee or
assignee, and Landlord shall be released from all liability and obligations
under this Lease accruing after the effective date of such sale, transfer or
assignment.
Section 9.3 Limitation of Landlord’s Liability. Any provisions of
this Lease to the contrary notwithstanding, Tenant hereby agrees that no
personal, partnership or corporate liability of any kind or character
(including, without limitation, the payment of any judgment) whatsoever now
attaches or at any time hereafter under any condition shall attach to Landlord
or any of Landlord’s Related Parties or any mortgagee for payment of any amounts
payable under this Lease or for the performance of any obligation under this
Lease. The exclusive remedies of Tenant for the failure of Landlord to perform
any of its obligations under this Lease shall be to proceed against the interest
of Landlord in and to the Project. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Tenant might
otherwise have to obtain injunctive relief against Landlord or Landlord’s
successors in interest or any suit or action in connection with enforcement or
collection of amounts which may become owing or payable under or on account of
insurance maintained by Landlord. In no event shall Landlord be liable to Tenant
or any interest of Landlord in the Project be subject to execution by Tenant,
for any indirect special, consequential or punitive damages.
Landlord’s Initials:
/s/ DWN
Tenant’s Initials:
/s/ sb
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ARTICLE X
Section 10.1 Subordination. This Lease shall be subject and subordinated
at all times to (a) all ground or underlying leases now existing or which may
hereinafter be executed affecting the Project, and (b) the lien or liens of all
mortgages and deeds of trust in any amount or amounts, whatsoever now or
hereafter placed on the Project or Landlord’s interest or estate therein or on
or against such ground or underlying leases and to all renewals, modifications,
consolidations, replacements and extensions thereof and to each advance made or
hereafter to be made thereunder. Tenant shall execute and deliver upon demand
any instruments, releases or other documents requested by any lessor or
mortgagee for the purpose of subjecting and subordinating this Lease to such
ground leases, mortgages or deeds of trust. Tenant shall attorn to any party
succeeding to Landlord’s interest in the Premises, whether by purchase,
foreclosure, deed in lieu of foreclosure, power of sale, termination of lease or
otherwise, only upon such party’s request and at such party’s sole discretion
but not otherwise. Notwithstanding such attornment, Tenant agrees that any such
successor in interest shall not be (a) liable for any act or omission of, or
subject to any rights of setoff, claims or defenses otherwise assertable by
Tenant against any prior owner of the Project (including without limitation,
Landlord), (b) bound by any rents paid more than one (1) month in advance to any
prior owner, (c) liable for any Security Deposit not paid over to such successor
by Landlord, and (d) if such successor is a mortgagee or a ground lessor whose
address has been previously given to Tenant bound by any modification, amendment
extension or cancellation of the Lease not consented to in writing by such
mortgagee or ground lessor. Tenant shall execute all such agreements confirming
such attornment as such party may reasonably request. Tenant shall not seek to
enforce any remedy it may have for any default on the part of Landlord without
first giving written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any mortgagee or lessor under a
lien instrument or lease covering the premises whose address has been given to
Tenant, and affording such mortgagee or lessor a reasonable opportunity to
perform Landlord’s obligations hereunder. Landlord hereby agrees to use
commercially reasonable efforts to obtain a Subordination, Non-Disturbance and
Attornment Agreement from its current mortgagee and any future mortgagees, on
such mortgagee’s commercially reasonable standard form. Notwithstanding the
generality of the foregoing, any mortgagee or ground lessor may at any time
subordinate any such deeds of trust mortgages, other security instruments or
ground leases to this Lease on such terms and conditions as such mortgagee or
ground lessor may deem appropriate.
Section 10.2 Estoppel Certificate or Three-Party Agreement. Tenant
agrees (a) within ten (10) days following request by Landlord, to execute,
acknowledge and deliver to Landlord and any other persons specified by Landlord,
a certificate or three-party agreement among Landlord, Tenant and/or any third
party dealing with Landlord, certifying (i) that this Lease is unmodified and in
fall force and effect, or, if modified, stating the nature of such modification
(ii) the date to which the Rent and other charges are paid in advance, if any,
(iii) that there are not, to Tenant’s knowledge, any uncured defaults on the
part of Landlord hereunder, or so specifying such defaults, if any, as are
claimed and/or (iv) any other matters as such third party may reasonably require
in connection with the business dealings of Landlord and/or such third party and
(b) to deliver to Landlord audited financial statements that Tenant prepares
annually, including a balance sheet and a profit and loss statement for the most
recent two (2) years, all prepared in accordance with generally accepted
accounting principles consistently applied and certified by an independent
certified public accountant. Tenant’s failure to deliver such certificate or
three-party agreement within such ten (10) day period shall be conclusive upon
Tenant (x) that this Lease is in fill force and effect without modification
except as may be represented by Landlord, (y) that to Tenant’s knowledge there
are no uncured defaults in Landlord’s performance, and (z) that no Rent has been
paid in advance except as set forth in this Lease. Financial statements required
to be delivered pursuant to Section 10.2(b) may be delivered electronically and
if so delivered, shall be deemed to have been delivered on the date that
Tenant’s parent company posts its consolidated financial statements, or provides
a link thereto, on Tenant’s website on the Internet at www.texasroadhouse.com.
In the event that Tenant’s parent company is no longer publicly traded or is no
longer required to publicly disclose its financial statements, then Landlord
agrees to keep Tenant’s financial statements provided in accordance with the
above provisions confidential, and shall not disclose or share such financial
statements or the information contained therein with any other persons except
Landlord’s lenders, advisors, leasing agents, investors, attorneys and
prospective purchasers and their lenders.
Section 10.3 Notices. Any notice, request approval, consent or other
communication required or contemplated by this Lease must be in writing, unless
otherwise in this Lease expressly provided, and may be given or be served by
depositing the same in the United States Postal Service, postpaid and certified
and addressed to the party to be notified, with return receipt requested, or by
delivering the same in person to such party (or, in case of a corporate party,
to an officer of such party), or by prepaid telegram or express overnight mail
service, when appropriate, addressed to the party to be notified. Notice
deposited in the mail in the manner hereinabove described shall be effective
from and after three (3) days (exclusive of Saturdays, Sundays and postal
holidays) after such deposit. Notice given in any other manner shall be
effective only if and when delivered to the party to be notified or at such
party’s address for purposes of notice as set forth herein. For purposes of
notice the addresses of the parties shall, until changed as herein provided, be
as provided on the first page of this Lease; provided, that any notices sent to
Tenant will only be effective if copies thereof are simultaneously sent to the
attention of Tenant at 6040 Dutchmans Lane, Suite 200, Louisville, Kentucky
40205, Attention: Sheila C. Brown, Esq., General Counsel. The parties hereto
shall have the right from time to time to change their respective addresses by
giving at least fifteen (15) days’ written notice to the other party in the
manner set forth in this Section 10.3.
ARTICLE XI
Section 11.1 Right to Relocate Tenant. [Intentionally Omitted]
Section 11.2 Rights and Remedies Cumulative. The rights and remedies of
Landlord under this Lease shall be nonexclusive and each right or remedy shall
be in addition to and cumulative of all other rights and remedies available to
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Landlord under this Lease or at law or in equity. Pursuit of any right or remedy
shall not preclude pursuit of any other rights or remedies provided in this
Lease or at law or in equity, nor shall pursuit of any right or remedy
constitute a forfeiture or waiver of any Rent due to Landlord or of any damages
accruing to Landlord by reason of the violation of any of the terms of this
Lease.
Section 11.3 Legal Interpretation. This Lease and the rights and
obligations of the parties hereto shall be interpreted, construed and enforced
in accordance, with the laws of the state in which the Building is located and
the United States. The determination that one or more provisions of this Lease
is invalid, void, illegal or unenforceable shall not affect or invalidate any
other provision of this Lease, and this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained in this
Lease, and, so far as is reasonable and possible, effect shall be given to the
intent manifested by the portion held invalid or inoperative. All obligations of
either party hereunder not fully performed as of the expiration or termination
of the Term of this Lease shall survive the expiration or termination of the
Term of this Lease and shall be fully enforceable in accordance with those
provisions pertaining thereto. Article and section titles and captions appearing
in this Lease are for convenient reference only and shall not be used to
interpret or limit the meaning of any provision of this Lease. No custom or
practice, which may evolve between the parties in the administration of the
terms of this Lease, shall waive or diminish the right of Landlord to insist
upon the performance by Tenant in strict accordance with the terms of this
Lease. This Lease is for the sole benefit of Landlord and Tenant and, without
the express written consent thereto, no third party shall be deemed a third
party beneficiary hereof. Tenant agrees that this Lease supersedes and cancels
any and all previous statements, negotiations, arrangements, brochures,
agreements and understandings, if any, between. Landlord and Tenant with respect
to the subject matter of this Lease or the Premises and that this Lease,
including written extrinsic documents referred to herein, is the entire
agreement of the parties, and that there are no representations, understandings,
stipulations, agreements, warranties or promises (express or implied, oral or
written) between Landlord and Tenant with respect to the subject matter of this
Lease or the Premises. It is likewise agreed that this Lease may not be altered,
amended, changed or extended except by an instrument in writing signed by both
Landlord and Tenant. The terms and provisions of this Lease shall not be
construed against or in favor of a party hereto merely because such party is the
“Landlord” or the “Tenant” hereunder or because such party or its counsel is the
draftsman of this Lease. All references to days in this Lease and any Exhibits
or Addenda hereto mean calendar days, not working or business days, unless
otherwise stated.
Section 11.4 Tenant’s Authority. Both Tenant and the person executing
this Lease on behalf of Tenant warrant and represent unto Landlord that (a)
Tenant is a duly organized and validly existing legal entity, in good standing
and qualified to do business in the state in which the Building is located, with
no proceedings pending or contemplated for its dissolution or reorganization,
voluntary or involuntary, (b) Tenant has full right, power and authority to
execute, deliver and perform this Lease, (c) the person executing this Lease on
behalf of Tenant is authorized to do so, (d) upon execution of this Lease by
Tenant, this Lease shall constitute a valid and legally binding obligation of
Tenant, and (e) upon request of Landlord, such person will deliver to Landlord
satisfactory evidence of the matters set forth in this Section.
Section 11.5 No Brokers. Landlord and Tenant warrant and represent to
the other that it has not dealt with any real estate broker and/or salesman in
connection with the negotiation or execution of this Lease and no such broker or
salesman has been involved in connection with this Lease, and each party agrees
to defend, indemnify and hold harmless the other party from and against any and
all costs, expenses, attorneys’ fees or liability for any compensation,
commission and charges claimed by any real estate broker and/or salesman (other
than the aforesaid brokers) due to acts of such party or such party’s
representatives.
Section 11.6 Consents by Landlord. Except as otherwise expressly
provided in this Lease, in all circumstances under this Lease where the prior
consent or permission of Landlord is required before Tenant is authorized to
take any particular type of action, such consent must be in writing and the
matter of whether to grant such consent or permission shall be within the sole
and exclusive judgment and discretion of Landlord, and it shall not constitute
any nature of breach by Landlord under this Lease or any defense to the
performance of any covenant, duty or obligation of Tenant under this Lease that
Landlord delayed or withheld the granting of such consent or permission, whether
or not the delay or withholding of such consent or permission was prudent or
reasonable or based on good cause.
With respect to any provision of this Lease, which provides that Tenant shall
obtain Landlord’s prior consent or approval, Landlord may withhold such consent
or approval for any reason at its sole discretion, unless the provision
specifically states that the consent or approval will not be unreasonably
withheld.
With respect to any provision of this Lease which provides that Landlord shall
not unreasonably withhold or unreasonably delay any consent or any approval,
Tenant in no event, shall be entitled to make, nor shall Tenant make, any claim
for, and Tenant hereby waives any claim for money damages; nor shall Tenant
claim any money damages by way of setoff, counterclaim or defense, based upon
any claim or assertion by Tenant that Landlord has unreasonably withheld or
unreasonably delayed any consent or approval, unless Landlord has acted in an
arbitrary and capricious manner; but Tenant’s sole remedy shall be an action or
proceeding to enforce any such provision, or for specific performance,
injunction or declaratory judgment.
Section 11.7 Joint and Several Liability. If there is more than one
Tenant, then the obligations hereunder imposed upon Tenant shall be joint and
several. If there is a guarantor of Tenant’s obligations hereunder, then the
obligations hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and such guarantor, and Landlord need not first proceed
against Tenant before proceeding against such guarantor nor shall any such
guarantor be released from its guaranty for any reason whatsoever.
Section 11.8 Independent Covenants. The obligation of Tenant to pay Rent
and other monetary obligations
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provided to be paid by Tenant under this Lease and the obligation of Tenant to
perform Tenant’s other covenants and duties under this Lease constitute
independent unconditional obligations of Tenant to be performed at all times
provided for under this Lease, save and except only when an abatement thereof or
reduction therein is expressly provided for in this Lease and not otherwise, and
Tenant acknowledges and agrees that in no event shall such obligations,
covenants and duties of Tenant under this Lease be dependent upon the condition
of the Premises or the Project, or the performance by Landlord of its
obligations hereunder.
Section 11.9 Attorneys’ Fees and Other Expenses. In the event either
party hereto defaults in the faithful performance or observance of any of the
terms, covenants, provisions, agreements or conditions contained in this Lease,
the party in default shall be liable for and shall pay to the non-defaulting
party all expenses incurred by such party in enforcing any of its remedies for
any such default, and if the non-defaulting party places the enforcement of all
or any part of this Lease in the hands of an attorney, the party in default
agrees to pay the non-defaulting party’s reasonable attorneys’ fees in
connection therewith.
Section 11.10 Recording. Neither Landlord nor Tenant shall record this
Lease, but a short-form memorandum hereof may be recorded at the request of
Landlord or Tenant.
Section 11.11 Disclaimer; Waiver of Jury Trial. LANDLORD AND TENANT
EXPRESSLY ACKNOWLEDGE AND AGREE, AS A MATERIAL PART OF THE CONSIDERATION FOR
LANDLORD’S ENTERING INTO THIS LEASE WITH TENANT, THAT, EXCEPT AS OTHERWISE SET
FORTH IN THIS LEASE, LANDLORD HAS MADE NO WARRANTIES TO TENANT AS TO THE USE OR
CONDITION OF THE PREMISES OR THE PROJECT, EITHER EXPRESS OR IMPLIED, AND
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES OR
THE PROJECT ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL PURPOSE OR ANY OTHER
WARRANTY (EXPRESS OR IMPLIED) REGARDING THE PREMISES OR THE PROJECT. EXCEPT AS
EXPRESSLY SET FORTH IN THIS LEASE, LANDLORD AND TENANT EXPRESSLY AGREE THAT
THERE ARE NO, AND SHALL NOT BE ANY, IMPLIED WARRANTIES OF MERCHANTABIL1TY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER KIND ARISING OUT OF
THIS LEASE, ALL SUCH OTHER EXPRESS OR IMPLIED WARRANTIES IN CONNECTION HEREWITH
BEING EXPRESSLY DISCLAIMED AND WAIVED.
LANDLORD AND TENANT WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY TENANT AND TENANT
ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON ACTING ON BEHALF OF LANDLORD
HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. TENANT FURTHER ACKNOWLEDGES THAT IT
HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. TENANT FURTHER ACKNOWLEDGES THAT IT HAS READ
AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND AS
EVIDENCE OF SAME HAS EXECUTED THIS LEASE.
Section 11.12 No Access to Roof. Tenant shall have no right of access to
the roof of the Premises or the Building, except as set forth in Special
Stipulation No. 5 of Exhibit C attached hereto.
Section 11.13 Parking. Tenant’s occupancy of the Premises shall initially
include the use of up to one hundred seventy-three (173) parking spaces (i.e., a
ratio of 3.70 per 1,000 square feet of Rentable Area) to Tenant, which shall be
used in common with other tenants, invitees and visitors of the Building. Tenant
shall have the right to park in the Building parking facilities in common with
other tenants of the Building upon such terms and conditions, including the
imposition of a reasonable parking charge, if the same is established by
Landlord at any time during the Term of this Lease. Tenant’s allotted parking
spaces shall be increased based on the ratio set forth above upon each
applicable Commencement Date should this Lease later be amended to reflect a
change to the Rentable Area of the Premises. Tenant agrees not to overburden the
parking facilities and agrees to cooperate with Landlord and other tenants in
use of the parking facilities. Landlord reserves the right in its absolute
discretion to determine whether the parking facilities are becoming overburdened
and to allocate and assign parking spaces among Tenant and other tenants, aid to
reconfigure the parking area and modify the existing ingress to and egress from
the parking area as Landlord shall deem appropriate.
Section 11.14 No Accord or Satisfaction. No payment by Tenant or receipt
by Landlord of a lesser amount the Rent and other sums due hereunder shall be
deemed to be other than on account of the earliest Rent or other sums due, nor
shall any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept such check
or payment without prejudice to Landlord’s right to recover the balance of such
Rent or other sum and to pursue any other remedy provided in this Lease.
Section 11.15 Acceptance. The submission of this Lease by Landlord does
not constitute an offer by Landlord or other option for, or restriction of, the
Premises, and this Lease shall only become effective and binding upon Landlord,
upon full execution hereof by Landlord and delivery of a signed copy to Tenant.
Section 11.16 Waiver of Counterclaim. Tenant hereby waives, the right to
interpose any counterclaim of whatever description in any summary proceeding.
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Section 11.17 Time Is of the Essence. Time is of the essence of this
Lease. Unless specifically provided otherwise, all references to terms of days
or months shall be construed as references to calendar days or calendar months,
respectively.
Section 11.18 Counterparts. This Lease may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
Section 11.19 Execution and Delivery of Lease. This Lease shall not be
valid and binding on Landlord and Tenant unless and until it has been completely
executed by and delivered to both parties.
Section 11.20 Real Estate Investment Trust. During the Term of this Lease,
should a real estate investment trust become Landlord hereunder, all provisions
of this Lease shall remain in full force and effect except as modified by this
paragraph. If Landlord in good faith determines that its status as a real estate
investment trust under the provisions of the Internal Revenue Code of 1986, as
heretofore or hereafter amended, will be jeopardized because of any provision of
this Lease, Landlord may request reasonable amendments to this Lease and Tenant
will not unreasonably withhold, delay or defer its consent thereto, provided
that such amendments do not (a) increase the monetary obligations of Tenant
pursuant to this Lease or (b) in any other manner adversely affect Tenant’s
interest in the Premises.
IN TESTIMONY WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
LANDLORD
PARAGON CENTRE HOLDINGS, LLC, a Kentucky limited
liability company
By:
/s/ David W. Nicklies
David W. Nicklies, Manager
Date: 3-20-06
TENANT:
TEXAS ROADHOUSE HOLDINGS LLC, a Kentucky limited
liability company
By:
Texas Roadhouse, Inc., a Delaware corporation, its Manager
By:
/s/ Sheila C. Brown
Title:
Sheila C. Brown
General Counsel, Corporate Secretary
Date: March 3, 2006
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EXHIBIT A
LEGAL DESCRIPTION OF LAND
Being a portion of the tract conveyed to Louisville Dutchmans Lane Associates,
Ltd., as recorded in Deed Book 5533 Page 278, in the Office of the County Clerk
of Jefferson County, Kentucky; and more particularly described as follows:
BEGINNING at a pipe at the intersection of the southerly line of Dutchmans Lane
as established in instrument of record in Deed Book 1238 Page 397, in the Office
of the Clerk of the County Court of Jefferson County, Kentucky, thence with the
northwesterly line of the tract conveyed to Louisville Dutchmans Lane
Associates, Ltd by Deed of record in Deed Book 5533 Page 278, in the Office of
the Clerk aforesaid; thence with the southerly line of Dutchmans Lane and with
an arc of a curve to the left having a radius of 216.33 feet and the following
chords:
South 66 degrees 19 minutes 48 seconds East 43.05 feet to an iron pipe; South 78
degrees 40 minutes 38 seconds East 50.00 feet to an iron pipe; North 88 degrees
03 minutes 02 seconds East 50.00 feet to an iron pipe; North 74 degrees 46
minutes 42 seconds East 50.00 feet to an iron pipe; North 61 degrees 30 minutes
22 seconds East 50.00 feet to an iron pipe; thence continuing with the
southeasterly line of Dutchmans Lane, North 54 degrees 52 minutes 12 seconds
East 46.50 feet to an iron pipe in the southwestern most corner of the tract
conveyed to Louisville OPC Associates, Ltd. by Deed of record in Deed Book 5559
Page 255; thence with the most pipe; southwesterly line of said tract South 35
degrees 07 minutes 48 seconds East 31.00 feet to an iron thence South 46 degrees
11 minutes 52 seconds East 112.93 feet to an iron pipe; thence with an arc of a
curve to the left having a radius of 867.00 feet, and a chord of South 48
degrees 27 minutes 20 seconds East 118.26 feet to an iron pipe; thence with the
arc of a curve to the right having a radius of 12.00 feet and a chord of South
06 degrees 36 minutes 16 seconds East 17.20 feet; thence South 39 degrees 09
minutes 26 seconds West 18.32 feet to an iron pipe; South 50 degrees 50 minutes
34 seconds East 24.00 feet to an iron pipe; North 84 degrees 09 minutes 25
seconds East 62.44 feet to an iron pipe; thence with the arc of a curve to the
right having a radius of 11.00 feet, and a chord of South 73 degrees 20 minutes
26 seconds East 8.43 feet, thence the following courses and distances: South 50
degrees 50 minutes 16 seconds East 5.34 feet to an iron pipe; South 05 degrees
50 minutes 34 seconds East 34.25 feet to an iron pipe; South 47 degrees 17
minutes 46 seconds East 243.59 feet to an iron pipe on the west line of
right-of-way for Watterson Expressway 1-264, said point also being on the
southeastern most line of the tract conveyed to Louisville OPC Associates, Ltd.
as recorded in Deed Book 5559 Page 255 in aforementioned clerks office; thence
along West right-of-way line of Watterson Expressway 1-264, South 59 degrees 37
minutes 00 seconds West 389.94 feet to an iron pipe; thence leaving the existing
right-of-way of Watterson Expressway 1-264, with the following courses, North 33
degrees 22 minutes 13 seconds West 701.67 feet to the POINT OF BEGINNING
containing approximately 4.410 acres.
EXCEPTING THEREFROM that certain parcel conveyed to the Commonwealth of Kentucky
by Deed of Conveyance dated June 28, 1989, and recorded in Deed Book 5876 Page
97 in the Office of the Clerk of the County Court of Jefferson County, Kentucky,
and further described as follows:
BEGINNING at a point in the existing access control and right of way line, said
point being the Grantor’s east property corner, 38.00 feet left of 1-264 Station
606+52.59; thence with said existing access control and right of way line and
the Grantor’s, southeast property line South 60 degrees 51 minutes 23 sec6nds
West (Grantor’s Survey South 59 degrees 37 minutes 00 second West), 389.94 feet
to the Grantor’s south property corner 38.00 feet left of 1-264 Station
602+62.65; thence with the Grantor’s southwest property line North 32 degrees 07
minutes 50 seconds West (Grantor’s Survey North 33 degrees 22 minutes 13 seconds
West), 98.13 feet to a point in the proposed access control and right of way
line 136.00 feet left of 1-264 Station 602+57.54; thence with said proposed
access control and right of way line the following courses: South 89 degrees 45
minutes 09 seconds East, 77.43 feet to a point 98.00 feet left of I-264 Station
603+25.00; North 60 degrees 15 minutes 12 seconds East 308.38 feet to a point in
the Grantor’s northeast property line 101.25 feet left of I-264 Station
606+33,36; thence with said northeast property line South 46 degrees 03 minutes
23 seconds East (Grantor’s Survey South 47 degrees 17 minutes 46 seconds East),
66.11 feet to the point of beginning containing approximately 0.567 acre.
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EXHIBIT B
FLOORPLAN of PREMISES
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EXHIBIT C
SPECIAL STIPULATIONS
These Special Stipulations are hereby incorporated into this Lease and in the
event that they conflict with any provisions of this Lease, these Special
Stipulations shall control.
1. Right of First Offer.
Prior to execution of a lease or leases for the approximately 16,130 square feet
of Rentable Area depicted on Exhibit C-1 attached hereto (the “First Offer
Spaces”), composed of Suites 220, 250, 315 and 320 during the first five (5)
years of the Term of this Lease, and so long as Tenant is not then in default
under this Lease, Landlord will notify Tenant of the terms and conditions upon
which it would be willing to lease all or portions of the First Offer Spaces to
Tenant as such space becomes available.
If within ten (10) business days after receipt of Landlord’s notice, Tenant
agrees in writing to lease portions of the First Offer Spaces at the current
market rate then being charged by Landlord for comparable space in the Building
and upon such terms and conditions set forth in Landlord’s notice, Landlord and
Tenant will execute an amendment or amendments to this Lease adding the First
Offer Spaces to the Premises within ten (10) business days after Landlord’s
receipt of Tenant’s notice of intent to lease upon all the same terms as this
Lease except as modified by the terms in Landlord’s notice. If Tenant does not
deliver its notice of intent to lease all or a portion the First Offer Spaces or
elects not to lease all or a portion of the First Offer Spaces within such 10
business-day period, then this right of first offer to lease that portion of the
First Offer Spaces will lapse and be of no further effect and Landlord will have
the right to lease that portion the First Offer Spaces to any third party on the
same or any other terms and conditions, whether or not such terms and conditions
are more or less favorable than those offered to Tenant. The right granted to
Tenant under this paragraph is personal to Tenant and to any Permitted
Transferee; furthermore, in the event of any assignment of this Lease to a party
other than a Permitted Transferee or a sublease to a party other than a
Permitted Transferee Tenant of more than fifty percent (50%) of the Premises,
this right of first offer to lease the First Offer Spaces shall thenceforth be
null and void and of no further force and effect.
2. Extension Option.
(a) So long as this Lease is in full force and effect and Tenant is
not in default beyond any applicable notice and cure period in the performance
of any of the covenants or terms and conditions of this Lease at the time of
notification to Landlord or at the time of commencement of the Extension Period,
as that term is hereinafter defined, Tenant shall have the option (the
“Extension Option”) to extend the Term for the entire Premises for one (1)
additional period of five (5) years (the “Extension Period”), which Extension
Period shall commence upon the expiration of the initial Term upon the same
terms and conditions of this Lease, except that the Base Rent during the
Extension Period shall be at an annual rate equal to ninety five percent (95%)
of thee then current fair market value rate for lease renewals and extensions
comparable to this Lease for space comparable to the Premises in the Building,
taking into account such factors as tenant improvement allowances, rent
concessions and rental escalations (the “FMR”), subject to the following terms
and conditions: Tenant shall provide Landlord with written notice, of its desire
to extend the Term of this Lease nine (9) months prior to the expiration of the
initial Term. In the event Tenant timely exercises this Extension Option, this
Lease shall be deemed extended and the FMR shall be determined as set forth
below. In the event that Landlord does not receive Tenant’s written notice nine
(9) months prior to the expiration of the initial Term, then such Extension
Option shall be null and void and of no further force or effect this Lease shall
expire on the Expiration Date (as that term is defined in Article I), and if
requested by Landlord, Tenant shall execute an instrument in form and substance
acceptable to Landlord confirming such facts.
(b) The FMR shall be determined by Landlord and Tenant by mutual
agreement; however, if Landlord and Tenant cannot agree in writing on the FMR
within ten (10) days after Landlord’s receipt of Tenant’s notice of its election
to extend this Lease, the FMR shall be determined by the Three Broker Method set
forth below. Tenant shall have the option to select a real estate broker, who
shall act on Tenant’s behalf in determining the FMR, within five (5) business
days after the expiration of the 10-day period. Landlord must select a real
estate broker within five (5) business days after written notice of Tenant’s
selection. Landlord, by written notice to Tenant shall designate a real estate
broker, who shall act on Landlord’s behalf in the determination of the FMR. If
either Landlord or Tenant fails or refuses to select a broker, the other broker
shall alone determine the FMR. Otherwise, within ten (10) days after the
selection of Landlord’s broker, Landlord and Tenant’s brokers shall then select
a third broker meeting the qualifications stated below, and each broker, within
fifteen (15) days after the third broker is elected, shall submit his or her
determination of the FMR. The FMR shall be the determination of the broker that
is not the highest or the lowest (or, if two brokers reach an identical
determination, the determination of such two brokers). Landlord and Tenant shall
each pay the fee of the broker selected by it, and they shall equally share the
payment of the fee of the third broker.
(c) In the event that the appraisal process has not been completed
prior to the commencement of the Extension Period, then upon commencement of the
Extension Period, and until the process is completed (the “Interim Period”),
Tenant shall pay Landlord monthly Base Rent and Additional Rent equal to the
Base Rent and Additional Rent for the immediately preceding Lease year, until
the increase in the Base Rent is determined by such process as provided herein;
provided, however, that such payments made during the Interim Period shall be
subject to adjustment based upon the results of such process. If, as a result of
such appraisal process, it is determined that Tenant has underpaid Base Rent
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and Additional Rent during the Interim Period, then such underpaid Base Rent and
Additional Rent shall be due from Tenant to Landlord within ten (10) days after
expiration of the Interim Period. All brokers selected in accordance with this
subparagraph must be licensed in the state of Kentucky as a real estate broker
and shall have at least ten (10) years prior experience in commercial office
leasing in the metropolitan area of Louisville, Kentucky. Landlord and Tenant
agree that they shall be bound by the determination of the FMR pursuant to this
subparagraph for the Extension Period.
(d) Tenant shall accept the Premises in their existing condition (on
an “as is” basis) upon the commencement of the Extension Period and Landlord
shall have no obligation to grant or pay any allowance, abatement or concession
of any kind with respect to the Premises. Tenant shall have no option to renew
or extend this Lease beyond the expiration of the Extension Period.
(e) This Extension Option is personal to Tenant and to any Permitted
Transferee; furthermore, in the event of an assignment of this Lease to a party
other than a Permitted Transferee or a sublease to a party other than a
Permitted Transferee by Tenant of more than fifty percent (50%) of the Premises,
this Extension Option shall become null and void and of no further force or
effect.
3. Condition of Lease.
Landlord’s agreement to enter into this Lease and to terminate the Prior Lease
is expressly conditioned upon Tenant’s full and complete performance of all
obligations of Tenant under the Prior Lease, including, without limitation, the
payment by Tenant of all Rent, Additional Rent and other amounts due and payable
under the Prior Lease through the Commencement Date of this Lease. Should Tenant
fail to satisfy such obligations within applicable notice and cure periods set
forth in the Prior Lease, Landlord shall have the option to terminate this
Lease.
4. Signage.
So long as Tenant is not in default under this Lease past applicable notice and
cure periods, Tenant shall have the right to install and maintain, at its sole
cost and expense, signage depicting Tenant’s identification logo and name on (i)
the portion of the Building facing the Watterson Expressway (I-264), (ii) the
existing monument sign located between the Building and One Paragon Centre, and
(iii) the existing monument sign located on Dutchmans Lane, subject to the
following terms and conditions:
(a) The location, design, construction, size, lighting, font of
lettering, method of attachment of the individual letters and all other aspects
of such signage shall be subject to Landlord’s written consent prior to the
fabrication and installation of such signage, which consent shall not be
unreasonably withheld or delayed and such signage must also comply with all
applicable rules, regulations, ordinances and laws including, without
limitation, zoning ordinances.
(b) The expense of installing, constructing, maintaining and removing
the sign shall be the sole cost and expense of Tenant and shall be paid directly
by Tenant. Tenant shall be responsible for all costs and expenses associated
with such signage and Tenant shall promptly repair any damage to the Building
resulting from the installation, construction, maintenance or removal of such
signage, normal wear and tear, fire or other casualty excepted.
(c) Tenant hereby agrees to indemnify and hold Landlord harmless for
any cost, expense, loss or other liability associated with the installation,
construction, maintenance and removal of the sign.
(d) The foregoing rights granted to Tenant under this Special
Stipulation No. 4 shall be personal to Tenant and to any Permitted Transferee
(provided that Landlord shall have prior approval rights over any change in the
name on such signage in addition to the approval rights set forth above);
furthermore, in the event of any assignment of this Lease to a party other than
a Permitted Transferee or subletting of the Premises to a party other than a
Permitted Transferee by Tenant of more than fifty percent (50%) of the Premises,
Tenant’s signage rights as contained herein shall not be transferable or
assignable to such third-party assignee or subtenant. Upon such an assignment of
this Lease or subletting by Tenant, this right shall become null and void and of
no further force and effect, and Tenant shall immediately remove the
identification signage from the Building as provided in subparagraph (e) below,
unless the continuance and/or transfer of such signage rights and the proposed
signage for is approved by Landlord.
(e) Upon the expiration or earlier termination of this Lease, Tenant
shall promptly remove the identification signage and reimburse Landlord for all
costs and expenses associated with any damage to the Building caused by such
removal.
5. Satellite Antenna Equipment.
Subject to the terms and conditions set forth herein, Landlord hereby grants to
Tenant a license to install, maintain and operate a satellite dish and related
antenna equipment on the roof of the Building (the “Equipment”), including
necessary wiring and cabling, subject to the following terms and, conditions:
(a) The size, location, configuration, specifications, and operational
frequency of the Equipment shall be approved by Landlord prior to Tenant’s
installation of the Equipment. Tenant shall deliver to Landlord Tenant’s plans
and specifications for the installation of the Equipment and the surrounding
screening for review and approval by Landlord’s engineer not less than thirty
(30) days prior to commencing installation of the Equipment. Notwithstanding the
foregoing, Landlord hereby approves the size, configuration, specifications and
operational frequency of the Equipment depicted on Exhibit C-2 hereto. Tenant
shall reimburse Landlord for all third party out-of-pocket costs and expenses
incurred by
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Landlord in connection with Landlord or its designated agent’s review and
approval of such plans and specifications as well as ensuring Tenant’s
compliance with this provision.
(b) Provided that Tenant has submitted to Landlord (a) detailed plans
and specifications for the installation of the Equipment, (b) copies of all
required or appropriate governmental or quasi-governmental permits, licenses,
and authorizations obtained by Tenant at its expense, and (c) a certificate of
insurance from Tenant and the installer of the Equipment evidencing insurance
coverage as required under this Lease and by Landlord, naming Landlord as an
additional insured, and provided further that Tenant is in compliance with the
terms herein in connection with the installation, maintenance, repair, operation
and removal of the Equipment, Tenant shall have the right to install the
Equipment in an aesthetically pleasing manner and Tenant shall exercise all
reasonable steps to shield or screen the Equipment from public view. Tenant
shall fence or screen the Equipment so as to minimize any risks to ensure that
the Equipment does not create a nuisance.
(c) Tenant shall operate the Equipment in compliance with all
applicable laws, rules, regulations and ordinances.
(d) Tenant shall be responsible for maintaining the Equipment in good
condition at its sole cost and expense. Tenant shall provide written notice to
Landlord twenty-four (24) hours in advance, except in the event of an emergency,
to notify Landlord when Tenant intends to install and/or access the Equipment
(e) Landlord shall perform all roof penetrations and modifications
necessary for the installation, maintenance or removal of Tenant’s Equipment.
Tenant will reimburse Landlord for all third party out-of-pocket costs and
expenses incurred by Landlord in connection with such roof penetrations and
modifications.
(f) Tenant hereby agrees to indemnify and hold Landlord, its agents,
employees, contractors and representatives, harmless from and against any and
all cost claims, damages (including, but not limited to, any damage to the
Building, the roof or Landlord’s property), causes of action and liability which
may arise by reason of any occurrence attributable to or arising out of Tenant’s
installation, maintenance, repair, operation or removal of any of the Equipment,
including without limitation, any claim or cause of action for injury to or
death of any person or damage to any property arising therefrom and Tenant
agrees to defend any claim or demand against Landlord, its agents or employees
arising out of any such occurrence. Tenant shall, upon thirty (30) days prior
written notice from Landlord, reimburse Landlord for all costs and expenses
incurred by Landlord as a result of Tenant’s operation of the Equipment
including damages to the Building and the furnishing of electric power for the
operation of the Equipment
(g) During the term of the license, Tenant shall pay to Landlord the
monthly sum of One Hundred Five and No/100 Dollars ($105.00) as monthly rental
for the license granted in this Special Stipulation No. 5.
(h) Tenant’s Equipment shall not hinder or unreasonably interfere with
any other tenants’ or licensees’ installation, operation and maintenance or
repair of antennae or satellite equipment.
(i) Landlord reserves the right to enter into a contract with a
third-party manager for the leasing and management of the roof of the Building.
Tenant shall be responsible for complying with all reasonable rules and
regulations established by such manager.
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EXHIBIT C-I
FIRST OFFER SPACE
Two Paragon Centre
SECOND FLOOR
TWO PARAGON CENTRE
THIRD FLOOR
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GRAPHIC [g152681ke05i001.gif]
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GRAPHIC [g152681ke05i002.gif]
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EXHIBIT C-2
EQUIPMENT (SATELLITE)
AGREEMENT REGARDING SATELLITE ANTENNA
] THIS AGREEMENT REGARDING SATELLITE ANTENNA (“Agreement”) is made this
day of , 2005, (the “Effective Date”), by and, between,
Paragon Centre Holdings, L.L.C., a Kentucky limited liability company,
(“Landlord”), and Texas Roadhouse Holdings LLC (“Tenant”). For good and valuable
consideration, the receipt and adequacy of which is hereby mutually and
respectively acknowledged by them, Landlord and Tenant hereby covenant,
contract, acknowledge, and agree as follows:
1. Landlord and Tenant are also parties to a Lease dated
, 2005, (“Lease”)
for those premises located at 6040 Dutchmans Lane, Suites 400, 100, 110, 120,
130, 140, 200, 300, 305, 310 in Louisville, Kentucky (“Premises”).
Any breach or Default by Tenant under the Lease shall also be a breach or
Default under this Agreement. Any breach or Default by Tenant of this Agreement
shall also be a breach or Default under the Lease and shall be governed by
Article VIII of the Lease.
2. Provided (but not otherwise) Tenant always fully, duly, and
timely complies with all its obligations, duties, and responsibilities under the
Lease and this Agreement, Tenant, subject to the other contents of this
Agreement and subject to the contents of the Lease, shall have the rights
described in this Agreement.
3. The general purpose of this Agreement is to allow Tenant,
subject to the terms, provisions, and contents of this Agreement and at Tenant’s
sole risk, responsibility, and expense, to install, maintain, repair, operate
and remove one Satellite Antenna Receiving Dish (“the Satellite Antenna”) on,
at, or from the roof area of the Building (as defined in the Lease), the exact
placement of the Satellite Antenna to be as Landlord, at its reasonable
discretion, from time to time directs, provided that the functionality of the
Satellite Antenna for Tenant’s intended use is not impaired, including, without
limitation, the right of Landlord to require Tenant to relocate the Satellite
Antenna on the roof from time to time at Tenant’s sole cost and expense. This
Agreement absolutely may not and absolutely shall not be assigned or otherwise
transferred by Tenant or anyone on its behalf except to an assignee of the Lease
as permitted under the terms of the Lease. The size, configuration,
specifications, and operational frequency of the Satellite Antenna are depicted
on Exhibit “K” attached hereto and expressly made a part hereof. To the extent
known or controlled by Tenant, no persons or parties other than the Tenant shall
in any way whatsoever use, utilize, or obtain any benefit from the Satellite
Antenna.
4. Tenant shall not install, maintain, repair, operate, or remove
the Satellite Antenna until Tenant first receives in each instance the written
approval of Landlord therefore, which approval shall be at Landlord’s reasonable
discretion. Before seeking in each instance such approval, Tenant shall submit
to Landlord: (a) detailed plans and specifications and other pertinent data and
information, with respect to the undertaking (b) copies of all required or
appropriate governmental and quasi-governmental permits, licenses and
authorizations, same to be obtained by Tenant at its sole responsibility and
expense, and (c) a certificate of insurance evidencing insurance coverage as
required by the Lease and any other insurance required by Landlord (in its
reasonable discretion) as regards the installation, maintenance, repair,
operation, or removal of the Satellite Antenna. In no event whatsoever shall
such installation, maintenance, repair, operation, or removal of the Satellite
Antenna in any way whatsoever damage the building located at 6040 Dutchmans
Lane, Louisville, Kentucky 40205 (the “Building”) or any of its appurtenances or
facilities, interfere with or impede any services provided by Landlord or the
other tenants or occupants of the Building, or otherwise adversely affect the
operation of the Building or any of the appurtenances or facilities. Tenant will
notify Landlord 24 hours in advance, unless in an emergency, when it desires
access to the Satellite Antenna. Provided that Tenant has complied with the
terms and conditions of this Agreement, including, without limitation, the
delivery of the items referenced in (a), (b), and (c) above and the Installer’s
insurance certificate referenced in Paragraph 5 below, and Landlord has given
its written approval, Tenant shall have the right to effect the installation of
the Satellite Antenna on the Effective Date of this Agreement.
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5. Any contractors, subcontractors, etc., hired or engaged by Tenant
to effect or assist in the installation, maintenance, repair, operation, or
removal of the Satellite Antenna must first be approved in writing by the
Landlord, which approval shall be at Landlord’s reasonable discretion. Landlord
hereby requires such contractors, subcontractors, etc., to provide lien waivers
and to be bonded and insured in such amounts and with such coverage as Landlord
may in its reasonable discretion prescribe. Landlord recognizes that Tenant has
elected to use Spacenet (the “Installer”) for the performance of all
installation, repair, maintenance, operation, and removal obligations hereunder
and Landlord hereby approves Spacenet as Tenant’s contractor. Further the
Installer or any other contractors must name Landlord, as an additional insured
on such insurance policies and prior to undertaking any work with respect to
this Agreement, the Installer or other such contractors shall provide Landlord
with a Certificate of Insurance at limits as reasonably requested by the
Landlord naming Landlord as an additional insured.
6. The term of this Agreement shall begin on the Effective Date,
and, subject to the other contents of this Agreement, shall be coterminous with
the term (as may be extended) of the Lease. Notwithstanding the foregoing,
Tenant, for any or no reason whatsoever, may at any time cancel this Agreement
upon not less than thirty (30) days’ prior written notice to the Landlord so
stating, provided that such cancellation of this Agreement shall have no effect
whatsoever on the term, provisions or contents of the Lease. Nothing in this
Paragraph 6 shall prohibit Landlord from terminating this Agreement in the event
that Tenant defaults under this Agreement and such default is not cured within
30 days after receipt of notice from Landlord in the event of a non-monetary
default, or within 10 business days after receipt of notice from Landlord in the
event of al non-monetary default.
7. Tenant, during the first nine months of this Agreement, shall pay
Landlord as rent the monthly sum of One Hundred Five and No/l00 Dollars
($105.00). Thereafter, such rent shall be subject to adjustments, from time to
time, but no more frequently than one time per calendar year, and in no event
more than three percent per calendar year, as Landlord, in its reasonable
discretion, elects. Rent during the term of this Agreement shall be due on the
first day of each month, commencing on the Effective Date, and shall be payable
with rent due under the Lease. Landlord will provide Tenant with 30 days prior
written notice of any adjustment to the rent due under this Agreement. Tenant
shall have no right to an abatement, reduction, diminution, deduction, offset,
or recoupment of such rent if for any, or no, reason whatsoever (other than
Landlord’s default under this Agreement) Tenant is unable to, or does not, use
the Satellite Antenna. Any monies payable by Tenant to Landlord under this
Agreement, at Landlord’s option, may be deemed to be Additional Rent (as defined
in the Lease) due Landlord from Tenant under the Lease.
8. Tenant shall fully, completely, and absolutely hold harmless,
indemnify and defend Landlord against any and all, claims, actions, losses,
damages, liabilities, costs, and expenses, including, without limitation,
attorneys’ fees through final appeal, in any way whatsoever associated with the
Satellite Antenna and its use, non-use, installation, maintenance, repair,
operation, or removal.
9. Landlord reserves the right, in its reasonable discretion, to
require Tenant at Tenant’s sole risk, responsibility, and expense, to relocate
at any time and from time to time the Satellite Antenna, such relocation to be
effected as Landlord, in its reasonable discretion, prescribes, provided that
the functionality of the Satellite Antenna for Tenant’s intended use is not
impaired.
10. At the expiration or earlier termination of this Agreement, Tenant
shall, within 15 business days thereafter, remove the Satellite Antenna, such
removal to be at Tenant’s sole risk, expense, and responsibility and to be
effected as Landlord, in its reasonable discretion, prescribes. Tenant, at its
sole risk, expense, and responsibility shall repair any and all damage caused by
such removal, such repair to be effected as Landlord, in its reasonable
discretion, prescribes. If Tenant does not effect such removal and/or repair
above-described, then Tenant hereby authorizes Landlord to do so and to charge
Tenant for all costs and expenses incurred in doing so, plus the greater of (i)
$500.00 or (ii) twenty percent of all costs and expenses incurred in effecting
the removal and/or repair, for Landlord’s overhead and inconvenience in doing
so, and Landlord shall incur no liability of any nature whatsoever in doing so,
and Tenant hereby agrees to indemnify and hold
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harmless the Landlord as provided in Paragraph 8 hereof in connection with such
removal and/or repair.
IN WITNESS WHEREOF, LANDLORD and TENANT have duly executed this Agreement as of
the day and year first above written, each acknowledging receipt of an executed
copy hereof together with all EXHIBITS referenced herein.
Signed and Acknowledged
Tenant:
in the Presence of:
Texas Roadhouse Holdings LLC
a Kentucky limited liability company
By:
Texas Roadhouse, Inc. its Manager
By:
/s/ Sheila C. Brown
Title:
Sheila C. Brown
General Counsel, Corporate Secretary
Signed and Acknowledged
Landlord:
in the Presence of:
Paragon Centre Holdings, LLC
a Kentucky limited liability company
By:
/s/ David W. Nicklies
Title:
David W. Nicklies, Manager
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EXHIBIT D
[INTENTIONALLY OMITTED]
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EXHIBIT E
WORK LETTER AGREEMENT
(Suite 150)
Tenant hereby accepts the Premises “As Is” and acknowledges and agrees Landlord
shall have no obligation to construct any tenant improvements to the Premises or
make any alterations or additions thereto, except that Landlord agrees to
provide Tenant the Tenant Improvement Allowance as set forth herein to cover a
portion of the costs associated with the improvements to the Premises. Tenant
shall construct the tenant improvements to the Premises in accordance with this
Exhibit E. The following provisions shall govern (A) the preparation and
approval process for the drawings and specifications for the improvements to the
Premises, which Tenant shall perform in accordance with the terms of this
Exhibit E, and (B) terms and conditions relating to contractors and
subcontractors in connection with the improvements to the Premises.
A. Tenant’s Work. Tenant shall be responsible for all work,
construction and installation in the Premises. Such work shall hereinafter be
referred to as “Tenant’s Work” and shall be at Tenant’s sole cost and expense,
except as provided below.
B. Tenant Allowance. Landlord agrees to provide to Tenant an allowance
with respect to the Suite 150 Premises, of $10.00 per rentable square foot (the
“Tenant Improvement Allowance”) (i.e., a total of 3,317 sf x $10.00 prsf =
$33,170.00) for leasehold improvements to the Premises. Fifty percent (50%) of
the Tenant Improvement Allowance for each suite must be applied to the Tenant’s
Work for that particular suite or for other suites leased by Tenant at Two
Paragon Centre. If the foregoing condition is satisfied, up to fifty percent
(50%) of the Tenant Improvement Allowance (i.e. $16,585.00) may be applied to
the cost of space planning, architectural and mechanical drawings, Tenant’s
cabling, furniture, fixtures and equipment, moving-related expenses and the
like, for the Premises or any of Tenant’s premises at Two Paragon Centre.
The Tenant Improvement Allowance shall be disbursed by Landlord to Tenant within
ten (10) days after the date Landlord delivers possession of such suite to
Tenant. Upon completion of Tenant’s Work for Suite 150, Tenant shall promptly
deliver to Landlord final and unconditional lien waivers for Tenant’s Work and
copies of paid invoices evidencing the cost of all of Tenant’s Work. Any unused
portion of the Tenant Improvement Allowance shall be retained by Landlord.
To the extent that the cost of Tenant’s Work exceeds the Tenant Improvement
Allowance, Tenant shall be fully responsible for payment of the same and shall
provide evidence of payment thereof to Landlord.
C. Tenant’s Space Plans. Tenant shall submit to Landlord for
Landlord’s approval a space plan for the improvements to the Premises (‘Tenant’s
Space Plans”) prepared by Tenant’s architect showing the interior layout of the
Premises and its integration with Building systems, core areas and the building
shell improvements in sufficient detail to permit Landlord a reasonable
opportunity to review and provide preliminary approval or comments regarding
Tenant’s proposed interior design. Landlord shall review and approve or
disapprove of Tenant’s Space Plans within ten (10) business days of Landlord’s
receipt thereof, which approval shall not be unreasonably withheld, conditioned
or delayed. If Landlord disapproves; either in whole or in part, of Tenant’s
Space Plans, Landlord shall provide to Tenant with reasonable specificity
Landlord’s reasons for its disapproval. Tenant shall promptly correct or
otherwise address all disapproved items identified by Landlord. The revised
final plans are referred to as “Final Plans.”
D. Tenant’s Contractor; Construction. Tenant shall have the right to
retain its own contractor(s) or subcontractor(s) to perform Tenant’s Work and
its telephone, security and cabling within the Premises at Tenant’s sole cost
and expense, subject to application of the Tenant Improvement Allowance. Such
contractor(s) must be approved, in its reasonable discretion, by Landlord’s
property manager, which shall serve as construction manager (“Construction
Manager”) and such contractor must be licensed and insured in the State of
Kentucky and must comply with all Building constriction rules and regulations
required by the Construction Manager. Landlord hereby approves Buffalo
Construction, Inc. as a contractor without further action required on the part
of Tenant. Following the preparation and approval of the Final Plans and the
working drawings, Tenant shall construct the improvements to the Premises
according to the Final Plans and in a good and workmanlike manner in compliance
with Landlord’s reasonable rules regarding construction in the Building.
Construction Manager shall review and approve the construction bid provided by
Tenant’s contractor prior to any Tenant’s Work commencing. On behalf of
Landlord, the Construction Manager shall supervise the construction of the
Premises. Tenant shall reimburse Landlord from the Tenant Improvement Allowance
for Landlord’s actual out-of-pocket costs in connection therewith.
E. Permits, Compliance with Laws. Tenant shall be responsible for
applying for and obtaining all permits required for Tenant to perform Tenant’s
Work or to operate within the Premises, including without limitation, building
permits, the final certificate of occupancy or its equivalent and for obtaining
the final fire inspection approval after installation of its fixtures, furniture
and equipment and for obtaining any other required inspections and approvals,
and shall provide Landlord with a copy of all such permits, approvals and
certificates of occupancy. The Final Plans shall comply with all applicable
local, state and federal laws, ordinances, codes and regulations. Tenant’s
architect shall certify to Landlord and Tenant that the Final Plans comply with
the Americans with Disabilities Act of 1990 and all other applicable local,
state and federal laws, ordinances, codes and regulations.
F. Substantial Completion. For purposes of this Lease, substantially
complete means full completion, except
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for minor or insubstantial details of construction, decoration or installation.
G. No Liability. Notwithstanding the review and approval by Landlord
of Tenant’s Space Plans, the Final Plans and Specifications, Landlord shall have
no responsibility or liability in regard to the safety, sufficiency, adequacy or
legality thereof and Tenant shall be solely responsible for the compliance of
such plans and specifications (and improvement constructed as a result hereof)
with all applicable laws and regulations, the architectural completeness and
sufficiency thereof and other matters relating thereto.
H. Insurance. Tenant shall secure, pay for, and maintain, or cause
its contractors and subcontractors to secure, pay for, and maintain, during the
continuance of construction and fixturing work within the Premises, all of the
insurance policies required in the amounts as set forth herein, together with
such insurance as may from time to time be required by city, county, state or
federal laws, codes, regulations or authorities. Tenant shall not commence, nor
may it permit its contractors and its subcontractors to commence any work, until
all required insurance has been obtained, and, if Landlord requests, until
Tenant’s certificates of such insurance have been delivered to Landlord,
tenant’s insurance policies shall name the Landlord, Landlord’s mortgagee(s), if
any, and Construction Manager, as additional insureds. Tenant’s certificates of
insurance shall provide that no change or cancellation of such insurance
coverage shall be undertaken without thirty (30) days prior written notice to
Landlord. Landlord shall have the right to require Tenant, and Tenant shall have
the duty, to stop work in the Premises immediately if any of the coverage Tenant
is required to carry herein lapses during the course of the work, in which event
Tenant’s Work may not be resumed until the required insurance is obtained and
satisfactory evidence of same is provided to Landlord.
Tenant shall purchase, or cause to be purchased, General Contractor’s and
Subcontractor’s Required Minimum Coverages and Limits of Liability as follows:
(i) Worker’s Compensation, as required by state law, and Employer’s
Liability Insurance with a limit of not less than $2,000,000.00 (or more if
required by the law of the State) and any insurance required by any Employee
Benefit Act or similar statute applicable where the work is to be performed, as
will protect the contractor and subcontractors from any and all liability under
the aforementioned act(s) or similar statute;
(ii) Commercial General Liability Insurance (including Contractor’s
Protective Liability) in an amount not less than $2,000,000.00 per occurrence
whether involving personal injury liability (or death resulting there from) or
property damage liability or a combination thereof (combined single limit
coverage) with a minimum aggregate limit of $2,000,000.00. Such insurance shall
include explosion, collapse and underground coverage. Such insurance shall
insure each party’s general contractor against any and all claims for personal
injury, death, and damage to the property of others arising from its operations
under its contract, whether such operations are performed by such party’s
contractors, subcontractors, or sub-subcontractors, or by anyone directly or
indirectly employed by any of them; and
(iii) Comprehensive Automotive Liability Insurance, for the ownership,
maintenance, or operation of any automotive equipment, whether owned, leased, or
otherwise held, including employer’s non-ownership and hired automobile
liability endorsements, in an amount not less than $2,000,000.00 per occurrence
and $2,000,000.00 aggregate, combined single limit bodily injury and property
damage liability.
Such insurance policies shall insure Tenant’s general contractor and all
subcontractors against any and all claims for bodily injury, including death
resulting there from, and damage to the property of others arising from its
operations under its contract in connection with construction of the Premises,
whether performed by Tenant’s general contractor, subcontractors, or
sub-subcontractors, or by anyone directly or indirectly employed by any of them.
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EXHIBIT F
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other
similar areas shall not be used for the disposal of trash, be obstructed by
Tenant or be used by Tenant for any purpose other than ingress and egress to and
from the Premises and for going from one part of the Building to another part of
the Building.
2. Plumbing fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags, or other
unsuitable material shall be thrown or placed therein. Damage resulting to any
such fixtures or appliances from misuse by Tenant shall be paid by such Tenant
and Landlord shall not in any case he responsible therefor.
3. Signs, advertisements, or notices visible in or from public
corridors or from outside the Building shall be subject to Landlord’s prior
written approval. Without Landlord’s prior consent no nails, hooks, or screws
shall be driven or inserted into any part of the Building, and no curtains or
other window treatments shall be placed between the glass and the Building
standard window treatments.
4. With respect to work being performed by Tenant in the Premises,
Tenant shall refer all contractors, contractors’ representatives, and
installation technicians rendering any service to Tenant to Landlord for
Landlord’s supervision and approval before the performance of any contractual
services. This provision shall apply to all work performed in the Building,
including, but not limited to, installations of telephones, telegraph equipment
electrical devices and attachments, and any and all installations of every
nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment,
and other physical portions of the Building.
5. Movement in or out of the Building of furniture, office equipment
safes and other heavy equipment, or the dispatch or receipt by Tenant of any
bulky material or merchandise, or materials which require use of elevators or
stairways or movement through the Building entrances or lobby, shall be
restricted to such hours as Landlord designates. All such movement shall be
under the supervision of Landlord and in the manner agreed between Tenant and
Landlord by prearrangement before performance. Such prearrangement, to be
initiated by Tenant will include determination by Landlord as to the time,
method, and routing of such movement and as to limitations for safety or other
concerns. Tenant assumes all risks of damage to articles moved and injury to
persons engaged or not engaged in such movement. Tenant shall be liable to
personnel of Landlord damaged or injured as a result of acts in connection with
carrying out this service for Tenant, and Landlord shall not be liable for the
acts of any person engaged in, or any damage or loss to any property or persons
resulting from any act in connection with, such service performed for Tenant.
6. Building management shall have the right and authority to prescribe
the maximum weight and position of safes and other heavy equipment, which may
overstress any portion of a floor. All damages done to the Building by taking in
or putting out any property of Tenant, or done by Tenant’s property while in the
Building, shall be repaired at the expense of Tenant.
7. Corridor doors, when not in use, shall be kept closed.
8. Tenant space visible from a public area must be kept neat and
clean.
9. Should Tenant require telegraphic, telephonic, annunciation, or
other communication services, Landlord will direct the electricians as to where
and how wires are to be introduced and placed, and none shall be introduced or
placed except as Landlord shall direct. Electric current shall not be used for
power or heating without Landlord’s prior written permission.
10. No animals shall be brought into or kept in, on, or about the
Building.
11. All routine deliveries to the Premises during 8:00 a.m. to 5:00 p.m.
weekdays shall be made through the freight elevators. Passenger elevators are to
be used only for the movement of persons, unless an exception is approved by the
Building management office.
12. All freight elevator lobbies are to be kept neat and clean. The
disposal of trash or storage of materials in these areas by Tenant is
prohibited.
13. Tenant shall not tamper with or attempt to adjust temperature
control thermostats in the Premises. Landlord shall adjust thermostats as
required to maintain the Building standard temperature. Landlord requests that
all window blinds remain down and tilted at a 45-degree angle toward the street
to help maintain comfortable room temperatures and conserve energy.
14. Tenant will comply with all security procedures during business
hours and after hours and on weekends.
15. Tenants are requested to lock all office doors leading to corridors
and to turn out all lights at the close of theft working day.
16. All requests for overtime air conditioning or heating must be
submitted in writing to the Building management office by 4:00 p.m. on the
preceding business day.
17. No flammable or explosive fluids or materials shall be kept or
used within the Building except in areas approved by Landlord, and Tenant shall
comply with all applicable building and fire codes relating thereto.
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18. Tenant may not place any items on the balconies of the Building
without obtaining Landlord’s prior written consent.
19. No smoking shall be permitted in the Premises. Smoking shall only
be permitted in areas expressly designated by Landlord from time to time.
20. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations as in its
good faith judgment shall from time to time be needed for the safety,
protection, care and cleanliness of the Property, the operation thereof, the
preservation of good order therein, and the protection and comfort of the
tenants and their agents, employees, and invitees, which rules and regulations;
when made and written notice thereof is given to Tenant, shall be binding upon
Tenant in like manner as if originally herein prescribed.
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Exhibit 10-ii
Michael J. LaVelle - Terms and Conditions of
Retirement and Consulting Agreement
·
On December 31, 2005, Mr. LaVelle will receive a lump sum distribution of
approximately $1.4 million from the Company’s Special Executive Retirement Plan
(the “Plan”) as specified by the terms and conditions of the Plan.
·
Mr. LaVelle will continue to serve as Chairman of the Board and receive
compensation for such services as set by the Compensation Committee from time to
time.
·
Mr. LaVelle will provide services as an employee-consultant concerning
management transition until June 30, 2006 for a minimum average of twenty (20)
hours per week at a monthly gross salary of $16,675.
·
Mr. LaVelle will maintain medical and dental insurance coverage for himself and
his spouse in accordance with the Company’s Supplemental Medicare Coverage Plan
and Supplemental Dental Coverage Plan.
·
Prior to termination of employment, the Company will study and arrange for 2004
restricted stock award to continue to vest as scheduled through 2007 and for
continuation of currently held stock options in $3-$5 strike price range while a
member of the Board or until such options expire.
·
Mr. LaVelle will continue to have use of company office space and a company car
during his tenure as Chairman.
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Exhibit 10.9
EXECUTION COPY
$100,000,000
CREDIT AGREEMENT
Dated as of October 19, 2006
Among
GLADSTONE BUSINESS INVESTMENT LLC
as the Borrower
GLADSTONE MANAGEMENT CORPORATION
as the Servicer
THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO
as Committed Lenders
THE COMMERCIAL PAPER LENDERS FROM TIME TO TIME PARTY HERETO
as CP Lenders
THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO
as Managing Agents
and
DEUTSCHE BANK AG, NEW YORK BRANCH
as the Administrative Agent
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1
Section 1.1
Certain Defined Terms.
1
Section 1.2
Other Terms.
29
Section 1.3
Computation of Time Periods.
29
Section 1.4
Interpretation.
29
ARTICLE II ADVANCES
30
Section 2.1
Advances.
30
Section 2.2
Procedures for Advances.
31
Section 2.3
Optional Changes in Facility Amount; Prepayments.
32
Section 2.4
Principal Repayments.
33
Section 2.5
The Notes.
33
Section 2.6
Interest Payments.
34
Section 2.7
Fees.
35
Section 2.8
Settlement Procedures.
35
Section 2.9
Collections and Allocations.
36
Section 2.10
Payments, Computations, Etc.
37
Section 2.11
Breakage Costs.
37
Section 2.12
Increased Costs; Capital Adequacy; Illegality.
38
Section 2.13
Taxes.
39
Section 2.14
Revolver Loan Funding.
41
ARTICLE III CONDITIONS OF EFFECTIVENESS AND ADVANCES
42
Section 3.1
Conditions to Effectiveness and Advances.
42
Section 3.2
Additional Conditions Precedent to All Advances.
43
ARTICLE IV REPRESENTATIONS AND WARRANTIES
43
Section 4.1
Representations and Warranties of the Borrower.
43
ARTICLE V GENERAL COVENANTS OF THE BORROWER
47
Section 5.1
Covenants of the Borrower.
47
Section 5.2
Hedging Agreement.
52
ARTICLE VI SECURITY INTEREST
52
Section 6.1
Security Interest.
52
Section 6.2
Remedies.
53
Section 6.3
Release of Liens.
54
Section 6.4
Assignment of the Purchase Agreement.
55
ARTICLE VII ADMINISTRATION AND SERVICING OF LOANS
55
Section 7.1
Appointment of the Servicer.
55
Section 7.2
Duties and Responsibilities of the Servicer.
55
Section 7.3
Authorization of the Servicer.
57
Section 7.4
Collection of Payments.
58
i
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Section 7.5
Servicer Advances.
59
Section 7.6
Realization Upon Defaulted Loans or Charged-Off Loans.
59
Section 7.7
Optional Repurchase of Transferred Loans.
60
Section 7.8
Representations and Warranties of the Servicer.
60
Section 7.9
Covenants of the Servicer.
62
Section 7.10
Payment of Certain Expenses by Servicer.
63
Section 7.11
Reports.
64
Section 7.12
Annual Statement as to Compliance.
64
Section 7.13
Limitation on Liability of the Servicer and Others.
64
Section 7.14
The Servicer Not to Resign.
65
Section 7.15
Access to Certain Documentation and Information Regarding the Loans.
65
Section 7.16
Merger or Consolidation of the Servicer.
66
Section 7.17
Identification of Records.
66
Section 7.18
Servicer Termination Events.
66
Section 7.19
Appointment of Successor Servicer.
68
Section 7.20
Market Servicing Fee.
69
ARTICLE VIII EARLY TERMINATION EVENTS
69
Section 8.1
Early Termination Events.
69
ARTICLE IX INDEMNIFICATION
71
Section 9.1
Indemnities by the Borrower.
71
Section 9.2
Indemnities by the Servicer.
73
ARTICLE X THE ADMINISTRATIVE AGENT AND THE MANAGING AGENTS
74
Section 10.1
Authorization and Action.
74
Section 10.2
Delegation of Duties.
75
Section 10.3
Exculpatory Provisions.
75
Section 10.4
Reliance.
76
Section 10.5
Non-Reliance on Administrative Agent, Managing Agents and Other Lenders.
77
Section 10.6
Reimbursement and Indemnification.
77
Section 10.7
Administrative Agent and Managing Agents in their Individual Capacities.
77
Section 10.8
Successor Administrative Agent or Managing Agent.
78
ARTICLE XI ASSIGNMENTS; PARTICIPATIONS
78
Section 11.1
Assignments and Participations.
78
Section 11.2
Additional Lender Groups.
81
ARTICLE XII MISCELLANEOUS
82
Section 12.1
Amendments and Waivers.
82
Section 12.2
Notices, Etc.
83
Section 12.3
No Waiver, Rights and Remedies.
83
Section 12.4
Binding Effect.
83
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Section 12.5
Term of this Agreement.
83
Section 12.6
GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE.
83
Section 12.7
WAIVER OF JURY TRIAL.
84
Section 12.8
Costs, Expenses and Taxes.
84
Section 12.9
No Proceedings.
85
Section 12.10
Recourse Against Certain Parties.
85
Section 12.11
Protection of Security Interest; Appointment of Administrative Agent as
Attorney-in-Fact.
86
Section 12.12
Confidentiality.
87
Section 12.13
Execution in Counterparts; Severability; Integration.
88
EXHIBITS
EXHIBIT A
Form of Borrower Notice
EXHIBIT B
Form of Note
EXHIBIT C
Form of Assignment and Acceptance
EXHIBIT D
Form of Joinder Agreement
EXHIBIT E
Form of Monthly Report
EXHIBIT F
Form of Servicer’s Certificate
EXHIBIT G
[Reserved]
EXHIBIT H
Form of Primary Document Trust Receipt
EXHIBIT I
Form of Assignment of Mortgage
EXHIBIT J
[Reserved]
EXHIBIT K
[Reserved]
EXHIBIT L
Form of Deposit Account Control Agreement
EXHIBIT M
Credit Report and Transaction Summary
EXHIBIT N
Moody’s Industry Classifications
SCHEDULES
SCHEDULE I
Schedule of Documents
SCHEDULE II
List of Lock-Box Banks, Lock-Box Accounts, Collection Account and Securities
Accounts
SCHEDULE III
Loan List
SCHEDULE IV
Form of Loans
iii
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THIS CREDIT AGREEMENT is made as of October 19, 2006, among:
(1) GLADSTONE BUSINESS INVESTMENT LLC, a Delaware limited liability
company, as borrower (the “Borrower”);
(2) GLADSTONE MANAGEMENT CORPORATION, a Delaware corporation, as
servicer (the “Servicer”);
(3) Each financial institution from time to time party hereto as a
“Committed Lender” and their respective successors and assigns (collectively,
the “Committed Lenders”);
(4) Each commercial paper issuer from time to time party hereto as a
“CP Lender” and their respective successors and assigns (collectively, the “CP
Lenders”);
(5) Each financial institution from time to time party hereto as a
“Managing Agent” and their respective successors and assigns (collectively, the
“Managing Agents”); and
(6) DEUTSCHE BANK AG, NEW YORK BRANCH, as “Administrative Agent” and
its respective successors and assigns (the “Administrative Agent”).
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS.
(A) CERTAIN CAPITALIZED TERMS USED THROUGHOUT THIS AGREEMENT ARE
DEFINED ABOVE OR IN THIS SECTION 1.1.
(B) AS USED IN THIS AGREEMENT AND ITS EXHIBITS, THE FOLLOWING TERMS
SHALL HAVE THE FOLLOWING MEANINGS (SUCH MEANINGS TO BE EQUALLY APPLICABLE TO
BOTH THE SINGULAR AND PLURAL FORMS OF THE TERMS DEFINED).
“Additional Amount” is defined in Section 2.13.
“Adjusted Eurodollar Rate” means for any Settlement Period, an interest rate per
annum equal to the quotient, expressed as a percentage and rounded upwards (if
necessary), to the nearest 1/100 of 1%, (i) the numerator of which is equal to
the LIBO Rate for such Settlement Period and (ii) the denominator of which is
equal to 100% minus the Eurodollar Reserve Percentage for such Settlement
Period.
“1940 Act” is defined in Section 4.1(x).
“Administrative Agent” is defined in the preamble hereto.
“Advance” is defined in Section 2.1(a).
--------------------------------------------------------------------------------
“Advances Outstanding” means on any day, the aggregate principal amount of
Advances outstanding on such day, after giving effect to all repayments of
Advances and makings of new Advances on such day.
“Adverse Claim” means a lien, security interest, pledge, charge, encumbrance or
other right or claim of any Person.
“Affected Committed Lender” is defined in Section 11.1(c).
“Affected Party” is defined in Section 2.12(a).
“Affiliate” with respect to a Person, means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, “control” when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” or “controlled” have meanings correlative
to the foregoing.
“Agent’s Account” means Account number 10-581587-0008 at Deutsche Bank AG, New
York Branch.
“Aggregate Outstanding Loan Balance” means on any day, the sum of the
Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral on such date.
“Aggregate Purchased Loan Balance” means on any day, (a) the sum of (i) the
Purchased Loan Balances of all Eligible Loans included as part of the Collateral
on such date and (ii) the amount of cash and cash equivalents held in the
Collection Account less the sum of the aggregate accrued but unpaid Servicing
Fee, Revolving Loan Funding Fee, Program Fee and Commitment Fee minus (b) the
Excess Concentration Amount as of such date.
“Agreement” or “Credit Agreement” means this Credit Agreement, dated as of
October 19, 2006, as hereafter amended, modified, supplemented or restated from
time to time.
“Alternative Rate” means an interest rate per annum equal to the Adjusted
Eurodollar Rate; provided, however, that the Alternative Rate shall be the Base
Rate if a Eurodollar Disruption Event occurs; and, provided, further, that the
Alternative Rate for the first two (2) Business Days following any Advance made
by a Committed Lender shall be the Base Rate unless such Committed Lender has
received at least two (2) Business Days’ prior notice of such Advance.
“Amortization Period” means the period beginning on the Termination Date and
ending on the Maturity Date.
“Applicable Law” means, for any Person, all existing and future applicable laws,
rules, regulations (including proposed, temporary and final income tax
regulations), statutes, treaties, codes, ordinances, permits, certificates,
orders and licenses of and interpretations by any Governmental Authority
(including, without limitation, usury laws, the Federal Truth in Lending Act,
and Regulation Z, Regulation W, Regulation U and Regulation B of the Federal
Reserve
2
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Board), and applicable judgments, decrees, injunctions, writs, orders, or line
action of any court, arbitrator or other administrative, judicial, or
quasi-judicial tribunal or agency of competent jurisdiction.
“Assignment and Acceptance” is defined in Section 11.1(b).
“Assignment of Mortgage” means as to each Loan secured by an interest in real
property, one or more assignments, notices of transfer or equivalent
instruments, each in recordable form and sufficient under the laws of the
relevant jurisdiction to reflect the transfer of the related mortgage, deed of
trust, security deed or similar security instrument and all other documents
related to such Loan and to the Borrower and to grant a perfected lien thereon
by the Borrower in favor of the Administrative Agent on behalf of the Secured
Parties, each such Assignment of Mortgage to be substantially in the form of
Exhibit I hereto.
“Availability” means on any day, the lesser of (i) the amount by which the
Borrowing Base exceeds the sum of (A) Advances Outstanding and (B) the aggregate
outstanding unfunded commitments under the Revolver Loans on such day and (ii)
the amount by which the Facility Amount exceeds the sum of (A) Advances
Outstanding and (B) the aggregate outstanding unfunded commitments under the
Revolver Loans on such day; provided, however, during the Amortization Period,
the Availability shall be zero.
“Available Collections” is defined in Section 2.8(a).
“Backup Servicer” means The Bank of New York, in its capacity as Backup Servicer
under the Backup Servicing Agreement, together with its successors and assigns.
“Backup Servicer Expenses” means the out-of-pocket expenses to be paid to the
Backup Servicer under the Backup Servicing Agreement.
“Backup Servicer Fee” means the fee to be paid to the Backup Servicer as set
forth in the Backup Servicing Agreement.
“Backup Servicing Agreement” means the Backup Servicing Agreement, dated as of
the date hereof among the Borrower, the Servicer, the Administrative Agent and
the Backup Servicer, as the same may from time to time be amended, supplemented,
waived or modified.
“Bankruptcy Code” means The United States Bankruptcy Reform Act of 1978 (11
U.S.C. §§ 101, et seq.), as amended from time to time.
“Base Rate” means on any date, a fluctuating rate of interest per annum equal to
the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 0.5%.
“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Borrower or any ERISA Affiliate of the Borrower
is, or at any time during the immediately preceding six years was, an “employer”
as defined in Section 3(5) of ERISA.
“Borrower” means Gladstone Business Investment LLC, a Delaware limited liability
company, or any permitted successor thereto.
3
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“Borrowing Base” means on any date of determination, the lesser of (a) (i) the
Aggregate Purchased Loan Balance minus (ii) the Required Equity Investment or
(b) an amount equal to 50% of the Aggregate Purchased Loan Balance.
“Borrowing Base Test” means as of any date, a determination that the Borrowing
Base shall be equal to or greater than the Advances Outstanding.
“Borrower Notice” means a written notice, in the form of Exhibit A, to be used
for each borrowing, repayment of each Advance or termination or reduction of the
Facility Amount or Prepayments of Advances.
“Breakage Costs” is defined in Section 2.11.
“Business Day” means any day of the year other than a Saturday or a Sunday on
which (a) (i) banks are not required or authorized to be closed in New York, New
York, and Virginia or (ii) which is not a day on which the Bond Market
Association recommends a closed day for the U.S. Bond Market, and (b) if the
term “Business Day” is used in connection with the Adjusted Eurodollar Rate,
means the foregoing only if such day is also a day of year on which dealings in
United States dollar deposits are carried on in the London interbank market.
“Change-in-Control” means with respect to any entity, the date on which (i) any
Person or “group” acquires any “beneficial ownership” (as such terms are defined
under Rule 13d-3 of, and Regulation 13D under, the Securities Exchange Act of
1934, as amended), either directly or indirectly, of membership interests or
other equity interests or any interest convertible into any such interest in
such entity having more than 50% of the voting power for the election of
managers of such entity, if any, under ordinary circumstances, or (ii) (with
regard to the Borrower, except in connection with any Securitization) an entity
sells, transfers, conveys, assigns or otherwise disposes of all or substantially
all of the assets of such entity.
“Charged-Off Loan” means any Loan (i) that is 120 days past due with respect to
any interest or principal payment, (ii) for which an Insolvency Event has
occurred with respect to the related Obligor or (iii) that is or should be
written off as uncollectible by the Servicer in accordance with the Credit and
Collection Policy.
“Charged-Off Ratio” means with respect to any Settlement Period, the percentage
equivalent of a fraction, calculated as of the Determination Date for such
Settlement Period, (i) the numerator of which is equal to the aggregate
Outstanding Loan Balance of all Loans that became Charged-Off Loans during such
Settlement Period and (ii) the denominator of which is equal to the sum of (A)
the Aggregate Outstanding Loan Balance as of the first day of such Settlement
Period and (B) the Aggregate Outstanding Loan Balance as of the last day of such
Settlement Period divided by 2.
“Closing Date” means October 19, 2006.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collateral” means all right, title and interest, whether now owned or hereafter
acquired or arising, and wherever located, of the Borrower in, to and under any
and all of the following:
4
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(i) the Transferred Loans, and all monies due or to become due in
payment of such Loans on and after the related Purchase Date;
(ii) any Related Property securing the Transferred Loans including all
Proceeds from any sale or other disposition of such Related Property;
(iii) the Loan Documents relating to the Transferred Loans;
(iv) all Supplemental Interests related to any Transferred Loans;
(v) the Collection Account, all funds held in such account, and all
certificates and instruments, if any, from time to time representing or
evidencing the Collection Account or such funds;
(vi) all Collections and all other payments made or to be made in the
future with respect to the Transferred Loans, including such payments under any
guarantee or similar credit enhancement with respect to such Loans;
(vii) all Hedge Collateral; and
(viii) all income and Proceeds of the foregoing.
“Collateral Custodian” means The Bank of New York Trust Company, N.A., in its
capacity as Collateral Custodian under the Custody Agreement, together with its
successors and assigns.
“Collateral Custodian Expenses” means the out-of-pocket expenses to be paid to
the Collateral Custodian under the Custody Agreement.
“Collateral Custodian Fee” means the fee to be paid to the Collateral Custodian
as set forth in the Custody Agreement.
“Collateral Quality Test” means as of any date, (i) the weighted average life of
the Transferred Loans shall not be greater than 66 months, (ii) the weighted
average excess spread in respect of Transferred Loans shall not be less than
2.5% (for the purpose of this definition, the excess spread on (A) Transferred
Loans which accrue interest at a floating rate shall be the amount by which the
interest rate on such Transferred Loans exceeds the LIBO Rate and (B)
Transferred Loans which accrue interest at a fixed rate shall be amount by which
the interest rate on such Transferred Loans exceeds the cap rate under the
related Hedge Transactions) and (iii) the weighted average Risk Rating of the
portfolio shall not be less than B-/B3/4 by S&P, Moody’s or the Servicer’s risk
rating model, respectively.
“Collection Account” is defined in Section 7.4(e).
“Collection Date” means the date following the Termination Date on which all
Advances Outstanding have been reduced to zero, the Lenders have received all
accrued Interest, fees, and all other amounts owing to them under this Agreement
and the Hedging Agreement, the Hedge Counterparties have received all amounts
due and owing hereunder and under the Hedge
5
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Transactions, and each of the Backup Servicer, the Collateral Custodian, the
Administrative Agent and the Managing Agents have each received all amounts due
to them in connection with the Transaction Documents.
“Collections” means (a) all cash collections or other cash proceeds of a
Transferred Loan received by or on behalf of the Borrower by the Servicer or
Originator from or on behalf of any Obligor in payment of any amounts owed in
respect of such Transferred Loan, including, without limitation, Interest
Collections, Principal Collections, Deemed Collections, all Proceeds received
from any Supplemental Interests, Insurance Proceeds, and all Recoveries, (b) all
amounts received by the Buyer in connection with the repurchase of an Ineligible
Loan pursuant to Section 6.1 of the Purchase Agreement, (c) all amounts received
by the Administrative Agent in connection with the purchase of a Transferred
Loan pursuant to Section 7.7, (d) all payments received pursuant to any Hedging
Agreement or Hedge Transaction, and (e) interest earnings in the Collection
Account.
“Commercial Paper Notes” means on any day, any short-term promissory notes
issued by any CP Lender with respect to financing any Advance hereunder that are
allocated, in whole or in part, by such CP Lender to fund or maintain the
Advances Outstanding.
“Commitment” means (a) for each Committed Lender, the commitment of such
Committed Lender to fund any Advance to the Borrower in an amount not to exceed
the amount set forth opposite such Committed Lender’s name on the signature
pages of this Agreement, as such amount may be modified in accordance with the
terms hereof and (b) with respect to any Person who becomes a Committed Lender
pursuant to an Assignment and Acceptance or a Joinder Agreement, the commitment
of such Person to fund any Advance to the Borrower in an amount not to exceed
the amount set forth in such Assignment and Acceptance or Joinder Agreement, as
such amount may be modified in accordance with the terms hereof.
“Commitment Fee” is defined in the Fee Letter.
“Commitment Termination Date” means October 18, 2007, or such later date to
which the Commitment Termination Date may be extended (if extended) in the sole
discretion of the Lenders in accordance with the terms of Section 2.1(b).
“Committed Lenders” is defined in the preamble hereto.
“Contractual Obligation” means with respect to any Person, means any provision
of any securities issued by such Person or any indenture, mortgage, deed of
trust, contract, undertaking, agreement, instrument or other document to which
such Person is a party or by which it or any of its property is bound or is
subject.
“CP Lenders” is defined in the preamble hereto.
“CP Rate” means for any Settlement Period for any Advances made by a CP Lender,
the per annum rate equivalent to the weighted average of the per annum rates
paid or payable by such CP Lender from time to time as interest on or otherwise
(by means of interest rate hedges or otherwise taking into consideration any
incremental carrying costs associated with short-term promissory notes issued by
such CP Lender maturing on dates other than those certain dates on
6
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which such CP Lender is to receive funds) in respect of the Commercial Paper
Notes issued by such CP Lender during such period, as determined by such CP
Lender and reported to the Borrower and the Servicer, which rates shall reflect
and give effect to the commissions of placement agents and dealers in respect of
such promissory notes, to the extent such commissions are allocated, in whole or
in part, to such promissory notes by such CP Lender, provided, however, that if
any component of such rate is a discount rate, in calculating the CP Rate, such
CP Lender shall for such component use the rate resulting from converting such
discount rate to an interest bearing equivalent rate per annum.
“Credit and Collection Policy” means those credit, collection, customer relation
and service policies (i) determined by the Borrower, the Originator and the
initial Servicer as of the date hereof relating to the Transferred Loans and
related Loan Documents, as on file with the Administrative Agent and as the same
may be amended or modified from time to time in accordance with Sections 5.1(r)
and 7.9(g); and (ii) with respect to any Successor Servicer, the collection
procedures and policies of such person (as approved by the Administrative Agent)
at the time such Person becomes Successor Servicer.
“Current Pay Loan” means any Transferred Loan (a) in respect of which the
Servicer or Originator shall have taken any of the following actions: charging a
default rate of interest, restricting Obligor’s right to make subordinated
payments (other than payments in respect of owner’s debts and seller
financings), acceleration of the Transferred Loan, foreclosure on collateral for
the Loan, increasing its representation on the Obligor’s Board of Directors or
similar governing body, or increasing the frequency of its inspection rights to
permit inspection on demand, (b) that is not more than thirty (30) days past due
with respect to any interest or principal payments and (c) in respect of which
the Servicer shall have certified (which certification may be in the form of an
e-mail or other written electronic communication) to the Administrative Agent
that the Servicer does not believe, in its reasonable judgment, that a failure
to pay interest or ultimate principal will occur. A Transferred Loan shall
cease to be a Current Pay Loan if it (i) becomes a Defaulted Loan through
failure to satisfy the requirements set forth in this definition or (ii) becomes
an Unrestricted Eligible Loan, which shall occur upon receipt of a certification
from the Servicer (which certification may be in the form of an e-mail or other
written electronic communication) to the Administrative Agent that, as of the
date of the certification (x) the applicable circumstances enumerated in clause
(a) above which caused the Loan to be a Current Pay Loan shall no longer exist
and (y) such Loan is an Unrestricted Eligible Loan.
“Custody Agreement” means the Custodial Agreement, dated as of the date hereof
among the Borrower, the Servicer, the Originator, the Administrative Agent and
the Collateral Custodian, as the same may from time to time be amended,
supplemented, waived or modified.
“DB” means Deutsche Bank AG, New York Branch, in its individual capacity, and
its successors or assigns.
“Deemed Collections” means on any day, the aggregate of all amounts Borrower
shall have been deemed to have received as a Collection of a Transferred Loan.
Borrower shall be deemed to have received a Collection in an amount equal to the
unpaid balance (including any accrued interest thereon) of a Transferred Loan if
at any time the Outstanding Loan Balance of any such Loan is either (i) reduced
as a result of any discount or any adjustment or otherwise by Borrower (other
than receipt of cash Collections) or (ii) reduced or canceled as a result of a
setoff in respect of
7
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any claim by any Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction).
“Defaulted Loan” means any Transferred Loan (i) that is sixty (60) days past due
with respect to any interest or principal payments or (ii) in respect of which
the Servicer or Originator shall have taken any of the following actions:
charging a default rate of interest, restricting Obligor’s right to make
subordinated payments (other than payments in respect of owner’s debts and
seller financings), acceleration of the Transferred Loan, foreclosure on
collateral for the Loan, increasing its representation on the Obligor’s Board of
Directors or similar governing body, or increasing the frequency of its
inspection rights to permit inspection on demand and is not a Current Pay Loan.
“Default Ratio” means with respect to any Settlement Period, the percentage
equivalent of a fraction, calculated as of the Determination Date for such
Settlement Period, (a) the numerator of which is equal to the aggregate
Outstanding Loan Balance of all Transferred Loans (excluding Charged-Off Loans)
included as part of the Collateral that became Defaulted Loans during such
Settlement Period and (b) the denominator of which is equal to (i) the sum of
(x) the Aggregate Outstanding Loan Balance as of the first day of such
Settlement Period and (y) the Aggregate Outstanding Loan Balance as of the last
day of such Settlement Period divided by (ii) two.
“Deposit Account Control Agreement” means a letter agreement, substantially in
the form of Exhibit L, among the Borrower, the Administrative Agent and the bank
maintaining the Collection Account or a Lock-Box Bank.
“Derivatives” means any exchange-traded or over-the-counter (i) forward, future,
option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depository
instrument, depository price, depository index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
“Determination Date” means the last day of each Settlement Period.
“DIP Loan” means a Loan made to a debtor-in-possession as described in Section
1107 of the Bankruptcy Code or a trustee (if appointment of such trustee has
been ordered pursuant to Section 1104 of the Bankruptcy Code) (a “Debtor”)
organized under the laws of the United States or any state therein, the terms of
which have been approved by an order of a court of competent jurisdiction, which
order provides that (i) such DIP Loan is secured by liens on the Debtor’s
otherwise unencumbered assets pursuant to 364(c)(2) of the Bankruptcy Code, (ii)
such DIP Loan is secured by liens of equal or senior priority on property of the
Debtor’s estate that is otherwise subject to a lien pursuant to Section 364(d)
of the Bankruptcy Code, (iii) such DIP Loan is secured by junior liens on the
Debtor’s encumbered assets (so long as such DIP Loan is
8
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fully secured based upon a current valuation or appraisal report), or (iv) if
the DIP Loan or any portion thereof is unsecured, the repayment of such DIP Loan
retains priority over all other administrative expenses pursuant to Section
364(c)(1) of the Bankruptcy Code; provided that, in the case of the origination
or acquisition of any DIP Loan, neither Borrower nor the Servicer have actual
knowledge that the order set forth above is subject to any pending contested
matter or proceeding (as such terms are defined in the Federal Rules of
Bankruptcy Procedure).
“Early Termination Event” is defined in Section 8.1.
“Eligible Assignee” means a Person (a) whose short-term rating is at least A-1
from S&P and P-1 from Moody’s, or whose obligations under this Agreement are
guaranteed by a Person whose short-term rating is at least A-1 from S&P and P-1
from Moody’s and (b) who is approved by the Administrative Agent (such approval
not to be unreasonably withheld) and, if such Person will become a Liquidity
Bank for a CP Lender, by such CP Lender.
“Eligible Loan” means on any date of determination, each Loan which is either:
(i) an Unrestricted Eligible Loan; or
(ii) a Current Pay Loan.
“Eligible Obligor” means on any day, any Obligor that satisfies each of the
following requirements:
(i) such Obligor’s principal office and any Related Property are
located in the United States or any territory of the United States
(ii) no other Loan of such Obligor is a Defaulted Loan;
(iii) such Obligor is (A) not the subject of any Insolvency Event or
(B) the Obligor with regard to a DIP Loan;
(iv) such Obligor is not a Governmental Authority;
(v) such Obligor is in material compliance with all material terms and
conditions of its Loan Documents; and
(vi) such Obligor is not (A) an Affiliate of the Borrower, the Servicer
or the Originator or (B) an entity to which the Borrower, the Servicer or the
Originator would be deemed an Insider.
“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
“ERISA Affiliate” means (a) any corporation that is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Borrower; (b) a trade or business (whether or not incorporated)
under common control (within the meaning of Section 414(c) of the Code) with the
Borrower or (c) a member of the same affiliated service
9
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group (within the meaning of Section 414(m) of the Code) as the Borrower, any
corporation described in clause (a) above or any trade or business described in
clause (b) above.
“Eurodollar Disruption Event” means with respect to any Advance as to which
Interest accrues or is to accrue at a rate based upon the Adjusted Eurodollar
Rate, any of the following: (a) a determination by a Lender that it would be
contrary to law or to the directive of any central bank or other governmental
authority (whether or not having the force of law) to obtain United States
dollars in the London interbank market to make, fund or maintain any Advance;
(b) the inability of any Lender to obtain timely information for purposes of
determining the Adjusted Eurodollar Rate; (c) a determination by a Lender that
the rate at which deposits of United States dollars are being offered to such
Lender in the London interbank market does not accurately reflect the cost to
such Lender of making, funding or maintaining any Advance; or (d) the inability
of a Lender to obtain United States dollars in the London interbank market to
make, fund or maintain any Advance.
“Eurodollar Reserve Percentage” means on any day, the then applicable percentage
(expressed as a decimal) prescribed by the Federal Reserve Board (or any
successor) for determining reserve requirements applicable to “Eurocurrency
Liabilities” pursuant to Regulation D or any other then applicable regulation of
the Federal Reserve Board (or any successor) that prescribes reserve
requirements applicable to “Eurocurrency Liabilities” as presently defined in
Regulation D.
“Excess Concentration Amount” means on any date of determination, the sum of,
without duplication, (a) the aggregate amount by which the Outstanding Loan
Balances of Eligible Loans included as part of the Collateral, the Obligors of
which are residents of any one state, exceeds 40% of the Aggregate Outstanding
Loan Balance, (b) the aggregate amount by which the Outstanding Loan Balances of
Eligible Loans included as part of the Collateral, the Obligors of which are in
the same Industry, exceeds 25% of the Aggregate Outstanding Loan Balance, (c)
the aggregate amount by which the Outstanding Loan Balance of each Eligible Loan
included as part of the Collateral exceeds the Large Loan Limit applicable to
such Eligible Loan, (d) the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral which are PIK
Loans exceeds 25% of the Aggregate Outstanding Loan Balance, (e) the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans that have
original terms to maturity greater than 84 months (measured as of the date such
Loans became Transferred Loans) exceeds 15% of the Aggregate Outstanding Loan
Balance, (f) the aggregate amount by which the Outstanding Loan Balances of
Qualifying Syndicated Loans included as part of the Collateral, for which no
Subsequent Delivery Trust Receipt (as defined in the Custody Agreement) has been
received exceeds 10% of the Aggregate Outstanding Loan Balance, (g) the
aggregate Outstanding Loan Balances of all Loans which have a Risk Rating of
CCC+/Caa1/3 or below exceeds 10% of the Aggregate Outstanding Loan Balance, (h)
the aggregate amount by which the Outstanding Loan Balances of all Eligible
Loans included as part of the Collateral which are Revolver Loans exceeds 25% of
the Aggregate Outstanding Loan Balance, (i) the aggregate amount by which the
Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral which are Revolver Loans having a term to maturity of more than one
year (measured as of the date such Loans became Transferred Loans) exceeds 10%
of the Aggregate Outstanding Loan Balance, (j) the aggregate Outstanding Loan
Balances of all Loans which are not priced by Standard & Poor’s Securities
Evaluations, Inc. on a quarterly
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basis and have not been so priced by Standard & Poor’s Securities Evaluations,
Inc. for a period in excess of 135 days from the date such Loans became
Transferred Loans, (k) the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans that are unsecured exceeds 10% of the Aggregate
Outstanding Loan Balance, (l) the aggregate amount by which the Outstanding Loan
Balances of all Fixed Rate Loans exceeds 35% of the Aggregate Outstanding Loan
Balance, (m) the aggregate amount by which the Outstanding Loan Balances of all
Fixed Rate Loans which are not subject to a Hedge Transaction exceeds 10% of the
Aggregate Outstanding Loan Balance, (n) the aggregate amount by which the
Outstanding Loan Balances of all Eligible Loans that are Current Pay Loans
exceeds 10% of the Aggregate Outstanding Loan Balance, (o) the aggregate amount
by which the Outstanding Loan Balances of all Eligible Loans included as part of
the Collateral which are DIP Loans exceeds 20% of the Aggregate Outstanding Loan
Balance and (p) the aggregate amount by which the Outstanding Loan Balances of
all Loans which are subordinated to any other indebtedness of the applicable
Obligor exceeds 60% of the Aggregate Outstanding Loan Balance.
“Facility Amount” means at any time, $100,000,000; provided, however, that on or
after the Termination Date, the Facility Amount shall be equal to the amount of
Advances Outstanding.
“Fair Market Value” means with respect to each Eligible Loan, (1) to the extent
that such Eligible Loan does not have a long term credit rating from S&P or
Moody’s, the least of (a) to the extent priced by Standard & Poor’s Securities
Evaluations, Inc., the product of (x) the remaining principal amount of the
Eligible Loan and (y) the pricing as determined by Standard & Poor’s Securities
Evaluations, Inc. in its most recent quarterly pricing, (b) the remaining
principal amount of such Eligible Loan and (c) if such Eligible Loan has been
reduced in value below the remaining principal amount thereof (other than as a
result of the allocation of a portion of the remaining principal amount to
warrants), the value of such Eligible Loan as required by, and in accordance
with, the 1940 Act, as amended, and any orders of the SEC issued to the
Originator, to be determined by the Board of Directors of the Originator and
reviewed by its auditors and (2) otherwise, the least of (a) (x) the remaining
principal amount of such Eligible Loan times (y) the price quoted to the
Borrower on such Eligible Loan from a financial institution rated at least
A-1/P-1 that makes a market in such Eligible Loan or from a pricing service
otherwise acceptable to the Managing Agents, (b) the remaining principal amount
of such Eligible Loan and (c) if such Eligible Loan has been reduced in value
below the remaining principal amount thereof (other than as a result of the
allocation of a portion of the remaining principal amount to warrants), the
value of such Eligible Loan as required by, and in accordance with, the 1940
Act, as amended, and any orders of the SEC issued to the Originator, to be
determined by the Board of Directors of the Originator and reviewed by its
auditors.
“FASB” is defined in Section 2.12(a).
“Federal Funds Rate” means for any period, a fluctuating interest rate per annum
for each day during such period equal to (a) the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the preceding Business Day) by the Federal
Reserve Bank of New York; or (b) if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:30
a.m. (New York City
11
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time) for such day on such transactions received by DB from three federal funds
brokers of recognized standing selected by it.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System.
“Fee Letter” means the letter agreement in respect of fees among the Borrower,
the Originator, the Managing Agents, Deutsche Bank Securities Inc., as arranger
and the Administrative Agent, as it may be amended or modified and in effect
from time to time.
“Fixed Rate Loans” is defined in Section 5.2.
“Funding Date” means any day on which an Advance is made in accordance with and
subject to the terms and conditions of this Agreement.
“Funding Request” means a Borrower Notice requesting an Advance and including
the items required by Section 2.2.
“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States.
“Governmental Authority” means with respect to any Person, any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
such Person.
“Group Advance Limit” means for each Lender Group, the sum of the Commitments of
the Committed Lenders in such Lender Group.
“Guarantor Event of Default” means the occurrence of any “Event of Default”
under and as defined in the Performance Guaranty.
“Hedge Breakage Costs” means for any Hedge Transaction, any amount payable by
the Borrower for the early termination of that Hedge Transaction or any portion
thereof.
“Hedge Collateral” is defined in Section 5.2(b).
“Hedge Counterparty” means DB or any entity that (a) on the date of entering
into any Hedge Transaction (i) is an interest rate swap dealer that is either a
Lender or an Affiliate of a Lender, or has been approved in writing by the
Administrative Agent (which approval shall not be unreasonably withheld), and
(ii) has a short-term unsecured debt rating of not less than A-1 by S&P and not
less than P-1 by Moody’s, and (b) in a Hedging Agreement (i) consents to the
assignment of the Borrower’s rights under the Hedging Agreement to the
Administrative Agent pursuant to Section 5.2(b) and (ii) agrees that in the
event that S&P or Moody’s reduces its short-term unsecured debt rating below A-1
or P-1, respectively, it shall transfer its rights and obligations under each
Hedging Transaction to another entity that meets the requirements of clause (a)
and (b) hereof or make other arrangements acceptable to the Administrative Agent
and the Rating Agencies.
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“Hedge Notional Amount” means the aggregate notional amount in effect on any day
under all Hedge Transactions entered into pursuant to Section 5.2 which have not
matured, been terminated or cancelled.
“Hedge Transaction” means each interest rate cap transaction between the
Borrower and a Hedge Counterparty that is entered into pursuant to Section 5.2
and is governed by a Hedging Agreement.
“Hedging Agreement” means each agreement between the Borrower and a Hedge
Counterparty that governs one or more Hedge Transactions entered into pursuant
to Section 5.2, which agreement shall consist of a “Master Agreement” in a form
published by the International Swaps and Derivatives Association, Inc., together
with a “Schedule” thereto substantially in a form as the Administrative Agent
shall approve in writing, and each “Confirmation” thereunder confirming the
specific terms of each such Hedge Transaction.
“Increased Costs” means any amounts required to be paid by the Borrower to an
Affected Party pursuant to Section 2.12.
“Indebtedness” means with respect to the Borrower or the initial Servicer at any
date, (a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current liabilities incurred
in the ordinary course of business and payable in accordance with customary
trade practices) or that is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Adverse Claims on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, and (e) all indebtedness,
obligations or liabilities of that Person in respect of Derivatives, and (f)
obligations under direct or indirect guaranties in respect of obligations
(contingent or otherwise) to purchase or otherwise acquire, or to otherwise
assure a creditor against loss in respect of, clauses (a) through (e) above.
“Indemnified Amounts” is defined in Section 9.1.
“Indemnified Party” is defined in Section 9.1.
“Industry” means the industry of an Obligor as determined by reference to the
Moody’s Industry Classifications.
“Ineligible Loan” is defined in the Purchase Agreement.
“Insider” is defined in Section 101(31) of the Bankruptcy Code.
“Insolvency Event” means with respect to a specified Person, (a) the filing of a
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person’s affairs, and such decree
or order shall
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remain unstayed and in effect for a period of sixty (60) consecutive days; or
(b) the commencement by such Person of a voluntary case under any applicable
Insolvency Law now or hereafter in effect, or the consent by such Person to the
entry of an order for relief in an involuntary case under any such law, or the
consent by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due, or the taking
of action by such Person in furtherance of any of the foregoing.
“Insolvency Laws” means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.
“Insolvency Proceeding” means any case, action or proceeding before any court or
Governmental Authority relating to an Insolvency Event.
“Insurance Policy” means with respect to any Loan included in the Collateral, an
insurance policy covering physical damage to or loss to any assets or Related
Property of the Obligor securing such Loan.
“Insurance Proceeds” means any amounts payable or any payments made, to the
Borrower or to the Servicer on its behalf under any Insurance Policy.
“Interest” means for each Settlement Period and each Advance outstanding during
such Settlement Period, the product of:
IR x P x
AD
360
where
IR
=
the Interest Rate applicable to such Advance;
P
=
the principal amount of such Advance on the first day of such Settlement Period,
or if such Advance was first made during such Settlement Period, the principal
amount of such Advance on the day such Advance is made; and
AD
=
the actual number of days in such Settlement Period, or if such Advance was
first made during such Settlement Period, the actual number of days beginning on
the day such Advance was first made through the end of such Settlement Period;
provided, however, that (i) no provision of this Agreement shall require or
permit the collection of Interest in excess of the maximum permitted by
Applicable Law and (ii) Interest shall not be
14
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considered paid by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.
“Interest Collections” means any and all amounts received in respect of any
interest, fees or other similar charges on a Transferred Loan from or on behalf
of any Obligors that are deposited into the Collection Account, or received by
the Borrower or on behalf of the Borrower by the Servicer or Originator in
respect of the Transferred Loans, in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment (net of any payment owed
by the Borrower to, and including any receipts from, any Hedge Counterparties)
and, solely for purposes of calculating the Portfolio Rate, any and all amounts
accrued in respect of any fees and interest (but only to the extent such fees or
interest were not received during the applicable Settlement Period) owed by any
Obligor in respect of any Transferred Loan.
“Interest Coverage Ratio” means with respect to any Settlement Period, the
percentage equivalent of a fraction, calculated as of the Determination Date for
such Settlement Period, (a) the numerator of which is equal to the aggregate
Interest Collections for such Settlement Period and (b) the denominator of which
is equal to the sum of (x) the aggregate amount payable pursuant to Section
2.8(i), (iii), (iv) and (vi) hereunder and (y) an amount equal to the sum of the
products, for each day during the related Settlement Period, of (i) the Advances
Outstanding, (ii) the weighted average of the Servicing Fee Rates used to
compute the Servicing Fee for such Settlement Period, and (iii) a fraction, the
numerator of which is 1 and the denominator of which is 360.
“Interest Rate” means for any Settlement Period:
(a) to the extent the Lender is a CP Lender that is funding the
applicable Advance or portion thereof through the issuance of Commercial Paper
Notes, a rate equal to the CP Rate for such Settlement Period on such portion;
or
(b) to the extent the relevant Lender is not funding the applicable
Advance or portion thereof through the issuance of Commercial Paper Notes, a
rate equal to the Alternative Rate on such portion.
“Investment” means with respect to any Person, any direct or indirect loan,
advance or investment by such Person in any other Person, whether by means of
share purchase, capital contribution, loan or otherwise, excluding the
acquisition of assets pursuant to the Purchase Agreement and excluding
commission, travel and similar advances to officers, employees and directors
made in the ordinary course of business.
“Joinder Agreement” means a joinder agreement substantially in the form set
forth in Exhibit D hereto pursuant to which a new Lender Group becomes party to
this Agreement.
“Key Man Event” means any two of (a) David Gladstone, (b) Terry Brubaker and (c)
George Stelljes shall cease to be executive officers of Gladstone Management
Corporation.
“Large Loan Limit” means: (a) for the Eligible Loans with the three largest
Outstanding Loan Balances, $17,500,000; (b) for the Eligible Loans with the
fourth to sixth largest Outstanding Loan Balances, $15,000,000; (c) for the
Eligible Loans with the seventh to ninth
15
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largest Outstanding Loan Balances, $12,500,000; and (d) for all other Eligible
Loans, $10,000,000.
“Lender Group” means any CP Lender, its related Committed Lenders and their
related Managing Agent.
“Lenders” means collectively, the CP Lenders, the Committed Lenders and any
other Person that agrees, pursuant to the pertinent Joinder Agreement or
Assignment and Acceptance, as applicable, to fund Advances pursuant to this
Agreement.
“LIBO Rate” means for any Settlement Period and any Advance, an interest rate
per annum equal to:
(i) the posted rate for thirty (30) day deposits in United States
dollars appearing on Telerate page 3750 as of 11:00 a.m. (London time) on the
Business Day that is the second Business Day immediately preceding the
applicable Funding Date (with respect to the initial Settlement Period for such
Advance) and as of the second Business Day immediately preceding the first day
of the applicable Settlement Period (with respect to all subsequent Settlement
Periods for such Advance); or
(ii) if no rate appears on Telerate page 3750 at such time and day,
then the LIBO Rate shall be determined by DB at its principal office in New
York, New York as its rate (each such determination, absent manifest error, to
be conclusive and binding on all parties hereto and their assignees) at which
thirty (30) day deposits in United States dollars are being, have been, or would
be offered or quoted by DB to major banks in the applicable interbank market for
Eurodollar deposits at or about 11:00 a.m. (New York City time) on such day.
“Lien” means with respect to any Collateral, (a) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Collateral, or (b) the interest of a vendor or lessor under any conditional sale
agreement, financing loan or other title retention agreement relating to such
Collateral.
“Liquidation Expenses” means with respect to any Defaulted Loan or Charged-Off
Loan, the aggregate amount of out-of-pocket expenses reasonably incurred by the
Borrower or on behalf of the Borrower by the Servicer (including amounts paid to
any subservicer) in connection with the repossession, refurbishing and
disposition of any related assets securing such Loan including the attempted
collection of any amount owing pursuant to such Loan.
“Liquidity Agreement” means a liquidity agreement entered into by a CP Lender
with a group of financial institutions in connection with this Agreement.
“Liquidity Bank” means each financial institution that is a party to a Liquidity
Agreement.
“Loan” means any senior or subordinate loan arising from the extension of credit
to an Obligor by the Originator in the ordinary course of the Originator’s
business.
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“Loan Documents” means with respect to any Loan, the related promissory note and
any related loan agreement, security agreement, mortgage, assignment of Loans,
all guarantees, and UCC financing statements and continuation statements
(including amendments or modifications thereof) executed by the Obligor thereof
or by another Person on the Obligor’s behalf in respect of such Loan and related
promissory note, including, without limitation, general or limited guaranties
and, for each Loan secured by real property an Assignment of Mortgage.
“Loan File” means with respect to any Loan, each of the Loan Documents related
thereto.
“Loan List: means the Loan List provided by the Borrower to the Administrative
Agent and the Collateral Custodian, as set forth in Schedule III hereto (which
shall include the specific documents that should be included in each Loan File),
as the same may be changed from time to time in accordance with the provisions
hereof.
“Lock-Box” means a post office box to which Collections are remitted for
retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box
Account.
“Lock-Box Account” means an account, subject to a Deposit Account Control
Agreement, maintained in the name of the Borrower for the purpose of receiving
Collections at a Lock-Box Bank.
“Lock-Box Bank” means any of the banks or other financial institutions holding
one or more Lock-Box Accounts.
“Managing Agent” means as to any CP Lender, the financial institution identified
as such on the signature pages hereof or in the applicable Assignment and
Acceptance or Joinder Agreement.
“Mandatory Prepayment” is defined in Section 2.4(a).
“Market Servicing Fee” is defined in Section 7.20.
“Market Servicing Fee Differential” means on any date of determination, an
amount equal to the positive difference between the Market Servicing Fee and
Servicing Fee.
“Material Adverse Change” means with respect to any Person, any material adverse
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of such Person.
“Material Adverse Effect” means with respect to any event or circumstance, means
a material adverse effect on (a) the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Servicer or
the Borrower, (b) the validity, enforceability or collectibility of this
Agreement or any other Transaction Document or any Liquidity Agreement or the
validity, enforceability or collectibility of the Loans, (c) the rights and
remedies of the Administrative Agent or any Secured Party under this Agreement
or any Transaction Document or any Liquidity Agreement or (d) the ability of the
Borrower or the Servicer to perform its obligations under this Agreement or any
other Transaction Document, or
17
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(e) the status, existence, perfection, priority, or enforceability of the
Administrative Agent’s or Secured Parties’ interest in the Collateral.
“Maturity Date” means the date that is two years after the Termination Date.
The Advances Outstanding will be due and payable in full on the Maturity Date.
“Maximum Lawful Rate” is defined in Section 2.6(d).
“Monthly Report” is defined in Section 7.11(a).
“Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.
“Moody’s Industry Classifications” means the classifications as set forth in
Exhibit N.
“Multiemployer Plan” means a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA that is or was at any time during the current year or the
immediately preceding five years contributed to by the Borrower or any ERISA
Affiliate on behalf of its employees.
“Non-Syndicated Loan” means each Loan which is not a Qualifying Syndicated Loan.
“Notes” is defined in Section 2.5(a).
“Obligations” means all loans, advances, debts, liabilities and obligations, for
monetary amounts owing by the Borrower to the Lenders, the Administrative Agent,
the Managing Agents or any of their assigns, as the case may be, whether due or
to become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, present or future, arising under or in respect of any of this
Agreement, the Fee Letter, any other Transaction Document delivered in
connection with the transactions contemplated by this Agreement, or any Hedging
Agreement, as amended or supplemented from time to time, whether or not
evidenced by any separate note, agreement or other instrument. This term
includes, without limitation, all principal, interest (including interest that
accrues after the commencement against the Borrower of any action under the
Bankruptcy Code), Breakage Costs, Hedge Breakage Costs, fees, including, without
limitation, any and all arrangement fees, loan fees, facility fees, and any and
all other fees, expenses, costs or other sums (including attorney costs)
chargeable to the Borrower under any of the Transaction Documents or under any
Hedging Agreement.
“Obligor” means with respect to any Loan, the Person or Persons obligated to
make payments pursuant to such Loan, including any guarantor thereof. For
purposes of calculating the Excess Concentration Amount, all Loans included in
the Collateral or to become part of the Collateral the Obligor of which is an
Affiliate of another Obligor shall be aggregated with all Loans of such other
Obligor.
“Officer’s Certificate” means a certificate signed by any officer of the
Borrower or the Servicer, as the case may be, and delivered to the
Administrative Agent.
18
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“Opinion of Counsel” means a written opinion of counsel, who may be counsel for
the Borrower or the Servicer, as the case may be, and who shall be reasonably
acceptable to the Administrative Agent.
“Originator” means Gladstone Investment Corporation, a Delaware corporation.
“Outstanding Loan Balance” means with respect to any Loan, the then outstanding
principal balance thereof, provided, however, that with respect to Current Pay
Loans, the “Outstanding Loan Balance” of such Loans shall be equal to 70% of the
outstanding principal balance thereof.
“Participant” is defined in Section 11.1(g).
“Payment Date” means the seventh (7th) day of each calendar month or, if such
day is not a Business Day, the next succeeding Business Day; provided that for
purposes of distributions required pursuant to Section 2.8(a)(vii) only,
“Payment Date” shall mean any Business Day.
“Performance Guarantor” is defined in the Performance Guaranty.
“Performance Guaranty” means the Performance Guaranty dated as of the date
hereof, by the Originator in favor of the Borrower and the Administrative Agent,
as amended, modified, supplemented or restated from time to time.
“Permitted Investments” means any one or more of the following types of
investments:
(a) marketable obligations of the United States, the full and timely
payment of which are backed by the full faith and credit of the United States
and that have a maturity of not more than 270 days from the date of acquisition;
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
and that have a maturity of not more than 270 days from the date of acquisition;
(c) bankers’ acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody’s;
(d) repurchase obligations with a term of not more than ten (10) days
for underlying securities of the types described in clauses (a), (b) and (c)
above entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by Moody’s; and
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated
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under the laws of the United States or any state thereof (or domestic branches
of any foreign bank) and subject to supervision and examination by federal or
state banking or depository institution authorities; provided, however that at
the time such investment, or the commitment to make such investment, is entered
into, the short-term debt rating of such depository institution or trust company
shall be at least A-1 by S&P and P-1 by Moody’s.
“Permitted Liens” means liens created pursuant to the Transaction Documents in
favor of the Administrative Agent, as agent for the Secured Parties.
“Person” means an individual, partnership, corporation (including a statutory
trust), limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
“PIK Loan” means a Loan to an Obligor, which provides for a portion of the
interest that accrues thereon to be added to the principal amount of such Loan
for some period of the time prior to such Loan requiring the cash payment of
interest on a monthly or quarterly basis.
“Portfolio Rate” means on any day, with respect to any Settlement Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to all Interest Collections for such Settlement Period, and the denominator of
which is equal to the Advances Outstanding on the last day of such Settlement
Period.
“Portfolio Yield” means on any day, the excess, if any, of (a) the Portfolio
Rate on such day over (b) the Interest Rate plus the Program Fee Rate on such
day.
“Post-Termination Revolver Loan Fundings” means an advance by the Committed
Lenders, made on or following the Revolver Loan Funding Date, which may be used
for the sole purpose of funding advances requested by Obligors under the
Revolver Loans.
“Prime Rate” means the rate publicly announced by DB from time to time on
Reuters telerate page 3750 as its prime rate in the United States, such rate to
change as and when such designated rate changes. The Prime Rate is not intended
to be the lowest rate of interest charged by DB in connection with extensions of
credit to debtors.
“Principal Collections” means any and all amounts received in respect of any
principal due and payable under any Transferred Loan from or on behalf of
Obligors that are deposited into the Collection Account, or received by the
Borrower or on behalf of the Borrower by the Servicer or Originator in respect
of the Transferred Loans, in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment.
“Proceeds” means with respect to any Collateral, whatever is receivable or
received when such Collateral is sold, collected, liquidated, foreclosed,
exchanged, or otherwise disposed of, whether such disposition is voluntary or
involuntary, including all rights to payment with respect to any insurance
relating to such Collateral.
“Program Fee” means for each Settlement Period and each Advance Outstanding
during such Settlement Period, the product of:
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PFR x P x AD/360
where
PFR
=
the Program Fee Rate;
P
=
the principal amount of such Advance on the first day of such Settlement Period,
or if such Advance was first made during such Settlement Period, the principal
amount of such Advance on the day such Advance is made; and
AD
=
the actual days comprising such Settlement Period, or if such Advance was first
made during such Settlement Period, the actual number of days beginning on the
day such Advance was first made through the end of such Settlement Period.
“Program Fee Rate” is defined in the Fee Letter.
“Pro-Rata Share” means with respect to any Committed Lender on any day, the
percentage equivalent of a fraction the numerator of which is such Committed
Lender’s Commitment and the denominator of which is the Group Advance Limit of
the related CP Lender’s Lender Group.
“Purchase Agreement” means the Purchase and Sale Agreement dated as of the date
hereof, between the Originator and the Borrower, as amended, modified,
supplemented or restated from time to time.
“Purchase Date” is defined in the Purchase Agreement.
“Purchased Loan Balance” means as of any date of determination and any
Transferred Loan, the lesser of (i) the Outstanding Loan Balance of such Loan as
of such date and (ii) the Fair Market Value of such Loan.
“Purchasing Committed Lender” is defined in Section 11.1(b).
“Qualified Institution” is defined in Section 7.4(e).
“Qualifying Syndicated Loan” means any Loan designated by the Borrower as such
in the Loan List.
“Rating Agency” means any rating agency that has been requested to issue a
rating with respect to the Commercial Paper Notes issued by a CP Lender.
“Records” means with respect to any Transferred Loans, all documents, books,
records and other information (including without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) maintained with respect to any item of Collateral and the related
Obligors, other than the Loan Documents.
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“Recoveries” means with respect to any Defaulted Loan or Charged-Off Loan,
Proceeds of the sale of any Related Property, Insurance Proceeds, and any other
recoveries with respect to such Loan and Related Property, and amounts
representing late fees and penalties, net of Liquidation Expenses and amounts,
if any, received that are required to be refunded to the Obligor on such Loan.
“Reference Bank” means any bank that furnishes information for purposes of
determining the Adjusted Eurodollar Rate.
“Register” is defined in Section 11.1(e).
“Regulatory Change” is defined in Section 2.12(a).
“Related Obligation” means an obligation issued by Gladstone Management
Corporation, any of its Affiliates that are investment funds or any other Person
that is an investment fund, whose investments are primarily managed by Gladstone
Management Corporation or any of its Affiliates.
“Related Property” means with respect to a Loan, any property or other assets of
the Obligor thereunder pledged as collateral to the Originator to secure the
repayment of such Loan.
“Reporting Date” means the date that is two (2) Business Days prior to each
Payment Date.
“Repurchase Price” means for any Transferred Loan purchased pursuant to Section
7.7, an amount equal to the outstanding principal balance of such Loan as of the
date of purchase, plus all accrued and unpaid interest on such Loan.
“Required Committed Lenders” means at a particular time, Committed Lenders with
Commitments in excess of 66 2/3 % of the Facility Amount.
“Required Equity Investment” means the minimum amount of equity investment in
the Borrower which shall be maintained by the Originator, in the form of
Eligible Loans and/or cash having an outstanding principal balance on the
initial Funding Date and at all times prior to the Termination Date of an amount
equal to the greater of (i) $50,000,000 or (ii) the sum of the Outstanding Loan
Balances of the five largest Eligible Loans included as part of the Collateral.
“Required Ratings” means with respect to any Committed Lender, the short term
ratings from S&P and Moody’s equal to or greater than the ratings required in
order to maintain the rating of the commercial paper issued by the related CP
Lender.
“Required Reports” means collectively, the Monthly Report, the Servicer’s
Certificate and the annual and quarterly financial statements of the Originator
required to be delivered to the Borrower, the Managing Agents, the
Administrative Agent and the Backup Servicer pursuant to Section 7.11 hereof.
“Responsible Officer” means as to the Borrower, David Gladstone, Terry Brubaker,
George Stelljes, Harry Brill, Michael Melka or Gary Gerson, and as to any other
Person, any
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officer of such Person with direct responsibility for the administration of this
Agreement and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer’s knowledge of and
familiarity with the particular subject. The Borrower may designate other
Responsible Officers from time to time by notice to the Administrative Agent.
“Revolver Loan” means each Loan with respect to which the Borrower has a
revolving credit commitment to advance amounts to the applicable Obligor during
a specified term.
“Revolver Loan Funding” is defined in Section 2.14.
‘Revolver Loan Funding Account” is defined in Section 2.14.
“Revolver Loan Funding Account Shortfall” means on any date, the amount, if any,
by which the Revolver Loan Funding Amount at such time exceeds the aggregate
amount on deposit in the Revolver Loan Funding Accounts.
“Revolver Loan Funding Account Surplus” means on any date, the amount, if any,
by which the amount on deposit in the Revolver Loan Funding Accounts exceeds the
Revolver Loan Funding Amount at such time.
“Revolver Loan Funding Amount” is defined in Section 2.14.
“Revolver Loan Funding Date” means the Termination Date, if Revolver Loans are
outstanding on such date.
“Revolver Loan Funding Fee” means, for any Settlement Period, a fee equal to
0.80% multiplied by the weighted average amount on deposit in the Revolver Loan
Funding Accounts during such Settlement Period, calculated on the basis of a
year of 360 days for the actual number of days elapsed.
“Revolving Period” means the period commencing on the Closing Date and ending on
the day immediately preceding the Termination Date.
“Risk Rating” means, with respect to any Loan at any time, if such Loan is at
such time (i) rated by both S&P and Moody’s, the lower of such ratings, (ii)
rated by either S&P or Moody’s, such rating or (iii) not rated by either S&P or
Moody’s, the rating determined by the Servicer’s risk rating model.
“Rolling Three-Month Charged-Off Ratio” means for any day, beginning after the
end of the third Settlement Period following the Closing Date, the rolling three
period average Charged-Off Ratio for the three immediately preceding Settlement
Periods.
“Rolling Three-Month Default Ratio” means for any day, beginning after the end
of the third Settlement Period following the Closing Date, the rolling three
period average Default Ratio for the three immediately preceding Settlement
Periods.
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“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
“Scheduled Payment” means on any Determination Date, with respect to any Loan,
each monthly payment (whether principal, interest or principal and interest)
scheduled to be made by the Obligor thereof after such Determination Date under
the terms of such Loan.
“Secured Party” means (i) Each Lender, (ii) each Managing Agent, (iii) each
Liquidity Bank and (iv) each Hedge Counterparty that is either a Lender or an
Affiliate of a Lender if that Affiliate executes a counterpart of this Agreement
agreeing to be bound by the terms of this Agreement applicable to a Secured
Party.
“Securitization” means a disposition of Transferred Loans in one or a series of
structured finance securitization transactions.
“Senior Debt Loan” means a Loan which (a) has a risk rating equal to or greater
than 5.5 (or the equivalent of a rating greater than B/B2 by S&P and Moody’s
respectively), as determined by the Servicer’s risk rating model and (b) is not
subordinated to any other indebtedness of the applicable Obligor.
“Senior Syndicated Loan” means any Senior Debt Loan which is a Qualifying
Syndicated Loan.
“Servicer” means Gladstone Management Corporation, a Delaware corporation, and
its permitted successors and assigns.
“Servicer Advance” means an advance of Scheduled Payments made by the Servicer
pursuant to Section 7.5.
“Servicer Termination Event” is defined in Section 7.18.
“Servicer’s Certificate” is defined in Section 7.11(b).
“Servicing Duties” means those duties of the Servicer which are enumerated in
Section 7.2.
“Servicing Fee” means for each Payment Date, an amount equal to the sum of the
products, for each day during the related Settlement Period, of (i) the
Outstanding Loan Balance of each Loan as of the preceding Determination Date,
(ii) the applicable Servicing Fee Rate, and (iii) a fraction, the numerator of
which is 1 and the denominator of which is 360.
“Servicing Fee Limit Amount” means for each Payment Date, an amount equal to 10%
of the Servicing Fee for the related Settlement Period.
“Servicing Fee Rate” means with respect all Loans, a rate equal to 2.0% per
annum.
“Servicing Records” means all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, data processing
software and
24
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related property rights) prepared and maintained by the Servicer with respect to
the Transferred Loans and the related Obligors.
“Settlement Period” means each period from and including a Payment Date to but
excluding the following Payment Date.
“Solvent” means as to any Person at any time, having a state of affairs such
that all of the following conditions are met: (a) the fair value of the
property owned by such Person is greater than the amount of such Person’s
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(32) of the Bankruptcy Code; (b) the present fair salable value of the
property owned by such Person in an orderly liquidation of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person is able
to realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person’s ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s property would constitute unreasonably
small capital.
“Subordination Event” is defined in Section 5.1(u).
“Successor Servicer” is defined in Section 7.19(a).
“Supplemental Interests” means with respect to any Transferred Loan, any
warrants, equity or other equity interests or interests convertible into or
exchangeable for any such interests received by the Originator from the Obligor
in connection with such Transferred Loan.
“Swap Breakage and Indemnity Amounts” means any early termination payments,
taxes, indemnification payments and any other amounts owed to a Hedge
Counterparty under a Hedging Agreement that do not constitute monthly payments.
“Taxes” means any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Government Authority.
“Termination Date” means the earliest to occur of (a) the date declared by the
Administrative Agent or occurring automatically in respect of the occurrence of
an Early Termination Event pursuant to Section 8.1, (b) a date selected by the
Borrower upon at least thirty (30) days’ prior written notice to the
Administrative Agent and each Managing Agent and (c) the Commitment Termination
Date.
“Termination Notice” is defined in Section 7.18.
“Transaction Documents” means this Agreement, the Purchase Agreement, all
Hedging Agreements, the Custody Agreement, the Backup Servicing Agreement, the
Performance Guaranty and any additional document, letter, fee letter,
certificate, opinion, agreement or
25
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writing the execution of which is necessary or incidental to carrying out the
terms of the foregoing documents.
“Transferred Loans” means each Loan, together with the related interests and
property associated therewith, acquired by the Borrower under the Purchase
Agreement and all Loans received by the Borrower in respect of the Required
Equity Investment. Any Transferred Loan that is (i) repurchased or reacquired
by the Originator pursuant to the terms of Section 6.1 of the Purchase
Agreement, (ii) purchased pursuant to the terms of Section 7.7 or (iii)
otherwise released from the lien of this Agreement pursuant to Section 6.3 shall
not be treated as a Transferred Loan for purposes of this Agreement (provided,
that the purchase or repurchase of any Defaulted Loan or Charged-Off Loan shall
not alter such Transferred Loan’s status as a Defaulted Loan or Charged-Off Loan
for purposes of calculating ratios for periods occurring prior to the purchase
or repurchase of such Transferred Loan).
“Transition Costs” means the reasonable costs and expenses incurred by the
Backup Servicer in transitioning to Servicer; provided, however, that the
Administrative Agent’s consent shall be required if such Transition Costs exceed
$50,000.00 in the aggregate.
“UCC” means the Uniform Commercial Code as from time to time in effect in the
specified jurisdiction or, if no jurisdiction is specified, the State of New
York.
“United States” means The United States of America.
“Unmatured Termination Event” means an event that, with the giving of notice or
lapse of time, or both, would become an Early Termination Event.
“Unreimbursed Servicer Advances” means at any time, the amount of all previous
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to Section 2.8 and that the Servicer has
determined in its sole discretion will not be recoverable from Collections with
respect to the related Transferred Loan.
“Unrestricted Eligible Loan” means on any date of determination, each Loan
which satisfies each of the following requirements:
(i) the Loan is evidenced by a promissory note that has been duly
authorized and that, together with the related Loan Documents, is in full force
and effect and constitutes the legal, valid and binding obligation of the
Obligor of such Loan to pay the stated amount of the Loan and interest thereon,
and the related Loan Documents are enforceable against such Obligor in
accordance with their respective terms;
(ii) the Loan was originated in accordance with the terms of the
Credit and Collection Policy and arose in the ordinary course of the
Originator’s business from the lending of money to the Obligor thereof;
(iii) the Loan is not a Defaulted Loan;
(iv) the Obligor of such Loan has executed all appropriate
documentation required by the Originator;
26
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(v) the Loan, together with the Loan Documents related thereto, is a
“general intangible”, an “instrument”, an “account”, or “chattel paper” within
the meaning of the UCC of all jurisdictions that govern the perfection of the
security interest granted therein;
(vi) all material consents, licenses, approvals or authorizations of,
or registrations or declarations with, any Governmental Authority required to be
obtained, effected or given in connection with the making of such Loan have been
duly obtained, effected or given and are in full force and effect;
(vii) the Loan is denominated and payable only in United States dollars
in the United States;
(viii) the Loan bears interest, which is due and payable no less
frequently than quarterly, except for (i) Loans which bear interest which is due
and payable no less frequently than semi-annually, provided that the aggregate
Outstanding Loan Balances of such Loans do not exceed 10% of the Aggregate
Outstanding Loan Balance and (ii) PIK Loans;
(ix) the Loan, together with the Loan Documents related thereto, does
not contravene in any material respect any Applicable Laws (including, without
limitation, laws, rules and regulations relating to usury, truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no party to the Loan
Documents related thereto is in material violation of any such Applicable Laws;
(x) the Loan, together with the related Loan Documents, is fully
assignable, (and if such Loan is secured by an interest in real property, an
Assignment of Mortgage executed in blank has been delivered to the Collateral
Custodian);
(xi) the Loan was documented and closed in accordance with the Credit
and Collection Policy, including the relevant opinions and assignments, and
there is only one current original promissory note;
(xii) the Loan and all Related Property are free of any Liens except
for Permitted Liens;
(xiii) the Loan has an original term to maturity of no more than 120
months;
(xiv) no right of rescission, set off, counterclaim, defense or other
material dispute has been asserted with respect to such Loan;
(xv) any Related Property with respect to such Loan is insured in
accordance with the Credit and Collection Policy;
(xvi) the Obligor with respect to such Loan is an Eligible Obligor;
(xvii) if such Loan is a PIK Loan, such Loan shall pay a minimum of 5.0%
per annum current interest, on at least a quarterly basis;
27
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(xviii) the Loan is not a loan or extension of credit made by the
Originator or one of its subsidiaries to an Obligor for the purpose of making
any principal, interest or other payment on such Loan necessary in order to keep
such Loan from becoming delinquent;
(xix) the Loan has not been amended to (A) reduce the amount (other than
by reason of the repayment thereof) or extend the time for payment of principal
or (B) reduce the rate or extend the time of payment of interest (or any
component thereof), in each case without the consent of the Required Committed
Lenders;
(xx) if such Loan is a Qualifying Syndicated Loan, (a) the Borrower has
purchased an interest in such Loan from a financial institution which (A) has a
short-term debt rating equal to at least A-1 from S&P and P-1 from Moody’s or
(B) has been approved in writing by the Required Committed Lenders prior to the
related Funding Date and (b) such Loan closed not more than thirty (30) days
previously;
(xxi) if such Loan is a Revolver Loan, it shall be secured by a first
priority, perfected security interest on certain assets of the Obligor which
shall include, without limitation, accounts receivable and inventory;
(xxii) if such Loan is a Revolver Loan, the revolving credit commitment
of the Borrower to the applicable Obligor thereunder (A) is between $500,000 and
$5,000,000 and (B) shall have a term to maturity of five years or less;
(xxiii) the Loan will not cause the Borrower to be deemed to own 5.0% or
more of the voting securities of any publicly registered issuer or any
securities that are immediately convertible into or immediately exercisable or
exchangeable for 5.0% or more of the voting securities of any publicly
registered issuer, as determined by the Servicer;
(xxiv) the Loan is not an equity security;
(xxv) the Loan is not a Related Obligation;
(xxvi) the repayment of such Loan is not subject to non-credit related
risks;
(xxvii) such Loan does not contain a confidentiality provision that
restricts the ability of the Administrative Agent to exercise its rights under
the Transaction Documents, including, without limitation, its rights to review
the Loan and related Loan File;
(xxviii) the proceeds of such Loan are not used to finance construction
projects or activities;
(xxix) the financing of such Loan by the Lenders does not contravene in
any material respect Regulation U of the Federal Reserve Board, nor require the
Lenders to undertake reporting thereunder which it would not otherwise have
cause to make; and
28
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(xxx) the Loan will not cause the Borrower, the Servicer or the
Originator to be deemed an Insider or an Affiliate of the related Obligor.
“Williams Mullen Opinion” means the “non-consolidation” opinion letter of
Williams Mullen delivered on the Closing Date, as such opinion letter may be
modified, supplemented or replaced in any subsequent opinion letter covering
such subject matter delivered to the Administrative Agent.
SECTION 1.2 OTHER TERMS.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
SECTION 1.3 COMPUTATION OF TIME PERIODS.
Unless otherwise stated in this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each mean “to but
excluding.”
SECTION 1.4 INTERPRETATION.
In each Transaction Document, unless a contrary intention appears:
(I) THE SINGULAR NUMBER INCLUDES THE PLURAL NUMBER AND VICE
VERSA;
(II) REFERENCE TO ANY PERSON INCLUDES SUCH PERSON’S SUCCESSORS
AND ASSIGNS BUT, IF APPLICABLE, ONLY IF SUCH SUCCESSORS AND ASSIGNS ARE
PERMITTED BY THE TRANSACTION DOCUMENT;
(III) REFERENCE TO ANY GENDER INCLUDES EACH OTHER GENDER;
(IV) REFERENCE TO ANY AGREEMENT (INCLUDING ANY TRANSACTION
DOCUMENT), DOCUMENT OR INSTRUMENT MEANS SUCH AGREEMENT, DOCUMENT OR INSTRUMENT
AS AMENDED, SUPPLEMENTED OR MODIFIED AND IN EFFECT FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS THEREOF AND, IF APPLICABLE, THE TERMS OF THE OTHER
TRANSACTION DOCUMENTS AND REFERENCE TO ANY PROMISSORY NOTE INCLUDES ANY
PROMISSORY NOTE THAT IS AN EXTENSION OR RENEWAL THEREOF OR A SUBSTITUTE OR
REPLACEMENT THEREFOR; AND
(V) REFERENCE TO ANY APPLICABLE LAW MEANS SUCH APPLICABLE LAW AS
AMENDED, MODIFIED, CODIFIED, REPLACED OR REENACTED, IN WHOLE OR IN PART, AND IN
EFFECT FROM TIME TO TIME, INCLUDING RULES AND REGULATIONS PROMULGATED THEREUNDER
AND REFERENCE TO ANY SECTION OR OTHER PROVISION OF ANY APPLICABLE LAW MEANS THAT
PROVISION OF SUCH APPLICABLE LAW FROM TIME TO TIME IN EFFECT AND CONSTITUTING
THE SUBSTANTIVE AMENDMENT, MODIFICATION, CODIFICATION, REPLACEMENT OR
REENACTMENT OF SUCH SECTION OR OTHER PROVISION.
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ARTICLE II
ADVANCES
SECTION 2.1 ADVANCES.
(A) ON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH, THE BORROWER
MAY, BY DELIVERY OF A FUNDING REQUEST TO THE ADMINISTRATIVE AGENT, FROM TIME TO
TIME ON ANY BUSINESS DAY DURING THE REVOLVING PERIOD, AT ITS OPTION, REQUEST
THAT THE LENDERS MAKE ADVANCES (EACH, AN “ADVANCE”) TO IT IN AN AMOUNT WHICH, AT
ANY TIME, SHALL NOT EXCEED THE AVAILABILITY IN EFFECT ON THE RELATED FUNDING
DATE. SUCH FUNDING REQUEST SHALL BE DELIVERED NOT LATER THAN 10:00 A.M. (NEW
YORK CITY TIME) ON THE DATE WHICH IS ONE (1) BUSINESS DAY PRIOR TO THE REQUESTED
FUNDING DATE. FOLLOWING RECEIPT BY THE ADMINISTRATIVE AGENT OF A FUNDING
REQUEST, THE ADMINISTRATIVE AGENT SHALL FORWARD SUCH FUNDING REQUEST TO EACH
MANAGING AGENT NOT LATER THAN 11:00 A.M. (NEW YORK CITY TIME) THAT DAY. UPON
RECEIPT OF SUCH FUNDING REQUEST, EACH MANAGING AGENT SHALL REQUEST THE CP LENDER
IN ITS LENDER GROUP TO MAKE THE ADVANCE, AND SUCH CP LENDER MAY FROM TIME TO
TIME DURING THE REVOLVING PERIOD, IN ITS SOLE DISCRETION, AGREE OR DECLINE TO
MAKE THE ADVANCE. IF ANY CP LENDER DECLINES TO MAKE ALL OR ANY PART OF A
PROPOSED ADVANCE, IT SHALL SO NOTIFY THE COMMITTED LENDERS AND THE APPLICABLE
PORTION OF THE ADVANCE WILL BE MADE BY THE COMMITTED LENDERS IN SUCH CP LENDER’S
LENDER GROUP IN ACCORDANCE WITH THEIR PRO-RATA SHARES. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS SECTION 2.1 OR ELSEWHERE IN THIS AGREEMENT TO THE CONTRARY, NO
COMMITTED LENDER SHALL BE OBLIGATED TO MAKE ANY ADVANCE IN AN AMOUNT THAT WOULD
RESULT IN THE AGGREGATE ADVANCES THEN FUNDED BY SUCH COMMITTED LENDER EXCEEDING
ITS COMMITMENT THEN IN EFFECT (MINUS THE UNRECOVERED PRINCIPAL AMOUNT OF SUCH
COMMITTED LENDER’S ADVANCES MADE, DOWNGRADE DRAWS FUNDED OR PURCHASE PRICES PAID
PURSUANT TO ANY APPLICABLE LIQUIDITY AGREEMENT TO WHICH IT IS A PARTY). THE
OBLIGATION OF EACH COMMITTED LENDER TO REMIT ITS PRO-RATA SHARE OF ANY SUCH
INVESTMENT SHALL BE SEVERAL FROM THAT OF EACH OTHER COMMITTED LENDER, AND THE
FAILURE OF ANY COMMITTED LENDER TO SO MAKE SUCH AMOUNT AVAILABLE TO THE BORROWER
SHALL NOT RELIEVE ANY OTHER COMMITTED LENDER OF ITS OBLIGATION HEREUNDER. EACH
ADVANCE TO BE MADE HEREUNDER SHALL BE MADE RATABLY AMONG THE LENDER GROUPS IN
ACCORDANCE WITH THEIR GROUP ADVANCE LIMITS.
(B) THE BORROWER MAY, WITHIN SIXTY (60) DAYS, BUT NO LATER THAN
FORTY-FIVE (45) DAYS, PRIOR TO THE THEN CURRENT COMMITMENT TERMINATION DATE, BY
WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT, MAKE WRITTEN REQUESTS FOR THE
LENDERS TO EXTEND THE COMMITMENT TERMINATION DATE. THE ADMINISTRATIVE AGENT
WILL GIVE PROMPT NOTICE TO EACH MANAGING AGENT OF ITS RECEIPT OF SUCH REQUEST,
AND EACH MANAGING AGENT SHALL GIVE PROMPT NOTICE TO EACH OF THE LENDERS IN ITS
RELATED LENDER GROUP OF ITS RECEIPT OF SUCH REQUEST FOR EXTENSION OF THE
COMMITMENT TERMINATION DATE. EACH LENDER SHALL MAKE A DETERMINATION, IN ITS
SOLE DISCRETION AND AFTER A FULL CREDIT REVIEW, NOT LESS THAN FIFTEEN (15) DAYS
PRIOR TO THE THEN APPLICABLE COMMITMENT TERMINATION DATE AS TO WHETHER OR NOT IT
WILL AGREE TO EXTEND THE COMMITMENT TERMINATION DATE; PROVIDED, HOWEVER, THAT
THE FAILURE OF ANY LENDER TO MAKE A TIMELY RESPONSE TO THE BORROWER’S REQUEST
FOR EXTENSION OF THE COMMITMENT TERMINATION DATE SHALL BE DEEMED TO CONSTITUTE A
REFUSAL BY SUCH LENDER TO EXTEND THE COMMITMENT TERMINATION DATE. IN THE EVENT
THAT AT LEAST ONE COMMITTED LENDER AGREES TO EXTEND THE COMMITMENT TERMINATION
DATE, THE BORROWER, THE SERVICER, THE ADMINISTRATIVE AGENT AND THE EXTENDING
COMMITTED LENDERS AND, IF SUCH EXTENSION IS APPROVED BY A CP LENDER IN ITS SOLE
DISCRETION, SUCH CP LENDER SHALL ENTER INTO SUCH DOCUMENTS AS SUCH
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EXTENDING COMMITTED LENDERS AND CP LENDERS MAY DEEM NECESSARY OR APPROPRIATE TO
REFLECT SUCH EXTENSION, AND ALL REASONABLE COSTS AND EXPENSES INCURRED BY SUCH
CP LENDERS, SUCH COMMITTED LENDERS AND THE ADMINISTRATIVE AGENT (INCLUDING
REASONABLE ATTORNEYS’ FEES) SHALL BE PAID BY THE BORROWER. IN THE EVENT THAT
ANY COMMITTED LENDER DECLINES THE REQUEST TO EXTEND THE COMMITMENT TERMINATION
DATE (EACH SUCH COMMITTED LENDER BEING REFERRED TO HEREIN AS A “NON-RENEWING
COMMITTED LENDER”), AND THE COMMITMENT OF SUCH NON-RENEWING COMMITTED LENDER IS
NOT ASSIGNED TO ANOTHER PERSON IN ACCORDANCE WITH THE TERMS OF ARTICLE XI PRIOR
TO THE THEN CURRENT COMMITMENT TERMINATION DATE, (I) THE FACILITY AMOUNT SHALL
BE REDUCED BY AN AMOUNT EQUAL TO EACH SUCH NON-RENEWING COMMITTED LENDER’S
COMMITMENT ON THE THEN CURRENT COMMITMENT TERMINATION DATE, AND (II) THE GROUP
ADVANCE LIMITS OF THE APPLICABLE LENDER GROUPS SHALL BE REDUCED BY AN AMOUNT
EQUAL TO THE APPLICABLE NON-RENEWING COMMITTED LENDER’S COMMITMENT ON THE THEN
CURRENT COMMITMENT TERMINATION DATE.
SECTION 2.2 PROCEDURES FOR ADVANCES.
(A) IN THE CASE OF THE MAKING OF ANY ADVANCE, THE REPAYMENT OF ANY
ADVANCE, OR ANY TERMINATION, INCREASE OR REDUCTION OF THE FACILITY AMOUNT AND
PREPAYMENTS OF ADVANCES, THE BORROWER SHALL GIVE THE ADMINISTRATIVE AGENT A
BORROWER NOTICE. EACH BORROWER NOTICE SHALL SPECIFY THE AMOUNT (SUBJECT TO
SECTION 2.1 HEREOF) OF ADVANCES TO BE BORROWED OR REPAID AND THE FUNDING DATE OR
REPAYMENT DATE (WHICH, IN ALL CASES, SHALL BE A BUSINESS DAY).
(B) SUBJECT TO THE CONDITIONS DESCRIBED IN SECTION 2.1, THE BORROWER
MAY REQUEST AN ADVANCE FROM THE LENDERS BY DELIVERING TO THE ADMINISTRATIVE
AGENT AT CERTAIN TIMES THE INFORMATION AND DOCUMENTS SET FORTH IN THIS SECTION
2.2.
(C) NO LATER THAN 10:00 A.M. (NEW YORK CITY TIME) FIVE (5) BUSINESS
DAYS PRIOR TO THE PROPOSED FUNDING DATE (OR SUCH SHORTER PERIOD OF TIME OR LATER
DATE AS MAY BE AGREED TO BY THE REQUIRED COMMITTED LENDERS), THE BORROWER SHALL
NOTIFY (I) THE COLLATERAL CUSTODIAN BY DELIVERY TO THE COLLATERAL CUSTODIAN OF
WRITTEN NOTICE OF SUCH PROPOSED FUNDING DATE, AND (II) THE ADMINISTRATIVE AGENT
BY DELIVERY TO THE ADMINISTRATIVE AGENT OF A CREDIT REPORT AND TRANSACTION
SUMMARY FOR EACH LOAN THAT IS THE SUBJECT OF THE PROPOSED ADVANCE SETTING FORTH
THE CREDIT UNDERWRITING BY THE ORIGINATOR OF SUCH LOAN, INCLUDING WITHOUT
LIMITATION A DESCRIPTION OF THE OBLIGOR AND THE PROPOSED LOAN TRANSACTION IN THE
FORM OF EXHIBIT M HERETO; PROVIDED THAT THE REQUIREMENTS OF THIS SECTION 2.2(C)
SHALL APPLY ONLY WITH RESPECT TO THE FIRST ADVANCE TO BE MADE WITH RESPECT TO A
REVOLVER LOAN. BY 5:00 P.M. (NEW YORK CITY TIME) ON THE NEXT BUSINESS DAY, THE
ADMINISTRATIVE AGENT SHALL USE ITS BEST EFFORTS TO CONFIRM TO THE BORROWER THE
RECEIPT OF SUCH ITEMS AND WHETHER IT HAS REVIEWED SUCH ITEMS AND FOUND THEM TO
BE COMPLETE AND IN PROPER FORM. IF THE ADMINISTRATIVE AGENT MAKES A
DETERMINATION THAT THE ITEMS ARE INCOMPLETE OR NOT IN PROPER FORM, IT WILL
COMMUNICATE SUCH DETERMINATION TO THE BORROWER. FAILURE BY THE ADMINISTRATIVE
AGENT TO RESPOND TO THE BORROWER BY 5:00 P.M. (NEW YORK CITY TIME) ON THE DAY
THE RELATED FUNDING REQUEST IS DELIVERED BY THE BORROWER SHALL CONSTITUTE AN
IMPLIED DETERMINATION THAT THE ITEMS ARE INCOMPLETE OR NOT IN PROPER FORM. THE
BORROWER WILL TAKE SUCH STEPS REQUESTED BY THE ADMINISTRATIVE AGENT TO CORRECT
THE PROBLEM(S). IN THE EVENT OF A DELAY IN THE ACTUAL FUNDING DATE DUE TO THE
NEED TO CORRECT ANY SUCH PROBLEMS, THE FUNDING DATE SHALL BE NO EARLIER THAN TWO
(2) BUSINESS DAYS AFTER THE DAY ON WHICH THE ADMINISTRATIVE AGENT CONFIRMS TO
THE BORROWER THAT THE PROBLEMS HAVE BEEN CORRECTED.
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(D) NO LATER THAN 11:00 A.M. (NEW YORK CITY TIME) ONE (1) BUSINESS DAY
PRIOR TO THE PROPOSED FUNDING DATE (OR SUCH SHORTER PERIOD OF TIME OR LATER DATE
AS MAY BE AGREED TO BY THE REQUIRED COMMITTED LENDERS), THE ADMINISTRATIVE
AGENT, EACH MANAGING AGENT AND THE COLLATERAL CUSTODIAN, AS APPLICABLE, SHALL
RECEIVE OR SHALL HAVE PREVIOUSLY RECEIVED THE FOLLOWING:
(I) A FUNDING REQUEST IN THE FORM OF EXHIBIT A;
(II) A WIRE DISBURSEMENT AND AUTHORIZATION FORM SHALL BE DELIVERED TO
THE ADMINISTRATIVE AGENT; AND
(III) A CERTIFICATION SUBSTANTIALLY IN THE FORM OF EXHIBIT H CONCERNING
THE COLLATERAL CUSTODIAN’S RECEIPT OF CERTAIN DOCUMENTATION RELATING TO THE
ELIGIBLE LOAN(S) RELATED TO SUCH ADVANCE SHALL BE DELIVERED TO THE
ADMINISTRATIVE AGENT.
(E) EACH FUNDING REQUEST SHALL SPECIFY THE AGGREGATE AMOUNT OF THE
REQUESTED ADVANCE, WHICH SHALL BE IN AN AMOUNT EQUAL TO AT LEAST $500,000. EACH
FUNDING REQUEST SHALL BE ACCOMPANIED BY (I) A BORROWER NOTICE, DEPICTING THE
OUTSTANDING AMOUNT OF ADVANCES UNDER THIS AGREEMENT AND REPRESENTING THAT ALL
CONDITIONS PRECEDENT FOR A FUNDING HAVE BEEN MET, INCLUDING A REPRESENTATION BY
THE BORROWER THAT THE REQUESTED ADVANCE SHALL NOT, ON THE FUNDING DATE THEREOF,
EXCEED THE AVAILABILITY ON SUCH DAY, (II) A CALCULATION OF THE BORROWING BASE AS
OF THE DATE THE ADVANCE IS REQUESTED, (III) AN UPDATED LOAN LIST INCLUDING EACH
LOAN THAT IS SUBJECT TO THE REQUESTED ADVANCE, (IV) THE PROPOSED FUNDING DATE,
AND (V) WIRE TRANSFER INSTRUCTIONS FOR THE ADVANCE. A FUNDING REQUEST SHALL BE
IRREVOCABLE WHEN DELIVERED.
(F) ON THE FUNDING DATE FOLLOWING THE SATISFACTION OF THE APPLICABLE
CONDITIONS SET FORTH IN THIS SECTION 2.2 AND ARTICLE III, EACH CP LENDER MAY, OR
THE RELATED COMMITTED LENDERS, AS APPLICABLE, SHALL, MAKE AVAILABLE TO THE
ADMINISTRATIVE AGENT AT ITS ADDRESS LISTED BENEATH ITS SIGNATURE ON ITS
SIGNATURE PAGE TO THIS AGREEMENT (OR ON THE SIGNATURE PAGE TO THE JOINDER
AGREEMENT PURSUANT TO WHICH IT BECAME A PARTY HERETO), FOR DEPOSIT TO THE
ACCOUNT OF THE BORROWER OR ITS DESIGNEE IN SAME DAY FUNDS, AT THE ACCOUNT
SPECIFIED IN THE FUNDING REQUEST, AN AMOUNT EQUAL TO SUCH LENDER’S RATABLE SHARE
OF THE ADVANCE THEN BEING MADE. EACH WIRE TRANSFER OF AN ADVANCE TO THE
BORROWER SHALL BE INITIATED BY THE APPLICABLE LENDER NO LATER THAN 3:00 P.M.
(NEW YORK CITY TIME) ON THE APPLICABLE FUNDING DATE.
SECTION 2.3 OPTIONAL CHANGES IN FACILITY
AMOUNT; PREPAYMENTS.
(A) THE BORROWER SHALL BE ENTITLED AT ITS OPTION, AT ANY TIME PRIOR TO
THE OCCURRENCE OF AN EARLY TERMINATION EVENT, TO REDUCE THE FACILITY AMOUNT IN
WHOLE OR IN PART; PROVIDED THAT THE BORROWER SHALL GIVE PRIOR WRITTEN NOTICE OF
SUCH REDUCTION TO THE ADMINISTRATIVE AGENT AND EACH MANAGING AGENT AS PROVIDED
IN PARAGRAPH (B) OF THIS SECTION 2.3 AND THAT ANY PARTIAL REDUCTION OF THE
FACILITY AMOUNT SHALL BE IN AN AMOUNT EQUAL TO $3,000,000 WITH INTEGRAL
MULTIPLES OF $500,000 ABOVE SUCH AMOUNT. UNLESS OTHERWISE AGREED BY THE
COMMITTED LENDERS, THE COMMITMENT OF EACH COMMITTED LENDER SHALL BE REDUCED
RATABLY IN PROPORTION TO SUCH REDUCTION IN THE FACILITY AMOUNT. ANY REQUEST FOR
A REDUCTION OR TERMINATION PURSUANT TO THIS SECTION 2.3 SHALL BE IRREVOCABLE.
(B) FROM TIME TO TIME DURING THE REVOLVING PERIOD THE BORROWER MAY
PREPAY ANY PORTION OR ALL OF THE ADVANCES OUTSTANDING, OTHER THAN WITH RESPECT
TO MANDATORY PREPAYMENTS,
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BY DELIVERING TO THE ADMINISTRATIVE AGENT AND EACH MANAGING AGENT A BORROWER
NOTICE AT LEAST TWO (2) BUSINESS DAY PRIOR TO THE DATE OF SUCH REPAYMENT;
PROVIDED, THAT NO SUCH REDUCTION SHALL BE GIVEN EFFECT UNLESS THE BORROWER HAS
COMPLIED WITH THE TERMS OF ANY HEDGING AGREEMENT REQUIRING THAT ONE OR MORE
HEDGE TRANSACTIONS BE TERMINATED IN WHOLE OR IN PART AS THE RESULT OF ANY SUCH
PREPAYMENT OF THE ADVANCES OUTSTANDING, AND THE BORROWER HAS PAID ALL HEDGE
BREAKAGE COSTS OWING TO THE RELEVANT HEDGE COUNTERPARTY FOR ANY SUCH
TERMINATION. IF ANY BORROWER NOTICE RELATING TO ANY PREPAYMENT IS GIVEN, THE
AMOUNT SPECIFIED IN SUCH BORROWER NOTICE SHALL BE DUE AND PAYABLE ON THE DATE
SPECIFIED THEREIN, TOGETHER WITH ACCRUED INTEREST TO THE PAYMENT DATE ON THE
AMOUNT PREPAID AND ANY BREAKAGE COSTS (INCLUDING HEDGE BREAKAGE COSTS) RELATED
THERETO. ANY PARTIAL PREPAYMENT BY THE BORROWER OF ADVANCES HEREUNDER, OTHER
THAN WITH RESPECT TO MANDATORY PREPAYMENTS, SHALL BE IN A MINIMUM AMOUNT OF
$500,000 WITH INTEGRAL MULTIPLES OF $100,000 ABOVE SUCH AMOUNT. ANY AMOUNT SO
PREPAID MAY, SUBJECT TO THE TERMS AND CONDITIONS HEREOF, BE REBORROWED DURING
THE REVOLVING PERIOD. A BORROWER NOTICE RELATING TO ANY SUCH PREPAYMENT SHALL
BE IRREVOCABLE WHEN DELIVERED.
SECTION 2.4 PRINCIPAL REPAYMENTS.
(A) THE ADVANCES OUTSTANDING SHALL BE DUE AND PAYABLE IN ACCORDANCE
WITH SECTION 2.8 ON THE MATURITY DATE. IN ADDITION, ADVANCES OUTSTANDING SHALL
BE REPAID AS AND WHEN NECESSARY TO CAUSE THE BORROWING BASE TEST TO BE MET, IN
ACCORDANCE WITH SECTION 2.8 (EACH SUCH PAYMENT, A “MANDATORY PREPAYMENT”), AND
ANY AMOUNT SO REPAID MAY, SUBJECT TO THE TERMS AND CONDITIONS HEREOF, BE
REBORROWED HEREUNDER DURING THE REVOLVING PERIOD.
(B) ALL REPAYMENTS OF ANY ADVANCE OR ANY PORTION THEREOF SHALL BE MADE
TOGETHER WITH PAYMENT OF (I) ALL INTEREST ACCRUED AND UNPAID ON THE AMOUNT
REPAID TO (BUT EXCLUDING) THE DATE OF SUCH REPAYMENT, (II) ANY AND ALL BREAKAGE
COSTS, AND (III) ALL HEDGE BREAKAGE COSTS AND ANY OTHER AMOUNTS PAYABLE BY THE
BORROWER UNDER OR WITH RESPECT TO ANY HEDGING AGREEMENT.
SECTION 2.5 THE NOTES.
(A) THE ADVANCES MADE BY THE LENDERS HEREUNDER SHALL BE EVIDENCED BY A
DULY EXECUTED PROMISSORY NOTE OF THE BORROWER PAYABLE TO EACH MANAGING AGENT, ON
BEHALF OF THE APPLICABLE LENDERS IN THE RELATED LENDER GROUP, IN SUBSTANTIALLY
THE FORM OF EXHIBIT B HERETO (COLLECTIVELY, THE “NOTES”). THE NOTES SHALL BE
DATED THE CLOSING DATE AND SHALL BE IN A MAXIMUM PRINCIPAL AMOUNT EQUAL TO THE
APPLICABLE LENDER GROUP’S GROUP ADVANCE LIMIT, AND SHALL OTHERWISE BE DULY
COMPLETED.
(B) EACH MANAGING AGENT IS HEREBY AUTHORIZED TO ENTER ON A SCHEDULE
ATTACHED TO ITS NOTES THE FOLLOWING NOTATIONS (WHICH MAY BE COMPUTER GENERATED)
WITH RESPECT TO EACH ADVANCE MADE BY EACH LENDER IN THE APPLICABLE LENDER
GROUP: (I) THE DATE AND PRINCIPAL AMOUNT THEREOF AND (II) EACH PAYMENT AND
REPAYMENT OF PRINCIPAL THEREOF, AND ANY SUCH RECORDATION SHALL CONSTITUTE PRIMA
FACIE EVIDENCE OF THE ACCURACY OF THE INFORMATION SO RECORDED. THE FAILURE OF A
MANAGING AGENT TO MAKE ANY SUCH NOTATION ON THE SCHEDULE ATTACHED TO THE
APPLICABLE NOTE SHALL NOT LIMIT OR OTHERWISE AFFECT THE OBLIGATION OF THE
BORROWER TO REPAY THE ADVANCES IN ACCORDANCE WITH THEIR RESPECTIVE TERMS AS SET
FORTH HEREIN.
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SECTION 2.6 INTEREST PAYMENTS.
(A) INTEREST SHALL ACCRUE ON EACH ADVANCE DURING EACH SETTLEMENT
PERIOD AT THE APPLICABLE INTEREST RATE. THE BORROWER SHALL PAY INTEREST ON THE
UNPAID PRINCIPAL AMOUNT OF EACH ADVANCE FOR THE PERIOD COMMENCING ON AND
INCLUDING THE FUNDING DATE OF SUCH ADVANCE UNTIL BUT EXCLUDING THE DATE THAT
SUCH ADVANCE SHALL BE PAID IN FULL. INTEREST SHALL ACCRUE DURING EACH
SETTLEMENT PERIOD AND BE PAYABLE ON THE ADVANCES OUTSTANDING ON EACH PAYMENT
DATE, UNLESS EARLIER PAID PURSUANT TO (I) A PREPAYMENT IN ACCORDANCE WITH
SECTION 2.3(B) OR (II) A REPAYMENT IN ACCORDANCE WITH SECTION 2.4(B).
(B) EACH MANAGING AGENT SHALL DETERMINE (IN ACCORDANCE WITH
INFORMATION PROVIDED BY THE RELEVANT CP LENDER AND/OR COMMITTED LENDERS IN THE
RELATED LENDER GROUP, AS APPLICABLE) ITS ESTIMATE OF THE INTEREST (INCLUDING
UNPAID INTEREST, IF ANY DUE AND PAYABLE ON A PRIOR PAYMENT DATE) TO BE PAID TO
THE LENDERS IN THE APPLICABLE LENDER GROUP ON EACH PAYMENT DATE FOR THE RELATED
SETTLEMENT PERIOD AND SHALL ADVISE THE ADMINISTRATIVE AGENT AND THE SERVICER, ON
BEHALF OF THE BORROWER, THEREOF THREE (3) BUSINESS DAYS PRIOR TO EACH PAYMENT
DATE. IN THE EVENT THAT ANY MANAGING AGENT’S, CP LENDER’S OR COMMITTED
LENDER’S, AS APPLICABLE, ESTIMATE OF THE INTEREST PAYABLE FOR A RELATED
SETTLEMENT PERIOD IS DIFFERENT FROM THE ACTUAL AMOUNT OF INTEREST FOR SUCH
SETTLEMENT PERIOD, THE MANAGING AGENT SHALL INCREASE OR DECREASE ITS ESTIMATE OF
INTEREST FOR THE NEXT SUCCEEDING SETTLEMENT PERIOD BY THE AMOUNT OF SUCH
DIFFERENCE, PLUS INTEREST THEREON, IF APPLICABLE. FAILURE TO SET ASIDE ANY
AMOUNT SO ACCRUED SHALL NOT RELIEVE THE BORROWER OR THE SERVICER ON BEHALF OF
THE BORROWER OF ITS OBLIGATION TO REMIT OR CAUSE THE SERVICER TO REMIT
COLLECTIONS TO THE ADMINISTRATIVE AGENT WITH RESPECT TO SUCH ACCRUED AMOUNT AS
AND TO THE EXTENT PROVIDED IN SECTION 2.8.
(C) IF ANY MANAGING AGENT, ON BEHALF OF THE APPLICABLE LENDERS, SHALL
NOTIFY THE ADMINISTRATIVE AGENT THAT A EURODOLLAR DISRUPTION EVENT AS DESCRIBED
IN CLAUSE (A) OF THE DEFINITION OF “EURODOLLAR DISRUPTION EVENT” HAS OCCURRED,
THE ADMINISTRATIVE AGENT SHALL IN TURN SO NOTIFY THE BORROWER, WHEREUPON ALL
ADVANCES IN RESPECT OF WHICH INTEREST ACCRUES AT THE LIBO RATE SHALL IMMEDIATELY
BE CONVERTED INTO ADVANCES IN RESPECT OF WHICH INTEREST ACCRUES AT THE BASE
RATE.
(D) ANYTHING IN THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS TO
THE CONTRARY NOTWITHSTANDING, IF AT ANY TIME THE RATE OF INTEREST PAYABLE BY ANY
PERSON UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS EXCEEDS THE HIGHEST
RATE OF INTEREST PERMISSIBLE UNDER APPLICABLE LAW (THE “MAXIMUM LAWFUL RATE”),
THEN, SO LONG AS THE MAXIMUM LAWFUL RATE WOULD BE EXCEEDED, THE RATE OF INTEREST
UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS SHALL BE EQUAL TO THE MAXIMUM
LAWFUL RATE. IF AT ANY TIME THEREAFTER THE RATE OF INTEREST PAYABLE UNDER THIS
AGREEMENT AND THE TRANSACTION DOCUMENTS IS LESS THAN THE MAXIMUM LAWFUL RATE,
SUCH PERSON SHALL CONTINUE TO PAY INTEREST UNDER THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS AT THE MAXIMUM LAWFUL RATE UNTIL SUCH TIME AS THE TOTAL
INTEREST RECEIVED FROM SUCH PERSON IS EQUAL TO THE TOTAL INTEREST THAT WOULD
HAVE BEEN RECEIVED HAD APPLICABLE LAW NOT LIMITED THE INTEREST RATE PAYABLE
UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS. IN NO EVENT SHALL THE TOTAL
INTEREST RECEIVED BY A LENDER UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS
EXCEED THE AMOUNT THAT SUCH LENDER COULD LAWFULLY HAVE RECEIVED, HAD THE
INTEREST DUE UNDER THIS AGREEMENT AND THE TRANSACTION DOCUMENTS BEEN CALCULATED
SINCE THE CLOSING DATE AT THE MAXIMUM LAWFUL RATE.
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SECTION 2.7 FEES.
(A) THE BORROWER SHALL PAY TO THE ADMINISTRATIVE AGENT FROM THE
COLLECTION ACCOUNT ON EACH PAYMENT DATE, MONTHLY IN ARREARS IN ACCORDANCE WITH
SECTION 2.8, THE PROGRAM FEE, COMMITMENT FEE AND, FROM AND AFTER THE REVOLVER
LOAN FUNDING DATE, THE REVOLVER LOAN FUNDING FEE.
(B) THE BORROWER SHALL PAY TO THE SERVICER FROM THE COLLECTION ACCOUNT
ON EACH PAYMENT DATE, MONTHLY IN ARREARS IN ACCORDANCE WITH SECTION 2.8, THE
SERVICING FEE.
(C) THE BACKUP SERVICER SHALL BE ENTITLED TO RECEIVE FROM THE
COLLECTION ACCOUNT ON EACH PAYMENT DATE, MONTHLY IN ARREARS IN ACCORDANCE WITH
SECTION 2.8, THE BACKUP SERVICING FEE.
(D) THE COLLATERAL CUSTODIAN SHALL BE ENTITLED TO RECEIVE FROM THE
COLLECTION ACCOUNT ON EACH PAYMENT DATE, MONTHLY IN ARREARS IN ACCORDANCE WITH
SECTION 2.8, THE COLLATERAL CUSTODIAN FEE.
SECTION 2.8 SETTLEMENT PROCEDURES.
On each Payment Date, the Servicer on behalf of the Borrower shall pay for
receipt by the applicable Lender no later than 11:00 a.m. (New York City time)
to the following Persons, from (i) the Collection Account, to the extent of
available funds, (ii) Servicer Advances, and (iii) amounts received in respect
of any Hedge Agreement during such Settlement Period (the sum of such amounts
described in clauses (i), (ii) and (iii), minus any amounts required to be
deposited to the Revolver Loan Funding Accounts in accordance with Section 2.14
below being the “Available Collections”) the following amounts in the following
order of priority:
(I) FIRST, TO EACH HEDGE COUNTERPARTY, ANY AMOUNTS OWING THAT HEDGE
COUNTERPARTY UNDER ITS RESPECTIVE HEDGING AGREEMENT IN RESPECT OF ANY HEDGE
TRANSACTION(S), FOR THE PAYMENT THEREOF, BUT EXCLUDING, TO THE EXTENT THE HEDGE
COUNTERPARTY IS NOT THE SAME PERSON AS THE ADMINISTRATIVE AGENT, ANY SWAP
BREAKAGE AND INDEMNITY AMOUNTS;
(II) SECOND, TO THE SERVICER, IN AN AMOUNT EQUAL TO ANY UNREIMBURSED
SERVICER ADVANCES, FOR THE PAYMENT THEREOF;
(III) THIRD, TO THE EXTENT NOT PAID BY THE SERVICER, TO THE BACKUP
SERVICER AND ANY SUCCESSOR SERVICER, AS APPLICABLE, IN AMOUNT EQUAL TO ANY
ACCRUED AND UNPAID BACKUP SERVICING FEE AND, IF ANY, ACCRUED AND UNPAID
TRANSITION COSTS, BACKUP SERVICER EXPENSES AND MARKET SERVICING FEE
DIFFERENTIAL, EACH FOR THE PAYMENT THEREOF;
(IV) FOURTH, TO THE EXTENT NOT PAID BY THE SERVICER, TO THE COLLATERAL
CUSTODIAN IN AN AMOUNT EQUAL TO ANY ACCRUED AND UNPAID COLLATERAL CUSTODIAN FEE
AND COLLATERAL CUSTODIAN EXPENSES, IF ANY, FOR THE PAYMENT THEREOF;
(V) FIFTH, TO THE SERVICER, IN AN AMOUNT EQUAL TO (A) IF THE SERVICER
IS GLADSTONE MANAGEMENT CORPORATION OR ANY OF ITS AFFILIATES, ITS ACCRUED AND
UNPAID
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SERVICING FEES TO THE END OF THE PRECEDING SETTLEMENT PERIOD, UP TO THE
SERVICING FEE LIMIT AMOUNT FOR SUCH SETTLEMENT PERIOD, FOR THE PAYMENT THEREOF
AND (B) OTHERWISE, ITS ACCRUED AND UNPAID SERVICING FEES TO THE END OF THE
PRECEDING SETTLEMENT PERIOD FOR THE PAYMENT THEREOF;
(VI) SIXTH, TO THE ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, IN AN AMOUNT EQUAL TO ANY ACCRUED AND
UNPAID INTEREST, PROGRAM FEE, COMMITMENT FEE AND REVOLVER LOAN FUNDING FEE, IF
ANY, FOR SUCH PAYMENT DATE;
(VII) SEVENTH, AT ANY TIME DURING THE REVOLVING PERIOD, TO THE
ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING AGENT, ON BEHALF OF THE
RELATED LENDERS, AN AMOUNT EQUAL TO THE EXCESS, IF ANY, OF ADVANCES OUTSTANDING
OVER THE LESSER OF (I) THE BORROWING BASE OR (II) THE FACILITY AMOUNT, TOGETHER
WITH THE AMOUNT OF BREAKAGE COSTS INCURRED BY THE APPLICABLE LENDERS IN
CONNECTION WITH ANY SUCH PAYMENT (AS SUCH BREAKAGE COSTS ARE NOTIFIED TO THE
BORROWER BY THE APPLICABLE LENDER(S));
(VIII) EIGHTH, DURING THE AMORTIZATION PERIOD AND FROM AND AFTER THE
MATURITY DATE, TO THE ADMINISTRATIVE AGENT FOR RATABLE PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, IN AN AMOUNT TO REDUCE ADVANCES
OUTSTANDING TO ZERO AND TO PAY ANY OTHER OBLIGATIONS IN FULL;
(IX) NINTH, TO EACH HEDGE COUNTERPARTY, ANY SWAP BREAKAGE AND
INDEMNITY AMOUNTS OWING THAT HEDGE COUNTERPARTY.
(X) TENTH, TO THE ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, IN THE AMOUNT OF UNPAID BREAKAGE COSTS
(OTHER THAN BREAKAGE COSTS COVERED IN CLAUSE (VII) ABOVE) WITH RESPECT TO ANY
PREPAYMENTS MADE ON SUCH PAYMENT DATE, INCREASED COSTS AND/OR TAXES (IF ANY);
(XI) ELEVENTH, TO THE ADMINISTRATIVE AGENT, ALL OTHER AMOUNTS THEN DUE
UNDER THIS AGREEMENT TO THE ADMINISTRATIVE AGENT, THE LENDERS, THE AFFECTED
PARTIES OR INDEMNIFIED PARTIES, EACH FOR THE PAYMENT THEREOF;
(XII) TWELFTH, TO THE SERVICER, IN AN AMOUNT EQUAL TO (A) IF THE
SERVICER IS GLADSTONE MANAGEMENT CORPORATION OR ANY OF ITS AFFILIATES, ITS
ACCRUED AND UNPAID SERVICING FEES TO THE END OF THE PRECEDING SETTLEMENT PERIOD
NOT OTHERWISE PAID PURSUANT TO PRIORITY FIFTH ABOVE; AND
(XIII) THIRTEENTH, ALL REMAINING AMOUNTS TO THE BORROWER
SECTION 2.9 COLLECTIONS AND ALLOCATIONS.
(A) THE BORROWER OR THE SERVICER ON BEHALF OF THE BORROWER SHALL
PROMPTLY (BUT IN NO EVENT LATER THAN TWO (2) BUSINESS DAYS AFTER THE RECEIPT
THEREOF) IDENTIFY ANY COLLECTIONS RECEIVED BY IT AS BEING ON ACCOUNT OF INTEREST
COLLECTIONS OR PRINCIPAL COLLECTIONS AND DEPOSIT ALL SUCH INTEREST COLLECTIONS
OR PRINCIPAL COLLECTIONS RECEIVED DIRECTLY BY IT INTO THE COLLECTION ACCOUNT.
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THE SERVICER ON BEHALF OF THE BORROWER SHALL MAKE SUCH DEPOSITS OR PAYMENTS ON
THE DATE INDICATED BY WIRE TRANSFER, IN IMMEDIATELY AVAILABLE FUNDS.
(B) UNTIL THE OCCURRENCE OF AN EARLY TERMINATION EVENT, TO THE EXTENT
THERE ARE UNINVESTED AMOUNTS DEPOSITED IN THE COLLECTION ACCOUNT, ALL AMOUNTS
SHALL BE INVESTED IN PERMITTED INVESTMENTS SELECTED BY THE SERVICER ON BEHALF OF
THE BORROWER THAT MATURE NO LATER THAN THE BUSINESS DAY IMMEDIATELY PRECEDING
THE NEXT PAYMENT DATE; FROM AND AFTER (I) THE OCCURRENCE OF AN EARLY TERMINATION
EVENT OR (II) THE APPOINTMENT OF A SUCCESSOR SERVICER, TO THE EXTENT THERE ARE
UNINVESTED AMOUNTS DEPOSITED IN THE COLLECTION ACCOUNT, ALL AMOUNTS MAY BE
INVESTED IN PERMITTED INVESTMENTS SELECTED BY THE ADMINISTRATIVE AGENT THAT
MATURE NO LATER THAN THE NEXT BUSINESS DAY. ANY EARNINGS (AND LOSSES) THEREON
SHALL BE FOR THE ACCOUNT OF THE BORROWER.
SECTION 2.10 PAYMENTS, COMPUTATIONS, ETC.
(A) UNLESS OTHERWISE EXPRESSLY PROVIDED HEREIN, ALL AMOUNTS TO BE PAID
OR DEPOSITED BY THE BORROWER OR THE SERVICER ON BEHALF OF THE BORROWER HEREUNDER
SHALL BE PAID OR DEPOSITED IN ACCORDANCE WITH THE TERMS HEREOF NO LATER THAN
10:00 A.M. (NEW YORK CITY TIME) ON THE DAY WHEN DUE IN LAWFUL MONEY OF THE
UNITED STATES IN IMMEDIATELY AVAILABLE FUNDS TO THE AGENT’S ACCOUNT. THE
BORROWER SHALL, TO THE EXTENT PERMITTED BY LAW, PAY TO THE SECURED PARTIES
INTEREST ON ALL AMOUNTS NOT PAID OR DEPOSITED WHEN DUE HEREUNDER AT 2.0% PER
ANNUM ABOVE THE BASE RATE, PAYABLE ON DEMAND; PROVIDED, HOWEVER, THAT SUCH
INTEREST RATE SHALL NOT AT ANY TIME EXCEED THE MAXIMUM LAWFUL RATE. ALL
COMPUTATIONS OF INTEREST AND ALL COMPUTATIONS OF THE INTEREST RATE AND OTHER
FEES HEREUNDER SHALL BE MADE ON THE BASIS OF A YEAR OF 360 DAYS FOR THE ACTUAL
NUMBER OF DAYS (INCLUDING THE FIRST BUT EXCLUDING THE LAST DAY) ELAPSED.
(B) WHENEVER ANY PAYMENT HEREUNDER SHALL BE STATED TO BE DUE ON A DAY
OTHER THAN A BUSINESS DAY, SUCH PAYMENT SHALL BE MADE ON THE NEXT SUCCEEDING
BUSINESS DAY, AND SUCH EXTENSION OF TIME SHALL IN SUCH CASE BE INCLUDED IN THE
COMPUTATION OF PAYMENT OF INTEREST, OTHER INTEREST OR ANY FEE PAYABLE HEREUNDER,
AS THE CASE MAY BE.
(C) ALL PAYMENTS HEREUNDER SHALL BE MADE WITHOUT SET-OFF OR
COUNTERCLAIM AND IN SUCH AMOUNTS AS MAY BE NECESSARY IN ORDER THAT ALL SUCH
PAYMENTS SHALL NOT BE LESS THAN THE AMOUNTS OTHERWISE SPECIFIED TO BE PAID UNDER
THIS AGREEMENT (AFTER WITHHOLDING FOR OR ON ACCOUNT OF ANY TAXES).
SECTION 2.11 BREAKAGE COSTS.
The Borrower shall pay to the Administrative Agent for the account of the
applicable Managing Agent, on behalf of the related Lenders, upon the request of
any Managing Agent, any Lender or the Administrative Agent on each Payment Date
on which a prepayment is made, such amount or amounts as shall, without
duplication, compensate the Lenders for any loss, cost or expense (the “Breakage
Costs”) incurred by the Lenders (as reasonably determined by the applicable
Lender) as a result of any prepayment of an Advance (and interest thereon)
arising under this Agreement and the Liquidity Agreements. The determination by
any Managing Agent, on behalf of the related Lenders, of the amount of any such
loss or expense shall be set forth in a written notice to the Borrower delivered
by the applicable Lender prior to the date of
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such prepayment in the case where notice of such prepayment is delivered to such
Lender in accordance with Section 2.3(b) or within two (2) Business Days
following such prepayment in the case where no such notice is delivered (in
which case, Breakage Costs shall include interest thereon from the date of such
prepayment) and shall be conclusive absent manifest error. No Breakage Costs
shall be payable to any CP Lender to the extent that (a) notice of such
prepayment shall have been delivered to such CP Lender in accordance with the
provisions of Section 2.3(b) or 7.7(c), (b) such prepayment is made on a Payment
Date, and (c) such prepayment does not exceed the lesser of (i) 20% of the
Advances made by such CP Lender and (ii) $20,000,000.
SECTION 2.12 INCREASED COSTS; CAPITAL ADEQUACY;
ILLEGALITY.
(A) IF AFTER THE DATE HEREOF, ANY MANAGING AGENT, LENDER, LIQUIDITY
BANK OR ANY AFFILIATE THEREOF (EACH OF WHICH, AN “AFFECTED PARTY”) SHALL BE
CHARGED ANY FEE, EXPENSE OR INCREASED COST ON ACCOUNT OF THE ADOPTION OF ANY
APPLICABLE LAW, RULE OR REGULATION (INCLUDING ANY APPLICABLE LAW, RULE OR
REGULATION REGARDING CAPITAL ADEQUACY), ANY ACCOUNTING PRINCIPLES OR ANY CHANGE
IN ANY OF THE FOREGOING, OR ANY CHANGE IN THE INTERPRETATION OR ADMINISTRATION
THEREOF BY ANY GOVERNMENTAL AUTHORITY, THE FINANCIAL ACCOUNTING STANDARDS BOARD
(“FASB”), ANY CENTRAL BANK OR ANY COMPARABLE AGENCY CHARGED WITH THE
INTERPRETATION OR ADMINISTRATION THEREOF, OR COMPLIANCE WITH ANY REQUEST OR
DIRECTIVE (WHETHER OR NOT HAVING THE FORCE OF LAW) OF ANY SUCH AUTHORITY OR
AGENCY (A “REGULATORY CHANGE”): (I) THAT SUBJECTS ANY AFFECTED PARTY TO ANY
CHARGE OR WITHHOLDING ON OR WITH RESPECT TO ANY TRANSACTION DOCUMENT OR AN
AFFECTED PARTY’S OBLIGATIONS UNDER A TRANSACTION DOCUMENT, OR ON OR WITH RESPECT
TO THE ADVANCES, OR CHANGES THE BASIS OF TAXATION OF PAYMENTS TO ANY AFFECTED
PARTY OF ANY AMOUNTS PAYABLE UNDER ANY TRANSACTION DOCUMENT (EXCEPT FOR CHANGES
IN THE RATE OF TAX ON THE OVERALL NET INCOME OF AN AFFECTED PARTY OR TAXES
EXCLUDED BY SECTION 2.13) OR (II) THAT IMPOSES, MODIFIES OR DEEMS APPLICABLE ANY
RESERVE, ASSESSMENT, INSURANCE CHARGE, SPECIAL DEPOSIT OR SIMILAR REQUIREMENT
AGAINST ASSETS OF, DEPOSITS WITH OR FOR THE ACCOUNT OF AN AFFECTED PARTY, OR
CREDIT EXTENDED BY AN AFFECTED PARTY PURSUANT TO A TRANSACTION DOCUMENT OR (III)
THAT IMPOSES ANY OTHER CONDITION THE RESULT OF WHICH IS TO INCREASE THE COST TO
AN AFFECTED PARTY OF PERFORMING ITS OBLIGATIONS UNDER A TRANSACTION DOCUMENT, OR
TO REDUCE THE RATE OF RETURN ON AN AFFECTED PARTY’S CAPITAL AS A CONSEQUENCE OF
ITS OBLIGATIONS UNDER A TRANSACTION DOCUMENT, OR TO REDUCE THE AMOUNT OF ANY SUM
RECEIVED OR RECEIVABLE BY AN AFFECTED PARTY UNDER A TRANSACTION DOCUMENT OR TO
REQUIRE ANY PAYMENT CALCULATED BY REFERENCE TO THE AMOUNT OF INTERESTS OR LOANS
HELD OR INTEREST RECEIVED BY IT, THEN, UPON DEMAND BY THE APPLICABLE MANAGING
AGENT, BORROWER SHALL PAY TO THE ADMINISTRATIVE AGENT, FOR PAYMENT TO THE
APPLICABLE MANAGING AGENT FOR THE BENEFIT OF THE RELEVANT AFFECTED PARTY, SUCH
AMOUNTS CHARGED TO SUCH AFFECTED PARTY OR SUCH AMOUNTS TO OTHERWISE COMPENSATE
SUCH AFFECTED PARTY FOR SUCH INCREASED COST OR SUCH REDUCTION.
(B) IF AS A RESULT OF ANY EVENT OR CIRCUMSTANCE SIMILAR TO THOSE
DESCRIBED IN CLAUSE (A) OF THIS SECTION 2.12, AN AFFECTED PARTY IS REQUIRED TO
COMPENSATE A BANK OR OTHER FINANCIAL INSTITUTION PROVIDING LIQUIDITY SUPPORT,
CREDIT ENHANCEMENT OR OTHER SIMILAR SUPPORT TO SUCH AFFECTED PARTY IN CONNECTION
WITH THIS AGREEMENT OR THE FUNDING OR MAINTENANCE OF ADVANCES HEREUNDER, THEN
WITHIN TEN (10) DAYS AFTER DEMAND BY SUCH AFFECTED PARTY, THE BORROWER SHALL PAY
TO SUCH AFFECTED PARTY SUCH ADDITIONAL AMOUNT OR AMOUNTS AS MAY BE NECESSARY TO
REIMBURSE SUCH AFFECTED PARTY FOR ANY SUCH AMOUNTS PAID BY IT.
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(C) IN DETERMINING ANY AMOUNT PROVIDED FOR IN THIS SECTION, THE
AFFECTED PARTY MAY USE ANY REASONABLE AVERAGING AND ATTRIBUTION METHODS. ANY
AFFECTED PARTY MAKING A CLAIM UNDER THIS SECTION SHALL SUBMIT TO THE BORROWER A
CERTIFICATE AS TO SUCH ADDITIONAL OR INCREASED COST OR REDUCTION, WHICH
CERTIFICATE SHALL CALCULATE IN REASONABLE DETAIL ANY SUCH CHARGES AND SHALL BE
CONCLUSIVE ABSENT DEMONSTRABLE ERROR.
SECTION 2.13 TAXES.
(A) ALL PAYMENTS MADE BY THE BORROWER IN RESPECT OF ANY ADVANCE AND
ALL PAYMENTS MADE BY THE BORROWER UNDER THIS AGREEMENT WILL BE MADE FREE AND
CLEAR OF AND WITHOUT DEDUCTION OR WITHHOLDING FOR OR ON ACCOUNT OF ANY TAXES,
UNLESS SUCH WITHHOLDING OR DEDUCTION IS REQUIRED BY LAW. IN SUCH EVENT, THE
BORROWER SHALL PAY TO THE APPROPRIATE TAXING AUTHORITY ANY SUCH TAXES REQUIRED
TO BE DEDUCTED OR WITHHELD AND THE AMOUNT PAYABLE TO EACH LENDER OR THE
ADMINISTRATIVE AGENT (AS THE CASE MAY BE) WILL BE INCREASED (SUCH INCREASE, THE
“ADDITIONAL AMOUNT”) SUCH THAT EVERY NET PAYMENT MADE UNDER THIS AGREEMENT AFTER
DEDUCTION OR WITHHOLDING FOR OR ON ACCOUNT OF ANY TAXES (INCLUDING, WITHOUT
LIMITATION, ANY TAXES ON SUCH INCREASE) IS NOT LESS THAN THE AMOUNT THAT WOULD
HAVE BEEN PAID HAD NO SUCH DEDUCTION OR WITHHOLDING BEEN DEDUCTED OR WITHHELD.
THE FOREGOING OBLIGATION TO PAY ADDITIONAL AMOUNTS, HOWEVER, WILL NOT APPLY WITH
RESPECT TO, AND THE TERM “ADDITIONAL AMOUNT” SHALL BE DEEMED NOT TO INCLUDE NET
INCOME OR FRANCHISE TAXES IMPOSED ON A LENDER, ANY MANAGING AGENT OR THE
ADMINISTRATIVE AGENT, RESPECTIVELY, WITH RESPECT TO PAYMENTS REQUIRED TO BE MADE
BY THE BORROWER OR SERVICER ON BEHALF OF THE BORROWER UNDER THIS AGREEMENT, BY A
TAXING JURISDICTION IN WHICH SUCH LENDER, SUCH MANAGING AGENT OR THE
ADMINISTRATIVE AGENT IS ORGANIZED, CONDUCTS BUSINESS OR IS PAYING TAXES AS OF
THE CLOSING DATE (AS THE CASE MAY BE). IF A LENDER, ANY MANAGING AGENT OR THE
ADMINISTRATIVE AGENT PAYS ANY TAXES IN RESPECT OF WHICH THE BORROWER IS
OBLIGATED TO PAY ADDITIONAL AMOUNTS UNDER THIS SECTION 2.13(A), THE BORROWER
SHALL PROMPTLY REIMBURSE SUCH LENDER OR ADMINISTRATIVE AGENT IN FULL.
(B) THE BORROWER WILL INDEMNIFY EACH LENDER, EACH MANAGING AGENT AND
THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES IN RESPECT OF WHICH THE
BORROWER IS REQUIRED TO PAY ADDITIONAL AMOUNTS (INCLUDING, WITHOUT LIMITATION,
ANY TAXES IMPOSED BY ANY JURISDICTION ON SUCH ADDITIONAL AMOUNTS) PAID BY SUCH
LENDER, MANAGING AGENT OR THE ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY
LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO; PROVIDED, HOWEVER, THAT SUCH LENDER, MANAGING AGENT OR THE
ADMINISTRATIVE AGENT, AS APPROPRIATE, MAKING A DEMAND FOR INDEMNITY PAYMENT,
SHALL PROVIDE THE BORROWER, AT ITS ADDRESS SET FORTH UNDER ITS NAME ON THE
SIGNATURE PAGES HEREOF, WITH A CERTIFICATE FROM THE RELEVANT TAXING AUTHORITY OR
FROM A RESPONSIBLE OFFICER OF SUCH LENDER, MANAGING AGENT OR THE ADMINISTRATIVE
AGENT STATING OR OTHERWISE EVIDENCING THAT SUCH LENDER, MANAGING AGENT OR THE
ADMINISTRATIVE AGENT HAS MADE PAYMENT OF SUCH TAXES AND WILL PROVIDE A COPY OF
OR EXTRACT FROM DOCUMENTATION, IF AVAILABLE, FURNISHED BY SUCH TAXING AUTHORITY
EVIDENCING ASSERTION OR PAYMENT OF SUCH TAXES. THIS INDEMNIFICATION SHALL BE
MADE WITHIN TEN (10) DAYS FROM THE DATE SUCH LENDER, MANAGING AGENT OR THE
ADMINISTRATIVE AGENT (AS THE CASE MAY BE) MAKES WRITTEN DEMAND THEREFOR.
(C) WITHIN THIRTY (30) DAYS AFTER THE DATE OF ANY PAYMENT BY THE
BORROWER OF ANY TAXES, THE BORROWER WILL FURNISH TO THE ADMINISTRATIVE AGENT,
THE MANAGING AGENT OR THE
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LENDER, AS APPLICABLE, AT ITS ADDRESS SET FORTH UNDER ITS NAME ON THE SIGNATURE
PAGES HEREOF, APPROPRIATE EVIDENCE OF PAYMENT THEREOF.
(D) IF A LENDER IS NOT CREATED OR ORGANIZED UNDER THE LAWS OF THE
UNITED STATES OR A POLITICAL SUBDIVISION THEREOF, SUCH LENDER SHALL, TO THE
EXTENT THAT IT MAY THEN DO SO UNDER APPLICABLE LAWS, DELIVER TO THE BORROWER
WITH A COPY TO THE ADMINISTRATIVE AGENT (I) WITHIN FIFTEEN (15) DAYS AFTER THE
DATE HEREOF, OR, IF LATER, THE DATE ON WHICH SUCH LENDER BECOMES A LENDER HEREOF
TWO (OR SUCH OTHER NUMBER AS MAY FROM TIME TO TIME BE PRESCRIBED BY APPLICABLE
LAWS) DULY COMPLETED COPIES OF IRS FORM W-8EC1 OR FORM W-8BEN FOR ANY SUCCESSOR
FORMS OR OTHER CERTIFICATES OR STATEMENTS THAT MAY BE REQUIRED FROM TIME TO TIME
BY THE RELEVANT UNITED STATES TAXING AUTHORITIES OR APPLICABLE LAWS), AS
APPROPRIATE, TO PERMIT THE BORROWER TO MAKE PAYMENTS HEREUNDER FOR THE ACCOUNT
OF SUCH LENDER, AS THE CASE MAY BE, WITHOUT DEDUCTION OR WITHHOLDING OF UNITED
STATES FEDERAL INCOME OR SIMILAR TAXES AND (II) UPON THE OBSOLESCENCE OF OR
AFTER THE OCCURRENCE OF ANY EVENT REQUIRING A CHANGE IN, ANY FORM OR CERTIFICATE
PREVIOUSLY DELIVERED PURSUANT TO THIS SECTION 2.13(D), TWO COPIES (OR SUCH OTHER
NUMBER AS MAY FROM TIME TO TIME BE PRESCRIBED BY APPLICABLE LAWS) OF SUCH
ADDITIONAL, AMENDED OR SUCCESSOR FORMS, CERTIFICATES OR STATEMENTS AS MAY BE
REQUIRED UNDER APPLICABLE LAWS TO PERMIT THE BORROWER TO MAKE PAYMENTS HEREUNDER
FOR THE ACCOUNT OF SUCH LENDER, WITHOUT DEDUCTION OR WITHHOLDING OF UNITED
STATES FEDERAL INCOME OR SIMILAR TAXES.
(E) FOR ANY PERIOD WITH RESPECT TO WHICH A LENDER HAS FAILED TO
PROVIDE THE BORROWER WITH THE APPROPRIATE FORM, CERTIFICATE OR STATEMENT
DESCRIBED IN CLAUSE (D) OF THIS SECTION (OTHER THAN IF SUCH FAILURE IS DUE TO A
CHANGE IN LAW OCCURRING AFTER THE DATE OF THIS AGREEMENT), SUCH LENDER, AS THE
CASE MAY BE, SHALL NOT BE ENTITLED TO INDEMNIFICATION UNDER CLAUSES (A) OR (B)
OF THIS SECTION WITH RESPECT TO ANY TAXES.
(F) WITHIN THIRTY (30) DAYS OF THE WRITTEN REQUEST OF THE BORROWER
THEREFOR, THE ADMINISTRATIVE AGENT, THE MANAGING AGENT OR THE LENDER, AS
APPROPRIATE, SHALL EXECUTE AND DELIVER TO THE BORROWER SUCH CERTIFICATES, FORMS
OR OTHER DOCUMENTS THAT CAN BE FURNISHED CONSISTENT WITH THE FACTS AND THAT ARE
REASONABLY NECESSARY TO ASSIST THE BORROWER IN APPLYING FOR REFUNDS OF TAXES
REMITTED HEREUNDER; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT, THE
MANAGING AGENT AND THE LENDER SHALL NOT BE REQUIRED TO DELIVER SUCH CERTIFICATES
FORMS OR OTHER DOCUMENTS IF IN THEIR RESPECTIVE SOLE DISCRETION IT IS DETERMINED
THAT THE DELIVERY OF SUCH CERTIFICATE, FORM OR OTHER DOCUMENT WOULD HAVE A
MATERIAL ADVERSE EFFECT ON THE ADMINISTRATIVE AGENT, THE MANAGING AGENT OR THE
LENDER AND PROVIDED FURTHER, HOWEVER, THAT THE BORROWER SHALL REIMBURSE THE
ADMINISTRATIVE AGENT, THE MANAGING AGENT OR THE LENDER FOR ANY REASONABLE
EXPENSES INCURRED IN THE DELIVERY OF SUCH CERTIFICATE, FORM OR OTHER DOCUMENT.
(G) IF, IN CONNECTION WITH AN AGREEMENT OR OTHER DOCUMENT PROVIDING
LIQUIDITY SUPPORT, CREDIT ENHANCEMENT OR OTHER SIMILAR SUPPORT TO THE LENDERS IN
CONNECTION WITH THIS AGREEMENT OR THE FUNDING OR MAINTENANCE OF ADVANCES
HEREUNDER, THE LENDERS ARE REQUIRED TO COMPENSATE A BANK OR OTHER FINANCIAL
INSTITUTION IN RESPECT OF TAXES UNDER CIRCUMSTANCES SIMILAR TO THOSE DESCRIBED
IN THIS SECTION THEN WITHIN TEN (10) DAYS AFTER DEMAND BY THE LENDERS, THE
BORROWER SHALL PAY TO THE LENDERS SUCH ADDITIONAL AMOUNT OR AMOUNTS AS MAY BE
NECESSARY TO REIMBURSE THE LENDERS FOR ANY AMOUNTS PAID BY THEM.
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SECTION 2.14 REVOLVER LOAN FUNDING.
(A) UPON THE OCCURRENCE OF A REVOLVER LOAN FUNDING DATE EACH CP LENDER
MAY, IN ITS SOLE DISCRETION MAKE, AND IF IT DOES NOT, THE RELATED COMMITTED
LENDERS SHALL MAKE AN ADVANCE (EACH, A “REVOLVER LOAN FUNDING”) IN AN AMOUNT
EQUAL TO SUCH COMMITTED LENDER’S RATABLE SHARE OF THE AGGREGATE OUTSTANDING
UNFUNDED COMMITMENTS UNDER THE REVOLVER LOANS (COLLECTIVELY, THE “REVOLVER LOAN
FUNDING AMOUNT”). UPON RECEIPT OF THE PROCEEDS OF SUCH REVOLVER LOAN FUNDING,
THE ADMINISTRATIVE AGENT SHALL DEPOSIT SUCH FUNDS INTO SEGREGATED ACCOUNTS
(EACH, A “REVOLVER LOAN FUNDING ACCOUNT”), IN ITS NAME, REFERENCING THE NAME OF
THE APPLICABLE LENDER, AND MAINTAINED AT A QUALIFIED INSTITUTION. EACH LENDER
HEREBY GRANTS TO THE ADMINISTRATIVE AGENT FULL POWER AND AUTHORITY, ON ITS
BEHALF, TO WITHDRAW FUNDS FROM THE APPLICABLE REVOLVER LOAN FUNDING ACCOUNT AT
THE TIME OF, AND IN CONNECTION WITH, THE FUNDING OF ANY POST-TERMINATION
REVOLVER LOAN FUNDINGS TO BE MADE BY THE BORROWER, AND TO DEPOSIT TO THE RELATED
REVOLVER LOAN FUNDING ACCOUNT ANY FUNDS RECEIVED IN RESPECT OF EACH RELEVANT
LENDER’S RATABLE SHARE OF PRINCIPAL PAYMENTS UNDER SECTION 2.8 HEREOF, ALL IN
ACCORDANCE WITH THE TERMS OF AND FOR THE PURPOSES SET FORTH IN THIS AGREEMENT.
THE DEPOSIT OF MONIES IN SUCH REVOLVER LOAN FUNDING ACCOUNT BY ANY LENDER SHALL
NOT CONSTITUTE AN ADVANCE (AND SUCH LENDER SHALL NOT BE ENTITLED TO INTEREST ON
SUCH MONIES EXCEPT AS PROVIDED IN CLAUSE (D) BELOW) UNLESS AND UNTIL (AND THEN
ONLY TO THE EXTENT THAT) SUCH MONIES ARE USED TO MAKE POST-TERMINATION REVOLVER
LOAN FUNDINGS PURSUANT TO THE FIRST SENTENCE OF CLAUSE (B) BELOW).
(B) FROM AND AFTER THE ESTABLISHMENT OF A REVOLVER LOAN FUNDING
ACCOUNT WITH RESPECT TO ANY LENDER, AND UNTIL THE EARLIER OF (I) THE REDUCTION
TO ZERO OF ALL OUTSTANDING COMMITMENTS IN RESPECT OF REVOLVER LOANS AND (II)
FIVE YEARS FOLLOWING THE REVOLVER LOAN FUNDING DATE, ALL POST-TERMINATION
REVOLVER LOAN FUNDINGS TO BE MADE BY SUCH LENDER HEREUNDER SHALL BE MADE BY
WITHDRAWING FUNDS FROM THE APPLICABLE REVOLVER LOAN FUNDING ACCOUNT. ON EACH
BUSINESS DAY DURING SUCH TIME, THE ADMINISTRATIVE AGENT SHALL, (I) IF A REVOLVER
LOAN FUNDING ACCOUNT SHORTFALL EXISTS, DEPOSIT THE LESSER OF (A) THE AMOUNT
ALLOCABLE TO THE REPAYMENT OF PRINCIPAL TO THE LENDERS AND (B) THE REVOLVER LOAN
FUNDING ACCOUNT SHORTFALL AND (II) IF A REVOLVER LOAN FUNDING ACCOUNT SURPLUS
EXISTS, PAY TO THE APPLICABLE MANAGING AGENT, ON BEHALF OF EACH LENDER, SUCH
LENDER’S RATABLE SHARE OF THE REVOLVER LOAN FUNDING ACCOUNT SURPLUS. UNTIL THE
EARLIER OF (I) THE REDUCTION TO ZERO OF ALL OUTSTANDING COMMITMENTS IN RESPECT
OF REVOLVER LOANS AND (II) FIVE YEARS FOLLOWING THE REVOLVER LOAN FUNDING DATE,
ALL REMAINING FUNDS THEN HELD IN SUCH REVOLVER LOAN FUNDING ACCOUNT (AFTER
GIVING EFFECT TO ANY POST-TERMINATION REVOLVER LOAN FUNDINGS TO BE MADE ON SUCH
DATE) SHALL BE PAID BY THE ADMINISTRATIVE AGENT TO THE APPLICABLE MANAGING
AGENT, ON BEHALF OF SUCH LENDER, AND THEREAFTER ALL PAYMENTS MADE IN RESPECT OF
THE LOANS (WHETHER OR NOT ORIGINALLY FUNDED FROM SUCH LENDER’S REVOLVER LOAN
FUNDING ACCOUNT) SHALL BE PAID DIRECTLY TO THE APPLICABLE MANAGING AGENT, ON
BEHALF OF SUCH LENDER, IN ACCORDANCE WITH THE TERMS OF SECTION 2.8.
(C) THE ADMINISTRATIVE AGENT MAY, ITS SOLE DISCRETION, ADVANCE FUNDS
WITHDRAWN FROM THE REVOLVER LOAN FUNDING ACCOUNTS TO (I) THE BORROWER OR (II)
THE APPLICABLE OBLIGOR DIRECTLY, ON BEHALF OF THE BORROWER, AND IN EITHER CASE,
SUCH FUNDS SHALL BE USED SOLELY FOR THE PURPOSE OF FUNDING ADVANCES REQUESTED BY
AN OBLIGOR UNDER A REVOLVER LOAN.
(D) PROCEEDS IN A REVOLVER LOAN FUNDING ACCOUNT SHALL BE INVESTED, AT
THE WRITTEN DIRECTION OF THE APPLICABLE LENDER (OR THE APPLICABLE MANAGING AGENT
ON ITS BEHALF) TO THE
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APPLICABLE REVOLVER LOAN FUNDING ACCOUNT BANK, ONLY IN INVESTMENTS WHICH
CONSTITUTE PERMITTED INVESTMENTS. THE INVESTMENT EARNINGS WITH RESPECT TO A
REVOLVER LOAN FUNDING ACCOUNT SHALL ACCRUE AS THE LENDER AND REVOLVER LOAN
FUNDING ACCOUNT BANK SHALL AGREE. THE ADMINISTRATIVE AGENT SHALL DIRECT THE
REVOLVER LOAN FUNDING ACCOUNT BANK TO PAY ALL SUCH INVESTMENT EARNINGS FROM THE
RELEVANT ACCOUNT DIRECTLY TO THE APPLICABLE MANAGING AGENT, FOR THE ACCOUNT OF
THE APPLICABLE LENDER.
(E) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NONE OF THE
ADMINISTRATIVE AGENT, THE OTHER MANAGING AGENTS, THE OTHER PURCHASERS NOR THE
REVOLVER LOAN FUNDING ACCOUNT BANK SHALL HAVE ANY LIABILITY FOR ANY LOSS ARISING
FROM ANY INVESTMENT OR REINVESTMENT MADE BY IT WITH RESPECT TO A REVOLVER LOAN
FUNDING ACCOUNT IN ACCORDANCE WITH, AND PURSUANT TO, THE PROVISIONS HEREOF.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND ADVANCES
SECTION 3.1 CONDITIONS TO EFFECTIVENESS AND
ADVANCES.
No Lender shall be obligated to make any Advance hereunder from and after the
Closing Date, nor shall any Lender, the Administrative Agent or the Managing
Agents be obligated to take, fulfill or perform any other action hereunder,
until the following conditions have been satisfied, in the sole discretion of,
or waived in writing by, the Managing Agents:
(A) THIS AGREEMENT AND ALL OTHER TRANSACTION DOCUMENTS AND EACH
LIQUIDITY AGREEMENT OR COUNTERPARTS HEREOF OR THEREOF SHALL HAVE BEEN DULY
EXECUTED BY, AND DELIVERED TO, THE PARTIES HERETO AND THERETO AND THE
ADMINISTRATIVE AGENT SHALL HAVE RECEIVED SUCH OTHER DOCUMENTS, INSTRUMENTS,
AGREEMENTS AND LEGAL OPINIONS AS ANY MANAGING AGENT SHALL REASONABLY REQUEST IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON OR PRIOR TO
THE CLOSING DATE, EACH IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE
AGENT;
(B) THE BORROWER SHALL HAVE PAID ALL FEES REQUIRED TO BE PAID BY IT ON
THE CLOSING DATE, INCLUDING ALL FEES REQUIRED HEREUNDER AND UNDER THE FEE LETTER
TO BE PAID AS OF SUCH DATE, AND SHALL HAVE REIMBURSED EACH LENDER AND THE
ADMINISTRATIVE AGENT FOR ALL FEES, COSTS AND EXPENSES RELATED TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND UNDER THE OTHER TRANSACTION DOCUMENTS
AND EACH LIQUIDITY AGREEMENT, INCLUDING THE LEGAL AND OTHER DOCUMENT PREPARATION
COSTS INCURRED BY ANY LENDER AND/OR THE ADMINISTRATIVE AGENT;
(C) EACH CP LENDER WHOSE COMMERCIAL PAPER IS BEING RATED BY ONE OR
MORE RATING AGENCY SHALL HAVE RECEIVED, TO THE EXTENT REQUIRED UNDER THE TERMS
OF SUCH CP LENDER’S PROGRAM DOCUMENTS, THE WRITTEN CONFIRMATION OF EACH SUCH
RATING AGENCY THAT THE EXECUTION AND DELIVERY OF THIS AGREEMENT WILL NOT RESULT
IN A WITHDRAWAL OR DOWNGRADING OF THE THEN-CURRENT RATING OF SUCH COMMERCIAL
PAPER BY SUCH RATING AGENCY; AND
(D) THE REQUIRED EQUITY INVESTMENT SHALL BE MAINTAINED.
The Administrative Agent shall promptly notify each Lender of the satisfaction
or waiver of the conditions set forth above.
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SECTION 3.2 ADDITIONAL CONDITIONS PRECEDENT TO
ALL ADVANCES.
Each Advance shall be subject to the further conditions precedent that:
(A) ON THE RELATED FUNDING DATE, THE BORROWER OR THE SERVICER, AS THE
CASE MAY BE, SHALL HAVE CERTIFIED IN THE RELATED BORROWER NOTICE THAT:
(I) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 4.1 AND
7.8 ARE TRUE AND CORRECT ON AND AS OF SUCH DATE, BEFORE AND AFTER GIVING EFFECT
TO SUCH BORROWING AND TO THE APPLICATION OF THE PROCEEDS THEREFROM, AS THOUGH
MADE ON AND AS OF SUCH DATE; AND
(II) NO EVENT HAS OCCURRED, OR WOULD RESULT FROM SUCH ADVANCE OR FROM
THE APPLICATION OF THE PROCEEDS THEREFROM, THAT CONSTITUTES AN EARLY TERMINATION
EVENT OR AN UNMATURED EARLY TERMINATION EVENT.
(B) THE TERMINATION DATE SHALL NOT HAVE OCCURRED;
(C) BEFORE AND AFTER GIVING EFFECT TO SUCH BORROWING AND TO THE
APPLICATION OF PROCEEDS THEREFROM THE BORROWING BASE TEST SHALL BE SATISFIED, AS
CALCULATED ON SUCH DATE;
(D) NO CLAIM HAS BEEN ASSERTED OR PROCEEDING COMMENCED CHALLENGING
ENFORCEABILITY OR VALIDITY OF ANY OF THE LOAN DOCUMENTS, EXCLUDING ANY
INSTRUMENTS, CERTIFICATES OR OTHER DOCUMENTS RELATING TO LOANS THAT WERE THE
SUBJECT OF PRIOR ADVANCES;
(E) THERE SHALL HAVE BEEN NO MATERIAL ADVERSE CHANGE WITH RESPECT TO
THE BORROWER OR THE SERVICER SINCE THE PRECEDING ADVANCE;
(F) BEFORE AND AFTER GIVING EFFECT TO SUCH BORROWING AND TO THE
APPLICATION OF PROCEEDS THEREFROM THE COLLATERAL QUALITY TEST SHALL BE
SATISFIED, AS CALCULATED ON SUCH DATE; AND
(G) THE SERVICER AND BORROWER SHALL HAVE TAKEN SUCH OTHER ACTION,
INCLUDING DELIVERY OF APPROVALS, CONSENTS, OPINIONS, DOCUMENTS, AND INSTRUMENTS
TO THE MANAGING AGENTS AS EACH MAY REASONABLY REQUEST.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF
THE BORROWER.
The Borrower represents and warrants as follows:
(A) ORGANIZATION AND GOOD STANDING. THE BORROWER IS A DELAWARE
LIMITED LIABILITY COMPANY DULY ORGANIZED, VALIDLY EXISTING, AND IN GOOD STANDING
UNDER THE LAWS OF THE JURISDICTION OF ITS FORMATION, AND HAS FULL POWER,
AUTHORITY AND LEGAL RIGHT TO OWN OR LEASE ITS PROPERTIES AND CONDUCT ITS
BUSINESS AS SUCH BUSINESS IS PRESENTLY CONDUCTED.
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(B) DUE QUALIFICATION. THE BORROWER IS QUALIFIED TO DO BUSINESS AS A
LIMITED LIABILITY COMPANY, IS IN GOOD STANDING, AND HAS OBTAINED ALL LICENSES
AND APPROVALS AS REQUIRED UNDER THE LAWS OF ALL JURISDICTIONS IN WHICH THE
OWNERSHIP OR LEASE OF ITS PROPERTY AND OR THE CONDUCT OF ITS BUSINESS (OTHER
THAN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER) REQUIRES SUCH QUALIFICATION,
STANDING, LICENSE OR APPROVAL, EXCEPT TO THE EXTENT THAT THE FAILURE TO SO
QUALIFY, MAINTAIN SUCH STANDING OR BE SO LICENSED OR APPROVED WOULD NOT HAVE AN
ADVERSE EFFECT ON THE INTERESTS OF THE LENDERS. THE BORROWER IS QUALIFIED TO DO
BUSINESS AS A LIMITED LIABILITY COMPANY, IS IN GOOD STANDING, AND HAS OBTAINED
ALL LICENSES AND APPROVALS AS REQUIRED UNDER THE LAWS OF ALL STATES IN WHICH THE
PERFORMANCE OF ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT REQUIRES SUCH
QUALIFICATION, STANDING, LICENSE OR APPROVAL AND WHERE THE FAILURE TO QUALIFY OR
OBTAIN SUCH LICENSE OR APPROVAL WOULD HAVE MATERIAL ADVERSE EFFECT ON ITS
ABILITY TO PERFORM HEREUNDER.
(C) DUE AUTHORIZATION. THE EXECUTION AND DELIVERY OF THIS AGREEMENT
AND EACH TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY AND THE
CONSUMMATION OF THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN HAVE BEEN DULY
AUTHORIZED BY THE BORROWER BY ALL NECESSARY ACTION ON THE PART OF THE BORROWER.
(D) NO CONFLICT. THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND
EACH TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY, THE PERFORMANCE BY
THE BORROWER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THE
FULFILLMENT OF THE TERMS HEREOF AND THEREOF WILL NOT CONFLICT WITH OR RESULT IN
ANY BREACH OF ANY OF THE TERMS AND PROVISIONS OF, AND WILL NOT CONSTITUTE (WITH
OR WITHOUT NOTICE OR LAPSE OF TIME OR BOTH) A DEFAULT UNDER, THE BORROWER’S
LIMITED LIABILITY COMPANY AGREEMENT OR ANY MATERIAL CONTRACTUAL OBLIGATION OF
THE BORROWER.
(E) NO VIOLATION. THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND
EACH TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY, THE PERFORMANCE OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THE FULFILLMENT OF THE
TERMS HEREOF AND THEREOF WILL NOT CONFLICT WITH OR VIOLATE, IN ANY MATERIAL
RESPECT, ANY APPLICABLE LAW.
(F) NO PROCEEDINGS. THERE ARE NO PROCEEDINGS OR INVESTIGATIONS
PENDING OR, TO THE BEST KNOWLEDGE OF THE BORROWER, THREATENED AGAINST THE
BORROWER, BEFORE ANY GOVERNMENTAL AUTHORITY (I) ASSERTING THE INVALIDITY OF THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY, (II)
SEEKING TO PREVENT THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY OR
(III) SEEKING ANY DETERMINATION OR RULING THAT COULD REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT.
(G) ALL CONSENTS REQUIRED. ALL MATERIAL APPROVALS, AUTHORIZATIONS,
CONSENTS, ORDERS OR OTHER ACTIONS OF ANY PERSON OR OF ANY GOVERNMENTAL AUTHORITY
(IF ANY) REQUIRED IN CONNECTION WITH THE DUE EXECUTION, DELIVERY AND PERFORMANCE
BY THE BORROWER OF THIS AGREEMENT AND ANY TRANSACTION DOCUMENT TO WHICH THE
BORROWER IS A PARTY, HAVE BEEN OBTAINED.
(H) REPORTS ACCURATE. ALL MONTHLY REPORTS (IF PREPARED BY THE
BORROWER, OR TO THE EXTENT THAT INFORMATION CONTAINED THEREIN IS SUPPLIED BY THE
BORROWER), INFORMATION, EXHIBIT, FINANCIAL STATEMENT, DOCUMENT, BOOK, RECORD OR
REPORT FURNISHED OR TO BE FURNISHED BY THE BORROWER TO THE ADMINISTRATIVE AGENT
OR A LENDER IN CONNECTION WITH THIS AGREEMENT ARE TRUE, COMPLETE AND ACCURATE IN
ALL MATERIAL RESPECTS.
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(I) SOLVENCY. THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT AND
EACH TRANSACTION DOCUMENT TO WHICH THE BORROWER IS A PARTY DO NOT AND WILL NOT
RENDER THE BORROWER NOT SOLVENT.
(J) SELECTION PROCEDURES. NO PROCEDURES BELIEVED BY THE BORROWER TO
BE MATERIALLY ADVERSE TO THE INTERESTS OF THE SECURED PARTIES WERE UTILIZED BY
THE BORROWER IN IDENTIFYING AND/OR SELECTING THE LOANS THAT ARE PART OF THE
COLLATERAL.
(K) TAXES. THE BORROWER HAS FILED OR CAUSED TO BE FILED ALL TAX
RETURNS REQUIRED TO BE FILED BY IT. THE BORROWER HAS PAID ALL TAXES AND ALL
ASSESSMENTS MADE AGAINST IT OR ANY OF ITS PROPERTY (OTHER THAN ANY AMOUNT OF TAX
THE VALIDITY OF WHICH IS CURRENTLY BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS AND WITH RESPECT TO WHICH RESERVES IN ACCORDANCE WITH GAAP HAVE BEEN
PROVIDED ON THE BOOKS OF THE BORROWER), AND NO TAX LIEN HAS BEEN FILED AND, TO
THE BORROWER’S KNOWLEDGE, NO CLAIM IS BEING ASSERTED, WITH RESPECT TO ANY SUCH
TAX, FEE OR OTHER CHARGE.
(L) AGREEMENTS ENFORCEABLE. THIS AGREEMENT AND EACH TRANSACTION
DOCUMENT TO WHICH THE BORROWER IS A PARTY CONSTITUTE THE LEGAL, VALID AND
BINDING OBLIGATION OF THE BORROWER ENFORCEABLE AGAINST THE BORROWER IN
ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE
LIMITED BY INSOLVENCY LAWS AND EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY
GENERAL PRINCIPLES OF EQUITY (WHETHER CONSIDERED IN A SUIT AT LAW OR IN EQUITY).
(M) NO LIENS. THE COLLATERAL IS OWNED BY THE BORROWER FREE AND CLEAR
OF ANY LIENS EXCEPT FOR PERMITTED LIENS AS PROVIDED HEREIN, AND THE
ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES, HAS A VALID AND
PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE COLLATERAL THEN EXISTING OR
THEREAFTER ARISING, FREE AND CLEAR OF ANY LIENS EXCEPT FOR PERMITTED LIENS. NO
EFFECTIVE FINANCING STATEMENT OR OTHER INSTRUMENT SIMILAR IN EFFECT COVERING ANY
COLLATERAL IS ON FILE IN ANY RECORDING OFFICE EXCEPT SUCH AS MAY BE FILED IN
FAVOR OF THE ADMINISTRATIVE AGENT RELATING TO THIS AGREEMENT OR REFLECTING THE
TRANSFER OF THE COLLATERAL FROM THE ORIGINATOR TO THE BORROWER.
(N) SECURITY INTEREST. THE BORROWER HAS GRANTED A SECURITY INTEREST
(AS DEFINED IN THE UCC) TO THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED
PARTIES, IN THE COLLATERAL, WHICH IS ENFORCEABLE IN ACCORDANCE WITH APPLICABLE
LAW. ALL FILINGS (INCLUDING, WITHOUT LIMITATION, SUCH UCC FILINGS) AS ARE
NECESSARY IN ANY JURISDICTION TO PERFECT THE INTEREST OF THE ADMINISTRATIVE
AGENT AS AGENT FOR THE SECURED PARTIES, IN THE COLLATERAL HAVE BEEN MADE.
(O) LOCATION OF OFFICES. THE BORROWER’S JURISDICTION OF ORGANIZATION,
PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE AND THE OFFICE WHERE THE
BORROWER KEEPS ALL THE RECORDS IS LOCATED AT THE ADDRESS OF THE BORROWER
REFERRED TO IN SECTION 12.2 HEREOF (OR AT SUCH OTHER LOCATIONS AS TO WHICH THE
NOTICE AND OTHER REQUIREMENTS SPECIFIED IN SECTION 5.1(M) SHALL HAVE BEEN
SATISFIED).
(P) TRADENAMES. THE BORROWER HAS NO TRADE NAMES, FICTITIOUS NAMES,
ASSUMED NAMES OR “DOING BUSINESS AS” NAMES OR OTHER NAMES UNDER WHICH IT HAS
DONE OR IS DOING BUSINESS.
(Q) PURCHASE AGREEMENT. THE PURCHASE AGREEMENT IS THE ONLY AGREEMENT
PURSUANT TO WHICH THE BORROWER ACQUIRES COLLATERAL (OTHER THAN THE HEDGE
COLLATERAL).
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(R) VALUE GIVEN. THE BORROWER GAVE REASONABLY EQUIVALENT VALUE TO
THE ORIGINATOR IN CONSIDERATION FOR THE TRANSFER TO THE BORROWER OF THE
TRANSFERRED LOANS UNDER THE PURCHASE AGREEMENT, NO SUCH TRANSFER WAS MADE FOR OR
ON ACCOUNT OF AN ANTECEDENT DEBT OWED BY THE ORIGINATOR TO THE BORROWER, AND NO
SUCH TRANSFER IS VOIDABLE OR SUBJECT TO AVOIDANCE UNDER ANY INSOLVENCY LAW.
(S) ACCOUNTING. THE BORROWER ACCOUNTS FOR THE TRANSFERS TO IT FROM
THE ORIGINATOR OF INTERESTS IN THE LOANS UNDER THE PURCHASE AGREEMENT AS SALES
OF SUCH LOANS IN ITS BOOKS, RECORDS AND FINANCIAL STATEMENTS, IN EACH CASE
CONSISTENT WITH GAAP.
(T) SEPARATE ENTITY. THE BORROWER IS OPERATED AS AN ENTITY WITH
ASSETS AND LIABILITIES DISTINCT FROM THOSE OF THE ORIGINATOR AND ANY AFFILIATES
THEREOF (OTHER THAN THE BORROWER), AND THE BORROWER HEREBY ACKNOWLEDGES THAT THE
ADMINISTRATIVE AGENT AND THE LENDERS ARE ENTERING INTO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT IN RELIANCE UPON THE BORROWER’S IDENTITY AS A
SEPARATE LEGAL ENTITY FROM THE ORIGINATOR AND FROM EACH SUCH OTHER AFFILIATE OF
THE ORIGINATOR.
(U) INVESTMENTS. EXCEPT FOR SUPPLEMENTAL INTERESTS OR SUPPLEMENTAL
INTERESTS THAT CONVERT INTO AN EQUITY INTEREST IN ANY PERSON, THE BORROWER DOES
NOT OWN OR HOLD DIRECTLY OR INDIRECTLY, ANY CAPITAL STOCK OR EQUITY SECURITY OF,
OR ANY EQUITY INTEREST IN, ANY PERSON.
(V) BUSINESS. SINCE ITS FORMATION, THE BORROWER HAS CONDUCTED NO
BUSINESS OTHER THAN THE PURCHASE AND RECEIPT OF LOANS AND RELATED PROPERTY FROM
THE ORIGINATOR UNDER THE PURCHASE AGREEMENT, THE BORROWING OF FUNDS UNDER THIS
AGREEMENT AND SUCH OTHER ACTIVITIES AS ARE INCIDENTAL TO THE FOREGOING.
(W) ERISA. THE BORROWER IS IN COMPLIANCE WITH ERISA AND HAS NOT
INCURRED AND DOES NOT EXPECT TO INCUR ANY LIABILITIES (EXCEPT FOR PREMIUM
PAYMENTS ARISING IN THE ORDINARY COURSE OF BUSINESS) PAYABLE TO THE PENSION
BENEFIT GUARANTY CORPORATION UNDER ERISA.
(X) INVESTMENT COMPANY ACT.
(I) THE BORROWER REPRESENTS AND WARRANTS THAT THE BORROWER IS EXEMPT
AND WILL REMAIN EXEMPT FROM REGISTRATION AS AN “INVESTMENT COMPANY” WITHIN THE
MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “1940 ACT”).
(II) THE BUSINESS AND OTHER ACTIVITIES OF THE BORROWER, INCLUDING BUT
NOT LIMITED TO, THE MAKING OF THE ADVANCES BY THE LENDERS, THE APPLICATION OF
THE PROCEEDS AND REPAYMENT THEREOF BY THE BORROWER AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS TO WHICH THE BORROWER IS
A PARTY DO NOT NOW AND WILL NOT AT ANY TIME RESULT IN ANY VIOLATIONS, WITH
RESPECT TO THE BORROWER, OF THE PROVISIONS OF THE 1940 ACT OR ANY RULES,
REGULATIONS OR ORDERS ISSUED BY THE SEC THEREUNDER.
(Y) GOVERNMENT REGULATIONS. THE BORROWER IS NOT ENGAGED IN THE
BUSINESS OF EXTENDING CREDIT FOR THE PURPOSE OF “PURCHASING” OR “CARRYING” ANY
“MARGIN SECURITY,” AS SUCH TERMS ARE DEFINED IN REGULATION U OF THE FEDERAL
RESERVE BOARD AS NOW AND FROM TIME TO TIME HEREAFTER IN EFFECT (SUCH SECURITIES
BEING REFERRED TO HEREIN AS “MARGIN STOCK”). THE BORROWER OWNS NO MARGIN STOCK,
AND NO PORTION OF THE PROCEEDS OF ANY ADVANCE HEREUNDER WILL BE USED,
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directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any portion of such proceeds to be considered a
“purpose credit” within the meaning of Regulation T, U or X of the Federal
Reserve Board. The Borrower will not take or permit to be taken any action that
might cause any Related Document to violate any regulation of the Federal
Reserve Board.
(Z) ELIGIBILITY OF LOANS. AS OF THE CLOSING DATE, (I) THE LOAN LIST
AND THE INFORMATION CONTAINED IN THE BORROWER NOTICE DELIVERED PURSUANT TO
SECTIONS 2.1 AND 2.2 IS AN ACCURATE AND COMPLETE LISTING IN ALL MATERIAL
RESPECTS OF ALL THE LOANS THAT ARE PART OF THE COLLATERAL AS OF THE CLOSING
DATE, AND THE INFORMATION CONTAINED THEREIN WITH RESPECT TO THE IDENTITY OF SUCH
LOANS AND THE AMOUNTS OWING THEREUNDER IS TRUE AND CORRECT IN ALL MATERIAL
RESPECTS AS OF SUCH DATE AND (II) EACH SUCH LOAN IS AN ELIGIBLE LOAN. ON EACH
FUNDING DATE, THE BORROWER SHALL BE DEEMED TO REPRESENT AND WARRANT THAT ANY
ADDITIONAL LOAN REFERENCED ON THE RELATED BORROWER NOTICE DELIVERED PURSUANT TO
SECTIONS 2.1 AND 2.2 IS AN ELIGIBLE LOAN.
SECTION 4.2 JOINT REPRESENTATIONS AND
WARRANTIES REGARDING ORDINARY COURSE OF BUSINESS.
(A) EACH OF THE BORROWER AND THE ADMINISTRATIVE AGENT REPRESENTS AND
WARRANTS AS TO ITSELF THAT EACH REMITTANCE OF COLLECTIONS BY THE BORROWER TO THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THIS AGREEMENT WILL HAVE BEEN (I)
IN PAYMENT OF A DEBT INCURRED BY THE BORROWER IN THE ORDINARY COURSE OF BUSINESS
OR FINANCIAL AFFAIRS OF THE BORROWER AND THE ADMINISTRATIVE AGENT AND (II) MADE
IN THE ORDINARY COURSE OF BUSINESS OR FINANCIAL AFFAIRS OF THE BORROWER AND THE
ADMINISTRATIVE AGENT.
(B) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTIONS 4.2
AND SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
ARTICLE V
GENERAL COVENANTS OF THE BORROWER
SECTION 5.1 COVENANTS OF THE BORROWER.
The Borrower hereby covenants that:
(a) Compliance with Laws. The Borrower will comply in all material
respects with all Applicable Laws, including those with respect to the Loans in
the Collateral and any Related Property.
(b) Preservation of Corporate Existence. The Borrower will preserve
and maintain its existence, rights, franchises and privileges in the
jurisdiction of its formation, and qualify and remain qualified in good standing
in each jurisdiction where the failure to maintain such existence, rights,
franchises, privileges and qualification has had, or could reasonably be
expected to have, a Material Adverse Effect.
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(c) Security Interests. Except as contemplated in this Agreement, the
Borrower will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Loan or Related
Property that is part of the Collateral, whether now existing or hereafter
transferred hereunder, or any interest therein. The Borrower will promptly
notify the Administrative Agent of the existence of any Lien on any Loan or
Related Property that is part of the Collateral and the Borrower shall defend
the right, title and interest of the Administrative Agent as agent for the
Secured Parties in, to and under any Loan and the Related Property that is part
of the Collateral, against all claims of third parties; provided, however, that
nothing in this Section 5.1(c) shall prevent or be deemed to prohibit the
Borrower from suffering to exist Permitted Liens upon any Loan or any Related
Property that is part of the Collateral.
(D) DELIVERY OF COLLECTIONS. THE BORROWER AGREES TO CAUSE THE
DELIVERY TO THE SERVICER PROMPTLY (BUT IN NO EVENT LATER THAN TWO (2) BUSINESS
DAYS AFTER RECEIPT) ALL COLLECTIONS (INCLUDING ANY DEEMED COLLECTIONS) RECEIVED
BY BORROWER IN RESPECT OF THE LOANS THAT ARE PART OF THE COLLATERAL.
(E) ACTIVITIES OF BORROWER. THE BORROWER SHALL NOT ENGAGE IN ANY
BUSINESS OR ACTIVITY OF ANY KIND, OR ENTER INTO ANY TRANSACTION OR INDENTURE,
MORTGAGE, INSTRUMENT, AGREEMENT, CONTRACT, LOAN OR OTHER UNDERTAKING, WHICH IS
NOT INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED AND AUTHORIZED BY THIS AGREEMENT
OR THE PURCHASE AGREEMENT.
(F) INDEBTEDNESS. THE BORROWER SHALL NOT CREATE, INCUR, ASSUME OR
SUFFER TO EXIST ANY INDEBTEDNESS OR OTHER LIABILITY WHATSOEVER, EXCEPT (I)
OBLIGATIONS INCURRED UNDER THIS AGREEMENT, UNDER ANY HEDGING AGREEMENT REQUIRED
BY SECTION 5.2(A), OR THE PURCHASE AGREEMENT, OR (II) LIABILITIES INCIDENT TO
THE MAINTENANCE OF ITS EXISTENCE IN GOOD STANDING.
(G) GUARANTEES. THE BORROWER SHALL NOT BECOME OR REMAIN LIABLE,
DIRECTLY OR INDIRECTLY, IN CONNECTION WITH ANY INDEBTEDNESS OR OTHER LIABILITY
OF ANY OTHER PERSON, WHETHER BY GUARANTEE, ENDORSEMENT (OTHER THAN ENDORSEMENTS
OF NEGOTIABLE INSTRUMENTS FOR DEPOSIT OR COLLECTION IN THE ORDINARY COURSE OF
BUSINESS), AGREEMENT TO PURCHASE OR REPURCHASE, AGREEMENT TO SUPPLY OR ADVANCE
FUNDS, OR OTHERWISE.
(H) INVESTMENTS. THE BORROWER SHALL NOT MAKE OR SUFFER TO EXIST ANY
LOANS OR ADVANCES TO, OR EXTEND ANY CREDIT TO, OR MAKE ANY INVESTMENTS (BY WAY
OF TRANSFER OF PROPERTY, CONTRIBUTIONS TO CAPITAL, PURCHASE OF STOCK OR
SECURITIES OR EVIDENCES OF INDEBTEDNESS, ACQUISITION OF THE BUSINESS OR ASSETS,
OR OTHERWISE) IN, ANY PERSON EXCEPT FOR PURCHASES OF LOANS AND SUPPLEMENTAL
INTERESTS PURSUANT TO THE PURCHASE AGREEMENT, OR FOR INVESTMENTS IN PERMITTED
INVESTMENTS IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
(I) MERGER; SALES. THE BORROWER SHALL NOT ENTER INTO ANY TRANSACTION
OF MERGER OR CONSOLIDATION, OR LIQUIDATE OR DISSOLVE ITSELF (OR SUFFER ANY
LIQUIDATION OR DISSOLUTION), OR ACQUIRE OR BE ACQUIRED BY ANY PERSON, OR CONVEY,
SELL, LOAN OR OTHERWISE DISPOSE OF ALL OR SUBSTANTIALLY ALL OF ITS PROPERTY OR
BUSINESS, EXCEPT AS PROVIDED FOR IN THIS AGREEMENT.
(J) DISTRIBUTIONS. THE BORROWER MAY NOT DECLARE OR PAY OR MAKE,
DIRECTLY OR INDIRECTLY, ANY DISTRIBUTION (WHETHER IN CASH OR OTHER PROPERTY)
WITH RESPECT TO ANY PERSON’S EQUITY INTEREST IN THE BORROWER (COLLECTIVELY, A
“DISTRIBUTION”); PROVIDED, HOWEVER, IF NO EARLY
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Termination Event has occurred or will occur as a result thereof, the Borrower
may make Distributions.
(K) AGREEMENTS. THE BORROWER SHALL NOT AMEND OR MODIFY (I) THE
PROVISIONS OF ITS LIMITED LIABILITY COMPANY AGREEMENT OR (II) THE PURCHASE
AGREEMENT WITHOUT THE CONSENT OF THE ADMINISTRATIVE AGENT AND PRIOR WRITTEN
NOTICE TO EACH MANAGING AGENT, OR ISSUE ANY POWER OF ATTORNEY EXCEPT TO THE
ADMINISTRATIVE AGENT OR THE SERVICER.
(L) SEPARATE EXISTENCE. THE BORROWER SHALL:
(I) MAINTAIN ITS OWN DEPOSIT ACCOUNT OR ACCOUNTS, SEPARATE FROM THOSE
OF ANY AFFILIATE, WITH COMMERCIAL BANKING INSTITUTIONS. THE FUNDS OF THE
BORROWER WILL NOT BE DIVERTED TO ANY OTHER PERSON OR FOR OTHER THAN CORPORATE
USES OF THE BORROWER.
(II) ENSURE THAT, TO THE EXTENT THAT IT SHARES THE SAME PERSONS AS
OFFICERS OR OTHER EMPLOYEES AS ANY OF ITS AFFILIATES, THE SALARIES OF AND THE
EXPENSES RELATED TO PROVIDING BENEFITS TO SUCH OFFICERS OR EMPLOYEES SHALL BE
FAIRLY ALLOCATED AMONG SUCH ENTITIES, AND EACH SUCH ENTITY SHALL BEAR ITS FAIR
SHARE OF THE SALARY AND BENEFIT COSTS ASSOCIATED WITH ALL SUCH COMMON OFFICERS
AND EMPLOYEES.
(III) ENSURE THAT, TO THE EXTENT THAT IT JOINTLY CONTRACTS WITH ANY OF
ITS AFFILIATES TO DO BUSINESS WITH VENDORS OR SERVICE PROVIDERS OR TO SHARE
OVERHEAD EXPENSES, THE COSTS INCURRED IN SO DOING SHALL BE ALLOCATED FAIRLY
AMONG SUCH ENTITIES, AND EACH SUCH ENTITY SHALL BEAR ITS FAIR SHARE OF SUCH
COSTS. TO THE EXTENT THAT THE BORROWER CONTRACTS OR DOES BUSINESS WITH VENDORS
OR SERVICE PROVIDERS WHEN THE GOODS AND SERVICES PROVIDED ARE PARTIALLY FOR THE
BENEFIT OF ANY OTHER PERSON, THE COSTS INCURRED IN SO DOING SHALL BE FAIRLY
ALLOCATED TO OR AMONG SUCH ENTITIES FOR WHOSE BENEFIT THE GOODS AND SERVICES ARE
PROVIDED, AND EACH SUCH ENTITY SHALL BEAR ITS FAIR SHARE OF SUCH COSTS. ALL
MATERIAL TRANSACTIONS BETWEEN BORROWER AND ANY OF ITS AFFILIATES SHALL BE ONLY
ON AN ARM’S LENGTH BASIS.
(IV) MAINTAIN A PRINCIPAL EXECUTIVE AND ADMINISTRATIVE OFFICE THROUGH
WHICH ITS BUSINESS IS CONDUCTED SEPARATE FROM THOSE OF ITS AFFILIATES. TO THE
EXTENT THAT BORROWER AND ANY OF ITS AFFILIATES HAVE OFFICES IN THE SAME
LOCATION, THERE SHALL BE A FAIR AND APPROPRIATE ALLOCATION OF OVERHEAD COSTS
AMONG THEM, AND EACH SUCH ENTITY SHALL BEAR ITS FAIR SHARE OF SUCH EXPENSES.
(V) CONDUCT ITS AFFAIRS STRICTLY IN ACCORDANCE WITH ITS LIMITED
LIABILITY COMPANY AGREEMENT AND OBSERVE ALL NECESSARY, APPROPRIATE AND CUSTOMARY
LEGAL FORMALITIES, INCLUDING, BUT NOT LIMITED TO, HOLDING ALL REGULAR AND
SPECIAL DIRECTOR’S MEETINGS APPROPRIATE TO AUTHORIZE ALL ACTION, KEEPING
SEPARATE AND ACCURATE RECORDS OF SUCH MEETINGS, PASSING ALL RESOLUTIONS OR
CONSENTS NECESSARY TO AUTHORIZE ACTIONS TAKEN OR TO BE TAKEN, AND MAINTAINING
ACCURATE AND SEPARATE BOOKS, RECORDS AND ACCOUNTS, INCLUDING, BUT NOT LIMITED
TO, PAYROLL AND TRANSACTION ACCOUNTS.
(VI) TAKE OR REFRAIN FROM TAKING, AS APPLICABLE, EACH OF THE ACTIVITIES
SPECIFIED OR ASSUMED IN THE WILLIAMS MULLEN OPINION, UPON WHICH THE CONCLUSIONS
EXPRESSED THEREIN ARE BASED.
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(VII) MAINTAIN THE EFFECTIVENESS OF, AND CONTINUE TO PERFORM UNDER THE
PURCHASE AGREEMENT AND THE PERFORMANCE GUARANTY, SUCH THAT IT DOES NOT AMEND,
RESTATE, SUPPLEMENT, CANCEL, TERMINATE OR OTHERWISE MODIFY THE PURCHASE
AGREEMENT OR THE PERFORMANCE GUARANTY, OR GIVE ANY CONSENT, WAIVER, DIRECTIVE OR
APPROVAL THEREUNDER OR WAIVE ANY DEFAULT, ACTION, OMISSION OR BREACH UNDER THE
PURCHASE AGREEMENT OR THE PERFORMANCE GUARANTY OR OTHERWISE GRANT ANY INDULGENCE
THEREUNDER, WITHOUT (IN EACH CASE) THE PRIOR WRITTEN CONSENT OF THE
ADMINISTRATIVE AGENT AND EACH MANAGING AGENT.
(M) CHANGE OF NAME OR JURISDICTION OF BORROWER; RECORDS. THE BORROWER
(X) SHALL NOT CHANGE ITS NAME OR JURISDICTION OF ORGANIZATION, WITHOUT THIRTY
(30) DAYS’ PRIOR WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT AND (Y) SHALL NOT
MOVE, OR CONSENT TO THE SERVICER OR COLLATERAL CUSTODIAN MOVING, THE LOAN
DOCUMENTS WITHOUT THIRTY (30) DAYS’ PRIOR WRITTEN NOTICE TO THE ADMINISTRATIVE
AGENT AND (Z) WILL PROMPTLY TAKE ALL ACTIONS REQUIRED OF EACH RELEVANT
JURISDICTION IN ORDER TO CONTINUE THE FIRST PRIORITY PERFECTED SECURITY INTEREST
OF THE ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES (EXCEPT FOR
PERMITTED LIENS) IN ALL COLLATERAL, AND SUCH OTHER ACTIONS AS THE ADMINISTRATIVE
AGENT MAY REASONABLY REQUEST, INCLUDING BUT NOT LIMITED TO DELIVERY OF AN
OPINION OF COUNSEL.
(N) ERISA MATTERS. THE BORROWER WILL NOT (A) ENGAGE OR PERMIT ANY
ERISA AFFILIATE TO ENGAGE IN ANY PROHIBITED TRANSACTION FOR WHICH AN EXEMPTION
IS NOT AVAILABLE OR HAS NOT PREVIOUSLY BEEN OBTAINED FROM THE UNITED STATES
DEPARTMENT OF LABOR; (B) PERMIT TO EXIST ANY ACCUMULATED FUNDING DEFICIENCY, AS
DEFINED IN SECTION 302(A) OF ERISA AND SECTION 412(A) OF THE CODE, OR FUNDING
DEFICIENCY WITH RESPECT TO ANY BENEFIT PLAN OTHER THAN A MULTIEMPLOYER PLAN; (C)
FAIL TO MAKE ANY PAYMENTS TO A MULTIEMPLOYER PLAN THAT THE BORROWER OR ANY ERISA
AFFILIATE MAY BE REQUIRED TO MAKE UNDER THE AGREEMENT RELATING TO SUCH
MULTIEMPLOYER PLAN OR ANY LAW PERTAINING THERETO; (D) TERMINATE ANY BENEFIT PLAN
SO AS TO RESULT IN ANY LIABILITY; OR (E) PERMIT TO EXIST ANY OCCURRENCE OF ANY
REPORTABLE EVENT DESCRIBED IN TITLE IV OF ERISA.
(O) ORIGINATOR COLLATERAL. WITH RESPECT TO EACH ITEM OF COLLATERAL
ACQUIRED BY THE BORROWER, THE BORROWER WILL (I) ACQUIRE SUCH COLLATERAL PURSUANT
TO AND IN ACCORDANCE WITH THE TERMS OF THE PURCHASE AGREEMENT, (II) TAKE ALL
ACTION NECESSARY TO PERFECT, PROTECT AND MORE FULLY EVIDENCE THE BORROWER’S
OWNERSHIP OF SUCH COLLATERAL, INCLUDING, WITHOUT LIMITATION, (A) FILING AND
MAINTAINING, EFFECTIVE FINANCING STATEMENTS (FORM UCC-1) NAMING THE ORIGINATOR
AS SELLER/DEBTOR AND THE BORROWER AS PURCHASER/CREDITOR IN ALL NECESSARY OR
APPROPRIATE FILING OFFICES, AND FILING CONTINUATION STATEMENTS, AMENDMENTS OR
ASSIGNMENTS WITH RESPECT THERETO IN SUCH FILING OFFICES AND (B) EXECUTING OR
CAUSING TO BE EXECUTED SUCH OTHER INSTRUMENTS OR NOTICES AS MAY BE NECESSARY OR
APPROPRIATE, INCLUDING, WITHOUT LIMITATION, ASSIGNMENTS OF MORTGAGE, AND (III)
TAKE ALL ADDITIONAL ACTION THAT THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST
TO PERFECT, PROTECT AND MORE FULLY EVIDENCE THE RESPECTIVE INTERESTS OF THE
PARTIES TO THIS AGREEMENT IN THE COLLATERAL.
(P) TRANSACTIONS WITH AFFILIATES. THE BORROWER WILL NOT ENTER INTO,
OR BE A PARTY TO, ANY TRANSACTION WITH ANY OF ITS AFFILIATES, EXCEPT (I) THE
TRANSACTIONS PERMITTED OR CONTEMPLATED BY THIS AGREEMENT, THE PURCHASE AGREEMENT
AND ANY HEDGING AGREEMENTS AND (II) OTHER TRANSACTIONS (INCLUDING, WITHOUT
LIMITATION, TRANSACTIONS RELATED TO THE USE OF OFFICE SPACE OR COMPUTER
EQUIPMENT OR SOFTWARE BY THE BORROWER TO OR FROM AN AFFILIATE) (A) IN THE
ORDINARY COURSE OF BUSINESS, (B) PURSUANT TO THE REASONABLE REQUIREMENTS OF THE
BORROWER’S BUSINESS, (C)
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upon fair and reasonable terms that are no less favorable to the Borrower than
could be obtained in a comparable arm’s-length transaction with a Person not an
Affiliate of the Borrower, and (D) not inconsistent with the factual assumptions
set forth in the Williams Mullen Opinion, as such assumptions may be modified in
any subsequent opinion letters delivered to the Administrative Agent pursuant to
Section 3.2 or otherwise. It is understood that any compensation arrangement
for any officer or employee shall be permitted under clause (ii)(A) through (C)
above if such arrangement has been expressly approved by the managers of the
Borrower in accordance with the Borrower’s limited liability company agreement.
(Q) CHANGE IN THE TRANSACTION DOCUMENTS. THE BORROWER WILL NOT AMEND,
MODIFY, WAIVE OR TERMINATE ANY TERMS OR CONDITIONS OF ANY OF THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY, WITHOUT THE PRIOR WRITTEN CONSENT OF
ADMINISTRATIVE AGENT.
(R) CREDIT AND COLLECTION POLICY. THE BORROWER WILL (A) COMPLY IN
ALL MATERIAL RESPECTS WITH THE CREDIT AND COLLECTION POLICY IN REGARD TO EACH
LOAN AND THE RELATED PROPERTY INCLUDED IN THE COLLATERAL, AND (B) FURNISH TO THE
ADMINISTRATIVE AGENT AND EACH MANAGING AGENT, AT LEAST TWENTY (20) DAYS PRIOR TO
ITS PROPOSED EFFECTIVE DATE, PROMPT NOTICE OF ANY MATERIAL CHANGES IN THE CREDIT
AND COLLECTION POLICY. THE BORROWER WILL NOT AGREE OR OTHERWISE PERMIT TO OCCUR
ANY MATERIAL CHANGE IN THE CREDIT AND COLLECTION POLICY, WHICH CHANGE WOULD
IMPAIR THE COLLECTIBILITY OF ANY LOAN OR OTHERWISE ADVERSELY AFFECT THE
INTERESTS OR REMEDIES OF THE ADMINISTRATIVE AGENT OR THE SECURED PARTIES UNDER
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE ADMINISTRATIVE AGENT (IN ITS SOLE DISCRETION).
(S) EXTENSION OR AMENDMENT OF LOANS. THE BORROWER WILL NOT, EXCEPT AS
OTHERWISE PERMITTED IN SECTION 7.4(A) EXTEND, AMEND OR OTHERWISE MODIFY, OR
PERMIT THE SERVICER ON ITS BEHALF TO EXTEND, AMEND OR OTHERWISE MODIFY, THE
TERMS OF ANY LOAN.
(T) REPORTING. THE BORROWER WILL FURNISH TO THE ADMINISTRATIVE AGENT
AND EACH MANAGING AGENT:
(I) AS SOON AS POSSIBLE AND IN ANY EVENT WITHIN TWO (2) BUSINESS DAYS
AFTER THE OCCURRENCE OF EACH EARLY TERMINATION EVENT AND EACH UNMATURED
TERMINATION EVENT, A WRITTEN STATEMENT, SIGNED BY A RESPONSIBLE OFFICER, SETTING
FORTH THE DETAILS OF SUCH EVENT AND THE ACTION THAT THE BORROWER PROPOSES TO
TAKE WITH RESPECT THERETO;
(II) PROMPTLY UPON REQUEST, SUCH OTHER INFORMATION, DOCUMENTS, RECORDS
OR REPORTS RESPECTING THE TRANSFERRED LOANS OR THE CONDITION OR OPERATIONS,
FINANCIAL OR OTHERWISE, OF THE BORROWER OR ORIGINATOR AS THE ADMINISTRATIVE
AGENT MAY FROM TIME TO TIME REASONABLY REQUEST IN ORDER TO PROTECT THE INTERESTS
OF THE ADMINISTRATIVE AGENT OR THE SECURED PARTIES UNDER OR AS CONTEMPLATED BY
THIS AGREEMENT; AND
(III) PROMPTLY, BUT IN NO EVENT LATER THAN TWO (2) BUSINESS DAYS AFTER
ITS RECEIPT THEREOF, COPIES OF ANY AND ALL NOTICES, CERTIFICATES, DOCUMENTS, OR
REPORTS DELIVERED TO IT BY THE ORIGINATOR UNDER THE PURCHASE AGREEMENT.
(U) SUBORDINATION EVENTS. THE BORROWER WILL NOT ENGAGE OR PERMIT ANY
AFFILIATE TO ENGAGE IN ANY ACTIVITIES RELATING TO ANY OBLIGOR AND/OR WITH
RESPECT TO ANY LOAN THAT WOULD SUBJECT A LOAN TO THE RISK OF (I) EQUITABLE
SUBORDINATION UNDER SECTION 510(C) OF THE BANKRUPTCY
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Code, or (ii) recharacterization as an equity security under Section 105(a) of
the Bankruptcy Code or otherwise, as a result of the conduct of the Borrower,
the Servicer, the Originator or any of their respective Affiliates (items (i),
and (ii) above, each a “Subordination Event”).
(V) COMPLIANCE WITH LOAN DOCUMENTS. THE BORROWER WILL ACT IN STRICT
CONFORMITY WITH ALL MATERIAL TERMS AND CONDITIONS OF THE LOAN DOCUMENTS,
INCLUDING THE PROMPT ENFORCEMENT OF ITS RIGHTS THEREUNDER.
SECTION 5.2 HEDGING AGREEMENT.
(A) IF AT ANY TIME THE AGGREGATE OUTSTANDING LOAN BALANCES OF LOANS
BEARING FIXED RATES OF INTEREST (“FIXED RATE LOANS”) EXCEEDS 10% OF THE
AGGREGATE OUTSTANDING LOAN BALANCE, THE BORROWER MAY, AND SHALL AT THE REQUEST
OF THE MANAGING AGENTS, WITH RESPECT ONLY TO SUCH OUTSTANDING LOAN BALANCE OF
FIXED RATE LOANS AGGREGATING IN EXCESS OF 10% OF THE AGGREGATE OUTSTANDING LOAN
BALANCE, ENTER INTO AND MAINTAIN A HEDGE TRANSACTION WITH A HEDGE COUNTERPARTY
WHICH HEDGE TRANSACTION SHALL: (I) BE IN THE FORM OF INTEREST RATE CAPS OR SWAPS
HAVING A NOTIONAL AMOUNT AND AMORTIZATION SCHEDULE AS SHALL BE DETERMINED BY THE
MANAGING AGENTS UPON CONSULTATION WITH THE BORROWER AND (II) SHALL PROVIDE FOR
PAYMENTS TO THE BORROWER TO THE EXTENT THAT THE LIBO RATE SHALL EXCEED A RATE
AGREED UPON BETWEEN THE MANAGING AGENTS AND THE BORROWER.
(B) AS ADDITIONAL SECURITY HEREUNDER, THE BORROWER HEREBY ASSIGNS TO
THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES, ALL RIGHT, TITLE AND
INTEREST OF THE BORROWER IN ANY AND ALL HEDGING AGREEMENTS, ANY AND ALL HEDGE
TRANSACTIONS, AND ANY AND ALL PRESENT AND FUTURE AMOUNTS PAYABLE BY A HEDGE
COUNTERPARTY TO THE BORROWER UNDER OR IN CONNECTION WITH ITS RESPECTIVE HEDGING
AGREEMENT AND HEDGE TRANSACTION(S) (COLLECTIVELY, THE “HEDGE COLLATERAL”), AND
GRANTS A SECURITY INTEREST TO THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED
PARTIES, IN THE HEDGE COLLATERAL. THE BORROWER ACKNOWLEDGES THAT, AS A RESULT
OF THAT ASSIGNMENT, THE BORROWER MAY NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE ADMINISTRATIVE AGENT, EXERCISE ANY RIGHTS UNDER ANY HEDGING AGREEMENT OR
HEDGE TRANSACTION, EXCEPT FOR THE BORROWER’S RIGHT UNDER ANY HEDGING AGREEMENT
TO ENTER INTO HEDGE TRANSACTIONS IN ORDER TO MEET THE BORROWER’S OBLIGATIONS
UNDER SECTION 5.2(A) HEREOF. NOTHING HEREIN SHALL HAVE THE EFFECT OF RELEASING
THE BORROWER FROM ANY OF ITS OBLIGATIONS UNDER ANY HEDGING AGREEMENT OR ANY
HEDGE TRANSACTION, NOR BE CONSTRUED AS REQUIRING THE CONSENT OF THE
ADMINISTRATIVE AGENT OR ANY SECURED PARTY FOR THE PERFORMANCE BY THE BORROWER OF
ANY SUCH OBLIGATIONS.
ARTICLE VI
SECURITY INTEREST
SECTION 6.1 SECURITY INTEREST.
As collateral security for the prompt, complete and indefeasible payment and
performance in full when due, whether by lapse of time, acceleration or
otherwise, of the Obligations, the Borrower hereby assigns, pledges and grants
to the Administrative Agent, as agent for the Secured Parties, a lien on and
security interest in all of the Borrower’s right, title and interest in, to and
under (but none of its obligations under) the Collateral, whether now
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existing or owned or hereafter arising or acquired by the Borrower, and wherever
located. The assignment under this Section 6.1 does not constitute and is not
intended to result in a creation or an assumption by the Administrative Agent,
the Managing Agents or any of the Secured Parties of any obligation of the
Borrower or any other Person in connection with any or all of the Collateral or
under any agreement or instrument relating thereto. Anything herein to the
contrary notwithstanding, (a) the Borrower shall remain liable under the
Transferred Loans to the extent set forth therein to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Administrative Agent, as agent for the Secured
Parties, of any of its rights in the Collateral shall not release the Borrower
from any of its duties or obligations under the Collateral, and (c) none of the
Administrative Agent, the Managing Agents or any Secured Party shall have any
obligations or liability under the Collateral by reason of this Agreement, nor
shall the Administrative Agent, the Managing Agents or any Secured Party be
obligated to perform any of the obligations or duties of the Borrower thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 6.2 REMEDIES.
The Administrative Agent (for itself and on behalf of the other Secured Parties)
shall have all of the rights and remedies of a secured party under the UCC and
other Applicable Law. Upon the occurrence and during the continuance of an
Early Termination Event, the Administrative Agent or its designees may (i)
deliver a notice of exclusive control to the Collateral Custodian; (ii) instruct
the Collateral Custodian to deliver any or all of the Collateral to the
Administrative Agent or its designees and otherwise give all instructions and
entitlement orders to the Collateral Custodian regarding the Collateral; (iii)
require that the Borrower or the Collateral Custodian immediately take action to
liquidate the Collateral to pay amounts due and payable in respect of the
Obligations; (iv) sell or otherwise dispose of the Collateral in a commercially
reasonable manner, all without judicial process or proceedings; (v) take control
of the Proceeds of any such Collateral; (vi) exercise any consensual or voting
rights in respect of the Collateral; (vii) release, make extensions, discharges,
exchanges or substitutions for, or surrender all or any part of the Collateral;
(viii) enforce the Borrower’s rights and remedies under the Custody Agreement
with respect to the Collateral; (ix) institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;
(x) remove from the Borrower’s, the Servicer’s, the Collateral Custodian’s and
their respective agents’ place of business all books, records and documents
relating to the Collateral; and/or (xi) endorse the name of the Borrower upon
any items of payment relating to the Collateral or upon any proof of claim in
bankruptcy against an account debtor. For purposes of taking the actions
described in subsections (i) through (xi) of this Section 6.2 the Borrower
hereby irrevocably appoints the Administrative Agent as its attorney-in-fact
(which appointment being coupled with an interest is irrevocable while any of
the Obligations remain unpaid), with power of substitution, in the name of the
Administrative Agent or in the name of the Borrower or otherwise, for the use
and benefit of the Administrative Agent, but at the cost and expense of the
Borrower and without notice to the Borrower; provided that the Administrative
Agent hereby agrees to exercise such power only so long as an Early Termination
Event shall be continuing.
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SECTION 6.3 RELEASE OF LIENS.
(A) IF (I) THE BORROWING BASE TEST IS MET, AND (II) NO EARLY
TERMINATION EVENT OR UNMATURED TERMINATION EVENT HAS OCCURRED AND IS CONTINUING,
AT THE SAME TIME AS ANY LOAN THAT IS PART OF THE COLLATERAL EXPIRES BY ITS TERMS
AND ALL AMOUNTS IN RESPECT THEREOF HAVE BEEN PAID BY THE RELATED OBLIGOR AND
DEPOSITED IN THE COLLECTION ACCOUNT, THE ADMINISTRATIVE AGENT AS AGENT FOR THE
SECURED PARTIES WILL, TO THE EXTENT REQUESTED BY THE BORROWER OR THE SERVICER ON
BEHALF OF THE BORROWER, RELEASE ITS INTEREST IN SUCH LOAN AND ANY SUPPLEMENTAL
INTERESTS RELATED THERETO. IN CONNECTION WITH ANY SUCH RELEASE ON OR AFTER THE
OCCURRENCE OF THE ABOVE, THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED
PARTIES, WILL EXECUTE AND DELIVER TO THE BORROWER OR THE SERVICER ON BEHALF OF
THE BORROWER ANY TERMINATION STATEMENTS AND ANY OTHER RELEASES AND INSTRUMENTS
AS THE BORROWER OR THE SERVICER ON BEHALF OF THE BORROWER MAY REASONABLY REQUEST
IN ORDER TO EFFECT THE RELEASE OF SUCH LOAN AND SUPPLEMENTAL INTEREST; PROVIDED,
THAT, THE ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES WILL MAKE NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO ANY SUCH LOAN OR
SUPPLEMENTAL INTEREST IN CONNECTION WITH SUCH SALE OR TRANSFER AND ASSIGNMENT.
(B) UPON ANY REQUEST FOR A RELEASE OF CERTAIN LOANS IN CONNECTION WITH
A PROPOSED SECURITIZATION, IF, UPON APPLICATION OF THE PROCEEDS OF SUCH
TRANSACTION IN ACCORDANCE WITH SECTION 2.8 EITHER (X) ALL ADVANCES OUTSTANDING
HEREUNDER SHALL HAVE BEEN OR REDUCED TO ZERO OR (Y) (I) THE REQUIRED EQUITY
INVESTMENT SHALL BE MAINTAINED, (II) THE BORROWING BASE TEST SHALL BE MET, (III)
THE COLLATERAL QUALITY TEST SHALL BE MET AND (IV) NO EARLY TERMINATION EVENT OR
UNMATURED TERMINATION EVENT SHALL RESULT THEREFROM OR SHALL HAVE OCCURRED AND BE
CONTINUING, THE ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES WILL, TO
THE EXTENT REQUESTED BY THE BORROWER OR THE SERVICER ON BEHALF OF THE BORROWER,
RELEASE ITS INTEREST IN SUCH LOAN AND ANY SUPPLEMENTAL INTERESTS RELATED
THERETO. IN CONNECTION WITH ANY SUCH RELEASE ON OR AFTER THE OCCURRENCE OF THE
ABOVE, THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES, WILL EXECUTE
AND DELIVER TO THE BORROWER OR THE SERVICER ON BEHALF OF THE BORROWER ANY
TERMINATION STATEMENTS AND ANY OTHER RELEASES AND INSTRUMENTS AS THE BORROWER OR
THE SERVICER ON BEHALF OF THE BORROWER MAY REASONABLY REQUEST IN ORDER TO EFFECT
THE RELEASE OF SUCH LOAN AND SUPPLEMENTAL INTEREST; PROVIDED, THAT, THE
ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES WILL MAKE NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO ANY SUCH LOAN OR
SUPPLEMENTAL INTEREST IN CONNECTION WITH SUCH SALE OR TRANSFER AND ASSIGNMENT.
(C) UPON RECEIPT BY THE ADMINISTRATIVE AGENT OF THE PROCEEDS OF A
REPURCHASE OF AN INELIGIBLE LOAN (AS SUCH TERM IS DEFINED IN THE PURCHASE
AGREEMENT) BY THE ORIGINATOR PURSUANT TO THE TERMS OF SECTION 6.1 OF THE
PURCHASE AGREEMENT, THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES,
SHALL BE DEEMED TO HAVE AUTOMATICALLY RELEASED ITS INTEREST IN SUCH INELIGIBLE
LOAN AND ANY SUPPLEMENTAL INTERESTS RELATED THERETO WITHOUT ANY FURTHER ACTION
ON ITS PART. IN CONNECTION WITH ANY SUCH RELEASE ON OR AFTER THE OCCURRENCE OF
SUCH REPURCHASE, THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES,
WILL EXECUTE AND DELIVER TO THE BORROWER OR THE SERVICER ON BEHALF OF THE
BORROWER ANY RELEASES AND INSTRUMENTS AS THE BORROWER OR THE SERVICER ON BEHALF
OF THE BORROWER MAY REASONABLY REQUEST IN ORDER TO EFFECT THE RELEASE OF SUCH
INELIGIBLE LOAN AND SUPPLEMENTAL INTEREST.
(D) UPON RECEIPT BY THE ADMINISTRATIVE AGENT OF THE PROCEEDS OF A
PURCHASE OF A TRANSFERRED LOAN PURSUANT TO THE TERMS OF SECTION 7.7, THE
ADMINISTRATIVE AGENT, AS AGENT FOR THE
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Secured Parties, shall be deemed to have automatically released its interest in
such Transferred Loan and any Supplemental Interests related thereto without any
further action on its part. In connection with any such release on or after the
occurrence of such purchase, the Administrative Agent, as agent for the Secured
Parties, will execute and deliver to the Borrower or the Servicer on behalf of
the Borrower any releases and instruments as the Borrower or the Servicer on
behalf of the Borrower may reasonably request in order to effect the release of
such Transferred Loan and Supplemental Interest.
SECTION 6.4 ASSIGNMENT OF THE PURCHASE
AGREEMENT.
The Borrower hereby represents, warrants and confirms to the Administrative
Agent that the Borrower has assigned to the Administrative Agent, for the
ratable benefit of the Secured Parties hereunder, all of the Borrower’s right
and title to and interest in the Purchase Agreement. The Borrower confirms that
following an Early Termination Event the Administrative Agent shall have the
sole right to enforce the Borrower’s rights and remedies under the Purchase
Agreement for the benefit of the Secured Parties, but without any obligation on
the part of the Administrative Agent, the Secured Parties or any of their
respective Affiliates to perform any of the obligations of the Borrower under
the Purchase Agreement. The Borrower further confirms and agrees that such
assignment to the Administrative Agent shall terminate upon the Collection Date;
provided, however, that the rights of the Administrative Agent and the Secured
Parties pursuant to such assignment with respect to rights and remedies in
connection with any indemnities and any breach of any representation, warranty
or covenants made by the Originator pursuant to the Purchase Agreement, which
rights and remedies survive the Termination of the Purchase Agreement, shall be
continuing and shall survive any termination of such assignment.
ARTICLE VII
ADMINISTRATION AND SERVICING OF LOANS
SECTION 7.1 APPOINTMENT OF THE SERVICER.
The Borrower hereby appoints the Servicer to service the Transferred Loans and
enforce its respective rights and interests in and under each Transferred Loan
in accordance with the terms and conditions of this Article VII and to serve in
such capacity until the termination of its responsibilities pursuant to Section
7.18. The Servicer hereby agrees to perform the duties and obligations with
respect thereto set forth herein. The Servicer and the Borrower hereby
acknowledge that the Administrative Agent and the Secured Parties are third
party beneficiaries of the obligations undertaken by the Servicer hereunder.
SECTION 7.2 DUTIES AND RESPONSIBILITIES OF THE
SERVICER.
(A) THE SERVICER SHALL CONDUCT THE SERVICING, ADMINISTRATION AND
COLLECTION OF THE TRANSFERRED LOANS AND SHALL TAKE, OR CAUSE TO BE TAKEN, ALL
SUCH ACTIONS AS MAY BE NECESSARY OR ADVISABLE TO SERVICE, ADMINISTER AND COLLECT
TRANSFERRED LOANS FROM TIME TO TIME ON BEHALF OF THE BORROWER AND AS THE
BORROWER’S AGENT.
(B) THE DUTIES OF THE SERVICER, AS THE BORROWER’S AGENT, SHALL
INCLUDE, WITHOUT LIMITATION:
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(I) PREPARING AND SUBMITTING OF CLAIMS TO, AND POST-BILLING LIAISON
WITH, OBLIGORS ON TRANSFERRED LOANS;
(II) MAINTAINING ALL NECESSARY SERVICING RECORDS WITH RESPECT TO THE
TRANSFERRED LOANS AND PROVIDING SUCH REPORTS TO THE BORROWER, THE MANAGING
AGENTS AND THE ADMINISTRATIVE AGENT IN RESPECT OF THE SERVICING OF THE
TRANSFERRED LOANS (INCLUDING INFORMATION RELATING TO ITS PERFORMANCE UNDER THIS
AGREEMENT) AS MAY BE REQUIRED HEREUNDER OR AS THE BORROWER, ANY MANAGING AGENT
OR THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST;
(III) MAINTAINING AND IMPLEMENTING ADMINISTRATIVE AND OPERATING
PROCEDURES (INCLUDING, WITHOUT LIMITATION, AN ABILITY TO RECREATE SERVICING
RECORDS EVIDENCING THE TRANSFERRED LOANS IN THE EVENT OF THE DESTRUCTION OF THE
ORIGINALS THEREOF) AND KEEPING AND MAINTAINING ALL DOCUMENTS, BOOKS, RECORDS AND
OTHER INFORMATION REASONABLY NECESSARY OR ADVISABLE FOR THE COLLECTION OF THE
TRANSFERRED LOANS (INCLUDING, WITHOUT LIMITATION, RECORDS ADEQUATE TO PERMIT THE
IDENTIFICATION OF EACH NEW TRANSFERRED LOAN AND ALL COLLECTIONS OF AND
ADJUSTMENTS TO EACH EXISTING TRANSFERRED LOAN); PROVIDED, HOWEVER, THAT ANY
SUCCESSOR SERVICER SHALL ONLY BE REQUIRED TO RECREATE THE SERVICING RECORDS OF
EACH PRIOR SERVICER TO THE EXTENT SUCH RECORDS HAVE BEEN DELIVERED TO IT IN A
FORMAT REASONABLY ACCEPTABLE TO SUCH SUCCESSOR SERVICER;
(IV) PROMPTLY DELIVERING TO THE BORROWER, ANY MANAGING AGENT OR THE
ADMINISTRATIVE AGENT, FROM TIME TO TIME, SUCH INFORMATION AND SERVICING RECORDS
(INCLUDING INFORMATION RELATING TO ITS PERFORMANCE UNDER THIS AGREEMENT) AS THE
BORROWER, SUCH MANAGING AGENT OR THE ADMINISTRATIVE AGENT FROM TIME TO TIME
REASONABLY REQUEST;
(V) IDENTIFYING EACH TRANSFERRED LOAN CLEARLY AND UNAMBIGUOUSLY IN ITS
SERVICING RECORDS TO REFLECT THAT SUCH TRANSFERRED LOAN IS OWNED BY THE BORROWER
AND PLEDGED TO THE ADMINISTRATIVE AGENT;
(VI) COMPLYING IN ALL MATERIAL RESPECTS WITH THE CREDIT AND COLLECTION
POLICY IN REGARD TO EACH TRANSFERRED LOAN;
(VII) COMPLYING IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE LAWS WITH
RESPECT TO IT, ITS BUSINESS AND PROPERTIES AND ALL TRANSFERRED LOANS AND
COLLECTIONS WITH RESPECT THERETO;
(VIII) PRESERVING AND MAINTAINING ITS EXISTENCE, RIGHTS, LICENSES,
FRANCHISES AND PRIVILEGES AS A CORPORATION IN THE JURISDICTION OF ITS
ORGANIZATION, AND QUALIFYING AND REMAINING QUALIFIED IN GOOD STANDING AS A
FOREIGN CORPORATION AND QUALIFYING TO AND REMAINING AUTHORIZED AND LICENSED TO
PERFORM OBLIGATIONS AS SERVICER (INCLUDING ENFORCEMENT OF COLLECTION OF
TRANSFERRED LOANS ON BEHALF OF THE BORROWER, LENDERS, EACH HEDGE COUNTERPARTY
AND THE COLLATERAL CUSTODIAN) IN EACH JURISDICTION WHERE THE FAILURE TO PRESERVE
AND MAINTAIN SUCH EXISTENCE, RIGHTS, FRANCHISES, PRIVILEGES AND QUALIFICATION
WOULD MATERIALLY ADVERSELY AFFECT (A) THE RIGHTS OR INTERESTS OF THE BORROWER,
LENDERS, EACH HEDGE COUNTERPARTY AND THE COLLATERAL CUSTODIAN IN THE TRANSFERRED
LOANS, (B) THE
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COLLECTIBILITY OF ANY TRANSFERRED LOAN, OR (C) THE ABILITY OF THE SERVICER TO
PERFORM ITS OBLIGATIONS HEREUNDER; AND
(IX) NOTIFYING THE BORROWER, EACH MANAGING AGENT AND THE
ADMINISTRATIVE AGENT OF ANY MATERIAL ACTION, SUIT, PROCEEDING, DISPUTE, OFFSET
DEDUCTION, DEFENSE OR COUNTERCLAIM THAT IS OR IS THREATENED TO BE (A) ASSERTED
BY AN OBLIGOR WITH RESPECT TO ANY TRANSFERRED LOAN; OR (B) REASONABLY EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT; AND
(C) THE BORROWER AND SERVICER HEREBY ACKNOWLEDGE THAT THE SECURED
PARTIES, THE ADMINISTRATIVE AGENT AND THE COLLATERAL CUSTODIAN SHALL NOT HAVE
ANY OBLIGATION OR LIABILITY WITH RESPECT TO ANY TRANSFERRED LOANS, NOR SHALL ANY
OF THEM BE OBLIGATED TO PERFORM ANY OF THE OBLIGATIONS OF THE SERVICER
HEREUNDER.
SECTION 7.3 AUTHORIZATION OF THE SERVICER.
(A) EACH OF THE BORROWER, EACH MANAGING AGENT, ON BEHALF OF ITSELF AND
THE RELATED LENDERS, THE ADMINISTRATIVE AGENT AND EACH HEDGE COUNTERPARTY HEREBY
AUTHORIZES THE SERVICER (INCLUDING ANY SUCCESSOR THERETO) TO TAKE ANY AND ALL
REASONABLE STEPS IN ITS NAME AND ON ITS BEHALF NECESSARY OR DESIRABLE AND NOT
INCONSISTENT WITH THE PLEDGE OF THE TRANSFERRED LOANS TO THE LENDER, EACH HEDGE
COUNTERPARTY, AND THE COLLATERAL CUSTODIAN, IN THE DETERMINATION OF THE
SERVICER, TO COLLECT ALL AMOUNTS DUE UNDER ANY AND ALL TRANSFERRED LOANS,
INCLUDING, WITHOUT LIMITATION, ENDORSING ANY OF THEIR NAMES ON CHECKS AND OTHER
INSTRUMENTS REPRESENTING COLLECTIONS, EXECUTING AND DELIVERING ANY AND ALL
INSTRUMENTS OF SATISFACTION OR CANCELLATION, OR OF PARTIAL OR FULL RELEASE OR
DISCHARGE, AND ALL OTHER COMPARABLE INSTRUMENTS, WITH RESPECT TO THE TRANSFERRED
LOANS AND, AFTER THE DELINQUENCY OF ANY TRANSFERRED LOAN AND TO THE EXTENT
PERMITTED UNDER AND IN COMPLIANCE WITH APPLICABLE LAW, TO COMMENCE PROCEEDINGS
WITH RESPECT TO ENFORCING PAYMENT THEREOF, TO THE SAME EXTENT AS THE ORIGINATOR
COULD HAVE DONE IF IT HAD CONTINUED TO OWN SUCH LOAN. THE BORROWER SHALL
FURNISH THE SERVICER (AND ANY SUCCESSORS THERETO) WITH ANY POWERS OF ATTORNEY
AND OTHER DOCUMENTS NECESSARY OR APPROPRIATE TO ENABLE THE SERVICER TO CARRY OUT
ITS SERVICING AND ADMINISTRATIVE DUTIES HEREUNDER, AND SHALL COOPERATE WITH THE
SERVICER TO THE FULLEST EXTENT IN ORDER TO ENSURE THE COLLECTIBILITY OF THE
TRANSFERRED LOANS. IN NO EVENT SHALL THE SERVICER BE ENTITLED TO MAKE THE
BORROWER, ANY LENDER, ANY MANAGING AGENT, ANY HEDGE COUNTERPARTY, THE COLLATERAL
CUSTODIAN OR THE ADMINISTRATIVE AGENT A PARTY TO ANY LITIGATION WITHOUT SUCH
PARTY’S EXPRESS PRIOR WRITTEN CONSENT, OR TO MAKE THE BORROWER A PARTY TO ANY
LITIGATION (OTHER THAN ANY ROUTINE FORECLOSURE OR SIMILAR COLLECTION PROCEDURE)
WITHOUT THE ADMINISTRATIVE AGENT’S CONSENT.
(B) AFTER AN EARLY TERMINATION EVENT HAS OCCURRED AND IS CONTINUING,
AT THE ADMINISTRATIVE AGENT’S DIRECTION, THE SERVICER SHALL TAKE SUCH ACTION AS
THE ADMINISTRATIVE AGENT MAY DEEM NECESSARY OR ADVISABLE TO ENFORCE COLLECTION
OF THE TRANSFERRED LOANS; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT MAY,
AT ANY TIME THAT AN EARLY TERMINATION EVENT HAS OCCURRED AND IS CONTINUING,
NOTIFY ANY OBLIGOR WITH RESPECT TO ANY TRANSFERRED LOANS OF THE ASSIGNMENT OF
SUCH TRANSFERRED LOANS TO THE ADMINISTRATIVE AGENT AND DIRECT THAT PAYMENTS OF
ALL AMOUNTS DUE OR TO BECOME DUE TO THE BORROWER THEREUNDER BE MADE DIRECTLY TO
THE ADMINISTRATIVE AGENT OR ANY SERVICER, COLLECTION AGENT OR LOCK-BOX OR OTHER
ACCOUNT DESIGNATED BY THE ADMINISTRATIVE AGENT AND, UPON SUCH NOTIFICATION AND
AT THE EXPENSE OF THE BORROWER, THE ADMINISTRATIVE AGENT MAY ENFORCE COLLECTION
OF ANY SUCH TRANSFERRED LOANS AND ADJUST, SETTLE OR
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compromise the amount or payment thereof. The Administrative Agent shall give
written notice to any Successor Servicer of the Administrative Agent’s actions
or directions pursuant to this Section 7.3(b), and no Successor Servicer shall
take any actions pursuant to this Section 7.3(b) that are outside of its Credit
and Collection Policy.
SECTION 7.4 COLLECTION OF PAYMENTS.
(A) COLLECTION EFFORTS, MODIFICATION OF LOANS. THE SERVICER WILL MAKE
REASONABLE EFFORTS TO COLLECT ALL PAYMENTS CALLED FOR UNDER THE TERMS AND
PROVISIONS OF THE TRANSFERRED LOANS AS AND WHEN THE SAME BECOME DUE, AND WILL
FOLLOW THOSE COLLECTION PROCEDURES WHICH IT FOLLOWS WITH RESPECT TO ALL
COMPARABLE LOANS THAT IT SERVICES FOR ITSELF OR OTHERS. THE SERVICER MAY NOT
WAIVE, MODIFY OR OTHERWISE VARY ANY PROVISION OF A TRANSFERRED LOAN, EXCEPT AS
MAY BE IN ACCORDANCE WITH THE PROVISIONS OF THE CREDIT AND COLLECTION POLICY,
INCLUDING THE WAIVER OF ANY LATE PAYMENT CHARGE OR ANY OTHER FEES THAT MAY BE
COLLECTED IN THE ORDINARY COURSE OF SERVICING ANY LOAN INCLUDED IN THE
COLLATERAL.
(B) ACCELERATION. THE SERVICER SHALL ACCELERATE THE MATURITY OF ALL
OR ANY SCHEDULED PAYMENTS UNDER ANY TRANSFERRED LOAN UNDER WHICH A DEFAULT UNDER
THE TERMS THEREOF HAS OCCURRED AND IS CONTINUING (AFTER THE LAPSE OF ANY
APPLICABLE GRACE PERIOD) PROMPTLY AFTER SUCH LOAN BECOMES A DEFAULTED LOAN OR
SUCH EARLIER OR LATER TIME AS IS CONSISTENT WITH THE CREDIT AND COLLECTION
POLICY.
(C) TAXES AND OTHER AMOUNTS. TO THE EXTENT PROVIDED FOR IN ANY
TRANSFERRED LOAN, THE SERVICER WILL USE ITS BEST EFFORTS TO COLLECT ALL PAYMENTS
WITH RESPECT TO AMOUNTS DUE FOR TAXES, ASSESSMENTS AND INSURANCE PREMIUMS
RELATING TO SUCH TRANSFERRED LOANS OR THE RELATED PROPERTY AND REMIT SUCH
AMOUNTS TO THE APPROPRIATE GOVERNMENTAL AUTHORITY OR INSURER ON OR PRIOR TO THE
DATE SUCH PAYMENTS ARE DUE.
(D) PAYMENTS TO LOCK-BOX ACCOUNT: ON OR BEFORE THE CLOSING DATE, THE
SERVICER SHALL HAVE INSTRUCTED ALL OBLIGORS TO MAKE ALL PAYMENTS IN RESPECT OF
LOANS INCLUDED IN THE COLLATERAL TO A LOCK-BOX OR DIRECTLY TO A LOCK-BOX ACCOUNT
OR THE COLLECTION ACCOUNT.
(E) ESTABLISHMENT OF THE COLLECTION ACCOUNT. THE BORROWER OR THE
SERVICER ON ITS BEHALF SHALL CAUSE TO BE ESTABLISHED, ON OR BEFORE THE CLOSING
DATE, AND MAINTAINED IN THE NAME OF THE BORROWER AND ASSIGNED TO THE
ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES, WITH AN OFFICE OR BRANCH
OF A DEPOSITORY INSTITUTION OR TRUST COMPANY ORGANIZED UNDER THE LAWS OF THE
UNITED STATES OR ANY ONE OF THE STATES THEREOF OR THE DISTRICT OF COLUMBIA (OR
ANY DOMESTIC BRANCH OF A FOREIGN BANK) A SEGREGATED CORPORATE TRUST ACCOUNT (THE
“COLLECTION ACCOUNT”) FOR THE PURPOSE OF RECEIVING COLLECTIONS FROM THE
COLLATERAL; PROVIDED, HOWEVER, THAT AT ALL TIMES SUCH DEPOSITORY INSTITUTION OR
TRUST COMPANY SHALL BE A DEPOSITORY INSTITUTION ORGANIZED UNDER THE LAWS OF THE
UNITED STATES OR ANY ONE OF THE STATES THEREOF OR THE DISTRICT OF COLUMBIA (OR
ANY DOMESTIC BRANCH OF A FOREIGN BANK), (I) (A) THAT HAS EITHER (1) A LONG-TERM
UNSECURED DEBT RATING OF A- OR BETTER BY S&P AND A-3 OR BETTER BY MOODY’S OR (2)
A SHORT-TERM UNSECURED DEBT RATING OR CERTIFICATE OF DEPOSIT RATING OF A-1 OR
BETTER BY S&P OR P-1 OR BETTER BY MOODY’S, (B) THE PARENT CORPORATION OF WHICH
HAS EITHER (1) A LONG-TERM UNSECURED DEBT RATING OF A- OR BETTER BY S&P AND A-3
OR BETTER BY MOODY’S OR (2) A SHORT-TERM UNSECURED DEBT RATING OR CERTIFICATE OF
DEPOSIT RATING OF A-1 OR BETTER BY S&P AND P-1 OR BETTER BY MOODY’S OR (C) IS
OTHERWISE ACCEPTABLE TO THE
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Administrative Agent and (ii) whose deposits are insured by the Federal Deposit
Insurance Corporation (any such depository institution or trust company, a
“Qualified Institution”).
(F) ADJUSTMENTS. IF (I) THE SERVICER MAKES A DEPOSIT INTO THE
COLLECTION ACCOUNT IN RESPECT OF A COLLECTION OF A LOAN IN THE COLLATERAL AND
SUCH COLLECTION WAS RECEIVED BY THE SERVICER IN THE FORM OF A CHECK THAT IS NOT
HONORED FOR ANY REASON OR (II) THE SERVICER MAKES A MISTAKE WITH RESPECT TO THE
AMOUNT OF ANY COLLECTION AND DEPOSITS AN AMOUNT THAT IS LESS THAN OR MORE THAN
THE ACTUAL AMOUNT OF SUCH COLLECTION, THE SERVICER SHALL APPROPRIATELY ADJUST
THE AMOUNT SUBSEQUENTLY DEPOSITED INTO THE COLLECTION ACCOUNT TO REFLECT SUCH
DISHONORED CHECK OR MISTAKE. ANY SCHEDULED PAYMENT IN RESPECT OF WHICH A
DISHONORED CHECK IS RECEIVED SHALL BE DEEMED NOT TO HAVE BEEN PAID.
SECTION 7.5 SERVICER ADVANCES.
For each Settlement Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) that was due and payable pursuant to a Loan
included in the Collateral during such Settlement Period was not received prior
to the end of such Settlement Period, the Servicer may, but shall not be
obligated to, make an advance in an amount up to the amount of such delinquent
Scheduled Payment (or portion thereof) to the extent that the Servicer
reasonably expects to be reimbursed for such advance; in addition, if on any day
there are not sufficient funds on deposit in the Collection Account to pay
accrued Interest on any Advance the Settlement Period of which ends on such day,
the Servicer may make an advance in the amount necessary to pay such Interest
(in either case, any such advance, a “Servicer Advance”). Notwithstanding the
preceding sentence, any Successor Servicer will not be obligated to make any
Servicer Advances. The Servicer will deposit any Servicer Advances into the
Collection Account on or prior to 11:00 a.m. (New York City time) on the related
Payment Date, in immediately available funds.
SECTION 7.6 REALIZATION UPON DEFAULTED LOANS
OR CHARGED-OFF LOANS.
The Servicer will use reasonable efforts to repossess or otherwise comparably
convert the ownership of any Related Property with respect to a Defaulted Loan
or Charged-Off Loan and will act as sales and processing agent for Related
Property that it repossesses. The Servicer will follow the practices and
procedures set forth in the Credit and Collection Policy in order to realize
upon such Related Property. Without limiting the foregoing, the Servicer may
sell any such Related Property with respect any Defaulted Loan or Charged-Off
Loan to the Servicer or its Affiliates for a purchase price equal to the then
fair market value thereof; any such sale to be evidenced by a certificate of a
Responsible Officer of the Servicer delivered to the Administrative Agent
identifying the Defaulted Loan or Charged-Off Loan and the Related Property,
setting forth the sale price of the Related Property and certifying that such
sale price is the fair market value of such Related Property. In any case in
which any such Related Property has suffered damage, the Servicer will not
expend funds in connection with any repair or toward the repossession of such
Related Property unless it reasonably determines that such repair and/or
repossession will increase the Recoveries by an amount greater than the amount
of such expenses. The Servicer will remit to the Collection Account the
Recoveries received in connection with the sale or disposition of Related
Property with respect to a Defaulted Loan or Charged-Off Loan.
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SECTION 7.7 OPTIONAL REPURCHASE OF TRANSFERRED
LOANS.
(A) THE SERVICER MAY, AT ANY TIME, NOTIFY THE BORROWER AND THE
ADMINISTRATIVE AGENT THAT IT (OR ITS ASSIGNEE) IS REQUESTING TO PURCHASE ANY
TRANSFERRED LOAN WITH RESPECT TO WHICH THE BORROWER OR ANY AFFILIATE OF THE
BORROWER HAS RECEIVED NOTICE OF THE RELATED OBLIGOR’S INTENTION TO PREPAY SUCH
TRANSFERRED LOAN IN FULL WITHIN A PERIOD OF NOT MORE THAN SIXTY (60) DAYS FROM
THE DATE OF SUCH NOTIFICATION.
(B) EITHER OF THE ORIGINATOR OR THE SERVICER (OR ITS ASSIGNEE) MAY, AT
ITS SOLE OPTION, WITH RESPECT TO ANY TRANSFERRED LOAN THAT IT DETERMINES, IN THE
EXERCISE OF ITS REASONABLE DISCRETION, WILL LIKELY BECOME A DEFAULTED LOAN OR A
CHARGED-OFF LOAN, OR THAT HAS BECOME A DEFAULTED LOAN OR A CHARGED-OFF LOAN,
NOTIFY THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT IS REQUESTING TO
PURCHASE EACH SUCH TRANSFERRED LOAN; PROVIDED, HOWEVER, THAT NO MORE THAN SIX
TRANSFERRED LOANS MAY BE PURCHASED PURSUANT TO THIS PARAGRAPH (B) DURING THE
TERM OF THIS AGREEMENT.
(C) THE SERVICER (OR ITS ASSIGNEE) MAY REQUEST PURCHASE OF A
TRANSFERRED LOAN PURSUANT TO PARAGRAPH (A) OR (B) ABOVE, AND THE ORIGINATOR MAY
REQUEST PURCHASE OF A TRANSFERRED LOAN PURSUANT TO PARAGRAPH (B) ABOVE, BY
PROVIDING FIVE (5) BUSINESS DAYS’ PRIOR WRITTEN NOTICE TO BORROWER AND THE
ADMINISTRATIVE AGENT. THE BORROWER MAY AGREE TO SUCH PURCHASE WITH THE CONSENT
OF THE ADMINISTRATIVE AGENT (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD).
WITH RESPECT TO ANY SUCH PURCHASE OF A TRANSFERRED LOAN, THE PARTY PROVIDING THE
REQUIRED WRITTEN NOTICE SHALL, ON THE DATE OF PURCHASE, REMIT TO THE BORROWER IN
IMMEDIATELY AVAILABLE FUNDS AN AMOUNT EQUAL TO THE REPURCHASE PRICE THEREFOR.
UPON EACH PURCHASE OF A TRANSFERRED LOAN PURSUANT TO THIS SECTION 7.7, THE
BORROWER SHALL AUTOMATICALLY AND WITHOUT FURTHER ACTION BE DEEMED TO TRANSFER,
ASSIGN AND SET-OVER TO THE PURCHASER THEREOF ALL THE RIGHT, TITLE AND INTEREST
OF THE BORROWER IN, TO AND UNDER SUCH TRANSFERRED LOAN AND ALL MONIES DUE OR TO
BECOME DUE WITH RESPECT THERETO, ALL PROCEEDS THEREOF AND ALL RIGHTS TO SECURITY
FOR ANY SUCH TRANSFERRED LOAN, AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING,
FREE AND CLEAR OF ANY LIEN CREATED PURSUANT TO THIS AGREEMENT, ALL OF THE
BORROWER’S RIGHT, TITLE AND INTEREST IN SUCH TRANSFERRED LOAN, INCLUDING ANY
RELATED SUPPLEMENTAL INTERESTS. EACH LENDER SHALL RECEIVE FIVE (5) BUSINESS
DAYS’ NOTICE OF ANY REPURCHASE THAT RESULTS IN A PREPAYMENT OF ALL OR A PORTION
OF ANY ADVANCE.
(D) THE BORROWER SHALL, AT THE SOLE EXPENSE OF THE PARTY PURCHASING
ANY TRANSFERRED LOAN, EXECUTE SUCH DOCUMENTS AND INSTRUMENTS OF TRANSFER AS MAY
BE PREPARED BY SUCH PARTY AND TAKE SUCH OTHER ACTIONS AS SHALL REASONABLY BE
REQUESTED BY SUCH PARTY TO EFFECT THE TRANSFER OF SUCH TRANSFERRED LOAN PURSUANT
TO THIS SECTION 7.7.
SECTION 7.8 REPRESENTATIONS AND WARRANTIES OF
THE SERVICER.
The initial Servicer, and any Successor Servicer (mutatis mutandis), hereby
represents and warrants as follows:
(A) ORGANIZATION AND GOOD STANDING. THE SERVICER IS A CORPORATION
DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTION OF ITS INCORPORATION WITH ALL REQUISITE CORPORATE POWER AND
AUTHORITY TO OWN ITS PROPERTIES AND TO CONDUCT ITS BUSINESS AS PRESENTLY
CONDUCTED AND TO ENTER INTO AND PERFORM ITS OBLIGATIONS PURSUANT TO THIS
AGREEMENT.
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(B) DUE QUALIFICATION. THE SERVICER IS QUALIFIED TO DO BUSINESS AS A
CORPORATION, IS IN GOOD STANDING, AND HAS OBTAINED ALL LICENSES AND APPROVALS AS
REQUIRED UNDER THE LAWS OF ALL JURISDICTIONS IN WHICH THE OWNERSHIP OR LEASE OF
ITS PROPERTY AND OR THE CONDUCT OF ITS BUSINESS (OTHER THAN THE PERFORMANCE OF
ITS OBLIGATIONS HEREUNDER) REQUIRES SUCH QUALIFICATION, STANDING, LICENSE OR
APPROVAL, EXCEPT TO THE EXTENT THAT THE FAILURE TO SO QUALIFY, MAINTAIN SUCH
STANDING OR BE SO LICENSED OR APPROVED WOULD NOT HAVE AN ADVERSE EFFECT ON THE
INTERESTS OF THE BORROWER OR OF THE LENDERS. THE SERVICER IS QUALIFIED TO DO
BUSINESS AS A CORPORATION, IS IN GOOD STANDING, AND HAS OBTAINED ALL LICENSES
AND APPROVALS AS REQUIRED UNDER THE LAWS OF ALL STATES IN WHICH THE PERFORMANCE
OF ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT REQUIRES SUCH QUALIFICATION,
STANDING, LICENSE OR APPROVAL AND WHERE THE FAILURE TO QUALIFY OR OBTAIN SUCH
LICENSE OR APPROVAL WOULD HAVE MATERIAL ADVERSE EFFECT ON ITS ABILITY TO PERFORM
HEREUNDER.
(C) POWER AND AUTHORITY. THE SERVICER HAS THE CORPORATE POWER AND
AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT AND TO CARRY OUT ITS TERMS. THE
SERVICER HAS DULY AUTHORIZED THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT BY ALL REQUISITE CORPORATE ACTION.
(D) NO VIOLATION. THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY, AND THE FULFILLMENT OF THE TERMS OF, THIS AGREEMENT BY THE SERVICER (WITH OR
WITHOUT NOTICE OR LAPSE OF TIME) WILL NOT (I) CONFLICT WITH, RESULT IN ANY
BREACH OF ANY OF THE TERMS OR PROVISIONS OF, OR CONSTITUTE A DEFAULT UNDER, THE
ARTICLES OF INCORPORATION OR BY-LAWS OF THE SERVICER, OR ANY CONTRACTUAL
OBLIGATION TO WHICH THE SERVICER IS A PARTY OR BY WHICH IT OR ANY OF ITS
PROPERTY IS BOUND, (II) RESULT IN THE CREATION OR IMPOSITION OF ANY ADVERSE
CLAIM UPON ANY OF ITS PROPERTIES PURSUANT TO THE TERMS OF ANY SUCH CONTRACTUAL
OBLIGATION (OTHER THAN THIS AGREEMENT), OR (III) VIOLATE ANY APPLICABLE LAW.
(E) NO CONSENT. NO CONSENT, APPROVAL, AUTHORIZATION, ORDER,
REGISTRATION, FILING, QUALIFICATION, LICENSE OR PERMIT OF OR WITH ANY
GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER THE SERVICER OR ANY OF ITS
PROPERTIES IS REQUIRED TO BE OBTAINED BY OR WITH RESPECT TO THE SERVICER IN
ORDER FOR THE SERVICER TO ENTER INTO THIS AGREEMENT OR PERFORM ITS OBLIGATIONS
HEREUNDER.
(F) BINDING OBLIGATION. THIS AGREEMENT CONSTITUTES A LEGAL, VALID
AND BINDING OBLIGATION OF THE SERVICER, ENFORCEABLE AGAINST THE SERVICER IN
ACCORDANCE WITH ITS TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY (I)
APPLICABLE INSOLVENCY LAWS AND (II) GENERAL PRINCIPLES OF EQUITY (WHETHER
CONSIDERED IN A SUIT AT LAW OR IN EQUITY).
(G) NO PROCEEDING. THERE ARE NO PROCEEDINGS OR INVESTIGATIONS PENDING
OR THREATENED AGAINST THE SERVICER, BEFORE ANY GOVERNMENTAL AUTHORITY (I)
ASSERTING THE INVALIDITY OF THIS AGREEMENT, (II) SEEKING TO PREVENT THE
CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR (III)
SEEKING ANY DETERMINATION OR RULING THAT MIGHT (IN THE REASONABLE JUDGMENT OF
THE SERVICER) HAVE A MATERIAL ADVERSE EFFECT.
(H) REPORTS ACCURATE. ALL SERVICER CERTIFICATES, MONTHLY REPORTS,
INFORMATION, EXHIBITS, FINANCIAL STATEMENTS, DOCUMENTS, BOOKS, SERVICER RECORDS
OR OTHER REPORTS FURNISHED OR TO BE FURNISHED BY THE SERVICER TO THE
ADMINISTRATIVE AGENT OR A LENDER IN CONNECTION WITH THIS AGREEMENT ARE AND WILL
BE ACCURATE, TRUE AND CORRECT IN ALL MATERIAL RESPECTS.
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SECTION 7.9 COVENANTS OF THE SERVICER.
The Servicer hereby covenants that:
(A) COMPLIANCE WITH LAW. THE SERVICER WILL COMPLY IN ALL MATERIAL
RESPECTS WITH ALL APPLICABLE LAWS, INCLUDING THOSE WITH RESPECT TO THE
TRANSFERRED LOANS AND RELATED PROPERTY AND LOAN DOCUMENTS OR ANY PART THEREOF.
(B) PRESERVATION OF CORPORATE EXISTENCE. THE SERVICER WILL PRESERVE
AND MAINTAIN ITS CORPORATE EXISTENCE, RIGHTS, FRANCHISES AND PRIVILEGES IN THE
JURISDICTION OF ITS FORMATION, AND QUALIFY AND REMAIN QUALIFIED IN GOOD STANDING
AS A FOREIGN CORPORATION IN EACH JURISDICTION WHERE THE FAILURE TO MAINTAIN SUCH
EXISTENCE, RIGHTS, FRANCHISES, PRIVILEGES AND QUALIFICATION HAS HAD, OR COULD
REASONABLY BE EXPECTED TO HAVE, A MATERIAL ADVERSE EFFECT.
(C) OBLIGATIONS WITH RESPECT TO LOANS. THE SERVICER WILL DULY FULFILL
AND COMPLY WITH ALL MATERIAL OBLIGATIONS ON THE PART OF THE BORROWER TO BE
FULFILLED OR COMPLIED WITH UNDER OR IN CONNECTION WITH EACH LOAN AND WILL DO
NOTHING TO IMPAIR THE RIGHTS OF THE BORROWER OR THE ADMINISTRATIVE AGENT AS
AGENT FOR THE SECURED PARTIES OR OF THE SECURED PARTIES IN, TO AND UNDER THE
COLLATERAL.
(D) PRESERVATION OF SECURITY INTEREST. THE SERVICER ON BEHALF OF THE
BORROWER WILL EXECUTE AND FILE (OR CAUSE THE EXECUTION AND FILING OF) SUCH
FINANCING AND CONTINUATION STATEMENTS AND ANY OTHER DOCUMENTS THAT MAY BE
REQUIRED BY ANY LAW OR REGULATION OF ANY GOVERNMENTAL AUTHORITY TO PRESERVE AND
PROTECT FULLY THE INTEREST OF THE ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED
PARTIES IN, TO AND UNDER THE COLLATERAL.
(E) NO BANKRUPTCY PETITION. WITH RESPECT TO ANY CP LENDER, PRIOR TO
THE DATE THAT IS ONE YEAR AND ONE (1) DAY AFTER THE PAYMENT IN FULL OF ALL
AMOUNTS OWING IN RESPECT OF ALL OUTSTANDING COMMERCIAL PAPER ISSUED BY SUCH CP
LENDER AND, WITH RESPECT TO THE BORROWER, PRIOR TO THE DATE THAT IS ONE YEAR AND
ONE (1) DAY AFTER THE COLLECTION DATE, THE SERVICER WILL NOT INSTITUTE AGAINST
THE BORROWER OR SUCH CP LENDER, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST
THE BORROWER OR SUCH CP LENDER, ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT,
INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDINGS UNDER THE
LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. THIS SECTION
7.9(E) WILL SURVIVE THE TERMINATION OF THIS AGREEMENT.
(F) CHANGE OF NAME OR JURISDICTION; RECORDS. THE SERVICER (I) SHALL
NOT CHANGE ITS NAME OR JURISDICTION OF INCORPORATION, WITHOUT THIRTY (30) DAYS’
PRIOR WRITTEN NOTICE TO THE BORROWER AND THE ADMINISTRATIVE AGENT, AND (II)
SHALL NOT MOVE, OR CONSENT TO THE COLLATERAL CUSTODIAN MOVING, THE LOAN
DOCUMENTS RELATING TO THE TRANSFERRED LOANS WITHOUT THIRTY (30) DAYS’ PRIOR
WRITTEN NOTICE TO THE BORROWER AND THE ADMINISTRATIVE AGENT AND, IN EITHER CASE,
WILL PROMPTLY TAKE ALL ACTIONS REQUIRED OF EACH RELEVANT JURISDICTION IN ORDER
TO CONTINUE THE FIRST PRIORITY PERFECTED SECURITY INTEREST OF THE ADMINISTRATIVE
AGENT AS AGENT FOR THE SECURED PARTIES ON ALL COLLATERAL, AND SUCH OTHER ACTIONS
AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST, INCLUDING BUT NOT LIMITED TO
DELIVERY OF AN OPINION OF COUNSEL.
(G) CREDIT AND COLLECTION POLICY. THE SERVICER WILL (I) COMPLY IN ALL
MATERIAL RESPECTS WITH THE CREDIT AND COLLECTION POLICY IN REGARD TO EACH
TRANSFERRED LOAN AND (II) FURNISH TO EACH MANAGING AGENT AND THE ADMINISTRATIVE
AGENT, AT LEAST TWENTY (20) DAYS PRIOR TO ITS PROPOSED
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effective date, prompt notice of any material change in the Credit and
Collection Policy. The Servicer will not agree or otherwise permit to occur any
material change in the Credit and Collection Policy, which change would impair
the collectibility of any Transferred Loan or otherwise adversely affect the
interests or remedies of the Administrative Agent or the Secured Parties under
this Agreement or any other Transaction Document, without the prior written
consent of the Administrative Agent (in its sole discretion).
(H) EARLY TERMINATION EVENTS. THE SERVICER WILL FURNISH TO EACH
MANAGING AGENT AND THE ADMINISTRATIVE AGENT, AS SOON AS POSSIBLE AND IN ANY
EVENT WITHIN THREE (3) BUSINESS DAYS AFTER THE OCCURRENCE OF EACH EARLY
TERMINATION EVENT OR UNMATURED TERMINATION EVENT, A WRITTEN STATEMENT SETTING
FORTH THE DETAILS OF SUCH EVENT AND THE ACTION THAT THE SERVICER PROPOSES TO
TAKE WITH RESPECT THERETO.
(I) EXTENSION OR AMENDMENT OF LOANS. THE SERVICER WILL NOT, EXCEPT
AS OTHERWISE PERMITTED IN SECTION 7.4(A), EXTEND, AMEND OR OTHERWISE MODIFY THE
TERMS OF ANY TRANSFERRED LOAN.
(J) OTHER. THE SERVICER WILL FURNISH TO THE BORROWER, ANY MANAGING
AGENT AND THE ADMINISTRATIVE AGENT SUCH OTHER INFORMATION, DOCUMENTS RECORDS OR
REPORTS RESPECTING THE TRANSFERRED LOANS OR THE CONDITION OR OPERATIONS,
FINANCIAL OR OTHERWISE OF THE SERVICER AS THE BORROWER, SUCH MANAGING AGENT OR
THE ADMINISTRATIVE AGENT MAY FROM TIME TO TIME REASONABLY REQUEST IN ORDER TO
PROTECT THE RESPECTIVE INTERESTS OF THE BORROWER, SUCH MANAGING AGENT, THE
ADMINISTRATIVE AGENT OR THE SECURED PARTIES UNDER OR AS CONTEMPLATED BY THIS
AGREEMENT.
(K) SUBORDINATION EVENTS. THE SERVICER WILL NOT ENGAGE OR PERMIT ANY
AFFILIATE TO ENGAGE IN ANY ACTIVITIES RELATING TO ANY OBLIGOR AND/OR WITH
RESPECT TO ANY LOAN THAT WOULD SUBJECT A LOAN TO THE RISK OF A SUBORDINATION
EVENT.
(L) COMPLIANCE WITH LOAN DOCUMENTS. THE SERVICER WILL, ON BEHALF OF
THE BORROWER, ACT IN STRICT CONFORMITY WITH ALL MATERIAL TERMS AND CONDITIONS OF
THE LOAN DOCUMENTS, INCLUDING THE PROMPT ENFORCEMENT OF THE BORROWER’S RIGHTS
THEREUNDER.
SECTION 7.10 PAYMENT OF CERTAIN EXPENSES BY SERVICER.
The Servicer, so long as it shall be an Affiliate of the Borrower, will be
required to pay all expenses incurred by it in connection with its activities
under this Agreement, including fees and disbursements of legal counsel and
independent accountants, Taxes imposed on the Servicer, expenses incurred in
connection with payments and reports pursuant to this Agreement, and all other
fees and expenses not expressly stated under this Agreement for the account of
the Borrower. In consideration for the payment by the Borrower of the Servicing
Fee, the Servicer will be required to pay: (a) all reasonable fees and expenses
owing to any bank or trust company in connection with the maintenance of the
Collection Account; (b) the Backup Servicer Fee pursuant to the Backup Servicing
Agreement; and (c) the Collateral Custodian Fee pursuant to the Custody
Agreement. The Servicer shall be required to pay such expenses for its own
account and shall not be entitled to any payment therefor other than the
Servicing Fee.
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SECTION 7.11 REPORTS.
(A) MONTHLY REPORT. WITH RESPECT TO EACH DETERMINATION DATE AND THE
RELATED SETTLEMENT PERIOD, THE SERVICER WILL PROVIDE TO THE BORROWER, THE BACKUP
SERVICER, EACH MANAGING AGENT AND THE ADMINISTRATIVE AGENT, ON THE RELATED
REPORTING DATE, A MONTHLY STATEMENT (A “MONTHLY REPORT”) SIGNED BY A RESPONSIBLE
OFFICER OF THE SERVICER AND SUBSTANTIALLY IN THE FORM OF EXHIBIT E. EXCEPT AS
OTHERWISE SET FORTH IN THE BACKUP SERVICING AGREEMENT, THE BACKUP SERVICER SHALL
HAVE NO OBLIGATION TO REVIEW ANY INFORMATION IN THE MONTHLY REPORT.
(B) SERVICER CERTIFICATE. TOGETHER WITH EACH MONTHLY REPORT, THE
SERVICER SHALL SUBMIT TO THE BORROWER, THE BACKUP SERVICER, EACH MANAGING AGENT
AND THE ADMINISTRATIVE AGENT A CERTIFICATE (A “SERVICER’S CERTIFICATE”), SIGNED
BY A RESPONSIBLE OFFICER OF THE SERVICER AND SUBSTANTIALLY IN THE FORM OF
EXHIBIT F. EXCEPT AS OTHERWISE SET FORTH IN THE BACKUP SERVICING AGREEMENT, THE
BACKUP SERVICER SHALL HAVE NO OBLIGATION TO REVIEW ANY INFORMATION IN THE
SERVICER CERTIFICATE.
(C) FINANCIAL STATEMENTS. THE BORROWER WILL SUBMIT TO THE BACKUP
SERVICER, EACH MANAGING AGENT AND THE ADMINISTRATIVE AGENT, PROMPTLY UPON
RECEIPT THEREOF, THE QUARTERLY AND ANNUAL FINANCIAL STATEMENTS RECEIVED FROM THE
ORIGINATOR PURSUANT TO SECTION 5.1(A) OF THE PURCHASE AGREEMENT. EXCEPT AS
OTHERWISE SET FORTH IN THE BACKUP SERVICING AGREEMENT, THE BACKUP SERVICER SHALL
HAVE NO DUTY TO REVIEW ANY OF THE FINANCIAL INFORMATION SET FORTH IN SUCH
FINANCIAL STATEMENTS.
SECTION 7.12 ANNUAL STATEMENT AS TO COMPLIANCE.
The Servicer will provide to the Borrower, each Managing Agent, the
Administrative Agent, and the Backup Servicer, within ninety (90) days following
the end of each fiscal year of the Servicer, commencing with the fiscal year
ending on March 31, 2008, an annual report signed by a Responsible Officer of
the Servicer certifying that (a) a review of the activities of the Servicer, and
the Servicer’s performance pursuant to this Agreement, for the period ending on
the last day of such fiscal year has been made under such Person’s supervision
and (b) the Servicer has performed or has caused to be performed in all material
respects all of its obligations under this Agreement throughout such year and no
Servicer Termination Event has occurred and is continuing (or if a Servicer
Termination Event has so occurred and is continuing, specifying each such event,
the nature and status thereof and the steps necessary to remedy such event, and,
if a Servicer Termination Event occurred during such year and no notice thereof
has been given to the Administrative Agent, specifying such Servicer Termination
Event and the steps taken to remedy such event).
SECTION 7.13 LIMITATION ON LIABILITY OF THE SERVICER
AND OTHERS.
Except as provided herein, neither the Servicer (including any Successor
Servicer) nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Borrower, the Administrative Agent,
the Lenders or any other Person for any action taken or for refraining from the
taking of any action expressly provided for in this Agreement; provided,
however, that this provision shall not protect the Servicer or any such Person
against
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any liability that would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct hereunder.
The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its duties to service the Transferred
Loans in accordance with this Agreement that in its reasonable opinion may
involve it in any expense or liability. The Servicer may, in its sole
discretion, undertake any legal action relating to the servicing, collection or
administration of Transferred Loans and the Related Property that it may
reasonably deem necessary or appropriate for the benefit of the Borrower and the
Secured Parties with respect to this Agreement and the rights and duties of the
parties hereto and the respective interests of the Borrower and the Secured
Parties hereunder.
SECTION 7.14 THE SERVICER NOT TO RESIGN.
The Servicer shall not resign from the obligations and duties hereby imposed on
it except upon its determination that (i) the performance of its duties
hereunder is or becomes impermissible under Applicable Law and (ii) there is no
reasonable action that it could take to make the performance of its duties
hereunder permissible under Applicable Law. Any such determination permitting
the resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel to such effect delivered to the Borrower and the
Administrative Agent. No such resignation shall become effective until a
Successor Servicer shall have assumed the responsibilities and obligations of
the Servicer in according with the terms of this Agreement.
SECTION 7.15 ACCESS TO CERTAIN DOCUMENTATION AND
INFORMATION REGARDING THE LOANS.
The Borrower or the Servicer, as applicable, shall provide to the Administrative
Agent and each Managing Agent access to the Loan Documents and all other
documentation regarding the Loans included as part of the Collateral and the
Related Property, such access being afforded without charge but only (i) upon
reasonable prior notice, (ii) during normal business hours and (iii) subject to
the Servicer’s normal security and confidentiality procedures. From and after
(x) the Closing Date and periodically thereafter at the discretion of the
Administrative Agent (but in no event limited to fewer than twice per calendar
year), the Administrative Agent, on behalf of and with the input of each
Managing Agent, may review the Borrower’s and the Servicer’s collection and
administration of the Loans in order to assess compliance by the Servicer with
the Servicer’s written policies and procedures, as well as with this Agreement
and may conduct an audit of the Transferred Loans, Loan Documents and Records in
conjunction with such a review, which audit shall be reasonable in scope and
shall be completed in a reasonable period of time and (y) the occurrence, and
during the continuation of an Early Termination Event, the Administrative Agent
and each Managing Agent may review the Borrower’s and the Servicer’s collection
and administration of the Transferred Loans in order to assess compliance by the
Servicer with the Servicer’s written policies and procedures, as well as with
this Agreement, which review shall not be limited in scope or frequency, nor
restricted in period. The Administrative Agent may also conduct an audit (as
such term is used in clause (x) of this Section 7.15) of the Transferred Loans,
Loan Documents and Records in conjunction with such a review. The Borrower
shall bear the cost of such reviews and audits.
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Section 7.16 Merger or Consolidation of the Servicer.
The Servicer shall not consolidate with or merge into any other Person or convey
or transfer its properties and assets substantially as an entirety to any Person
and unless:
(I) THE PERSON FORMED BY SUCH CONSOLIDATION OR INTO WHICH THE
SERVICER IS MERGED OR THE PERSON THAT ACQUIRES BY CONVEYANCE OR TRANSFER THE
PROPERTIES AND ASSETS OF THE SERVICER SUBSTANTIALLY AS AN ENTIRETY SHALL BE, IF
THE SERVICER IS NOT THE SURVIVING ENTITY, ORGANIZED AND EXISTING UNDER THE LAWS
OF THE UNITED STATES OR ANY STATE OR THE DISTRICT OF COLUMBIA AND SHALL
EXPRESSLY ASSUME, BY AN AGREEMENT SUPPLEMENTAL HERETO, EXECUTED AND DELIVERED TO
THE BORROWER AND THE ADMINISTRATIVE AGENT IN FORM SATISFACTORY TO THE BORROWER
AND THE ADMINISTRATIVE AGENT, THE PERFORMANCE OF EVERY COVENANT AND OBLIGATION
OF THE SERVICER HEREUNDER (TO THE EXTENT THAT ANY RIGHT, COVENANT OR OBLIGATION
OF THE SERVICER, AS APPLICABLE HEREUNDER, IS INAPPLICABLE TO THE SUCCESSOR
ENTITY, SUCH SUCCESSOR ENTITY SHALL BE SUBJECT TO SUCH COVENANT OR OBLIGATION,
OR BENEFIT FROM SUCH RIGHT, AS WOULD APPLY, TO THE EXTENT PRACTICABLE, TO SUCH
SUCCESSOR ENTITY);
(II) THE SERVICER SHALL HAVE DELIVERED TO THE BORROWER AND THE
ADMINISTRATIVE AGENT AN OFFICER’S CERTIFICATE THAT SUCH CONSOLIDATION, MERGER,
CONVEYANCE OR TRANSFER AND SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH THIS SECTION
7.16 AND THAT ALL CONDITIONS PRECEDENT HEREIN PROVIDED FOR RELATING TO SUCH
TRANSACTION HAVE BEEN COMPLIED WITH AND AN OPINION OF COUNSEL THAT SUCH
SUPPLEMENTAL AGREEMENT IS LEGAL, VALID AND BINDING WITH RESPECT TO THE SUCCESSOR
ENTITY AND THAT THE ENTITY SURVIVING SUCH CONSOLIDATION, CONVEYANCE OR TRANSFER
IS ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OR
THE DISTRICT OF COLUMBIA. THE BORROWER AND THE ADMINISTRATIVE AGENT SHALL
RECEIVE PROMPT WRITTEN NOTICE OF SUCH MERGER OR CONSOLIDATION OF THE SERVICER;
AND
(III) AFTER GIVING EFFECT THERETO, NO EARLY TERMINATION EVENT,
UNMATURED TERMINATION EVENT OR SERVICER TERMINATION EVENT SHALL HAVE OCCURRED.
SECTION 7.17 IDENTIFICATION OF RECORDS.
The Servicer shall clearly and unambiguously identify each Loan that is part of
the Collateral and the Related Property in its computer or other records to
reflect that the interest in such Loans and Related Property have been
transferred to and are owned by the Borrower and that the Administrative Agent
has the interest therein granted by Borrower pursuant to this Agreement.
SECTION 7.18 SERVICER TERMINATION EVENTS.
(A) IF ANY ONE OF THE FOLLOWING EVENTS (A “SERVICER TERMINATION
EVENT”) SHALL OCCUR AND BE CONTINUING ON ANY DAY:
(I) ANY FAILURE BY THE SERVICER TO MAKE ANY PAYMENT, TRANSFER OR
DEPOSIT AS REQUIRED BY THIS AGREEMENT;
(II) ANY FAILURE BY THE SERVICER TO GIVE INSTRUCTIONS OR NOTICE TO THE
BORROWER, ANY MANAGING AGENT AND/OR THE ADMINISTRATIVE AGENT AS REQUIRED BY THIS
AGREEMENT OR
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TO DELIVER ANY REQUIRED REPORTS HEREUNDER ON OR BEFORE THE DATE OCCURRING TWO
(2) BUSINESS DAYS AFTER THE DATE SUCH INSTRUCTIONS, NOTICE OR REPORT IS REQUIRED
TO BE MADE OR GIVEN, AS THE CASE MAY BE, UNDER THE TERMS OF THIS AGREEMENT;
(III) ANY FAILURE ON THE PART OF THE SERVICER DULY TO OBSERVE OR
PERFORM IN ANY MATERIAL RESPECT ANY OTHER COVENANTS OR AGREEMENTS OF THE
SERVICER SET FORTH IN THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT TO WHICH
IT IS A PARTY AS SERVICER THAT CONTINUES UNREMEDIED FOR A PERIOD OF FIVE (5)
DAYS AFTER THE FIRST TO OCCUR OF (I) THE DATE ON WHICH WRITTEN NOTICE OF SUCH
FAILURE REQUIRING THE SAME TO BE REMEDIED SHALL HAVE BEEN GIVEN TO THE SERVICER
BY THE ADMINISTRATIVE AGENT, ANY MANAGING AGENT OR THE BORROWER AND (II) THE
DATE ON WHICH THE SERVICER BECOMES OR SHOULD HAVE BECOME AWARE THEREOF;
(IV) ANY REPRESENTATION, WARRANTY OR CERTIFICATION MADE BY THE SERVICER
IN THIS AGREEMENT OR IN ANY CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT
SHALL PROVE TO HAVE BEEN FALSE OR INCORRECT IN ANY MATERIAL RESPECT WHEN MADE;
(V) THE SERVICER SHALL FAIL TO SERVICE THE TRANSFERRED LOANS IN
ACCORDANCE WITH THE CREDIT AND COLLECTION POLICY;
(VI) AN INSOLVENCY EVENT SHALL OCCUR WITH RESPECT TO THE SERVICER;
(VII) THE SERVICER AGREES TO MATERIALLY ALTER THE CREDIT AND COLLECTION
POLICY WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT;
(VIII) ANY FINANCIAL OR ASSET INFORMATION REASONABLY REQUESTED BY THE
ADMINISTRATIVE AGENT OR ANY MANAGING AGENT AS PROVIDED HEREIN IS NOT PROVIDED AS
REQUESTED WITHIN FIVE (5) BUSINESS DAYS (OR SUCH LONGER PERIOD AS THE
ADMINISTRATIVE AGENT OR SUCH MANAGING AGENT MAY CONSENT TO) OF THE RECEIPT BY
THE SERVICER OF SUCH REQUEST;
(IX) THE RENDERING AGAINST THE SERVICER OF A FINAL JUDGMENT, DECREE OR
ORDER FOR THE PAYMENT OF MONEY IN EXCESS OF U.S. $5,000,000 (INDIVIDUALLY OR IN
THE AGGREGATE) AND THE CONTINUANCE OF SUCH JUDGMENT, DECREE OR ORDER UNSATISFIED
AND IN EFFECT FOR ANY PERIOD OF THIRTY (30) CONSECUTIVE DAYS WITHOUT A STAY OF
EXECUTION;
(X) THE FAILURE OF THE PERFORMANCE GUARANTOR TO MAKE ANY PAYMENT DUE
WITH RESPECT TO AGGREGATE RECOURSE DEBT OR OTHER OBLIGATIONS WITH AN AGGREGATE
PRINCIPAL AMOUNT EXCEEDING U.S. $1,000,000 OR THE OCCURRENCE OF ANY EVENT OR
CONDITION THAT WOULD PERMIT ACCELERATION OF SUCH RECOURSE DEBT OR OTHER
OBLIGATIONS IF SUCH EVENT OR CONDITION HAS NOT BEEN WAIVED;
(XI) ANY GUARANTOR EVENT OF DEFAULT SHALL OCCUR;
(XII) ANY MATERIAL ADVERSE CHANGE OCCURS IN THE FINANCIAL CONDITION OF
THE SERVICER OR THE COLLECTIBILITY OF THE TRANSFERRED LOANS; OR
(XIII) ANY CHANGE-IN-CONTROL OF THE SERVICER IS MADE WITHOUT THE PRIOR
WRITTEN CONSENT OF THE BORROWER AND THE ADMINISTRATIVE AGENT;
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then, notwithstanding anything herein to the contrary, so long as any such
Servicer Termination Events shall not have been remedied at the expiration of
any applicable cure period, the Administrative Agent may, or at the direction of
the Required Lenders shall, by written notice to the Servicer and the Backup
Servicer (a “Termination Notice”), subject to the provisions of Section 7.19,
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement. The Borrower shall pay all reasonable set-up and conversion
costs associated with the transfer of servicing rights to the Successor
Servicer.
SECTION 7.19 APPOINTMENT OF SUCCESSOR SERVICER.
(A) ON AND AFTER THE RECEIPT BY THE SERVICER OF A TERMINATION NOTICE
PURSUANT TO SECTION 7.18, THE SERVICER SHALL CONTINUE TO PERFORM ALL SERVICING
FUNCTIONS UNDER THIS AGREEMENT UNTIL THE DATE SPECIFIED IN THE TERMINATION
NOTICE OR OTHERWISE SPECIFIED BY THE ADMINISTRATIVE AGENT, TO THE SERVICER AND
THE BACKUP SERVICER IN WRITING. THE ADMINISTRATIVE AGENT MAY AT THE TIME
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE IN ITS SOLE DISCRETION, APPOINT
THE BACKUP SERVICER AS THE SERVICER HEREUNDER, AND THE BACKUP SERVICER SHALL
WITHIN SEVEN (7) DAYS ASSUME ALL OBLIGATIONS OF THE SERVICER HEREUNDER, AND ALL
AUTHORITY AND POWER OF THE SERVICER UNDER THIS AGREEMENT SHALL PASS TO AND BE
VESTED IN THE BACKUP SERVICER; PROVIDED, HOWEVER, THAT ANY SUCCESSOR SERVICER
(INCLUDING, WITHOUT LIMITATION, THE BACKUP SERVICER) SHALL NOT (I) BE
RESPONSIBLE OR LIABLE FOR ANY PAST ACTIONS OR OMISSIONS OF THE OUTGOING SERVICER
OR (II) BE OBLIGATED TO MAKE SERVICER ADVANCES. THE ADMINISTRATIVE AGENT MAY
APPOINT (I) THE BACKUP SERVICER AS SUCCESSOR SERVICER, OR (II) IF THE
ADMINISTRATIVE AGENT DOES NOT SO APPOINT THE BACKUP SERVICER, THERE IS NO BACKUP
SERVICER OR THE BACKUP SERVICER IS UNWILLING OR UNABLE TO ASSUME SUCH
OBLIGATIONS ON SUCH DATE, THE ADMINISTRATIVE AGENT SHALL AS PROMPTLY AS POSSIBLE
APPOINT AN ALTERNATE SUCCESSOR SERVICER TO ACT AS SERVICER (IN EACH SUCH CASE,
THE “SUCCESSOR SERVICER”), AND SUCH SUCCESSOR SERVICER SHALL ACCEPT ITS
APPOINTMENT BY A WRITTEN ASSUMPTION IN A FORM ACCEPTABLE TO THE ADMINISTRATIVE
AGENT.
(B) UPON ITS APPOINTMENT AS SUCCESSOR SERVICER, THE BACKUP SERVICER
(SUBJECT TO SECTION 7.19(A)) OR THE ALTERNATE SUCCESSOR SERVICER, AS APPLICABLE,
SHALL BE THE SUCCESSOR IN ALL RESPECTS TO THE SERVICER WITH RESPECT TO SERVICING
FUNCTIONS UNDER THIS AGREEMENT, SHALL ASSUME ALL SERVICING DUTIES HEREUNDER AND
SHALL BE SUBJECT TO ALL THE RESPONSIBILITIES, DUTIES AND LIABILITIES RELATING
THERETO PLACED ON THE SERVICER BY THE TERMS AND PROVISIONS HEREOF, AND ALL
REFERENCES IN THIS AGREEMENT TO THE SERVICER SHALL BE DEEMED TO REFER TO THE
BACKUP SERVICER OR THE SUCCESSOR SERVICER, AS APPLICABLE. ANY SUCCESSOR
SERVICER SHALL BE ENTITLED, WITH THE PRIOR CONSENT OF THE ADMINISTRATIVE AGENT,
TO APPOINT AGENTS TO PROVIDE SOME OR ALL OF ITS DUTIES HEREUNDER, PROVIDED THAT
NO SUCH APPOINTMENT SHALL RELIEVE SUCH SUCCESSOR SERVICER OF THE DUTIES AND
OBLIGATIONS OF THE SUCCESSOR SERVICER PURSUANT TO THE TERMS HEREOF AND THAT ANY
SUCH SUBCONTRACT MAY BE TERMINATED UPON THE OCCURRENCE OF A SERVICER TERMINATION
EVENT.
(C) ALL AUTHORITY AND POWER GRANTED TO THE SERVICER UNDER THIS
AGREEMENT SHALL AUTOMATICALLY CEASE AND TERMINATE UPON TERMINATION OF THE
SERVICER UNDER THIS AGREEMENT AND SHALL PASS TO AND BE VESTED IN THE SUCCESSOR
SERVICER, AND, WITHOUT LIMITATION, THE SUCCESSOR SERVICER IS HEREBY AUTHORIZED
AND EMPOWERED TO EXECUTE AND DELIVER, ON BEHALF OF THE SERVICER, AS
ATTORNEY-IN-FACT OR OTHERWISE, ALL DOCUMENTS AND OTHER INSTRUMENTS, AND TO DO
AND ACCOMPLISH ALL OTHER ACTS OR THINGS NECESSARY OR APPROPRIATE TO EFFECT THE
PURPOSES OF SUCH TRANSFER OF SERVICING RIGHTS. THE SERVICER AGREES TO COOPERATE
WITH THE SUCCESSOR SERVICER IN EFFECTING THE
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termination of the responsibilities and rights of the Servicer to conduct
servicing on the Collateral.
(D) UPON THE BACKUP SERVICER RECEIVING NOTICE THAT IT IS REQUIRED TO
SERVE AS THE SUCCESSOR SERVICER HEREUNDER PURSUANT TO THE FOREGOING PROVISIONS
OF THIS SECTION 7.19, THE BACKUP SERVICER WILL PROMPTLY BEGIN THE TRANSITION TO
ITS ROLE AS SUCCESSOR SERVICER.
(E) THE BACKUP SERVICER SHALL BE ENTITLED TO RECEIVE ITS TRANSITION
COSTS INCURRED IN TRANSITIONING TO SERVICER.
SECTION 7.20 MARKET SERVICING FEE.
Notwithstanding anything to the contrary herein, in the event that a Successor
Servicer is appointed Servicer, the Servicing Fee shall equal the market rate
for comparable servicing duties to be fixed upon the date of such appointment by
such Successor Servicer with the consent of the Administrative Agent (the
“Market Servicing Fee”).
ARTICLE VIII
EARLY TERMINATION EVENTS
SECTION 8.1 EARLY TERMINATION EVENTS.
If any of the following events (each, an “Early Termination Event”) shall occur
and be continuing:
(A) THE BORROWER SHALL FAIL TO (I) MAKE PAYMENT OF ANY AMOUNT REQUIRED
TO BE MADE UNDER THE TERMS OF THIS AGREEMENT AND SUCH FAILURE SHALL CONTINUE FOR
MORE THAN TWO (2) BUSINESS DAYS; OR (II) REPAY ALL ADVANCES OUTSTANDING ON OR
PRIOR TO THE MATURITY DATE; OR
(B) THE BORROWING BASE TEST SHALL NOT BE MET, AND SUCH FAILURE SHALL
CONTINUE FOR MORE THAN TWO (2) BUSINESS DAYS; OR
(C) (I) THE BORROWER SHALL FAIL TO PERFORM OR OBSERVE IN ANY MATERIAL
RESPECT ANY OTHER COVENANT OR OTHER AGREEMENT OF THE BORROWER SET FORTH IN THIS
AGREEMENT AND ANY OTHER TRANSACTION DOCUMENT TO WHICH IT IS A PARTY, OR (II) THE
ORIGINATOR SHALL FAIL TO PERFORM OR OBSERVE IN ANY MATERIAL RESPECT ANY TERM,
COVENANT OR AGREEMENT OF SUCH ORIGINATOR SET FORTH IN ANY OTHER TRANSACTION
DOCUMENT TO WHICH IT IS A PARTY, IN EACH CASE WHEN SUCH FAILURE CONTINUES
UNREMEDIED FOR MORE THAN FIVE (5) DAYS AFTER THE FIRST TO OCCUR OF (I) THE DATE
ON WHICH WRITTEN NOTICE OF SUCH FAILURE REQUIRING THE SAME TO BE REMEDIED SHALL
HAVE BEEN GIVEN TO SUCH PERSON BY THE ADMINISTRATIVE AGENT, ANY MANAGING AGENT
OR THE COLLATERAL CUSTODIAN AND (II) THE DATE ON WHICH SUCH PERSON BECOMES OR
SHOULD HAVE BECOME AWARE THEREOF; OR
(D) ANY REPRESENTATION OR WARRANTY MADE OR DEEMED MADE HEREUNDER SHALL
PROVE TO BE INCORRECT IN ANY MATERIAL RESPECT AS OF THE TIME WHEN THE SAME SHALL
HAVE BEEN MADE; OR
(E) AN INSOLVENCY EVENT SHALL OCCUR WITH RESPECT TO THE BORROWER OR
THE ORIGINATOR; OR
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(F) A SERVICER TERMINATION EVENT OCCURS; OR
(G) ANY CHANGE-IN-CONTROL OF THE BORROWER OR ORIGINATOR OCCURS; OR
(H) THE BORROWER OR THE SERVICER DEFAULTS IN MAKING ANY PAYMENT
REQUIRED TO BE MADE UNDER ANY MATERIAL AGREEMENT FOR BORROWED MONEY TO WHICH
EITHER IS A PARTY AND SUCH DEFAULT IS NOT CURED WITHIN THE RELEVANT CURE PERIOD;
OR
(I) THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES, SHALL
FAIL FOR ANY REASON TO HAVE A VALID AND PERFECTED FIRST PRIORITY SECURITY
INTEREST IN ANY OF THE COLLATERAL; OR
(J) (I) A FINAL JUDGMENT FOR THE PAYMENT OF MONEY IN EXCESS OF (A)
$5,000,000 SHALL HAVE BEEN RENDERED AGAINST THE ORIGINATOR OR (B) $100,000
AGAINST THE BORROWER BY A COURT OF COMPETENT JURISDICTION AND, IF SUCH JUDGMENT
RELATES TO THE ORIGINATOR, SUCH JUDGMENT, DECREE OR ORDER SHALL CONTINUE
UNSATISFIED AND IN EFFECT FOR ANY PERIOD OF THIRTY (30) CONSECUTIVE DAYS WITHOUT
A STAY OF EXECUTION, OR (II) THE ORIGINATOR OR THE BORROWER, AS THE CASE MAY BE,
SHALL HAVE MADE PAYMENTS OF AMOUNTS IN EXCESS OF $5,000,000 OR $50,000,
RESPECTIVELY, IN SETTLEMENT OF ANY LITIGATION; OR
(K) THE BORROWER OR THE SERVICER AGREES OR CONSENTS TO, OR OTHERWISE
PERMITS TO OCCUR, ANY AMENDMENT, MODIFICATION, CHANGE, SUPPLEMENT OR RECESSION
OF OR TO THE CREDIT AND COLLECTION POLICY IN WHOLE OR IN PART THAT COULD HAVE A
MATERIAL ADVERSE EFFECT UPON THE TRANSFERRED LOANS OR INTEREST OF ANY LENDER,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT; OR
(L) A KEY MAN EVENT OCCURS; OR
(M) ON ANY DETERMINATION DATE, THE PORTFOLIO YIELD DOES NOT EQUAL OR
EXCEED 7.0% ON AND SUCH FAILURE CONTINUES ON THE NEXT SUCCEEDING DETERMINATION
DATE; OR
(N) THE ROLLING THREE-MONTH DEFAULT RATIO SHALL EXCEED 7.5%; OR
(O) THE ROLLING THREE-MONTH CHARGED-OFF RATIO SHALL EXCEED 5.0%; OR
(P) THE BORROWER SHALL BECOME AN “INVESTMENT COMPANY” SUBJECT TO
REGISTRATION UNDER THE 1940 ACT; OR
(Q) THE BUSINESS AND OTHER ACTIVITIES OF THE BORROWER OR THE
ORIGINATOR, INCLUDING BUT NOT LIMITED TO, THE ACCEPTANCE OF THE ADVANCES BY THE
BORROWER MADE BY THE LENDERS, THE APPLICATION AND USE OF THE PROCEEDS THEREOF BY
THE BORROWER AND THE CONSUMMATION AND CONDUCT OF THE TRANSACTIONS CONTEMPLATED
BY THE TRANSACTION DOCUMENTS TO WHICH THE BORROWER OR THE ORIGINATOR IS A PARTY
RESULT IN A VIOLATION BY THE ORIGINATOR, THE BORROWER, OR ANY OTHER PERSON OR
ENTITY OF THE 1940 ACT OR THE RULES AND REGULATIONS PROMULGATED THEREUNDER; OR
(R) ON ANY DETERMINATION DATE, THE INTEREST COVERAGE RATIO DOES NOT
EQUAL OR EXCEED 150.0% AND SUCH FAILURE CONTINUES ON THE NEXT SUCCEEDING
DETERMINATION DATE; OR
(S) ANY MATERIAL ADVERSE CHANGE OCCURS WITH RESPECT TO THE BORROWER,
THE ORIGINATOR OR THE SERVICER; OR
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(T) (I) THE DIFFERENCE BETWEEN (A) THE AGGREGATE OUTSTANDING LOAN
BALANCE MINUS (B) THE ADVANCES OUTSTANDING SHALL BE LESS THAN (II) AN AMOUNT
EQUAL TO 50% OF THE REQUIRED EQUITY INVESTMENT;
then, and in any such event, the Administrative Agent shall, at the request, or
may with the consent, of the Required Committed Lenders, by notice to the
Borrower declare the Termination Date to have occurred, without demand, protest
or future notice of any kind, all of which are hereby expressly waived by the
Borrower, and all Advances Outstanding and all other amounts owing by the
Borrower under this Agreement shall be accelerated and become immediately due
and payable, provided, that in the event that the Early Termination Event
described in subsection (e) herein has occurred, the Termination Date shall
automatically occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower. Upon its receipt of written
notice thereof, the Administrative Agent shall promptly notify each Lender of
the occurrence of any Early Termination Event.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 INDEMNITIES BY THE BORROWER.
(A) WITHOUT LIMITING ANY OTHER RIGHTS THAT ANY SUCH PERSON MAY HAVE
HEREUNDER OR UNDER APPLICABLE LAW, THE BORROWER HEREBY AGREES TO INDEMNIFY THE
ADMINISTRATIVE AGENT, THE MANAGING AGENTS, THE BACKUP SERVICER, ANY SUCCESSOR
SERVICER, THE COLLATERAL CUSTODIAN, ANY SECURED PARTY OR ITS ASSIGNEE AND EACH
OF THEIR RESPECTIVE AFFILIATES AND OFFICERS, DIRECTORS, EMPLOYEES, MEMBERS AND
AGENTS THEREOF (COLLECTIVELY, THE “INDEMNIFIED PARTIES”), FORTHWITH ON DEMAND,
FROM AND AGAINST ANY AND ALL DAMAGES, LOSSES, CLAIMS, LIABILITIES AND RELATED
COSTS AND EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS (ALL
OF THE FOREGOING BEING COLLECTIVELY REFERRED TO AS “INDEMNIFIED AMOUNTS”)
AWARDED AGAINST OR INCURRED BY, ANY SUCH INDEMNIFIED PARTY OR OTHER NON-MONETARY
DAMAGES OF ANY SUCH INDEMNIFIED PARTY ANY OF THEM ARISING OUT OF OR AS A RESULT
OF THIS AGREEMENT, EXCLUDING, HOWEVER, INDEMNIFIED AMOUNTS TO THE EXTENT
RESULTING FROM GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF ANY
INDEMNIFIED PARTY. WITHOUT LIMITING THE FOREGOING, THE BORROWER SHALL INDEMNIFY
THE INDEMNIFIED PARTIES FOR INDEMNIFIED AMOUNTS RELATING TO OR RESULTING FROM:
(I) ANY LOAN TREATED AS OR REPRESENTED BY THE BORROWER TO BE AN
ELIGIBLE LOAN THAT IS NOT AT THE APPLICABLE TIME AN ELIGIBLE LOAN;
(II) RELIANCE ON ANY REPRESENTATION OR WARRANTY MADE OR DEEMED MADE BY
THE BORROWER, THE SERVICER (OR ONE OF ITS AFFILIATES) OR ANY OF THEIR RESPECTIVE
OFFICERS UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHICH SHALL HAVE BEEN FALSE
OR INCORRECT IN ANY MATERIAL RESPECT WHEN MADE OR DEEMED MADE OR DELIVERED;
(III) THE FAILURE BY THE BORROWER OR THE SERVICER (OR ONE OF ITS
AFFILIATES) TO COMPLY WITH ANY TERM, PROVISION OR COVENANT CONTAINED IN THIS
AGREEMENT OR ANY AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR WITH
ANY APPLICABLE LAW WITH RESPECT TO ANY LOAN COMPRISING A PORTION OF THE
COLLATERAL, OR THE NONCONFORMITY OF ANY
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LOAN, THE RELATED PROPERTY WITH ANY SUCH APPLICABLE LAW OR ANY FAILURE BY THE
ORIGINATOR, THE BORROWER OR ANY AFFILIATE THEREOF TO PERFORM ITS RESPECTIVE
DUTIES UNDER THE LOANS INCLUDED AS A PART OF THE COLLATERAL;
(IV) THE FAILURE TO VEST AND MAINTAIN VESTED IN THE ADMINISTRATIVE
AGENT A FIRST PRIORITY PERFECTED SECURITY INTEREST IN THE COLLATERAL;
(V) THE FAILURE TO FILE, OR ANY DELAY IN FILING, FINANCING STATEMENTS
OR OTHER SIMILAR INSTRUMENTS OR DOCUMENTS UNDER THE UCC OF ANY APPLICABLE
JURISDICTION OR OTHER APPLICABLE LAWS WITH RESPECT TO ANY COLLATERAL WHETHER AT
THE TIME OF ANY ADVANCE OR AT ANY SUBSEQUENT TIME AND AS REQUIRED BY THE
TRANSACTION DOCUMENTS;
(VI) ANY DISPUTE, CLAIM, OFFSET OR DEFENSE (OTHER THAN THE DISCHARGE IN
BANKRUPTCY OF THE OBLIGOR) OF THE OBLIGOR TO THE PAYMENT OF ANY LOAN INCLUDED AS
PART OF THE COLLATERAL THAT IS, OR IS PURPORTED TO BE, AN ELIGIBLE LOAN
(INCLUDING, WITHOUT LIMITATION, A DEFENSE BASED ON THE LOAN NOT BEING A LEGAL,
VALID AND BINDING OBLIGATION OF SUCH OBLIGOR ENFORCEABLE AGAINST IT IN
ACCORDANCE WITH ITS TERMS);
(VII) ANY FAILURE OF THE BORROWER OR THE SERVICER (IF THE ORIGINATOR OR
ONE OF ITS AFFILIATES) TO PERFORM ITS DUTIES OR OBLIGATIONS IN ACCORDANCE WITH
THE PROVISIONS OF THIS AGREEMENT OR ANY FAILURE BY THE ORIGINATOR, THE BORROWER
OR ANY AFFILIATE THEREOF TO PERFORM ITS RESPECTIVE DUTIES UNDER THE TRANSFERRED
LOANS;
(VIII) ANY PRODUCTS LIABILITY CLAIM OR PERSONAL INJURY OR PROPERTY DAMAGE
SUIT OR OTHER SIMILAR OR RELATED CLAIM OR ACTION OF WHATEVER SORT ARISING OUT OF
OR IN CONNECTION WITH MERCHANDISE OR SERVICES THAT ARE THE SUBJECT OF ANY LOAN
INCLUDED AS PART OF THE COLLATERAL OR THE RELATED PROPERTY INCLUDED AS PART OF
THE COLLATERAL;
(IX) THE FAILURE BY BORROWER TO PAY WHEN DUE ANY TAXES FOR WHICH THE
BORROWER IS LIABLE, INCLUDING WITHOUT LIMITATION, SALES, EXCISE OR PERSONAL
PROPERTY TAXES PAYABLE IN CONNECTION WITH THE COLLATERAL;
(X) ANY REPAYMENT BY THE ADMINISTRATIVE AGENT, ANY MANAGING AGENT OR
A SECURED PARTY OF ANY AMOUNT PREVIOUSLY DISTRIBUTED IN REDUCTION OF ADVANCES
OUTSTANDING OR PAYMENT OF INTEREST OR ANY OTHER AMOUNT DUE HEREUNDER OR UNDER
ANY HEDGING AGREEMENT, IN EACH CASE WHICH AMOUNT THE ADMINISTRATIVE AGENT, SUCH
MANAGING AGENT OR A SECURED PARTY BELIEVES IN GOOD FAITH IS REQUIRED TO BE
REPAID;
(XI) ANY INVESTIGATION, LITIGATION OR PROCEEDING RELATED TO THIS
AGREEMENT OR THE USE OF PROCEEDS OF ADVANCES OR IN RESPECT OF ANY LOAN INCLUDED
AS PART OF THE COLLATERAL OR THE RELATED PROPERTY INCLUDED AS PART OF THE
COLLATERAL;
(XII) ANY FAILURE BY THE BORROWER TO GIVE REASONABLY EQUIVALENT VALUE
TO THE ORIGINATOR IN CONSIDERATION FOR THE TRANSFER BY THE ORIGINATOR TO THE
BORROWER OF ANY TRANSFERRED LOAN OR THE RELATED PROPERTY OR ANY ATTEMPT BY ANY
PERSON TO VOID OR OTHERWISE AVOID ANY SUCH TRANSFER UNDER ANY STATUTORY
PROVISION OR COMMON LAW OR EQUITABLE ACTION, INCLUDING, WITHOUT LIMITATION, ANY
PROVISION OF THE BANKRUPTCY CODE;
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(XIII) THE FAILURE OF THE BORROWER, THE ORIGINATOR OR ANY OF THEIR
RESPECTIVE AGENTS OR REPRESENTATIVES TO REMIT TO THE SERVICER OR THE
ADMINISTRATIVE AGENT, COLLECTIONS ON THE COLLATERAL REMITTED TO THE BORROWER OR
ANY SUCH AGENT OR REPRESENTATIVE IN ACCORDANCE WITH THE TERMS HEREOF OR THE
COMMINGLING BY THE BORROWER OR ANY AFFILIATE OF ANY COLLECTIONS; OR
(XIV) THE OCCURRENCE OF A SUBORDINATION EVENT.
(B) ANY AMOUNTS SUBJECT TO THE INDEMNIFICATION PROVISIONS OF THIS
SECTION 9.1 SHALL BE PAID BY THE BORROWER TO THE APPLICABLE INDEMNIFIED PARTY
WITHIN TWO (2) BUSINESS DAYS FOLLOWING THE ADMINISTRATIVE AGENT’S DEMAND
THEREFOR.
(C) IF FOR ANY REASON THE INDEMNIFICATION PROVIDED ABOVE IN THIS
SECTION 9.1 IS UNAVAILABLE TO THE INDEMNIFIED PARTY OR IS INSUFFICIENT TO HOLD
AN INDEMNIFIED PARTY HARMLESS, THEN THE BORROWER SHALL CONTRIBUTE TO THE AMOUNT
PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT OF SUCH LOSS, CLAIM,
DAMAGE OR LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE
RELATIVE BENEFITS RECEIVED BY SUCH INDEMNIFIED PARTY ON THE ONE HAND AND THE
BORROWER, ON THE OTHER HAND BUT ALSO THE RELATIVE FAULT OF SUCH INDEMNIFIED
PARTY AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS.
(D) THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 9.1 SHALL
SURVIVE THE REMOVAL OF THE ADMINISTRATIVE AGENT OR ANY MANAGING AGENT AND THE
TERMINATION OF THIS AGREEMENT.
(E) THE PARTIES HERETO AGREE THAT THE PROVISIONS OF SECTION 9.1 SHALL
NOT BE INTERPRETED TO PROVIDE RECOURSE TO THE BORROWER AGAINST LOSS BY REASON OF
THE BANKRUPTCY OR INSOLVENCY (OR OTHER CREDIT CONDITION) OF, OR DEFAULT BY, AN
OBLIGOR ON, ANY TRANSFERRED LOAN.
SECTION 9.2 INDEMNITIES BY THE SERVICER.
(A) WITHOUT LIMITING ANY OTHER RIGHTS THAT ANY SUCH PERSON MAY HAVE
HEREUNDER OR UNDER APPLICABLE LAW, THE SERVICER HEREBY AGREES TO INDEMNIFY EACH
INDEMNIFIED PARTY, FORTHWITH ON DEMAND, FROM AND AGAINST ANY AND ALL INDEMNIFIED
AMOUNTS (CALCULATED WITHOUT DUPLICATION OF INDEMNIFIED AMOUNTS PAID BY THE
BORROWER PURSUANT TO SECTION 9.1 ABOVE) AWARDED AGAINST OR INCURRED BY ANY SUCH
INDEMNIFIED PARTY BY REASON OF ANY ACTS, OMISSIONS OR ALLEGED ACTS OR OMISSIONS
OF THE SERVICER, INCLUDING, BUT NOT LIMITED TO (I) ANY REPRESENTATION OR
WARRANTY MADE BY THE SERVICER UNDER OR IN CONNECTION WITH ANY TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY, ANY MONTHLY REPORT, SERVICER’S CERTIFICATE OR
ANY OTHER INFORMATION OR REPORT DELIVERED BY OR ON BEHALF OF THE SERVICER
PURSUANT HERETO, WHICH SHALL HAVE BEEN FALSE, INCORRECT OR MISLEADING IN ANY
MATERIAL RESPECT WHEN MADE OR DEEMED MADE, (II) THE FAILURE BY THE SERVICER TO
COMPLY WITH ANY APPLICABLE LAW, (III) THE FAILURE OF THE SERVICER TO COMPLY WITH
ITS DUTIES OR OBLIGATIONS IN ACCORDANCE WITH THE AGREEMENT, (IV) ANY LITIGATION,
PROCEEDINGS OR INVESTIGATION AGAINST THE SERVICER, OR (V) THE OCCURRENCE OF A
SUBORDINATION EVENT, EXCLUDING, HOWEVER, (A) INDEMNIFIED AMOUNTS TO THE EXTENT
RESULTING FROM GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF SUCH
INDEMNIFIED PARTY, AND (B) UNDER ANY FEDERAL, STATE OR LOCAL INCOME OR FRANCHISE
TAXES OR ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME (OR ANY INTEREST OR
PENALTIES WITH RESPECT THERETO OR ARISING FROM A FAILURE TO COMPLY THEREWITH)
REQUIRED TO BE PAID BY SUCH INDEMNIFIED PARTY IN CONNECTION HEREWITH TO ANY
TAXING AUTHORITY. THE PROVISIONS OF THIS
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indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. If the Servicer has made any indemnity payment
pursuant to this Section 9.2 and such payment fully indemnified the recipient
thereof and the recipient thereafter collects any payments from others in
respect of such Indemnified Amounts, the recipient shall repay to the Servicer
an amount equal to the amount it has collected from others in respect of such
indemnified amounts.
(B) IF FOR ANY REASON THE INDEMNIFICATION PROVIDED ABOVE IN THIS
SECTION 9.2 IS UNAVAILABLE TO THE INDEMNIFIED PARTY OR IS INSUFFICIENT TO HOLD
AN INDEMNIFIED PARTY HARMLESS, THEN SERVICER SHALL CONTRIBUTE TO THE AMOUNT PAID
OR PAYABLE TO SUCH INDEMNIFIED PARTY AS A RESULT OF SUCH LOSS, CLAIM, DAMAGE OR
LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE
BENEFITS RECEIVED BY SUCH INDEMNIFIED PARTY ON THE ONE HAND AND SERVICER ON THE
OTHER HAND BUT ALSO THE RELATIVE FAULT OF SUCH INDEMNIFIED PARTY AS WELL AS ANY
OTHER RELEVANT EQUITABLE CONSIDERATIONS.
(C) THE OBLIGATIONS OF THE SERVICER UNDER THIS SECTION 9.2 SHALL
SURVIVE THE RESIGNATION OR REMOVAL OF THE ADMINISTRATIVE AGENT OR ANY MANAGING
AGENTS AND THE TERMINATION OF THIS AGREEMENT.
(D) THE PARTIES HERETO AGREE THAT THE PROVISIONS OF THIS SECTION 9.2
SHALL NOT BE INTERPRETED TO PROVIDE RECOURSE TO THE SERVICER AGAINST LOSS BY
REASON OF THE BANKRUPTCY OR INSOLVENCY (OR OTHER CREDIT CONDITION) OF, OR
DEFAULT BY, RELATED OBLIGOR ON, ANY TRANSFERRED LOAN.
(E) ANY INDEMNIFICATION PURSUANT TO THIS SECTION 9.2 SHALL NOT BE
PAYABLE FROM THE COLLATERAL.
ARTICLE X
THE ADMINISTRATIVE AGENT AND THE MANAGING AGENTS
SECTION 10.1 AUTHORIZATION AND ACTION.
(A) EACH SECURED PARTY HEREBY DESIGNATES AND APPOINTS DB AS
ADMINISTRATIVE AGENT HEREUNDER, AND AUTHORIZES DB TO TAKE SUCH ACTIONS AS AGENT
ON ITS BEHALF AND TO EXERCISE SUCH POWERS AS ARE DELEGATED TO THE ADMINISTRATIVE
AGENT BY THE TERMS OF THIS AGREEMENT TOGETHER WITH SUCH POWERS AS ARE REASONABLY
INCIDENTAL THERETO. THE ADMINISTRATIVE AGENT SHALL NOT HAVE ANY DUTIES OR
RESPONSIBILITIES, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN, OR ANY FIDUCIARY
RELATIONSHIP WITH ANY SECURED PARTY, AND NO IMPLIED COVENANTS, FUNCTIONS,
RESPONSIBILITIES, DUTIES, OBLIGATIONS OR LIABILITIES ON THE PART OF THE
ADMINISTRATIVE AGENT SHALL BE READ INTO THIS AGREEMENT OR OTHERWISE EXIST FOR
THE ADMINISTRATIVE AGENT. IN PERFORMING ITS FUNCTIONS AND DUTIES HEREUNDER, THE
ADMINISTRATIVE AGENT SHALL ACT SOLELY AS AGENT FOR THE SECURED PARTIES AND DOES
NOT ASSUME NOR SHALL BE DEEMED TO HAVE ASSUMED ANY OBLIGATION OR RELATIONSHIP OF
TRUST OR AGENCY WITH OR FOR THE BORROWER OR ANY OF ITS SUCCESSORS OR ASSIGNS.
THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO TAKE ANY ACTION THAT EXPOSES
THE ADMINISTRATIVE AGENT TO PERSONAL LIABILITY OR THAT IS CONTRARY TO THIS
AGREEMENT OR APPLICABLE LAW. THE APPOINTMENT AND AUTHORITY OF THE
ADMINISTRATIVE AGENT HEREUNDER SHALL TERMINATE AT THE INDEFEASIBLE PAYMENT IN
FULL OF THE OBLIGATIONS.
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(B) EACH LENDER HEREBY DESIGNATES AND APPOINTS THE MANAGING AGENT FOR
SUCH LENDER’S LENDER GROUP AS ITS MANAGING AGENT HEREUNDER, AND AUTHORIZES SUCH
MANAGING AGENT TO TAKE SUCH ACTIONS AS AGENT ON ITS BEHALF AND TO EXERCISE SUCH
POWERS AS ARE DELEGATED TO THE MANAGING AGENTS BY THE TERMS OF THIS AGREEMENT
TOGETHER WITH SUCH POWERS AS ARE REASONABLY INCIDENTAL THERETO. NO MANAGING
AGENT SHALL HAVE ANY DUTIES OR RESPONSIBILITIES, EXCEPT THOSE EXPRESSLY SET
FORTH HEREIN, OR ANY FIDUCIARY RELATIONSHIP WITH ANY LENDER, AND NO IMPLIED
COVENANTS, FUNCTIONS, RESPONSIBILITIES, DUTIES, OBLIGATIONS OR LIABILITIES ON
THE PART OF THE APPLICABLE MANAGING AGENT SHALL BE READ INTO THIS AGREEMENT OR
OTHERWISE EXIST FOR THE APPLICABLE MANAGING AGENT. IN PERFORMING ITS FUNCTIONS
AND DUTIES HEREUNDER, EACH MANAGING AGENT SHALL ACT SOLELY AS AGENT FOR THE
LENDERS IN THE RELATED LENDER GROUP AND DOES NOT ASSUME NOR SHALL BE DEEMED TO
HAVE ASSUMED ANY OBLIGATION OR RELATIONSHIP OF TRUST OR AGENCY WITH OR FOR THE
BORROWER OR ANY OF ITS SUCCESSORS OR ASSIGNS. NO MANAGING AGENT SHALL BE
REQUIRED TO TAKE ANY ACTION THAT EXPOSES IT TO PERSONAL LIABILITY OR THAT IS
CONTRARY TO THIS AGREEMENT OR APPLICABLE LAW. THE APPOINTMENT AND AUTHORITY OF
EACH MANAGING AGENT HEREUNDER SHALL TERMINATE AT THE INDEFEASIBLE PAYMENT IN
FULL OF THE OBLIGATIONS.
SECTION 10.2 DELEGATION OF DUTIES.
(A) THE ADMINISTRATIVE AGENT MAY EXECUTE ANY OF ITS DUTIES UNDER THIS
AGREEMENT BY OR THROUGH AGENTS OR ATTORNEYS-IN-FACT AND SHALL BE ENTITLED TO
ADVICE OF COUNSEL CONCERNING ALL MATTERS PERTAINING TO SUCH DUTIES. THE
ADMINISTRATIVE AGENT SHALL NOT BE RESPONSIBLE FOR THE NEGLIGENCE OR MISCONDUCT
OF ANY AGENTS OR ATTORNEYS-IN-FACT SELECTED BY IT WITH REASONABLE CARE.
(B) EACH MANAGING AGENT MAY EXECUTE ANY OF ITS DUTIES UNDER THIS
AGREEMENT BY OR THROUGH AGENTS OR ATTORNEYS-IN-FACT AND SHALL BE ENTITLED TO
ADVICE OF COUNSEL CONCERNING ALL MATTERS PERTAINING TO SUCH DUTIES. NO MANAGING
AGENT SHALL BE RESPONSIBLE FOR THE NEGLIGENCE OR MISCONDUCT OF ANY AGENTS OR
ATTORNEYS-IN-FACT SELECTED BY IT WITH REASONABLE CARE.
SECTION 10.3 EXCULPATORY PROVISIONS.
(A) NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES SHALL BE (I) LIABLE FOR ANY ACTION LAWFULLY TAKEN
OR OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT
(EXCEPT FOR ITS, THEIR OR SUCH PERSON’S OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OR, IN THE CASE OF THE ADMINISTRATIVE AGENT, THE BREACH OF ITS
OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT), OR (II) RESPONSIBLE IN ANY
MANNER TO ANY OF THE SECURED PARTIES FOR ANY RECITALS, STATEMENTS,
REPRESENTATIONS OR WARRANTIES MADE BY THE BORROWER CONTAINED IN THIS AGREEMENT
OR IN ANY CERTIFICATE, REPORT, STATEMENT OR OTHER DOCUMENT REFERRED TO OR
PROVIDED FOR IN, OR RECEIVED UNDER OR IN CONNECTION WITH, THIS AGREEMENT FOR THE
VALUE, VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR SUFFICIENCY OF
THIS AGREEMENT OR ANY OTHER DOCUMENT FURNISHED IN CONNECTION HEREWITH, OR FOR
ANY FAILURE OF THE BORROWER TO PERFORM ITS OBLIGATIONS HEREUNDER, OR FOR THE
SATISFACTION OF ANY CONDITION SPECIFIED IN ARTICLE III. THE ADMINISTRATIVE
AGENT SHALL NOT BE UNDER ANY OBLIGATION TO ANY SECURED PARTY TO ASCERTAIN OR TO
INQUIRE AS TO THE OBSERVANCE OR PERFORMANCE OF ANY OF THE AGREEMENTS OR
COVENANTS CONTAINED IN, OR CONDITIONS OF, THIS AGREEMENT, OR TO INSPECT THE
PROPERTIES, BOOKS OR RECORDS OF THE BORROWER. THE ADMINISTRATIVE AGENT SHALL
NOT BE DEEMED TO HAVE KNOWLEDGE OF ANY EARLY TERMINATION EVENT UNLESS THE
ADMINISTRATIVE AGENT HAS RECEIVED NOTICE OF SUCH EARLY TERMINATION EVENT, IN A
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document or other written communication titled “Notice of Early Termination
Event” from the Borrower or a Secured Party.
(B) NEITHER ANY MANAGING AGENT NOR ANY OF ITS RESPECTIVE DIRECTORS,
OFFICERS, AGENTS OR EMPLOYEES SHALL BE (I) LIABLE FOR ANY ACTION LAWFULLY TAKEN
OR OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT
(EXCEPT FOR ITS, THEIR OR SUCH PERSON’S OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OR, IN THE CASE OF A MANAGING AGENT, THE BREACH OF ITS OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT), OR (II) RESPONSIBLE IN ANY MANNER TO THE
ADMINISTRATIVE AGENT OR ANY OF THE SECURED PARTIES FOR ANY RECITALS, STATEMENTS,
REPRESENTATIONS OR WARRANTIES MADE BY THE BORROWER CONTAINED IN THIS AGREEMENT
OR IN ANY CERTIFICATE, REPORT, STATEMENT OR OTHER DOCUMENT REFERRED TO OR
PROVIDED FOR IN, OR RECEIVED UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR FOR
THE VALUE, VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR SUFFICIENCY
OF THIS AGREEMENT OR ANY OTHER DOCUMENT FURNISHED IN CONNECTION HEREWITH, OR FOR
ANY FAILURE OF THE BORROWER TO PERFORM ITS OBLIGATIONS HEREUNDER, OR FOR THE
SATISFACTION OF ANY CONDITION SPECIFIED IN ARTICLE III. NO MANAGING AGENT SHALL
BE UNDER ANY OBLIGATION TO THE ADMINISTRATIVE AGENT OR ANY SECURED PARTY TO
ASCERTAIN OR TO INQUIRE AS TO THE OBSERVANCE OR PERFORMANCE OF ANY OF THE
AGREEMENTS OR COVENANTS CONTAINED IN, OR CONDITIONS OF, THIS AGREEMENT, OR TO
INSPECT THE PROPERTIES, BOOKS OR RECORDS OF THE BORROWER. NO MANAGING AGENT
SHALL BE DEEMED TO HAVE KNOWLEDGE OF ANY EARLY TERMINATION EVENT UNLESS SUCH
MANAGING AGENT HAS RECEIVED NOTICE OF SUCH EARLY TERMINATION EVENT, IN A
DOCUMENT OR OTHER WRITTEN COMMUNICATION TITLED “NOTICE OF EARLY TERMINATION
EVENT” FROM THE BORROWER, THE ADMINISTRATIVE AGENT OR A SECURED PARTY.
SECTION 10.4 RELIANCE.
(A) THE ADMINISTRATIVE AGENT SHALL IN ALL CASES BE ENTITLED TO RELY,
AND SHALL BE FULLY PROTECTED IN RELYING, UPON ANY DOCUMENT OR CONVERSATION
BELIEVED BY IT TO BE GENUINE AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE
BY THE PROPER PERSON OR PERSONS AND UPON ADVICE AND STATEMENTS OF LEGAL COUNSEL
(INCLUDING, WITHOUT LIMITATION, COUNSEL TO THE BORROWER), INDEPENDENT
ACCOUNTANTS AND OTHER EXPERTS SELECTED BY THE ADMINISTRATIVE AGENT. THE
ADMINISTRATIVE AGENT SHALL IN ALL CASES BE FULLY JUSTIFIED IN FAILING OR
REFUSING TO TAKE ANY ACTION UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT FURNISHED
IN CONNECTION HEREWITH UNLESS IT SHALL FIRST RECEIVE SUCH ADVICE OR CONCURRENCE
OF THE REQUIRED COMMITTED LENDERS OR ALL OF THE SECURED PARTIES, AS APPLICABLE,
AS IT DEEMS APPROPRIATE OR IT SHALL FIRST BE INDEMNIFIED TO ITS SATISFACTION BY
THE LENDERS, PROVIDED, THAT, UNLESS AND UNTIL THE ADMINISTRATIVE AGENT SHALL
HAVE RECEIVED SUCH ADVICE, THE ADMINISTRATIVE AGENT MAY TAKE OR REFRAIN FROM
TAKING ANY ACTION, AS THE ADMINISTRATIVE AGENT SHALL DEEM ADVISABLE AND IN THE
BEST INTERESTS OF THE SECURED PARTIES. THE ADMINISTRATIVE AGENT SHALL IN ALL
CASES BE FULLY PROTECTED IN ACTING, OR IN REFRAINING FROM ACTING, IN ACCORDANCE
WITH A REQUEST OF THE REQUIRED COMMITTED LENDERS OR ALL OF THE SECURED PARTIES,
AS APPLICABLE, AND SUCH REQUEST AND ANY ACTION TAKEN OR FAILURE TO ACT PURSUANT
THERETO SHALL BE BINDING UPON ALL THE SECURED PARTIES.
(B) EACH MANAGING AGENT SHALL IN ALL CASES BE ENTITLED TO RELY, AND
SHALL BE FULLY PROTECTED IN RELYING, UPON ANY DOCUMENT OR CONVERSATION BELIEVED
BY IT TO BE GENUINE AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE BY THE
PROPER PERSON OR PERSONS AND UPON ADVICE AND STATEMENTS OF LEGAL COUNSEL
(INCLUDING, WITHOUT LIMITATION, COUNSEL TO THE BORROWER), INDEPENDENT
ACCOUNTANTS AND OTHER EXPERTS SELECTED BY SUCH MANAGING AGENT. EACH MANAGING
AGENT SHALL IN
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all cases be fully justified in failing or refusing to take any action under
this Agreement or any other document furnished in connection herewith unless it
shall first receive such advice or concurrence of the Committed Lenders in its
related Lender Group as it deems appropriate or it shall first be indemnified to
its satisfaction by the Committed Lenders in its related Lender Group, provided
that unless and until such Managing Agent shall have received such advice, the
Managing Agent may take or refrain from taking any action, as the Managing Agent
shall deem advisable and in the best interests of the Lenders in its Lender
Group. Each Managing Agent shall in all cases be fully protected in acting, or
in refraining from acting, in accordance with a request of the Committed Lenders
in such Managing Agent’s Lender Group and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders in such
Managing Agent’s Lender Group.
SECTION 10.5 NON-RELIANCE ON ADMINISTRATIVE AGENT,
MANAGING AGENTS AND OTHER LENDERS.
Each Secured Party expressly acknowledges that neither the Administrative Agent,
any other Secured Party nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Administrative Agent or any other
Secured Party hereafter taken, including, without limitation, any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent or any other Secured Party. Each Secured
Party represents and warrants to the Administrative Agent and to each other
Secured Party that it has and will, independently and without reliance upon the
Administrative Agent or any other Secured Party and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to enter into this Agreement
SECTION 10.6 REIMBURSEMENT AND INDEMNIFICATION.
The Committed Lenders agree to reimburse and indemnify the Administrative Agent,
and the Committed Lenders in each Lender Group agree to reimburse the Managing
Agent for such Lender Group, and their respective officers, directors,
employees, representatives and agents ratably according to their Commitments, as
applicable, to the extent not paid or reimbursed by the Borrower (i) for any
amounts for which the Administrative Agent, acting in its capacity as
Administrative Agent, or any Managing Agent, acting in its capacity as a
Managing Agent, is entitled to reimbursement by the Borrower hereunder and (ii)
for any other expenses incurred by the Administrative Agent, in its capacity as
Administrative Agent, or any Managing Agent, acting in its capacity as a
Managing Agent, and acting on behalf of the related Lenders, in connection with
the administration and enforcement of this Agreement and the other Transaction
Documents.
SECTION 10.7 ADMINISTRATIVE AGENT AND MANAGING AGENTS
IN THEIR INDIVIDUAL CAPACITIES.
The Administrative Agent, each Managing Agent and each of their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the
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Borrower or any Affiliate of the Borrower as though the Administrative Agent or
such Managing Agent, as the case may be, were not the Administrative Agent or a
Managing Agent, as the case may be, hereunder. With respect to the acquisition
of Advances pursuant to this Agreement, the Administrative Agent, each Managing
Agent and each of their respective Affiliates shall have the same rights and
powers under this Agreement as any Lender and may exercise the same as though it
were not the Administrative Agent or a Managing Agent, as the case may be, and
the terms “Committed Lender” “Lender” “Committed Lenders” and “Lenders” shall
include the Administrative Agent or a Managing Agent, as the case may be, in its
individual capacity.
SECTION 10.8 SUCCESSOR ADMINISTRATIVE AGENT OR
MANAGING AGENT.
(A) THE ADMINISTRATIVE AGENT MAY, UPON FIVE (5) DAYS’ NOTICE TO THE
BORROWER AND THE SECURED PARTIES, AND THE ADMINISTRATIVE AGENT WILL, UPON THE
DIRECTION OF ALL OF THE LENDERS RESIGN AS ADMINISTRATIVE AGENT. IF THE
ADMINISTRATIVE AGENT SHALL RESIGN, THEN THE REQUIRED COMMITTED LENDERS DURING
SUCH FIVE (5) DAY PERIOD SHALL APPOINT FROM AMONG THE SECURED PARTIES A
SUCCESSOR AGENT. IF FOR ANY REASON NO SUCCESSOR ADMINISTRATIVE AGENT IS
APPOINTED BY THE REQUIRED COMMITTED LENDERS DURING SUCH FIVE (5) DAY PERIOD,
THEN EFFECTIVE UPON THE EXPIRATION OF SUCH FIVE (5) DAY PERIOD, THE SECURED
PARTIES SHALL PERFORM ALL OF THE DUTIES OF THE ADMINISTRATIVE AGENT HEREUNDER
AND THE BORROWER SHALL MAKE ALL PAYMENTS IN RESPECT OF THE OBLIGATIONS OR UNDER
THE FEE LETTER DELIVERED BY THE BORROWER TO THE ADMINISTRATIVE AGENT AND THE
SECURED PARTIES DIRECTLY TO THE APPLICABLE MANAGING AGENTS, ON BEHALF OF THE
LENDERS IN THE APPLICABLE LENDER GROUP AND FOR ALL PURPOSES SHALL DEAL DIRECTLY
WITH THE SECURED PARTIES. AFTER ANY RETIRING ADMINISTRATIVE AGENT’S RESIGNATION
HEREUNDER AS ADMINISTRATIVE AGENT, THE PROVISIONS OF ARTICLE IX AND ARTICLE X
SHALL INURE TO ITS BENEFIT AS TO ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT
WHILE IT WAS ADMINISTRATIVE AGENT UNDER THIS AGREEMENT.
(B) ANY MANAGING AGENT MAY, UPON FIVE (5) DAYS’ NOTICE TO THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE RELATED LENDERS, AND ANY MANAGING
AGENT WILL, UPON THE DIRECTION OF ALL OF THE RELATED COMMITTED LENDERS RESIGN AS
A MANAGING AGENT. IF A MANAGING AGENT SHALL RESIGN, THEN THE RELATED COMMITTED
LENDERS DURING SUCH FIVE (5) DAY PERIOD SHALL APPOINT FROM AMONG THE RELATED
COMMITTED LENDERS A SUCCESSOR MANAGING AGENT. IF FOR ANY REASON NO SUCCESSOR
MANAGING AGENT IS APPOINTED BY SUCH COMMITTED LENDERS DURING SUCH FIVE (5) DAY
PERIOD, THEN EFFECTIVE UPON THE EXPIRATION OF SUCH FIVE (5) DAY PERIOD, SUCH
COMMITTED LENDERS SHALL PERFORM ALL OF THE DUTIES OF THE RELATED MANAGING AGENT
HEREUNDER. AFTER ANY RETIRING MANAGING AGENT’S RESIGNATION HEREUNDER AS A
MANAGING AGENT, THE PROVISIONS OF ARTICLE IX AND ARTICLE X SHALL INURE TO ITS
BENEFIT AS TO ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS A
MANAGING AGENT UNDER THIS AGREEMENT.
ARTICLE XI
ASSIGNMENTS; PARTICIPATIONS
SECTION 11.1 ASSIGNMENTS AND PARTICIPATIONS.
(A) BORROWER AND EACH COMMITTED LENDER HEREBY AGREE AND CONSENT TO THE
COMPLETE OR PARTIAL ASSIGNMENT BY EACH CP LENDER OF ALL OR ANY PORTION OF ITS
RIGHTS UNDER, INTEREST IN, TITLE TO AND OBLIGATIONS UNDER THIS AGREEMENT (I) TO
ITS LIQUIDITY BANKS PURSUANT TO A LIQUIDITY
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Agreement, (ii) (A) to any other issuer of commercial paper notes sponsored or
administered by the Managing Agent of such CP Lender’s Lender Group or (B) to
any Lender or any Affiliate of a Lender hereunder, or (iii) to any other Person;
provided that, prior to the occurrence of an Early Termination Event, such CP
Lender may not make any such assignment pursuant to this clause (iii), except in
the event that the circumstances described in Section 11.1(c) occur, without the
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed). Upon such assignment, such CP Lender shall be released from its
obligations so assigned. Further, Borrower and each Committed Lender hereby
agree that any assignee of any CP Lender of this Agreement or all or any of the
outstanding Advances of such CP Lender shall have all of the rights and benefits
under this Agreement as if the term “CP Lender” explicitly referred to such
party, and no such assignment shall in any way impair the rights and benefits of
such CP Lender hereunder. Neither Borrower nor the Servicer shall have the
right to assign its rights or obligations under this Agreement.
(B) ANY COMMITTED LENDER MAY AT ANY TIME AND FROM TIME TO TIME ASSIGN
TO ONE OR MORE PERSONS (“PURCHASING COMMITTED LENDERS”) ALL OR ANY PART OF ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT PURSUANT TO AN ASSIGNMENT AGREEMENT,
SUBSTANTIALLY IN THE FORM SET FORTH IN EXHIBIT C HERETO (THE “ASSIGNMENT AND
ACCEPTANCE”) EXECUTED BY SUCH PURCHASING COMMITTED LENDER AND SUCH SELLING
COMMITTED LENDER. THE CONSENT OF THE CP LENDER OR CP LENDERS IN SUCH COMMITTED
LENDER’S LENDER GROUP SHALL BE REQUIRED PRIOR TO THE EFFECTIVENESS OF ANY SUCH
ASSIGNMENT. IN ADDITION, SO LONG AS NO EARLY TERMINATION EVENT OR UNMATURED
TERMINATION EVENT HAS OCCURRED AND IS CONTINUING AT SUCH TIME, THE CONSENT OF
THE BORROWER (SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD OR DELAYED) SHALL BE
REQUIRED PRIOR TO THE EFFECTIVENESS OF ANY SUCH ASSIGNMENT. EACH ASSIGNEE OF A
COMMITTED LENDER MUST BE AN ELIGIBLE ASSIGNEE AND MUST AGREE TO DELIVER TO THE
ADMINISTRATIVE AGENT, PROMPTLY FOLLOWING ANY REQUEST THEREFOR BY THE MANAGING
AGENT FOR ITS LENDER GROUP OR THE AFFECTED CP LENDER OR CP LENDERS, AN
ENFORCEABILITY OPINION IN FORM AND SUBSTANCE SATISFACTORY TO SUCH MANAGING AGENT
AND SUCH CP LENDER OR CP LENDERS. UPON DELIVERY OF THE EXECUTED ASSIGNMENT AND
ACCEPTANCE TO THE ADMINISTRATIVE AGENT, SUCH SELLING COMMITTED LENDER SHALL BE
RELEASED FROM ITS OBLIGATIONS HEREUNDER TO THE EXTENT OF SUCH ASSIGNMENT.
THEREAFTER THE PURCHASING COMMITTED LENDER SHALL FOR ALL PURPOSES BE A COMMITTED
LENDER PARTY TO THIS AGREEMENT AND SHALL HAVE ALL THE RIGHTS AND OBLIGATIONS OF
A COMMITTED LENDER UNDER THIS AGREEMENT TO THE SAME EXTENT AS IF IT WERE AN
ORIGINAL PARTY HERETO AND NO FURTHER CONSENT OR ACTION BY BORROWER, THE LENDERS
OR THE ADMINISTRATIVE AGENT SHALL BE REQUIRED.
(C) EACH OF THE COMMITTED LENDERS AGREES THAT IN THE EVENT THAT IT
SHALL CEASE TO HAVE THE REQUIRED RATINGS (AN “AFFECTED COMMITTED LENDER”), SUCH
AFFECTED COMMITTED LENDER SHALL BE OBLIGED, AT THE REQUEST OF THE CP LENDERS IN
SUCH COMMITTED LENDER’S LENDER GROUP OR THE APPLICABLE MANAGING AGENT, TO ASSIGN
ALL OF ITS RIGHTS AND OBLIGATIONS HEREUNDER TO (X) ANOTHER COMMITTED LENDER OR
(Y) ANOTHER FUNDING ENTITY NOMINATED BY SUCH MANAGING AGENT AND ACCEPTABLE TO
SUCH AFFECTED CP LENDERS, AND WILLING TO PARTICIPATE IN THIS AGREEMENT THROUGH
THE TERMINATION DATE IN THE PLACE OF SUCH AFFECTED COMMITTED LENDER; PROVIDED
THAT THE AFFECTED COMMITTED LENDER RECEIVES PAYMENT IN FULL, PURSUANT TO AN
ASSIGNMENT AGREEMENT, OF AN AMOUNT EQUAL TO SUCH COMMITTED LENDER’S PRO RATA
SHARE OF THE OUTSTANDING ADVANCES AND INTEREST OWING TO THE COMMITTED LENDERS
AND ALL ACCRUED BUT UNPAID FEES AND OTHER COSTS AND EXPENSES PAYABLE IN RESPECT
OF ITS PRO RATA SHARE OF THE OUTSTANDING ADVANCES OF THE COMMITTED LENDERS.
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(D) BY EXECUTING AND DELIVERING AN ASSIGNMENT AND ACCEPTANCE, THE
PURCHASING COMMITTED LENDER THEREUNDER AND THE SELLING COMMITTED LENDER
THEREUNDER CONFIRM TO AND AGREE WITH EACH OTHER AND THE OTHER PARTIES HERETO AS
FOLLOWS: (I) OTHER THAN AS PROVIDED IN SUCH ASSIGNMENT AND ACCEPTANCE, SUCH
SELLING COMMITTED LENDER MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO
RESPONSIBILITY WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS
MADE IN OR IN CONNECTION WITH THIS AGREEMENT OR THE EXECUTION, LEGALITY,
VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THIS AGREEMENT OR
ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO; (II) SUCH SELLING
COMMITTED LENDER MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO
RESPONSIBILITY WITH RESPECT TO THE FINANCIAL CONDITION OF THE RELATED CP LENDER
OR THE PERFORMANCE OR OBSERVANCE BY SUCH CP LENDER OF ANY OF ITS OBLIGATIONS
UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT
HERETO; (III) SUCH PURCHASING COMMITTED LENDER CONFIRMS THAT IT HAS RECEIVED A
COPY OF THIS AGREEMENT, TOGETHER WITH COPIES OF SUCH FINANCIAL STATEMENTS AND
OTHER DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE TO MAKE ITS OWN
CREDIT ANALYSIS AND DECISION TO ENTER INTO SUCH ASSIGNMENT AND ACCEPTANCE; (IV)
SUCH PURCHASING COMMITTED LENDER WILL, INDEPENDENTLY AND WITHOUT RELIANCE UPON
THE ADMINISTRATIVE AGENT OR ANY MANAGING AGENT, THE SELLING COMMITTED LENDER OR
ANY OTHER COMMITTED LENDER AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT
SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN
TAKING OR NOT TAKING ACTION UNDER THIS AGREEMENT; (V) SUCH PURCHASING COMMITTED
LENDER AND SUCH SELLING COMMITTED LENDER CONFIRM THAT SUCH PURCHASING COMMITTED
LENDER IS AN ELIGIBLE ASSIGNEE; (VI) SUCH PURCHASING COMMITTED LENDER APPOINTS
AND AUTHORIZES EACH OF THE ADMINISTRATIVE AGENT AND THE APPLICABLE MANAGING
AGENT TO TAKE SUCH ACTION AS AGENT ON ITS BEHALF AND TO EXERCISE SUCH POWERS
UNDER THIS AGREEMENT AS ARE DELEGATED TO SUCH AGENT BY THE TERMS HEREOF,
TOGETHER WITH SUCH POWERS AS ARE REASONABLY INCIDENTAL THERETO; AND (VII) SUCH
PURCHASING COMMITTED LENDER AGREES THAT IT WILL PERFORM IN ACCORDANCE WITH THEIR
TERMS ALL OF THE OBLIGATIONS WHICH BY THE TERMS OF THIS AGREEMENT ARE REQUIRED
TO BE PERFORMED BY IT AS A COMMITTED LENDER.
(E) THE ADMINISTRATIVE AGENT SHALL MAINTAIN AT ITS ADDRESS REFERRED TO
HEREIN A COPY OF EACH ASSIGNMENT AND ACCEPTANCE DELIVERED TO AND ACCEPTED BY IT
AND A REGISTER FOR THE RECORDATION OF THE NAMES AND ADDRESSES OF THE COMMITTED
LENDERS AND THE COMMITMENT OF, AND PRINCIPAL AMOUNT OF, EACH ADVANCE OWNED BY
EACH COMMITTED LENDER FROM TIME TO TIME (THE “REGISTER”). THE ENTRIES IN THE
REGISTER SHALL BE CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST
ERROR, AND THE LENDERS, THE BORROWER AND THE MANAGING AGENTS MAY TREAT EACH
PERSON WHOSE NAME IS RECORDED IN THE REGISTER AS A COMMITTED LENDER HEREUNDER
FOR ALL PURPOSES OF THIS AGREEMENT. THE REGISTER SHALL BE AVAILABLE FOR
INSPECTION BY THE LENDERS, ANY MANAGING AGENT OR THE BORROWER AT ANY REASONABLE
TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR NOTICE.
(F) SUBJECT TO THE PROVISIONS OF THIS SECTION 11.1, UPON THEIR
RECEIPT OF AN ASSIGNMENT AND ACCEPTANCE EXECUTED BY AN SELLING COMMITTED LENDER
AND AN PURCHASING COMMITTED LENDER, THE ADMINISTRATIVE AGENT SHALL, IF SUCH
ASSIGNMENT AND ACCEPTANCE HAS BEEN COMPLETED AND IS IN SUBSTANTIALLY THE FORM OF
EXHIBIT C HERETO, ACCEPT SUCH ASSIGNMENT AND ACCEPTANCE, AND THE ADMINISTRATIVE
AGENT SHALL THEN (I) RECORD THE INFORMATION CONTAINED THEREIN IN THE REGISTER
AND (II) GIVE PROMPT NOTICE THEREOF TO EACH MANAGING AGENT.
(G) ANY COMMITTED LENDER MAY, IN THE ORDINARY COURSE OF ITS BUSINESS
AT ANY TIME SELL TO ONE OR MORE PERSONS (EACH A “PARTICIPANT”) PARTICIPATING
INTERESTS IN ITS PRO-RATA SHARE OF THE ADVANCES OF THE COMMITTED LENDERS OR ANY
OTHER INTEREST OF SUCH COMMITTED LENDER
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hereunder. Notwithstanding any such sale by a Committed Lender of a
participating interest to a Participant, such Committed Lender’s rights and
obligations under this Agreement shall remain unchanged, such Committed Lender
shall remain solely responsible for the performance of its obligations
hereunder, and the Borrower, the CP Lenders, the Managing Agents and the
Administrative Agent shall continue to deal solely and directly with such
Committed Lender in connection with such Committed Lender’s rights and
obligations under this Agreement. Each Committed Lender agrees that any
agreement between such Committed Lender and any such Participant in respect of
such participating interest shall not restrict such Committed Lender’s right to
agree to any amendment, supplement, waiver or modification to this Agreement,
except for any amendment, supplement, waiver or modification set forth in
Section 12.1 of this Agreement.
(H) EACH COMMITTED LENDER MAY, IN CONNECTION WITH ANY ASSIGNMENT OR
PARTICIPATION OR PROPOSED ASSIGNMENT OR PARTICIPATION PURSUANT TO THIS SECTION
11.1, DISCLOSE TO THE ASSIGNEE OR PARTICIPANT OR PROPOSED ASSIGNEE OR
PARTICIPANT ANY INFORMATION RELATING TO THE BORROWER OR SERVICER FURNISHED TO
SUCH COMMITTED LENDER BY OR ON BEHALF OF THE BORROWER OR THE SERVICER.
(I) NOTHING HEREIN SHALL PROHIBIT ANY COMMITTED LENDER FROM PLEDGING
OR ASSIGNING AS COLLATERAL ANY OF ITS RIGHTS UNDER THIS AGREEMENT TO ANY FEDERAL
RESERVE BANK IN ACCORDANCE WITH APPLICABLE LAW AND ANY SUCH PLEDGE OR COLLATERAL
ASSIGNMENT MAY BE MADE WITHOUT COMPLIANCE WITH SECTION 11.1(A) OR SECTION
11.1(B).
(J) IN THE EVENT ANY COMMITTED LENDER CAUSES INCREASED COSTS,
EXPENSES OR TAXES TO BE INCURRED BY THE ADMINISTRATIVE AGENT, MANAGING AGENTS OR
THE RELATED CP LENDER IN CONNECTION WITH THE ASSIGNMENT OR PARTICIPATION OF SUCH
COMMITTED LENDER’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT TO AN ELIGIBLE
ASSIGNEE THEN SUCH COMMITTED LENDER AGREES THAT IT WILL MAKE REASONABLE EFFORTS
TO ASSIGN SUCH INCREASED COSTS, EXPENSES OR TAXES TO SUCH ELIGIBLE ASSIGNEE IN
ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT.
SECTION 11.2 ADDITIONAL LENDER GROUPS.
Upon the Borrower’s request, with the consent of the Administrative Agent, an
additional Lender Group may be added to this Agreement at any time by the
execution and delivery of a Joinder Agreement by the members of such proposed
additional Lender Group, the Borrower, the Servicer and the Administrative
Agent, which execution and delivery shall not be unreasonably refused by such
parties. Upon the effective date of such Joinder Agreement, (i) each Person
specified therein as a “CP Lender” shall become a party hereto as a CP Lender,
entitled to the rights and subject to the obligations of a CP Lender hereunder,
(ii) each Person specified therein as a “Committed Lender” shall become a party
hereto as a Committed Lender, entitled to the rights and subject to the
obligations of a Committed Lender hereunder, (iii) each Person specified therein
as a “Managing Agent” shall become a party hereto as a Managing Agent, entitled
to the rights and subject to the obligations of a Managing Agent hereunder and
(iv) the Facility Amount shall be increased by an amount equal to the aggregate
Commitments of the Committed Lenders party to such Joinder Agreement. On or
prior to the effective date of such Joinder Agreement, the Borrower, the
Servicer and the new Managing Agent shall enter into a fee letter for purposes
of setting forth the fees payable to the members of such Lender Group in
connection with this Agreement, which fee letter shall be considered the “Fee
Letter”
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for all purposes of this Agreement. The Administrative Agent shall give each
Lender prompt notice of the addition of any Lender Group.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 AMENDMENTS AND WAIVERS.
Except as provided in this Section 12.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Borrower, the Administrative Agent, the Managing Agents
and the Required Committed Lenders; provided, however, that (i) without the
consent of the Committed Lenders in any Lender Group (other than the Lender
Group to which such Committed Lenders are being added), the Administrative Agent
and the applicable Managing Agent may, with the consent of Borrower, amend this
Agreement solely to add additional Persons as Committed Lenders hereunder, (ii)
any amendment of this Agreement that is solely for the purpose of increasing the
Commitment of a specific Committed Lender may be effected with the written
consent of the Borrower, the Administrative Agent and the affected Committed
Lender, (iii) any amendment waiver or other modification, the effect of which is
to create a commitment by any CP Lender to fund Advances hereunder, shall not be
effective without the consent of such CP Lender, and (iv) the consent of each
affected Lender shall be required to: (A) extend the Commitment Termination Date
or the date of any payment or deposit of Collections by the Borrower or the
Servicer, (B) reduce the amount (other than by reason of the repayment thereof)
or extend the time of payment of Advances Outstanding or reduce the rate or
extend the time of payment of Interest (or any component thereof) or increase
the Group Advance Limit of the related Lender Group, (C) reduce any fee payable
to the Administrative Agent or any Managing Agent for the benefit of the
Lenders, (D) amend, modify or waive any provision of the definition of Required
Committed Lenders or Sections 2.11, 11.1(a), 12.1, 12.9, or 12.10, (E) consent
to or permit the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement, (F) amend or waive any Servicer Termination
Event or Early Termination Event, (G) change the definition of “Borrowing Base,”
“Charged-Off Ratio,” “Default Ratio,” “Eligible Loan” or “Settlement Date,” or
(H) amend or modify any defined term (or any defined term used directly or
indirectly in such defined term) used in clauses (A) through (G) above in a
manner that would circumvent the intention of the restrictions set forth in such
clauses. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
No amendment, waiver or other modification (i) affecting the rights or
obligations of any Hedge Counterparty or (ii) having a material affect on the
rights or obligations of the Collateral Custodian or the Backup Servicer
(including any duties of the Servicer that the Backup Servicer would have to
assume as Successor Servicer) shall be effective against such Person without the
written agreement of such Person. The Borrower or the Servicer on its behalf
will deliver a copy of all waivers and amendments to the Collateral Custodian
and the Backup Servicer.
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SECTION 12.2 NOTICES, ETC.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or hand
delivered, as to each party hereto, at its address set forth under its name on
the signature pages hereof or specified in such party’s Assignment and
Acceptance or Joinder Agreement or at such other address as shall be designated
by such party in a written notice to the other parties hereto. All such notices
and communications shall be effective, upon receipt, or in the case of (a)
notice by mail, five (5) days after being deposited in the United States mail,
first class postage prepaid, (b) notice by telex, when telexed against receipt
of answer back, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to this
Article XII shall not be effective until received with respect to any notice
sent by mail or telex.
SECTION 12.3 NO WAIVER, RIGHTS AND REMEDIES.
No failure on the part of the Administrative Agent or any Secured Party or any
assignee of any Secured Party to exercise, and no delay in exercising, any right
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies
herein provided are cumulative and not exclusive of any rights and remedies
provided by law.
SECTION 12.4 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Administrative Agent, the Secured Parties and their respective successors
and permitted assigns and, in addition, the provisions of Section 2.8 shall
inure to the benefit of each Hedge Counterparty, whether or not that Hedge
Counterparty is a Secured Party, and the provisions relating to the Backup
Servicer, including Sections 2.8, 7.18, 9.1 and 9.2 shall inure to the benefit
of the Backup Servicer.
SECTION 12.5 TERM OF THIS AGREEMENT.
This Agreement, including, without limitation, the Borrower’s obligation to
observe its covenants set forth in Article V, and the Servicer’s obligation to
observe its covenants set forth in Article VII, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Borrower pursuant to Articles III and IV and the
indemnification and payment provisions of Article IX and Article X and the
provisions of Section 12.9 and Section 12.10 shall be continuing and shall
survive any termination of this Agreement.
SECTION 12.6 GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF OBJECTION TO VENUE.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE SECURED PARTIES, THE BORROWER AND THE
ADMINISTRATIVE AGENT HEREBY
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AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE
STATE OF NEW YORK. EACH OF THE PARTIES HERETO AND EACH SECURED PARTY HEREBY
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE
OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.
SECTION 12.7 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES, THE
BORROWER AND THE ADMINISTRATIVE AGENT WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 12.8 COSTS, EXPENSES AND TAXES.
(A) IN ADDITION TO THE RIGHTS OF INDEMNIFICATION GRANTED TO THE
ADMINISTRATIVE AGENT, THE MANAGING AGENTS, THE OTHER SECURED PARTIES AND ITS OR
THEIR AFFILIATES AND OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS THEREOF UNDER
ARTICLE IX HEREOF, THE BORROWER AGREES TO PAY ON DEMAND ALL REASONABLE COSTS AND
EXPENSES OF THE ADMINISTRATIVE AGENT, THE MANAGING AGENTS AND THE OTHER SECURED
PARTIES INCURRED IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION (INCLUDING PERIODIC AUDITING), AMENDMENT OR MODIFICATION OF, OR
ANY WAIVER OR CONSENT ISSUED IN CONNECTION WITH, THIS AGREEMENT AND THE OTHER
DOCUMENTS TO BE DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND OUT-OF-POCKET EXPENSES OF COUNSEL
FOR THE ADMINISTRATIVE AGENT, THE MANAGING AGENTS AND THE OTHER SECURED PARTIES
WITH RESPECT THERETO AND WITH RESPECT TO ADVISING THE ADMINISTRATIVE AGENT, THE
MANAGING AGENTS AND THE OTHER SECURED PARTIES AS TO THEIR RESPECTIVE RIGHTS AND
REMEDIES UNDER THIS AGREEMENT AND THE OTHER DOCUMENTS TO BE DELIVERED HEREUNDER
OR IN CONNECTION HEREWITH, AND ALL COSTS AND EXPENSES, IF ANY (INCLUDING
REASONABLE COUNSEL FEES AND EXPENSES), INCURRED BY THE ADMINISTRATIVE AGENT, THE
MANAGING AGENTS OR THE OTHER SECURED PARTIES IN CONNECTION WITH THE ENFORCEMENT
OF THIS AGREEMENT AND THE OTHER DOCUMENTS TO BE DELIVERED HEREUNDER OR IN
CONNECTION HEREWITH (INCLUDING ANY HEDGE AGREEMENT).
(B) THE BORROWER SHALL PAY ON DEMAND ANY AND ALL STAMP, SALES, EXCISE
AND OTHER TAXES AND FEES PAYABLE OR DETERMINED TO BE PAYABLE IN CONNECTION WITH
THE EXECUTION, DELIVERY, FILING AND RECORDING OF THIS AGREEMENT, THE OTHER
DOCUMENTS TO BE DELIVERED HEREUNDER OR ANY AGREEMENT OR OTHER DOCUMENT PROVIDING
LIQUIDITY SUPPORT, CREDIT ENHANCEMENT OR OTHER SIMILAR SUPPORT TO THE LENDER IN
CONNECTION WITH THIS AGREEMENT OR THE FUNDING OR MAINTENANCE OF ADVANCES
HEREUNDER.
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(C) THE BORROWER SHALL PAY ON DEMAND ALL OTHER COSTS, EXPENSES AND
TAXES (EXCLUDING INCOME TAXES) (“OTHER COSTS”), INCLUDING, WITHOUT LIMITATION,
ALL REASONABLE COSTS AND EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT OR ANY
MANAGING AGENT IN CONNECTION WITH PERIODIC AUDITS OF THE BORROWER’S OR THE
SERVICER’S BOOKS AND RECORDS, WHICH ARE INCURRED AS A RESULT OF THE EXECUTION OF
THIS AGREEMENT.
SECTION 12.9 NO PROCEEDINGS.
Each party hereto (other than the applicable CP Lender) hereby covenants and
agrees that on behalf of itself and each of its affiliates, that prior to the
date which is one year and one (1) day after the payment in full of all
indebtedness for borrowed money of a CP Lender, such party will not institute
against, or join any other Person in instituting against, such CP Lender any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States. The provisions of this Section 12.9 shall survive the
termination of this Agreement.
Each of the parties hereto (other than the Administrative Agent and the Secured
Parties) hereby agrees that it will not institute against, or join any other
Person in instituting against the Borrower any Insolvency Proceeding so long as
there shall not have elapsed one (1) year and one (1) day since the Collection
Date.
SECTION 12.10 RECOURSE AGAINST CERTAIN PARTIES.
(A) NO RECOURSE UNDER OR WITH RESPECT TO ANY OBLIGATION, COVENANT OR
AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE PAYMENT OF ANY FEES OR ANY OTHER
OBLIGATIONS) OF THE ADMINISTRATIVE AGENT, ANY SECURED PARTY AS CONTAINED IN THIS
AGREEMENT OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT ENTERED INTO BY IT
PURSUANT HERETO OR IN CONNECTION HEREWITH SHALL BE HAD AGAINST ANY PERSON OR ANY
MANAGER OR ADMINISTRATOR OF SUCH PERSON OR ANY INCORPORATOR, AFFILIATE,
STOCKHOLDER, OFFICER, EMPLOYEE OR DIRECTOR OF SUCH PERSON OR OF THE BORROWER OR
OF ANY SUCH MANAGER OR ADMINISTRATOR, AS SUCH, BY THE ENFORCEMENT OF ANY
ASSESSMENT OR BY ANY LEGAL OR EQUITABLE PROCEEDING, BY VIRTUE OF ANY STATUTE OR
OTHERWISE.
(B) EACH OF PARTIES HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY
OTHER TRANSACTIONS WITH A CP LENDER HEREUNDER SHALL BE WITHOUT RECOURSE OF ANY
KIND TO SUCH CP LENDER. A CP LENDER SHALL HAVE NO OBLIGATION TO PAY ANY AMOUNTS
OWING HEREUNDER IN EXCESS OF ANY AMOUNT AVAILABLE TO SUCH CP LENDER AFTER PAYING
OR MAKING PROVISION FOR THE PAYMENT OF ANY COMMERCIAL PAPER NOTES OF SUCH CP
LENDER. IN ADDITION, EACH PARTY HERETO AGREES THAT A CP LENDER SHALL HAVE NO
OBLIGATION TO PAY ANY OTHER PARTY, ANY AMOUNTS CONSTITUTING FEES, A
REIMBURSEMENT FOR EXPENSES OR INDEMNITIES (COLLECTIVELY, “EXPENSE CLAIMS”), AND
SUCH EXPENSE CLAIMS SHALL NOT CONSTITUTE A CLAIM AGAINST SUCH CP LENDER (AS
DEFINED IN SECTION 101 OF TITLE 11 OF THE UNITED STATES BANKRUPTCY CODE), UNLESS
OR UNTIL SUCH CP LENDER HAS RECEIVED AMOUNTS SUFFICIENT TO PAY SUCH EXPENSE
CLAIMS AND SUCH AMOUNTS ARE NOT REQUIRED TO PAY THE COMMERCIAL PAPER OF SUCH CP
LENDER.
(C) THE PROVISIONS OF THIS SECTION 12.10 SHALL SURVIVE THE TERMINATION
OF THIS AGREEMENT.
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SECTION 12.11 PROTECTION OF SECURITY INTEREST; APPOINTMENT OF
ADMINISTRATIVE AGENT AS ATTORNEY-IN-FACT.
(A) THE BORROWER SHALL, OR SHALL CAUSE THE SERVICER TO, CAUSE THIS
AGREEMENT, ALL AMENDMENTS HERETO AND/OR ALL FINANCING STATEMENTS AND
CONTINUATION STATEMENTS AND ANY OTHER NECESSARY DOCUMENTS COVERING THE RIGHT,
TITLE AND INTEREST OF THE ADMINISTRATIVE AGENT AS AGENT FOR THE SECURED PARTIES
AND OF THE SECURED PARTIES TO THE COLLATERAL TO BE PROMPTLY RECORDED, REGISTERED
AND FILED, AND AT ALL TIME TO BE KEPT RECORDED, REGISTERED AND FILED, ALL IN
SUCH MANNER AND IN SUCH PLACES AS MAY BE REQUIRED BY LAW FULLY TO PRESERVE AND
PROTECT THE RIGHT, TITLE AND INTEREST OF THE ADMINISTRATIVE AGENT AS AGENT FOR
THE SECURED PARTIES HEREUNDER TO ALL PROPERTY COMPRISING THE COLLATERAL. THE
BORROWER SHALL DELIVER OR, SHALL CAUSE THE SERVICER TO DELIVER, TO THE
ADMINISTRATIVE AGENT FILE-STAMPED COPIES OF, OR FILING RECEIPTS FOR, ANY
DOCUMENT RECORDED, REGISTERED OR FILED AS PROVIDED ABOVE, AS SOON AS AVAILABLE
FOLLOWING SUCH RECORDING, REGISTRATION OR FILING. THE BORROWER AND THE SERVICER
SHALL COOPERATE FULLY IN CONNECTION WITH THE OBLIGATIONS SET FORTH ABOVE AND
WILL EXECUTE ANY AND ALL DOCUMENTS REASONABLY REQUIRED TO FULFILL THE INTENT OF
THIS SECTION 12.11.
(B) THE BORROWER AGREES THAT FROM TIME TO TIME, AT ITS EXPENSE, IT
WILL PROMPTLY EXECUTE AND DELIVER ALL INSTRUMENTS AND DOCUMENTS, AND TAKE ALL
ACTIONS, THAT MAY REASONABLY BE NECESSARY OR DESIRABLE, OR THAT THE
ADMINISTRATIVE AGENT MAY REASONABLY REQUEST, TO PERFECT, PROTECT OR MORE FULLY
EVIDENCE THE SECURITY INTEREST GRANTED TO THE ADMINISTRATIVE AGENT, AS AGENT FOR
THE SECURED PARTIES, IN THE COLLATERAL, OR TO ENABLE THE ADMINISTRATIVE AGENT OR
THE SECURED PARTIES TO EXERCISE AND ENFORCE THEIR RIGHTS AND REMEDIES HEREUNDER.
(C) IF THE BORROWER OR THE SERVICER FAILS TO PERFORM ANY OF ITS
OBLIGATIONS HEREUNDER AFTER FIVE (5) BUSINESS DAYS’ NOTICE FROM THE
ADMINISTRATIVE AGENT, THE ADMINISTRATIVE AGENT OR ANY LENDER MAY (BUT SHALL NOT
BE REQUIRED TO) PERFORM, OR CAUSE PERFORMANCE OF, SUCH OBLIGATION; AND THE
ADMINISTRATIVE AGENT’S OR SUCH LENDER’S REASONABLE COSTS AND EXPENSES INCURRED
IN CONNECTION THEREWITH SHALL BE PAYABLE BY THE BORROWER (IF THE SERVICER THAT
FAILS TO SO PERFORM IS THE BORROWER OR AN AFFILIATE THEREOF) AS PROVIDED IN
ARTICLE IX, AS APPLICABLE. THE BORROWER IRREVOCABLY AUTHORIZES THE
ADMINISTRATIVE AGENT AND APPOINTS THE ADMINISTRATIVE AGENT AS ITS
ATTORNEY-IN-FACT TO ACT ON BEHALF OF THE BORROWER, (I) TO EXECUTE ON BEHALF OF
THE BORROWER AS DEBTOR AND TO FILE FINANCING STATEMENTS NECESSARY OR DESIRABLE
IN THE ADMINISTRATIVE AGENT’S SOLE DISCRETION TO PERFECT AND TO MAINTAIN THE
PERFECTION AND PRIORITY OF THE INTEREST OF THE SECURED PARTIES IN THE COLLATERAL
AND (II) TO FILE A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS AGREEMENT
OR ANY FINANCING STATEMENT WITH RESPECT TO THE COLLATERAL AS A FINANCING
STATEMENT IN SUCH OFFICES AS THE ADMINISTRATIVE AGENT IN ITS SOLE DISCRETION
DEEMS NECESSARY OR DESIRABLE TO PERFECT AND TO MAINTAIN THE PERFECTION AND
PRIORITY OF THE INTERESTS OF THE LENDERS IN THE COLLATERAL. THIS APPOINTMENT IS
COUPLED WITH AN INTEREST AND IS IRREVOCABLE.
(D) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWER WILL,
NOT EARLIER THAN SIX (6) MONTHS AND NOT LATER THAN THREE (3) MONTHS PRIOR TO THE
FIFTH ANNIVERSARY OF THE DATE OF FILING OF THE FINANCING STATEMENT REFERRED TO
IN SECTION 3.1 OR ANY OTHER FINANCING STATEMENT FILED PURSUANT TO THIS AGREEMENT
OR IN CONNECTION WITH ANY ADVANCE HEREUNDER, UNLESS THE COLLECTION DATE SHALL
HAVE OCCURRED:
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(I) EXECUTE AND DELIVER AND FILE OR CAUSE TO BE FILED AN APPROPRIATE
CONTINUATION STATEMENT WITH RESPECT TO SUCH FINANCING STATEMENT; AND
(II) DELIVER OR CAUSE TO BE DELIVERED TO THE ADMINISTRATIVE AGENT AN
OPINION OF THE COUNSEL FOR BORROWER, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE ADMINISTRATIVE AGENT, CONFIRMING AND UPDATING THE OPINION
DELIVERED PURSUANT TO SECTION 3.1 WITH RESPECT TO PERFECTION AND OTHERWISE TO
THE EFFECT THAT THE COLLATERAL HEREUNDER CONTINUES TO BE SUBJECT TO A PERFECTED
SECURITY INTEREST IN FAVOR OF THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED
PARTIES, SUBJECT TO NO OTHER LIENS OF RECORD EXCEPT AS PROVIDED HEREIN OR
OTHERWISE PERMITTED HEREUNDER, WHICH OPINION MAY CONTAIN USUAL AND CUSTOMARY
ASSUMPTIONS, LIMITATIONS AND EXCEPTIONS.
SECTION 12.12 CONFIDENTIALITY.
(A) EACH OF THE ADMINISTRATIVE AGENT, THE MANAGING AGENTS, THE OTHER
SECURED PARTIES AND THE BORROWER SHALL MAINTAIN AND SHALL CAUSE EACH OF ITS
EMPLOYEES AND OFFICERS TO MAINTAIN THE CONFIDENTIALITY OF THE AGREEMENT AND THE
OTHER CONFIDENTIAL PROPRIETARY INFORMATION WITH RESPECT TO THE OTHER PARTIES
HERETO AND THEIR RESPECTIVE BUSINESSES OBTAINED BY IT OR THEM IN CONNECTION WITH
THE STRUCTURING, NEGOTIATING AND EXECUTION OF THE TRANSACTIONS CONTEMPLATED
HEREIN, EXCEPT THAT EACH SUCH PARTY AND ITS OFFICERS AND EMPLOYEES MAY (I)
DISCLOSE SUCH INFORMATION TO ITS EXTERNAL ACCOUNTANTS AND ATTORNEYS AND AS
REQUIRED BY AN APPLICABLE LAW, AS REQUIRED TO BE PUBLICLY FILED WITH SEC, OR AS
REQUIRED BY AN ORDER OF ANY JUDICIAL OR ADMINISTRATIVE PROCEEDING, (II) DISCLOSE
THE EXISTENCE OF THIS AGREEMENT, BUT NOT THE FINANCIAL TERMS THEREOF AND (III)
DISCLOSE THE AGREEMENT AND SUCH INFORMATION IN ANY SUIT, ACTION, PROCEEDING OR
INVESTIGATION (WHETHER IN LAW OR IN EQUITY OR PURSUANT TO ARBITRATION) INVOLVING
AND OF THE LOAN DOCUMENTS OR ANY HEDGING AGREEMENT FOR THE PURPOSE OF DEFENDING
ITSELF, REDUCING ITSELF, REDUCING ITS LIABILITY, OR PROTECTING OR EXERCISING ANY
OF ITS CLAIMS, RIGHTS, REMEDIES, OR INTERESTS UNDER OR IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS OR ANY HEDGING AGREEMENT.
(B) ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE BORROWER
HEREBY CONSENTS TO THE DISCLOSURE OF ANY NONPUBLIC INFORMATION WITH RESPECT TO
IT FOR USE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN AND IN THE
TRANSACTION DOCUMENTS (I) TO THE ADMINISTRATIVE AGENT OR THE SECURED PARTIES BY
EACH OTHER, (II) BY THE ADMINISTRATIVE AGENT OR THE SECURED PARTIES TO ANY
PROSPECTIVE OR ACTUAL ELIGIBLE ASSIGNEE OR PARTICIPANT OF ANY OF THEM OR (III)
BY THE ADMINISTRATIVE AGENT OR THE SECURED PARTIES TO ANY RATING AGENCY,
COMMERCIAL PAPER DEALER OR PROVIDER OF A SURETY, GUARANTY OR CREDIT OR LIQUIDITY
ENHANCEMENT TO A SECURED PARTY AND TO ANY OFFICERS, DIRECTORS, MEMBERS,
EMPLOYEES, OUTSIDE ACCOUNTANTS AND ATTORNEYS OF ANY OF THE FOREGOING, PROVIDED
EACH SUCH PERSON IS INFORMED OF THE CONFIDENTIAL NATURE OF SUCH INFORMATION AND
AGREE TO BE BOUND HEREBY. IN ADDITION, THE SECURED PARTIES AND THE
ADMINISTRATIVE AGENT MAY DISCLOSE ANY SUCH NONPUBLIC INFORMATION PURSUANT TO ANY
LAW, RULE, REGULATION, DIRECTION, REQUEST OR ORDER OF ANY JUDICIAL,
ADMINISTRATIVE OR REGULATORY AUTHORITY OR PROCEEDINGS.
(C) THE BORROWER AND THE SERVICER EACH AGREES THAT IT SHALL NOT (AND
SHALL NOT PERMIT ANY OF ITS AFFILIATES TO) ISSUE ANY NEWS RELEASE OR MAKE ANY
PUBLIC ANNOUNCEMENT PERTAINING TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE TRANSACTION DOCUMENTS WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ADMINISTRATIVE AGENT (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD) UNLESS
SUCH NEWS RELEASE OR PUBLIC ANNOUNCEMENT IS REQUIRED BY LAW, IN WHICH CASE THE
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Borrower or the Servicer shall consult with the Administrative Agent and each
Managing Agent prior to the issuance of such news release or public
announcement. The Borrower and the Servicer each may, however, disclose the
general terms of the transactions contemplated by this Agreement and the
Transaction Documents to trade creditors, suppliers and other similarly-situated
Persons so long as such disclosure is not in the form of a news release or
public announcement.
SECTION 12.13 EXECUTION IN COUNTERPARTS; SEVERABILITY;
INTEGRATION.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby. This Agreement contains the
final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings other than the Fee Letter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
BORROWER:
GLADSTONE BUSINESS INVESTMENT LLC
By
/s/ George Stelljes III
Name: George Stelljes III
Title: President
Gladstone Business Investment LLC
1521 Westbranch Drive, Suite 200
McLean, Virginia 22102
Attention: President
Facsimile No.: (703) 287-5801
Confirmation No.: (703) 286-7000
SERVICER:
GLADSTONE MANAGEMENT CORPORATION
By
/s/ David Gladstone
Name: David Gladstone
Title: Chairman
Gladstone Management Corporation
1521 Westbranch Drive, Suite 200
McLean, Virginia 22102
Attention: Chairman
Facsimile No.: (703) 287-5801
Confirmation No.: (703) 286-7000
S-1
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COMMITTED LENDER:
DEUTSCHE BANK AG, CAYMAN ISLAND BRANCH
By
/s/ Daniel Pietrzak
Name: Daniel Pietrzak
Title: Director
By
/s/ Peter Kim
Name: Peter Kim
Title: Vice President
Commitment: $100,000,000
60 Wall Street
18th Floor
New York, New York 10005
Attention: Tina Gu
Phone:(212) 250-0357
Facsimile: (212) 797-5150
S-2
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CP LENDER:
SARATOGA FUNDING CORP., LLC
By
/s/ Lori Gebron
Name: Lori Gebron
Title: Vice President
SARATOGA FUNDING CORP., LLC
c/o Lord Securities Corporation
48 Wall Street, 27th Floor
New York, NY 10005
Attention: President
Phone: (212) 346-9000
Facsimile: (212) 346-9012
with copies to:
DEUTSCHE BANK AG, NEW YORK BRANCH
60 Wall Street
18th Floor
New York, New York 10005
Attention: Tina Gu
Phone: (212) 250-0357
Facsimile: (212) 797-5150
S-3
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MANAGING AGENT for the Saratoga
Lender Group:
DEUTSCHE BANK AG, NEW YORK BRANCH
By
/s/ Daniel Pietrzak
Name: Daniel Pietrzak
Title: Director
By
/s/ Peter Kim
Name: Peter Kim
Title: Vice President
60 Wall Street
18th Floor
New York, New York 10005
Attention: Tina Gu
Phone:(212) 250-0357
Facsimile: (212) 797-5150
ADMINISTRATIVE AGENT
DEUTSCHE BANK AG, NEW YORK BRANCH
By
/s/ Daniel Pietrzak
Name: Daniel Pietrzak
Title: Director
By
/s/ Peter Kim
Name: Peter Kim
Title: Vice President
60 Wall Street
18th Floor
New York, New York 10005
Attention: Tina Gu
Phone:(212) 250-0357
Facsimile: (212) 797-5150
S-4
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EXHIBIT 10.1
TERMINATION AGREEMENT
This Termination (Agreement) is made and entered into by and between Custom
Switching Technologies, Inc., (CSTi) a California Corporation, and Cognigen
Networks, Inc.(Cognigen), a Colorado corporation.
RECITALS
CSTi and Cognigen are parties to a Master Services Agreement entered into
effective February 1, 2004 (the MSA);
Under the terms of the MSA, CSTi provides those services to Cognigen
identified in Section 2 and Exhibits A-1 and A-2 of the MSA;
CSTi has permitted Cognigen to utilize its telecommunication switching
systems and its telecommunications carrier contracts to provide Cognigen
products to Cognigen customers. The parties dispute whether this permission is
encompassed within the terms of the MSA.
The parties now wish to terminate the MSA.
TERMS
In consideration for the terms of this agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1.
Termination of MSA
1.1
The MSA shall terminate on October 31, 2006 (the Termination Date), without any
penalty or fee to either party. CSTi expressly waives its right to an early
termination fee as provided at section 1(C)(i) of the MSA or to any other
penalties, fees or claims arising from the early termination of the MSA.
1.2.
The parties shall cooperate in the migration of all services provided by CSTi to
Cognigen, whether provided for under the MSA or not, and will use their best
efforts to complete the migration before the Termination Date.
2.
Post-Termination Services
2.1.
After the Termination Date, CSTi shall continue to provide to Cognigen those
services not successfully migrated as of the Termination Date.
2.2.
Should Cognigen not completely switch all of its traffic related to CogniDial or
CogniCall off of CSTi’s equipment by November 30, 2006, CSTi is authorized to:
(i) continue to provide the services called for under the MSA for any such
traffic remaining on CSTi’s equipment after November 30, 2006; (ii) bill
Cognigen pursuant to the MSA for such services and related carrier costs; (iii)
directly collect credit card charges from Cognigen customers related to such
traffic; (iv) deduct any carrier and service charges; and (v) remit any
remaining proceeds to Cognigen with a full accounting thereof.
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2.3.
Absent an agreement, in no event shall CSTi be obligated to provide services to
Cognigen beyond December 31, 2006.
3.
Toll Free Access Numbers. Effective as of the Termination Date, CSTi shall
release to Cognigen the following CogniDial and CogniCall North American toll
free access numbers:
1-877-615-3653 USA 48
1-800-661-1347 USA 48
1-888-883-8418 USA Alaska
1-888-300-9634 USA Hawaii
1-800-441-8608 Canada
1-800-704-5388 Canada
1-800-431-8016 USA 48
1-877-615-3650 USA Alaska
1-888-748-6973 USA Hawaii
1-800-441-8160 USA Canada
CSTi shall not release the international toll free access numbers that have been
utilized by Cognigen customers. Cognigen acknowledges and agrees that effective
the Termination Date, it must obtain international toll free access numbers for
its CogniCall and CogniDial products.
4.
Representations and Warranties. The parties mutually represent and warranty
that:
4.1.
They have carefully read this Agreement, have been given the opportunity to
consult with legal counsel regarding this Agreement and understand the contents
and legal effect of each provision of the Agreement;
4.2.
They have executed this Agreement voluntarily and without any duress or undue
influence; and
4.3.
Outside those express representations and warranties contained within this
Agreement, no representation, warranty, or promise whatsoever, express or
implied, concerning the subject matter hereof and not contained herein, has been
made by either party to induce the other to enter into this Agreement and the
parties have not entered into this Agreement in reliance upon such
representation, warranty or promise.
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5.
Mutual Release and Representations.
5.1
Mutual Release. Except for the obligations of the parties under this Agreement,
the parties agree for themselves, their heirs, executors, administrators,
successors and assigns to forever release and discharge each other and all
related entities, successors, assigns, officers, directors, agents, attorneys,
employees, former employees and consultants from any and all claims, debts,
promises, agreements, demands, causes of action, losses and expenses of every
nature whatsoever, known or unknown, suspected or unsuspected, filed or unfiled,
existing as of the date of this Agreement and relating to the MSA.
With respect to the claims released, the parties hereby waive any rights and
benefits conferred upon them by the provisions of California Civil Code section
1542, which provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR.”
5.2
Representations by CSTi. CSTi represents and warrants to Cognigen that, to the
best of its knowledge, it is not currently in breach of, and as of the date of
this agreement has not breached, the MSA in any material respect.
5.3
Voiding of Cognigen’s Release. The parties acknowledge and agree that CSTi’s
representation and warranty in section 5.2 above is a material inducement to
Cognigen’s release of claims relating to the MSA in section 5.1 above. The
parties further acknowledge and agree that should Cognigen learn of facts or
circumstances giving it a reasonable basis for a good faith belief that CSTi has
breached its representation and warranty in section 5.2, then Cognigen’s release
in section 5.1 shall be null and void with respect to such facts and/or
circumstances.
6.
Jurisdiction. This Agreement shall be deemed to be an agreement made under the
laws of the State of California and for all purposes shall be governed by and
construed in accordance with such laws.
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7.
Venue. All actions brought to enforce the terms of this Agreement or the
performance thereunder shall be brought in the Superior Court for the State of
California, San Luis Obispo County.
8.
Attorneys Fees and Costs. Should an action be brought to enforce the terms of
this Agreement or the performance thereunder, the prevailing party shall be
entitled to its reasonable attorney’s fees and costs.
9.
Entire Agreement. This Agreement contains the entire agreement and understanding
concerning the subject matter of this Agreement and supersedes and replaces all
prior and contemporaneous negotiations and agreements between the parties
hereto, whether written or oral. There are no other agreements, representations
or warranties, written or oral, by any party hereto to any other party hereto
concerning the subject matter of this Agreement. Any amendment, modification or
change to this Agreement shall not be binding unless set forth in a writing duly
executed by all parties to be bound or affected by such amendment, modification
or change.
10.
Counterparts. This Agreement may be signed by the parties in counterpart
originals.
The undersigned represent and warrant that they have been duly authorized
to execute this Agreement and bind their respective party. The Agreement is
effective as of the last date set forth below.
Dated: September 8, 2006 Cognigen Networks, Inc.
By: /s/ Gary Cook Gary Cook
Acting President
Dated: September 8, 2006 Custom Switching Technologies, Inc.
By: /s/ Jimmy Boswell Jimmy Boswell
President and CEO
4
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|
Exhibit 10.3
[FORM OF EMPLOYEE STOCK APPRECIATION RIGHT AWARD AGREEMENT (TIME VESTED)]
STOCK APPRECIATION RIGHT AWARD AGREEMENT UNDER THE DREAMWORKS ANIMATION SKG,
INC., 2004 OMNIBUS INCENTIVE COMPENSATION PLAN dated as of «Month» «Day»,
«Year», between DreamWorks Animation SKG, Inc. (the “Company”), a Delaware
Corporation, and «First» «Last».
This Stock Appreciation Right Award Agreement (the “Award Agreement”) sets forth
the terms and conditions of an award (the “Award”) of stock appreciation rights
(“SARs”) that are granted to you under the DreamWorks Animation SKG, Inc., 2004
Omnibus Incentive Compensation Plan (the “Plan”). The number of SARs subject to
this Award is «SARs», at a price per Share of $«Exercise_Price» (the “Exercise
Price”). A SAR constitutes an unfunded and unsecured promise of the Company to
deliver (or cause to be delivered) to you, subject to the terms of this Award
Agreement, whole shares of the Company’s Class A Common Stock, $0.01 par value
(a “Share”), at the time such SAR vests and is exercised, as provided herein,
equal in value to the excess, if any, of the Fair Market Value per Share over
the Exercise Price per Share of the SAR. (Fractional shares will not be
delivered and the number of Shares to be delivered upon any exercise by you of
SARs subject to this Award shall be rounded down to the nearest whole Share.)
Until such delivery, you have only the rights of a general unsecured creditor
and no rights as a shareholder of the Company.
THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE DISPUTE RESOLUTION PROVISIONS SET
FORTH IN SECTION 10. BY SIGNING YOUR NAME BELOW, YOU WILL HAVE CONFIRMED YOUR
ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT.
SECTION 1. The Plan. This Award is made pursuant to the Plan, all the terms of
which are hereby incorporated in this Award Agreement. In the event of any
conflict between the terms of the Plan and the terms of this Award Agreement,
the terms of this Award Agreement shall govern. In the event of any conflict
between the terms of this Award Agreement and the terms of any individual
employment agreement between you and the Company or any of its Affiliates (an
“Employment Agreement”), the terms of your Employment Agreement will govern.
SECTION 2. Definitions. Capitalized terms used in this Award Agreement that are
not defined in this Award Agreement have the meanings as used or defined in the
Plan. As used in this Award Agreement, the following terms have the meanings set
forth below:
“Business Day” means a day that is not a Saturday, a Sunday or a day on which
banking institutions are legally permitted to be closed in the City of New York.
“Vesting Date” means the date on which your rights with respect to all or a
portion of the SARs subject to this Award Agreement may become fully vested, and
the restrictions set forth in this Award Agreement may lapse, as provided in
Section 3(a) of this Award Agreement.
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SECTION 3. Vesting and Exercise. (a) Vesting. On each Vesting Date set forth
below, your rights with respect to the number of SARs that corresponds to such
Vesting Date, as specified in the chart below, shall become vested and may be
exercised, provided that you must be employed by the Company or an Affiliate on
the relevant Vesting Date, except as otherwise determined by the Committee in
its sole discretion or as otherwise provided in your Employment Agreement.
Vesting Date
Aggregate Percentage Vested
Aggregate Number of SARs Subject to Vesting
«Vesting_Date_1» 25 «SAR1» «Vesting_Date_2» 50 «SAR2» «Vesting_Date_3»
75 «SAR3» «Vesting_Date_4» 100 «SAR4»
(b) Exercise of SARs. SARs, to the extent that they are vested, may be
exercised, in whole or in part (but not for fractional SARs), by delivery
pursuant to the Company’s SARs exercise program currently administered by Smith
Barney Citigroup Global Markets, Inc. (or such successor arrangement established
by the Company) of a written or electronic notice, complying with the applicable
procedures established by the Committee or the Company, stating the number of
SARs that are thereby exercised. The notice shall be signed by you or any other
person then entitled to exercise the SARs. Upon exercise, the Company shall
deliver to you or your legal representative the number of Shares (rounded down
to the nearest whole Share) equal to (x) (A) the excess, if any, of the Fair
Market Value per Share on the exercise date over the Exercise Price per Share of
the SAR, multiplied by (B) the number of SARs being exercised pursuant to such
notice, divided by (y) the Fair Market Value per Share on the exercise date.
Notwithstanding the foregoing, unless the Committee determines otherwise and
except as otherwise provided in your Employment Agreement, unexercised SARs
expire (i) automatically on the date of your termination of employment for Cause
(as defined in your Employment Agreement or, if your Employment Agreement does
not contain a definition of Cause, as determined by the Company) or (ii) 90 days
after your termination of employment for any reason other than Cause; provided
that all SARs will automatically expire on the tenth anniversary of this Award
Agreement.
SECTION 4. Forfeiture of SARs. Unless the Committee determines otherwise, and
except as otherwise provided in your Employment Agreement, if your rights with
respect to any SARs awarded to you pursuant to this Award Agreement have not
become vested prior to the date on which your employment with the Company and
its Affiliates terminates, your rights with respect to such SARs shall
immediately terminate, and you will be entitled to no further payments or
benefits with respect thereto.
2
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SECTION 5. Voting Rights; Dividend Equivalents. Prior to the date on which your
rights with respect to a SAR have become vested and you exercise such SAR, you
shall not be entitled to exercise any voting rights with respect to such SAR or
any Shares with respect thereto, and shall not be entitled to receive dividends
or other distributions with respect thereto.
SECTION 6. Non-Transferability of SARs. Unless otherwise provided by the
Committee in its discretion, SARs may not be sold, assigned, alienated,
transferred, pledged, attached or otherwise encumbered except as provided in
Section 9(a) of the Plan. Any purported sale, assignment, alienation, transfer,
pledge, attachment or other encumbrance of a SAR in violation of the provisions
of this Section 6 and Section 9(a) of the Plan shall be void.
SECTION 7. Withholding, Consents and Legends. (a) Withholding. The delivery of
Shares pursuant to Section 3(b) is conditioned on satisfaction of any applicable
withholding taxes in accordance with Section 9(d) of the Plan. In the event that
there is withholding tax liability in connection with the exercise of a SAR, you
may satisfy, in whole or in part, any withholding tax liability by having the
Company withhold from the number of Shares you would be entitled to receive
pursuant to the exercise of the SARs, a number of Shares having a Fair Market
Value equal to such withholding tax liability.
(b) Consents. Your rights in respect of the SARs that are subject to this Award
are conditioned on the receipt to the full satisfaction of the Committee of any
required consents that the Committee may determine to be necessary or advisable
(including, without limitation, your consenting to the Company’s supplying to
any third-party recordkeeper of the Plan such personal information as the
Committee deems advisable to administer the Plan).
(c) Legends. The Company may affix to certificates for Shares issued pursuant to
this Award Agreement any legend that the Committee determines to be necessary or
advisable (including to reflect any restrictions to which you may be subject
under any applicable securities laws). The Company may advise the transfer agent
to place a stop order against any legended Shares.
SECTION 8. Successors and Assigns of the Company. The terms and conditions of
this Award Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors and assigns.
SECTION 9. Committee Discretion. The Committee shall have full and plenary
discretion with respect to any actions to be taken or determinations to be made
in connection with this Award Agreement, and its determinations shall be final,
binding and conclusive.
SECTION 10. Dispute Resolution. (a) Jurisdiction and Venue. Notwithstanding any
provision in your Employment Agreement, you and the Company irrevocably submit
to the exclusive jurisdiction of (i) the United States District Court for
3
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the District of Delaware and (ii) the courts of the State of Delaware for the
purposes of any suit, action or other proceeding arising out of this Award
Agreement or the Plan. You and the Company agree to commence any such action,
suit or proceeding either in the United States District Court for the District
of Delaware or, if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the courts of the State of Delaware.
You and the Company further agree that service of any process, summons, notice
or document by U.S. registered mail to the other party’s address set forth below
shall be effective service of process for any action, suit or proceeding in
Delaware with respect to any matters to which you have submitted to jurisdiction
in this Section 10(a). You and the Company irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or proceeding arising
out of this Award Agreement or the Plan in (A) the United States District Court
for the District of Delaware or (B) the courts of the State of Delaware, and
hereby and thereby further irrevocably and unconditionally waive and agree not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
(b) Waiver of Jury Trial. You and the Company hereby waive, to the fullest
extent permitted by applicable law, any right either of you may have to a trial
by jury in respect to any litigation directly or indirectly arising out of,
under or in connection with this Award Agreement or the Plan.
(c) Confidentiality. You hereby agree to keep confidential the existence of, and
any information concerning, a dispute described in this Section 10, except that
you may disclose information concerning such dispute to the court that is
considering such dispute or to your legal counsel (provided that such counsel
agrees not to disclose any such information other than as necessary to the
prosecution or defense of the dispute).
SECTION 11. Notice. All notices, requests, demands and other communications
required or permitted to be given under the terms of this Award Agreement shall
be in writing and shall be deemed to have been duly given when delivered by hand
or overnight courier or three Business Days after they have been mailed by U.S.
registered mail, return receipt requested, postage prepaid, addressed to the
other party as set forth below:
4
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If to the Company:
DreamWorks Animation SKG, Inc.
1000 Flower Street
Glendale, CA 91201
Attention: General Counsel
Telecopy :
If to you:
«First» «Last»
«Street» «Unit»
«City», «State» «Postal_Code»
The parties may change the address to which notices under this Award Agreement
shall be sent by providing written notice to the other in the manner specified
above.
SECTION 12. Headings. Headings are given to the Sections and subsections of this
Award Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of this Award Agreement or any provision thereof.
SECTION 13. Amendment of this Award Agreement. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate this Award Agreement prospectively or retroactively;
provided, however, that any such waiver, amendment, alteration, suspension,
discontinuance, cancelation or termination that would materially and adversely
impair your rights under this Award Agreement shall not to that extent be
effective without your consent (it being understood, notwithstanding the
foregoing proviso, that this Award Agreement and the SARs shall be subject to
the provisions of Section 7(c) of the Plan). Notwithstanding the foregoing, the
Company reserves the right to amend the Plan, the Award and/or this Award
Agreement if the Company or the Committee determines that such an amendment is
necessary or desirable to minimize or avoid the incurrence of any taxes or
interest that might be payable by the Company or any Affiliate, or by any holder
of SARs, pursuant to the provisions of Section 409A of the Internal Revenue Code
of 1986, as amended. Regardless of any such amendment, the Company does not
guarantee that any such taxes or interest pursuant to Section 409A will be
minimized or avoided.
SECTION 14. Counterparts. This Award Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
5
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IN WITNESS WHEREOF, the parties have duly executed this Award Agreement as of
the date first written above.
DREAMWORKS ANIMATION SKG, INC.,
by
Name: Title:
«FIRST» «LAST»
6 |
EXHIBIT 10.2
Guaranty Supplement
The undersigned hereby agrees to be bound as a Guarantor for purposes
of the Subsidiary Guaranty, dated as of October 27, 2004 (as amended, amended
and restated, supplemented and otherwise modified from time to time, the
“Guaranty”), among Guardian Assets, Inc., Unitive, Inc., Unitive Electronics,
Inc. and certain other Subsidiaries of Amkor Technology, Inc. from time to time
party thereto as Guarantors and acknowledged by Citicorp North America, Inc., as
Administrative Agent, and the undersigned hereby acknowledges receipt of a copy
of the Guaranty and the Second Lien Credit Agreement. The undersigned hereby
represents and warrants that each of the representations and warranties
contained in Section 16 (Representations and Warranties; Covenants) of the
Guaranty applicable to it is true and correct on and as the date hereof as if
made on and as of such date. Capitalized terms used herein but not defined
herein are used with the meanings given them in the Guaranty.
[Signature page follows]
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In witness whereof, the undersigned has caused this Guaranty Supplement to
be duly executed and delivered as of May 5, 2006.
Amkor Worldwide Services LLC
By: /s/ Joanne Solomon
Name: Joanne Solomon
Title: Treasurer and Secretary
Acknowledged and Agreed
as of the date first above written:
Citicorp North America, Inc.,
as Administrative Agent under the
Second Lien Credit Agreement
By:
/s/ Suzanne Crymes
Name: Suzanne Crymes
Title: Vice President
[SIGNATURE PAGE TO GUARANTY SUPPLEMENT OF AMKOR WORLDWIDE SERVICES LLC]
|
AMENDMENT
This AMENDMENT (this “Amendment”), dated effective as of June 22, 2006, is
entered into by and between GVI SECURITY SOLUTIONS, INC., a Delaware corporation
(the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands company
(“Laurus”), for the purpose of amending the terms of that certain Term Note,
dated as of May 27, 2004 in the original principal amount of $5,000,000 issued
by the Company to Laurus (as amended, modified and/or supplemented from time to
time, the “Term Note”). The Note, the Securities Purchase Agreement together
with the Related Agreements (as defined in the Securities Purchase Agreement)
are referred to herein as the “Loan Documents”. Capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the
Securities Purchase Agreement.
WHEREAS, the Company and Laurus have agreed to make certain changes to the Loan
Documents as set forth herein; and
NOW, THEREFORE, in consideration of the above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Amendment to Secured Convertible Term Note. (a) Section 2.1(a) of the Note
is hereby amended by deleting the last sentence appearing therein in its
entirety and inserting the following new sentence in lieu thereof:
“For purposes hereof, the initial “Fixed Conversion Price” means $1.91;
provided, however, that in respect of the first Three Hundred Thousand Dollars
($300,000) of aggregate principal amount (the “Post-June 2006 Converted Amount”)
of the Note converted into shares of Common Stock on and after June 22, 2006,
the Fixed Conversion Price in respect of such Post-June 2006 Converted Amount
(and the interest and fees associated therewith to the extent converted) shall
be equal to $0.15.”
(b) The following new Section 5.10 is hereby inserted into the Note immediately
following existing Section 5.09 of the Note:
“Section 5.10 Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Note shall be registered as to both principal and any stated interest
with the Borrower. Notwithstanding any document, instrument or agreement
relating to this Note to the contrary, transfer of this Note (or the right to
any payments of principal or stated interest thereunder) may only be effected by
(i) surrender of this Note and either the reissuance by the Borrower of this
Note to the new holder or the issuance by the Borrower of a new instrument to
the new holder, or (ii) transfer through a book entry system maintained by the
Borrower (or its agent), within the meaning of Treasury Regulation Section
1.871-14(c)(1)(i)(B).”
2. Laurus hereby agrees with the Company that it shall convert into shares of
Common Stock as soon as practicable after the Amendment Effective Date (but in
no event later than June 30, 2006), Three Hundred Thousand Dollars ($300,000) of
aggregate principal amount of the Note. The principal so converted shall be
applied to the next payments of principal otherwise due under the Term Note.
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3. The Company understands that it has an affirmative obligation to make prompt
public disclosure of material agreements and material amendments to such
agreements. It is the Company’s determination that this Amendment is material.
The Company agrees to file an 8-K within 2 days of the date hereof and in the
form otherwise prescribed by the SEC.
4. The amendment set forth herein shall be effective as of the date first above
written (the “Amendment Effective Date”) on the date when each of the Company
and Laurus shall have executed and the Company shall have delivered to Laurus
its respective counterpart to this Amendment.
5. Except as specifically set forth in this Amendment, there are no other
amendments, modifications or waivers to the Loan Documents, and all of the other
forms, terms and provisions of the Loan Documents remain in full force and
effect.
6. The Company hereby represents and warrants to Laurus that (i) no Event of
Default exists on the date hereof, after giving effect to this Amendment, (ii)
on the date hereof all representations, warranties and covenants made by the
Company in connection with the Loan Documents are true, correct and complete and
(iii) on the date hereof all of the Company’s and its Subsidiaries’ covenant
requirements have been met.
7. From and after the Amendment Effective Date, all references in the Loan
Documents to the Securities Purchase Agreement shall be deemed to be references
to the Securities Purchase Agreement as modified hereby.
8. This Amendment shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, each of the Company and Laurus has caused this Amendment to
the Loan Documents to be signed in its name effective as of this 22nd day of
June 2006.
GVI SECURITY SOLUTIONS, INC. By:____________________________
Name: Title: LAURUS MASTER FUND, LTD.
By:___________________________ Name: Title:
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|
Exhibit 10.1
RESTRICTED SHARE AGREEMENT
PARK-OHIO HOLDINGS CORP.
This Restricted Share Agreement (this “Agreement”) is made as of
, by and between Park-Ohio Holdings Corp., (the “Company”)
and , an employee of the Company or wholly owned subsidiary
of the Company (the “Employee”).
WHEREAS, pursuant to the provisions of the Park-Ohio Holdings Corp. Amended
and Restated 1998 Long-Term Incentive Plan (the “Plan”), the Company desires to
award to the Employee restricted shares of the Company’s Common Stock, par value
$1.00 per share (“Common Stock”), in accordance with the provisions of the Plan,
all on the terms and conditions hereinafter set forth; and
WHEREAS, Employee wishes to accept said offer; and
WHEREAS, the parties hereto understand and agree that any terms used and
not defined herein have the same meanings as in the Plan.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. Award of Shares. The Company hereby awards to the Employee
shares of the Company’s Common Stock (the “Shares”) in
accordance with the terms of this Agreement.
2. Provisions of Plan Controlling. The Employee specifically understands
and agrees that the Shares issued under the Plan are being awarded to the
Employee pursuant to the Plan, copies of which Plan the Employee acknowledges he
has read, understands and by which he agrees to be bound. The provisions of the
Plan are incorporated herein by reference. In the event of a conflict between
the terms and conditions of the Plan and this Agreement, the provisions of the
Plan will control.
3. Vesting of Shares.
(a) Except as provided in paragraph (b) and (c) below, the Shares awarded
hereunder shall be forfeited to the Company for no consideration in the event
(i) Employee voluntarily terminates his or her employment with the Company prior
to or (ii) Employee is terminated for Cause prior to
.
(b) The Shares awarded hereunder shall be fully vested in the Employee and
no longer subject to a risk of forfeiture such rights shall become exercisable
to the extent of [to be provided].
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(c) Notwithstanding anything in this Agreement to the contrary, the Shares
awarded hereunder shall be fully vested in the Employee and no longer subject to
risk of forfeiture pursuant to paragraph (a) or the vesting schedule set forth
in paragraph (b), upon the occurrence of the earliest of the following events.
(i) the date on which the Company undergoes a “Change in Control” as
defined in the Plan;
(ii) the date on which the employment of the Employee is terminated by the
Company without Cause; or
(iii) the date on which the Employee dies or becomes disabled.
(d) For purposes of this Agreement, “Cause” shall be defined as (i) an act
or acts of dishonesty by the Employee constituting a felony and resulting or
intended to result directly or indirectly in substantial gain or personal
enrichment at the expense of the Company; or (ii) the willful and continued
failure by the Employee substantially to perform his duties with the Company
(other than any such failure resulting from incapacity due to mental or physical
illness) after a demand in writing for substantial performance is delivered by
the Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed his duties, and such
failure results in demonstrably material injury to the Company.
(e) For purposes of this Agreement, the Employee shall be deemed disabled
if, as a result of his incapacity due to physical or mental illness, he shall
have been absent from his duties with the Company on a full-time basis for a
period of at least six months and a physician selected by him and acceptable to
the Company is of the opinion that (i) he is suffering from “Total Disability”
as defined in the Company’s Pension Plan, or any successor plan or program and
(ii) he will qualify for Social Security Disability Payment and (iii) within
thirty (30) days after such determination is made, he shall not have returned to
the full-time performance of his duties with the Company.
(f) I hereby designate the individual or individuals named on the attached
Designation of Beneficiary Form as my Beneficiary or Beneficiaries under the
Plan
4. Escrow Agreement. I hereby agree that the certificate or certificates
representing the Shares will remain in the possession of the Company to be held
by it in escrow until the date upon which the restrictions imposed upon the
Shares under Section 3 of this Agreement (referred to collectively as the
“Restrictions”) lapse in accordance with the terms and conditions of the Plan
and this Agreement. I further agree that the Company may enter into an agreement
with a third party whereby such third party shall hold the Shares in escrow,
subject to the terms of the Plan and this Agreement. I further agree to execute
such documents as may be necessary to facilitate the transfer of the Shares to
such third party.
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5. Dividend and Voting Rights. Employee shall have the right to vote any
Shares awarded hereunder and to receive any dividends declared with respect to
such Shares, provided that such voting and dividend rights shall lapse with
respect to any Shares that are forfeited to the Company pursuant to Section 3(a)
of this Agreement.
6. Additional Shares. (a) If the Company shall pay a stock dividend or
declare a stock split on or with respect to any of its Common Stock, or
otherwise distribute securities of the Company to the holders of its Common
Stock, the number of shares of stock or other securities of the Company issued
with respect to the Shares then subject to the restrictions contained in this
Agreement shall be added to the Shares subject to this Agreement. If the Company
shall distribute to its stockholders shares of stock of another corporation, the
shares of stock of such other corporation distributed with respect to the Shares
then subject to the restrictions contained in this Agreement shall be added to
the Shares subject to this Agreement.
(b) If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to a merger,
consolidation or capital reorganization, there shall be substituted for the
Shares then subject to the restrictions contained in this Agreement such amount
and kind of securities as are issued in such subdivision, combination,
reclassification, merger, consolidation or capital reorganization in respect of
the Shares subject to this Agreement.
7. Legends. All certificates representing the Shares to be issued to the
Employee pursuant to this Agreement shall have endorsed thereon legends
substantially as follows:
“The shares represented by this certificate are subject to restrictions set
forth in a Restricted Stock Agreement dated with this
Company, a copy of which Agreement is available for inspection at the offices of
the Company or will be made available upon request.”
“The shares represented by this certificate have been taken for investment and
they may not be sold or otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration Statement with respect to such
shares shall be effective under the Securities Act of 1933, as amended, or
(b) the Company shall have received an opinion of counsel satisfactory to it
that an exemption from registration under such Act is then available, and
(2) there shall have been compliance with all applicable state securities laws.”
8. No Obligation to Employ. The Company is not obligated, by the Plan or
this Agreement, to continue the Employee as an employee of the Company.
9. Investment Intent. The Employee represents and warrants to the Company
that the Shares are being acquired for the Employee’s own account, for
investment, and not with a view to,
--------------------------------------------------------------------------------
or for sale in connection with, the distribution of any such Shares. Further, I
understand and agree that during the period the Shares are held in escrow, I
cannot sell, transfer, assign, hypothecate or otherwise dispose of the Shares or
pledge them as collateral for a loan. In addition, during the escrow period, the
Shares shall be subject to such additional restrictions as the Committee deems
necessary or appropriate.
10. Notices. Any notices required or permitted by the terms of this
Agreement or the Plan shall be given by recognized courier service, facsimile,
registered or certified mail, return receipt requested, addressed as follows:
To the Company:
Robert D. Vilsack
Secretary
23000 Euclid Avenue
Cleveland, Ohio 44117
To the Employee:
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service or three business days following mailing by registered or
certified mail.
11. Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Ohio.
12. Withholding. Prior to delivery of Shares to Employee upon the release
of the restrictions stated in Section 3 hereof, Employee shall be required to
make arrangements, satisfactory to the Company, for appropriate withholding for
federal, state, and local tax purposes. Employee is permitted to satisfy any
such tax withholding requirements, in whole or in part, by delivering Shares to
Company (including Shares awarded hereunder) having a fair market value as of
the date employee requests delivery of the shares to Company equal to the amount
of such tax.
13. Benefit of Agreement. Subject to the provisions of the Plan and the
other provisions hereof, this Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto.
14. Entire Agreement. This Agreement, together with the Plan, embodies the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement not expressly set forth in this
--------------------------------------------------------------------------------
Agreement shall affect or be used to interpret, change or restrict, the express
terms and provisions of this Agreement, provided, however, in any event, this
Agreement shall be subject to and governed by the Plan.
15. Modifications and Amendments. The terms and provisions of this
Agreement may be modified or amended as provided in the Plan.
16. Waivers and Consents. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
17. Irrevocable Stock Power. To facilitate the escrow of the Shares and any
conveyance of the Shares to the Company upon their forfeiture, I have delivered
herewith the attached Irrevocable Stock Power with respect to the Shares,
executed by me in blank as of the date of this Agreement.
IN WITNESS WHEREOF, the Company and Employee have caused this Agreement to
be executed as of the day and year first above written.
PARK-OHIO HOLDINGS CORP.
By:
Employee
--------------------------------------------------------------------------------
IRREVOCABLE STOCK POWER
KNOW ALL MEN BY THESE PRESENTS that for value received, the undersigned,
(the “Transferor”),
does hereby transfer to Park-Ohio Holdings Corp. or its successor in interest
(the “Transferee”), Common Shares, par value
$1.00 per share, of Park-Ohio Holdings Corp., an Ohio corporation (the
“Corporation”), which shares are represented by certificate number ___, and does
hereby appoint the Transferee his true and lawful attorney, irrevocable for
himself and in his name and stead, to assign, transfer and set over, all or any
part of the shares hereby transferred to the Transferee, and for that purpose,
to make and execute all necessary acts of assignment and transfer, and one or
more persons to substitute with like full power, hereby ratifying and confirming
all that his said attorney, or substitute or substitutes shall lawfully do by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand as of the ___ day of
.
TRANSFEROR
--------------------------------------------------------------------------------
RESTRICTED SHARE AGREEMENT
DESIGNATION OF BENEFICIARY FORM
Grantee:
Pursuant to the provisions of the Amended and Restated 1998 Long-Term Incentive
Plan (the “Plan”) permitting the designation of a Beneficiary or Beneficiaries
by a grantee, I hereby designate the following person or persons as primary and
secondary Beneficiaries under the Plan:
Primary Beneficiary(ies):
Name:
Address:
Contingent Beneficiary(ies):
Name:
Address:
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND CONTINGENT
BENEFICIARIES.
In the event my employment with the Company or a Subsidiary is terminated by my
death prior to , any Shares granted to
me that become unrestricted in accordance with the Plan shall be distributed to
my primary Beneficiary or Beneficiaries. If my primary Beneficiary or
Beneficiaries do not survive me, any such Shares shall be distributed to my
contingent Beneficiary or Beneficiaries. If no named Beneficiary survives me,
then any such Shares shall be distributed to my default Beneficiaries, as
defined in the Plan.
Date of this Designation
Signature of Grantee
|
Exhibit 10.12
Translation of $724,944 (RMB Yuan 6 million) loan between GoVideo DigiTech
(Huizhou) Ltd. and TCL Corp.
Control number: JT2005001
Agreement of Internal loans of TCL Industries Holdings (Hong Kong)
Debitor (“Party A)”): GoVideo DigiTech (Huizhou) Ltd
Creditor (“Party B”): TCL Corp. .
Party A, for its business needs, intends to apply a loan from Party B, which
agrees to make such a loan. The both parties agree to reach the flowing
agreements based on mutual consents and governing laws and regulations:
1. Loan type: Short term loan.
2. Loan amount: Six million RMB Yuan ($724,944, translator’s note per rate
of $1=RMB 8.2765)
3. Purpose of the loan: To satisfy the needs of the business expansion of
the subsidiaries.
4. Loan terms: From 4/19/2005 to 6/30/2005 and may be automatically
extended on six month term basis when matures and neither party objects to
renewal of the loan. If the beginning date of the loan on any subsequent
amendment(s) to renew this loan is different from this original date, the
beginning date on this agreement should used for the purpose of calculation. Any
subsequent extensions of this loan shall be a part to this agreement and shall
have the same binding force.
5. Interest Loan interest rate, calculation of interest
(1) The annual interest rate shall be 5.2167%.
(2) Interest shall be calculated after the money wired to the account of Party
A.. Daily interest rate shall be monthly rate divided by 30.
(3) Any adjustment of interest rate before the maturity of the loan shall be
based on the bank regulation on interest rate.
6. Condition of releasing the loan to debitor
(1) Party A properly completed the registration process and satisfied all the
legal documents for the loan to be released;
(2) If the loan requires collateral, all the conditions are satisfied by Party A
or the third party.
(3) Party A has not breached any clause that required by for this loan.
7. Payment of interest and principal
(1) Party A shall pay interest on the interest calculation day. First payment is
the day after the first calculation day of the month, and last payment shall be
made together with the principal when the loan matures.
(2) Party A agrees to accrue sufficient amount to pay interest when due, and
remit the interest payment to Party B’s designated bank account.
(3) Party A shall reserve sufficient amount in its bank account when the loan
matures
--------------------------------------------------------------------------------
in order to payback the principal amount of the loan.
(4) If Party A fails to payback the loan amount when the loan matures, Party B
has the right to dispose the collateral at its discretion or seek legal venue to
resolve the issue.
8. Collateral
The collateral required for this loan is the number 1 in the following list;
(1) Guarantee without collateral;
(2) Collateral;
(3) Collateral with physical assets;
(4) Letter of credit;
(5) Counter guarantee;
(6) Letter of promissory notes;
(7) Others
9. The main rights and liabilities of both parties
(1) The rights and liabilities of Party A:
(A) The rights of Party A
(a) Party A has the right to ask Party B to release the loan;
(b) Party A has the right to use the loan under the terms of the loan agreement;
(c) Party A has the right to ask Party B for extension(s) of the loan with the
consent of Party B;
(d) Party A has the right to ask Party B to keep the confidentiality of all the
information regarding its accounting and business operation, except otherwise
governed by the laws and regulations
(B) The liabilities of Party A
(a) Party A shall pay back the principal and interest when the loan matures;
(b) Party A shall use the loan in accordance with the terms of the agreement,
and not use the loan for other purpose without written consent from Party B;
(c) Party A shall provide Party B with all the information include but not
limited accounting, statistics, business planning and KPI, etc. when requested
by Party B.
(d) Without payback the loan amount, Party A shall not use the loan amount as
collateral to secure another loan;
(e) If Party A will provide guarantee to other parties before the loan is
matured, Party A must notice Party B and receives consent from Party B;
(f) Party A shall provide Party B with additional collateral if the value of the
collateral used for this loan is less that the original stated amount as
required by the agreement;
(g) Party A must notify Party B for any changes made to its name, legal person,
business registration, registered capital, etc.
(h) Party A must notice Party B within 10 days for any of the following that may
affect Party B to exercise its right as a creditor: contract, joint venture,
merge, acquisition, spin-off, apply for close of business, apply for bankruptcy,
etc.
(i) Party A shall immediately notify Party B for any of the following: closedown
of business operation, revoke of business license, revoked of business
registration, any involvement of legal person in illegal activities, becomes a
party to legal action, severe deterioration of financial conditions, and resolve
the payment of the
--------------------------------------------------------------------------------
loan and collateral under the conditions of Party B;
(2) Rights and liabilities of Party B
(A) The rights of Party B
(a) Party B has the rights to get access to the information regarding Party A’s
financial and business operation, has the right to ask Party A to provide all
the information include but not limited to its planning, accounting and KPI
data;
(b) Party B has the right to audit Party A on the use of the loan.
(B) The liabilities of Party B
(a) Party B shall release the loan amount to Party A once the agreement is
effective, unless for the reasons caused by Party A;
(b) Party B agrees to keep all the information provided by Party A confidential
unless otherwise mandated by laws and regulations.
10. Change and termination of the loan agreement
(1) The agreement may be revised, amended or terminated with the written
agreement by both parties. Any changes made shall become part of the whole
agreement. If any provision of this agreement is held invalid and void, the
balance of the provisions will remain in full force and effect.
(2) If Party A plans to transfer its rights and liabilities to the third party,
it must get a written consent from Party B, and transfer will not be valid
unless the third party sign the new loan agreement with Party B;
(3) Party A must give a 30 day notice to Party for any of the following actions:
contract, leasing, merge and acquisition, joint venture, joint corporation,
ownership change etc. Party A shall not take any actions unless it receives a
written consent from Party B;
(4) Party A agrees to continue to bear the responsible for the liabilities of
the loan even though it has joint venture, joint corporation or equity merge, in
which Party A has equity interest.
11. Breach of agreement
(1) If Party A fails to payback the principal when the loan agreement at the
maturity date, Party B has the right accrue the interest at the daily rate of
2.1/10000.
(2) If Party A fails to pay interest, Party B has the right to accrue the
interest at the daily rate of 2.1/10000. If Party A pays back the principal
amount but fails to the accrued the interest, Party B has the right to continue
to accrue the interest on the unpaid amount of interest at a daily compound rate
of 2.1/10000.
(3) If Party A uses the loan for the purposes other than stated in the loan
agreement, Party B has the right to charge a penalty for the breached amount at
the daily rate of 5/10000.
(4) At any time before the loan agreement matures, Party B has the right to stop
releasing the loan, take back the loan and interest that were release to Party
A, or deduct directly from Party A’s account if Party A:
(a) fails to pay back principal or interest;
(b) use the loan for other purpose;
(c) provide false information to Party B;
--------------------------------------------------------------------------------
(d) breaches part of the loan agreement;
(e) is involved in law suites or litigations that substantially affect Party A’s
business;
(f) deterioration of Party A’s financial situation;
(g) faces any of the following situations: depreciation, damage, loss, frozen of
the collateral and fails to provide new collateral;
(h) Any actions by Party A that affect its ability to payback the loan principal
and interest.
12. Settlement of dispute
Both parties shall consult with each other for any disputes regarding the loan
agreement; unresolved disputes shall be arbitrated by the management of TCL
Corporation. During the period of dispute, the balance of the agreement shall be
in full force.
13. Others
(1) Any other issues that are included the loan agreement but pertinent to the
agreement, both parties shall follow the laws, rules and regulations of the
government;
(2) The loan agreement shall be effective once it is properly signed by the
legal persons of the two parties. The agreement will be terminated once all the
principal and interest are fully paid.
(3) This agreement will be executed in counterpart copies and each and all of
which will be deemed an original.
14. Special clause
(1) Party A acknowledges that Party B fully consulted with Party A for all the
provisions in the loan agreement.
(2) Party A acknowledges that it has full comprehension of all the provisions of
the loan agreement, and Party B gives all the explanations to Party A for any
and all of the questions that Party A has.
(3) Both parties consent that they have no disagreement over the provisions of
the agreement.
Party A: Legal person or authorized signer:
/s/ Guo Xiangyang
Dated: April 19, 2005
Party B: Legal person or authorized signer:
/s/ Lan Xuqiang
Dated: April 19, 2005
-------------------------------------------------------------------------------- |
AMENDMENT TO 1997 LONG-TERM STOCK INCENTIVE PLAN
WHEREAS, the Polo Ralph Lauren Corporation (the “Company”) sponsors the
Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (as Amended
and Restated as of August 12, 2004) (the “Plan”);
WHEREAS, the Board of Directors of the Company (the “Board”) desires to
amend the Plan to clarify that members of the Board who are not employees of the
Company may receive awards under the Plan, and to make conforming and other
non-material changes to the Plan; and
WHEREAS, the Board may amend the Plan in accordance with Section 12(a) of
the Plan, subject to stockholder approval to the extent necessary to comply with
any tax or regulatory requirement applicable to the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows, as of June 30, 2006,
but subject to the subsequent approval of the stockholders of the Company at the
Company’s August 10, 2006 annual stockholders meeting:
1. The first sentence of Section 1 of the Plan is hereby amended to read in
its entirety as follows:
The purposes of this Polo Ralph Lauren Corporation 1997 Long-Term Stock
Incentive Plan are to promote the interests of Polo Ralph Lauren Corporation and
its stockholders by (i) attracting and retaining exceptional directors, officers
and other employees and third party service providers of the Company and its
Subsidiaries, as defined below; (ii) motivating such individuals by means of
performance-related incentives to achieve longer-range performance goals; and
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Company.
2. The definition of “Participant” in Section 2 of the Plan is hereby
amended to read in its entirety as follows:
“Participant” shall mean any person eligible to receive an Award under Section 5
of the Plan and selected by the Committee to receive an Award under the Plan.
3. The first sentence of Section 4(a) of the Plan is hereby amended by
inserting, immediately after the phrase “shall be 26,000,000;”, the following:
the maximum number of Shares with respect to which Awards may be granted to any
Participant who is a director of the Company but not an employee of the Company
in any fiscal year may not exceed 25,000;
4. The first sentence of Section 4(e) of the Plan is hereby amended by
replacing the word “shares” with the word “Shares”.
--------------------------------------------------------------------------------
5. The last sentence of Section 4(e) of the Plan is hereby amended to read
in its entirety as follows:
Subject to the rights of any Participant under an Award outstanding as of
August 12, 2004, the vesting of Full Value Awards may only be accelerated upon
(i) death, disability, retirement or other termination of employment or service
of the Participant or (ii) a Change of Control.
6. Section 5 of the Plan is hereby amended to read in its entirety as
follows:
SECTION 5. Eligibility. Any director, officer or employee of, or Third Party
Service Provider to, the Company or any of its Subsidiaries (including any
prospective director, officer, employee or Third Party Service Provider) shall
be eligible to be designated a Participant.
7. Clause (ii) of Section 8(d) of the Plan is hereby amended to read in its
entirety as follows:
subject to the rights of any Participant under an Award outstanding as of
August 12, 2004, the vesting of Awards of Shares of Restricted Stock and/or
Restricted Stock Units that are Full Value Awards may only be accelerated upon
(A) death, disability, retirement or other termination of employment or service
of the Participant or (B) a Change of Control.
8. Clause (ii) of Section 9(d) of the Plan is hereby amended to read in its
entirety as follows:
subject to the rights of any Participant under an Award outstanding as of
August 12, 2004, the vesting of Performance Awards that are Full Value Awards
may only be accelerated upon (A) death, disability, retirement or other
termination of employment or service of the Participant or (B) a Change of
Control.
9. Clause (ii) of Section 10(c) of the Plan is hereby amended to read in its
entirety as follows:
subject to the rights of any Participant under an Award outstanding as of
August 12, 2004, the vesting of “Other Stock-Based Awards” that are Full Value
Awards may only be accelerated upon (A) death, disability, retirement or other
termination of employment or service of the Participant or (B) a Change of
Control.
10. Section 11(c) of the Plan is hereby amended by inserting the word “that”
immediately preceding the phrase “is (are) to apply to the Company”. 11.
Section 11(d)(vi)(i) of the Plan is hereby amended by inserting the word “a”
immediately preceding the phrase “Performance Compensation Award”. 12. The
first proviso of Section 12(b) of the Plan is hereby amended by modifying the
phrase “that would impair the rights of any Participant or any holder or
--------------------------------------------------------------------------------
beneficiary of any Option theretofore granted” to read as follows: “that
would impair the rights of any Participant or any holder or beneficiary of any
Award theretofore granted”. 13. Section 14(a)(iii) of the Plan is hereby
amended by (a) replacing the phrase “Incentive Options” with the phrase
“Incentive Stock Options”; (b) replacing “grantee” with “Grantee”; and
(c) replacing “option” each time it appears with “Option”.
This Amendment shall not take effect unless and until it has been approved
by the stockholders of the Company at the Company’s August 10, 2006 annual
stockholders meeting. Except as expressly amended hereby, the Plan shall
continue in full force and effect in accordance with the provisions thereof on
the date hereof. The validity, construction and effect of this Amendment shall
be determined in accordance with the laws of the State of New York.
|
Exhibit 10.1
AMENDMENT NO. 2 TO THE
STEP-UP EQUITY FINANCING AGREEMENT
Dated as of September 30, 2006
CELL THERAPEUTICS, INC.
SOCIÉTÉ GÉNÉRALE
--------------------------------------------------------------------------------
AMENDMENT NO. 2 TO THE
STEP-UP EQUITY FINANCING AGREEMENT
BETWEEN
CELL THERAPEUTICS, INC. a Washington corporation with headquarters located at
501 Elliott Avenue, Suite 400, Seattle, Washington 98119, represented by
James A. BIANCO, duly empowered,
(hereinafter the “Issuer”)
AND
SOCIÉTÉ GÉNÉRALE a French société anonyme with a share capital of EUR
548,043,436.25, headquarters located at 29, boulevard Haussmann - 75009 Paris,
France, registered under No. 552 120 222 RCS Paris, represented by Thierry du
BOISLOUVEAU, duly empowered,
(hereinafter the “Subscriber”)
WHEREAS
The parties have previously entered into the Step-Up Equity Financing Agreement
(hereinafter, and including the exhibits and schedules thereto, the “Agreement”)
which provides the Issuer with the right to raise cash pursuant to one or more
share issues.
Pursuant to this Amendment No. 2, dated as of September 30, 2006 (this
“Amendment”), each of the Issuer and the Subscriber wish that certain terms of
the Agreement be amended as follows.
2
--------------------------------------------------------------------------------
IT IS HEREBY AGREED AS FOLLOWS:
1. Section 13 of the Agreement is amended and restated in its entirety as
follows:
“13. Termination
Upon occurrence of an Event of Default, the Subscriber shall have the right to
demand that such Event of Default be remedied by the Issuer. If the Subscriber
so demands, the Issuer shall have one (1) month from the date of the demand to
remedy the Event of Default, after which period, if the Event of Default shall
not have been so remedied, this Agreement shall automatically terminate. In
addition, if the condition set forth in Section 4.3(b) shall not have been
satisfied on or prior to 15th December 2006, this Agreement shall automatically
terminate on 15th December 2006. Any termination of this Agreement shall be
without liability of any party to any other party except that the provisions of
(i) Articles 1 through 6 and 10 of this Agreement, with respect only to any
pending Share Issue, and (ii) Articles 7, 8, 11, 13 and 14 of this Agreement,
shall remain in full force and effect notwithstanding such termination.
Nothing in this Article 13 shall relieve any party to this Agreement of
liability for any breach of this Agreement prior to its termination.”
2. This Amendment shall be governed by, and construed in accordance with, the
laws of the Republic of Italy, except where mandatorily governed by other laws,
and each of the parties irrevocably submits to the jurisdiction of the Court of
Milan, which shall have non exclusive jurisdiction to hear and decide any suit,
action, dispute or proceeding relating to this Amendment.
3. Except as expressly amended hereby, the parties to this Amendment intend for
the Agreement to remain in full force and effect and to be legally bound by the
Agreement as amended by this Amendment.
[SIGNATURE PAGE TO FOLLOW]
3
--------------------------------------------------------------------------------
Dated as of September 30, 2006, and signed in two originals.
Cell Therapeutics, Inc.
SOCIÉTÉ GÉNÉRALE
/s/ James A. Bianco /s/ Thierry du Boislouveau
Represented by: James A. BIANCO
Represented by: Thierry du BOISLOUVEAU
Title: President and Chief Executive Officer
Title: Legal Representative |
EXHIBIT 10.23
FIRST AMENDMENT
TO
TRANSITION AGREEMENT
WHEREAS, a transition agreement (the “Agreement”) was entered into, effective as
of August 10, 2005, between Genentech, Inc., One DNA Way, South San Francisco,
CA 94080, and Myrtle Potter;
WHEREAS, Section 6 of the Agreement provides that the parties to the Agreement
are to cooperate diligently and in good faith to take action to prevent the
imposition of penalties under Section 409A of the Internal Revenue Code
(“Section 409A Penalties”); and
WHEREAS, the parties have decided to amend the Agreement as contemplated by
Section 6 of the Agreement in order to avoid the imposition of Section 409A
Penalties;
WHEREAS, the parties understand that further action, or amendments to the
Agreement, may need to be made to avoid Section 409A Penalties as provided in
Section 6 of the Agreement;
NOW, THEREFORE, the Agreement is hereby, amended effective August 10, 2005, as
follows:
I.
Section 5 is amended as follows:
A. The second paragraph of Section 5 is amended to read as follows:
Potter’s currently outstanding stock options granted to her under Genentech’s
1999 Stock Plan during the course of her employment will continue to vest and be
exercisable during her term as a consultant in the same manner as they were
during her employment. The stock options will cease to vest when her consultancy
ends either at the end of its term as set forth in Section 1 above or upon its
earlier termination as set forth in Section 1 above. Potter’s options granted on
or after September 12, 2002 that are or become vested and exercisable shall be
exercised in a cashless exercise in accordance with their terms as follows: All
options granted on or after September 12, 2002 that become vested and
exercisable on or after January 2, 2006 shall be exercised on January 2, 2006 or
the first trading day thereafter. Options granted on or after September 12, 2002
that are not vested and exercisable on January 2, 2006 shall be exercised on the
first trading day after the date they first become vested and exercisable. For
illustration, a schedule showing, with respect to options granted on or after
September 12, 2002, exercise dates and
-1-
--------------------------------------------------------------------------------
number of options to be exercised is attached hereto as Exhibit A. Potter’s
options granted prior to September 12, 2002 are the subject of a property
settlement incident to divorce and will be exercised at the direction of James
Potter pursuant to such settlement.
B. The following sentence is added to the end of last paragraph of Section
5:
Notwithstanding the foregoing, Potter shall be paid her accrued SERP benefit
with Genentech in a lump sum cash payment on February 13, 2006.
II.
The first paragraph of Section 6 is amended by adding the following sentence to
the end thereof:
Notwithstanding the foregoing provisions of this paragraph, in lieu of any and
all information technology support and security services to be provided as
described above after March 16, 2006, commencing on March 16, 2006, Genentech
will instead provide to Potter during the term of her consultancy a monthly
payment equal to fifty dollars ($50.00) payable March 16, 2006 and the 16th day
of each subsequent month for the remainder of the term of the consulting
relationship (with any payments for partial months to be prorated
appropriately); provided that in the event the cost of such services to Potter
exceeds $350.00 in the aggregate, Potter may request in advance that Genentech
pay such excess. If Genentech approves Potter’s request, Genentech shall
promptly pay Potter such excess.
III.
The following sentence is added to the end of Section 12:
Notwithstanding the foregoing, any reimbursements for attorney’s fees and
related costs incurred by Potter will be made on or before March 15, 2006.
IV.
A new Exhibit A - Option Exercise Plan - is added to the end of the Agreement to
read as provided in the attachment hereto.
-2-
--------------------------------------------------------------------------------
V.
Except as otherwise provided herein, the Agreement shall remain in full force
and effect.
This First Amendment to the Agreement may be executed in separate counterparts
that together constitute one instrument.
GENENTECH, INC.
By:
/s/ STEPHEN JUELSGAARD
Stephen Juelsgaard
Date:
December 28, 2005
MYRTLE POTTER
/s/ MYRTLE POTTER
Date:
December 29, 2005
-3-
--------------------------------------------------------------------------------
|
Exhibit 10.92
SECOND AMENDMENT TO THE
WORLDSPAN TECHNOLOGIES INC.
STOCK INCENTIVE PLAN
This SECOND AMENDMENT TO THE WORLDSPAN TECHNOLOGIES INC. STOCK INCENTIVE PLAN
(“Plan”), is adopted by Worldspan Technologies Inc. with the consent of the
Chief Executive Officer of Worldspan, L.P. effective as of June 15, 2006:
1. Second 5.1 of the Plan is deleted in its entirety and replaced
with the following:
5.1 Number. Subject to the provisions of Section 5.3, the number of
shares of Common Stock subject to Incentive Awards under the Plan may not exceed
13,250,000. The shares of Common Stock to be delivered under the Plan may
consist, in whole or in part, of shares held in treasury or authorized but
unissued shares not reserved for any other purpose.
2. Except as expressly amended herein, the Plan shall continue in
full force and effect.
WORLDSPAN TECHNOLOGIES INC.
By:
/s/ Margaret K. Cassidy
Margaret K. Cassidy
Assistant Secretary
Consented to this 15th day of June 2006
/s/ Rakesh Gangwal
Rakesh Gangwal
Chief Executive Officer of Worldspan, L.P.
-------------------------------------------------------------------------------- |
EXHIBIT 10.2
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this “Agreement”) is entered into as of the 28th
day of August, 2006, by FERTWALL PROPERTIES, LTD. (“Fertwall”), BARRY
DISTRIBUTION CENTER DE MEXICO, S.A. DE C.V., a Mexican corporation (“Tenant”),
and R.G. BARRY CORPORATION, an Ohio corporation (“Guarantor”).
Recitals
A. PARQUE INDUSTRIAL NUEVO LAREDO 2000, S.A. DE C.V., a Mexican corporation
(“Landlord”), PLANEACION Y DISENO DE NUEVO LAREDO, S.A. DE C.V., a Mexican
corporation (“Additional Landlord”), and Tenant are parties to a Lease Agreement
(the “Lease”) dated June 28, 2002, pursuant to which Landlord and Additional
Landlord leased to Tenant certain premises (the “Premises”) located in the
Oradel Industrial Park and Business Center in Nuevo Laredo, Tamaulipas, Mexico.
B. Guarantor has guaranteed the payment and performance of the obligations
of Tenant under the Lease pursuant to an Absolute Guaranty Agreement (the
“Guaranty”) dated July 23, 2002 by Guarantor for the benefit of Landlord.
C. Landlord has commenced an action against Guarantor with respect to the
Lease and the Guaranty, being Case No. SA05CA1098-XR in the United States
District Court for the Western District of Texas, San Antonio Division (the
“Action”).
D. The Landlord and Additional Landlord have assigned all their rights,
interests, claims, and responsibilities under both the Lease and the Guaranty to
Fertwall. Tenant and Guarantor are aware of, and approve, the assignment from
Landlord and Additional Landlord to Fertwall.
E. The parties desire to settle and resolve the Action and all matters
between Landlord, Additional Landlord, and Fertwall on the one hand, and Tenant
and Guarantor, on the other hand, on the terms and conditions set forth herein.
Statement of Agreement
In consideration of the mutual covenants and agreements set forth herein,
Fertwall, Tenant and Guarantor hereby agree as follows:
1. Within two business days after the full execution of this Agreement,
Guarantor shall pay to Fertwall the sum of $2,763,843.
2. As of the date of this Agreement, subject only to the payment to be made
by Guarantor to Fertwall pursuant to Section 1 above, the Lease and the Guaranty
shall terminate and Tenant shall be deemed to have surrendered the Premises to
Fertwall in accordance with the requirements of the Lease, and neither Tenant
nor Guarantor shall have any further obligations to Fertwall, Landlord, or
Additional Landlord under the Lease or the Guaranty. Tenant shall surrender to
Fertwall, and Fertwall shall accept, all personal property located in or on the
Premises as of the date of this Agreement, other than the truck located on the
Premises which Tenant shall retain.
3. Promptly after Guarantor makes the payment to Fertwall in accordance
with Section 1 above, Fertwall shall dismiss the Action, with prejudice.
Releases
4. Provided that Guarantor makes the payment to Fertwall in accordance with
Section 1 above, Fertwall, Landlord and Additional Landlord hereby release
Tenant and Guarantor from any and all liabilities
--------------------------------------------------------------------------------
and claims, which were or could have been asserted in the Action, arising from
or in any way related to the Lease, the Guaranty or the Premises, other than
claims for breach of an obligation under this Agreement.
5. Tenant and Guarantor hereby release Fertwall, Landlord and Additional
Landlord from any and all liabilities and claims, which were or could have been
asserted in the Action, arising from or in any way related to the Lease, the
Guaranty or the Premises, other than claims for breach of an obligation under
this Agreement.
The parties have executed this Agreement as of the date first set forth
above.
FERTWALL PROPERTIES, LTD
By: /s/ Rafael Kalach
Name: Rafael Kalach
Title: Secretary
BARRY DISTRIBUTION CENTER DE
MEXICO, S.A. DE C.V.
By: /s/ Jose G. Ibarra
Name: Jose G. Ibarra
Title: VP – Treasurer
R.G. BARRY CORPORATION
By: /s/ Daniel D. Viren
Name: Daniel D. Viren
Title: Senior VP Finance – CFO
ACKNOWLEDGEMENT OF AGREEMENT AND
ASSIGNMENT
PARQUE INDUSTRIAL NUEVO
LAREDO 2000, S.A. DE C.V.
By: /s/ Joel Mondlak
Name:
Title: Joel Mondlak
Vice President
PLANEACION Y DISENO DE NUEVO LAREDO, S.A. DE C.V.
By: /s/ Moises Mondlak
Name:
Title: Moises Mondlak
Vice President |
FOURTH AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT
This Fourth Amendment to Amended and Restated Loan Agreement (this “Fourth
Amendment”) is entered into as of the 29th day of March, 2006, to be effective
as of June 30, 2005 (the “Effective Date”) by and among THREE D OIL CO. OF
KILGORE, INC., a Texas corporation (“Borrower”), UNITED FUEL & ENERGY
CORPORATION, a Texas corporation (“United” or a “Guarantor”), THOMAS E. KELLY,
an individual residing in Midland County, Texas (“Kelly” or a “Guarantor”)
(United and Kelly are collectively referred to herein as “Guarantors”), and
CITIBANK TEXAS, N.A., a national banking association, formerly known as First
American Bank, SSB (“Lender”).
RECITALS:
A. Borrower, Guarantors and Lender entered into that certain Amended and
Restated Loan Agreement dated as of October 10, 2003, as amended by First
Amendment to Amended and Restated Loan Agreement and Consent dated as of July
14, 2004, by Second Amendment to Amended and Restated Loan Agreement and Consent
dated August 6, 2004, and by Third Amendment to Amended and Restated Loan
Agreement dated October 10, 2004 (the “Loan Agreement”).
B. Pursuant to the terms of the Loan Agreement, Borrower executed that certain
Term Note dated October 10, 2003, in the original principal amount of
$1,500,000, payable to the order of Lender (the “Term Note”).
C. Borrower and Guarantors have requested that Lender amend certain provisions
of the Loan Agreement, which Lender has agreed to do subject to the terms and
conditions contained herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained and other good and valuable consideration, it is hereby agreed between
Lender, Borrower and Guarantors as follows:
Agreement
1. Definitions. Except as otherwise expressly provided herein, all capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in the Loan Agreement.
-1-
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2. Amendment to Loan Agreement. Effective as of the Effective Date, Section 7.13
of the Loan Agreement (Debt Service Coverage Ratio) is hereby amended in its
entirety to read as follows:
7.13 Debt Service Coverage Ratio. Borrower will not permit its Debt Service
Coverage Ratio to be less than 1.25 to 1.0 as of the last day of any fiscal
quarter of Borrower ending on or after September 30, 2006.
3. Conditions Precedent. The effectiveness of this Fourth Amendment shall be
subject to the satisfaction of each of the following conditions precedent:
(a) Borrower and Guarantors shall have executed and delivered to Lender this
Fourth Amendment and all other required documents, all in form and substance
satisfactory to Lender;
(b) CIT shall have waived its right under Section 14 of the Intercreditor
Agreement to receive a copy of this Fourth Amendment at least ten (10) days
prior to the execution thereof; and
(c) The Boards of Directors of Borrower and United shall have approved the
execution, delivery and performance of this Fourth Amendment and all other
required documents by resolutions satisfactory to Lender and its counsel, and
appropriate certificates as to such actions, showing the parties authorized to
execute the same and all items required herein, shall have been delivered to
Lender.
4. Representations. As an inducement to Lender to enter into this Fourth
Amendment, Borrower and Guarantors jointly and severally represent and warrant
to Lender that (i) the representations and warranties contained in the Loan
Agreement are true and correct as of the execution date hereof, (ii) neither
Borrower nor Guarantors have breached any of the covenants contained in the Loan
Agreement or the other Loan Papers (except as may have been waived in writing by
Lender), and (iii) no Event of Default now exists, nor does there exist any
condition or event which, with notice and/or lapse of time, would constitute an
Event of Default.
5. No Waiver. Neither the execution by Lender of this Fourth Amendment nor
anything contained herein shall in anywise be construed or operate as a waiver
by Lender of any Event of Default (whether now existing or that may occur
hereafter) or any of Lender's rights under the Loan Agreement, as hereby
amended, or under any of the other Loan Papers.
6. Ratification. Except as provided herein, all terms and provisions of the Loan
Agreement shall remain unchanged. Borrower and Guarantors hereby ratify, affirm
and reaffirm all of the terms and provisions of the Loan Agreement as amended
hereby, of the Term Note, of the Guaranties, of the Security Documents and of
the other Loan Papers, in each case to the extent such party is a party thereto.
-2-
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7. Governing Law. This Fourth Amendment is being executed and delivered, and is
intended to be performed, in the State of Texas, and the substantive laws of the
State of Texas shall govern the validity, construction, enforcement and
interpretation of this Fourth Amendment and all other documents and instruments
referred to herein, unless otherwise specified therein.
8. Final Agreement. THIS FOURTH AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9. Counterparts. This Fourth Amendment may be executed in any number of separate
counterparts (including by facsimile transmission), each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
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EXECUTED effective as of the Effective Date.
BORROWER:
THREE D OIL CO. OF KILGORE, INC.
By: /s/ Bobby W. Page
--------------------------------------------------------------------------------
Bobby W. Page Vice President and Chief Financial Officer
GUARANTORS:
By: /s/ Thomas E. Kelly
--------------------------------------------------------------------------------
THOMAS E. KELLY
UNITED FUEL & ENERGY CORPORATION
By: /s/ Bobby W. Page
--------------------------------------------------------------------------------
Bobby W. Page Vice President and Chief Financial Officer
LENDER:
CITIBANK TEXAS, N.A.
By: /s/ Frank K. Stowers
--------------------------------------------------------------------------------
Frank K. Stowers Senior Vice President
-4-
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|
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Exhibit 10.2
LETTER OF SUPPORT
In consideration of Danske Bank A/S (the “Bank") at our request having granted
or undertaken to grant the following credit facilities (“the Facilities”):
Multi option facility……………………... DKK 17.000.000,00
Currency loan 99690……………………..DKK 3.300.000,00
to our subsidiary Daploma International A/S (“the Subsidiary”) of which we own
100% of the shares,
We, the undersigned Digital Angel Corporation, USA, hereby confirm that we shall
maintain our holding of 100% of the share capital of the Subsidiary, and that we
shall neither sell, nor pledge, nor in any other way dispose of any part of our
said holding or otherwise reduce our influence on the Subsidiary without the
prior consent of the Bank.
Moreover, we confirm that we shall continuously review the status of the
Subsidiary, which it is our policy to support financially, that we shall use our
influence to ensure that the Subsidiary at any time is in a position to fulfil
any and all obligations towards the Bank in respect of the Facilities, and that
we shall provide the Subsidiary with sufficient liquid funds to ensure that the
Bank will at no time suffer any loss in connection with the Facilities.
We accept that if we do not fulfil our above obligations under this Letter of
Support, we shall be under an obligation to compensate the Bank for any loss,
which it may suffer in such event.
We are aware that the Bank has made, or may make, a provison that the Facilities
are provisional, and expressly confirm that this present Letter of Support shall
also remain in full force and effect if one or more of the Facilities granted
are prolonged, and in all respects for as long as the Subsidiary is indebted to
the Bank, in as much as we shall continuously monitor the Subsidiary'’s
engagement with the Bank.
This Letter of Support shall be governed by and construed in accordance with
Danish law and our Company hereby submits to the jurisdiction of the Danish
courts at the option of the Bank.
Place Date: 06-01-06
/s/ Kevin N. McGrath
───────────────────────────────────
Digital Angel Corporation
--------------------------------------------------------------------------------
We confirm the authenticity of the above signatures and that the signatories are
authorised to sign for the company.
_________________________________________________
Stamp and signatures of Bank
|
Exhibit 10.35
December 1, 2005
Mr. Howard K. Aihara
2366 Tryall
Tustin, CA 92782
AGREEMENT
Dear Mr. Aihara:
1. Reference is made to (i) the Alliance Imaging, Inc. 1999 Equity Plan (the
“Option Plan”) and (ii) the Stock Option Agreement (the “Option Agreement”)
between Alliance Imaging, Inc. (the “Company”) and you, dated as of December 1,
2005. In consideration of the Company granting you options under the Option
Plan, executing and delivering the Option Agreement and making the payments
described in Paragraph 5 below, you agree that no Competition Event (as defined
below) shall occur prior to nine (9) months after the Date of Termination (as
defined in the employment agreement between the Company and you as of the date
hereof (the “Employment Agreement”)). Defined terms used but not defined herein
shall have the meaning ascribed thereto in the Employment Agreement.
2. For purposes of this letter agreement, a Competition Event shall occur if
you directly or indirectly (i) engage in any imaging business or any other
business that becomes material to the Company’s business during your employment
by the Company (the “Company Business”) within the United States that is the
same or substantially similar to or competitive with any service provided by the
Company; (ii) compete or participate as agent, employee, consultant, advisor,
representative or otherwise in any enterprise engaged in a business which has
any operations engaged in the Company Business within the United States that is
the same or substantially similar to or competitive with any service provided by
the Company; or (iii) compete or participate as a stockholder, partner or joint
venturer, or have any direct or indirect financial interest, in any enterprise
which has any material operations engaged in the Company Business within the
United States that is the same or substantially similar to or competitive with
any service provided by the Company; provided, however, that nothing contained
herein shall prohibit you from owning no more than five percent (5%) of the
equity of any publicly traded entity with respect to which you do not serve as
an officer, director, employee, consultant or in any other capacity other than
as an investor.
3. As a means reasonably designed to protect certain confidential
information of the Company which would otherwise inherently be utilized in the
--------------------------------------------------------------------------------
following proscribed activities, and in partial consideration of the Company’s
covenant to make the payment described in Paragraph 5, you agree that you will
not, prior to the nine (9) month anniversary of the Date of Termination, solicit
or make any other contact with, directly or indirectly, any customer of the
Company as of the Date of Termination with respect to the provision by you of
any service to any such customer that is the same or substantially similar to
any service provided to such customer by the Company.
4. In partial consideration of the Company’s covenant to make the payment
described in Paragraph 5, you agree that you will not, prior to the nine (9)
month anniversary of the Date of Termination, solicit or make any other contact
with, directly or indirectly, any employee of the Company on the Date of
Termination (or any person who was employed by the Company at any time during
the three-month period prior to the Date of Termination) with respect to any
employment, services or other business relationship.
5. In partial consideration of your covenants contained herein, the Company
shall, following the Date of Termination, pay you an amount equal to nine (9)
months of your annual base salary as of the effective date of the general
release referred in Paragraph 6 below. The payment under this Paragraph 5 shall
be made in a lump sum. Notwithstanding the foregoing, the Company shall not be
obligated to make any payments under this Paragraph 5 to you if your employment
with the Company is terminated by reason of your death or disability or for
Cause or by reason of your resignation other than for Good Reason.
6. In partial consideration of the Company’s covenant to make the payment
described in Paragraph 5, the Company may require you to execute a full release
of claims against the Company and its officers, directors, agents and affiliates
concerning such matters and in such form as the Company shall prescribe.
7. Notwithstanding paragraph 1 through 4 hereof, if the Company shall fail
to make any payment to you that the Company is obligated to make pursuant to
Paragraph 5 and such failure shall continue for more than five days after
receipt of notice from you, all future payments to you, if any, under Paragraph
5 shall become immediately due and payable and you shall be relieved of all
obligations under this Agreement.
8. For purposes of paragraph 2 through 4 hereof, the term Company shall
include Alliance Imaging, Inc., its subsidiaries and/or its affiliates.
9. You acknowledge that irreparable damage would occur in the event of a
breach of the provisions of this Agreement by you. It is accordingly agreed
that, in addition to any other remedy to which it is entitled at law or in
equity, the Company shall be entitled to an injunction or injunctions to prevent
breaches of
--------------------------------------------------------------------------------
this letter agreement and to enforce specifically the terms and provisions of
this letter agreement.
10. If, at the time of enforcement, any sentence, paragraph, clause, or
combination of the same of this Agreement is in violation of the law of any
state where applicable, such sentence, paragraph, clause, or combination of the
same shall be void in the jurisdictions where it is unlawful, and the remainder
of this Agreement shall remain binding on the parties. In the event that any
part of any covenant of this Agreement is determined by a court of law to be
overly broad thereby making the covenant unenforceable, the parties agree that
such court shall substitute a judicially enforceable limitation in its place,
and that as so modified, the covenants shall be binding upon the parties as if
originally set forth in this Agreement.
If you are in agreement with the foregoing, please sign a copy of this letter
where indicated below.
Very truly yours,
ALLIANCE IMAGING, INC.
By:
/s/ Paul S. Viviano
Name:
Paul S. Viviano
Title:
Chairman of the Board
Chief Executive Officer
Acknowledged and agreed to
as of the date first above
written:
By:
/s/ Howard K. Aihara
Name: Howard K. Aihara
-------------------------------------------------------------------------------- |
Exhibit 10.2
CONSENT AND SECOND AMENDMENT
TO
CREDIT AGREEMENT
This CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated
as of December 20, 2006, by and among SITEL CORPORATION, a Minnesota
corporation (“Parent”), and each of Parent’s Subsidiaries identified on the
signature pages hereof (such Subsidiaries, together with Parent, are referred to
hereinafter each individually as a “Borrower”, and collectively, as the
“Borrowers”), and ABLECO FINANCE LLC, a Delaware limited liability company, as a
Lender, the arranger and administrative agent for the Lenders (as defined below)
and collateral agent for the Lender Group (as defined below) (in such
capacities, together with its successors and assigns in such capacities, the
“Agent”) and the other Lenders party hereto.
WHEREAS, Borrowers, Agent and certain lenders identified on the signature pages
thereto (such lenders, together with their respective successors and permitted
assigns, are referred to hereinafter each individually as a “Lender”, and
collectively, as the “Lenders”; and together with Agent, collectively the
“Lender Group”) are parties to that certain Credit Agreement dated as of August
19, 2005 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”);
WHEREAS, (i) the Borrowers desire to increase the face amount of the letter of
credit issued by US Bank on behalf of Parent and listed on Schedule 4.19 to the
Credit Agreement from $900,000 to $1,350,000 (the “US Bank L/C Increase”) and to
increase the amount of cash and cash equivalents pledged to US Bank to secure
such letter of credit as described on Schedule P-1 to the Credit Agreement from
$900,000 to $1,350,000 (the “US Bank Lien Increase” and, together with the US
Bank L/C Increase, the “US Bank Transactions”) and (ii) SITEL do Brasil Ltda
(“SITEL Brazil”) desires to borrow up to an additional BRL 500,000 from Safra
and desires to apply the proceeds of such additional borrowing to repay amounts
listed on Schedule 2 to that certain Waiver, Consent and First Amendment to
Credit Agreement dated August 15, 2006 among Agent, Collateral Agent, Lenders
and Borrowers owing to Sudameris (the “SITEL Brazil Refinancing”);
WHEREAS, Borrowers have requested that Agent and Required Lenders consent to the
US Bank Transactions and the SITEL Brazil Refinancing and the undersigned
Required Lenders have agreed to do so subject to the terms and conditions
contained herein; and
WHEREAS, Borrowers, Agent and Required Lenders have further agreed to amend
Section 6.17(a)(iii) of the Credit Agreement, subject to the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
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1. DEFINED TERMS. UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED
TERMS USED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO SUCH TERMS IN THE CREDIT
AGREEMENT.
2. CONSENT. SUBJECT TO THE SATISFACTION OF THE CONDITIONS SET FORTH
IN SECTION 5 BELOW, NOTWITHSTANDING ANY PROVISION IN THE CREDIT AGREEMENT OR THE
OTHER LOAN DOCUMENTS TO THE CONTRARY, AGENT AND THE REQUIRED LENDERS HEREBY
CONSENT TO THE US BANK TRANSACTIONS AND THE SITEL BRAZIL REFINANCING. FOR THE
AVOIDANCE OF DOUBT, NO PORTION OF ANY INDEBTEDNESS BASKET SET FORTH IN SECTION
6.1 OR 6.16 OF THE CREDIT AGREEMENT, ANY INVESTMENT BASKET SET FORTH IN THE
DEFINITION OF PERMITTED INVESTMENTS OR ANY LIEN BASKET SET FORTH IN THE
DEFINITION OF PERMITTED LIENS OR IN SECTION 6.16 OF THE CREDIT AGREEMENT SHALL
BE DEEMED UTILIZED BY THE US BANK TRANSACTIONS AND THE SITEL BRAZIL
REFINANCING. THIS CONSENT IS A LIMITED CONSENT AND SHALL NOT BE DEEMED TO
CONSTITUTE A CONSENT WITH RESPECT TO ANY OTHER CURRENT OR FUTURE DEPARTURE FROM
THE REQUIREMENTS OF ANY PROVISION OF THE CREDIT AGREEMENT OR ANY OTHER LOAN
DOCUMENTS.
3. AMENDMENTS TO CREDIT AGREEMENT. SUBJECT TO THE SATISFACTION OF
THE CONDITIONS SET FORTH IN SECTION 5 OF THIS AMENDMENT, SECTION 6.17(A)(III) OF
THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:
(III) LEVERAGE RATIO. A LEVERAGE RATIO, MEASURED ON A QUARTER-END
BASIS, OF NOT MORE THAN THE RATIO SET FORTH IN THE FOLLOWING TABLE FOR THE
APPLICABLE PERIOD SET FORTH OPPOSITE THERETO:
Applicable Ratio
Applicable Period
2.50:1.0
For the 4 fiscal quarters ending March 31, 2006 and June 30, 2006
2.25:1.0
For the 4 fiscal quarters ending September 30, 2006 and December 31, 2006
2.00:1.0
For the 4 fiscal quarters ending each fiscal quarter thereafter
4. RATIFICATION. THIS AMENDMENT, SUBJECT TO SATISFACTION OF THE
CONDITIONS PROVIDED BELOW, SHALL CONSTITUTE CONSENTS AND AMENDMENTS TO THE
CREDIT AGREEMENT AND ALL OF THE LOAN DOCUMENTS AS APPROPRIATE TO EXPRESS THE
AGREEMENTS CONTAINED HEREIN. IN ALL OTHER RESPECTS, THE CREDIT AGREEMENT AND
THE LOAN DOCUMENTS SHALL REMAIN UNCHANGED AND IN FULL FORCE AND EFFECT IN
ACCORDANCE WITH THEIR ORIGINAL TERMS.
2
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5. CONDITIONS PRECEDENT. THE EFFECTIVENESS OF THIS AMENDMENT IS
SUBJECT TO THE FOLLOWING CONDITIONS PRECEDENT:
(A) BORROWERS, AGENT AND THE REQUIRED LENDERS SHALL HAVE EXECUTED AND
DELIVERED TO AGENT THIS AMENDMENT;
(B) BORROWERS, WFF FOREIGN BORROWERS, WFF, WF CANADA AND THE “REQUIRED
LENDERS” UNDER THE WFF CREDIT AGREEMENT SHALL HAVE EXECUTED AND DELIVERED A
CONSENT TO THE WFF CREDIT AGREEMENT IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO AGENT; AND
(C) AGENT SHALL HAVE RECEIVED THE AMENDMENT FEE PAYABLE PURSUANT TO
SECTION 6 BELOW.
6. AMENDMENT FEE. BORROWERS HEREBY AGREE TO PAY TO AGENT ON THE
DATE HEREOF, FOR DISTRIBUTION TO THE LENDERS BASED ON THEIR PRO RATA SHARES, AN
AMENDMENT FEE EQUAL TO $50,000. THE FOREGOING AMENDMENT FEE IS FULLY-EARNED AND
DUE AND PAYABLE IN IMMEDIATELY AVAILABLE FUNDS ON THE DATE HEREOF,
NON-REFUNDABLE, AND IS IN ADDITION TO, AND NOT IN LIEU OF, ALL OTHER FEES
CHARGED TO THE BORROWERS UNDER THE LOAN DOCUMENTS.
7. RELEASE. EACH BORROWER HEREBY ABSOLUTELY AND UNCONDITIONALLY
RELEASES AND FOREVER DISCHARGES AGENT AND THE LENDERS, AND ANY AND ALL
PARTICIPANTS, PARENT CORPORATIONS, SUBSIDIARY CORPORATIONS, AFFILIATED
CORPORATIONS, INSURERS, INDEMNITORS, SUCCESSORS AND ASSIGNS THEREOF, TOGETHER
WITH ALL OF THE PRESENT AND FORMER DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES OF
ANY OF THE FOREGOING, FROM ANY AND ALL CLAIMS, DEMANDS OR CAUSES OF ACTION OF
ANY KIND, NATURE OR DESCRIPTION, WHETHER ARISING IN LAW OR EQUITY OR UPON
CONTRACT OR TORT OR UNDER ANY STATE OR FEDERAL LAW OR OTHERWISE, WHICH SUCH
BORROWER HAS HAD, NOW HAS OR HAS MADE CLAIM TO HAVE AGAINST ANY SUCH PERSON FOR
OR BY REASON OF ANY ACT, OMISSION, MATTER, CAUSE OR THING WHATSOEVER ARISING
FROM THE BEGINNING OF TIME TO AND INCLUDING THE DATE OF THIS AMENDMENT, WHETHER
SUCH CLAIMS, DEMANDS AND CAUSES OF ACTION ARE MATURED OR UNMATURED OR KNOWN (AND
FOR THE AVOIDANCE OF DOUBT, NOT INCLUDING ANY ACT, OMISSION, MATTER, CAUSE OR
THING WHATSOEVER ARISING AFTER THE DATE OF THIS AMENDMENT) OR UNKNOWN.
8. MISCELLANEOUS.
(A) WARRANTIES AND ABSENCE OF DEFAULTS. IN ORDER TO INDUCE AGENT AND
REQUIRED LENDERS TO ENTER INTO THIS AMENDMENT, EACH BORROWER HEREBY WARRANTS TO
AGENT AND THE LENDERS, AS OF THE DATE HEREOF, THAT:
(I) THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CREDIT
AGREEMENT OR IN THE OTHER LOAN DOCUMENTS SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS ON AND AS OF THE DATE HEREOF, AS THOUGH MADE ON AND AS OF SUCH
DATE (EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES RELATE
SOLELY TO AN EARLIER DATE); AND
(II) NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING ON THE DATE HEREOF.
3
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(B) EXPENSES. BORROWERS, JOINTLY AND SEVERALLY, AGREE TO PAY ON
DEMAND ALL REASONABLE COSTS AND EXPENSES OF AGENT (INCLUDING THE REASONABLE FEES
AND EXPENSES OF OUTSIDE COUNSEL FOR AGENT) IN CONNECTION WITH THE PREPARATION,
NEGOTIATION, EXECUTION, DELIVERY AND ADMINISTRATION OF THIS AMENDMENT AND ALL
OTHER INSTRUMENTS OR DOCUMENTS PROVIDED FOR HEREIN OR DELIVERED OR TO BE
DELIVERED HEREUNDER OR IN CONNECTION HEREWITH. ALL OBLIGATIONS PROVIDED HEREIN
SHALL SURVIVE ANY TERMINATION OF THIS AMENDMENT AND THE CREDIT AGREEMENT.
(C) GOVERNING LAW. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(D) COUNTERPARTS. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, AND BY THE PARTIES HERETO ON THE SAME OR SEPARATE COUNTERPARTS,
AND EACH SUCH COUNTERPART, WHEN EXECUTED AND DELIVERED, SHALL BE DEEMED TO BE AN
ORIGINAL, BUT ALL SUCH COUNTERPARTS SHALL TOGETHER CONSTITUTE BUT ONE AND THE
SAME AMENDMENT. DELIVERY OF AN EXECUTED COUNTERPART OF THIS AMENDMENT BY
TELEFACSIMILE OR ELECTRONIC MAIL SHALL BE EQUALLY AS EFFECTIVE AS DELIVERY OF AN
ORIGINAL EXECUTED COUNTERPART OF THIS AMENDMENT. ANY PARTY DELIVERING AN
EXECUTED COUNTERPART OF THIS AMENDMENT BY TELEFACSIMILE OR ELECTRONIC MAIL SHALL
ALSO DELIVER AN ORIGINAL EXECUTED COUNTERPART OF THIS AMENDMENT, BUT THE FAILURE
TO DO SO SHALL NOT AFFECT THE VALIDITY, ENFORCEABILITY OR BINDING EFFECT OF THIS
AMENDMENT.
[Signature Pages Follow.]
4
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized and delivered as of the
date first above written.
BORROWERS:
SITEL CORPORATION,
a Minnesota corporation
By:
/s/ Ronald E. Reno
Title:
Vice President of Finance and Treasury
NATIONAL ACTION FINANCIAL
SERVICES, INC.,
a Georgia corporation
By:
/s/ Ronald E. Reno
Title:
Assistant Treasurer
SITEL HOME MORTGAGE CORP.,
a Nebraska corporation
By:
/s/ Ronald E. Reno
Title:
Treasurer
FINANCIAL INSURANCE SERVICES,
INC.,
a Nebraska corporation
By:
/s/ Ronald E. Reno
Title:
Treasurer
SITEL INTERNATIONAL LLC,
a Delaware limited liability company
By:
/s/ Ronald E. Reno
Title:
Vice President of Finance and Treasury
5
--------------------------------------------------------------------------------
AGENT AND ON BEHALF OF ITSELF
AND ITS AFFILIATE ASSIGNS, AS A
LENDER:
ABLECO FINANCE LLC,
a Delaware limited liability company
By:
/s/
Title:
6
-------------------------------------------------------------------------------- |
EXHIBIT 10.2
CONTINUING GUARANTY
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in
consideration of credit and/or financial accommodation heretofore or hereafter
from time to time made or granted to INTERNATIONAL RECTIFIER SOUTHEAST ASIA PTE.
LTD. (the “Borrower”) pursuant to the Credit Agreement (as defined below) with
BANK OF AMERICA, N.A., as Administrative Agent, and the other Lenders party
thereto (Agent and Lenders being collectively referred to herein as the
“Lender”), the undersigned Guarantor (the “Guarantor”) hereby furnishes its
guaranty of the Guaranteed Obligations (as hereinafter defined) as follows:
1. Guaranty. The Guarantor hereby absolutely and unconditionally
guarantees, as a guaranty of payment and performance and not merely as a
guaranty of collection, prompt payment when due, whether at stated maturity, by
required prepayment, upon acceleration, demand or otherwise, and at all times
thereafter, of any and all existing and future indebtedness and liabilities of
every kind, nature and character, direct or indirect, absolute or contingent,
liquidated or unliquidated, voluntary or involuntary and whether for principal,
interest, premiums, fees indemnities, damages, costs, expenses or otherwise, of
the Borrower to the Lender, arising under that certain Credit Agreement dated
June 27, 2006 between the Borrower and the Lender (the “Credit Agreement”) and
any of the other Loan Documents (as defined therein) (including all renewals,
extensions, amendments, refinancings and other modifications thereof and all
costs, attorneys’ fees and expenses incurred by the Lender in connection with
the collection or enforcement thereof), and whether recovery upon such
indebtedness and liabilities may be or hereafter become unenforceable or shall
be an allowed or disallowed claim under any proceeding or case commenced by or
against the Guarantor or the Borrower under the Bankruptcy Code (Title 11,
United States Code), any successor statute or any other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally
(collectively, “Debtor Relief Laws”), and including interest that accrues after
the commencement by or against the Borrower of any proceeding under any Debtor
Relief Laws (collectively, the “Guaranteed Obligations”). The Lender’s books and
records showing the amount of the Guaranteed Obligations shall be admissible in
evidence in any action or proceeding, and shall be binding upon the Guarantor
and conclusive for the purpose of establishing the amount of the Guaranteed
Obligations. This Guaranty shall not be affected by the genuineness, validity,
regularity or enforceability of the Guaranteed Obligations or any instrument or
agreement evidencing any Guaranteed Obligations, or by the existence, validity,
enforceability, perfection, non-perfection or extent of any collateral therefor,
or by any fact or circumstance relating to the Guaranteed Obligations which
might otherwise constitute a defense to the obligations of the Guarantor under
this Guaranty, and the Guarantor hereby irrevocably waives any defenses it may
now have or hereafter acquire in any way relating to any or all of the
foregoing.
2. No Setoff or Deductions; Taxes; Payments. The Guarantor
represents and warrants that it is organized and resident in the United States
of America. The Guarantor shall make all payments hereunder without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
--------------------------------------------------------------------------------
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Guarantor is compelled by law to make such
deduction or withholding. If any such obligation (other than one arising with
respect to (a) taxes imposed on or measured by the Lender’s overall net income,
gross receipts or capital (however denominated), and franchise taxes, excise
taxes, net worth and similar levies (in lieu of taxes on overall net income,
gross receipts or capital), or (b) any branch profits taxes imposed by the
United States or any similar tax imposed by any jurisdiction in which the
Borrower is located) is imposed upon the Guarantor with respect to any amount
payable by it hereunder, the Guarantor will pay to the Lender, on the date on
which such amount is due and payable hereunder, such additional amount in U.S.
dollars as shall be necessary to enable the Lender to receive the same net
amount which the Lender would have received on such due date had no such
obligation been imposed upon the Guarantor. The Guarantor will deliver promptly
to the Lender upon request evidence of all withholding taxes paid by it with
respect to payments made by the Guarantor hereunder. The obligations of the
Guarantor under this paragraph shall survive the payment in full of the
Guaranteed Obligations and termination of this Guaranty. At the Lender’s option,
all payments under this Guaranty shall be made in the United States. The
obligations hereunder shall not be affected by any acts of any legislative body
or governmental authority affecting the Borrower, including but not limited to,
any restrictions on the conversion of currency or repatriation or control of
funds or any total or partial expropriation of the Borrower’s property, or by
economic, political, regulatory or other events in the countries where the
Borrower is located.
3. Rights of Lender. The Guarantor consents and agrees that the
Lender may, at any time and from time to time, without notice or demand, and
without affecting the enforceability or continuing effectiveness hereof:
(a) amend, extend, renew, compromise, discharge, accelerate or otherwise change
the time for payment or the terms of the Guaranteed Obligations or any part
thereof; (b) take, hold, exchange, enforce, waive, release, fail to perfect,
sell, or otherwise dispose of any security for the payment of this Guaranty or
any Guaranteed Obligations; (c) apply such security and direct the order or
manner of sale thereof as the Lender in its sole discretion may determine; and
(d) release or substitute one or more of any endorsers or other guarantors of
any of the Guaranteed Obligations. Without limiting the generality of the
foregoing, the Guarantor consents to the taking of, or failure to take, any
action which might in any manner or to any extent vary the risks of the
Guarantor under this Guaranty or which, but for this provision, might operate as
a discharge of the Guarantor.
4. Certain Waivers. The Guarantor waives (a) any defense arising by
reason of any disability or other defense of the Borrower or any other
guarantor, or the cessation from any cause whatsoever (including any act or
omission of the Lender) of the liability of the Borrower; (b) any defense based
on any claim that the Guarantor’s obligations exceed or are more burdensome than
those of the Borrower; (c) the benefit of any statute of limitations affecting
the Guarantor’s liability hereunder; (d) any right to require the Lender to
proceed against the Borrower, proceed against or exhaust any security for the
Guaranteed Obligations, or pursue any other remedy in the Lender ‘s power
whatsoever; (e) any benefit of and any right to participate in any security now
or hereafter held by the Lender; and (f) to the fullest extent permitted by law,
any and all other defenses or benefits that may be derived from or afforded by
applicable law limiting the liability of or exonerating guarantors or sureties.
The Guarantor expressly waives all setoffs and counterclaims and all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
--------------------------------------------------------------------------------
notices or demands of any kind or nature whatsoever with respect to the
Guaranteed Obligations, and all notices of acceptance of this Guaranty or of the
existence, creation or incurrence of new or additional Guaranteed Obligations.
5. Obligations Independent. The obligations of the Guarantor
hereunder are independent of the Guaranteed Obligations and the obligations of
any other guarantor, and a separate action may be brought against the Guarantor
to enforce this Guaranty whether or not the Borrower or any other person or
entity is joined as a party.
6. Subrogation. The Guarantor shall not exercise any right of
subrogation, contribution, indemnity, reimbursement or similar rights with
respect to any payments it makes under this Guaranty until all of the Guaranteed
Obligations and any amounts payable under this Guaranty have been indefeasibly
paid and performed in full and any commitments of the Lender or facilities
provided by the Lender with respect to the Guaranteed Obligations are
terminated. If any amounts are paid to the Guarantor in violation of the
foregoing limitation, then such amounts shall be held in trust for the benefit
of the Lender and shall forthwith be paid to the Lender to reduce the amount of
the Guaranteed Obligations, whether matured or unmatured.
7. Termination; Reinstatement. This Guaranty is a continuing and
irrevocable guaranty of all Guaranteed Obligations now or hereafter existing and
shall remain in full force and effect until all Guaranteed Obligations and any
other amounts payable under this Guaranty are indefeasibly paid in full in cash
and any commitments of the Lender or facilities provided by the Lender with
respect to the Guaranteed Obligations are terminated. Notwithstanding the
foregoing, this Guaranty shall continue in full force and effect or be revived,
as the case may be, if any payment by or on behalf of the Borrower or the
Guarantor is made, or the Lender exercises its right of setoff, in respect of
the Guaranteed Obligations and such payment or the proceeds of such setoff or
any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Lender in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Laws or otherwise, all as if such payment had not been made or such
setoff had not occurred and whether or not the Lender is in possession of or has
released this Guaranty and regardless of any prior revocation, rescission,
termination or reduction. The obligations of the Guarantor under this paragraph
shall survive termination of this Guaranty.
8. Subordination. The Guarantor hereby subordinates the payment of
all obligations and indebtedness of the Borrower owing to the Guarantor, whether
now existing or hereafter arising, including but not limited to any obligation
of the Borrower to the Guarantor as subrogee of the Lender or resulting from the
Guarantor’s performance under this Guaranty, to the indefeasible payment in full
in cash of all Guaranteed Obligations; provided, that unless and until an Event
of Default has occurred and is continuing under the Credit Agreement, Guarantor
may take and receive any payments from the Borrower not otherwise prohibited by
the Credit Agreement. If the Lender so requests after an Event of Default has
occurred under the Credit Agreement and while it is continuing, any such
obligation or indebtedness of the Borrower to the Guarantor shall be enforced
and performance received by the Guarantor as trustee for the Lender and the
proceeds thereof shall be paid over to the Lender on account of the Guaranteed
--------------------------------------------------------------------------------
Obligations, but without reducing or affecting in any manner the liability of
the Guarantor under this Guaranty.
9. Stay of Acceleration. In the event that acceleration of the time
for payment of any of the Guaranteed Obligations is stayed, in connection with
any case commenced by or against the Guarantor or the Borrower under any Debtor
Relief Laws, or otherwise, all such amounts shall nonetheless be payable by the
Guarantor immediately upon demand by the Lender.
10. Expenses. The Guarantor shall pay on demand all out-of-pocket
expenses (including attorneys’ fees and expenses and the allocated cost and
disbursements of internal legal counsel) in any way relating to the enforcement
or protection of the Lender’s rights under this Guaranty or in respect of the
Guaranteed Obligations, including any incurred during any “workout” or
restructuring in respect of the Guaranteed Obligations and any incurred in the
preservation, protection or enforcement of any rights of the Lender in any
proceeding any Debtor Relief Laws. The obligations of the Guarantor under this
paragraph shall survive the payment in full of the Guaranteed Obligations and
termination of this Guaranty.
11. Miscellaneous. No provision of this Guaranty may be waived,
amended, supplemented or modified, except by a written instrument executed by
the Lender and the Guarantor. No failure by the Lender to exercise, and no delay
in exercising, any right, remedy or power hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law or in equity. The unenforceability
or invalidity of any provision of this Guaranty shall not affect the
enforceability or validity of any other provision herein. Unless otherwise
agreed by the Lender and the Guarantor in writing, this Guaranty is not intended
to supersede or otherwise affect any other guaranty now or hereafter given by
the Guarantor for the benefit of the Lender or any term or provision thereof.
12. Condition of Borrower. The Guarantor acknowledges and agrees that
it has the sole responsibility for, and has adequate means of, obtaining from
the Borrower and any other guarantor such information concerning the financial
condition, business and operations of the Borrower and any such other guarantor
as the Guarantor requires, and that the Lender has no duty, and the Guarantor is
not relying on the Lender at any time, to disclose to the Guarantor any
information relating to the business, operations or financial condition of the
Borrower or any other guarantor (the guarantor waiving any duty on the part of
the Lender to disclose such information and any defense relating to the failure
to provide the same).
13. Setoff. If and to the extent any payment is not made when due
hereunder, the Lender may setoff and charge from time to time any amount so due
against any or all of the Guarantor’s accounts or deposits with the Lender.
14. Representations and Warranties. The Guarantor represents and
warrants that (a) it is duly organized and in good standing under the laws of
the jurisdiction of its organization and has full capacity and right to make and
perform this Guaranty, and all necessary authority has been obtained; (b) this
Guaranty constitutes its legal, valid and binding obligation enforceable in
accordance with its terms, except as such enforcement may be limited by
--------------------------------------------------------------------------------
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law; (c) the making and performance of this Guaranty does not and will not
violate the provisions of any applicable law, regulation or order, and does not
and will not result in the breach of, or constitute a default or require any
consent under, any material agreement, instrument, or document to which it is a
party or by which it or any of its property may be bound or affected; and
(d) all consents, approvals, licenses and authorizations of, and filings and
registrations with, any governmental authority required under applicable law and
regulations for the making and performance of this Guaranty have been obtained
or made and are in full force and effect.
15. Guarantor’s Covenants. Guarantor covenants and agrees to comply
with all of its financial and other covenants contained in Article V of that
certain Credit Agreement dated as of November 7, 2003, as amended by that
certain Amendment to the Credit Agreement, dated June 5, 2006, among Guarantor,
the banks, financial institutions and other institutional lenders signatory
thereto, and BNP Paribas, as administrative agent for the Lender Parties (as
defined therein), and as at any time further amended (the “Parent Credit
Agreement”), the terms of which Parent Credit Agreement are incorporated herein
by reference, all as if made directly in favor of Lender, other than the
covenants contained in Sections 5.01(j) and 5.01(l) (together, the “Collateral
Covenants”) and Sections 5.02(a) and 5.02(j) (together, the “Negative Pledge
Covenants”). In the event that the Parent Credit Agreement is either amended and
restated, or replaced by another financing and in either case, either (w) Lender
is also a party thereto, or (x) Lender is not a party thereto but such financing
is in an amount not less than $100,000,000 and is provided by not less than four
separate lenders, then Guarantor shall instead comply with all covenants in the
Parent Credit Agreement as so amended and restated or with all of the covenants
contained in any such replacement facility. If, as of any date, the Parent
Credit Agreement is (y) terminated and has not yet been replaced, or
(z) replaced by a financing which does not qualify under clause (x) of the
preceding paragraph, then Guarantor shall continue to comply with all of the
covenants contained in Article V of the Parent Credit Agreement (other than the
Collateral Covenants, but in this case including the Negative Pledge Covenants)
which are in effect as of the date immediately prior to such termination or
replacement. At all times that the Parent Credit Agreement is outstanding, the
Guarantor shall first obtain the consent of the Lender to any amendments or
modifications to Section 5.02(a) of the Parent Credit Agreement prior to the
effectiveness of any such amendment or modification.
16. Indemnification and Survival. Without limitation on any other
obligations of the Guarantor or remedies of the Lender under this Guaranty, the
Guarantor shall, to the fullest extent permitted by law, indemnify, defend and
save and hold harmless the Lender from and against, and shall pay on demand, any
and all damages, losses, liabilities and expenses (including attorneys’ fees and
expenses and the allocated cost and disbursements of internal legal counsel)
that may be suffered or incurred by the Lender in connection with or as a result
of any failure of any Guaranteed Obligations to be the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their terms. The obligations of the Guarantor under this paragraph shall survive
the payment in full of the Guaranteed Obligations and termination of this
Guaranty.
--------------------------------------------------------------------------------
17. Governing Law; Assignment; Jurisdiction; Notices. This Guaranty
shall be governed by, and construed in accordance with, the internal laws of the
State of New York. This Guaranty shall (a) bind the Guarantor and its successors
and assigns, provided that the Guarantor may not assign its rights or
obligations under this Guaranty without the prior written consent of the Lender
(and any attempted assignment without such consent shall be void), and (b) inure
to the benefit of the Lender and its successors and assigns. The Guarantor
hereby irrevocably (i) submits to the non-exclusive jurisdiction of any United
States Federal or State court sitting in New York City, New York in any action
or proceeding arising out of or relating to this Guaranty, and (ii) waives to
the fullest extent permitted by law any defense asserting an inconvenient forum
in connection therewith. Service of process by the Lender in connection with
such action or proceeding shall be binding on the Guarantor if sent to the
Guarantor by registered or certified mail at its address specified below or such
other address as from time to time notified by the Guarantor. The Guarantor
agrees that the Lender may disclose to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations of
all or part of the Guaranteed Obligations any and all information in the
Lender’s possession concerning the Guarantor or this Guaranty. All notices and
other communications to the Guarantor under this Guaranty shall be in writing
and shall be delivered by hand or overnight courier service, mailed by certified
or registered mail or sent by telecopier to the Guarantor at its address set
forth below or at such other address in the United States as may be specified by
the Guarantor in a written notice delivered to the Lender at such office as the
Lender may designate for such purpose from time to time in a written notice to
the Guarantor.
18. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY
APPLICABLE LAW, THE GUARANTOR AND THE LENDER EACH IRREVOCABLY WAIVES TRIAL BY
JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON, ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE GUARANTEED OBLIGATIONS. THIS GUARANTY
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
19. Foreign Currency. If any claim arising under or related to this
Guaranty is reduced to judgment denominated in a currency (the “Judgment
Currency”) other than the currencies in which the Guaranteed Obligations are
denominated or the currencies payable hereunder (collectively the “Obligations
Currency”), the judgment shall be for the equivalent in the Judgment Currency of
the amount of the claim denominated in the Obligations Currency included in the
judgment, determined as of the date of judgment. The equivalent of any
Obligations Currency amount in any Judgment Currency shall be calculated at the
spot rate for the purchase of the Obligations Currency with the Judgment
Currency quoted by the Lender in the place of the Lender’s choice at or about
8:00 a.m. on the date for determination specified above. The Guarantor shall
indemnify the Lender and hold the Lender harmless from and against all loss or
damage resulting from any change in exchange rates between the date any claim is
reduced to judgment and the date of payment thereof by the Guarantor or any
failure of the amount of any such judgment to be calculated as provided in this
paragraph.
[signature page follows]
--------------------------------------------------------------------------------
Executed this 27th day of June, 2006.
INTERNATIONAL RECTIFIER CORPORATION
By:/s/ Michael P. McGee
Name: Michael P. McGee
Title: Executive Vice President and Chief Financial Officer
Address: 101 North Sepulveda Blvd.
El Segundo, CA 90245
Attn: Global Treasury &
Risk Management Dept.
Phone: 310-252-7181
Fax: 310-726-8597
-------------------------------------------------------------------------------- |
Exhibit 10.2
April 14, 2006
Mr. Paul V. Cusick, Jr.
66 Edmunds Road
Wellesley, MA 02482
Dear Paul:
This letter will serve to confirm our discussions and agreement regarding
your future role with the Company.
You have indicated your desire to limit your business activities in
anticipation of your full retirement when you reach age 65. As you of course
know, we will publicly announce a search for a replacement Chief Financial
Officer of the Company shortly. You will be deeply involved in that search, and
your efforts to assist that individual in getting oriented will obviously be
critical. It is expected that you will remain in full time employ of the Company
until the successful conclusion of the search and our hiring of a new CFO. You
will enter into a Consultancy Agreement with the Company which will begin when
the new CFO is in place and continue until you reach age 65. The terms of the
Consultancy Agreement will include an annual consulting fee of $85,000 a year.
The Agreement will also provide for the continued availability of an office and
executive secretarial services and reimbursement of all business related
expenses incurred by you during the term of your consultancy. You will undertake
confidentiality and noncompetition constraints in the Agreement.
The Company has benefited from your long and valuable service, and we look
forward to continuation of your valuable services in this new form.
Very truly yours,
CENTURY BANCORP, INC.
/s/ Marshall M. Sloane Marshall M. Sloane, Chairman of the Board
Accepted and Agreed:
By: /s/ Paul V. Cusick, Jr. Paul V. Cusick, Jr.
|
RESIDENTIAL ACCREDIT LOANS, INC.,
Company,
RESIDENTIAL FUNDING CORPORATION,
Master Servicer,
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
Trustee
SERIES SUPPLEMENT,
Dated as of April 1, 2006,
TO
STANDARD TERMS OF
POOLING AND SERVICING AGREEMENT
dated as of March 1, 2006
Mortgage Asset-Backed Pass-Through Certificates
SERIES 2006-QO4
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...............................................................3
Section 1.01. Definitions.......................................................3
Section 1.02. Determination of LIBOR...........................................49
Section 1.03. Determination of MTA.............................................50
Section 1.04. Use of Words and Phrases.........................................50
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES..........51
Section 2.01. Conveyance of Mortgage Loans.....................................51
Section 2.02. Acceptance by Trustee............................................51
Section 2.03. Representations, Warranties and Covenants of the Master Servicer
and the Company..................................................51
Section 2.04. Representations and Warranties of Sellers........................54
Section 2.05. Execution and Authentication of Certificates/Issuance of Certificates
Evidencing Interests in REMIC I and REMIC II Certificates........54
Section 2.06. Conveyance of Uncertificated Regular Interests; Acceptance by the
Trustee .........................................................54
Section 2.07. Issuance of Certificates Evidencing Interest in REMIC III........55
Section 2.08. Purposes and Powers of the Trust.................................55
Section 2.09. Agreement Regarding Ability to Disclose..........................55
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...........................56
Section 3.01 Master Servicer to Act as Servicer...............................56
Section 3.02 Subservicing Agreements Between Master Servicer and Subservicers;
Enforcement of Subservicers' and Sellers' Obligations............56
Section 3.03 Successor Subservicers...........................................56
Section 3.04 Liability of the Master Servicer.................................56
Section 3.05 No Contractual Relationship Between Subservicer and Trustee or
Certificateholders...............................................56
Section 3.06 Assumption or Termination of Subservicing Agreements by Trustee..56
Section 3.07 Collection of Certain Mortgage Loan Payments; Deposit to Custodial
Account .........................................................56
Section 3.08. Subservicing Accounts; Servicing Accounts........................59
Section 3.09. Access to Certain Documentation and Information Regarding the
Mortgage Loans ..................................................59
Section 3.10. Permitted Withdrawals from the Custodial Account.................59
Section 3.11. Maintenance of the Primary Insurance Policies; Collections
Thereunder ......................................................59
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity Coverage59
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and Modification
Agreements; Certain Assignments..................................59
Section 3.14. Realization Upon Defaulted Mortgage Loans........................59
Section 3.15. Trustee to Cooperate; Release of Mortgage Files..................60
Section 3.16. Servicing and Other Compensation; Compensating Interest..........60
Section 3.17. Reports to the Trustee and the Company...........................61
Section 3.18. Annual Statement as to Compliance................................61
Section 3.19. Annual Independent Public Accountants' Servicing Report..........61
Section 3.20. Rights of the Company in Respect of the Master Servicer..........61
Section 3.21. Administration of Buydown Funds..................................61
Section 3.22 Advance Facility.................................................61
ARTICLE IV PAYMENTS TO CERTIFICATEHOLDERS...........................................62
Section 4.01. Certificate Account..............................................62
Section 4.02. Distributions....................................................62
Section 4.03. Statements to Certificateholders; Statements to the Rating Agencies;
Exchange Act Reporting...........................................68
Section 4.04. Distribution of Reports to the Trustee and the Company; Advances
by the Master Servicer...........................................68
Section 4.05. Allocation of Realized Losses....................................69
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged Property....71
Section 4.07. Optional Purchase of Defaulted Mortgage Loans....................71
Section 4.08. Surety Bond......................................................71
Section 4.09. Basis Risk Shortfall Reserve Fund................................71
ARTICLE V THE CERTIFICATES.........................................................73
ARTICLE VI THE COMPANY AND THE MASTER SERVICER......................................74
ARTICLE VII DEFAULT..................................................................75
ARTICLE VIII CONCERNING THE TRUSTEE...................................................76
ARTICLE IX TERMINATION..............................................................77
Section 9.01 Optional Purchase by the Master Servicer of All Certificates;
Termination Upon Purchase by the Master Servicer or Liquidation
of All Mortgage Loans ...........................................77
Section 9.02 Additional Termination Requirements..............................81
Section 9.03 (See Section 9.03 of the Standard Terms).........................82
ARTICLE X REMIC PROVISIONS.........................................................83
Section 10.01. REMIC Administration.............................................83
Section 10.02. Master Servicer; REMIC Administrator and Trustee Indemnification.83
Section 10.03. Designation of REMICs............................................83
Section 10.04. Distributions on the REMIC I Regular Interests...................83
Section 10.05. Compliance with Withholding Requirements.........................83
ARTICLE XI MISCELLANEOUS PROVISIONS.................................................85
Section 11.01. Amendment........................................................85
Section 11.02. Recordation of Agreement; Counterparts...........................85
Section 11.03. Limitation on Rights of Certificateholders.......................85
Section 11.04. Governing Law....................................................85
Section 11.05. Notices..........................................................85
Section 11.06. Required Notices to Rating Agency and Subservicer................86
Section 11.07. Severability of Provisions.......................................86
Section 11.08. Supplemental Provisions for Resecuritization.....................86
Section 11.09. Allocation of Voting Rights......................................86
Section 11.10. No Petition......................................................86
ARTICLE XII COMPLIANCE WITH REGULATION AB............................................87
ARTICLE XIII CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER........................88
Section 13.01. Rights of the Certificate Insurer to Exercise Rights of Insured
Certificateholders...............................................88
Section 13.02. Claims Upon the Certificate Policy; Certificate Insurance Account...88
Section 13.03. Effect of Payments by the Certificate Insurer; Subrogation..........89
Section 13.04. Notices and Information to the Certificate Insurer..................90
Section 13.05. Trustee to Hold Certificate Policy..................................90
Section 13.06. Insurance Premium Payments..........................................91
Section 13.07. Ratings.............................................................91
Section 13.08. Voting Rights; Amendments...........................................91
Section 13.09 Termination......................................................92
Section 13.10. Third Party Beneficiaries...........................................92
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EXHIBITS
Exhibit One: Mortgage Loan Schedule
Exhibit Two: Information to be Included in Monthly Distribution Date Statement
Exhibit Three:Standard Terms of Pooling and Servicing Agreement, dated as of March 1, 2006
Exhibit Four: Certificate Policy of XL Capital Assurance Inc.
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This is a Series Supplement, dated as of April 1, 2006 (the "Series Supplement"), to the Standard
Terms of Pooling and Servicing Agreement, dated as of March 1, 2006 and attached as Exhibit Four hereto (the
"Standard Terms" and, together with this Series Supplement, the "Pooling and Servicing Agreement" or
"Agreement"), among RESIDENTIAL ACCREDIT LOANS, INC., as the company (together with its permitted successors
and assigns, the "Company"), RESIDENTIAL FUNDING CORPORATION, as master servicer (together with its permitted
successors and assigns, the "Master Servicer"), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
(together with its permitted successors and assigns, the "Trustee").
PRELIMINARY STATEMENT:
The Company intends to sell mortgage asset-backed pass-through certificates (collectively, the
"Certificates"), to be issued hereunder in multiple classes, which in the aggregate will evidence the entire
beneficial ownership interest in the Mortgage Loans.
The terms and provisions of the Standard Terms are hereby incorporated by reference herein as though
set forth in full herein. If any term or provision contained herein shall conflict with or be inconsistent
with any provision contained in the Standard Terms, the terms and provisions of this Series Supplement shall
govern. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Standard
Terms. The Pooling and Servicing Agreement shall be dated as of the date of this Series Supplement.
REMIC I
As provided herein, the REMIC Administrator will make an election to treat the segregated pool of
assets consisting of the Mortgage Loans and certain other related assets subject to this Agreement (but
excluding the Basis Risk Shortfall Reserve Fund) as a real estate mortgage investment conduit (a "REMIC") for
federal income tax purposes, and such segregated pool of assets will be designated as "REMIC I." The Class
R-I Certificates will represent the sole Class of "residual interests" in REMIC I for purposes of the REMIC
Provisions (as defined herein) under federal income tax law. The following table irrevocably sets forth the
designation, remittance rate (the "Uncertificated REMIC I Pass-Through Rate") and initial Uncertificated
Principal Balance for each of the "regular interests" in REMIC I (the "REMIC I Regular Interests"). The
"latest possible maturity date" (determined solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii)) for each REMIC I Regular Interest shall be the Maturity Date. None of the REMIC I
Regular Interests will be certificated.
UNCERTIFICATED
REMIC I INITIAL UNCERTIFICATED LATEST POSSIBLE
DESIGNATION PASS-THROUGH RATE PRINCIPAL BALANCE MATURITY DATE
Y-1 Variable(1) $222,388.34 April 25, 2046
Y-2 Variable(1) $202,619.47 April 25, 2046
Z-1 Variable(1) $444,554,285.66 April 25, 2046
Z-2 Variable(1) $405,047,988.53 April 25, 2046
____________
(1) Calculated in accordance with the definition of "Uncertificated REMIC I Pass Through Rate" herein.
REMIC II
As provided herein, the REMIC Administrator will make an election to treat the segregated pool of
assets consisting of the REMIC I Regular Interests and certain other related assets subject to this Agreement
as a real estate mortgage investment conduit (a "REMIC") for federal income tax purposes, and such segregated
pool of assets will be designated as "REMIC II." The Class R-II Certificates will represent the sole Class of
"residual interests" in REMIC II for purposes of the REMIC Provisions (as defined herein) under federal
income tax law. The following table irrevocably sets forth the designation, remittance rate (the
"Uncertificated REMIC II Pass-Through Rate") and initial Uncertificated Principal Balance for each of the
"regular interests" in REMIC II (the "REMIC II Regular Interests"). The "latest possible maturity date"
(determined solely for purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii)) for each REMIC
II Regular Interest shall be the Maturity Date. None of the REMIC II Regular Interests will be certificated.
UNCERTIFICATED INITIAL
REMIC I UNCERTIFICATED
REMIC I LATEST POSSIBLE
DESIGNATION PASS-THROUGH RATE PRINCIPAL BALANCE MATURITY DATE(3)
LT1 Variable(1) $489,983,363.36 April 25, 2046
LT2 Variable(1) $23,519.75 April 25, 2046
LT3 0.00% $25,508.28 April 25, 2046
LT4 Variable(1) $25,508.28 April 25, 2046
LT5 Variable(1) $411,223,498.79 April 25, 2046
LT6 Variable(1) $20,100.41 April 25, 2046
LT7 0.00% $21,048.42 April 25, 2046
LT8 Variable(1) $21,048.42 April 25, 2046
LT-Y1(2) Variable(1) $222,388.34 April 25, 2046
LT-Y2(2) Variable(1) $202,619.47 April 25, 2046
____________
(1) Calculated as provided in the definition of Uncertificated REMIC II Pass-Through Rate.
(2) LT-Y1 will have the same interest rate, principal balance, Principal Reduction Amount and allocation
of Realized Losses as the REMIC I Regular Interest Y-1. LT-Y2 will have the same interest rate,
principal balance, Principal Reduction Amount and allocation of Realized Losses as the REMIC I Regular
Interest Y-2.
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REMIC III
As provided herein, the REMIC Administrator will elect to treat the segregated pool of assets
consisting of the REMIC II Regular Interests as a REMIC for federal income tax purposes, and such segregated
pool of assets will be designated as REMIC III. The Class R-III Certificates will represent the sole Class
of "residual interests" in REMIC III for purposes of the REMIC Provisions under federal income tax law. The
following table sets forth the designation, type, Pass-Through Rate, aggregate Initial Certificate Principal
Balance, Maturity Date, initial ratings and certain features for each Class of Certificates comprising the
interests in the Trust Fund created hereunder. The "latest possible maturity date" (determined solely for
purposes of satisfying Treasury Regulation Section 1.860G-1(a)(4)(iii)) for each Class of REMIC III Regular
Interests and the Certificates shall be the Maturity Date.
Aggregate
Initial
Certificate
Pass-Through Principal Maturity S&P/ Minimum
Designation Rate Balance Features Date Moody's Denominations
Class I-A-1 Adjustable $327,356,000.00 Super Senior/ April 25, 2046 AAA/Aaa $100,000.00
Rate(1)(2) Adjustable Rate
Class I-A-2 Adjustable $81,838,000.00 Senior Mezzanine/ April 25, 2046 AAA/Aaa $100,000.00
Rate(1)(2) Adjustable Rate
Class II-A-1 Adjustable $223,699,000.00 Super Senior/ April 25, 2046 AAA/Aaa $100,000.00
Rate(1)(2) Adjustable Rate
Class II-A-2 Adjustable $93,208,000.00 Senior Mezzanine/ April 25, 2046 AAA/Aaa $100,000.00
Rate(1)(2) Adjustable Rate
Class II-A-3 Adjustable $55,924,000.00 Senior Mezzanine/ April 25, 2046 AAA/Aaa $100,000.00
Rate(1)(2) Adjustable Rate
Class M-1 Adjustable $19,126,000.00 Mezzanine/Adjustable April 25, 2046 AA+/Aa1 $100,000.00
Rate(1)(2) Rate
Class M-2 Adjustable $8,075,000.00 Mezzanine/Adjustable April 25, 2046 AA/Aa2 $100,000.00
Rate(1)(2) Rate
Class M-3 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 AA/Aa2 $100,000.00
Rate(1)(2) Rate
Class M-4 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 AA-/Aa3 $100,000.00
Rate(1)(2) Rate
Class M-5 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 A+/A1 $250,000.00
Rate(1)(2) Rate
Class M-6 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 A+/A2 $250,000.00
Rate(1)(2) Rate
Class M-7 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 A/A3 $250,000.00
Rate(1)(2) Rate
Class M-8 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 BBB+/Baa1 $250,000.00
Rate(1)(2) Rate
Class M-9 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 BBB/Baa2 $250,000.00
Rate(1)(2) Rate
Class M-10 Adjustable $4,250,000.00 Mezzanine/Adjustable April 25, 2046 BBB-/Ba1 $250,000.00
Rate(1)(2) Rate
Class SB (3) (3) $6,801,282.71 Subordinate April 25, 2046 N/R N/A
(1) The REMIC III Regular Interests, ownership of which is represented by the Class I-A, Class II-A and
Class M Certificates, will accrue interest at a per annum rate equal to MTA plus the related Margin or LIBOR
plus the related Margin, as the case may be, and each subject to a payment cap, as described in the
definition of "Pass-Through Rate," and the provisions for the payment of Basis Risk Shortfalls herein, which
payments will not be part of the entitlement of the REMIC III Regular Interests related to such Certificates.
(2) The Class A Certificates and Class M Certificates will also entitle their holders to receive certain
payments from the Holder of the Class SB Certificates from amounts to which the Holder of the Class SB
Certificates is entitled, which will not be a part of their ownership of the related REMIC III Regular
Interests.
(3) The Class SB Certificates will accrue interest as described in the definition of Accrued Certificate
Interest. The Class SB Certificates will not accrue interest on their Certificate Principal Balance. The
Class SB Certificates will represent ownership of two REMIC III Regular Interests, a principal only regular
interest designated REMIC III Regular Interest SB-PO and an interest only regular interest designated REMIC
III Regular Interest SB-IO, which will be entitled to distributions as set forth herein.
The Group I Loans have an aggregate Cut-off Date Principal Balance equal to $444,776,674.36. The
Group I Loans are payment-option adjustable-rate first lien mortgage loans with a negative amortization
feature having terms to maturity at origination or modification of generally not more than 40 years. The
Group II Loans have an aggregate Cut-off Date Principal Balance equal to $405,250,608.35. The Group II Loans
are payment option adjustable rate first lien mortgage loans with a negative amortization feature having
terms to maturity at origination or modification of generally not more than 40 years.
In consideration of the mutual agreements herein contained, the Company, the Master Servicer and the
Trustee agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01...DEFINITIONS.
Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article.
Accrued Certificate Interest: With respect to each Distribution Date and each Class of Class A
Certificates and Class M Certificates, interest accrued during the related Interest Accrual Period on the
Certificate Principal Balance thereof immediately prior to such Distribution Date at the Pass-Through Rate
for that Distribution Date.
The amount of Accrued Certificate Interest on each Class of Certificates shall be reduced by the
amount of Prepayment Interest Shortfalls on the related Mortgage Loans during the prior calendar month to the
extent not covered by Compensating Interest pursuant to Section 3.16, by Relief Act Shortfalls on the related
Mortgage Loans during the related Due Period, and by any Net Deferred Interest on the related Mortgage Loans
allocable to such Class of Certificates for that Distribution Date. The portion of any Prepayment Interest
Shortfalls or Relief Act Shortfalls allocated to the Class A Certificates will be based upon the related
Senior Percentage of all such reductions with respect to the related Mortgage Loans, such reductions to be
allocated among the related Class A Certificates, pro rata, on the basis of Accrued Certificate Interest
payable on such Distribution Date absent such reductions, with the remainder of such reductions allocated
among the Holders of all Classes of Class M Certificates, pro rata, on the basis of Accrued Certificate
Interest payable on such Distribution Date absent such reductions. Net Deferred Interest will be allocated
to each Class of Certificates as described in Section 4.02(i).
Accrued Certificate Interest with respect for any Distribution Date shall further be reduced by the
interest portion of Realized Losses allocated to any Class of Certificates pursuant to Section 4.05.
Accrued Certificate Interest with respect to the Class I-A Certificates shall accrue on the basis of a
360-day year divided into twelve 30-day months. Accrued Certificate Interest with respect to the Class II-A
Certificates and Class M Certificates shall accrue on the basis of a 360-day year and the actual number of
days in the related Interest Accrual Period.
With respect to each Distribution Date and the Class SB Certificates, interest accrued during the
preceding Interest Accrual Period at the related Pass-Through Rate on the Notional Amount as specified in the
definition of Pass-Through Rate, immediately prior to such Distribution Date, reduced by any interest
shortfalls with respect to the Mortgage Loans, including Prepayment Interest Shortfalls to the extent not
covered by Compensating Interest pursuant to Section 3.16 or by Excess Cash Flow pursuant to
Section 4.02(c)(iii) and (iv). Accrued Certificate Interest on the Class SB Certificates shall accrue on the
basis of a 360-day year and the actual number of days in the related Interest Accrual Period.
Adjusted Rate Cap: For the Class I-A-1 Certificates and Class I-A-2 Certificates, the Adjusted Rate
Cap shall equal the related Net WAC Cap Rate for that Distribution Date, computed for this purpose by first
reducing the Group I Net WAC Rate by a per annum rate equal to (i) the product of (a) the Net Deferred
Interest, if any, on the Group I Loans for that Distribution Date and (b) 12, divided by (ii) the aggregate
Stated Principal Balance of the Group I Loans immediately prior to such Distribution Date.
For the Class II-A-1, Class II-A-2 and Class II-A-3 Certificates, the Adjusted Rate Cap shall equal
the related Net WAC Cap Rate for that Distribution Date, computed for this purpose by first reducing the
Group II Net WAC Rate by a per annum rate equal to (i) the product of (a) the Net Deferred Interest, if any,
on the Group II Loans for that Distribution Date and (b) 12, divided by (ii) the aggregate Stated Principal
Balance of the Group II Loans immediately prior to such Distribution Date.
For the Class M Certificates, the Adjusted Rate Cap shall equal the related Net WAC Cap Rate for that
Distribution Date, computed for this purpose by first reducing each of the Group I Net WAC Rate and Group II
Net WAC Rate by a per annum rate equal to (i) the product of (a) the Net Deferred Interest, if any, on the
related Mortgage Loans for that Distribution Date and (b) 12, divided by (ii) the aggregate Stated Principal
Balance of the related Mortgage Loans immediately prior to such Distribution Date.
Adjustment Date: With respect to each Mortgage Loan, each date set forth in the related Mortgage Note
on which an adjustment to the interest rate on such Mortgage Loan becomes effective.
Available Distribution Amount: As to any Distribution Date, and as calculated in the aggregate for
both Loan Groups, an amount equal to (a) the sum of (i) the amount relating to the Mortgage Loans on deposit
in the Custodial Account as of the close of business on the immediately preceding Determination Date,
including any Subsequent Recoveries, and amounts deposited in the Custodial Account in connection with the
substitution of Qualified Substitute Mortgage Loans, (ii) the amount of any Advance made on the immediately
preceding Certificate Account Deposit Date, (iii) any amount deposited in the Certificate Account on the
related Certificate Account Deposit Date pursuant to the second paragraph of Section 3.12(a), (iv) any amount
deposited in the Certificate Account pursuant to Section 4.07 or Section 9.01, (v) any amount that the Master
Servicer is not permitted to withdraw from the Custodial Account or the Certificate Account pursuant to
Section 3.16(e), (vi) the proceeds of any Pledged Assets received by the Master Servicer, reduced by (b) the
sum as of the close of business on the immediately preceding Determination Date of (v) any payments or
collections consisting of Prepayment Charges on the Mortgage Loans that were received during the related
Prepayment Period; (w) aggregate Foreclosure Profits, (x) the Amount Held for Future Distribution, (y)
amounts permitted to be withdrawn by the Master Servicer from the Custodial Account in respect of the
Mortgage Loans pursuant to clauses (ii)-(x), inclusive, of Section 3.10(a) and (z) Insurer Premium payable.
Avoided Payment: Any amount previously distributed to a Certificateholder on an Insured Certificate
that is voided as a result of an Insolvency Proceeding and which is returned by a Holder of an Insured
Certificate as required by a final, nonappealable order of a court of competent jurisdiction.
Basis Risk Shortfall:
o With respect to the Class I-A-1 Certificates and Class I-A-2 Certificates and any Distribution Date on
which the Pass-Through Rate is based on the Net WAC Cap Rate, an amount equal to the excess of
(i) Accrued Certificate Interest for that Class calculated at a rate equal to MTA plus the
related Margin (but not more than the Net Maximum Cap Rate), over (ii) Accrued Certificate
Interest for that Class calculated using the related Net WAC Cap Rate; plus any unpaid Basis
Risk Shortfall from prior Distribution Dates, plus interest thereon to the extent not
previously paid from Excess Cash Flow calculated at a rate equal to MTA plus the related Margin
(but not more than the Net Maximum Cap Rate).
o With respect to the Class II-A-1, Class II-A-2 or Class II-A-3 Certificates and any Distribution Date
on which the Pass-Through Rate is based on the Net WAC Cap Rate, an amount equal to the excess
of (i) Accrued Certificate Interest for that Class calculated at a rate equal to LIBOR plus the
related Margin (but not more than 11.00%), over (ii) Accrued Certificate Interest for that
Class calculated using the related Net WAC Cap Rate; plus any unpaid related Basis Risk
Shortfall from prior Distribution Dates, plus interest thereon to the extent not previously
paid from Excess Cash Flow calculated at a rate equal to LIBOR plus the related Margin (but not
more than 11.00%).
o With respect to any Class of Class M Certificates and any Distribution Date on which the Pass-Through
Rate is based on the Net WAC Cap Rate, an amount equal to the excess of (i) Accrued Certificate
Interest for that Class calculated at a rate equal to LIBOR plus the related Margin (but not
more than 11.00%), over (ii) Accrued Certificate Interest calculated using the Net WAC Cap Rate
for the Class M Certificates; plus any unpaid Basis Risk Shortfall for the Class M Certificates
from prior Distribution Dates, plus interest thereon, to the extent not previously paid from
Excess Cash Flow, at a rate equal to LIBOR plus the related Margin (but not more than 11.00%).
Basis Risk Shortfall Reserve Fund: The reserve fund created pursuant to Section 4.09.
Basis Risk Shortfall Reserve Fund Amount: $860,000.00.
Book-Entry Certificate: The Class A Certificates and Class M Certificates.
Capitalization Reimbursement Amount: As to any Distribution Date and Loan Group, the amount of
Advances or Servicing Advances that were added to the Stated Principal Balance of the Mortgage Loans in such
Loan Group during the prior calendar month and reimbursed to the Master Servicer or Subservicer on or prior
to such Distribution Date pursuant to Section 3.10(a)(vii), plus the Capitalization Reimbursement Shortfall
Amount remaining unreimbursed from any prior Distribution Date and reimbursed to the Master Servicer or
Subservicer on or prior to such Distribution Date.
Capitalization Reimbursement Shortfall Amount: As to any Distribution Date and Loan Group, the
amount, if any, by which the amount of Advances or Servicing Advances that were added to the Stated Principal
Balance of the Mortgage Loans in such Loan Group during the preceding calendar month exceeds the amount of
principal payments on the Mortgage Loans included in the Available Distribution Amount for that Loan Group
and Distribution Date.
Certificate: Any Class A, Class M, Class SB or Class R Certificate.
Certificate Account: The separate account or accounts created and maintained pursuant to Section 4.01
of the Standard Terms, which shall be entitled "DEUTSCHE BANK TRUST COMPANY AMERICAS, as trustee, in trust
for the registered holders of Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through
Certificates, Series 2006-QO4" and which must be an Eligible Account.
Certificate Insurance Account: The account established pursuant to Section 13.02(b) of this Series
Supplement.
Certificate Insurance Payment: Any payment made by the Certificate Insurer with respect to the Insured
Certificates under the Certificate Policy.
Certificate Insurer: XL Capital Assurance Inc., a stock insurance company organized and created under
the laws of the State of New York, and any successors thereto, as issuer of the Certificate Policy.
Certificate Insurer Default: The existence of a failure by the Certificate Insurer to make a payment
required under the Certificate Policy in accordance with its terms and the continuance of such failure for
two Business Days.
Certificate Policy: The financial guaranty insurance policy No. CA02956A issued by the Certificate
Insurer for the benefit of the Holders of the Insured Certificates, including any endorsements thereto,
attached hereto as Exhibit Four.
Certificate Principal Balance: With respect to any Class A Certificate or Class M Certificate, on any
date of determination, an amount equal to (i) the Initial Certificate Principal Balance of such Certificate
as specified on the face thereof plus (ii) an amount equal to the aggregate Net Deferred Interest added to
the Certificate Principal Balance thereof prior to such date of determination, minus (iii) the sum of (x) the
aggregate of all amounts previously distributed with respect to such Certificate (or any predecessor
Certificate) and applied to reduce the Certificate Principal Balance thereof pursuant to Section 4.02(c) and
(y), the aggregate of all reductions in Certificate Principal Balance deemed to have occurred in connection
with Realized Losses which were previously allocated to such Certificate (or any predecessor Certificate)
pursuant to Section 4.05; provided, that with respect to any Distribution Date, the Certificate Principal
Balances of (i) the Class I-A or Class M Certificates will be increased, in each case to the extent of
Realized Losses previously allocated thereto and remaining unreimbursed, by the Subsequent Recovery
Allocation Amount for Loan Group I in the following order of priority: first to the Class I-A Certificates,
pro rata, and then to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7,
Class M-8, Class M-9 and Class M-10 Certificates, in that order and (ii) the Class II-A or Class M
Certificates will be increased, in each case to the extent of Realized Losses previously allocated thereto
and remaining unreimbursed, by the Subsequent Recovery Allocation Amount for Loan Group II in the following
order of priority: to the Class II-A, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6,
Class M-7, Class M-8, Class M-9 and Class M-10 Certificates, in that order. With respect to any Class SB
Certificate, on any date of determination, an amount equal to the Percentage Interest evidenced by such
Certificate, multiplied by an amount equal to (i) the excess, if any, of (A) the then aggregate Stated
Principal Balance of the Mortgage Loans over (B) the then aggregate Certificate Principal Balance of the
Class A Certificates and Class M Certificates then outstanding, which represents the sum of (i) the Initial
Principal Balance of the REMIC III Regular Interest SB-PO, as reduced by Realized Losses allocated thereto
and payments deemed made thereon, and (ii) accrued and unpaid interest on the REMIC III Regular Interest
SB-IO, as reduced by Realized Losses allocated thereto. The Class R Certificates will not have a Certificate
Principal Balance.
Class I-A-1 Certificate: The Class I-A-1 Certificates, executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form annexed hereto as Exhibit A, senior to the Class I-A-2
Certificates, Class M Certificates, Class SB Certificates and Class R Certificates with respect to
distributions and the allocation of Realized Losses in respect of Group I Loans as set forth in Section 4.05,
and evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class I-A-1 Margin: With respect to any Distribution Date, 0.920% per annum.
Class I-A-2 Certificate: The Class I-A-2 Certificates, executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form annexed hereto as Exhibit A, senior to the Class M
Certificates, Class SB Certificates and Class R Certificates with respect to distributions and the allocation
of Realized Losses in respect of Group I Loans as set forth in Section 4.05, and evidencing (i) an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the right to
receive Basis Risk Shortfalls.
Class I-A-2 Margin: With respect to any Distribution Date, 0.930% per annum.
Class I-A Certificates: Collectively, the Class I-A-1 Certificates and Class I-A-2 Certificates.
Class I-A Interest Remittance Amount: With respect to any Distribution Date, the portion of the
Available Distribution Amount for that Distribution Date attributable to interest received or advanced with
respect to the Group I Loans.
Class II-A-1 Certificate: The Class II-A-1 Certificates, executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form annexed hereto as Exhibit A, senior to the Class II-A-2
Certificates, Class II-A-3 Certificates, Class M Certificates, Class SB Certificates and Class R Certificates
with respect to distributions and the allocation of Realized Losses in respect of Group II Loans as set forth
in Section 4.05, and evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes
of the REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class II-A-1 Margin: With respect to any Distribution Date prior to the second Distribution Date
after the first possible Optional Termination Date, 0.190% per annum, and on any Distribution Date on or
after the second Distribution Date after the first possible Optional Termination Date, 0.380% per annum.
Class II-A-2 Certificate: The Class II-A-2 Certificates, executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form annexed hereto as Exhibit A, senior to the Class II-A-3
Certificates, Class M Certificates, Class SB Certificates and Class R Certificates with respect to
distributions and the allocation of Realized Losses in respect of Group II Loans as set forth in
Section 4.05, and evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes of
the REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class II-A-2 Margin: With respect to any Distribution Date prior to the second Distribution Date
after the first possible Optional Termination Date, 0.240% per annum, and on any Distribution Date on or
after the second Distribution Date after the first possible Optional Termination Date, 0.480% per annum.
Class II-A-3 Certificate: The Class II-A-3 Certificates, executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form annexed hereto as Exhibit A, senior to the Class M
Certificates, Class SB Certificates and Class R Certificates with respect to distributions and the allocation
of Realized Losses in respect of Group II Loans as set forth in Section 4.05, and evidencing (i) an interest
designated as a "regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the right to
receive Basis Risk Shortfalls.
Class II-A-3 Margin: With respect to any Distribution Date prior to the second Distribution Date
after the first possible Optional Termination Date, 0.210% per annum, and on any Distribution Date on or
after the second Distribution Date after the first possible Optional Termination Date, 0.420% per annum.
Class II-A Certificates: Collectively, the Class II-A-1 Certificates, Class II-A-2 Certificates and
Class II-A-3 Certificates.
Class II-A Interest Remittance Amount: With respect to any Distribution Date, the portion of the
Available Distribution Amount for that Distribution Date attributable to interest received or advanced with
respect to the Group II Loans.
Class A Certificates: Collectively, the Class I-A Certificates and Class II-A Certificates.
Class A Interest Distribution Priority: With respect to each Class of Class A Certificates and any
Distribution Date, the amount available for payment of Accrued Certificate Interest thereon for that
Distribution Date plus Accrued Certificate Interest thereon remaining unpaid from any prior Distribution
Date, in the amounts and priority as follows:
o first, concurrently, (i) to the Class I-A Certificates, pro rata, from the Class I-A Interest
Remittance Amount and (ii) to the Class II-A Certificates, pro rata, from the Class II-A
Interest Remittance Amount;
o second, concurrently, (i) to the Class I-A Certificates, pro rata, from the remaining Class II-A
Interest Remittance Amount and (ii) to the Class II-A Certificates, pro rata, from the
remaining Class I-A Interest Remittance Amount, as needed after taking into account any
distributions in respect of interest on the Class A Certificates made in first above;
o third, concurrently, (i) from the Principal Remittance Amount related to Loan Group I to the Class I-A
Certificates, pro rata, and (ii) from the Principal Remittance Amount related to Loan Group II
to the Class II-A Certificates, pro rata, after taking into account any distributions in
respect of interest on the Class A Certificates made in first and second above; and
o fourth, concurrently, (i) from the remaining Principal Remittance Amount related to Loan Group II to
the Class I-A Certificates, pro rata, and (ii) from the remaining Principal Remittance Amount
related to Loan Group I to the Class II-A Certificates, pro rata, as needed after taking into
account any distributions in respect of interest on the Class A Certificates made in first,
second and third above.
Class A Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the Principal Distribution Amount for that Distribution Date or (ii) on or after the Stepdown Date if a
Trigger Event is not in effect for that Distribution Date, the lesser of:
(i) the Principal Distribution Amount for that Distribution Date; and
(ii) the excess, if any, of (A) the aggregate Certificate Principal Balance of the Class A
Certificates immediately prior to that Distribution Date over (B) the lesser of (x) the product of (1)
the applicable Subordination Percentage and (2) the aggregate Stated Principal Balance of the Mortgage
Loans after giving effect to distributions to be made on that Distribution Date and (y) the excess, if
any, of the aggregate Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on that Distribution Date, over the Overcollateralization Floor.
Class M-1 Certificate: Any one of the Class M-1 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed to the Standard Terms as Exhibit
B, senior to the Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9,
Class M-10, Class SB and Class R Certificates with respect to distributions and the allocation of Realized
Losses as set forth in Section 4.05, and evidencing (i) an interest designated as a "regular interest" in
REMIC III for purposes of the REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class M-1 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.380% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.570% per annum.
Class M-1 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount or (ii) on or after the Stepdown Date if a Trigger Event is not in effect for
that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount for
that Distribution Date) and (2) the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to that Distribution Date over (B) the lesser of (x) the product of (1) the applicable Subordination
Percentage and (2) the aggregate Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on that Distribution Date and (y) the excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date, over the Overcollateralization Floor.
Class M-2 Certificate: Any one of the Class M-2 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed to the Standard Terms as Exhibit
B, senior to the Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10,
Class SB and Class R Certificates with respect to distributions and the allocation of Realized Losses as set
forth in Section 4.05, and evidencing (i) an interest designated as a "regular interest" in REMIC III for
purposes of the REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class M-2 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.400% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.600% per annum.
Class M-2 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount and Class M-1 Principal Distribution Amount or (ii) on or after the Stepdown
Date if a Trigger Event is not in effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount and the Class M-1 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A Certificates and Class M-1 Certificates (after taking into account the payment of the Class A
Principal Distribution Amount and the Class M-1 Principal Distribution Amount for that Distribution Date) and
(2) the Certificate Principal Balance of the Class M-2 Certificates immediately prior to that Distribution
Date over (B) the lesser of (x) the product of (1) the applicable Subordination Percentage and (2) the
aggregate Stated Principal Balance of the Mortgage Loans after giving effect to distributions to be made on
that Distribution Date and (y) the excess, if any, of the aggregate Stated Principal Balance of the Mortgage
Loans after giving effect to distributions to be made on that Distribution Date, over the
Overcollateralization Floor.
Class M-3 Certificate: Any one of the Class M-3 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class SB Certificates and
Class R Certificates with respect to distributions and the allocation of Realized Losses as set forth in
Section 4.05, and evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes of
the REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class M-3 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.420% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.630% per annum.
Class M-3 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount and Class M-2 Principal Distribution
Amount or (ii) on or after the Stepdown Date if a Trigger Event is not in effect for that Distribution Date,
the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount and Class M-2 Principal
Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount and the Class M-2 Principal Distribution
Amount for that Distribution Date) and (2) the Certificate Principal Balance of the Class M-3 Certificates
immediately prior to that Distribution Date over (B) the lesser of (x) the product of (1) the applicable
Subordination Percentage and (2) the aggregate Stated Principal Balance of the Mortgage Loans after giving
effect to distributions to be made on that Distribution Date and (y) the excess, if any, of the aggregate
Stated Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that
Distribution Date, over the Overcollateralization Floor.
Class M-4 Certificate: Any one of the Class M-4 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class SB Certificates and Class R
Certificates with respect to distributions and the allocation of Realized Losses as set forth in Section
4.05, and evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes of the
REMIC Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class M-4 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.580% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.870% per annum.
Class M-4 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount and Class M-3 Principal Distribution Amount or (ii) on or after the Stepdown Date if a Trigger Event
is not in effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal
Distribution Amount and Class M-3 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2 and Class M-3 Certificates (after taking into account the payment of the
Class A Principal Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2 Principal
Distribution Amount and the Class M-3 Principal Distribution Amount for that Distribution Date) and (2) the
Certificate Principal Balance of the Class M-4 Certificates immediately prior to that Distribution Date over
(B) the lesser of (x) the product of (1) the applicable Subordination Percentage and (2) the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date and (y) the excess, if any, of the aggregate Stated Principal Balance of the Mortgage Loans after giving
effect to distributions to be made on that Distribution Date, over the Overcollateralization Floor.
Class M-5 Certificate: Any one of the Class M-5 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class SB Certificates and Class R Certificates
with respect to distributions and the allocation of Realized Losses as set forth in Section 4.05, and
evidencing (i) an interest designated as a "regular interest" in REMIC III for purposes of the REMIC
Provisions and (ii) the right to receive Basis Risk Shortfalls.
Class M-5 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.600% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.900% per annum.
Class M-5 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount and Class M-4 Principal Distribution Amount or (ii) on or
after the Stepdown Date if a Trigger Event is not in effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, the Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount and Class M-4 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3 and Class M-4 Certificates (after taking into account the payment of
the Class A Principal Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount, the Class M-3 Principal Distribution Amount and the Class M-4 Principal
Distribution Amount for that Distribution Date) and (2) the Certificate Principal Balance of the Class M-5
Certificates immediately prior to that Distribution Date over (B) the lesser of (x) the product of (1) the
applicable Subordination Percentage and (2) the aggregate Stated Principal Balance of the Mortgage Loans
after giving effect to distributions to be made on that Distribution Date and (y) the excess, if any, of the
aggregate Stated Principal Balance of the Mortgage Loans after giving effect to distributions to be made on
that Distribution Date, over the Overcollateralization Floor.
Class M-6 Certificate: Any one of the Class M-6 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-7, Class M-8, Class M-9, Class M-10, Class SB Certificates and Class R Certificates with respect
to distributions and the allocation of Realized Losses as set forth in Section 4.05, and evidencing (i) an
interest designated as a "regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the
right to receive Basis Risk Shortfalls.
Class M-6 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 0.640% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 0.960% per annum.
Class M-6 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount and Class M-5
Principal Distribution Amount or (ii) on or after the Stepdown Date if a Trigger Event is not in effect for
that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, the Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount and
Class M-5 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates (after taking into account the
payment of the Class A Principal Distribution Amount, the Class M-1 Principal Distribution Amount, the
Class M-2 Principal Distribution Amount, the Class M-3 Principal Distribution Amount, the Class M-4 Principal
Distribution Amount and the Class M-5 Principal Distribution Amount for that Distribution Date) and (2) the
Certificate Principal Balance of the Class M-6 Certificates immediately prior to that Distribution Date over
(B) the lesser of (x) the product of (1) the applicable Subordination Percentage and (2) the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date and (y) the excess, if any, of the aggregate Stated Principal Balance of the Mortgage Loans after giving
effect to distributions to be made on that Distribution Date, over the Overcollateralization Floor.
Class M-7 Certificate: Any one of the Class M-7 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-8, Class M-9, Class M-10, Class SB Certificates and Class R Certificates with respect to
distributions and the allocation of Realized Losses as set forth in Section 4.05, and evidencing (i) an
interest designated as a "regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the
right to receive Basis Risk Shortfalls.
Class M-7 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 1.490% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 2.235% per annum.
Class M-7 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal
Distribution Amount and Class M-6 Principal Distribution Amount or (ii) on or after the Stepdown Date if a
Trigger Event is not in effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount,
Class M-5 Principal Distribution Amount and Class M-6 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M 5 and Class M-6 Certificates (after taking into
account the payment of the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount,
Class M-2 Principal Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal
Distribution Amount, Class M-5 Principal Distribution Amount and Class M-6 Principal Distribution Amount for
that Distribution Date) and (2) the Certificate Principal Balance of the Class M-7 Certificates immediately
prior to that Distribution Date over (B) the lesser of (x) the product of (1) the applicable Subordination
Percentage and (2) the aggregate Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on that Distribution Date and (y) the excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date, over the Overcollateralization Floor.
Class M-8 Certificate: Any one of the Class M-8 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-9, Class M-10, Class SB Certificates and Class R Certificates with respect to distributions and
the allocation of Realized Losses as set forth in Section 4.05, and evidencing (i) an interest designated as
a "regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the right to receive Basis
Risk Shortfalls.
Class M-8 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 1.690% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 2.535% per annum.
Class M-8 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal
Distribution Amount, Class M-6 Principal Distribution Amount and Class M-7 Principal Distribution Amount or
(ii) on or after the Stepdown Date if a Trigger Event is not in effect for that Distribution Date, the lesser
of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount,
Class M-5 Principal Distribution Amount, Class M-6 Principal Distribution Amount and Class M-7 Principal
Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M 5, Class M-6 and Class M-7 Certificates (after
taking into account the payment of the Class A Principal Distribution Amount, Class M-1 Principal
Distribution Amount, Class M-2 Principal Distribution Amount, Class M-3 Principal Distribution Amount,
Class M-4 Principal Distribution Amount, Class M-5 Principal Distribution Amount, Class M-6 Principal
Distribution Amount and Class M-7 Principal Distribution Amount for that Distribution Date) and (2) the
Certificate Principal Balance of the Class M-8 Certificates immediately prior to that Distribution Date over
(B) the lesser of (x) the product of (1) the applicable Subordination Percentage and (2) the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date and (y) the excess, if any, of the aggregate Stated Principal Balance of the Mortgage Loans after giving
effect to distributions to be made on that Distribution Date, over the Overcollateralization Floor.
Class M-9 Certificate: Any one of the Class M-9 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class M-10, Class SB Certificates and Class R Certificates with respect to distributions and the
allocation of Realized Losses as set forth in Section 4.05, and evidencing (i) an interest designated as a
"regular interest" in REMIC III for purposes of the REMIC Provisions and (ii) the right to receive Basis Risk
Shortfalls.
Class M-9 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 1.750% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 2.625% per annum.
Class M-9 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal
Distribution Amount, Class M-6 Principal Distribution Amount, Class M-7 Principal Distribution Amount and
Class M-8 Principal Distribution Amount or (ii) on or after the Stepdown Date if a Trigger Event is not in
effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount,
Class M-5 Principal Distribution Amount, Class M-6 Principal Distribution Amount, Class M-7 Principal
Distribution Amount and Class M-8 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M 5, Class M-6, Class M-7 and Class M-8
Certificates (after taking into account the payment of the Class A Principal Distribution Amount, Class M-1
Principal Distribution Amount, Class M-2 Principal Distribution Amount, Class M-3 Principal Distribution
Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal Distribution Amount, Class M-6 Principal
Distribution Amount, Class M-7 Principal Distribution Amount and Class M-8 Principal Distribution Amount for
that Distribution Date) and (2) the Certificate Principal Balance of the Class M-9 Certificates immediately
prior to that Distribution Date over (B) the lesser of (x) the product of (1) the applicable Subordination
Percentage and (2) the aggregate Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on that Distribution Date and (y) the excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to distributions to be made on that Distribution
Date, over the Overcollateralization Floor.
Class M-10 Certificate: Any one of the Class M-10 Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B, senior to
the Class SB Certificates and Class R Certificates with respect to distributions and the allocation of
Realized Losses as set forth in Section 4.05, and evidencing (i) an interest designated as a "regular
interest" in REMIC III for purposes of the REMIC Provisions and (ii) the right to receive Basis Risk
Shortfalls.
Class M-10 Margin: With respect to any Distribution Date prior to the second Distribution Date after
the first possible Optional Termination Date, 1.750% per annum, and on any Distribution Date on or after the
second Distribution Date after the first possible Optional Termination Date, 2.625% per annum.
Class M-10 Principal Distribution Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date or on or after the Stepdown Date if a Trigger Event is in effect for that Distribution Date,
the remaining Principal Distribution Amount for that Distribution Date after distribution of the Class A
Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal Distribution
Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal
Distribution Amount, Class M-6 Principal Distribution Amount, Class M-7 Principal Distribution Amount, Class
M-8 Principal Distribution Amount and Class M-9 Principal Distribution Amount or (ii) on or after the
Stepdown Date if a Trigger Event is not in effect for that Distribution Date, the lesser of:
(i)....the remaining Principal Distribution Amount for that Distribution Date after distribution of
the Class A Principal Distribution Amount, Class M-1 Principal Distribution Amount, Class M-2 Principal
Distribution Amount, Class M-3 Principal Distribution Amount, Class M-4 Principal Distribution Amount,
Class M-5 Principal Distribution Amount, Class M-6 Principal Distribution Amount, Class M-7 Principal
Distribution Amount, Class M-8 Principal Distribution Amount and Class M-9 Principal Distribution Amount; and
(ii)...the excess, if any, of (A) the sum of (1) the aggregate Certificate Principal Balance of the
Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M 5, Class M-6, Class M-7, Class M-8 and Class M-9
Certificates (after taking into account the payment of the Class A Principal Distribution Amount, Class M-1
Principal Distribution Amount, Class M-2 Principal Distribution Amount, Class M-3 Principal Distribution
Amount, Class M-4 Principal Distribution Amount, Class M-5 Principal Distribution Amount, Class M-6 Principal
Distribution Amount, Class M-7 Principal Distribution Amount, Class M-8 Principal Distribution Amount and
Class M-9 Principal Distribution Amount for that Distribution Date) and (2) the Certificate Principal Balance
of the Class M-10 Certificates immediately prior to that Distribution Date over (B) the lesser of (x) the
product of (1) the applicable Subordination Percentage and (2) the aggregate Stated Principal Balance of the
Mortgage Loans after giving effect to distributions to be made on that Distribution Date and (y) the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage Loans after giving effect to distributions
to be made on that Distribution Date, over the Overcollateralization Floor.
Class M Certificates: Collectively, the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class
M-6, Class M-7, Class M-8, Class M-9 and Class M-10 Certificates.
Class R Certificate: Any one of the Class R-I, Class R-II or Class R-III Certificates.
Class R-I Certificate: Any one of the Class R-I Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed to the Standard Terms as Exhibit
D and evidencing an interest designated as a "residual interest" in REMIC I for purposes of the REMIC
Provisions.
Class R-II Certificate: Any one of the Class R-II Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed to the Standard Terms as Exhibit
D and evidencing an interest designated as a "residual interest" in REMIC II for purposes of the REMIC
Provisions.
Class R-III Certificate: Any one of the Class R-III Certificates executed by the Trustee and
authenticated by the Certificate Registrar substantially in the form annexed to the Standard Terms as Exhibit
D and evidencing an interest designated as a "residual interest" in REMIC III for purposes of the REMIC
Provisions.
Class SB Certificate: Any one of the Class SB Certificates executed by the Trustee and authenticated
by the Certificate Registrar substantially in the form annexed hereto as Exhibit R, subordinate to the Class
A Certificates and Class M Certificates with respect to distributions and the allocation of Realized Losses
as set forth in Section 4.05, and evidencing ownership of REMIC III Regular Interests SB-IO and SB-PO
designated as "regular interests" in REMIC III for purposes of the REMIC Provisions, together with certain
obligations with respect to payments of Basis Risk Shortfall amounts.
Closing Date: April 27, 2006.
Corporate Trust Office: The principal office of the Trustee at which at any particular time its
corporate trust business with respect to this Agreement shall be administered, which office at the date of
the execution of this instrument is located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934,
Attention: Residential Funding Corporation, RALI 2006-QO4.
Cumulative Insurance Payments: For any Distribution Date, the aggregate of all Certificate Insurance
Payments previously made by the Certificate Insurer under the Certificate Policy minus the aggregate of all
payments previously made to the Certificate Insurer pursuant to Sections 4.02(c)(i)(B) and 4.02(c)(ii) of
this Series Supplement as reimbursement for Certificate Insurance Payments, together with interest thereon at
the Late Payment Rate from the date the Trustee received such amounts paid by the Certificate Insurer to such
Distribution Date.
Cut-off Date Principal Balance: $850,027,282.71.
Cut-off Date: April 1, 2006.
Deferred Interest: The amount of interest which is deferred and added to the principal balance of a
Mortgage Loan due to negative amortization.
Deficiency Amount: With respect to the Class I-A-2 Certificates and Class II-A-3 Certificates, as the
case may be, (a) for any Distribution Date prior to the Final Maturity Date, the sum of (1) the excess, if
any, of the Accrued Certificate Interest on the Certificates of such Class for such Distribution Date, net of
any Prepayment Interest Shortfalls, Relief Act Shortfalls, Basis Risk Shortfalls and Net Deferred Interest,
over the Available Distribution Amount from either Loan Group allocated to pay such net amount on the
Certificates of such Class on such Distribution Date and (2) the amount, if any, of any Realized Losses
allocable to the Class I-A-2 or Class II-A-3 Certificates, as the case may be, on such Distribution Date and
(b) for the Final Maturity Date, the sum of (x) the amount set forth in clause (a)(1) above for the Class
I-A-2 or Class II-A-3 Certificates, as the case may be, and (y) the outstanding Certificate Principal Balance
of such Class of Certificates, after giving effect to all payments of principal on the such Class of
Certificates on such Final Maturity Date, other than pursuant to a claim on this Policy on that Distribution
Date.
Determination Date: With respect to any Distribution Date, the second Business Day prior to each
Distribution Date.
Discount Net Mortgage Rate: Not applicable.
Due Period: With respect to each Distribution Date, the calendar month in which such Distribution
Date occurs.
Excess Bankruptcy Loss: Not applicable.
Excess Cash Flow: With respect to any Distribution Date, an amount equal to the sum of (A) the excess
of (i) the Available Distribution Amount for that Distribution Date over (ii) the sum of (a) the Interest
Distribution Amount for that Distribution Date and (b) the lesser of (1) the aggregate Certificate Principal
Balance of Class A Certificates and Class M Certificates immediately prior to such Distribution Date and
(2) the Principal Remittance Amount for that Distribution Date to the extent not applied to make distributions
of the Interest Distribution Amount on such Distribution Date and (B) the Overcollateralization Reduction
Amount, if any, for that Distribution Date.
Excess Fraud Loss: Not applicable.
Excess Overcollateralization Amount: With respect to any Distribution Date, the excess, if any, of
(a) the Overcollateralization Amount on such Distribution Date over (b) the Required Overcollateralization
Amount.
Excess Special Hazard Loss: Not applicable.
Excess Subordinate Principal Amount: Not applicable.
Expense Fee Rate: With respect to any Mortgage Loan as of any date of determination, the sum of the
Servicing Fee Rate and the rate per annum at which the Subservicing Fee accrues.
Final Maturity Date: May 25, 2046, the Distribution Date in the month following the month of the
latest scheduled maturity date of any Mortgage Loan.
Gross Margin: With respect to each Mortgage Loan, the fixed percentage set forth in the related
Mortgage Note and indicated on the Mortgage Loan Schedule attached hereto as the "NOTE MARGIN," which
percentage is added to the related Index on each Adjustment Date to determine (subject to rounding in
accordance with the related Mortgage Note, the Periodic Cap, the Maximum Mortgage Rate and the Minimum
Mortgage Rate) the interest rate to be borne by such Mortgage Loan until the next Adjustment Date.
Group I Certificates: The Class I-A-1 Certificates and Class I-A-2 Certificates.
Group I Cut-off Date Principal Balance: $444,776,674.36.
Group I Loans: The Mortgage Loans designated on the Mortgage Loan Schedule as Group I Loans.
Group I Net WAC Cap Rate: With respect to any Distribution Date, a per annum rate equal to the
weighted average of the Net Mortgage Rates (or, if applicable, the Modified Net Mortgage Rates) on the Group
I Loans using the Net Mortgage Rates in effect for the Monthly Payments due on such Mortgage Loans during the
related Due Period, weighted on the basis of the respective Stated Principal Balances thereof for such
Distribution Date, multiplied by a fraction equal to 30 divided by the actual number of days in the related
Interest Accrual Period.
Group I Net WAC Rate or Group II Net WAC Rate: With respect to any Distribution Date and Loan Group,
the weighted average of the Net Mortgage Rates of the Mortgage Loans in the related Loan Group as of the end
of the calendar month immediately preceding the month in which such Distribution Date occurs.
Group I Principal Distribution Amount: For any Distribution Date, the product of (x) the Class A
Principal Distribution Amount for such Distribution Date and (y) a fraction, the numerator of which is the
portion of the Principal Allocation Amount related to the Group I Loans for such Distribution Date and the
denominator of which is the Principal Allocation Amount for all of the Mortgage Loans for such Distribution
Date.
Group I Subordinate Amount: On any date of determination, the excess of the aggregate Stated
Principal Balance of the Group I Loans as of such date over the aggregate Certificate Principal Balance of
the Group I Certificates then outstanding.
Group II Certificates: The Class II-A-1, Class II-A-2 and Class II-A-3 Certificates.
Group II Cut-off Date Principal Balance: $405,250,608.35.
Group II Loans: The Mortgage Loans designated on the Mortgage Loan Schedule as Group II Loans.
Group II Net WAC Cap Rate: With respect to any Distribution Date, a per annum rate equal to the
weighted average of the Net Mortgage Rates (or, if applicable, the Modified Net Mortgage Rates) on the Group
II Loans using the Net Mortgage Rates in effect for the Monthly Payments due on such Mortgage Loans during
the related Due Period, weighted on the basis of the respective Stated Principal Balances thereof for such
Distribution Date, multiplied by a fraction equal to 30 divided by the actual number of days in the related
Interest Accrual Period.
Group II Principal Distribution Amount: For any Distribution Date, the product of (x) the Class A
Principal Distribution Amount for such Distribution Date and (y) a fraction, the numerator of which is the
portion of the Principal Allocation Amount related to the Group II Loans for such Distribution Date and the
denominator of which is the Principal Allocation Amount for all of the Mortgage Loans for such Distribution
Date.
Group II Subordinate Amount: On any date of determination, the excess of the aggregate Stated
Principal Balance of the Group II Loans as of such date over the aggregate Certificate Principal Balance of
the Group II Certificates then outstanding.
Index: With respect to any Mortgage Loan and as to any Adjustment Date therefor, the related index as
stated in the related Mortgage Note.
Initial Subordinate Class Percentage: Not applicable.
Insolvency Proceeding: The commencement, after the date this Agreement, of any bankruptcy,
insolvency, readjustment of debt, reorganization, marshalling of assets and liabilities or similar
proceedings by or against any Person, the commencement, after the date hereof, of any proceedings by or
against any Person for the winding up or liquidation of its affairs, or the consent, after the date hereof,
to the appointment of a trustee, conservator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, reorganization, marshalling of assets and liabilities or similar proceedings of or
relating to any Person.
Insurance Accrual Period: With respect to the calculation of the Insurance Premium and any
Distribution Date, the period beginning on and including the prior Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) and ending on the day immediately preceding the Distribution Date.
Insurance Premium: With respect to any Distribution Date, an amount equal to the product of (a) the
Certificate Principal Balance of the Class I-A-2 Certificates and Class II-A-3 Certificates as of such
Distribution Date (prior to giving effect to any distributions thereon on such Distribution Date) and (b)
0.06% per annum, adjusted to a basis of a 360-day year and the actual number of days in the related
Insurance Accrual Period.
Insurance Premium Rate: For either Class of Insured Certificates and any Distribution Date (a) the
Insurance Premium for such Distribution Date, multiplied by (b) a fraction the numerator of which equals the
Certificate Principal Balance of such Class immediately prior to the Distribution Date and the denominator
of which equals the aggregate Certificate Principal Balance of the Insured Certificates immediately prior to
such Distribution Date, divided by (c) the aggregate Stated Principal Balance of the Mortgage Loans in the
related Loan Group as of the Due Date in the prior calendar month, multiplied by (d) 12.
Insured Certificateholder: Any holder of an Insured Certificate.
Insured Certificate: Any one of the Class I-A-2 Certificates and Class II-A-3 Certificates.
Insured Payment: With respect to the Insured Certificates, the sum of (a) as of any Distribution Date,
any Deficiency Amount, and (b) any Avoided Payment.
Interest Accrual Period: (i) With respect to the Class I-A Certificates and any Distribution Date,
the calendar month preceding the month in which such Distribution Date occurs and (ii) with respect to the
Class II-A, Class M and Class SB Certificates and any Distribution Date, the period beginning on the prior
Distribution Date (or, in the case of the first Distribution Date, the Closing Date) and ending on the day
immediately preceding the Distribution Date.
Interest Distribution Amount: For any Distribution Date, the aggregate of the amounts payable
pursuant to Section 4.02(c)(i).
Interest Only Certificates: None.
Late Payment Rate: With respect to any Distribution Date, the lesser of (i) the greater of (a) the
rate of interest, as it is publicly announced by Citibank, N.A. at its principal office in New York, New York
as its prime rate (any change in such prime rate of interest to be effective on the date such change is
announced by Citibank, N.A.) plus 2% and (b) the then applicable highest rate of interest on the Class I-A-2
Certificates or Class II-A-3 Certificates, as the case may be, and (ii) as determined by the Certificate
Insurer, the maximum rate permissible under applicable usury or similar laws limiting interest rates. The
Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days.
LIBOR: With respect to any Distribution Date, the arithmetic mean of the London interbank offered
rate quotations for one-month U.S. Dollar deposits, expressed on a per annum basis, determined in accordance
with Section 1.02.
LIBOR Business Day: Any day other than (i) a Saturday or Sunday or (ii) a day on which banking
institutions in London, England are required or authorized to by law to be closed.
LIBOR Certificates: The Class II-A Certificates and Class M Certificates.
LIBOR Rate Adjustment Date: With respect to each Distribution Date, the second LIBOR Business Day
immediately preceding the commencement of the related Interest Accrual Period.
Liquidation Proceeds: As defined in the Standard Terms but excluding Subsequent Recoveries.
Loan Group: Either Loan Group I or Loan Group II.
Loan Group I: The group of Mortgage Loans comprised of the Group I Loans.
Loan Group II: The group of Mortgage Loans comprised of the Group II Loans.
Margin: The Class I-A-1 Margin, Class I-A-2 Margin, Class II-A-1 Margin, Class II-A-2 Margin, Class
II-A-3 Margin, Class M-1 Margin, Class M-2 Margin, Class M-3 Margin, Class M-4 Margin, Class M-5 Margin,
Class M-6 Margin, Class M-7 Margin, Class M-8 Margin, Class M-9 Margin or Class M-10 Margin, as applicable.
Marker Rate: With respect to the Class SB Certificates or REMIC III Regular Interest SB-IO and any
Distribution Date, in relation to the REMIC II Regular Interests LT1, LT2, LT3, LT4 and LT-Y1, a per annum
rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass-Through Rates for REMIC
II Regular Interest LT2 and REMIC II Regular Interest LT3. With respect to the Class SB Certificates or
REMIC III Regular Interest SB-IO and any Distribution Date, in relation to the REMIC II Regular Interests
LT5, LT6, LT7, LT8 and LT-Y2, a per annum rate equal to two (2) times the weighted average of the
Uncertificated REMIC II Pass-Through Rates for REMIC II Regular Interest LT6 and REMIC II Regular Interest
LT7.
Maturity Date: April 25, 2046, the Distribution Date in the month of the latest scheduled maturity
date of any Mortgage Loan.
Maximum Mortgage Rate: As to any Mortgage Loan, the per annum rate indicated in Mortgage Loan
Schedule hereto attached hereto as the "NOTE CEILING," which rate is the maximum interest rate that may be
applicable to such Mortgage Loan at any time during the life of such Mortgage Loan.
Maximum Net Mortgage Rate: As to any Mortgage Loan and any date of determination, the Maximum
Mortgage Rate minus the Expense Fee Rate.
Mortgage Loan Schedule: The list or lists of the Mortgage Loans attached hereto as Exhibit One,
segregated for the group I Loans and the Group II Loans, (and as amended from time to time to reflect the
addition of Qualified Substitute Mortgage Loans), which list or lists shall set forth the following
information as to each Mortgage Loan:
(i)....the Mortgage Loan identifying number ("RFC LOAN #");
(ii)...the maturity of the Mortgage Note ("MATURITY DATE");
(iii)..the Mortgage Rate as of origination ("ORIG RATE");
(iv)...the Mortgage Rate as of the Cut-off Date ("CURR RATE");
(v)....the Net Mortgage Rate as of the Cut-off Date ("CURR NET");
(vi)...the scheduled monthly payment of principal, if any, and interest as of the Cut-off Date
("ORIGINAL P & I" or "CURRENT P & I");
(vii)..the Cut-off Date Principal Balance ("PRINCIPAL BAL");
(viii).the Maximum Mortgage Rate ("NOTE CEILING");
(ix)...the maximum Net Mortgage Rate ("NET CEILING");
(x)....the Note Margin ("NOTE MARGIN");
(xi)...the Note Margin ("NOTE MARGIN");
(xii)..the Periodic Cap ("PERIODIC DECR" or "PERIODIC INCR");
(xiii).the rounding of the semi-annual or annual adjustment to the Mortgage Rate ("NOTE METHOD");
(xiv)..the Loan-to-Value Ratio at origination ("LTV");
(xv)...the rate at which the Subservicing Fee accrues ("SUBSERV FEE") and at which the Servicing Fee
accrues ("MSTR SERV FEE");
(xvi)..a code "T," "BT" or "CT" under the column "LN FEATURE," indicating that the Mortgage Loan is
secured by a second or vacation residence; and
(xvii).a code "N" under the column "OCCP CODE," indicating that the Mortgage Loan is secured by a
non-owner occupied residence.
Such schedule may consist of multiple reports that collectively set forth all of the information
required.
Mortgage Rate: With respect to any Mortgage Loan, the interest rate borne by the related Mortgage
Note, or any modification thereto other than a Servicing Modification. The Mortgage Rate on each Mortgage
Loan will adjust on each Adjustment Date to equal the sum (rounded to the nearest multiple of one eighth of
one percent (0.125%) or up to the nearest one-eighth of one percent, which are indicated by a "U" on the
Mortgage Loan Schedule, except in the case of the Mortgage Loans indicated by an "X" on the Mortgage Loan
Schedule under the heading "NOTE METHOD"), of the related Index plus the Note Margin, in each case subject to
the applicable Periodic Cap, Maximum Mortgage Rate and Minimum Mortgage Rate.
MTA: With respect to any Distribution Date, the twelve-month moving average monthly yield on United
States Treasury securities, expressed on a per annum basis, determined in accordance with Section 1.03.
MTA Determination Date: For each Interest Accrual Period, fifteen days prior to the commencement of
that Interest Accrual Period.
Net Deferred Interest: On any Distribution Date, Deferred Interest on the Mortgage Loans during
the related Due Period net of Principal Prepayments in full and partial Principal Prepayments included in the
Available Distribution Amount for such Distribution Date and available to make principal distributions on the
Certificates on that Distribution Date.
For purposes of REMIC I, Net Deferred Interest attributable to Group I Loans shall be allocated to the
REMIC I Regular Interest Z-1 and Net Deferred Interest attributable to Group II Loans shall be allocated to
the REMIC I Regular Interest Z-2, respectively, in reduction of the portion of the Uncertificated Accrued
Interest thereon distributable on the related Distribution Date and shall result in an increase in the
principal balance thereof to the extent of such reduction.
For purposes of REMIC II, Net Deferred Interest attributable to Group I Loans shall be allocated to
the REMIC II Regular Interest LT1 and Net Deferred Interest attributable to Group II Loans shall be allocated
to the REMIC II Regular Interest LT5, respectively, in reduction of the portion of the Uncertificated Accrued
Interest thereon distributable on the related Distribution Date and shall result in an increase in the
principal balance thereof to the extent of such reduction.
Net Maximum Cap Rate: For any Distribution Date and the Class I-A Certificates, the related Net WAC
Cap Rate computed for this purpose by assuming that each related Mortgage Loan accrued interest at its
maximum mortgage rate
Net Mortgage Rate: With respect to any Mortgage Loan as of any date of determination, a per annum
rate equal to the Mortgage Rate for such Mortgage Loan as of such date minus the related Expense Fee Rate.
Net WAC Cap Rate:
o For any Distribution Date and for the Class I-A-1 Certificates, the Group I Net WAC Rate.
o For any Distribution Date and for the Class I-A-2 Certificates, the Group I Net WAC Rate, minus the
Insurance Premium Rate.
o For any Distribution Date and for the Class II-A-1 Certificates and Class II-A-2 Certificates, the
Group II Net WAC Rate multiplied by a fraction the numerator of which is 30 and the denominator
of which is the actual number of days in the related Interest Accrual Period for such
Certificates.
o For any Distribution Date and for the Class II-A-3 Certificates, the Group II Net WAC Rate multiplied
by a fraction the numerator of which is 30 and the denominator of which is the actual number of
days in the related Interest Accrual Period for such Certificates, minus the Insurance Premium
Rate.
o For any Distribution Date and for the Class M Certificates, the weighted average of the Group I Net
WAC Rate and the Group II Net WAC Rate, weighted on the basis of the related Subordinate Amount
for each Loan Group, multiplied by a fraction the numerator of which is 30 and the denominator
of which is the actual number of days in the related Interest Accrual Period for such
Certificates.
Note Margin: With respect to each Mortgage Loan, the fixed percentage set forth in the related
Mortgage Note and indicated in Exhibit One hereto as the "NOTE MARGIN," which percentage is added to the
Index on each Adjustment Date to determine (subject to rounding in accordance with the related Mortgage Note,
the Periodic Cap, the Maximum Mortgage Rate and the Minimum Mortgage Rate) the interest rate to be borne by
such Mortgage Loan until the next Adjustment Date.
Notional Amount: An amount equal to the aggregate Uncertificated Principal Balance of the regular
interests in REMIC II.
Offered Certificates: The Class A Certificates and the Class M Certificates.
Optional Termination Date: Any Distribution Date on or after which the aggregate Stated Principal
Balance (after giving effect to distributions to be made on such Distribution Date) of the Mortgage Loans is
less than 10.00% of the Cut-off Date Principal Balance.
Overcollateralization Amount: With respect to any Distribution Date, the excess, if any, of (a) the
aggregate Stated Principal Balance of the Mortgage Loans before giving effect to distributions of principal
to be made on such Distribution Date over (b) the aggregate Certificate Principal Balance of the Class A
Certificates and Class M Certificates immediately prior to such date.
Overcollateralization Floor: An amount equal to the product of 0.50% and the Cut-off Date Principal
Balance.
Overcollateralization Increase Amount: With respect to any Distribution Date, the lesser of
(a) Excess Cash Flow for that Distribution Date (to the extent not used to cover the amounts described in
clauses (b)(iv)(2), (v) and (vi) of the definition of Principal Distribution Amount as of such Distribution
Date) and (b) the excess of (1) the Required Overcollateralization Amount for such Distribution Date over
(2) the Overcollateralization Amount for such Distribution Date.
Overcollateralization Reduction Amount: With respect to any Distribution Date on which the Excess
Overcollateralization Amount is, after taking into account all other distributions to be made on such
Distribution Date, greater than zero, the Overcollateralization Reduction Amount shall be equal to the lesser
of (i) the Excess Overcollateralization Amount for that Distribution Date and (ii) the Principal Remittance
Amount on such Distribution Date.
Pass-Through Rate:
o With respect to the Class I-A-1 Certificates and Class I-A-2 Certificates, and any Distribution Date,
a per annum rate equal to the lesser of (i) MTA plus the related Margin for such Distribution
Date and (ii) the related Net WAC Cap Rate for such Distribution Date.
o With respect to the Class II-A-1, Class II-A-2 and Class II-A-3 Certificates, and any Distribution
Date, the least of (i) LIBOR plus the related Margin for such Distribution Date, (ii) the
related Net WAC Cap Rate for such Distribution Date and (iii) 11.00%.
o With respect to the Class M Certificates, and any Distribution Date, the least of (i) LIBOR plus the
applicable Pass-Through Margin, (ii) the weighted average of the Net WAC Rates for the Group I
Loans and Group II Loans, weighted on the basis of the related Subordinate Amount (iii) 11.00%.
o With respect to the Class SB Certificates and any Distribution Date or REMIC III Regular Interest
SB-IO, a rate per annum equal to the percentage equivalent of a fraction, the numerator of
which is the sum of the amounts calculated pursuant to clauses (i) through (viii) below, and
the denominator of which is the aggregate principal balance of the REMIC II Regular Interests.
For purposes of calculating the Pass-Through Rate for the Class SB Certificates or the REMIC
III Regular Interest SB-IO, the numerator is equal to the sum of the following components:
(i)....the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT1 minus the related Marker
Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT1;
(ii)...the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT2 minus the related Marker
Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT2; and
(iii)..the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT4 minus twice the related
Marker Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular
Interest LT4.
(iv)...the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT5 minus the related Marker
Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT5;
(v)....the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT6 minus the related Marker
Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular Interest
LT6;
(vi)...the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT8 minus twice the related
Marker Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular
Interest LT8;
(vii)..the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT-Y1 minus the related
Marker Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular
Interest LT-Y1; and
(viii).the Uncertificated Pass-Through Rate for REMIC II Regular Interest LT-Y2 minus the related
Marker Rate, applied to a notional amount equal to the Uncertificated Principal Balance of REMIC II Regular
Interest LT-Y2.
Prepayment Assumption: The prepayment assumption to be used for determining the accrual of original
issue discount and premium and market discount on the Certificates for federal income tax purposes, which
assumes a constant prepayment rate of 25.0% per annum of the then outstanding principal balance of the
Mortgage Loans.
Prepayment Charge: With respect to any Mortgage Loan, the charges or premiums, if any, received in
connection with a full or partial prepayment of such Mortgage Loan in accordance with the terms thereof.
Prepayment Charge Loan: Any Mortgage Loan for which a Prepayment Charge may be assessed and to which
such Prepayment Charge the Class SB Certificates are entitled, as indicated on the Mortgage Loan Schedule.
Principal Allocation Amount: With respect to any Distribution Date, the sum of (a) the Principal
Remittance Amount for that Distribution Date, (b) any Realized Losses covered by amounts included in clause
(iv) of the definition of Principal Distribution Amount and (c) the aggregate amount of the principal portion
of Realized Losses on the Mortgage Loans in the calendar month preceding that Distribution Date, to the
extent covered by Excess Cash Flow included in clause (v) of the definition of Principal Distribution Amount;
provided, however, that on any Distribution Date on which there is (i) insufficient Subsequent Recoveries to
cover all unpaid Realized Losses on the Mortgage Loans described in clause (b) above, in determining the
Group I Principal Distribution Amount and the Group II Principal Distribution Amount, Subsequent Recoveries
will be allocated to the Class I-A Certificates and Class II-A Certificates, pro rata, based on the principal
portion of unpaid Realized Losses from prior Distribution Dates on the Group I Loans and Group II Loans,
respectively, and (ii) insufficient Excess Cash Flow to cover all Realized Losses on the Mortgage Loans
described in clause (c) above, in determining the Group I Principal Distribution Amount and the Group II
Principal Distribution Amount, the Excess Cash Flow remaining after the allocation described in clause (b) or
(i) above, as applicable, will be allocated to the Class I-A Certificates and Class II-A Certificates, pro
rata, based on the principal portion of Realized Losses incurred during the calendar month preceding that
Distribution Date on the Group I Loans and Group II Loans, respectively.
Principal Distribution Amount: With respect to any Distribution Date, the lesser of (a) the excess of
(x) Available Distribution Amount over (y) the sum of the Interest Distribution Amount and the amounts
reimbursable to the Certificate Insurer pursuant to Section 4.02(c)(i)(B) and (b) the sum of:
(i)....the principal portion of each Monthly Payment received or Advanced with respect to the related
Due Period on each Outstanding Mortgage Loan;
(ii)...the Stated Principal Balance of any Mortgage Loan repurchased during the related Prepayment
Period (or deemed to have been so repurchased in accordance with Section 3.07(b)) pursuant to Section 2.02,
2.03, 2.04 or 4.07 and the amount of any shortfall deposited in the Custodial Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section 2.03 or 2.04 during the related Prepayment Period;
(iii)..the principal portion of all other unscheduled collections, other than Subsequent Recoveries,
on the Mortgage Loans received (or deemed to have been so received) during the prior calendar month or, in
the case of Principal Prepayments in Full, during the related Prepayment Period, including, without
limitation, Curtailments, Insurance Proceeds, Liquidation Proceeds, REO Proceeds and, except to the extent
applied to offset Deferred Interest, Principal Prepayments, to the extent applied by the Master Servicer as
recoveries of principal pursuant to Section 3.14;
(iv)...the lesser of (1) Subsequent Recoveries for such Distribution Date and (2) the principal
portion of any Realized Losses allocated to any Class of Class A Certificates or Class M Certificates on a
prior Distribution Date and remaining unpaid;
(v)....the lesser of (1) the Excess Cash Flow for such Distribution Date (to the extent not used
pursuant to clause (iv) of this definition on such Distribution Date) and (2) the principal portion of any
Realized Losses incurred (or deemed to have been incurred) on any Mortgage Loans in the calendar month
preceding such Distribution Date; and
(vi)...the lesser of (a) the Excess Cash Flow for such Distribution Date, to the extent not used
pursuant to clauses (iv) and (v) of this definition on such Distribution Date, and (b) the amount of any
Overcollateralization Increase Amount for such Distribution Date;
minus
(vii)..(A) the amount of any Overcollateralization Reduction Amount for such Distribution Date and (B)
the amount of any Capitalization Reimbursement Amount for such Distribution Date.
Principal Only Certificates: None.
Principal Remittance Amount: With respect to any Distribution Date, all amounts described in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount for that Distribution Date.
Record Date: With respect to each Distribution Date and each Class of Book Entry Certificates, the
Business Day immediately preceding such Distribution Date. With respect to each Class of Definitive
Certificates, the close of business on the last Business Day of the month next preceding the month in which
the related Distribution Date occurs, except in the case of the first Record Date which shall be the Closing
Date.
Regular Certificates: The Class A, Class M and Class SB Certificates.
Related Group: With respect to the Class I-A Certificates, the Group I Loans. With respect to the
Class II-A Certificates, the Group II Loans.
Relief Act: The Servicemembers Civil Relief Act, as amended.
Relief Act Shortfalls: Interest shortfalls on the Mortgage Loans resulting from the Relief Act or
similar legislation or regulations.
REMIC I: The segregated pool of assets subject hereto, constituting a portion of the primary trust
created hereby and to be administered hereunder, exclusive of the Yield Maintenance Agreement, which is not
an asset of any REMIC, with respect to which a separate REMIC election is to be made, consisting of:
(i) the Mortgage Loans and the related Mortgage Files;
(ii) all payments on and collections in respect of the Mortgage Loans due after the Cut-off
Date (other than Monthly Payments due in the month of the Cut-off Date) as shall be on deposit in the
Custodial Account or in the Certificate Account and identified as belonging to the Trust Fund;
(iii) property which secured a Mortgage Loan and which has been acquired for the benefit of
the Certificateholders by foreclosure or deed in lieu of foreclosure;
(iv) the hazard insurance policies and Primary Insurance Policies pertaining to the Mortgage
Loans, if any; and
(v) all proceeds of clauses (i) through (iv) above.
REMIC I Available Distribution Amount: The Available Distribution Amount.
REMIC I Distribution Amount: For any Distribution Date, the REMIC I Available Distribution Amount
shall be distributed to the REMIC I Regular Interests and the Class R-I Certificates in the following amounts
and priority:
(a) To the extent of the portion of the REMIC I Available Distribution Amount for related to Loan
Group I:
(i) first, to REMIC I Y-1 and REMIC I Z-1 Regular Interests, concurrently, the
Uncertificated Accrued Interest for such Regular Interests remaining unpaid from previous Distribution Dates,
reduced in the case of the REMIC I Z-1 Regular Interest by any portion thereof representing Net Deferred
Interest allocated to such Regular Interest on such previous Distribution Date, pro rata according to their
respective shares of such unpaid amounts;
(ii) second, to the REMIC I Y-1 and REMIC I Z-1 Regular Interests, concurrently, the
Uncertificated Accrued Interest for such Classes for the current Distribution Date, reduced in the case of
the REMIC I Z-1 Regular Interest by any portion thereof representing Net Deferred Interest allocated to such
Regular Interest on such Distribution Date, pro rata according to their respective Uncertificated Accrued
Interest, as reduced; and
(iii) third, to the REMIC I Y-1 and REMIC I Z-1 Regular Interests, the REMIC I Y-1 Principal
Distribution Amount and the REMIC I Z-1 Principal Distribution Amount, respectively.
(b) To the extent of the portion of the REMIC I Available Distribution Amount related to Loan Group
II:
(i) first, to the REMIC I Y-2 and REMIC I Z-2 Regular Interests, concurrently, the
Uncertificated Accrued Interest for such Classes remaining unpaid from previous Distribution Dates, reduced
in the case of the REMIC I Z-2 Regular Interest by any portion thereof representing Net Deferred Interest
allocated to such Regular Interest on such previous Distribution Date, pro rata according to their respective
shares of such unpaid amounts;
(ii) second, to the REMIC I Y-2 and REMIC I Z-2 Regular Interests, concurrently, the
Uncertificated Accrued Interest for such Classes for the current Distribution Date, reduced in the case of
the REMIC I Z-2 Regular Interest by any portion thereof representing Net Deferred Interest allocated to such
Regular Interest on such Distribution Date, pro rata according to their respective Uncertificated Accrued
Interest, as reduced; and
(iii) third, to the REMIC I Y-2 and REMIC I Z-2 Regular Interests, the REMIC I Y-2 Principal
Distribution Amount and the REMIC I Z-2 Principal Distribution Amount, respectively.
(c) To the extent of the REMIC I Available Distribution Amounts for Group I and Group II for such
Distribution Date remaining after payment of the amounts pursuant to paragraphs (a) and (b) of this
definition of "REMIC I Distribution Amount:"
(i) first, to each Class of REMIC I Y and REMIC I Z Regular Interests, pro rata according
to the amount of unreimbursed Realized Losses allocable to principal previously allocated to each such
Regular Interest, the aggregate amount of any distributions to the Certificates as reimbursement of such
Realized Losses on such Distribution Date pursuant to clause (xiii) in Section 4.02(c); provided, however,
that any amounts distributed pursuant to this paragraph (c)(i) of this definition of "REMIC I Distribution
Amount" shall not cause a reduction in the Uncertificated Principal Balances of any of the REMIC I Y and
REMIC I Z Regular Interests; and
(ii) second, to the Class R-I Certificates, any remaining amount.
REMIC I Interests: The REMIC I Regular Interests and the Class R-I Certificates.
REMIC I Y Principal Reduction Amounts: For any Distribution Date the amounts by which the
Uncertificated Principal Balances of the REMIC I Y-1 Regular Interest and REMIC I Y-2 Regular Interest
respectively will be reduced on such distribution date by the allocation of Realized Losses and the
distribution of principal, determined as follows:
First for each of Loan Group I and Loan Group II determine the related Group REMIC Net WAC Cap Rate
for distributions of interest that will be made on the next succeeding Distribution Date (the "Group Interest
Rate"). The REMIC I Principal Reduction Amount for each of the REMIC I Y Regular Interests will be
determined pursuant to the "Generic solution for the REMIC I Y Regular Interests" set forth below (the
"Generic Solution") by making the following identifications among the Loan Groups and their related REMIC I Y
Regular Interests and REMIC I Z Regular Interests:
A. Determine which Loan Group has the lower Group REMIC Net WAC Cap Rate. That Loan Group
will be identified with Loan Group AA and the REMIC I Y Regular Interests and REMIC I Z Regular Interests
related to that Loan Group will be respectively identified with the REMIC I YAA and REMIC I ZAA Regular
Interests. The Group Interest Rate for that Loan Group will be identified with J%. If the two Loan Groups
have the same Group Interest Rate pick one for this purpose, subject to the restriction that each Loan Group
may be picked only once in the course of any such selections pursuant to paragraphs A and B of this
definition.
B. Determine which Loan Group has the higher Group REMIC Net WAC Cap Rate. That Loan
Group will be identified with Loan Group BB and the REMIC I Y Regular Interests and REMIC I Z Regular
Interests related to that Group will be respectively identified with the REMIC I YBB and REMIC I ZBB Regular
Interests. The Group Interest Rate for that Loan Group will be identified with K%. If the two Loan Groups
have the same Group Interest Rate the Loan Group not selected pursuant to paragraph A, above, will be
selected for purposes of this paragraph B.
Second, apply the Generic Solution set forth below to determine the REMIC I Y Principal Reduction
Amounts for the Distribution Date using the identifications made above.
GENERIC SOLUTION FOR THE REMIC I Y PRINCIPAL REDUCTION AMOUNTS: For any Distribution Date, the
amounts by which the Uncertificated Principal Balances of REMIC I YAA and REMIC I ZAA Regular Interests
respectively will be reduced on such Distribution Date by the allocation of Realized Losses and the
distribution of principal, determined as follows:
J% and K% represent the interest rates on Loan Group AA and Loan Group BB respectively. J% less than K%.
For purposes of the succeeding formulas the following symbols shall have the meanings set forth below:
PJB = the Loan Group AA Subordinate Balance after the allocation of Realized Losses and Net
Deferred Interest and distributions of principal on such Distribution Date.
PKB = the Loan Group BB Subordinate Balance after the allocation of Realized Losses and Net
Deferred Interest and distributions of principal on such Distribution Date.
R = the Class CB Pass Through Rate = (J%PJB + K%PKB)/(PJB + PKB)
Yj = the REMIC I YAA Principal Balance after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date.
Yk = the REMIC I YBB Principal Balance after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date.
(DELTA)Yj = the REMIC I YAA Principal Reduction Amount.
(DELTA)Yk = the REMIC I YBB Principal Reduction Amount.
Zj = the REMIC I ZAA Principal Balance after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date.
Zk = the REMIC I ZBB Principal Balance after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date.
(DELTA)Zj = the REMIC I ZAA Principal Reduction Amount.
= (DELTA)Pj - (DELTA)Yj
(DELTA)Zk = the REMIC I ZBB Principal Reduction Amount.
= (DELTA)Pk - (DELTA)Yk
Pj = the aggregate Uncertificated Principal Balance of the REMIC I YAA and REMIC I ZAA
Regular Interests after distributions and the allocation of Realized Losses and Net Deferred Interest on the
prior Distribution Date, which is equal to the aggregate principal balance of the Group AA Loans.
Pk = the aggregate Uncertificated Principal Balance of the REMIC I YBB and REMIC I ZBB
Regular Interests after distributions and the allocation of Realized Losses and Net Deferred Interest on the
prior Distribution Date, which is equal to the aggregate principal balance of the Loan Group BB Mortgage
Loans.
(DELTA)Pj = the aggregate principal reduction resulting on such Distribution Date on the
Loan Group AA Mortgage Loans as a result of principal distributions (exclusive of any amounts distributed
pursuant to clauses (c)(i) or (c)(ii) of the definition of REMIC I Distribution Amount) to be made and
Realized Losses and Net Deferred Interest to be allocated on such Distribution Date, if applicable, which is
equal to the aggregate of the REMIC I YAA and REMIC I ZAA Principal Reduction Amounts.
(DELTA)Pk= the aggregate principal reduction resulting on such Distribution Date on the
Loan Group BB Mortgage Loans as a result of principal distributions (exclusive of any amounts distributed
pursuant to clauses (c)(i) or (c)(ii) of the definition of REMIC I Distribution Amount) to be made and
Realized Losses and Net Deferred Interest to be allocated on such Distribution Date, which is equal to the
aggregate of the REMIC I YBB and REMIC I ZBB Principal Reduction Amounts.
(alpha) = .0005
(gamma) = (R - J%)/(K% - R). (gamma) is a non-negative number unless its denominator is
zero, in which event it is undefined.
If (gamma) is zero, (DELTA)Yk = Yk and (DELTA)Yj = (Yj/Pj)(DELTA)Pj.
If (gamma) is undefined, (DELTA)Yj = Yj, (DELTA)Yk = (Yk/Pk)(DELTA)Pk. if denominator
In the remaining situations, (DELTA)Yk and (DELTA)Yj shall be defined as follows:
1. If Yk - (alpha)(Pk - (DELTA)Pk) => 0, Yj- (alpha)(Pj - (DELTA)Pj) => 0, and (gamma) (Pj - (DELTA)Pj) less than
(Pk - (DELTA)Pk), (DELTA)Yk = Yk - (alpha)(gamma) (Pj - (DELTA)Pj) and
(DELTA)Yj = Yj - (alpha)(Pj - (DELTA)Pj).
2. If Yk - (alpha)(Pk - (DELTA)Pk) => 0, Yj - (alpha)(Pj - (DELTA)Pj) => 0, and (gamma) (Pj - (DELTA)Pj)
=> (Pk - (DELTA)Pk), (DELTA)Yk = Yk - (alpha)(Pk - (DELTA)Pk) and
(DELTA)Yj = Yj - ((alpha)/(gamma))(Pk - (DELTA)Pk).
3. If Yk - (alpha)(Pk - (DELTA)Pk) less than 0, Yj - (alpha)(Pj - (DELTA)Pj) => 0, and
Yj - (alpha)(Pj - (DELTA)Pj) => Yj - (Yk/(gamma)), (DELTA)Yk = Yk - (alpha)(gamma) (Pj - (DELTA)Pj) and
(DELTA)Yj = Yj - (alpha)(Pj - (DELTA)Pj).
4. If Yk - (alpha)(Pk - (DELTA)Pk) less than 0, Yj - (Yk/(gamma)) => 0, and
Yj - (alpha)(Pj - (DELTA)Pj) less than = Yj - (Yk/(gamma)), (DELTA)Yk = 0 and (DELTA)Yj = Yj - (Yk/(gamma)).
5. If Yj - (alpha)(Pj - (DELTA)Pj) less than 0, Yj - (Yk/(gamma)) less than 0, and
Yk - (alpha)(Pk - (DELTA)Pk) less than = Yk - ((gamma)Yj), (DELTA)Yk = Yk - ((gamma)Yj) and (DELTA)Yj = 0.
6. If Yj - (alpha)(Pj - (DELTA)Pj) less than 0, Yk - (alpha)(Pk - (DELTA)Pk) => 0, and
Yk - (alpha)(Pk - (DELTA)Pk) => Yk - ((gamma)Yj), (DELTA)Yk = Yk - (alpha)(Pk - (DELTA)Pk) and
(DELTA)Yj = Yj - ((alpha)/(gamma))(Pk - (DELTA)Pk).
The purpose of the foregoing definitional provisions together with the related provisions allocating
Realized Losses and defining the REMIC I Y and REMIC I Z Principal Distribution Amounts is to accomplish the
following goals in the following order of priority:
1. Making the ratio of Yk to Yj equal to (gamma) after taking account of the allocation Realized Losses
and the distributions that will be made through end of the Distribution Date to which such provisions
relate and assuring that the Principal Reduction Amount for each of the REMIC I YAA, REMIC I YBB, REMIC I
ZAA and REMIC I ZBB Regular Interests is greater than or equal to zero for such Distribution Date;
2. Making (i) the REMIC I YAA Principal Balance less than or equal to 0.0005 of the sum of the REMIC I
YAA and REMIC I ZAA principal balances and (ii) the REMIC I YBB principal balances less than or equal to
0.0005 of the sum of the REMIC I YBB and REMIC I ZBB Principal Balances in each case after giving effect
to allocations of Realized Losses and distributions to be made through the end of the Distribution Date
to which such provisions relate; and
3. Making the larger of (a) the fraction whose numerator is Yk and whose denominator is the sum of Yk and
Zk and (b) the fraction whose numerator is Yj and whose denominator is the sum of Yj, and Zj as large as
possible while remaining less than or equal to 0.0005.
In the event of a failure of the foregoing portion of the definition of REMIC I Y Principal
Reduction Amount to accomplish both of goals 1 and 2 above, the amounts thereof should be adjusted to so as
to accomplish such goals within the requirement that each REMIC I Y Principal Reduction Amount must be less
than or equal to the sum of (a) the principal Realized Losses to be allocated on the related Distribution
Date for the related Pool and (b) the remainder of the Available Distribution Amount for the related Pool or
after reduction thereof by the distributions to be made on such Distribution in respect of interest on the
related REMIC I Y and REMIC I Z Regular Interests, or, if both of such goals cannot be accomplished within
such requirement, such adjustment as is necessary shall be made to accomplish goal 1 within such
requirement. In the event of any conflict among the provisions of the definition of the REMIC I Y Principal
Reduction Amounts, such conflict shall be resolved on the basis of the goals and their priorities set forth
above within the requirement set forth in the preceding sentence.
REMIC I Realized Losses: Realized Losses on Group I Loans and Group II Loans shall be allocated to the
REMIC I Regular Interests as follows: (1) The interest portion of Realized Losses on Group I Loans, if any,
shall be allocated among the REMIC I Y-1 and REMIC I Z-1 Regular Interests pro rata according to the amount
of interest accrued but unpaid thereon, in reduction thereof; and (2) the interest portion of Realized Losses
on Group II Loans, if any, shall be allocated among the REMIC I Y-2 and REMIC I Z-2 Regular Interests pro
rata according to the amount of interest accrued but unpaid thereon, in reduction thereof. Any interest
portion of such Realized Losses in excess of the amount allocated pursuant to the preceding sentence shall be
treated as a principal portion of Realized Losses not attributable to any specific Mortgage Loan in such Loan
Group and allocated pursuant to the succeeding sentences. The principal portion of Realized Losses with
respect to Loan Group I and Loan Group II shall be allocated to the REMIC I Regular Interests as follows: (1)
The principal portion of Realized Losses on Group I Loans shall be allocated, first, to the REMIC I Y-1
Regular Interest to the extent of the REMIC I Y-1 Principal Reduction Amount in reduction of the
Uncertificated Principal Balance of such REMIC I Regular Interest and, second, the remainder, if any, of such
principal portion of such Realized Losses shall be allocated to the REMIC I Z-1 Regular Interest in reduction
of the Uncertificated Principal Balance thereof; and (2) the principal portion of Realized Losses on Group II
Loans shall be allocated, first, to the REMIC I Y-2 Regular Interest to the extent of the REMIC I Y-2
Principal Reduction Amount in reduction of the Uncertificated Principal Balance of such Regular Interest and,
second, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the
REMIC I Z-2 Regular Interest in reduction of the Uncertificated Principal Balance thereof.
REMIC I Regular Interests: REMIC I Regular Interest Y-1, Y-2, Z-1 and Z-2.
REMIC I Regular Interest Y-1: A regular interest in REMIC I that is held as an asset of REMIC II, that
has an initial principal balance equal to the related Uncertificated Principal Balance, that bears interest
at the related Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are described
herein.
REMIC I Regular Interest Y-1 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC I Regular Interest Y-1 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC I Regular Interest Y-1 on such Distribution Date.
REMIC I Regular Interest Y-2: A regular interest in REMIC I that is held as an asset of REMIC II, that
has an initial principal balance equal to the related Uncertificated Principal Balance, that bears interest
at the related Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are described
herein.
REMIC I Regular Interest Y-2 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC I Regular Interest Y-2 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC I Regular Interest Y-2 on such Distribution Date.
REMIC I Regular Interest Z-1: A regular interest in REMIC I that is held as an asset of REMIC II, that
has an initial principal balance equal to the related Uncertificated Principal Balance, that bears interest
at the related Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are described
herein.
REMIC I Regular Interest Z-1 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC I Regular Interest Z-1 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC I Regular Interest Z-1 on such Distribution Date.
REMIC I Regular Interest Z-2: A regular interest in REMIC I that is held as an asset of REMIC II,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.
REMIC I Regular Interest Z-2 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC I Regular Interest Z-2 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC I Regular Interest Z-2 on such Distribution Date.
REMIC I Z Principal Reduction Amounts: For any Distribution Date, the amounts by which the
Uncertificated Principal Balances of the REMIC I Z-1 and REMIC I Z-2 Regular Interests, respectively, will be
reduced on such Distribution Date by the allocation of Realized Losses and the distribution of principal,
which shall be in each case the excess of (A) the sum of (x) the excess of the REMIC I Available Distribution
Amount for the related Loan Group (i.e. the "related Group" for the REMIC I Z-1 Regular Interest is Group I
and the "related Loan Group" for the REMIC I Z-2 Regular Interest is Loan Group II) exclusive of any amount
in respect of Subsequent Recoveries included therein over the amount thereof distributable in respect of
interest on such REMIC I Z Regular Interest and the related REMIC I Y Regular Interest and (iv) to such
REMIC I Z Regular Interest and the related REMIC I Y Regular Interest pursuant to the definition of "REMIC I
Distribution Amount" and (y) the amount of Realized Losses allocable to principal for the related Loan Group
over (B) the REMIC I Y Principal Reduction Amount for the related Loan Group.
REMIC II: The segregated pool of assets subject hereto, constituting a portion of the primary trust
created hereby and to be administered hereunder, with respect to which a separate REMIC election is to be
made, consisting of the REMIC I Regular Interests.
REMIC II Available Distribution Amount: For any Distribution Date, the amount distributed from REMIC
I to REMIC II on such Distribution Date in respect of the REMIC I Regular Interests.
REMIC II Distribution Amount:
(a) On each Distribution Date, the following amounts, in the following order of priority, shall be
distributed by REMIC II to REMIC III on account of the REMIC II Regular Interests related to Loan Group I:
(i) to the extent of the portion of the REMIC II Available Distribution Amount related to
Group I, to REMIC III as the holder of REMIC II Regular Interests LT1, LT2, LT3, LT4 and LT-Y1, pro rata, in
an amount equal to (A) their Uncertificated Accrued Interest for such Distribution Date, plus (B) any amounts
in respect thereof remaining unpaid from previous Distribution Dates, in the case of the REMIC II Regular
Interest LT1 each such amount having first been reduced by Net Deferred Interest allocated thereto for the
related Distribution Date; and
(ii) on each Distribution Date, to REMIC III as the holder of the REMIC II Regular
Interests, in an amount equal to the remainder of such portion of the REMIC II Available Distribution Amount
after the distributions made pursuant to clause (i) above, allocated as follows (except as provided below):
(A) in respect of the REMIC II Regular Interests LT2, LT3, LT4 and LT-Y1, their
respective Principal Distribution Amounts;
(B) in respect of the REMIC II Regular Interest LT1 any remainder until the
Uncertificated Principal Balance thereof is reduced to zero;
(C) any remainder in respect of the REMIC II Regular Interests LT2, LT3 and LT4, pro
rata according to their respective Uncertificated Principal Balances as reduced by the distributions deemed
made pursuant to (A) above, until their respective Uncertificated Principal Balances are reduced to zero; and
(D) any remaining amounts to the Holders of the Class R-II Certificates.
(b) On each Distribution Date, the following amounts, in the following order of priority, shall be
distributed by REMIC II to REMIC III on account of the REMIC II Regular Interests related to Loan Group II:
(i) to the extent of the portion of the REMIC II Available Distribution Amount related to
Group II, to REMIC III as the holder of REMIC II Regular Interests LT5, LT6, LT7, LT8 and LT-Y2, pro rata, in
an amount equal to (A) their Uncertificated Accrued Interest for such Distribution Date, plus (B) any amounts
in respect thereof remaining unpaid from previous Distribution Dates, in the case of the REMIC II Regular
Interest LT5 each such amount having first been reduced by Net Deferred Interest allocated thereto for the
related Distribution Date; and
(ii) on each Distribution Date, to REMIC III as the holder of the REMIC II Regular
Interests, in an amount equal to the remainder of such portion of the REMIC II Available Distribution Amount
after the distributions made pursuant to clause (i) above, allocated as follows (except as provided below):
(A) in respect of the REMIC II Regular Interests LT6, LT7, LT8 and LT-Y2, their
respective Principal Distribution Amounts;
(B) in respect of the REMIC II Regular Interest LT5 any remainder until the
Uncertificated Principal Balance thereof is reduced to zero;
(C) any remainder in respect of the REMIC II Regular Interests LT6, LT7 and LT8, pro
rata according to their respective Uncertificated Principal Balances as reduced by the distributions deemed
made pursuant to (A) above, until their respective Uncertificated Principal Balances are reduced to zero; and
(D) any remaining amounts to the Holders of the Class R-II Certificates.
REMIC II Principal Reduction Amounts: For any Distribution Date, the amounts by which the principal
balances of the REMIC II Regular Interests LT1, LT2, LT3, LT4, LT5, LT6, LT7, LT8, LT-Y1 and LT-Y2,
respectively, will be reduced on such Distribution Date by the allocation of Realized Losses and the
distribution of principal, determined as follows:
For purposes of the succeeding formulas the following symbols shall have the meanings set forth below:
Y1 = the aggregate principal balance of the REMIC II Regular Interests LT1 and LT-Y1 after
distributions and the allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date.
Y2 = the principal balance of the REMIC II Regular Interest LT2 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date.
Y3 = the principal balance of the REMIC II Regular Interest LT3 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date.
Y4 = the principal balance of the REMIC II Regular Interest LT4 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date (note: Y3 = Y4).
AY1 = the combined REMIC II Regular Interest LT1 and LT-Y1 Principal Reduction Amount. Such amount
shall be allocated first to LT-Y1 up to the Class Y1 Principal Reduction Amount and thereafter the remainder
shall be allocated to LT1.
AY2 = the REMIC II Regular Interest LT2 Principal Reduction Amount.
AY3 = the REMIC II Regular Interest LT3 Principal Reduction Amount.
AY4 = the REMIC II Regular Interest LT4 Principal Reduction Amount.
P0 = the aggregate principal balance of the REMIC II Regular Interests LT1, LT2, LT3, LT4 and LT-Y1
after distributions and the allocation of Realized Losses and Net Deferred Interest on the prior Distribution
Date.
P1 = the aggregate principal balance of the REMIC II Regular Interests LT1, LT2, LT3, LT4 and LT-Y1
after distributions and the allocation of Realized Losses and Net Deferred Interest to be made on such
Distribution Date.
AP = P0 - P1 = the aggregate of the REMIC II Regular Interests LT1, LT2, LT3, LT4 and LT-Y1
Principal Reduction Amounts.
=the aggregate of the principal portions of Realized Losses and Net Deferred Interest to be
allocated to, and the principal distributions to be made on, the Group I Certificates on such Distribution
Date (including distributions of accrued and unpaid interest on the Class SB Certificates for prior
Distribution Dates).
R0 = the Group I Net WAC Cap Rate (stated as a monthly rate) after giving effect to amounts
distributed and Realized Losses and Net Deferred Interest allocated on the prior Distribution Date.
R1 = the Group I Net WAC Cap Rate (stated as a monthly rate) after giving effect to amounts to be
distributed and Realized Losses and Net Deferred Interest to be allocated on such Distribution Date.
a = (Y2 + Y3)/P0. The initial value of a on the Closing Date for use on the first Distribution
Date shall be 0.0001.
a0 = the lesser of (A) the sum of (1) for all Classes of Class A-I Certificates of the product for
each Class of (i) the monthly interest rate (as limited by the Group I Net WAC Cap Rate, if applicable) for
such Class applicable for distributions to be made on such Distribution Date and (ii) the aggregate
Certificate Principal Balance for such Class after distributions and the allocation of Realized Losses and
Net Deferred Interest on the prior Distribution Date, (2) for all Classes of Class M Certificates of the
product for each Class of (i) the monthly interest rate (as limited by the Class M Net WAC Cap Rate, if
applicable) for such Class applicable for distributions to be made on such Distribution Date and (ii) the
aggregate Certificate Principal Balance for such Class multiplied by a fraction whose numerator is the
principal balance of the REMIC I Regular Interest Y-1 and whose denominator is the sum of the principal
balances of the REMIC I Regular Interests Y-1 and Y-2 after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date and (3) the amount, if any, by which the sum
of the amounts in clauses (A)(1) and (2) of the definition of A0 exceeds S0*Q0 and (B) R0*P0.
a1 = the lesser of (A) the sum of (1) for all Classes of Class A-I Certificates of the product for
each Class of (i) the monthly interest rate (as limited by the Group I Net WAC Cap Rate, if applicable) for
such Class applicable for distributions to be made on the next succeeding Distribution Date and (ii) the
aggregate Certificate Principal Balance for such Class after distributions and the allocation of Realized
Losses and Net Deferred Interest to be made on such Distribution Date, (2) for all Classes of Class M
Certificates of the product for each Class of (i) the monthly interest rate (as limited by the Class M Net
WAC Cap Rate, if applicable) for such Class applicable for distributions to be made on the next succeeding
Distribution Date and (ii) the aggregate Certificate Principal Balance for such Class multiplied by a
fraction whose numerator is the principal balance of the REMIC I Regular Interest Y-1 and whose denominator
is the sum of the principal balances of the REMIC I Regular Interests Y-1 and Y-2 after distributions and the
allocation of Realized Losses and Net Deferred Interest to be made on such Distribution Date and (3) the
amount, if any, by which the sum of the amounts in clauses (A)(1) and (2) of the definition of A1 exceeds
S1*Q1 and (B) R1*P1.
Then, based on the foregoing definitions:
AY1 = AP - AY2 - AY3 - AY4;
AY2 = (a/2){( a0R1 - a1R0)/R0R1};
AY3 = aAP - AY2; and
AY4 = AY3.
if both AY2 and AY3, as so determined, are non-negative numbers. Otherwise:
(1) If AY2, as so determined, is negative, then
AY2 = 0;
AY3 = a{a1R0P0 - a0R1P1}/{a1R0};
AY4 = AY3; and
AY1 = AP - AY2 - AY3 - AY4.
(2) If AY3, as so determined, is negative, then
AY3 = 0;
AY2 = a{ a0R1P1 - a1R0P0}/{2R1R0P1 - a1R0};
AY4 = AY3; and
AY1 = AP - AY2 - AY3 - AY4.
For purposes of the succeeding formulas the following symbols shall have the meanings set forth below:
Y5 = the aggregate principal balance of the REMIC II Regular Interests LT5 and LT-Y2 after
distributions and the allocation of Realized Losses and Net Deferred Interest on the prior Distribution
Date.
Y6 = the principal balance of the REMIC II Regular Interest LT6 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date.
Y7 = the principal balance of the REMIC II Regular Interest LT7 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date.
Y8 = the principal balance of the REMIC II Regular Interest LT8 after distributions and the
allocation of Realized Losses and Net Deferred Interest on the prior Distribution Date (note: Y7 = Y8).
AY5 = the aggregate of the REMIC II Regular Interest LT5 and LT-Y2 Principal Reduction Amounts. Such
amount shall be allocated first to LT-Y2 up to the Class Y2 Principal Reduction Amount and thereafter the
remainder shall be allocated to LT5.
AY6 = the REMIC II Regular Interest LT6 Principal Reduction Amount.
AY7 = the REMIC II Regular Interest LT7 Principal Reduction Amount.
AY8 = the REMIC II Regular Interest LT8 Principal Reduction Amount.
Q0 = the aggregate principal balance of the REMIC II Regular Interests LT5, LT6, LT7, LT8 and LT-Y2
after distributions and the allocation of Realized Losses and Net Deferred Interest on the prior Distribution
Date.
Q1 = the aggregate principal balance of the REMIC II Regular Interests LT5, LT6, LT7, LT8, LT-Y1 and
LT-Y2 after distributions and the allocation of Realized Losses and Net Deferred Interest to be made on such
Distribution Date.
AQ = Q0 - Q1 = the aggregate of the REMIC II Regular Interests LT5, LT6, LT7, LT8 and LT-Y2
Principal Reduction Amounts.
=the aggregate of the principal portions of Realized Losses and Net Deferred Interest to be
allocated to, and the principal distributions to be made on, the Group II Certificates on such Distribution
Date (including distributions of accrued and unpaid interest on the Class SB Certificates for prior
Distribution Dates).
S0 = the Group II Net WAC Cap Rate (stated as a monthly rate) after giving effect to amounts
distributed and Realized Losses and Net Deferred Interest allocated on the prior Distribution Date.
S1 = the Group II Net WAC Cap Rate (stated as a monthly rate) after giving effect to amounts to be
distributed and Realized Losses and Net Deferred Interest to be allocated on such Distribution Date.
a = (Y6 + Y7)/Q0. The initial value of a on the Closing Date for use on the first Distribution
Date shall be 0.0001.
A0 = the lesser of (A) the sum of (1) for all Classes of Class A-II Certificates of the product for
each Class of (i) the monthly interest rate (as limited by the Group II Net WAC Cap Rate, if applicable) for
such Class applicable for distributions to be made on such Distribution Date and (ii) the aggregate
Certificate Principal Balance for such Class after distributions and the allocation of Realized Losses and
Net Deferred Interest on the prior Distribution Date, (2) for all Classes of Class M Certificates of the
product for each Class of (i) the monthly interest rate (as limited by the Class M Net WAC Cap Rate, if
applicable) for such Class applicable for distributions to be made on such Distribution Date and (ii) the
aggregate Certificate Principal Balance for such Class multiplied by a fraction whose numerator is the
principal balance of the REMIC I Regular Interest Y-2 and whose denominator is the sum of the principal
balances of the REMIC I Regular Interests Y-1 and Y-2 after distributions and the allocation of Realized
Losses and Net Deferred Interest on the prior Distribution Date and (3) the amount, if any, by which the sum
of the amounts in clauses (A)(1) and (2) of the definition of a0 exceeds R0*P0 and (B) S0*Q0.
A1 = the lesser of (A) the sum of (1) for all Classes of Class A-II Certificates of the product for
each Class of (i) the monthly interest rate (as limited by the Group II Net WAC Cap Rate, if applicable) for
such Class applicable for distributions to be made on the next succeeding Distribution Date and (ii) the
aggregate Certificate Principal Balance for such Class after distributions and the allocation of Realized
Losses and Net Deferred Interest to be made on such Distribution Date, (2) for all Classes of Class M
Certificates of the product for each Class of (i) the monthly interest rate (as limited by the Class M Net
WAC Cap Rate, if applicable) for such Class applicable for distributions to be made on the next succeeding
Distribution Date and (ii) the aggregate Certificate Principal Balance for such Class multiplied by a
fraction whose numerator is the principal balance of the REMIC I Regular Interest Y-2 and whose denominator
is the sum of the principal balances of the REMIC I Regular Interests Y-1 and Y-2 after distributions and the
allocation of Realized Losses and Net Deferred Interest to be made on such Distribution Date and (3) the
amount, if any, by which the sum of the amounts in clauses (A)(1) and (2) of the definition of a1 exceeds
R1*P1 and (B) S1*Q1.
Then, based on the foregoing definitions:
AY5 = AQ - AY6 - AY7 - AY8;
AY6 = (a/2){(A0S1 - A1S0)/S0S1};
AY7 = aAQ - AY6; and
AY8 = AY7.
if both AY6 and AY7, as so determined, are non-negative numbers. Otherwise:
(1) If AY6, as so determined, is negative, then
AY6 = 0;
AY7 = a{A1S0Q0 - A0S1Q1}/{A1S0};
AY8 = AY7; and
AY5 = AQ - AY6 - AY7 - AY8.
(2) If AY7, as so determined, is negative, then
AY7 = 0;
AY6 = a{A0S1Q1 - A1S0Q0}/{2S1S0Q1 - A1S0};
AY8 = AY7; and
AY5 = AQ - AY6 - AY7 - AY8.
REMIC II Realized Losses: Realized Losses on Group I Loans and Group II Loans shall be allocated to
the REMIC II Regular Interests as follows: (1) The interest portion of Realized Losses on Group I Loans, if
any, shall be allocated among the LT1, LT2, LT4 and LT-Y1 REMIC II Regular Interests pro rata according to
the amount of interest accrued but unpaid thereon, in reduction thereof; and (2) the interest portion of
Realized Losses on Group II Loans, if any, shall be allocated among the LT5, LT6, LT8 and LT-Y2 REMIC II
Regular Interests pro rata according to the amount of interest accrued but unpaid thereon, in reduction
thereof. Any interest portion of such Realized Losses in excess of the amount allocated pursuant to the
preceding sentence shall be treated as a principal portion of Realized Losses not attributable to any
specific Mortgage Loan in such Loan Group and allocated pursuant to the succeeding sentences. The principal
portion of Realized Losses with respect to Loan Group I and Loan Group II shall be allocated to the REMIC I
Regular Interests as follows: (1) The principal portion of Realized Losses on Group I Loans shall be
allocated, first, to the LT-Y1 REMIC II Regular Interest to the extent that such losses were allocated to the
Y-1 REMIC I Regular Interest in reduction of the Uncertificated Principal Balance thereof, second, to the LT
2, LT3 and LT4 REMIC II Regular Interests pro-rata according to their respective REMIC II Principal Reduction
Amounts to the extent thereof in reduction of the Uncertificated Principal Balance of such REMIC II Regular
Interests and, third, the remainder, if any, of such principal portion of such Realized Losses shall be
allocated to the LT1 REMIC II Regular Interest in reduction of the Uncertificated Principal Balance thereof;
and (2) the principal portion of Realized Losses on Group II Loans shall be allocated, first, to the LT-Y2
REMIC II Regular Interest to the extent that such losses were allocated to the Y-2 REMIC I Regular Interest
in reduction of the Uncertificated Principal Balance thereof, second, to the LT 6, LT7 and LT8 REMIC II
Regular Interests pro-rata according to their respective REMIC II Principal Reduction Amounts to the extent
thereof in reduction of the Uncertificated Principal Balance of such REMIC II Regular Interests and, third,
the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the LT5
REMIC II Regular Interest in reduction of the Uncertificated Principal Balance thereof.
REMIC II Regular Interests: REMIC II Regular Interest LT1, REMIC II Regular Interest LT2, REMIC II
Regular Interest LT3, REMIC II Regular Interest LT4, REMIC II Regular Interest LT5, REMIC II Regular Interest
LT6, REMIC II Regular Interest LT7, REMIC II Regular Interest LT8, REMIC II Regular Interest LT-Y1 and
REMIC II Regular Interest LT-Y2.
REMIC II Regular Interest LT1: A regular interest in REMIC II that is held as an asset of REMIC II,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT1 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT1 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT1 on such Distribution Date.
REMIC II Regular Interest LT2: A regular interest in REMIC II that is held as an asset of REMIC II,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT2 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT2 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT2 on such Distribution Date.
REMIC II Regular Interest LT3: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT3 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT3 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT3 on such Distribution Date.
REMIC II Regular Interest LT4: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT4 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT4 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT4 on such Distribution Date.
REMIC II Regular Interest LT5: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT5 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT5 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT5 on such Distribution Date.
REMIC II Regular Interest LT6: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT6 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT6 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT6 on such Distribution Date.
REMIC II Regular Interest LT7: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT7 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT7 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT7 on such Distribution Date.
REMIC II Regular Interest LT8: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT8 Principal Distribution Amount: For any Distribution Date, the excess, if
any, of the REMIC II Regular Interest LT8 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT8 on such Distribution Date.
REMIC II Regular Interest LT-Y1: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT-Y1 Principal Distribution Amount: For any Distribution Date, the excess,
if any, of the REMIC II Regular Interest LT-Y1 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT-Y1 on such Distribution Date.
REMIC II Regular Interest LT-Y2: A regular interest in REMIC II that is held as an asset of REMIC III,
that has an initial principal balance equal to the related Uncertificated Principal Balance, that bears
interest at the related Uncertificated REMIC II Pass-Through Rate, and that has such other terms as are
described herein.
REMIC II Regular Interest LT-Y2 Principal Distribution Amount: For any Distribution Date, the excess,
if any, of the REMIC II Regular Interest LT-Y2 Principal Reduction Amount for such Distribution Date over the
Realized Losses allocated to the REMIC II Regular Interest LT-Y2 on such Distribution Date.
REMIC III: The segregated pool of assets subject hereto, constituting a portion of the primary trust
created hereby and to be administered hereunder, with respect to which a separate REMIC election is to be
made, consisting of the REMIC II Regular Interests.
REMIC III Regular Interest SB-PO: A separate non-certificated beneficial ownership interests in
REMIC III issued hereunder and designated as a Regular Interest in REMIC III. REMIC III Regular Interest
SB-PO shall have no entitlement to interest, and shall be entitled to distributions of principal subject to
the terms and conditions hereof, in aggregate amount equal to the initial Certificate Principal Balance of
the Class SB Certificates as set forth in the Preliminary Statement hereto.
REMIC III Regular Interest SB-IO: A separate non-certificated beneficial ownership interests in
REMIC III issued hereunder and designated as a Regular Interest in REMIC III. REMIC III Regular Interest
SB-IO shall have no entitlement to principal, and shall be entitled to distributions of interest subject to
the terms and conditions hereof, in aggregate amount equal to the interest distributable with respect to the
Class SB Certificates pursuant to the terms and conditions hereof.
REMIC III Regular Interests: REMIC III Regular Interests SB-IO and SB-PO, together with the Class A
Certificates and Class M Certificates.
Required Overcollateralization Amount: With respect to any Distribution Date (i) prior to the
Stepdown Date, an amount equal to 0.80% of the aggregate Cut-off Date Principal Balance; (ii) on or after the
Stepdown Date but prior to the Distribution Date in May 2012, provided a Trigger Event is not in effect, the
greater of (x) 2.00% of the outstanding aggregate Stated Principal Balance of the Mortgage Loans after giving
effect to distributions made on that Distribution Date and (y) the Overcollateralization Floor; (iii) on or
after the Stepdown Date and on or after the Distribution Date in May 2012, provided a Trigger Event is not in
effect, the greater of (x) 1.60% of the outstanding aggregate Stated Principal Balance of the Mortgage Loans
after giving effect to distributions made on that Distribution Date and (y) the Overcollateralization Floor;
and (iv) on or after the Stepdown Date if a Trigger Event is in effect, the Required Overcollateralization
Amount for the immediately preceding Distribution Date; provided that the Required Overcollateralization
Amount may be reduced so long as written confirmation is obtained from each rating agency that the reduction
will not reduce the ratings assigned to the Class A Certificates and Class M Certificates (without regard to
the Certificate Policy) by that rating agency below the lower of the then-current ratings or the ratings
assigned to those certificates as of the closing date by that rating agency.
Reserve Fund: The separate trust account created and maintained by the Trustee pursuant to Section
4.09 hereof.
Senior Certificate: Any one of the Class A Certificates.
Senior Enhancement Percentage: With respect to any Distribution Date, the percentage obtained by
dividing (x) the sum of (i) the aggregate Certificate Principal Balance of the Class M Certificates and (ii)
the Overcollateralization Amount, in each case prior to the distribution of the Principal Distribution Amount
on such Distribution Date, by (y) the aggregated Stated Principal Balance of the Mortgage Loans after giving
effect to distributions to be made on that Distribution Date.
Senior Percentage: With respect to each Loan Group and any Distribution Date, the percentage equal to
the lesser of (x) the aggregate Certificate Principal Balances of the related Class A Certificates
immediately prior to such Distribution Date divided by the aggregate Stated Principal Balance of the Mortgage
Loans in such Loan Group immediately prior to such Distribution Date and (y) 100%.
Sixty-Plus Delinquency Percentage: With respect to any Distribution Date on or after the Stepdown
Date, the arithmetic average, for each of the three consecutive Distribution Dates ending with such
Distribution Date, of the fraction, expressed as a percentage, equal to (x) the aggregate Stated Principal
Balance of the Mortgage Loans that are 60 or more days delinquent in payment of principal and interest for
the applicable Due Date preceding that Distribution Date, including Mortgage Loans in foreclosure, REO
Properties and Mortgage Loans in bankruptcy over (y) the aggregate Stated Principal Balance of all of the
Mortgage Loans immediately preceding that Distribution Date.
Stated Principal Balance: With respect to any Mortgage Loan or related REO Property, as of any date
of determination, (i) the sum of (a) the Cut-off Date Principal Balance of the Mortgage Loan plus (b) any
amount by which the Stated Principal Balance of the Mortgage Loan has been increased pursuant to a Servicing
Modification and (c) any amount by which the Stated Principal Balance of the Mortgage Loan has been increased
for Deferred Interest pursuant to the terms of the related Mortgage Note on or prior to the Distribution
Date, minus (ii) the sum of (a) the principal portion of the Monthly Payments due with respect to such
Mortgage Loan or REO Property during each Due Period commencing with the first Due Period after the Cut-off
Date and ending with the Due Period relating to the most recent Distribution Date which were received or with
respect to which an Advance was made, (b) all Principal Prepayments with respect to such Mortgage Loan or REO
Property, and all Insurance Proceeds, Liquidation Proceeds and REO Proceeds, to the extent applied by the
Master Servicer as recoveries of principal in accordance with Section 3.14 with respect to such Mortgage Loan
or REO Property, in each case which were distributed pursuant to Section 4.02 on any previous Distribution
Date, and (c) any Realized Loss incurred with respect to such Mortgage Loan allocated to Certificateholders
with respect thereto for any previous Distribution Date.
Stepdown Date: The earlier to occur of (1) the Distribution Date following the Distribution Date on
which the aggregate Certificate Principal Balance of the Class A Certificates has been reduced to zero and
(2) the later to occur of (x) the Distribution Date in May 2009 and (y) the first Distribution Date on which
the Senior Enhancement Percentage is greater than or equal to (a) on any Distribution Date prior to the
Distribution Date in May 2012, 20.00% and (b) on any Distribution Date on or after the Distribution Date in
May 2012, 16.00%.
Subordinate Amount: With respect to (i) Loan Group I, the Group I Subordinate Amount, and (ii) Loan
Group II, the Group II Subordinate Amount.
Subordination Percentage: With respect to each Class of Class A Certificates and Class M
Certificates, the respective approximate percentage set forth in the table below:
Class Percentage (1) Percentage (2)
A 80.000% 84.000%
M-1 85.625% 88.500%
M-2 88.000% 90.400%
M-3 89.250% 91.400%
M-4 90.500% 92.400%
M-5 91.750% 93.400%
M-6 93.000% 94.400%
M-7 94.250% 95.400%
M-8 95.500% 96.400%
M-9 96.750% 97.400%
M-10 98.000% 98.400%
(1) For any Distribution Date prior to the Distribution Date in May 2012.
(2) For any Distribution Date in May 2012 or thereafter.
Subsequent Recovery Allocation Amount: With respect to a Loan Group, that portion of the Principal
Allocation Amount in respect of that Loan Group attributable to the amounts described in clause (iv) of the
definition of Principal Distribution Amount.
Trigger Event: A Trigger Event is in effect with respect to any Distribution Date on or after the
Stepdown Date if (a) the Certificate Insurer pays a Certificate Insurance Payment under the Certificate
Policy, (b) the Sixty-Plus Delinquency Percentage, as determined on that Distribution Date, exceeds 35.00%,
if prior to the Distribution Date in May 2012, or 40.00%, if on or after the Distribution Date in May 2012,
of the Senior Enhancement Percentage for that Distribution Date or (c) the aggregate amount of Realized
Losses on the Mortgage Loans as a percentage of the Cut-off Date Principal Balance exceeds the applicable
amount set forth below:
o May 2008 to April 2009: 0.200% with respect to May 2008, plus an additional 1/12th of 0.250% for each
month through April 2009.
o May 2009 to April 2010: 0.450% with respect to May 2009, plus an additional 1/12th of 0.350% for each
month through April 2010.
o May 2010 to April 2011: 0.800% with respect to May 2010, plus an additional 1/12th of 0.350% for each
month through April 2011.
o May 2011 to April 2012: 1.150% with respect to May 2011, plus an additional 1/12th of 0.400% for each
month through April 2012.
o May 2012 to April 2013: 1.550% with respect to May 2012, plus an additional 1/12th of 0.150% for each
month through April 2013.
o May 2013 and thereafter: 1.700%.
2006-QO4 REMIC: Either of REMIC I or REMIC II, as the case may be.
Uncertificated Accrued Interest: With respect to any Uncertificated Regular Interest for any
Distribution Date, one month's interest at the related Uncertificated Pass-Through Rate for such Distribution
Date, accrued on the Uncertificated Principal Balance or Uncertificated Notional Amount, as applicable,
immediately prior to such Distribution Date. Uncertificated Accrued Interest for the Uncertificated Regular
Interests shall accrue on the basis of a 360-day year consisting of twelve 30-day months. For purposes of
calculating the amount of Uncertificated Accrued Interest for the REMIC I Regular Interests for any
Distribution Date, any Prepayment Interest Shortfalls and Relief Act Shortfalls (to the extent not covered by
Compensating Interest) (i) relating to the Loan Group I Loans for any Distribution Date shall be allocated
among REMIC I Regular Interests Y-1 and Z-1 and (ii) relating to the Loan Group II Loans shall be allocated
among the REMIC I Regular Interests Y-2 and Z-2, pro rata, based on, and to the extent of, Uncertificated
Accrued Interest, as calculated without application of this sentence. For purposes of calculating the amount
of Uncertificated Accrued Interest for the REMIC II Regular Interest for any Distribution Date, any
Prepayment Interest Shortfalls and Relief Act Shortfalls (to the extent not covered by Compensating Interest)
(i) relating to the Loan Group I Loans for any Distribution Date shall be allocated among REMIC II Regular
Interests LT1, LT2, LT3, LT4 and LT-Y1 and (ii) relating to the Loan Group II Loans for any Distribution Date
shall be allocated among REMIC II Regular Interests LT5, LT6, LT7, LT8 and LT-Y2, pro rata, based on, and to
the extent of, Uncertificated Accrued Interest, as calculated without application of this sentence.
Uncertificated Interest on REMIC III Regular Interest SB-PO shall be zero. Uncertificated Interest on the
REMIC III Regular Interest SB-IO for each Distribution Date shall equal Accrued Certificate Interest for the
Class SB Certificates.
Uncertificated Notional Amount: With respect to REMIC III Regular Interest SB-IO, the Notional Amount
for such Class.
Uncertificated Pass-Through Rate: The Uncertificated REMIC I Pass-Through Rate or the Uncertificated
REMIC II Pass-Through Rate, as applicable.
Uncertificated Principal Balance: The principal amount of any Uncertificated Regular Interest
outstanding as of any date of determination. The Uncertificated Principal Balance of each REMIC Regular
Interest shall never be less than zero. With respect to the REMIC III Regular Interest SB-PO the initial
amount set forth with respect thereto in the Preliminary Statement as reduced by distributions deemed made in
respect thereof pursuant to Section 4.02 and Realized Losses allocated thereto pursuant to Section 4.05.
Uncertificated Regular Interests: The REMIC I Regular Interests and the REMIC II Regular Interests.
Uncertificated REMIC I Pass-Through Rate: With respect to any Distribution Date, the REMIC I Regular
Interest Y-1 and the REMIC I Regular Interest Z-1, the weighted average of the Net Mortgage Rates of the
Mortgage Loans in Loan Group I. With respect to any Distribution Date the REMIC I Regular Interest Y-2 and
the REMIC I Regular Interest Z-2, the weighted average of the Net Mortgage Rates of the Mortgage Loans in
Loan Group II.
Uncertificated REMIC II Pass-Through Rate: With respect to any Distribution Date and (i) REMIC II
Regular Interests LT1, LT2 and LT-Y1, the weighted average of the Net Mortgage Rates of the Mortgage Loans in
Loan Group I, (ii) REMIC II Regular Interests LT5, LT6 and LT-Y2, the weighted average of the Net Mortgage
Rates of the Mortgage Loans in Loan Group II, (iii) REMIC II Regular Interests LT3 and LT7, zero (0.00%),
(iv) REMIC II Regular Interest LT4, twice the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group I and (v) REMIC II Regular Interest LT8, twice the weighted average of the Net Mortgage
Rates of the Mortgage Loans in Loan Group II.
Underwriter: Greenwich Capital Markets, Inc.
SECTION 1.02. DETERMINATION OF LIBOR.
LIBOR applicable to the calculation of the Pass-Through Rate on the LIBOR Certificates for any
Interest Accrual Period will be determined as of each LIBOR Rate Adjustment Date. On each LIBOR Rate
Adjustment Date, or if such LIBOR Rate Adjustment Date is not a Business Day, then on the next succeeding
Business Day, LIBOR shall be established by the Trustee and, as to any Interest Accrual Period, will equal
the rate for one month United States dollar deposits that appears on the Dow Jones Telerate Screen Page 3750
as of 11:00 a.m., London time, on such LIBOR Rate Adjustment Date. "Dow Jones Telerate Screen Page 3750"
means the display designated as page 3750 on the Telerate Service (or such other page as may replace page
3750 on that service for the purpose of displaying London interbank offered rates of major banks). If such
rate does not appear on such page (or such other page as may replace that page on that service, or if such
service is no longer offered, LIBOR shall be so established by use of such other service for displaying LIBOR
or comparable rates as may be selected by the Trustee after consultation with the Master Servicer), the rate
will be the Reference Bank Rate. The "Reference Bank Rate" will be determined on the basis of the rates at
which deposits in U.S. Dollars are offered by the reference banks (which shall be any three major banks that
are engaged in transactions in the London interbank market, selected by the Trustee after consultation with
the Master Servicer) as of 11:00 a.m., London time, on the LIBOR Rate Adjustment Date to prime banks in the
London interbank market for a period of one month in amounts approximately equal to the aggregate Certificate
Principal Balance of the LIBOR Certificates then outstanding. The Trustee will request the principal London
office of each of the reference banks to provide a quotation of its rate. If at least two such quotations
are provided, the rate will be the arithmetic mean of the quotations rounded up to the next multiple of
1/16%. If on such date fewer than two quotations are provided as requested, the rate will be the arithmetic
mean of the rates quoted by one or more major banks in New York City, selected by the Trustee after
consultation with the Master Servicer, as of 11:00 a.m., New York City time, on such date for loans in U.S.
Dollars to leading European banks for a period of one month in amounts approximately equal to the aggregate
Certificate Principal Balance of the LIBOR Certificates then outstanding. If no such quotations can be
obtained, the rate will be LIBOR for the prior Distribution Date; provided however, if, under the priorities
described above, LIBOR for a Distribution Date would be based on LIBOR for the previous Distribution Date for
the third consecutive Distribution Date, the Trustee, after consultation with the Master Servicer, shall
select an alternative comparable index (over which the Trustee has no control), used for determining
one-month Eurodollar lending rates that is calculated and published (or otherwise made available) by an
independent party.
The establishment of LIBOR by the Trustee and the Master Servicer on any LIBOR Rate Adjustment Date
and the Master Servicer's subsequent calculation of the Pass-Through Rate applicable to the LIBOR
Certificates for the relevant Interest Accrual Period, in the absence of manifest error, will be final and
binding.
Promptly following each LIBOR Rate Adjustment Date the Trustee shall supply the Master Servicer with
the results of its determination of LIBOR on such date. Furthermore, the Trustee will supply to any
Certificateholder so requesting by telephone by calling (800) 735-7777 the Pass-Through Rate on the LIBOR
Certificates for the current and the immediately preceding Interest Accrual Period.
SECTION 1.03. DETERMINATION OF MTA.
MTA for any Interest Accrual Period will be determined as described below.
MTA shall be established by the Trustee for each Interest Accrual Period. MTA is a per annum rate
equal to the twelve-month moving average monthly yield on United States Treasury securities adjusted to a
constant maturity of one year as published by the Federal Reserve Board in statistical Release No. H.15(519),
or the Release, determined by averaging the monthly yield for the most recent twelve months. The MTA used
for each Interest Accrual Period will be the most recent MTA figure available as of the related MTA
Determination Date. If MTA is no longer available, the new index for the Class A Certificates will be
LIBOR.
The establishment of MTA by the Trustee and the Master Servicer's subsequent calculation of the
Pass-Through Rates applicable to the Class A Certificates for the relevant Interest Accrual Period, in the
absence of manifest error, will be final and binding.
Promptly following each MTA Determination Date the Trustee shall supply the Master Servicer with the
results of its determination of MTA on such date.
SECTION 1.04. USE OF WORDS AND PHRASES.
"Herein," "hereby," "hereunder," "hereof," "hereinbefore," "hereinafter" and other equivalent words
refer to the Pooling and Servicing Agreement as a whole. All references herein to Articles, Sections or
Subsections shall mean the corresponding Articles, Sections and Subsections in the Pooling and Servicing
Agreement. The definitions set forth herein include both the singular and the plural.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. CONVEYANCE OF MORTGAGE LOANS. (See Section 2.01 of the Standard Terms.)
SECTION 2.02. ACCEPTANCE BY TRUSTEE. (See Section 2.02 of the Standard Terms.)
SECTION 2.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER SERVICER AND THE COMPANY.
(A) For representations, warranties and covenants of the Master Servicer, see Section 2.03(a) of the
Standard Terms.
(B) The Company hereby represents and warrants to the Trustee for the benefit of Certificateholders that
as of the Closing Date (or, if otherwise specified below, as of the date so specified):
(I) No Mortgage Loan is 30 or more days Delinquent in payment of principal and interest as of the Cut-off
Date and no Mortgage Loan has been so Delinquent more than once in the 12-month period prior to
the Cut-off Date;
(II) The information set forth in Exhibit One hereto with respect to each Mortgage Loan or the Mortgage
Loans, as the case may be, is true and correct in all material respects at the date or dates
respecting which such information is furnished;
(III) The Mortgage Loans are payment-option adjustable-rate mortgage loans with a negative amortization
feature with Monthly Payments due, with respect to a majority of the Mortgage Loans, on the
first day of each month and terms to maturity at origination or modification of not more than
40 years;
(IV) To the best of the Company's knowledge, if a Mortgage Loan is secured by a Mortgaged Property with a
Loan-to-Value Ratio at origination in excess of 80%, such Mortgage Loan is the subject of a
Primary Insurance Policy that insures (a) at least 35% of the Stated Principal Balance of the
Mortgage Loan at origination if the Loan-to-Value Ratio is between 100.00% and 95.01%, (b) at
least 30% of the Stated Principal Balance of the Mortgage Loan at origination if the
Loan-to-Value Ratio is between 95.00% and 90.01%, (c) at least 25% of such balance if the
Loan-to-Value Ratio is between 90.00% and 85.01% and (d) at least 12% of such balance if the
Loan-to-Value Ratio is between 85.00% and 80.01%. To the best of the Company's knowledge, each
such Primary Insurance Policy is in full force and effect and the Trustee is entitled to the
benefits thereunder;
(V) The issuers of the Primary Insurance Policies are insurance companies whose claims-paying abilities
are currently acceptable to each Rating Agency;
(VI) No more than 0.9% of the Group I Loans by aggregate Stated Principal Balance as of the Cut-off Date
are secured by Mortgaged Properties located in any one zip code area in California, and no more
than 0.5% of the Group I Loans by aggregate Stated Principal Balance as of the Cut-off Date are
secured by Mortgaged Properties located in any one zip code area outside California; and no
more than 0.8% of the Group II Loans by aggregate Stated Principal Balance as of the Cut-off
Date are secured by Mortgaged Properties located in any one zip code area in Arizona, and no
more than 0.8% of the Group II Loans by aggregate Stated Principal Balance as of the Cut-off
Date are secured by Mortgaged Properties located in any one zip code area outside Arizona;
(VII) The improvements upon the Mortgaged Properties are insured against loss by fire and other hazards as
required by the Program Guide, including flood insurance if required under the National Flood
Insurance Act of 1968, as amended. The Mortgage requires the Mortgagor to maintain such
casualty insurance at the Mortgagor's expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at the Mortgagor's
expense and to seek reimbursement therefor from the Mortgagor;
(VIII) Immediately prior to the assignment of the Mortgage Loans to the Trustee, the Company had good title
to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien,
encumbrance or security interest (other than rights to servicing and related compensation) and
such assignment validly transfers ownership of the Mortgage Loans to the Trustee free and clear
of any pledge, lien, encumbrance or security interest;
(IX) No more than 86.47% of the Group I Loans by aggregate Stated Principal Balance as of the Cut-off Date
were underwritten under a reduced loan documentation program, no more than 0.63% of the Group I
Loans by aggregate Stated Principal Balance as of the Cut-off Date were underwritten under a
no-stated income program, and no more than 0.77% of the Group I Loans by aggregate Stated
Principal Balance as of the Cut-off Date were underwritten under a no income/no asset program;
and no more than 90.83% of the Group II Loans by aggregate Stated Principal Balance as of the
Cut-off Date were underwritten under a reduced loan documentation program, no more than 0.90%
of the Group II Loans by aggregate Stated Principal Balance as of the Cut-off Date were
underwritten under a no-stated income program, and no more than 0.20% of the Group II Loans by
aggregate Stated Principal Balance as of the Cut-off Date were underwritten under a no
income/no asset program;
(X) Except with respect to no more than 12.91% of the Group I Loans by aggregate Stated Principal Balance
as of the Cut-off Date and no more than 3.8% of the Group II Loans by aggregate Stated
Principal Balance as of the Cut-off Date, the Mortgagor represented in its loan application
with respect to the related Mortgage Loan that the Mortgaged Property would be owner-occupied;
(XI) None of the Mortgage Loans is a Buy-Down Mortgage Loan;
(XII) Each Mortgage Loan constitutes a qualified mortgage under Section 860G(a)(3)(A) of the Code and
Treasury Regulation Section 1.860G-2(a)(1), (2), (4), (5), (6), (7) and (9) without reliance on
the provisions of Treasury Regulation Section 1.860G-2(a)(3) or Treasury Regulation Section
1.860G-2(f)(2) or any other provision that would allow a Mortgage Loan to be treated as a
"qualified mortgage" notwithstanding its failure to meet the requirements of Section
860G(a)(3)(A) of the Code and Treasury Regulation Section 1.860G-2(a)(1), (2), (4), (5), (6),
(7) and (9);
(XIII) A policy of title insurance was effective as of the closing of each Mortgage Loan and is valid and
binding and remains in full force and effect, unless the Mortgaged Properties are located in
the State of Iowa and an attorney's certificate has been provided as described in the Program
Guide;
(XIV) No Mortgage Loan is a Cooperative Loan;
(XV) With respect to each Mortgage Loan originated under a "streamlined" Mortgage Loan program (through
which no new or updated appraisals of Mortgaged Properties are obtained in connection with the
refinancing thereof), the related Seller has represented that either (a) the value of the
related Mortgaged Property as of the date the Mortgage Loan was originated was not less than
the appraised value of such property at the time of origination of the refinanced Mortgage Loan
or (b) the Loan-to-Value Ratio of the Mortgage Loan as of the date of origination of the
Mortgage Loan generally meets the Company's underwriting guidelines;
(XVI) Interest on each Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve
30-day months;
(XVII) None of the Mortgage Loans contain in the related Mortgage File a Destroyed Mortgage Note;
(XVIII) None of the Mortgage Loans has been made to International Borrowers;
(XIX) No Mortgage Loan provides for payments that are subject to reduction by withholding taxes levied by
any foreign (non-United States) sovereign government; and
(XX) None of the Mortgage Loans are Additional Collateral Loans and none of the Mortgage Loans are Pledged
Asset Loans.
It is understood and agreed that the representations and warranties set forth in this Section 2.03(b) shall
survive delivery of the respective Mortgage Files to the Trustee or any Custodian.
Upon discovery by any of the Company, the Master Servicer, the Trustee or any Custodian of a breach of
any of the representations and warranties set forth in this Section 2.03(b) that materially and adversely
affects the interests of the Certificateholders in any Mortgage Loan, the party discovering such breach shall
give prompt written notice to the other parties (any Custodian being so obligated under a Custodial
Agreement); provided, however, that in the event of a breach of the representation and warranty set forth in
Section 2.03(b)(xii), the party discovering such breach shall give such notice within five days of
discovery. Within 90 days of its discovery or its receipt of notice of breach, the Company shall either (i)
cure such breach in all material respects or (ii) purchase such Mortgage Loan from the Trust Fund at the
Purchase Price and in the manner set forth in Section 2.02; provided that the Company shall have the option
to substitute a Qualified Substitute Mortgage Loan or Loans for such Mortgage Loan if such substitution
occurs within two years following the Closing Date; provided that if the omission or defect would cause the
Mortgage Loan to be other than a "qualified mortgage" as defined in Section 860G(a)(3) of the Code, any such
cure or repurchase must occur within 90 days from the date such breach was discovered. Any such substitution
shall be effected by the Company under the same terms and conditions as provided in Section 2.04 for
substitutions by Residential Funding. It is understood and agreed that the obligation of the Company to cure
such breach or to so purchase or substitute for any Mortgage Loan as to which such a breach has occurred and
is continuing shall constitute the sole remedy respecting such breach available to the Certificateholders or
the Trustee on behalf of the Certificateholders.
SECTION 2.04. REPRESENTATIONS AND WARRANTIES OF SELLERS.(See Section 2.04 of the Standard Terms)
SECTION 2.05. EXECUTION AND AUTHENTICATION OF CERTIFICATES/ISSUANCE OF CERTIFICATES EVIDENCING INTERESTS IN
REMIC I AND REMIC II.
The Trustee acknowledges the assignment to it of the Mortgage Loans and the delivery of the Mortgage
Files to it, or any Custodian on its behalf, subject to any exceptions noted, together with the assignment to
it of all other assets included in the Trust Fund and/or the applicable REMIC, receipt of which is hereby
acknowledged. Concurrently with such delivery and in exchange therefor, the Trustee, pursuant to the written
request of the Company executed by an officer of the Company, has executed and caused to be authenticated and
delivered to or upon the order of the Company the Class R-I Certificates in authorized denominations which
together with the REMIC I Regular Interests, evidence the entire beneficial interest in REMIC I, and the
Class R-II Certificates in authorized denominations which together with the REMIC II Regular Interests,
evidence the entire beneficial interest in REMIC II.
SECTION 2.06. CONVEYANCE OF UNCERTIFICATED REGULAR INTERESTS; ACCEPTANCE BY THE TRUSTEE.
The Company, as of the Closing Date, and concurrently with the execution and delivery hereof, does
hereby assign without recourse all the right, title and interest of the Company in and to the Uncertificated
Regular Interests to the Trustee for the benefit of the Holders of each Class of Certificates (other than the
Class R-I or Class R-II Certificates). The Trustee acknowledges receipt of the Uncertificated Regular
Interests and declares that it holds and will hold the same in trust for the exclusive use and benefit of all
present and future Holders of each Class of Certificates (other than the Class R-I Certificates or Class R-II
Certificates). The rights of the Holders of each Class of Certificates (other than the Class R-I
Certificates or Class R-II Certificates) to receive distributions from the proceeds of REMIC III in respect
of such Classes, and all ownership interests of the Holders of such Classes in such distributions, shall be
as set forth in this Agreement.
SECTION 2.07. ISSUANCE OF CERTIFICATES EVIDENCING INTEREST IN REMIC III.
The Trustee acknowledges the assignment to it of the Uncertificated Regular Interests and,
concurrently therewith and in exchange therefor, pursuant to the written request of the Company executed by
an officer of the Company, the Trustee has executed and caused to be authenticated and delivered to or upon
the order of the Company, all Classes of Certificates (other than the Class R-I Certificates and Class R-II
Certificates) in authorized denominations, which evidence the entire beneficial interest in REMIC III.
SECTION 2.08. PURPOSES AND POWERS OF THE TRUST. (See Section 2.08 of the Standard Terms.)
SECTION 2.09. AGREEMENT REGARDING ABILITY TO DISCLOSE.
The Company, the Master Servicer and the Trustee hereby agree, notwithstanding any other express or
implied agreement to the contrary, that any and all Persons, and any of their respective employees,
representatives, and other agents may disclose, immediately upon commencement of discussions, to any and all
Persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all
materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to
such tax treatment and tax structure. For purposes of this paragraph, the terms "tax treatment" and "tax
structure" are defined under Treasury Regulationss.1.6011-4(c).
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ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.01 MASTER SERVICER TO ACT AS SERVICER. (See Section 3.01 of the Standard Terms)
SECTION 3.02 SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND SUBSERVICERS; ENFORCEMENT OF
SUBSERVICERS' AND SELLERS' OBLIGATIONS. (See Section 3.02 of the Standard Terms)
SECTION 3.03 SUCCESSOR SUBSERVICERS. (See Section 3.03 of the Standard Terms)
SECTION 3.04 LIABILITY OF THE MASTER SERVICER. (See Section 3.04 of the Standard Terms)
SECTION 3.05 NO CONTRACTUAL RELATIONSHIP BETWEEN SUBSERVICER AND TRUSTEE OR CERTIFICATEHOLDERS.
(See Section 3.05 of the Standard Terms)
SECTION 3.06 ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY TRUSTEE. (See Section 3.06 of
the Standard Terms)
SECTION 3.07 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; DEPOSIT TO CUSTODIAL ACCOUNT.
(A) The Master Servicer shall make reasonable efforts to collect all payments called for under the
terms and provisions of the Mortgage Loans, and shall, to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any related Primary Insurance Policy, follow such collection
procedures as it would employ in its good faith business judgment and which are normal and usual in its
general mortgage servicing activities. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive any late payment charge or any prepayment charge or penalty interest in connection with
the prepayment of a Mortgage Loan and (ii) extend the Due Date for payments due on a Mortgage Loan in
accordance with the Program Guide; provided, however, that the Master Servicer shall first determine that any
such waiver or extension will not impair the coverage of any related Primary Insurance Policy or materially
adversely affect the lien of the related Mortgage. Notwithstanding anything in this Section to the contrary,
the Master Servicer shall not enforce any prepayment charge to the extent that such enforcement would violate
any applicable law. In the event of any such arrangement, the Master Servicer shall make timely advances on
the related Mortgage Loan during the scheduled period in accordance with the amortization schedule of such
Mortgage Loan without modification thereof by reason of such arrangements unless otherwise agreed to by the
Holders of the Classes of Certificates affected thereby; provided, however, that no such extension shall be
made if any such advance would be a Nonrecoverable Advance. Consistent with the terms of this Agreement, the
Master Servicer may also waive, modify or vary any term of any Mortgage Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to any Mortgagor if in the Master
Servicer's determination such waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Certificateholders or the Certificate Insurer (taking into account any estimated
Realized Loss that might result absent such action); provided, however, that the Master Servicer may not
modify materially or permit any Subservicer to modify any Mortgage Loan, including without limitation any
modification that would change the Mortgage Rate, forgive the payment of any principal or interest (unless in
connection with the liquidation of the related Mortgage Loan or except in connection with prepayments to the
extent that such reamortization is not inconsistent with the terms of the Mortgage Loan), capitalize any
amounts owing on the Mortgage Loan by adding such amount to the outstanding principal balance of the Mortgage
Loan, or extend the final maturity date of such Mortgage Loan, unless such Mortgage Loan is in default or, in
the judgment of the Master Servicer, such default is reasonably foreseeable; provided, further, that (1) no
such modification shall reduce the interest rate on a Mortgage Loan below one-half of the Mortgage Rate as in
effect on the Cut-off Date, but not less than the sum of the rates at which the Servicing Fee and the
Subservicing Fee with respect to such Mortgage Loan accrues plus the rate at which the premium paid to the
Certificate Insurer, if any, accrues, (2) the final maturity date for any Mortgage Loan shall not be
extended beyond the Maturity Date, (3) the Stated Principal Balance of all Reportable Modified Mortgage Loans
subject to Servicing Modifications (measured at the time of the Servicing Modification and after giving
effect to any Servicing Modification) can be no more than five percent of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date, unless such limit is increased from time to time with the consent
of the Rating Agencies and the Certificate Insurer, if any. In addition, any amounts owing on a Mortgage
Loan added to the outstanding principal balance of such Mortgage Loan must be fully amortized over the
remaining term of such Mortgage Loan, and such amounts may be added to the outstanding principal balance of a
Mortgage Loan only once during the life of such Mortgage Loan. Also, the addition of such amounts described
in the preceding sentence shall be implemented in accordance with the Program Guide and may be implemented
only by Subservicers that have been approved by the Master Servicer for such purpose. In connection with any
Curtailment of a Mortgage Loan, the Master Servicer, to the extent not inconsistent with the terms of the
Mortgage Note and local law and practice, may permit the Mortgage Loan to be reamortized such that the
Monthly Payment is recalculated as an amount that will fully amortize the remaining Stated Principal Balance
thereof by the original Maturity Date based on the original Mortgage Rate; provided, that such
re-amortization shall not be permitted if it would constitute a reissuance of the Mortgage Loan for federal
income tax purposes, except if such reissuance is described in Treasury Regulation Section 1.860G-2(b)(3)
(See Section 3.07(a) of the Standard Terms)
(B) The Master Servicer shall establish and maintain a Custodial Account in which the Master
Servicer shall deposit or cause to be deposited on a daily basis, except as otherwise specifically provided
herein, the following payments and collections remitted by Subservicers or received by it in respect of the
Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest on the
Mortgage Loans due on or before the Cut-off Date):
(I) All payments on account of principal, including Principal Prepayments made by
Mortgagors on the Mortgage Loans and the principal component of any Subservicer Advance or of any REO
Proceeds received in connection with an REO Property for which an REO Disposition has occurred;
(II) All payments on account of interest at the Adjusted Mortgage Rate on the Mortgage
Loans, including Buydown Funds, if any, and the interest component of any Subservicer Advance or of
any REO Proceeds received in connection with an REO Property for which an REO Disposition has occurred;
(III) Insurance Proceeds, Subsequent Recoveries and Liquidation Proceeds (net of any related
expenses of the Subservicer);
(IV) All proceeds of any Mortgage Loans purchased pursuant to Section 2.02, 2.03, 2.04 or
4.07 (including amounts received from Residential Funding pursuant to the last paragraph of Section 4
of the Assignment Agreement in respect of any liability, penalty or expense that resulted from a
breach of the Compliance With Laws Representation and all amounts required to be deposited in
connection with the substitution of a Qualified Substitute Mortgage Loan pursuant to Section 2.03 or
2.04);
(V) Any amounts required to be deposited pursuant to Section 3.07(c) or 3.21;
(VI) All amounts transferred from the Certificate Account to the Custodial Account in
accordance with Section 4.02(a);
(VII) Any amounts realized by the Subservicer and received by the Master Servicer in respect
of any Additional Collateral;
(VIII) Any amounts received by the Master Servicer in respect of Pledged Assets; and
(IX) Any amounts received by the Master Servicer in connection with any Prepayment Charges
on the Prepayment Charge Loans.
The foregoing requirements for deposit in the Custodial Account shall be exclusive, it being
understood and agreed that, without limiting the generality of the foregoing, payments on the Mortgage Loans
which are not part of the Trust Fund (consisting of payments in respect of principal and interest on the
Mortgage Loans due on or before the Cut-off Date) and payments or collections in the nature of late payment
charges or assumption fees may but need not be deposited by the Master Servicer in the Custodial Account. In
the event any amount not required to be deposited in the Custodial Account is so deposited, the Master
Servicer may at any time withdraw such amount from the Custodial Account, any provision herein to the
contrary notwithstanding. The Custodial Account may contain funds that belong to one or more trust funds
created for mortgage pass-through certificates of other series and may contain other funds respecting
payments on Mortgage Loans belonging to the Master Servicer or serviced or master serviced by it on behalf of
others. Notwithstanding such commingling of funds, the Master Servicer shall keep records that accurately
reflect the funds on deposit in the Custodial Account that have been identified by it as being attributable
to the Mortgage Loans.
With respect to Insurance Proceeds, Liquidation Proceeds, REO Proceeds and the proceeds of the
purchase of any Mortgage Loan pursuant to Sections 2.02, 2.03, 2.04 and 4.07 received in any calendar month,
the Master Servicer may elect to treat such amounts as included in the Available Distribution Amount for the
Distribution Date in the month of receipt, but is not obligated to do so. If the Master Servicer so elects,
such amounts will be deemed to have been received (and any related Realized Loss shall be deemed to have
occurred) on the last day of the month prior to the receipt thereof.
(C) (See Section 3.07(c) of the Standard Terms)
(D) (See Section 3.07(d) of the Standard Terms)
(E) Notwithstanding Section 3.07(a), The Master Servicer shall not waive (or permit a Subservicer
to waive) any Prepayment Charge unless: (i) the enforceability thereof shall have been limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to creditors' rights generally, (ii) the
enforcement thereof is illegal, or any local, state or federal agency has threatened legal action if the
prepayment penalty is enforced, (iii) the collectability thereof shall have been limited due to acceleration
in connection with a foreclosure or other involuntary payment or (iv) such waiver is standard and customary
in servicing similar Mortgage Loans and relates to a default or a reasonably foreseeable default and would,
in the reasonable judgment of the Master Servicer, maximize recovery of total proceeds taking into account
the value of such Prepayment Charge and the related Mortgage Loan. In no event will the Master Servicer
waive a Prepayment Charge in connection with a refinancing of a Mortgage Loan that is not related to a
default or a reasonably foreseeable default. If a Prepayment Charge is waived, but does not meet the
standards described above, then the Master Servicer is required to deposit into the Custodial Account the
amount of such waived Prepayment Charge at the time that the amount prepaid on the related Mortgage Loan is
required to be deposited into the Custodial Account. Notwithstanding any other provisions of this Agreement,
any payments made by the Master Servicer in respect of any waived Prepayment Charges pursuant to this Section
shall be deemed to be paid outside of the Trust Fund and not part of any REMIC.
SECTION 3.08. SUBSERVICING ACCOUNTS; SERVICING ACCOUNTS (See Section 3.08 of the Standard Terms)
SECTION 3.09. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE MORTGAGE LOANS (See
Section 3.09 of the Standard Terms)
SECTION 3.10. PERMITTED WITHDRAWALS FROM THE CUSTODIAL ACCOUNT (See Section 3.10 of the Standard
Terms)
SECTION 3.11. MAINTENANCE OF THE PRIMARY INSURANCE POLICIES; COLLECTIONS THEREUNDER(See Section 3.11
of the Standard Terms)
SECTION 3.12. MAINTENANCE OF FIRE INSURANCE AND OMISSIONS AND FIDELITY COVERAGE (See Section 3.12 of
the Standard Terms)
SECTION 3.13. ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AND MODIFICATION AGREEMENTS; CERTAIN
ASSIGNMENTS (See Section 3.13 of the Standard Terms)
SECTION 3.14. REALIZATION UPON DEFAULTED MORTGAGE LOANS
(A) (See Section 3.14(a) of the Standard Terms)
(B) (See Section 3.14(b) of the Standard Terms)
(C) (See Section 3.14(c) of the Standard Terms)
(D) The proceeds of any Cash Liquidation, REO Disposition or purchase or repurchase of any
Mortgage Loan pursuant to the terms of this Agreement, as well as any recovery resulting from a collection of
Liquidation Proceeds, Insurance Proceeds or REO Proceeds, will be applied in the following order of priority:
first, to reimburse the Master Servicer or the related Subservicer in accordance with Section 3.10(a)(ii);
second, to the Certificateholders to the extent of accrued and unpaid interest on the Mortgage Loan, and any
related REO Imputed Interest, at the Net Mortgage Rate (or the Modified Net Mortgage Rate in the case of a
Modified Mortgage Loan) to the Due Date prior to the Distribution Date on which such amounts are to be
distributed; third, to the Certificateholders as a recovery of principal on the Mortgage Loan (or REO
Property); fourth, to all Servicing Fees and Subservicing Fees payable therefrom (and the Master Servicer and
the Subservicer shall have no claims for any deficiencies with respect to such fees which result from the
foregoing allocation); and fifth, to Foreclosure Profits; provided, however, that the application of proceeds
to Certificateholders pursuant to the second and third clauses, above, shall be subject to the priorities of
Section 4.02, including the provisions providing for reimbursement to the Certificate Insurance of Cumulative
Insurance Payments.
(E) (See Section 3.14(e) of the Standard Terms)
SECTION 3.15. TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES (See Section 3.15 of the Standard
Terms)
SECTION 3.16. SERVICING AND OTHER COMPENSATION; COMPENSATING INTEREST
(A) (See Section 3.16(a) of the Standard Terms)
(B) Additional servicing compensation in the form of assumption fees, late payment charges,
investment income on amounts in the Custodial Account or the Certificate Account or otherwise (but not
including Prepayment Charges) shall be retained by the Master Servicer or the Subservicer to the
extent provided herein, subject to clause (e) below. Prepayment charges shall be deposited into the
Certificate Account and shall be paid on each Distribution Date to the holders of the Class SB
Certificates.
(C) (See Section 3.16(c) of the Standard Terms)
(D) (See Section 3.16(d) of the Standard Terms)
(E) (See Section 3.16(e) of the Standard Terms)
SECTION 3.17. REPORTS TO THE TRUSTEE AND THE COMPANY (See Section 3.17 of the Standard Terms)
SECTION 3.18. ANNUAL STATEMENT AS TO COMPLIANCE (See Section 3.18 of the Standard Terms)
SECTION 3.19. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT(See Section 3.19 of the
Standard Terms)
SECTION 3.20. RIGHTS OF THE COMPANY IN RESPECT OF THE MASTER SERVICER (See Section 3.20 of the
Standard Terms)
SECTION 3.21. ADMINISTRATION OF BUYDOWN FUNDS (See Section 3.21 of the Standard Terms)
SECTION 3.22 ADVANCE FACILITY (See Section 3.22 of the Standard Terms)
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. CERTIFICATE ACCOUNT. (See Section 4.01 of the Standard Terms.)
SECTION 4.02. DISTRIBUTIONS.
(A) On each Distribution Date, the Trustee (or the Paying Agent on behalf of the Trustee) shall allocate
and distribute the Available Distribution Amount to the extent on deposit in the Certificate Account for such
date to the interests issued in respect of REMIC I, REMIC II and REMIC III as specified in this Section.
(B) (1) On each Distribution Date, the REMIC I Distribution Amount shall be distributed by
REMIC I to REMIC II on account of the REMIC I Regular Interests in the amounts and with the priorities set
forth in the definition thereof.
(2) On each Distribution Date, the REMIC II Distribution Amount shall be distributed
by REMIC II to REMIC III on account of the REMIC II Regular Interests in the amounts and with the priorities
set forth in the definition thereof.
(3) Notwithstanding the distributions on the REMIC I Regular Interests described in
this Section 4.02(b), distribution of funds from the Certificate Account shall be made only in accordance
with Section 4.02(c).
(C) On each Distribution Date (x) the Master Servicer on behalf of the Trustee or (y) the Paying Agent
appointed by the Trustee, shall distribute (a) to the Certificate Insurer, the Insurance Premium, any
distribution pursuant to Section 4.02(a)(i)(B), below, and any distribution pursuant to Section 4.02(a)(ii),
below, and (b) to each Certificateholder of record on the next preceding Record Date (other than as provided
in Section 9.01 of the Standard Terms respecting the final distribution) either in immediately available
funds (by wire transfer or otherwise) to the account of such Certificateholder at a bank or other entity
having appropriate facilities therefor, if such Certificateholder has so notified the Master Servicer or the
Paying Agent, as the case may be, or, if such Certificateholder has not so notified the Master Servicer or
the Paying Agent by the Record Date, by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register, such Certificateholder's share (which share with respect to each Class
of Certificates, shall be based on the aggregate of the Percentage Interests represented by Certificates of
the applicable Class held by such Holder) of the following amounts, in the following order of priority, in
each case to the extent of the Available Distribution Amount (net of the Insurance Premium) on deposit in the
Certificate Account, and, in the case of the Class I-A-2 Certificates and Class II-A-3 Certificates, together
with any related Certificate Insurance Payment pursuant to Section 13.02 of this Series Supplement (except
that, with respect to clause (i) below, such distribution shall be to the extent and in the priority of the
Class A Interest Distribution Priority, and with respect to clause (viii)(B) below, such distribution shall
be to the extent of Prepayment Charges on deposit in the Certificate Account):
(I) (A) first, to the Class A Certificateholders, on a pro rata basis based upon the amount of Accrued
Certificate Interest accrued for such Classes, the Accrued Certificate Interest payable on the
Class A Certificates with respect to such Distribution Date, plus any related amounts accrued
pursuant to this clause (i)(A) but remaining unpaid from any prior Distribution Date, which
amount shall be allocated pursuant to the Class A Interest Distribution Priority, being paid
from and in reduction of the Available Distribution Amount for such Distribution Date;
(B) second, to the Certificate Insurer, as subrogee of the Insured
Certificateholders, reimbursement of Cumulative Insurance Payments to the extent of any
Certificate Insurance Payments paid in respect of interest on the Insured Certificates;
(C) third, to the Class M-1 Certificates, Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(D) fourth, to the Class M-2 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(E) fifth, to the Class M-3 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any related Accrued Certificate Interest due thereon
remaining unpaid from any prior Distribution Date, together with interest thereon at the
related Pass-Through Rate in effect for such Distribution Date;
(F) sixth, to the Class M-4 Certificates, Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(G) seventh, to the Class M-5 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(H) eight, to the Class M-6 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any related Accrued Certificate Interest due thereon
remaining unpaid from any prior Distribution Date, together with interest thereon at the
related Pass-Through Rate in effect for such Distribution Date;
(I) ninth, to the Class M-7 Certificates, Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date; and
(J) tenth, to the Class M-8 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(K) eleventh, to the Class M-9 Certificates, Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date; and
(L) twelfth, to the Class M-10 Certificates Accrued Certificate Interest due
thereon for such Distribution Date plus any Accrued Certificate Interest due thereon remaining
unpaid from any prior Distribution Date, together with interest thereon at the related
Pass-Through Rate in effect for such Distribution Date;
(II) to the Class A Certificateholders, the Class M Certificateholders, and the Certificate Insurer, from
the amount, if any, of Available Distribution Amount remaining after the foregoing
distributions, the Principal Distribution Amount, which amount shall be allocated in the manner
and priority set forth in Section 4.02(d), until the aggregate Certificate Principal Balance of
each Class of Class A Certificates has been reduced to zero, remaining Cumulative Insurance
Payments have been reduced to zero and the aggregate Certificate Principal Balance of each
Class of Class M Certificates has been reduced to zero;
(III) to the Class A Certificateholders and Class M Certificateholders from the amount, if any, of Excess
Cash Flow remaining after the foregoing distributions, the amount of any related Prepayment
Interest Shortfalls with respect to the Mortgage Loans for that Distribution Date, to the
extent not covered by Compensating Interest on such Distribution Date, which amount shall be
allocated to the Class A Certificateholders and Class M Certificateholders on a pro rata basis,
based on the amount of Prepayment Interest Shortfalls allocated thereto for such Distribution
Date;
(IV) to the Class A Certificateholders and Class M Certificateholders from the amount, if any, of Excess
Cash Flow remaining after the foregoing distributions, the amount of any Prepayment Interest
Shortfalls allocated thereto remaining unpaid from prior Distribution Dates together with
interest thereon at the related Pass-Through Rate in effect for such Distribution Date, which
amount shall be allocated to the Class A Certificateholders and Class M Certificateholders on a
pro rata basis, based on the amount of Prepayment Interest Shortfalls remaining unpaid;
(V) to the Class A Certificates and Class M Certificates from the amount, if any, of Excess Cash Flow
remaining after the foregoing distributions the amount of any related Basis Risk Shortfall on
such Certificates (after giving effect, with respect to the initial Distribution Date, to
payments made from the Basis Risk Shortfall Reserve Fund), which amount shall be allocated
first, to the Class A Certificates on a pro rata basis, based on their respective Basis Risk
Shortfalls for such Distribution Date, and then, sequentially, to the Class M-1, Class M-2,
Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class M-10
Certificateholders, in that order;
(VI) to pay the holders of the Class A and Class M Certificates, on a pro rata basis, based on Relief Act
Shortfalls allocated thereto for such Distribution Date, the amount of any Relief Act
Shortfalls allocated thereto with respect to the Mortgage Loans for such Distribution Date,
(VII) to the Class A Certificateholders and the Class M Certificateholders, the principal portion of any
Realized Losses previously allocated first, to the Class A Certificateholders on a pro rata
basis, based on their respective principal portion of any Realized Losses previously allocated
to those Certificates and remaining unreimbursed, and then to those Certificates and remaining
unreimbursed, which amount shall be allocated sequentially, to the Class M-1, Class M-2, Class
M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class M-10
Certificateholders, in that order;
(VIII) to the Class SB Certificates, (A) from the amount, if any, of the Available Distribution Amount
remaining after the foregoing distributions, the sum of (I) Accrued Certificate Interest
thereon, (II) the amount of any Overcollateralization Reduction Amount for such Distribution
Date and (III) for any Distribution Date after the Certificate Principal Balance of each Class
A Certificate and Class M Certificate has been reduced to zero, the Overcollateralization
Amount, and (B) from prepayment charges on deposit in the Certificate Account, any prepayment
charges received on the Mortgage Loans during the related Prepayment Period.
(IX) to the Class R Certificateholders, the balance, if any, of the Available Distribution Amount.
All payments of amounts in respect of Basis Risk Shortfall made pursuant to Section 4.02(c)(vi) shall,
for federal income tax purposes, be deemed to have been distributed from REMIC III to the holder of the Class
SB Certificates and then paid outside of any REMIC to the recipients thereof pursuant to an interest rate cap
contract. By accepting their Certificates the holders of the Certificates agree to treat such payments in
the manner described in the preceding sentence for purposes of filing their income tax returns.
(D) The Principal Distribution Amount payable to the Class A Certificateholders and the Class M
Certificateholders shall be distributed as follows:
(I) first, concurrently, (i) the Group I Principal Distribution Amount shall be distributed, pro rata, to
the Class I-A-1 Certificateholders and Class II-A-2 Certificateholders, in each case until the
Certificate Principal Balance thereof has been reduced to zero, and (i) the Group II Principal
Distribution Amount shall be distributed, pro rata, to the Class II-A-1, Class II-A-2 and Class
II-A-3 Certificateholders, in each case until the Certificate Principal Balance thereof has
been reduced to zero;
(II) second, after application of payments pursuant to clause (d)(i), concurrently, (i) the Group II
Principal Distribution Amount shall be distributed, pro rata, to the Class I-A-1
Certificateholders and Class I-A-2 Certificateholders, in each case until the Certificate
Principal Balance thereof has been reduced to zero and (ii) the Group I Principal Distribution
Amount shall be distributed, pro rata, to the Class II-A-1, Class II-A-2 and Class II-A-3
Certificateholders, in each case until the Certificate Principal Balance thereof has been
reduced to zero;
(III) third, Cumulative Insurance Payments shall be paid to the Certificate Insurer;
(IV) fourth, the Class M-1 Principal Distribution Amount shall be distributed to the Class M-1 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(V) fifth, the Class M-2 Principal Distribution Amount shall be distributed to the Class M-2 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(VI) sixth, the Class M-3 Principal Distribution Amount shall be distributed to the Class M-3 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(VII) seventh, the Class M-4 Principal Distribution Amount shall be distributed to the Class M-4
Certificates until the Certificate Principal Balance thereof has been reduced to zero;
(VIII) eighth, the Class M-5 Principal Distribution Amount shall be distributed to the Class M-5 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(IX) ninth, the Class M-6 Principal Distribution Amount shall be distributed to the Class M-6 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(X) tenth, the Class M-7 Principal Distribution Amount shall be distributed to the Class M-7 Certificates
until the Certificate Principal Balance thereof has been reduced to zero;
(XI) eleventh, the Class M-8 Principal Distribution Amount shall be distributed to the Class M-8
Certificates until the Certificate Principal Balance thereof has been reduced to zero;
(XII) twelfth, the Class M-9 Principal Distribution Amount shall be distributed to the Class M-9
Certificates until the Certificate Principal Balance thereof has been reduced to zero;
(XIII) thirteenth, the Class M-10 Principal Distribution Amount shall be distributed to the Class M-10
Certificates until the Certificate Principal Balance thereof has been reduced to zero.
(E) Notwithstanding the foregoing clauses (c) and (d), upon the reduction of the Certificate Principal
Balance of a Class of Class A Certificates or Class M Certificates to zero, such Class of Certificates will
not be entitled to further distributions pursuant to Section 4.02, including, without limitation, the payment
of current and unreimbursed Prepayment Interest Shortfalls pursuant to clauses (c)(iv) and (v) and the
related Basis Risk Shortfalls pursuant to clause (c)(vi).
(F) Each distribution with respect to a Book-Entry Certificate shall be paid to the Depository, as Holder
thereof, and the Depository shall be solely responsible for crediting the amount of such distribution to the
accounts of its Depository Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the Certificate Owners that it
represents. None of the Trustee, the Certificate Registrar, the Company or the Master Servicer shall have
any responsibility therefor.
(G) Except as otherwise provided in Section 9.01 of the Standard Terms, if the Master Servicer anticipates
that a final distribution with respect to any Class of Certificates will be made on a future Distribution
Date, the Master Servicer shall, no later than 40 days prior to such final Distribution Date, notify the
Trustee and the Trustee shall, not earlier than the 15th day and not later than the 25th day of the month
next preceding the month of such final distribution, distribute, or cause to be distributed, to each Holder
of such Class of Certificates a notice to the effect that: (i) the Trustee anticipates that the final
distribution with respect to such Class of Certificates will be made on such Distribution Date but only upon
presentation and surrender of such Certificates at the office of the Trustee or as otherwise specified
therein, and (ii) no interest shall accrue on such Certificates from and after the end of the related
Interest Accrual Period. In the event that Certificateholders required to surrender their Certificates
pursuant to Section 9.01(c) of the Standard Terms do not surrender their Certificates for final cancellation,
the Trustee shall cause funds distributable with respect to such Certificates to be withdrawn from the
Certificate Account and credited to a separate escrow account for the benefit of such Certificateholders as
provided in Section 9.01(d) of the Standard Terms.
(H) On the initial Distribution Date, Basis Risk Shortfall amounts with respect to the initial
Distribution Date, if any, will be paid to the Holders of the Class A Certificates and Class M Certificates,
pro rata, based on the amount of Basis Risk Shortfalls for such Classes, from amounts withdrawn from the
Basis Risk Shortfall Reserve Fund.
(I) On any Distribution Date, the Net Deferred Interest on a Loan Group will be allocated among the
related Classes of Certificates in an aggregate amount equal to the excess, if any, for each such Class of
(i) the interest accrued during the related Interest Accrual Period at the Pass-Through Rate for such Class,
over (ii) the amount that would have been calculated as accrued interest during the related Interest Accrual
Period had the Pass-Through Rate for such Class equaled the applicable Adjusted Rate Cap for such Class and
for such Distribution Date. Any remaining Net Deferred Interest on that Distribution Date shall be allocated
to the Class SB Certificates. Net Deferred Interest allocated to any Class of Certificates will be added as
principal to the outstanding Certificate Principal Balance of such Class of Certificates.
SECTION 4.03. STATEMENTS TO CERTIFICATEHOLDERS; STATEMENTS TO THE RATING AGENCIES; EXCHANGE ACT REPORTING.
(See Section 4.03 of the Standard Terms.)
SECTION 4.04. DISTRIBUTION OF REPORTS TO THE TRUSTEE AND THE COMPANY; ADVANCES BY THE MASTER SERVICER.
(A) (See Section 4.04(a) of the Standard Terms)
(B) On or before 2:00 P.M. New York time on each Certificate Account Deposit Date, the
Master Servicer shall either (i) deposit in the Certificate Account from its own funds, or funds received
therefor from the Subservicers, an amount equal to the Advances to be made by the Master Servicer in respect
of the related Distribution Date, which shall be in an aggregate amount equal to the aggregate amount of
Monthly Payments (with each interest portion thereof adjusted to the Net Mortgage Rate), less the amount of
any related Servicing Modifications, Debt Service Reductions or reductions in the amount of interest
collectable from the Mortgagor pursuant to the Servicemembers Civil Relief Act, as amended, or similar
legislation or regulations then in effect, on the Outstanding Mortgage Loans as of the related Due Date,
which Monthly Payments were not received as of the close of business as of the related Determination Date;
provided that no Advance shall be made if it would be a Nonrecoverable Advance; and provided, further, that
the Monthly Payment for purposes of this Section 4.04 shall mean the minimum monthly payment due under the
Mortgage Note, net of the Servicing Fee and Subservicing Fee, (ii) withdraw from amounts on deposit in the
Custodial Account and deposit in the Certificate Account all or a portion of the Amount Held for Future
Distribution in discharge of any such Advance, or (iii) make advances in the form of any combination of (i)
and (ii) aggregating the amount of such Advance. Any portion of the Amount Held for Future Distribution so
used shall be replaced by the Master Servicer by deposit in the Certificate Account on or before 11:00 A.M.
New York time on any future Certificate Account Deposit Date to the extent that funds attributable to the
Mortgage Loans that are available in the Custodial Account for deposit in the Certificate Account on such
Certificate Account Deposit Date shall be less than payments to Certificateholders required to be made on the
following Distribution Date. The Master Servicer shall be entitled to use any Advance made by a Subservicer
as described in Section 3.07(b) that has been deposited in the Custodial Account on or before such
Distribution Date as part of the Advance made by the Master Servicer pursuant to this Section 4.04. The
amount of any reimbursement pursuant to Section 4.02(a) in respect of outstanding Advances on any
Distribution Date shall be allocated to specific Monthly Payments due but delinquent for previous Due
Periods, which allocation shall be made, to the extent practicable, to Monthly Payments which have been
delinquent for the longest period of time. Such allocations shall be conclusive for purposes of
reimbursement to the Master Servicer from recoveries on related Mortgage Loans pursuant to Section 3.10.
The determination by the Master Servicer that it has made a Nonrecoverable Advance or that any
proposed Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate of the Master Servicer delivered to the Company and the Trustee.
If the Master Servicer determines as of the Business Day preceding any Certificate Account Deposit
Date that it will be unable to deposit in the Certificate Account an amount equal to the Advance required to
be made for the immediately succeeding Distribution Date, it shall give notice to the Trustee of its
inability to advance (such notice may be given by telecopy), not later than 3:00 P.M., New York time, on such
Business Day, specifying the portion of such amount that it will be unable to deposit. Not later than 3:00
P.M., New York time, on the Certificate Account Deposit Date the Trustee shall, unless by 12:00 Noon, New
York time, on such day the Trustee shall have been notified in writing (by telecopy) that the Master Servicer
shall have directly or indirectly deposited in the Certificate Account such portion of the amount of the
Advance as to which the Master Servicer shall have given notice pursuant to the preceding sentence, pursuant
to Section 7.01, (a) terminate all of the rights and obligations of the Master Servicer under this Agreement
in accordance with Section 7.01 and (b) assume the rights and obligations of the Master Servicer hereunder,
including the obligation to deposit in the Certificate Account an amount equal to the Advance for the
immediately succeeding Distribution Date.
The Trustee shall deposit all funds it receives pursuant to this Section 4.04 into the Certificate
Account.
SECTION 4.05. ALLOCATION OF REALIZED LOSSES.
(A) Prior to each Distribution Date, the Master Servicer shall determine the total amount of Realized
Losses, if any, that resulted from any Cash Liquidation, Servicing Modifications, Debt Service Reduction,
Deficient Valuation or REO Disposition that occurred during the related Prepayment Period or, in the case of
a Servicing Modification that constitutes a reduction of the interest rate on a Mortgage Loan, the amount of
the reduction in the interest portion of the Monthly Payment due in the month in which such Distribution Date
occurs. The amount of each Realized Loss shall be evidenced by an Officers' Certificate. All Realized
Losses on the Mortgage Loans shall be allocated as follows:
first, to the Excess Cash Flow as part of the Principal Distribution Amount as provided in Section
4.02(c), to the extent of the Excess Cash Flow for such Distribution Date,
second, in reduction of the Overcollateralization Amount, until such amount has been reduced to zero;
third, to the Class M-10 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
fourth, to the Class M-9 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
fifth, to the Class M-8 Certificates, until the Certificate Principal Balance thereof has been reduced
to zero;
sixth, to the Class M-7 Certificates, until the Certificate Principal Balance thereof has been reduced
to zero;
seventh, to the Class M-6 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
eighth, to the Class M-5 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
ninth, to the Class M-4 Certificates, until the Certificate Principal Balance thereof has been reduced
to zero;
tenth, to the Class M-3 Certificates, until the Certificate Principal Balance thereof has been reduced
to zero;
eleventh, to the Class M-2 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
twelfth, to the Class M-1 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; and
thirteenth, for Realized Losses on the Group I Loans, sequentially, to the Class I-A-2 Certificates
and Class I-A-1 Certificates, in that order, until the Certificate Principal Balance of each such Class has
been reduced to zero, and for Realized Losses on the Group II Loans, sequentially, to the Class II-A-3, Class
II-A-2 and Class II-A-1 Certificates, in that order, until the Certificate Principal Balance of each such
Class has been reduced to zero.
(B) Any allocation of the principal portion of Realized Losses (other than Debt Service Reductions) to the
Class A Certificates or Class M Certificates on any Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated, which allocation shall be deemed to have
occurred on such Distribution Date, until the Certificate Principal Balance thereof has been reduced to zero;
provided, that no such reduction shall reduce the aggregate Certificate Principal Balance of the Certificates
below the aggregate Stated Principal Balance of the Mortgage Loans. Allocations of the interest portions of
Realized Losses (other than any interest rate reduction resulting from a Servicing Modification) to any Class
of Class A Certificates or Class M Certificates on any Distribution Date shall be made by operation of the
definition of "Accrued Certificate Interest" for each Class for such Distribution Date. Allocations of the
interest portion of a Realized Loss resulting from an interest rate reduction in connection with a Servicing
Modification shall be made by operation of the priority of payment provisions of Section 4.02(c). All
Realized Losses and all other losses allocated to a Class of Certificates hereunder will be allocated among
the Certificates of such Class in proportion to the Percentage Interests evidenced thereby.
(C) All Realized Losses on the Mortgage Loans shall be allocated on each Distribution Date to the REMIC I
Regular Interests as provided in the definition of REMIC I Realized Losses.
(D) A Realized Losses on the Mortgage Loans shall be allocated on each Distribution Date to the REMIC II
Regular Interests as provided in the definition of REMIC II Realized Losses.
(E) Realized Losses allocated to the Excess Cash Flow or the Overcollateralization Amount pursuant to
paragraphs (a), (b) or (c) of this Section, the definition of Accrued Certificate Interest and the operation
of Section 4.02(c) shall be deemed allocated to the Class SB Certificates. Realized Losses allocated to the
Class SB Certificates shall, to the extent such Realized Losses represent Realized Losses on an interest
portion, be allocated to the REMIC III Regular Interest SB-IO. Realized Losses allocated to the Excess Cash
Flow pursuant to paragraph (b) of this Section shall be deemed to reduce Accrued Certificate Interest on the
REMIC III Regular Interest SB-IO. Realized Losses allocated to the Overcollateralization Amount pursuant to
paragraph (b) of this Section shall be deemed first to reduce the principal balance of the REMIC III Regular
Interest SB-PO until such principal balance shall have been reduced to zero and thereafter to reduce accrued
and unpaid interest on the REMIC III Regular Interest SB-IO.
SECTION 4.06. REPORTS OF FORECLOSURES AND ABANDONMENT OF MORTGAGED PROPERTY. (See Section 4.06 of the
Standard Terms.)
SECTION 4.07. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS. (See Section 4.07 of the Standard Terms.)
SECTION 4.08. SURETY BOND. (See Section 4.08 of the Standard Terms.)
SECTION 4.09. BASIS RISK SHORTFALL RESERVE FUND.
(a) On or before the Closing Date, the Trustee shall establish a Reserve Fund on behalf of the Holders of
the Class A Certificates and Class M Certificates. The Reserve Fund must be an Eligible Account. The Reserve
Fund shall be entitled "Basis Risk Shortfall Reserve Fund, Deutsche Bank Trust Company Americas, as Trustee
for the benefit of holders of Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through
Certificates, Series 2006-QO4" (the "Basis Risk Shortfall Reserve Fund"). The Basis Risk Shortfall Reserve
Fund shall be an Eligible Account or a sub-account of an Eligible Account. On the Closing Date, the
Depositor will cause, on behalf of the Trust, the Basis Risk Shortfall Reserve Fund Amount to be deposited
into the Basis Risk Shortfall Reserve Fund. Pursuant to Section 4.02(h), on the initial Distribution Date,
amounts on deposit in the Basis Risk Shortfall Reserve Fund will be withdrawn from the Basis Risk Shortfall
Reserve Fund and deposited into the Certificate Account for payment to the Class A Certificates and Class M
Certificates to the extent of any Basis Risk Shortfall Amount on the Class A Certificates and Class M
Certificates on such initial Distribution Date. After the initial Distribution Date, all amounts remaining
in the Basis Risk Shortfall Reserve Fund will be distributed to Greenwich Capital Markets, Inc. or its
designee, and following such withdrawal the Basis Risk Shortfall Reserve Fund will be closed.
(b) The Trustee will invest funds deposited in the Basis Risk Shortfall Reserve Fund as directed by the
Depositor or its designee in writing in Permitted Investments with a maturity date (i) no later than the
Business Day immediately preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee or an Affiliate of the Trustee is the
obligor for the Permitted Investment, or (ii) no later than the date on which such funds are required to be
withdrawn from such account or sub account of a trust account pursuant to this Agreement, if the Trustee or
an affiliate of the Trustee is the obligor for the Permitted Investment (or, if no written direction is
received by the Trustee from the Depositor, then funds in such account shall remain uninvested). For federal
income tax purposes, the Depositor shall be the owner of the Basis Risk Shortfall Reserve Fund and shall
report all items of income, deduction, gain or loss arising therefrom. At no time will the Basis Risk
Shortfall Reserve Fund be an asset of any REMIC created hereunder. All income and gain realized from
investment of funds deposited in the Basis Risk Shortfall Reserve Fund, which investment shall be made solely
upon the written direction of the Depositor, shall be for the sole and exclusive benefit of the Depositor and
shall be remitted by the Trustee to the Depositor within one Business Day from the closing of the Basis Risk
Shortfall Reserve Fund. The Depositor shall deposit in the Basis Risk Shortfall Reserve Fund the amount of
any net loss incurred in respect of any such Permitted Investment immediately upon realization of such loss.
--------------------------------------------------------------------------------
ARTICLE V
THE CERTIFICATES
(See Article V of the Standard Terms)
--------------------------------------------------------------------------------
ARTICLE VI
THE COMPANY AND THE MASTER SERVICER
(See Article VI of the Standard Terms.)
SECTION 6.01. RESPECTIVE LIABILITIES OF THE COMPANY AND MASTER SERVICER. (See Section 6.01 of the Standard
Terms.)
SECTION 6.02. MERGER OR CONSOLIDATION OF THE COMPANY OR MASTER SERVICER; ASSIGNMENT OF RIGHTS AND DELEGATION
OF DUTIES BY THE MASTER SERVICER. (
(a) (See Section 6.08(a) of the Standard Terms.).
(b) (See Section 6.08(b) of the Standard Terms).
(c) (See Section 6.08(c) of the Standard Terms).
(d) The conversion of Residential Funding Corporation's or Residential Accredit Loans, Inc.'s
organizational structure from a Delaware corporation to a limited liability company shall not require the
consent of any party or notice to any party and shall not in any way affect the rights or obligations of
Residential Funding Corporation or Residential Accredit Loans, Inc. hereunder.
SECTION 6.03. LIMITATION ON LIABILITY OF THE COMPANY, MASTER SERVICER AND OTHERS. (See Section 6.03 of the
Standard Terms.)
SECTION 6.04. COMPANY AND MASTER SERVICER NOT TO RESIGN. (See Section 6.04 of the Standard Terms.)
--------------------------------------------------------------------------------
ARTICLE VII
DEFAULT
(See Article VII of the Standard Terms.)
--------------------------------------------------------------------------------
ARTICLE VIII
CONCERNING THE TRUSTEE
(See Article VIII of the Standard Terms.)
SECTION 1.01.
--------------------------------------------------------------------------------
ARTICLE IX
TERMINATION
(See Article IX of the Standard Terms)
SECTION 9.01 OPTIONAL PURCHASE BY THE MASTER SERVICER OF ALL CERTIFICATES; TERMINATION UPON PURCHASE
BY THE MASTER SERVICER OR LIQUIDATION OF ALL MORTGAGE LOANS
(A) Subject to Section 9.02, the respective obligations and responsibilities of the Company, the
Master Servicer and the Trustee created hereby in respect of the Certificates (other than the obligation of
the Trustee to make certain payments after the Final Distribution Date to Certificateholders and the
obligation of the Company to send certain notices as hereinafter set forth) shall terminate upon the last
action required to be taken by the Trustee on the Final Distribution Date pursuant to this Article IX
following the earlier of:
(i) the later of the final payment or other liquidation (or any Advance with respect
thereto) of the last Mortgage Loan remaining in the Trust Fund or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan, or
(ii) at the option of the Master Servicer, the purchase of all Mortgage Loans and all
property acquired in respect of any Mortgage Loan remaining in the Trust Fund, at a price equal to
100% of the unpaid principal balance of each Mortgage Loan (or, if less than such unpaid principal
balance, the fair market value of the related underlying property of such Mortgage Loan with respect
to Mortgage Loans as to which title has been acquired if such fair market value is less than such
unpaid principal balance) (and if such purchase is made by the Master Servicer only, net of any
unreimbursed Advances attributable to principal) on the day of repurchase, plus accrued interest
thereon at the Net Mortgage Rate (or Modified Net Mortgage Rate in the case of any Modified Mortgage
Loan), to, but not including, the first day of the month in which such repurchase price is
distributed, plus any Cumulative Insurance Payments amount due to the Certificate Insurer;
provided, however, that in no event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James, living on the date hereof; and provided further, that the purchase
price set forth above shall be increased as is necessary, as determined by the Master Servicer, to avoid
disqualification of any REMIC created hereunder as a REMIC.
The purchase price paid by the Master Servicer pursuant to Section 9.01(a)(ii) shall also include any
amounts owed by Residential Funding pursuant to the last paragraph of Section 4 of the Assignment Agreement
in respect of any liability, penalty or expense that resulted from a breach of the representation and
warranty set forth in clause (xlvii) of Section 4 of the Assignment Agreement that remain unpaid on the date
of such purchase.
The right of the Master Servicer to purchase all the assets of the Trust Fund pursuant to clause (ii)
above is conditioned upon the Pool Stated Principal Balance of the Mortgage Loans in each Loan Group as of
the Final Distribution Date, prior to giving effect to distributions to be made on such Distribution Date,
being less than ten percent of the Cut-off Date Principal Balance of the Mortgage Loans in such Loan Group.
If such right is exercised by the Master Servicer, the Master Servicer shall be deemed to have been
reimbursed for the full amount of any unreimbursed Advances theretofore made by it with respect to the
Mortgage Loans. In addition, the Master Servicer shall provide to the Trustee the certification required by
Section 3.15 and the Trustee and any Custodian shall, promptly following payment of the purchase price,
release to the Master Servicer the Mortgage Files pertaining to the Mortgage Loans being purchased.
In addition to the foregoing, on any Distribution Date on which the Pool Stated Principal Balance of
the Mortgage Loans in each Loan Group, prior to giving effect to distributions to be made on such
Distribution Date, being less than ten percent of the Cut-off Date Principal Balance of the Mortgage Loans in
such Loan Group , the Master Servicer shall have the right, at its option, to purchase the Certificates in
whole, but not in part, at a price equal to the outstanding Certificate Principal Balance of such
Certificates plus the sum of Accrued Certificate Interest thereon for the related Interest Accrual Period and
any previously unpaid Accrued Certificate Interest, plus any Prepayment Interest Shortfalls, but not
including any current Relief Act Shortfalls or Basis Risk Shortfalls, as applicable, or reimbursement of the
principal portion of any Realized Losses previously allocate thereto that remain unremimbursed. If the
Master Servicer exercises this right to purchase the outstanding Certificates, the Master Servicer will
promptly terminate the respective obligations and responsibilities created hereby in respect of the
Certificates pursuant to this Article IX.
Notwithstanding the foregoing, no purchase pursuant to this Section 9.01(a) is permitted if it would
result in a draw on the Certificate Policy, or if the Certificate Insurer would not be paid all amounts owed
to it at such time, including the reimbursement for all Cumulative Insurance Payments, unless, in either
case, the Certificate Insurer consents in writing.
(B) Master Servicer shall give the Trustee and the Certificate Insurer not less than 40 days' prior
notice of the Distribution Date on which the Master Servicer anticipates that the final distribution will be
made to Certificateholders (whether as a result of the exercise by the Master Servicer of its right to
purchase the assets of the Trust Fund or otherwise) or on which the Master Servicer anticipates that the
Certificates will be purchased (as a result of the exercise by the Master Servicer to purchase the
outstanding Certificates). Notice of any termination specifying the anticipated Final Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which the Certificateholders may
surrender their Certificates to the Trustee (if so required by the terms hereof) for payment of the final
distribution and cancellation or notice of any purchase of the outstanding Certificates, specifying the
Distribution Date upon which the Holders may surrender their Certificates to the Trustee for payment, shall
be given promptly by the Master Servicer (if it is exercising its right to purchase the assets of the Trust
Fund or to purchase the outstanding Certificates), or by the Trustee (in any other case) by letter. Such
notice shall be prepared by the Master Servicer (if it is exercising its right to purchase the assets of the
Trust Fund or to purchase the outstanding Certificates), or by the Trustee (in any other case) and mailed by
the Trustee to the Certificateholders (with a copy to the Certificate Insurer) not earlier than the 15th day
and not later than the 25th day of the month next preceding the month of such final distribution specifying:
(i) the anticipated Final Distribution Date upon which final payment of the Certificates is
anticipated to be made upon presentation and surrender of Certificates at the office or agency of the Trustee
therein designated where required pursuant to this Agreement or, in the case of the purchase by the Master
Servicer of the outstanding Certificates, the Distribution Date on which such purchase is to be made,
(ii) the amount of any such final payment, or in the case of the purchase of the outstanding
Certificates, the purchase price, in either case, if known, and,
(iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, and in
the case of the Senior Certificates, or in the case of all of the Certificates in connection with the
exercise by the Master Servicer of its right to purchase the Certificates, that payment will be made only
upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified.
If the Master Servicer or Trustee is obligated to give notice to Certificateholders as aforesaid, it
shall give such notice to the Certificate Registrar at the time such notice is given to Certificateholders
and, if the Master Servicer is exercising its rights to purchase the outstanding Certificates, it shall give
such notice to each Rating Agency at the time such notice is given to Certificateholders. As a result of the
exercise by the Master Servicer of its right to purchase the assets of the Trust Fund, the Master Servicer
shall deposit in the Certificate Account, before the Final Distribution Date in immediately available funds
an amount equal to the purchase price for the assets of the Trust Fund, computed as provided above. As a
result of the exercise by the Master Servicer of its right to purchase the outstanding Certificates, the
Master Servicer shall deposit in an Eligible Account, established by the Master Servicer on behalf of the
Trustee and separate from the Certificate Account in the name of the Trustee in trust for the registered
holders of the Certificates, before the Distribution Date on which such purchase is to occur in immediately
available funds an amount equal to the purchase price for the Certificates, computed as above provided, and
provide notice of such deposit to the Trustee and the Certificate Insurer. The Trustee will withdraw from
such account the amount specified in subsection (c) below. The Master Servicer shall provide to the Trustee
written notification of any change to the anticipated Final Distribution Date as soon as practicable. If the
Trust Fund is not terminated on the anticipated Final Distribution Date, for any reason, the Trustee shall
promptly mail notice thereof to each affected Certificateholder.
(C) Upon presentation and surrender of the Certificates by the Certificateholders thereof, the
Trustee shall distribute to such Certificateholders (i) the amount otherwise distributable on such
Distribution Date, if not in connection with the Master Servicer's election to repurchase the Mortgage Loans
or the outstanding Certificates, or (ii) if the Master Servicer elected to so repurchase the Mortgage Loans
or the outstanding Certificates, an amount equal to the price paid pursuant to Section 9.01(a) as follows:
first, with respect to the Class A Certificates, pari passu, the outstanding Certificate Principal Balance
thereof, plus Accrued Certificate Interest thereon for the related Interest Accrual Period and any previously
unpaid Accrued Certificate Interest, second, to the Class M Certificates in the order of their payment
priority, the outstanding Certificate Principal Balance thereof, plus Accrued Certificate Interest thereon
for the related Interest Accrual Period and any previously unpaid Accrued Certificate Interest, third, to the
Certificate Insurer, the amount of any Cumulative Insurance Payments through the date of such optional
termination; fourth, with respect to the Class A Certificates and Class M Certificates, the amount of any
Prepayment Interest Shortfalls allocated thereto for such Distribution Date or remaining unpaid from prior
Distribution Dates and accrued interest thereon at the applicable Pass-Through Rate, on a pro rata basis
based on Prepayment Interest Shortfalls allocated thereto for such Distribution Date or remaining unpaid from
prior Distribution Dates, and fifth, with respect to the Class SB Certificates, all remaining amounts.
(D) If any Certificateholders shall not surrender their Certificates for final payment and
cancellation on or before the Final Distribution Date (if so required by the terms hereof), the Trustee shall
on such date cause all funds in the Certificate Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining Certificateholders by depositing
such funds in a separate escrow account for the benefit of such Certificateholders, and the Master Servicer
(if it exercised its right to purchase the assets of the Trust Fund), or the Trustee (in any other case)
shall give a second written notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within six months after the second
notice any Certificate shall not have been surrendered for cancellation, the Trustee shall take appropriate
steps as directed by the Master Servicer to contact the remaining Certificateholders concerning surrender of
their Certificates. The costs and expenses of maintaining the escrow account and of contacting
Certificateholders shall be paid out of the assets which remain in the escrow account. If within nine months
after the second notice any Certificates shall not have been surrendered for cancellation, the Trustee shall
pay to the Master Servicer all amounts distributable to the holders thereof and the Master Servicer shall
thereafter hold such amounts until distributed to such Holders. No interest shall accrue or be payable to
any Certificateholder on any amount held in the escrow account or by the Master Servicer as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment thereof in accordance with this
Section 9.01.
(E) If any Certificateholders do not surrender their Certificates on or before the Distribution
Date on which a purchase of the outstanding Certificates is to be made, the Trustee shall on such date cause
all funds in the Certificate Account deposited therein by the Master Servicer pursuant to Section 9.01(b) to
be withdrawn therefrom and deposited in a separate escrow account for the benefit of such Certificateholders,
and the Master Servicer shall give a second written notice to such Certificateholders to surrender their
Certificates for payment of the purchase price therefor. If within six months after the second notice any
Certificate shall not have been surrendered for cancellation, the Trustee shall take appropriate steps as
directed by the Master Servicer to contact the Holders of such Certificates concerning surrender of their
Certificates. The costs and expenses of maintaining the escrow account and of contacting Certificateholders
shall be paid out of the assets which remain in the escrow account. If within nine months after the second
notice any Certificates shall not have been surrendered for cancellation in accordance with this Section
9.01, the Trustee shall pay to the Master Servicer all amounts distributable to the Holders thereof and the
Master Servicer shall thereafter hold such amounts until distributed to such Holders. No interest shall
accrue or be payable to any Certificateholder on any amount held in the escrow account or by the Master
Servicer as a result of such Certificateholder's failure to surrender its Certificate(s) for payment in
accordance with this Section 9.01. Any Certificate that is not surrendered on the Distribution Date on which
a purchase pursuant to this Section 9.01 occurs as provided above will be deemed to have been purchased and
the Holder as of such date will have no rights with respect thereto except to receive the purchase price
therefor minus any costs and expenses associated with such escrow account and notices allocated thereto. Any
Certificates so purchased or deemed to have been purchased on such Distribution Date shall remain outstanding
hereunder until the Master Servicer has terminated the respective obligations and responsibilities created
hereby in respect of the Certificates pursuant to this Article IX. The Master Servicer shall be for all
purposes the Holder thereof as of such date.
SECTION 9.02 ADDITIONAL TERMINATION REQUIREMENTS.
(a) Each REMIC that comprises the Trust Fund shall be terminated in accordance with the following
additional requirements, unless (subject to Section 10.01(f)) the Trustee, the Certificate Insurer and the
Master Servicer have received an Opinion of Counsel (which Opinion of Counsel shall not be an expense of the
Trustee or the Certificate Insurer) to the effect that the failure of each such REMIC to comply with the
requirements of this Section 9.02 will not (i) result in the imposition on the Trust Fund of taxes on
"prohibited transactions," as described in Section 860F of the Code, or (ii) cause any such REMIC to fail to
qualify as a REMIC at any time that any Certificate is outstanding:
(i) The Master Servicer shall establish a 90-day liquidation period for each such REMIC and
specify the first day of such period in a statement attached to the Trust Fund's final Tax Return pursuant to
Treasury regulations Section 1.860F-1. The Master Servicer also shall satisfy all of the requirements of a
qualified liquidation for a REMIC under Section 860F of the Code and regulations thereunder;
(ii) The Master Servicer shall notify the Trustee at the commencement of such 90-day
liquidation period and, at or prior to the time of making of the final payment on the Certificates, the
Trustee shall sell or otherwise dispose of all of the remaining assets of the Trust Fund in accordance with
the terms hereof; and
(iii) If the Master Servicer or the Company is exercising its right to purchase the assets of
the Trust Fund, the Master Servicer shall, during the 90-day liquidation period and at or prior to the
Final Distribution Date, purchase all of the assets of the Trust Fund for cash.
(b) Each Holder of a Certificate and the Trustee hereby irrevocably approves and appoints the
Master Servicer as its attorney-in-fact to adopt a plan of complete liquidation for each REMIC at the expense
of the Trust Fund in accordance with the terms and conditions of this Agreement.
SECTION 9.03 (SEE SECTION 9.03 OF THE STANDARD TERMS).
--------------------------------------------------------------------------------
ARTICLE X
REMIC PROVISIONS
SECTION 10.01. REMIC ADMINISTRATION. (See Section 10.01 of the Standard Terms.)
SECTION 10.02. MASTER SERVICER; REMIC ADMINISTRATOR AND TRUSTEE INDEMNIFICATION. (See Section 10.02 of the
Standard Terms.)
SECTION 10.03. DESIGNATION OF REMICS.
The REMIC Administrator will make an election to treat the segregated pool of assets described in the
definition of REMIC I (as defined herein) (including the Mortgage Loans but excluding the Basis Risk
Shortfall Reserve Fund), and subject to this Agreement, as a REMIC (REMIC I) for federal income tax
purposes. The REMIC Administrator will make an election to treat the segregated pool of assets consisting of
the REMIC I Regular Interests as a REMIC (REMIC II) for federal income tax purposes and will make an election
to treat the pool of assets comprised of the Uncertificated REMIC II Regular Interests as a REMIC ("REMIC
III") for federal income tax purposes.
The Uncertificated REMIC I Regular Interests will be "regular interests" in REMIC I and the Class R-I
Certificates will be the sole class of "residual interests" in REMIC I for purposes of the REMIC Provisions
(as defined herein) under the federal income tax law. The Uncertificated REMIC II Regular Interests will be
"regular interests" in REMIC II and the Class R-II Certificates will be the sole class of "residual
interests" in REMIC II for purposes of the REMIC Provisions (as defined herein) under the federal income tax
law.
The Class I-A Certificates, Class II-A Certificates, Class M Certificates, Class SB Certificates and
the Uncertificated REMIC III Regular Interests, will be "regular interests" in REMIC III, and the Class R-III
Certificates will be the sole class of "residual interests" therein for purposes of the REMIC Provisions (as
defined herein) under federal income tax law.
SECTION 10.04. DISTRIBUTIONS ON THE REMIC I REGULAR INTERESTS. (See Section 4.02(c) of this Series
Supplement.)
SECTION 10.05. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provision of this Agreement, the Trustee or any Paying Agent, as applicable,
shall comply with all federal withholding requirements respecting payments to Certificateholders, including
interest or original issue discount payments or advances thereof that the Trustee or any Paying Agent, as
applicable, reasonably believes are applicable under the Code. The consent of Certificateholders shall not
be required for such withholding. In the event the Trustee or any Paying Agent, as applicable, does withhold
any amount from interest or original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trustee or any Paying Agent, as applicable, shall indicate
the amount withheld to such Certificateholder pursuant to the terms of such requirements.
--------------------------------------------------------------------------------
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. AMENDMENT. (See Section 11.01 of the Standard Terms.)
SECTION 11.02. RECORDATION OF AGREEMENT; COUNTERPARTS. (See Section 11.02 of the Standard Terms.)
SECTION 11.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (See Section 11.03 of the Standard Terms.)
SECTION 11.04. GOVERNING LAW. (See Section 11.04 of the Standard Terms.)
SECTION 11.05. NOTICES. All demands and notices hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered at or mailed by registered mail, postage prepaid (except for notices
to the Trustee which shall be deemed to have been duly given only when received), to the appropriate address
for each recipient listed in the table below or, in each case, such other address as may hereafter be
furnished in writing to the Master Servicer, the Trustee and the Company, as applicable:
------------------------------------- ----------------------------------------------------------
RECIPIENT ADDRESS
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
Company 8400 Normandale Lake Boulevard
Suite 250
Minneapolis, Minnesota 55437
Attention: President
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
Master Servicer 2255 N. Ontario Street, Suite 400
Burbank, California 91504-2130
Attention: Managing Director/Master Servicing
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
Trustee Corporate Trust Office
1761 East St. Andrew Place
Santa Ana, California 92705-4934,
Attention: Residential Accredit Loans, Inc. Series
2006-QO4
The Trustee designates its offices located at DB
Services Tennessee, 648 Grassmere Park Road, Nashville,
TN 37211-3658, Attn: Transfer Unit, for the purposes of
Section 8.12 of the Standard Terms
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
Moody's Investors Service, Inc. 99 Church Street, 4th Floor
New York, New York 10004
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
Standard & Poor's Ratings Services, 55 Water Street
a division of The McGraw-Hill 41st Floor
Companies, Inc. New York, New York 10041
------------------------------------- ----------------------------------------------------------
------------------------------------- ----------------------------------------------------------
XL Capital Assurance, Inc. 1221 Avenue of the Americas
New York, New York 10020-1001
Attn: Surveillance - RALI 2006-QO4
Policy No. CA02956A
------------------------------------- ----------------------------------------------------------
Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail,
postage prepaid, at the address of such holder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether
or not the Certificateholder receives such notice.
SECTION 11.06. REQUIRED NOTICES TO RATING AGENCY AND SUBSERVICER. (See Section 11.06 of the Standard Terms.)
SECTION 11.07. SEVERABILITY OF PROVISIONS. (See Section 11.07 of the Standard Terms.)
SECTION 11.08. SUPPLEMENTAL PROVISIONS FOR RESECURITIZATION. (See Section 11.08 of the Standard Terms.)
SECTION 11.09. ALLOCATION OF VOTING RIGHTS.
98.0% of all of the Voting Rights shall be allocated among Holders of the Class A Certificates and
Class M Certificates, in proportion to the outstanding Certificate Principal Balances of their respective
Certificates; 1.0% of all Voting Rights shall be allocated among the Holders of Class SB Certificates, and
1/3 of 1.00% of all of the Voting Rights shall be allocated to the Holders of each Class of the Class R-I,
Class R-II and Class R-III Certificates; in each case to be allocated among the Certificates of such Class in
accordance with their respective Percentage Interests.
SECTION 11.10. NO PETITION.
The Depositor, Master Servicer and the Trustee, by entering into this Agreement, and each
Certificateholder, by accepting a Certificate, hereby covenant and agree that they will not at any time
institute against the Trust Fund, or join in any institution against the Trust Fund of, any bankruptcy
proceedings under any United States federal or state bankruptcy or similar law in connection with any
obligation with respect to the Certificates or this Agreement.
--------------------------------------------------------------------------------
ARTICLE XII
COMPLIANCE WITH REGULATION AB
(See Article XII of the Standard Terms)
--------------------------------------------------------------------------------
ARTICLE XIII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 13.01. RIGHTS OF THE CERTIFICATE INSURER TO EXERCISE RIGHTS OF INSURED CERTIFICATEHOLDERS.
By accepting its Certificate, each Insured Certificateholder agrees that unless a Certificate Insurer
Default exists, the Certificate Insurer shall have the right to exercise all consent, voting, direction and
other control rights of the Insured Certificateholders under this Agreement without any further consent of
the Insured Certificateholders.
SECTION 13.02. CLAIMS UPON THE CERTIFICATE POLICY; CERTIFICATE INSURANCE ACCOUNT.
(a) If, on the second Business Day next preceding a Distribution Date, the Master Servicer determines that
(i) the funds that will be on deposit in the Certificate Account on the related Certificate Account
Deposit Date, to the extent distributable to the Insured Certificateholders pursuant to Section
4.02(a)(i) are insufficient to pay Accrued Certificate Interest on the Certificates of such Class for
such Distribution Date, net of any Prepayment Interest Shortfalls, Relief Act Shortfalls, Basis Risk
Shortfalls and Net Deferred Interest, over the Available Distribution Amount from either Loan Group
allocated to pay such net amount on the Certificates of such Class on such Distribution Date, (ii)
the principal portion of any Realized Loss is allocable to the Insured Certificates on such
Distribution Date or (iii) the funds available on the Final Maturity Date will be insufficient to
reduce the Certificate Principal Balance, net of any Subsequent Recoveries added thereto, of the
Insured Certificates to zero, the Master Servicer shall deliver to the Trustee not later than 11:00
a.m. New York City time on the second Business Day next preceding the Distribution Date a certificate
signed by a Servicing Officer directing the Trustee to draw on the Certificate Policy and stating the
amount to be drawn and stating the Insured Payment for the Insured Certificates, and the Trustee
shall give notice by telephone or telecopy of the aggregate amount of such deficiency, confirmed in
writing in the form set forth as Exhibit A to the Certificate Policy, to the Certificate Insurer and
any fiscal agent appointed by the Certificate Insurer at or before 12:00 noon, New York City time, on
the second Business Day prior to such Distribution Date. If, subsequent to such notice, and prior to
payment by the Certificate Insurer or any fiscal agent on behalf of the Certificate Insurer pursuant
to such notice, additional amounts are deposited in the Certificate Account, the Trustee shall
reasonably promptly notify the Certificate Insurer and any fiscal agent appointed by the Certificate
Insurer and withdraw the notice or reduce the amount claimed, as appropriate. Any notice received
after 12:00 noon, New York City time, shall be deemed received by and sent to the Certificate Insurer
on the next Business Day.
(b) The Trustee shall establish a separate special purpose trust account for the benefit of Holders of the
Insured Certificates and the Certificate Insurer referred to herein as the "Certificate Insurance
Account" over which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Certificate Policy in the Certificate Insurance
Account and distribute such amount only for purposes of payment to Holders of Insured Certificates of
the Insured Payment for which a claim was made. Such amount may not be applied to satisfy any costs,
expenses or liabilities of the Master Servicer, the Trustee or the Trust Fund. Amounts paid under the
Certificate Policy shall be transferred to the Certificate Account in accordance with the next
succeeding paragraph and disbursed by the Trustee to Holders of Insured Certificates in accordance
with Section 4.02 or Section 9.01(c), as applicable. It shall not be necessary for such payments to
be made by checks or wire transfers separate from the checks or wire transfers used to pay the
Insured Payment with other funds available to make such payment. However, the amount of any payment
of principal of or interest on the Insured Certificates to be paid from funds transferred from the
Certificate Insurance Account shall be noted as provided in paragraph (c) below and in the statement
to be furnished to Holders of the Certificates pursuant to Section 4.03. Funds held in the
Certificate Insurance Account shall not be invested by the Master Servicer or any other Person.
On any Distribution Date with respect to which a claim has been made under the Certificate
Policy, the amount of any funds received by the Trustee as a result of any claim under the Certificate
Policy, to the extent required to make the Insured Payment on such Distribution Date, shall be
withdrawn from the Certificate Insurance Account and deposited in the Certificate Account and applied
by the Master Servicer on behalf of the Trustee, together with the other funds to be distributed to
the Insured Certificateholders pursuant to Section 4.02, directly to the payment in full of the
Insured Payment due on the Insured Certificates. Any funds remaining in the Certificate Insurance
Account on the first Business Day following a Distribution Date shall be remitted to the Certificate
Insurer, pursuant to the instructions of the Certificate Insurer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount of interest and principal paid
into the Certificate Insurance Account in respect of the Insured Certificates from moneys received
under the Certificate Policy. The Certificate Insurer shall have the right to inspect such records at
reasonable times during normal business hours upon two Business Day's prior notice to the Trustee.
(d) In accordance with the terms of the Certificate Policy, any claim on the Certificate Policy in respect
of an Avoided Payment shall require the Trustee, upon receiving notice in respect of such Avoided
Payment, at the expense and with the cooperation of the Master Servicer, and if applicable, subject to
the cooperation of a Holder receiving such order, to obtain a certified copy of the order requiring
the return of an Avoided Payment, an opinion of counsel satisfactory to the Certificate Insurer that
the order is final and not subject to appeal, and other documentation as required by the Certificate
Policy. Any such opinion of counsel shall be provided at the sole expense of the Underwriter.
SECTION 13.03. EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION.
Anything herein to the contrary notwithstanding, for purposes of this Section 13.03, any payment with
respect to principal of or interest on the Insured Certificates which is made with monies received pursuant
to the terms of the Certificate Policy shall not be considered payment of the Insured Certificates from the
Trust Fund. The Master Servicer, the Company and the Trustee acknowledge, and each Holder by its acceptance
of an Insured Certificate agrees, that without the need for any further action on the part of the Certificate
Insurer, the Master Servicer, the Company, the Trustee or the Certificate Registrar, to the extent the
Certificate Insurer or any fiscal agent on behalf of the Certificate Insurer makes payments, directly or
indirectly, on account of principal of or interest on the Insured Certificates to the Holders of such
Certificates, the Certificate Insurer will be fully subrogated to, and each Insured Certificateholder, the
Master Servicer, the Company and the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of such Holders to receive such principal and interest from the
Trust Fund; provided that the Certificate Insurer shall be paid such amounts only from the sources and in the
manner explicitly provided for herein.
The Trustee and the Master Servicer shall cooperate in all respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's rights or interests under
this Agreement without limiting the rights or affecting the interests of the Holders as otherwise set forth
herein.
SECTION 13.04. NOTICES AND INFORMATION TO THE CERTIFICATE INSURER.
(a) All notices, statements, reports, certificates or opinions required by this Agreement to be sent or
made available to any other party hereto, to the Rating Agencies or to the Certificateholders
(including, without limitation, the statement, certificate and report described in Sections 3.17, 3.18
and 3.19, respectively, the statements described in Section 4.03 of the Standard Terms, and the
notices required under Section 11.06 of the Standard Terms) shall also be sent or made available to
the Certificate Insurer in the same manner and at the same time as they are sent or made available to
the Rating Agencies or Certificateholders, as the case may be.
(b) The Master Servicer shall designate a Person who shall be available to the Certificate Insurer to
provide reasonable access to information regarding the Mortgage Loans and to all books, records,
accounts, information and other matters relating to the Certificates or this Agreement.
SECTION 13.05. TRUSTEE TO HOLD CERTIFICATE POLICY.
The Trustee will hold the Certificate Policy in trust as agent for the Insured Certificateholders for
the purpose of making claims thereon and distributing the proceeds thereof. Neither the Certificate Policy,
nor the amounts paid on the Certificate Policy will constitute part of the Trust Fund or assets of any REMIC
created by this Agreement. Each Insured Certificateholder, by accepting its Certificate, appoints the Trustee
as attorney-in-fact for the purpose of making claims on the Certificate Policy. The Trustee shall surrender
the Certificate Policy to the Certificate Insurer for cancellation upon the payment in full of the Insured
Certificates. To the extent that the Certificate Policy constitutes a reserve fund for federal income tax
purposes, (1) it shall be an outside credit support agreement and not an asset of any REMIC and (2) it shall
be owned by the Certificate Insurer, all within the meaning of Section 1.860G-2(h) of the Treasury
Regulations.
SECTION 13.06. INSURANCE PREMIUM PAYMENTS.
(a) The Insurance Premium paid under this Agreement shall be nonrefundable and the right of the
Certificate Insurer to receive any Insurance Premium payable hereunder shall be absolute and
unconditional, in each case without regard to whether the Certificate Insurer or any fiscal agent on
behalf of the Certificate Insurer makes any payment under the Certificate Policy or any other
circumstances relating to the Insured Certificates or the Certificate Policy (including payment or any
provision being made for payment of the Insured Certificateholders prior to the final date for
distribution in respect of the Insured Certificates under this Agreement).
(b) The Master Servicer on behalf of the Trustee (or the Paying Agent appointed by the
Trustee) shall pay the Insurance Premium and all other amounts payable to the Certificate Insurer
under this Agreement, and the Trustee shall pay to the Certificate Insurer, upon direction of the
Master Servicer and receipt of funds sufficient for such payment, any amounts payable to the
Certificate Insurer under the Certificate Policy and not payable by the Master Servicer hereunder, in
each case in immediately available funds by wire transfer to such account as the Certificate Insurer
shall designate by notice, and in the lawful currency of the United States of America, on the dates
when due.
SECTION 13.07. RATINGS.
The parties hereto agree that references in this Agreement or in the Standard Terms to ratings on the
Certificates or interests of the Certificateholders, including any references to a requirement that any
ratings shall not be qualified, reduced or withdrawn by any Rating Agency, and including, without limitation,
the restrictions set forth in Section 6.02(b) of the Standard Terms, shall be determined without regard to
the Certificate Policy.
SECTION 13.08. VOTING RIGHTS; AMENDMENTS.
Notwithstanding anything in this Agreement or the Standard Terms to the contrary, the Certificate
Insurer's written consent will be required for any amendment that adversely affects in any respect the rights
and interests of the Certificate Insurer or of holders of the Class I-A-2 or Class II-A-3 Certificates
(without regard to the Policy).
For so long as there does not exist a failure by the Certificate Insurer to make a required payment
under the Certificate Policy and the continuation of such failure for two Business Days (such event, a
"Certificate Insurer Default"), the Certificate Insurer will have the right to exercise all rights, including
voting rights, of the holders of the Class I-A-2 Certificates and Class II-A-3 Certificates under this
Agreement without any consent of such holders, and such holders may exercise such rights only with the prior
written consent of the Certificate Insurer. In addition, to the extent of unreimbursed payments under the
Certificate Policy, the Certificate Insurer will be subrogated to the rights of the holders of the Class
I-A-2 Certificates and Class II-A-3 Certificates to which such Certificate Insurance Payments were paid. In
connection with each insured amount paid on a Class I-A-2 Certificate or Class II-A-3 Certificate, the
Trustee as attorney-in-fact for the holder thereof will be required to assign to the Certificate Insurer the
rights of such holder with respect to the Class I-A-2 Certificate or Class II-A-3 Certificates, as
applicable, to the extent of such Certificate Insurance Payment.
SECTION 13.09. THIRD PARTY BENEFICIARIES.
The Certificate Insurer shall be an express third-party beneficiary of this Agreement to the extent of
its express subrogation rights, its rights to receive any payments under this Agreement, and its express
rights set forth in this Agreement, including, without limitation, its rights under Article III, Article IX,
and this Article XIII, and shall have the right to enforce the related provisions of this Agreement as if it
were a party hereto.
--------------------------------------------------------------------------------
US_EAST:6223837.9
IN WITNESS WHEREOF, the Company, the Master Servicer and the Trustee have caused their names to be
signed hereto by their respective officers thereunto duly authorized and their respective seals, duly
attested, to be hereunto affixed, all as of the day and year first above written.
RESIDENTIAL ACCREDIT LOANS, INC.
[Seal]
By: /s/ Heather Anderson
Name: Heather Anderson
Title: Vice President
Attest: __/s/ Tim Jacobson________________
Name: Tim Jacobson
Title: Vice President
RESIDENTIAL FUNDING CORPORATION
[Seal]
By: /s/ Tim Jacobson
Name: Tim Jacobson
Title: Associate
Attest: __/s/ Heather Anderson_____________
Name: Heather Anderson
Title: Associate
DEUTSCHE BANK TRUST COMPANY AMERICAS, as
[Seal] Trustee
By: /s/ Barbara Campbell
Name: Barbara Campbell
Title: Vice President
By: /s/ Eiko Akiyama
Name: Eiko Akiyama
Title: Associate
Attest: __/s/ Marion Hogan_______________
Name: Marion Hogan
Title: Associate
--------------------------------------------------------------------------------
STATE OF MINNESOTA )
) ss.:
COUNTY OF HENNEPIN )
On the 27th day of April, 2006 before me, a notary public in and for said State, personally appeared
Heather Anderson known to me to be a Vice President of Residential Accredit Loans, Inc., one of the
corporations that executed the within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
--------------------------------------------------------------------------------
STATE OF MINNESOTA )
) ss.:
COUNTY OF HENNEPIN )
On the 27th day of April, 2006 before me, a notary public in and for said State, personally appeared
Tim Jacobson known to me to be a(n) Associate of Residential Funding Corporation, one of the corporations
that executed the within instrument, and also known to me to be the person who executed it on behalf of said
corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
--------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 27th day of April, 2006 before me, a notary public in and for said State, personally appeared
Barbara Campbell known to me to be a(n) Vice President of DEUTSCHE BANK TRUST COMPANY AMERICAS, the New York
banking corporation that executed the within instrument, and also known to me to be the person who executed
it on behalf of said banking corporation and acknowledged to me that such banking corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 27th day of April, 2006 before me, a notary public in and for said State, personally appeared
Eiko Akiyama known to me to be a(n) Associate of DEUTSCHE BANK TRUST COMPANY AMERICAS, the New York banking
corporation that executed the within instrument, and also known to me to be the person who executed it on
behalf of said banking corporation and acknowledged to me that such banking corporation executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
--------------------------------------------------------------------------------
EXHIBIT ONE
MORTGAGE LOAN SCHEDULE
--------------------------------------------------------------------------------
EXHIBIT TWO
INFORMATION TO BE INCLUDED IN
MONTHLY DISTRIBUTION DATE STATEMENT
(i) the applicable Record Date, Determination Date and Distribution Date, and the date on which the
applicable interest accrual period commenced;
(ii) for all Loan Groups together and for each Loan Group separately, the aggregate amount of payments
received with respect to the Mortgage Loans, including prepayment amounts;
(iii) the Servicing Fee and Subservicing Fee payable to the Master Servicer and the Subservicer;
(iv) the amount of any other fees or expenses paid, and the identity of the party receiving such fees
or expenses;
(v) (a) the amount of such distribution to the Certificateholders of such Class applied to reduce the
Certificate Principal Balance thereof, and (b) the aggregate amount included therein representing
Principal Prepayments;
(vi) the amount of such distribution to Holders of such Class of Certificates allocable to interest;
(vii) if the distribution to the Holders of such Class of Certificates is less than the full amount
that would be distributable to such Holders if there were sufficient funds available therefor, the
amount of the shortfall;
(viii) the aggregate Certificate Principal Balance of each Class of Certificates and Subordinate
Amount of each Loan Group, before and after giving effect to the amounts distributed on such
Distribution Date, separately identifying any reduction thereof due to Realized Losses on each Loan
Group, other than pursuant to an actual distribution of principal;
(ix) the aggregate Certificate Principal Balance of each of the Class A, Class M and Class SB
Certificates as of the Closing Date.
(x) the weighted average remaining term to maturity of the Group I Loans and Group II Loans after
giving effect to the amounts distributed on such Distribution Date;
(xi) the weighted average Mortgage Rates of the Group I Loans and Group II Loans after giving effect
to the amounts distributed on such Distribution Date;
(xii) the number and Pool Stated Principal Balance of the Group I Loans, the Group II Loans and the
Mortgage Loans after giving effect to the distribution of principal on such Distribution Date and the
number of Group I Loans, Group II Loans and the Mortgage Loans at the beginning and end of the related
Due Period;
(xiii) for all Loan Groups together and for each Loan Group, separately, on the basis of the most
recent reports furnished to it by Sub-Servicers, the number and Stated Principal Balances of Mortgage
Loans that are Delinquent (A) 30-59 days, (B) 60-89 days and (C) 90 or more days and the number and
Stated Principal Balances of Mortgage Loans that are in foreclosure;
(xiv) the aggregate amount of Realized Losses with respect to the Group I Loans and Group II Loans
for such Distribution Date;
(xv) the amount, terms and general purpose of any Advance by the Master Servicer with respect to the
Group I Loans and Group II Loans pursuant to Section 4.04 and the amount of all Advances that have
been reimbursed during the related Due Period;
(xvi) any material modifications, extensions or waivers to the terms of the Mortgage Loans during the
Due Period or that have cumulatively become material over time;
(xvii) any material breaches of Mortgage Loan representations or warranties or covenants in the
Agreement.
(xviii) for all Loan Groups together and for each Loan Group separately, the number, aggregate
principal balance and book value of any REO Properties;
(xix) the aggregate Accrued Certificate Interest remaining unpaid, if any, for each Class of
Certificates, after giving effect to the distribution made on such Distribution Date;
(xx) the Pass-Through Rate on each Class of Certificates, the related Net WAC Cap Rate, the Net
Maximum Cap Rate, LIBOR and MTA for such Distribution Date.
(xxi) the Basis Risk Shortfall, if any, for each Class of Certificates, and Prepayment Interest
Shortfalls;
(xxii) the related Senior Enhancement Percentage for such Distribution Date;
(xxiii) the Overcollateralization Amount and Required Overcollateralization Amount following such
Distribution Date;
(xxiv) the occurrence of the Stepdown Date, and the aggregate amount of Realized Losses since the
Cut-off Date for the Mortgage Loans;
(xxv) the occurrence of the Credit Support Depletion Date;
(xxvi) for all Loan Groups together and for each Loan Group separately, the aggregate amount of
Realized Losses for such Distribution Date;
(xxvi) for all Loan Groups together and for each Loan Group separately, the aggregate amount of any
recoveries on previously foreclosed loans from Sellers;
(xxvii) for all Loan Groups together and for each Loan Group separately, the aggregate amount of Net
Deferred Interest for such Distribution Date;
(xxviii) the amount of any payment made from the Basis Risk Shortfall Reserve Fund on the initial
Distribution Date and the balance of the Basis Risk Shortfall Reserve Fund after giving effect to such
amounts.
In the case of information furnished pursuant to clauses (v)(a) and (vi) above, the amounts shall be
expressed as a dollar amount per Certificate with a $1,000 denomination.
The Trustee's internet website will initially be located at www.tss.db.com/invr. To receive this
statement via first class mail, telephone the trustee at (800) 735-7777.
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EXHIBIT THREE
STANDARD TERMS OF POOLING AND SERVICING
AGREEMENT DATED AS OF MARCH 1, 2006
===============================================================================================================
STANDARD TERMS OF
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 2006
Residential Accredit Loans, Inc.
Mortgage Asset-Backed Pass-Through Certificates
===============================================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...............................................................2
Section 1.01. Definitions...........................................................2
Section 1.02. Use of Words and Phrases.............................................34
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES..........35
Section 2.01. Conveyance of Mortgage Loans.........................................35
Section 2.02. Acceptance by Trustee................................................41
Section 2.03. Representations, Warranties and Covenants of the Master Servicer and the Company
42
Section 2.04. Representations and Warranties of Residential Funding................44
Section 2.05. Execution and Authentication of Certificates/Issuance of Certificates Evidencing
Interests in REMIC I Certificates................................46
Section 2.06. Conveyance of Uncertificated REMIC I and REMIC II Regular Interests; Acceptance
by the Trustee...................................................46
Section 2.07. Issuance of Certificates Evidencing Interests in REMIC II............46
Section 2.08. Purposes and Powers of the Trust.....................................46
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...........................46
Section 3.01. Master Servicer to Act as Servicer...................................46
Section 3.02. Subservicing Agreements Between Master Servicer and Subservicers; Enforcement of
Subservicers' and Sellers' Obligations...........................48
Section 3.03. Successor Subservicers...............................................49
Section 3.04. Liability of the Master Servicer.....................................49
Section 3.05. No Contractual Relationship Between Subservicer and Trustee or Certificateholders
50
Section 3.06. Assumption or Termination of Subservicing Agreements by Trustee......50
Section 3.07. Collection of Certain Mortgage Loan Payments; Deposits to Custodial Account 50
Section 3.08. Subservicing Accounts; Servicing Accounts............................53
Section 3.09. Access to Certain Documentation and Information Regarding the Mortgage Loans 55
Section 3.10. Permitted Withdrawals from the Custodial Account.....................55
Section 3.11. Maintenance of the Primary Insurance Policies; Collections Thereunder57
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity Coverage...58
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and Modification Agreements;
Certain Assignments..............................................59
Section 3.14. Realization Upon Defaulted Mortgage Loans............................61
Section 3.15. Trustee to Cooperate; Release of Mortgage Files......................65
Section 3.16. Servicing and Other Compensation; Compensating Interest..............66
Section 3.17. Reports to the Trustee and the Company...............................67
Section 3.18. Annual Statement as to Compliance and Servicing Assessment...........67
Section 3.19. Annual Independent Public Accountants' Servicing Report..............68
Section 3.20. Rights of the Company in Respect of the Master Servicer..............68
Section 3.21. Administration of Buydown Funds......................................68
Section 3.22. Advance Facility.....................................................69
ARTICLE IV PAYMENTS TO CERTIFICATEHOLDERS...........................................73
Section 4.01. Certificate Account..................................................73
Section 4.02. Distributions. As provided in Section 4.02 of the Series Supplement74
Section 4.03. Statements to Certificateholders; Statements to Rating Agencies; Exchange Act
Reporting........................................................74
Section 4.04. Distribution of Reports to the Trustee and the Company; Advances by the Master
Servicer.........................................................76
Section 4.05. Allocation of Realized Losses........................................78
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged Property........78
Section 4.07. Optional Purchase of Defaulted Mortgage Loans........................78
Section 4.08. Surety Bond..........................................................79
ARTICLE V THE CERTIFICATES.........................................................79
Section 5.01. The Certificates.....................................................79
Section 5.02. Registration of Transfer and Exchange of Certificates................81
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates....................87
Section 5.04. Persons Deemed Owners................................................88
Section 5.05. Appointment of Paying Agent..........................................88
Section 5.06. U.S.A. Patriot Act Compliance........................................88
ARTICLE VI THE COMPANY AND THE MASTER SERVICER......................................89
Section 6.01. Respective Liabilities of the Company and the Master Servicer........89
Section 6.02. Merger or Consolidation of the Company or the Master Servicer; Assignment of
Rights and Delegation of Duties by Master Servicer...............89
Section 6.03. Limitation on Liability of the Company, the Master Servicer and Others90
Section 6.04. Company and Master Servicer Not to Resign............................91
ARTICLE VII DEFAULT..................................................................92
Section 7.01. Events of Default....................................................92
Section 7.02. Trustee or Company to Act; Appointment of Successor..................94
Section 7.03. Notification to Certificateholders...................................95
Section 7.04. Waiver of Events of Default..........................................95
ARTICLE VIII CONCERNING THE TRUSTEE...................................................96
Section 8.01. Duties of Trustee....................................................96
Section 8.02. Certain Matters Affecting the Trustee................................97
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans................99
Section 8.04. Trustee May Own Certificates.........................................99
Section 8.05. Master Servicer to Pay Trustee's Fees and Expenses; Indemnification.99
Section 8.06. Eligibility Requirements for Trustee................................100
Section 8.07. Resignation and Removal of the Trustee..............................101
Section 8.08. Successor Trustee...................................................102
Section 8.09. Merger or Consolidation of Trustee..................................102
Section 8.10. Appointment of Co-Trustee or Separate Trustee.......................102
Section 8.11. Appointment of Custodians...........................................103
Section 8.12. Appointment of Office or Agency.....................................104
ARTICLE IX TERMINATION OR OPTIONAL PURCHASE OF ALL CERTIFICATES....................105
Section 9.01. Optional Purchase by the Master Servicer of All Certificates; Termination Upon
Purchase by the Master Servicer or Liquidation of All Mortgage Loans105
Section 9.02. Additional Termination Requirements.................................108
Section 9.03. Termination of Multiple REMICs......................................109
ARTICLE X REMIC PROVISIONS........................................................110
Section 10.01.REMIC Administration................................................110
Section 10.02.Master Servicer, REMIC Administrator and Trustee Indemnification....113
Section 10.03.Designation of REMIC(s). As provided in Section 10.03 of the Series Supplement
114
Section 10.04.Distributions on the Uncertificated REMIC I and REMIC II Regular Interests. As
provided in Section 10.04 of the Series Supplement..............114
Section 10.05.Compliance with Withholding Requirements. As provided in Section 10.05 of the
Series Supplement...............................................114
ARTICLE XI MISCELLANEOUS PROVISIONS................................................115
Section 11.01.Amendment...........................................................115
Section 11.02.Recordation of Agreement; Counterparts..............................117
Section 11.03.Limitation on Rights of Certificateholders..........................118
Section 11.04.Governing Law.......................................................118
Section 11.05.Notices. As provided in Section 11.05 of the Series Supplement......119
Section 11.06.Required Notices to Rating Agency and Subservicer...................119
Section 11.07.Severability of Provisions..........................................120
Section 11.08.Supplemental Provisions for Resecuritization........................120
Section 11.09.Allocation of Voting Rights.........................................120
Section 11.10.No Petition.........................................................120
ARTICLE XII COMPLIANCE WITH REGULATION AB...........................................121
Section 12.01.Intent of the Parties; Reasonableness...............................121
Section 12.02.Additional Representations and Warranties of the Trustee............121
Section 12.03.Information to Be Provided by the Trustee...........................122
Section 12.04.Report on Assessment of Compliance and Attestation..................122
Section 12.05.Indemnification; Remedies...........................................123
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EXHIBITS
Exhibit A: Form of Class A Certificate
Exhibit A-I: Form of Class X Certificate
Exhibit B: Form of Class M Certificate
Exhibit C: Form of Class B Certificate
Exhibit C-I: Form of Class P Certificate
Exhibit D: Form of Class R Certificate
Exhibit E: Form of Seller/Servicer Contract
Exhibit F: Forms of Request for Release
Exhibit G-1: Form of Transfer Affidavit and Agreement
Exhibit G-2: Form of Transferor Certificate
Exhibit H: Form of Investor Representation Letter
Exhibit I: Form of Transferor Representation Letter
Exhibit J: Form of Rule 144A Investment Representation Letter
Exhibit K: Text of Amendment to Pooling and Servicing Agreement Pursuant to Section 11.01(e) for a
Limited Guaranty
Exhibit L: Form of Limited Guaranty
Exhibit M: Form of Lender Certification for Assignment of Mortgage Loan
Exhibit N: Request for Exchange Form
Exhibit O: Form of Form 10-K Certification
Exhibit P: Form of Back-Up Certification to Form 10-K Certificate
Exhibit Q: .......Information to be Provided by the Master Servicer to the Rating Agencies
Relating to Reportable Modified Mortgage Loans
Exhibit R: .......Servicing Criteria
--------------------------------------------------------------------------------
This is the Standard Terms of Pooling and Servicing Agreement, dated as of March 1, 2006 (the
"Standard Terms", and as incorporated by reference into a Series Supplement dated as of the Cut-off Date, the
"Pooling and Servicing Agreement" or "Agreement"), among RESIDENTIAL ACCREDIT LOANS, INC., as the company
(together with its permitted successors and assigns, the "Company"), RESIDENTIAL FUNDING CORPORATION, as
master servicer (together with its permitted successors and assigns, the "Master Servicer"), and the trustee
named in the applicable Series Supplement (together with its permitted successors and assigns, the "Trustee").
PRELIMINARY STATEMENT:
The Company intends to sell certain mortgage asset-backed pass-through certificates (collectively, the
"Certificates"), to be issued under the Agreement in multiple classes, which in the aggregate will evidence
the entire beneficial ownership interest in the Mortgage Loans.
In consideration of the mutual agreements herein contained, the Company, the Master Servicer and the
Trustee agree as follows:
--------------------------------------------------------------------------------
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article.
Accretion Termination Date: As defined in the Series Supplement.
Accrual Certificates: As defined in the Series Supplement.
Accrued Certificate Interest: With respect to each Distribution Date, as to any Class or Subclass of
Certificates (other than any Principal Only Certificates), interest accrued during the related Interest
Accrual Period at the related Pass-Through Rate on the Certificate Principal Balance or Notional Amount
thereof immediately prior to such Distribution Date. Accrued Certificate Interest will be calculated on the
basis of a 360-day year, consisting of twelve 30-day months. In each case Accrued Certificate Interest on any
Class or Subclass of Certificates will be reduced by the amount of:
(i) Prepayment Interest Shortfalls on all Mortgage Loans or, if the Mortgage Pool is comprised of
two or more Loan Groups, on the Mortgage Loans in the related Loan Group (to the extent not
offset by the Master Servicer with a payment of Compensating Interest as provided in Section
4.01),
(ii) the interest portion (adjusted to the Net Mortgage Rate (or the Modified Net Mortgage Rate in
the case of a Modified Mortgage Loan)) of Realized Losses on all Mortgage Loans or, if the
Mortgage Pool is comprised of two or more Loan Groups, on the Mortgage Loans in the related
Loan Group (including Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy
Losses and Extraordinary Losses) not allocated solely to one or more specific Classes of
Certificates pursuant to Section 4.05,
(iii) the interest portion of Advances that were (A) previously made with respect to a Mortgage Loan
or REO Property on all Mortgage Loans or, if the Mortgage Pool is comprised of two or more Loan
Groups, on the Mortgage Loans in the related Loan Group, which remained unreimbursed following
the Cash Liquidation or REO Disposition of such Mortgage Loan or REO Property and (B) made with
respect to delinquencies that were ultimately determined to be Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses, and
(iv) any other interest shortfalls not covered by the subordination provided by the Class M
Certificates and Class B Certificates, including interest that is not collectible from the
Mortgagor pursuant to the Servicemembers Civil Relief Act of 1940, as amended, or similar
legislation or regulations as in effect from time to time,
with all such reductions allocated (A) among all of the Certificates in proportion to their respective
amounts of Accrued Certificate Interest payable on such Distribution Date absent such reductions or (B) if
the Mortgage Pool is comprised of two or more Loan Groups, the related Senior Percentage of such reductions
among the related Senior Certificates in proportion to the amounts of Accrued Certificate Interest payable
from the related Loan Group on such Distribution Date absent such reductions, with the remainder of such
reductions allocated among the holders of the Class M Certificates and Class B Certificates in proportion to
their respective amounts of Accrued Certificate Interest payable on such Distribution Date absent such
reductions. In addition to that portion of the reductions described in the preceding sentence that are
allocated to any Class of Class B Certificates or any Class of Class M Certificates, Accrued Certificate
Interest on such Class of Class B Certificates or such Class of Class M Certificates will be reduced by the
interest portion (adjusted to the Net Mortgage Rate) of Realized Losses that are allocated solely to such
Class of Class B Certificates or such Class of Class M Certificates pursuant to Section 4.05.
Addendum and Assignment Agreement: The Addendum and Assignment Agreement, dated as of January 31,
1995, between MLCC and the Master Servicer.
Additional Collateral: Any of the following held, in addition to the related Mortgaged Property, as
security for a Mortgage Loan: (i) all money, securities, security entitlements, accounts, general
intangibles, payment rights, instruments, documents, deposit accounts, certificates of deposit, commodities
contracts and other investment property and other property of whatever kind or description now existing or
hereafter acquired which is pledged as security for the repayment of such Mortgage Loan, (ii) third-party
guarantees, and (A) all money, securities, security entitlements, accounts, general intangibles, payment
rights, instruments, documents, deposit accounts, certificates of deposit, commodities contracts and other
investment property and other property of whatever kind or description now existing or hereafter acquired
which is pledged as collateral for such guarantee or (B) any mortgaged property securing the performance of
such guarantee, or (iii) such other collateral as may be set forth in the Series Supplement.
Additional Collateral Loan: Each Mortgage Loan that is supported by Additional Collateral.
Adjusted Mortgage Rate: With respect to any Mortgage Loan and any date of determination, the Mortgage
Rate borne by the related Mortgage Note, less the rate at which the related Subservicing Fee accrues.
Advance: As to any Mortgage Loan, any advance made by the Master Servicer, pursuant to Section 4.04.
Advance Facility: As defined in Section 3.22.
Advance Facility Notice: As defined in Section 3.22.
Advance Facility Trustee: As defined in Section 3.22.
Advancing Person: As defined in Section 3.22.
Advance Reimbursement Amounts: As defined in Section 3.22.
Affiliate: With respect to any Person, any other Person controlling, controlled by or under common
control with such first Person. For the purposes of this definition, "control" means the power to direct the
management and policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
Ambac: Ambac Assurance Corporation (formerly known as AMBAC Indemnity Corporation).
Amount Held for Future Distribution: As to any Distribution Date and, with respect to any Mortgage
Pool that is comprised of two or more Loan Groups, each Loan Group, the total of the amounts held in the
Custodial Account at the close of business on the preceding Determination Date on account of (i) Liquidation
Proceeds, Subsequent Recoveries, Insurance Proceeds, Curtailments, Mortgage Loan purchases made pursuant to
Section 2.02, 2.03, 2.04 or 4.07 and Mortgage Loan substitutions made pursuant to Section 2.03 or 2.04
received or made in the month of such Distribution Date (other than such Liquidation Proceeds, Insurance
Proceeds and purchases of Mortgage Loans that the Master Servicer has deemed to have been received in the
preceding month in accordance with Section 3.07(b)), and Principal Prepayments in Full made after the related
Prepayment Period, and (ii) payments which represent early receipt of scheduled payments of principal and
interest due on a date or dates subsequent to the related Due Date.
Appraised Value: As to any Mortgaged Property, the lesser of (i) the appraised value of such
Mortgaged Property based upon the appraisal made at the time of the origination of the related Mortgage Loan,
and (ii) the sales price of the Mortgaged Property at such time of origination, except in the case of a
Mortgaged Property securing a refinanced or modified Mortgage Loan as to which it is either the appraised
value determined above or the appraised value determined in an appraisal at the time of refinancing or
modification, as the case may be.
Assigned Contracts: With respect to any Pledged Asset Loan: the Credit Support Pledge Agreement; the
Funding and Pledge Agreement, among GMAC Mortgage Corporation, National Financial Services Corporation and
the Mortgagor or other person pledging the related Pledged Assets; the Additional Collateral Agreement,
between GMAC Mortgage Corporation and the Mortgagor or other person pledging the related Pledged Assets; or
such other contracts as may be set forth in the Series Supplement.
Assignment: An assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable
form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect of record the sale of the Mortgage Loan to the Trustee for the benefit of Certificateholders, which
assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county, if permitted by law and
accompanied by an Opinion of Counsel to that effect.
Assignment Agreement: The Assignment and Assumption Agreement, dated the Closing Date, between
Residential Funding and the Company relating to the transfer and assignment of the Mortgage Loans.
Assignment of Proprietary Lease: With respect to a Cooperative Loan, the assignment of the related
Cooperative Lease from the Mortgagor to the originator of the Cooperative Loan.
Available Distribution Amount: As to any Distribution Date and, with respect to any Mortgage Pool
comprised of two or more Loan Groups, each Loan Group, an amount equal to (a) the sum of (i) the amount
relating to the Mortgage Loans on deposit in the Custodial Account as of the close of business on the
immediately preceding Determination Date, including any Subsequent Recoveries, and amounts deposited in the
Custodial Account in connection with the substitution of Qualified Substitute Mortgage Loans, (ii) the amount
of any Advance made on the immediately preceding Certificate Account Deposit Date, (iii) any amount deposited
in the Certificate Account on the related Certificate Account Deposit Date pursuant to the second paragraph
of Section 3.12(a), (iv) any amount deposited in the Certificate Account pursuant to Section 4.07 or Section
9.01, (v) any amount that the Master Servicer is not permitted to withdraw from the Custodial Account or the
Certificate Account pursuant to Section 3.16(e), (vi) any amount received by the Trustee pursuant to the
Surety Bond in respect of such Distribution Date and (vii) the proceeds of any Pledged Assets received by the
Master Servicer, reduced by (b) the sum as of the close of business on the immediately preceding
Determination Date of (w) aggregate Foreclosure Profits, (x) the Amount Held for Future Distribution, and (y)
amounts permitted to be withdrawn by the Master Servicer from the Custodial Account in respect of the
Mortgage Loans pursuant to clauses (ii)-(x), inclusive, of Section 3.10(a). Such amount shall be determined
separately for each Loan Group. Additionally, with respect to any Mortgage Pool that is comprised of two or
more Loan Groups, if on any Distribution Date Compensating Interest provided pursuant to this Section 3.16(e)
is less than Prepayment Interest Shortfalls incurred on the Mortgage Loans in connection with Principal
Prepayments in Full and Curtailments made in the prior calendar month, such Compensating Interest shall be
allocated on such Distribution Date to the Available Distribution Amount for each Loan Group on a pro rata
basis in accordance with the respective amounts of such Prepayment Interest Shortfalls incurred on the
Mortgage Loans in such Loan Group in respect of such Distribution Date.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation or Debt Service Reduction;
provided, however, that neither a Deficient Valuation nor a Debt Service Reduction shall be deemed a
Bankruptcy Loss hereunder so long as the Master Servicer has notified the Trustee in writing that the Master
Servicer is diligently pursuing any remedies that may exist in connection with the representations and
warranties made regarding the related Mortgage Loan and either (A) the related Mortgage Loan is not in
default with regard to payments due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any premiums on any applicable primary hazard insurance policy and any related
escrow payments in respect of such Mortgage Loan are being advanced on a current basis by the Master Servicer
or a Subservicer, in either case without giving effect to any Debt Service Reduction.
Book-Entry Certificate: Any Certificate registered in the name of the Depository or its nominee, and
designated as such in the Preliminary Statement to the Series Supplement.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking
institutions in the State of New York, the State of Michigan, the State of California, the State of Illinois
or the State of Minnesota (and such other state or states in which the Custodial Account or the Certificate
Account are at the time located) are required or authorized by law or executive order to be closed.
Buydown Funds: Any amount contributed by the seller of a Mortgaged Property, the Company or other
source in order to enable the Mortgagor to reduce the payments required to be made from the Mortgagor's funds
in the early years of a Mortgage Loan. Buydown Funds are not part of the Trust Fund prior to deposit into
the Custodial or Certificate Account.
Buydown Mortgage Loan: Any Mortgage Loan as to which a specified amount of interest is paid out of
related Buydown Funds in accordance with a related buydown agreement.
Calendar Quarter: A Calendar Quarter shall consist of one of the following time periods in any given
year: January 1 through March 31, April 1 through June 30, July 1 through September 30, and October 1
through December 31.
Capitalization Reimbursement Amount: With respect to any Distribution Date and, with respect to any
Mortgage Pool comprised of two or more Loan Groups, each Loan Group, the amount of Advances or Servicing
Advances that were added to the Stated Principal Balance of all Mortgage Loans or, if the Mortgage Pool is
comprised of two or more Loan Groups, on the Mortgage Loans in the related Loan Group, during the prior
calendar month and reimbursed to the Master Servicer or Subservicer on or prior to such Distribution Date
pursuant to Section 3.10(a)(vii), plus the Capitalization Reimbursement Shortfall Amount remaining
unreimbursed from any prior Distribution Date and reimbursed to the Master Servicer or Subservicer on or
prior to such Distribution Date.
Capitalization Reimbursement Shortfall Amount: With respect to any Distribution Date and, with
respect to any Mortgage Pool comprised of two or more Loan Groups, each Loan Group, the amount, if any, by
which the amount of Advances or Servicing Advances that were added to the Stated Principal Balance of all
Mortgage Loans (or, if the Mortgage Pool is comprised of two or more Loan Groups, on the Mortgage Loans in
the related Loan Group) during the preceding calendar month exceeds the amount of principal payments on the
Mortgage Loans included in the Available Distribution Amount (or, if the Mortgage Pool is comprised of two or
more Loan Groups, Available Distribution Amount for the related Loan Group) for that Distribution Date.
Cash Liquidation: As to any defaulted Mortgage Loan other than a Mortgage Loan as to which an REO
Acquisition occurred, a determination by the Master Servicer that it has received all Insurance Proceeds,
Liquidation Proceeds and other payments or cash recoveries which the Master Servicer reasonably and in good
faith expects to be finally recoverable with respect to such Mortgage Loan.
Certificate Account Deposit Date: As to any Distribution Date, the Business Day prior thereto.
Certificateholder or Holder: The Person in whose name a Certificate is registered in the Certificate
Register, and, in respect of any Insured Certificates, the Certificate Insurer to the extent of Cumulative
Insurance Payments, except that neither a Disqualified Organization nor a Non-United States Person shall be a
holder of a Class R Certificate for purposes hereof and, solely for the purpose of giving any consent or
direction pursuant to this Agreement, any Certificate, other than a Class R Certificate, registered in the
name of the Company, the Master Servicer or any Subservicer or any Affiliate thereof shall be deemed not to
be outstanding and the Percentage Interest or Voting Rights evidenced thereby shall not be taken into account
in determining whether the requisite amount of Percentage Interests or Voting Rights necessary to effect any
such consent or direction has been obtained. All references herein to "Holders" or "Certificateholders"
shall reflect the rights of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder" only the Person in whose name
a Certificate is registered in the Certificate Register.
Certificate Insurer: As defined in the Series Supplement.
Certificate Owner: With respect to a Book-Entry Certificate, the Person who is the beneficial owner
of such Certificate, as reflected on the books of an indirect participating brokerage firm for which a
Depository Participant acts as agent, if any, and otherwise on the books of a Depository Participant, if any,
and otherwise on the books of the Depository.
Certificate Principal Balance: With respect to each Certificate (other than any Interest Only
Certificate), on any date of determination, an amount equal to:
(i) the Initial Certificate Principal Balance of such Certificate as specified on the face thereof,
plus
(ii) any Subsequent Recoveries added to the Certificate Principal Balance of such Certificate
pursuant to Section 4.02, plus
(iii) in the case of each Accrual Certificate, an amount equal to the aggregate Accrued Certificate
Interest added to the Certificate Principal Balance thereof prior to such date of
determination, minus
(iv) the sum of (x) the aggregate of all amounts previously distributed with respect to such
Certificate (or any predecessor Certificate) and applied to reduce the Certificate Principal
Balance thereof pursuant to Section 4.02(a) and (y) the aggregate of all reductions in
Certificate Principal Balance deemed to have occurred in connection with Realized Losses which
were previously allocated to such Certificate (or any predecessor Certificate) pursuant to
Section 4.05;
provided, that the Certificate Principal Balance of each Certificate of the Class of Subordinate Certificates
with the Lowest Priority at any given time shall be further reduced by an amount equal to the Percentage
Interest represented by such Certificate multiplied by the excess, if any, of (A) the then aggregate
Certificate Principal Balance of all Classes of Certificates then outstanding over (B) the then aggregate
Stated Principal Balance of the Mortgage Loans.
Certificate Register and Certificate Registrar: The register maintained and the registrar appointed
pursuant to Section 5.02.
Class: Collectively, all of the Certificates bearing the same designation. The initial Class A-V
Certificates and any Subclass thereof issued pursuant to Section 5.01(c) shall be a single Class for purposes
of this Agreement.
Class A-P Certificate: Any one of the Certificates designated as a Class A-P Certificate.
Class A-P Collection Shortfall: With respect to the Cash Liquidation or REO Disposition of a Discount
Mortgage Loan, any Distribution Date and, with respect to any Mortgage Pool comprised of two or more Loan
Groups, each Loan Group, the excess of the amount described in clause (C)(1) of the definition of Class A-P
Principal Distribution Amount (for the related Loan Group, if applicable) over the amount described in clause
(C)(2) of such definition.
Class A-P Principal Distribution Amount: With respect to any Distribution Date and, with respect to
any Mortgage Pool comprised of two or more Loan Groups, each Loan Group, an amount equal to the aggregate of:
(A) the related Discount Fraction of the principal portion of each Monthly Payment on each
Discount Mortgage Loan (or, with respect to any Mortgage Pool comprised of two or more Loan Groups,
each Discount Mortgage Loan in the related Loan Group) due during the related Due Period, whether or
not received on or prior to the related Determination Date, minus the Discount Fraction of the
principal portion of any related Debt Service Reduction which together with other Bankruptcy Losses
exceeds the Bankruptcy Amount;
(B) the related Discount Fraction of the principal portion of all unscheduled collections
on each Discount Mortgage Loan (or, with respect to any Mortgage Pool comprised of two or more Loan
Groups, each Discount Mortgage Loan in the related Loan Group) received during the preceding calendar
month or, in the case of Principal Prepayments in Full, during the related Prepayment Period (other
than amounts received in connection with a Cash Liquidation or REO Disposition of a Discount Mortgage
Loan described in clause (C) below), including Principal Prepayments in Full, Curtailments, Subsequent
Recoveries and repurchases (including deemed repurchases under Section 3.07(b)) of such Discount
Mortgage Loans (or, in the case of a substitution of a Deleted Mortgage Loan, the Discount Fraction of
the amount of any shortfall deposited in the Custodial Account in connection with such substitution);
(C) in connection with the Cash Liquidation or REO Disposition of a Discount Mortgage Loan
(or, with respect to any Mortgage Pool comprised of two or more Loan Groups, each Discount Mortgage
Loan in the related Loan Group) that occurred during the preceding calendar month (or was deemed to
have occurred during such period in accordance with Section 3.07(b)) that did not result in any Excess
Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses, an
amount equal to the lesser of (1) the applicable Discount Fraction of the Stated Principal Balance of
such Discount Mortgage Loan immediately prior to such Distribution Date and (2) the aggregate amount
of the collections on such Mortgage Loan to the extent applied as recoveries of principal;
(D) any amounts allocable to principal for any previous Distribution Date (calculated
pursuant to clauses (A) through (C) above) that remain undistributed; and
(E) the amount of any Class A-P Collection Shortfalls for such Distribution Date and the
related Loan Group, if applicable, and the amount of any Class A-P Collection Shortfalls (for the
related Loan Group, if applicable) remaining unpaid for all previous Distribution Dates, but only to
the extent of the Eligible Funds for such Distribution Date; minus
(F) the related Discount Fraction of the portion of the Capitalization Reimbursement Amount
(for the related Loan Group, if applicable) for such Distribution Date, if any, related to each
Discount Mortgage Loan (in the related Loan Group, if applicable).
Notwithstanding the foregoing, with respect to any Distribution Date on and after the Credit Support
Depletion Date, the Class A-P Principal Distribution Amount (for a Loan Group, if applicable) shall equal the
excess of (i) the sum of (a) the related Discount Fraction of the principal portion of each Monthly Payment
on each Discount Mortgage Loan (in the related Loan Group, if applicable) received or advanced prior to the
related Determination Date and not previously distributed minus the Discount Fraction of the principal
portion of any related Debt Service Reduction which together with other Bankruptcy Losses exceeds the
Bankruptcy Amount and (b) the related Discount Fraction of the aggregate amount of unscheduled collections
described in clauses (B) and (C) above over (ii) the amount calculated pursuant to clause (F) above.
Class A-V Certificate: Any one of the Certificates designated as a Class A-V Certificate, including
any Subclass thereof.
Class B Certificate: Any one of the Certificates designated as a Class B-1 Certificate, Class B-2
Certificate or Class B-3 Certificate.
Class M Certificate: Any one of the Certificates designated as a Class M-1 Certificate, Class M-2
Certificate or Class M-3 Certificate.
Closing Date: As defined in the Series Supplement.
Code: The Internal Revenue Code of 1986, as amended.
Combined Collateral LLC: Combined Collateral LLC, a Delaware limited liability company.
Commission: The Securities and Exchange Commission.
Compensating Interest: With respect to any Distribution Date, an amount equal to Prepayment Interest
Shortfalls resulting from Principal Prepayments in Full during the related Prepayment Period and Curtailments
during the prior calendar month and included in the Available Distribution Amount for such Distribution Date,
but not more than the lesser of (a) one-twelfth of 0.125% of the Stated Principal Balance of the Mortgage
Loans immediately preceding such Distribution Date and (b) the sum of the Servicing Fee and all income and
gain on amounts held in the Custodial Account and the Certificate Account and payable to the
Certificateholders with respect to such Distribution Date; provided that for purposes of this definition the
amount of the Servicing Fee will not be reduced pursuant to Section 7.02(a) except as may be required
pursuant to the last sentence of such Section.
Compliance With Laws Representation: The following representation and warranty (or any representation
and warranty that is substantially similar) made by Residential Funding in Section 4 of Assignment Agreement:
"Each Mortgage Loan at the time it was made complied in all material respects with applicable local, state,
and federal laws, including, but not limited to, all applicable anti-predatory lending laws".
Cooperative: A private, cooperative housing corporation which owns or leases land and all or part of
a building or buildings, including apartments, spaces used for commercial purposes and common areas therein
and whose board of directors authorizes, among other things, the sale of Cooperative Stock.
Cooperative Apartment: A dwelling unit in a multi-dwelling building owned or leased by a Cooperative,
which unit the Mortgagor has an exclusive right to occupy pursuant to the terms of a proprietary lease or
occupancy agreement.
Cooperative Lease: With respect to a Cooperative Loan, the proprietary lease or occupancy agreement
with respect to the Cooperative Apartment occupied by the Mortgagor and relating to the related Cooperative
Stock, which lease or agreement confers an exclusive right to the holder of such Cooperative Stock to occupy
such apartment.
Cooperative Loans: Any of the Mortgage Loans made in respect of a Cooperative Apartment, evidenced by
a Mortgage Note and secured by (i) a Security Agreement, (ii) the related Cooperative Stock Certificate,
(iii) an assignment of the Cooperative Lease, (iv) financing statements and (v) a stock power (or other
similar instrument), and ancillary thereto, a recognition agreement between the Cooperative and the
originator of the Cooperative Loan, each of which was transferred and assigned to the Trustee pursuant to
Section 2.01 and are from time to time held as part of the Trust Fund.
Cooperative Stock: With respect to a Cooperative Loan, the single outstanding class of stock,
partnership interest or other ownership instrument in the related Cooperative.
Cooperative Stock Certificate: With respect to a Cooperative Loan, the stock certificate or other
instrument evidencing the related Cooperative Stock.
Credit Repository: Equifax, Transunion and Experian, or their successors in interest.
Credit Support Depletion Date: The first Distribution Date on which the Certificate Principal
Balances of the Subordinate Certificates have been reduced to zero.
Credit Support Pledge Agreement: The Credit Support Pledge Agreement, dated as of November 24, 1998,
among the Master Servicer, GMAC Mortgage Corporation, Combined Collateral LLC and The First National Bank of
Chicago (now known as Bank One, National Association), as custodian.
Cumulative Insurance Payments: As defined in the Series Supplement.
Curtailment: Any Principal Prepayment made by a Mortgagor which is not a Principal Prepayment in Full.
Custodial Account: The custodial account or accounts created and maintained pursuant to Section 3.07
in the name of a depository institution, as custodian for the holders of the Certificates, for the holders of
certain other interests in mortgage loans serviced or sold by the Master Servicer and for the Master
Servicer, into which the amounts set forth in Section 3.07 shall be deposited directly. Any such account or
accounts shall be an Eligible Account.
Custodial Agreement: An agreement that may be entered into among the Company, the Master Servicer,
the Trustee and a Custodian pursuant to which the Custodian will hold certain documents relating to the
Mortgage Loans on behalf of the Trustee.
Custodian: A custodian appointed pursuant to a Custodial Agreement.
Cut-off Date Principal Balance: As to any Mortgage Loan, the unpaid principal balance thereof at the
Cut-off Date after giving effect to all installments of principal due on or prior thereto (or due during the
month of the Cut-off Date), whether or not received.
Debt Service Reduction: With respect to any Mortgage Loan, a reduction in the scheduled Monthly
Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy
Code, except such a reduction constituting a Deficient Valuation or any reduction that results in a permanent
forgiveness of principal.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court of competent
jurisdiction of the Mortgaged Property in an amount less than the then outstanding indebtedness under the
Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any scheduled
Monthly Payment that constitutes a permanent forgiveness of principal, which valuation or reduction results
from a proceeding under the Bankruptcy Code.
Definitive Certificate: Any Certificate other than a Book-Entry Certificate.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced with a Qualified Substitute
Mortgage Loan.
Delinquent: As used herein, a Mortgage Loan is considered to be: "30 to 59 days" or "30 or more days"
delinquent when a payment due on any scheduled due date remains unpaid as of the close of business on the
last business day immediately prior to the next following monthly scheduled due date; "60 to 89 days" or "60
or more days" delinquent when a payment due on any scheduled due date remains unpaid as of the close of
business on the last business day immediately prior to the second following monthly scheduled due date; and
so on. The determination as to whether a Mortgage Loan falls into these categories is made as of the close of
business on the last business day of each month. For example, a Mortgage Loan with a payment due on July 1
that remained unpaid as of the close of business on July 31 would then be considered to be 30 to 59 days
delinquent. Delinquency information as of the Cut-off Date is determined and prepared as of the close of
business on the last business day immediately prior to the Cut-off Date.
Depository: The Depository Trust Company, or any successor Depository hereafter named. The nominee
of the initial Depository for purposes of registering those Certificates that are to be Book-Entry
Certificates is Cede & Co. The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
Depository Participant: A broker, dealer, bank or other financial institution or other Person for
whom from time to time a Depository effects book-entry transfers and pledges of securities deposited with the
Depository.
Destroyed Mortgage Note: A Mortgage Note the original of which was permanently lost or destroyed and
has not been replaced.
Determination Date: As defined in the Series Supplement.
Discount Fraction: With respect to each Discount Mortgage Loan, the fraction expressed as a
percentage, the numerator of which is the Discount Net Mortgage Rate minus the Net Mortgage Rate (or the
initial Net Mortgage Rate with respect to any Discount Mortgage Loans as to which the Mortgage Rate is
modified pursuant to 3.07(a)) for such Mortgage Loan and the denominator of which is the Discount Net
Mortgage Rate. The Discount Fraction with respect to each Discount Mortgage Loan is set forth as an exhibit
attached to the Series Supplement.
Discount Mortgage Loan: Any Mortgage Loan having a Net Mortgage Rate (or the initial Net Mortgage
Rate) of less than the Discount Net Mortgage Rate per annum and any Mortgage Loan deemed to be a Discount
Mortgage Loan pursuant to the definition of Qualified Substitute Mortgage Loan.
Discount Net Mortgage Rate: As defined in the Series Supplement.
Disqualified Organization: Any organization defined as a "disqualified organization" under Section
860E(e)(5) of the Code, and if not otherwise included, any of the following: (i) the United States, any
State or political subdivision thereof, any possession of the United States, or any agency or instrumentality
of any of the foregoing (other than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors is not selected by such
governmental unit), (ii) a foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code
(including the tax imposed by Section 511 of the Code on unrelated business taxable income), (iv) rural
electric and telephone cooperatives described in Section 1381(a)(2)(C) of the Code, (v) any "electing large
partnership," as defined in Section 775(a) of the Code and (vi) any other Person so designated by the Trustee
based upon an Opinion of Counsel that the holding of an Ownership Interest in a Class R Certificate by such
Person may cause the Trust Fund or any Person having an Ownership Interest in any Class of Certificates
(other than such Person) to incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an Ownership Interest in a Class R Certificate to such Person.
The terms "United States", "State" and "international organization" shall have the meanings set forth in
Section 7701 of the Code or successor provisions.
Distribution Date: The 25th day of any month beginning in the month immediately following the month
of the initial issuance of the Certificates or, if such 25th day is not a Business Day, the Business Day
immediately following such 25th day.
Due Date: With respect to any Distribution Date and any Mortgage Loan, the day during the related Due
Period on which the Monthly Payment is due.
Due Period: With respect to any Distribution Date, the one-month period set forth in the Series
Supplement.
Eligible Account: An account that is any of the following: (i) maintained with a depository
institution the debt obligations of which have been rated by each Rating Agency in its highest rating
available, or (ii) an account or accounts in a depository institution in which such accounts are fully
insured to the limits established by the FDIC, provided that any deposits not so insured shall, to the extent
acceptable to each Rating Agency, as evidenced in writing, be maintained such that (as evidenced by an
Opinion of Counsel delivered to the Trustee and each Rating Agency) the registered Holders of Certificates
have a claim with respect to the funds in such account or a perfected first security interest against any
collateral (which shall be limited to Permitted Investments) securing such funds that is superior to claims
of any other depositors or creditors of the depository institution with which such account is maintained, or
(iii) in the case of the Custodial Account, a trust account or accounts maintained in the corporate trust
department of the Trustee, or (iv) in the case of the Certificate Account, a trust account or accounts
maintained in the corporate trust department of the Trustee, or (v) an account or accounts of a depository
institution acceptable to each Rating Agency (as evidenced in writing by each Rating Agency that use of any
such account as the Custodial Account or the Certificate Account will not reduce the rating assigned to any
Class of Certificates by such Rating Agency below the then-current rating assigned to such Certificates).
Event of Default: As defined in Section 7.01.
Excess Bankruptcy Loss: Any Bankruptcy Loss, or portion thereof, which exceeds the then applicable
Bankruptcy Amount.
Excess Fraud Loss: Any Fraud Loss, or portion thereof, which exceeds the then applicable Fraud Loss
Amount.
Excess Special Hazard Loss: Any Special Hazard Loss, or portion thereof, that exceeds the then
applicable Special Hazard Amount.
Excess Subordinate Principal Amount: With respect to any Distribution Date on which the aggregate
Certificate Principal Balance of the Class of Subordinate Certificates then outstanding with the Lowest
Priority is to be reduced to zero and on which Realized Losses are to be allocated to such class or classes,
the excess, if any, of (i) the amount that would otherwise be distributable in respect of principal on such
class or classes of Certificates on such Distribution Date over (ii) the excess, if any, of the aggregate
Certificate Principal Balance of such class or classes of Certificates immediately prior to such Distribution
Date over the aggregate amount of Realized Losses to be allocated to such classes of Certificates on such
Distribution Date as reduced by any amount calculated pursuant to clause (E) of the definition of Class A-P
Principal Distribution Amount. With respect to any Mortgage Pool that is comprised of two or more Loan
Groups, the Excess Subordinate Principal Amount will be allocated between each Loan Group on a pro rata basis
in accordance with the amount of Realized Losses attributable to each Loan Group and allocated to the
Certificates on such Distribution Date.
Exchange Act: The Securities and Exchange Act of 1934, as amended.
Extraordinary Events: Any of the following conditions with respect to a Mortgaged Property (or, with
respect to a Cooperative Loan, the Cooperative Apartment) or Mortgage Loan causing or resulting in a loss
which causes the liquidation of such Mortgage Loan:
(a) losses that are of the type that would be covered by the fidelity bond and the errors and omissions
insurance policy required to be maintained pursuant to Section 3.12(b) but are in excess of the
coverage maintained thereunder;
(b) nuclear reaction or nuclear radiation or radioactive contamination, all whether controlled or
uncontrolled, and whether such loss be direct or indirect, proximate or remote or be in whole or in
part caused by, contributed to or aggravated by a peril covered by the definition of the term "Special
Hazard Loss";
(c) hostile or warlike action in time of peace or war, including action in hindering, combating or
defending against an actual, impending or expected attack:
1. by any government or sovereign power, de jure or de facto, or by any authority maintaining or using
military, naval or air forces; or
2. by military, naval or air forces; or
3. by an agent of any such government, power, authority or forces;
(d) any weapon of war employing atomic fission or radioactive force whether in time of peace or war; or
(e) insurrection, rebellion, revolution, civil war, usurped power or action taken by governmental
authority in hindering, combating or defending against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation by order of any government or public authority;
or risks of contraband or illegal transportation or trade.
Extraordinary Losses: Any loss incurred on a Mortgage Loan caused by or resulting from an
Extraordinary Event.
Fannie Mae: Federal National Mortgage Association, a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage Association Charter Act, or any
successor thereto.
FDIC: Federal Deposit Insurance Corporation or any successor thereto.
Final Distribution Date: The Distribution Date on which the final distribution in respect of the
Certificates will be made pursuant to Section 9.01, which Final Distribution Date shall in no event be later
than the end of the 90-day liquidation period described in Section 9.02.
Fitch: Fitch Ratings or its successor in interest.
Foreclosure Profits: As to any Distribution Date or related Determination Date and any Mortgage Loan,
the excess, if any, of Liquidation Proceeds, Insurance Proceeds and REO Proceeds (net of all amounts
reimbursable therefrom pursuant to Section 3.10(a)(ii)) in respect of each Mortgage Loan or REO Property for
which a Cash Liquidation or REO Disposition occurred in the related Prepayment Period over the sum of the
unpaid principal balance of such Mortgage Loan or REO Property (determined, in the case of an REO
Disposition, in accordance with Section 3.14) plus accrued and unpaid interest at the Mortgage Rate on such
unpaid principal balance from the Due Date to which interest was last paid by the Mortgagor to the first day
of the month following the month in which such Cash Liquidation or REO Disposition occurred.
Form 10-K Certification: As defined in Section 4.03(e).
Fraud Losses: Realized Losses on Mortgage Loans as to which there was fraud in the origination of
such Mortgage Loan.
Freddie Mac: Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States
created and existing under Title III of the Emergency Home Finance Act of 1970, as amended, or any successor
thereto.
Highest Priority: As of any date of determination, the Class of Subordinate Certificates then
outstanding with a Certificate Principal Balance greater than zero, with the earliest priority for payments
pursuant to Section 4.02(a), in the following order: Class M-1, Class M-2, Class M-3, Class B-1, Class B-2
and Class B-3 Certificates.
Independent: When used with respect to any specified Person, means such a Person who (i) is in fact
independent of the Company, the Master Servicer and the Trustee, or any Affiliate thereof, (ii) does not have
any direct financial interest or any material indirect financial interest in the Company, the Master Servicer
or the Trustee or in an Affiliate thereof, and (iii) is not connected with the Company, the Master Servicer
or the Trustee as an officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
Initial Certificate Principal Balance: With respect to each Class of Certificates, the Certificate
Principal Balance of such Class of Certificates as of the Cut-off Date, as set forth in the Series Supplement.
Initial Monthly Payment Fund: An amount representing scheduled principal amortization and interest at
the Net Mortgage Rate for the Due Date in the first Due Period commencing subsequent to the Cut-off Date for
those Mortgage Loans for which the Trustee will not be entitled to receive such payment, and as more
specifically defined in the Series Supplement.
Initial Notional Amount: With respect to any Class or Subclass of Interest Only Certificates, the
amount initially used as the principal basis for the calculation of any interest payment amount, as more
specifically defined in the Series Supplement.
Initial Subordinate Class Percentage: As defined in the Series Supplement.
Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans pursuant to any Primary Insurance
Policy or any other related insurance policy covering a Mortgage Loan (excluding any Certificate Policy (as
defined in the Series Supplement)), to the extent such proceeds are payable to the mortgagee under the
Mortgage, any Subservicer, the Master Servicer or the Trustee and are not applied to the restoration of the
related Mortgaged Property (or, with respect to a Cooperative Loan, the related Cooperative Apartment) or
released to the Mortgagor in accordance with the procedures that the Master Servicer would follow in
servicing mortgage loans held for its own account.
Insurer: Any named insurer under any Primary Insurance Policy or any successor thereto or the named
insurer in any replacement policy.
Interest Accrual Period: As defined in the Series Supplement.
Interest Only Certificates: A Class or Subclass of Certificates not entitled to payments of
principal, and designated as such in the Series Supplement. The Interest Only Certificates will have no
Certificate Principal Balance.
Interim Certification: As defined in Section 2.02.
International Borrower: In connection with any Mortgage Loan, a borrower who is (a) a United States
citizen employed in a foreign country, (b) a non-permanent resident alien employed in the United States or
(c) a citizen of a country other than the United States with income derived from sources outside the United
States.
Junior Certificateholder: The Holder of not less than 95% of the Percentage Interests of the Junior
Class of Certificates.
Junior Class of Certificates: The Class of Subordinate Certificates outstanding as of the date of the
repurchase of a Mortgage Loan pursuant to Section 4.07 herein that has the Lowest Priority.
Late Collections: With respect to any Mortgage Loan, all amounts received during any Due Period,
whether as late payments of Monthly Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise,
which represent late payments or collections of Monthly Payments due but delinquent for a previous Due Period
and not previously recovered.
Liquidation Proceeds: Amounts (other than Insurance Proceeds) received by the Master Servicer in
connection with the taking of an entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or in connection with the liquidation of a defaulted Mortgage Loan through trustee's sale,
foreclosure sale or otherwise, other than REO Proceeds.
Loan Group: Any group of Mortgage Loans designated as a separate loan group in the Series Supplement.
The Certificates relating to each Loan Group will be designated in the Series Supplement.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a percentage, the numerator of which
is the current principal balance of the related Mortgage Loan at the date of determination and the
denominator of which is the Appraised Value of the related Mortgaged Property.
Lower Priority: As of any date of determination and any Class of Subordinate Certificates, any other
Class of Subordinate Certificates then outstanding with a later priority for payments pursuant to Section
4.02 (a).
Lowest Priority: As of any date of determination, the Class of Subordinate Certificates then
outstanding with a Certificate Principal Balance greater than zero, with the latest priority for payments
pursuant to Section 4.02(a), in the following order: Class B-3, Class B-2, Class B-1, Class M-3, Class M-2
and Class M-1 Certificates.
Maturity Date: The latest possible maturity date, solely for purposes of Section 1.860G-1(a)(4)(iii)
of the Treasury regulations, by which the Certificate Principal Balance of each Class of Certificates (other
than the Interest Only Certificates which have no Certificate Principal Balance) and each Uncertificated
REMIC Regular Interest would be reduced to zero, as designated in the Series Supplement.
MERS: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the
laws of the State of Delaware, or any successor thereto.
MERS(R)System: The system of recording transfers of Mortgages electronically maintained by MERS.
MIN: The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS(R)System.
MLCC: Merrill Lynch Credit Corporation, or its successor in interest.
Modified Mortgage Loan: Any Mortgage Loan that has been the subject of a Servicing Modification.
Modified Net Mortgage Rate: As to any Mortgage Loan that is the subject of a Servicing Modification,
the Net Mortgage Rate minus the rate per annum by which the Mortgage Rate on such Mortgage Loan was reduced.
MOM Loan: With respect to any Mortgage Loan, MERS acting as the mortgagee of such Mortgage Loan,
solely as nominee for the originator of such Mortgage Loan and its successors and assigns, at the origination
thereof.
Monthly Payment: With respect to any Mortgage Loan (including any REO Property) and any Due Date, the
payment of principal and interest due thereon in accordance with the amortization schedule at the time
applicable thereto (after adjustment, if any, for Curtailments and for Deficient Valuations occurring prior
to such Due Date but before any adjustment to such amortization schedule by reason of any bankruptcy, other
than a Deficient Valuation, or similar proceeding or any moratorium or similar waiver or grace period and
before any Servicing Modification that constitutes a reduction of the interest rate on such Mortgage Loan).
Moody's: Moody's Investors Service, Inc., or its successor in interest.
Mortgage: With respect to each Mortgage Note related to a Mortgage Loan which is not a Cooperative
Loan, the mortgage, deed of trust or other comparable instrument creating a first lien on an estate in fee
simple or leasehold interest in real property securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to a particular Mortgage Loan
and any additional documents required to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loans: Such of the mortgage loans transferred and assigned to the Trustee pursuant to
Section 2.01 as from time to time are held or deemed to be held as a part of the Trust Fund, the Mortgage
Loans originally so held being identified in the initial Mortgage Loan Schedule, and Qualified Substitute
Mortgage Loans held or deemed held as part of the Trust Fund including, without limitation, (i) with respect
to each Cooperative Loan, the related Mortgage Note, Security Agreement, Assignment of Proprietary Lease,
Cooperative Stock Certificate, Cooperative Lease and Mortgage File and all rights appertaining thereto, and
(ii) with respect to each Mortgage Loan other than a Cooperative Loan, each related Mortgage Note, Mortgage
and Mortgage File and all rights appertaining thereto.
Mortgage Loan Schedule: As defined in the Series Supplement.
Mortgage Note: The originally executed note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan, together with any modification thereto.
Mortgage Pool: The pool of mortgage loans, including all Loan Groups, if any, consisting of the
Mortgage Loans.
Mortgage Rate: As to any Mortgage Loan, the interest rate borne by the related Mortgage Note, or any
modification thereto other than a Servicing Modification.
Mortgaged Property: The underlying real property securing a Mortgage Loan or, with respect to a
Cooperative Loan, the related Cooperative Lease and Cooperative Stock.
Mortgagor: The obligor on a Mortgage Note.
Net Mortgage Rate: As to each Mortgage Loan, a per annum rate of interest equal to the Adjusted
Mortgage Rate less the per annum rate at which the Servicing Fee is calculated.
Non-Discount Mortgage Loan: A Mortgage Loan that is not a Discount Mortgage Loan.
Non-Primary Residence Loans: The Mortgage Loans designated as secured by second or vacation
residences, or by non-owner occupied residences, on the Mortgage Loan Schedule.
Non-United States Person: Any Person other than a United States Person.
Nonrecoverable Advance: Any Advance previously made or proposed to be made by the Master Servicer or
Subservicer in respect of a Mortgage Loan (other than a Deleted Mortgage Loan) which, in the good faith
judgment of the Master Servicer, will not, or, in the case of a proposed Advance, would not, be ultimately
recoverable by the Master Servicer from related Late Collections, Insurance Proceeds, Liquidation Proceeds,
REO Proceeds or amounts reimbursable to the Master Servicer pursuant to Section 4.02(a) hereof. To the extent
that any Mortgagor is not obligated under the related Mortgage documents to pay or reimburse any portion of
any Servicing Advances that are outstanding with respect to the related Mortgage Loan as a result of a
modification of such Mortgage Loan by the Master Servicer, which forgives amounts which the Master Servicer
or Subservicer had previously advanced, and the Master Servicer determines that no other source of payment or
reimbursement for such advances is available to it, such Servicing Advances shall be deemed to be
Nonrecoverable Advances. The determination by the Master Servicer that it has made a Nonrecoverable Advance
or that any proposed Advance would constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate delivered to the Company, the Trustee and any Certificate Insurer.
Nonsubserviced Mortgage Loan: Any Mortgage Loan that, at the time of reference thereto, is not
subject to a Subservicing Agreement.
Notional Amount: With respect to any Class or Subclass of Interest Only Certificates, an amount used
as the principal basis for the calculation of any interest payment amount, as more specifically defined in
the Series Supplement.
Officers' Certificate: A certificate signed by the Chairman of the Board, the President or a Vice
President or Assistant Vice President, or a Director or Managing Director, and by the Treasurer, the
Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the Company or the Master Servicer,
as the case may be, and delivered to the Trustee, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel acceptable to the Trustee and the Master Servicer,
who may be counsel for the Company or the Master Servicer, provided that any opinion of counsel (i) referred
to in the definition of "Disqualified Organization" or (ii) relating to the qualification of any REMIC formed
under the Series Supplement or compliance with the REMIC Provisions must, unless otherwise specified, be an
opinion of Independent counsel.
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan (including an REO Property) which was
not the subject of a Principal Prepayment in Full, Cash Liquidation or REO Disposition and which was not
purchased, deleted or substituted for prior to such Due Date pursuant to Section 2.02, 2.03, 2.04 or 4.07.
Ownership Interest: As to any Certificate, any ownership or security interest in such Certificate,
including any interest in such Certificate as the Holder thereof and any other interest therein, whether
direct or indirect, legal or beneficial, as owner or as pledgee.
Pass-Through Rate: As defined in the Series Supplement.
Paying Agent: The Trustee or any successor Paying Agent appointed by the Trustee.
Percentage Interest: With respect to any Certificate (other than a Class R Certificate), the
undivided percentage ownership interest in the related Class evidenced by such Certificate, which percentage
ownership interest shall be equal to the Initial Certificate Principal Balance thereof or Initial Notional
Amount (in the case of any Interest Only Certificate) thereof divided by the aggregate Initial Certificate
Principal Balance or the aggregate of the Initial Notional Amounts, as applicable, of all the Certificates of
the same Class. With respect to a Class R Certificate, the interest in distributions to be made with respect
to such Class evidenced thereby, expressed as a percentage, as stated on the face of each such Certificate.
Permitted Investments: One or more of the following:
(i) obligations of or guaranteed as to timely payment of principal and interest by the United States or
any agency or instrumentality thereof when such obligations are backed by the full faith and credit of
the United States;
(ii) repurchase agreements on obligations specified in clause (i) maturing not more than one month from the
date of acquisition thereof, provided that the unsecured short-term debt obligations of the party
agreeing to repurchase such obligations are at the time rated by each Rating Agency in its highest
short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits, time deposits and bankers' acceptances (which
shall each have an original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365 days or a remaining maturity
of more than 30 days) denominated in United States dollars of any U.S. depository institution or trust
company incorporated under the laws of the United States or any state thereof or of any domestic
branch of a foreign depository institution or trust company; provided that the debt obligations of
such depository institution or trust company at the date of acquisition thereof have been rated by
each Rating Agency in its highest short-term rating available; and, provided further that, if the
original maturity of such short-term obligations of a domestic branch of a foreign depository
institution or trust company shall exceed 30 days, the short-term rating of such institution shall be
A-1+ in the case of Standard & Poor's if Standard & Poor's is a Rating Agency;
(iv) commercial paper and demand notes (having original maturities of not more than 365 days) of any
corporation incorporated under the laws of the United States or any state thereof which on the date of
acquisition has been rated by each Rating Agency in its highest short-term rating available; provided
that such commercial paper shall have a remaining maturity of not more than 30 days;
(v) any mutual fund, money market fund, common trust fund or other pooled investment vehicle, the assets
of which are limited to instruments that otherwise would constitute Permitted Investments hereunder
and have been rated by each Rating Agency in its highest short-term rating available (in the case of
Standard & Poor's such rating shall be either AAAm or AAAm-G), including any such fund that is managed
by the Trustee or any affiliate of the Trustee or for which the Trustee or any of its affiliates acts
as an adviser; and
(vi) other obligations or securities that are acceptable to each Rating Agency as a Permitted Investment
hereunder and will not reduce the rating assigned to any Class of Certificates by such Rating Agency
(without giving effect to any Certificate Policy (as defined in the Series Supplement) in the case of
Insured Certificates (as defined in the Series Supplement) below the lower of the then-current rating
assigned to such Certificates by such Rating Agency, as evidenced in writing;
provided, however, no instrument shall be a Permitted Investment if it represents, either (1) the right to
receive only interest payments with respect to the underlying debt instrument or (2) the right to receive
both principal and interest payments derived from obligations underlying such instrument and the principal
and interest payments with respect to such instrument provide a yield to maturity greater than 120% of the
yield to maturity at par of such underlying obligations. References herein to the highest rating available
on unsecured long-term debt shall mean AAA in the case of Standard & Poor's and Fitch and Aaa in the case of
Moody's, and for purposes of this Agreement, any references herein to the highest rating available on
unsecured commercial paper and short-term debt obligations shall mean the following: A-1 in the case of
Standard & Poor's, P-1 in the case of Moody's and F-1 in the case of Fitch; provided, however, that any
Permitted Investment that is a short-term debt obligation rated A-1 by Standard & Poor's must satisfy the
following additional conditions: (i) the total amount of debt from A-1 issuers must be limited to the
investment of monthly principal and interest payments (assuming fully amortizing collateral); (ii) the total
amount of A-1 investments must not represent more than 20% of the aggregate outstanding Certificate Principal
Balance of the Certificates and each investment must not mature beyond 30 days; (iii) the terms of the debt
must have a predetermined fixed dollar amount of principal due at maturity that cannot vary; and (iv) if the
investments may be liquidated prior to their maturity or are being relied on to meet a certain yield,
interest must be tied to a single interest rate index plus a single fixed spread (if any) and must move
proportionately with that index. Any Permitted Investment may be held by or through the Trustee or its
Affiliates.
Permitted Transferee: Any Transferee of a Class R Certificate, other than a Disqualified Organization
or Non-United States Person.
Person: Any individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or government or any agency or political
subdivision thereof.
Pledged Amount: With respect to any Pledged Asset Loan, the amount of money remitted to Combined
Collateral LLC, at the direction of or for the benefit of the related Mortgagor.
Pledged Asset Loan: Any Mortgage Loan supported by Pledged Assets or such other collateral, other
than the related Mortgaged Property, set forth in the Series Supplement.
Pledged Assets: With respect to any Mortgage Loan, all money, securities, security entitlements,
accounts, general intangibles, payment intangibles, instruments, documents, deposit accounts, certificates of
deposit, commodities contracts and other investment property and other property of whatever kind or
description pledged by Combined Collateral LLC as security in respect of any Realized Losses in connection
with such Mortgage Loan up to the Pledged Amount for such Mortgage Loan, and any related collateral, or such
other collateral as may be set forth in the Series Supplement.
Pledged Asset Mortgage Servicing Agreement: The Pledged Asset Mortgage Servicing Agreement, dated as
of February 28, 1996 between MLCC and the Master Servicer.
Pooling and Servicing Agreement or Agreement: With respect to any Series, this Standard Terms
together with the related Series Supplement.
Pool Stated Principal Balance: As to any Distribution Date, the aggregate of the Stated Principal
Balances of each Mortgage Loan.
Pool Strip Rate: With respect to each Mortgage Loan, a per annum rate equal to the excess of (a) the
Net Mortgage Rate of such Mortgage Loan over (b) the Discount Net Mortgage Rate (but not less than 0.00%) per
annum.
Prepayment Distribution Trigger: With respect to any Distribution Date and any Class of Subordinate
Certificates (other than the Class M-1 Certificates), a test that shall be satisfied if the fraction
(expressed as a percentage) equal to the sum of the Certificate Principal Balances of such Class and each
Class of Subordinate Certificates with a Lower Priority than such Class immediately prior to such
Distribution Date divided by the aggregate Stated Principal Balance of all of the Mortgage Loans (or related
REO Properties) immediately prior to such Distribution Date is greater than or equal to the sum of the
related Initial Subordinate Class Percentages of such Classes of Subordinate Certificates.
Prepayment Interest Shortfall: As to any Distribution Date and any Mortgage Loan (other than a
Mortgage Loan relating to an REO Property) that was the subject of (a) a Principal Prepayment in Full during
the portion of the related Prepayment Period that falls during the prior calendar month, an amount equal to
the excess of one month's interest at the Net Mortgage Rate (or Modified Net Mortgage Rate in the case of a
Modified Mortgage Loan) on the Stated Principal Balance of such Mortgage Loan over the amount of interest
(adjusted to the Net Mortgage Rate (or Modified Net Mortgage Rate in the case of a Modified Mortgage Loan))
paid by the Mortgagor for such month to the date of such Principal Prepayment in Full or (b) a Curtailment
during the prior calendar month, an amount equal to one month's interest at the Net Mortgage Rate (or
Modified Net Mortgage Rate in the case of a Modified Mortgage Loan) on the amount of such Curtailment.
Prepayment Period: As to any Distribution Date and Principal Prepayment in Full, the period
commencing on the 16th day of the month prior to the month in which that Distribution Date occurs and ending
on the 15th day of the month in which such Distribution Date occurs.
Primary Insurance Policy: Each primary policy of mortgage guaranty insurance or any replacement
policy therefor referred to in Section 2.03(b)(iv) and (v).
Principal Only Certificates: A Class of Certificates not entitled to payments of interest, and more
specifically designated as such in the Series Supplement.
Principal Prepayment: Any payment of principal or other recovery on a Mortgage Loan, including a
recovery that takes the form of Liquidation Proceeds or Insurance Proceeds, which is received in advance of
its scheduled Due Date and is not accompanied by an amount as to interest representing scheduled interest on
such payment due on any date or dates in any month or months subsequent to the month of prepayment.
Principal Prepayment in Full: Any Principal Prepayment of the entire principal balance of a Mortgage
Loan that is made by the Mortgagor.
Program Guide: Collectively, the Client Guide and the Servicer Guide for Residential Funding's
Expanded Criteria Mortgage Program.
Purchase Price: With respect to any Mortgage Loan (or REO Property) required to be or otherwise
purchased on any date pursuant to Section 2.02, 2.03, 2.04 or 4.07, an amount equal to the sum of (i) 100% of
the Stated Principal Balance thereof plus the principal portion of any related unreimbursed Advances and (ii)
unpaid accrued interest at the Adjusted Mortgage Rate (or Modified Net Mortgage Rate plus the rate per annum
at which the Servicing Fee is calculated in the case of a Modified Mortgage Loan) (or at the Net Mortgage
Rate (or Modified Net Mortgage Rate in the case of a Modified Mortgage Loan) in the case of a purchase made
by the Master Servicer) on the Stated Principal Balance thereof to the Due Date in the Due Period related to
the Distribution Date occurring in the month following the month of purchase from the Due Date to which
interest was last paid by the Mortgagor.
Qualified Substitute Mortgage Loan: A Mortgage Loan substituted by Residential Funding or the Company
for a Deleted Mortgage Loan which must, on the date of such substitution, as confirmed in an Officers'
Certificate delivered to the Trustee, with a copy to the Custodian,
(i) have an outstanding principal balance, after deduction of the principal portion of the monthly
payment due in the month of substitution (or in the case of a substitution of more than one
Mortgage Loan for a Deleted Mortgage Loan, an aggregate outstanding principal balance, after
such deduction), not in excess of the Stated Principal Balance of the Deleted Mortgage Loan
(the amount of any shortfall to be deposited by Residential Funding in the Custodial Account in
the month of substitution);
(ii) have a Mortgage Rate and a Net Mortgage Rate no lower than and not more than 1% per annum
higher than the Mortgage Rate and Net Mortgage Rate, respectively, of the Deleted Mortgage Loan
as of the date of substitution;
(iii) have a Loan-to-Value Ratio at the time of substitution no higher than that of the Deleted
Mortgage Loan at the time of substitution;
(iv) have a remaining term to stated maturity not greater than (and not more than one year less
than) that of the Deleted Mortgage Loan;
(v) comply with each representation and warranty set forth in Sections 2.03 and 2.04 hereof and
Section 4 of the Assignment Agreement; and
(vi) have a Pool Strip Rate equal to or greater than that of the Deleted Mortgage Loan.
Notwithstanding any other provisions herein, (x) with respect to any Qualified Substitute Mortgage Loan
substituted for a Deleted Mortgage Loan which was a Discount Mortgage Loan, such Qualified Substitute
Mortgage Loan shall be deemed to be a Discount Mortgage Loan and to have a Discount Fraction equal to the
Discount Fraction of the Deleted Mortgage Loan and (y) in the event that the "Pool Strip Rate" of any
Qualified Substitute Mortgage Loan as calculated pursuant to the definition of "Pool Strip Rate" is greater
than the Pool Strip Rate of the related Deleted Mortgage Loan
(i) the Pool Strip Rate of such Qualified Substitute Mortgage Loan shall be equal to the Pool Strip
Rate of the related Deleted Mortgage Loan for purposes of calculating the Pass-Through Rate on
the Class A-V Certificates and
(ii) the excess of the Pool Strip Rate on such Qualified Substitute Mortgage Loan as calculated
pursuant to the definition of "Pool Strip Rate" over the Pool Strip Rate on the related Deleted
Mortgage Loan shall be payable to the Class R Certificates pursuant to Section 4.02 hereof.
Rating Agency: Each of the statistical credit rating agencies specified in the Preliminary Statement
of the Series Supplement. If any agency or a successor is no longer in existence, "Rating Agency" shall be
such statistical credit rating agency, or other comparable Person, designated by the Company, notice of which
designation shall be given to the Trustee and the Master Servicer.
Realized Loss: With respect to each Mortgage Loan (or REO Property):
(a) as to which a Cash Liquidation or REO Disposition has occurred, an amount (not less than zero)
equal to (i) the Stated Principal Balance of the Mortgage Loan (or REO Property) as of the date
of Cash Liquidation or REO Disposition, plus (ii) interest (and REO Imputed Interest, if any)
at the Net Mortgage Rate from the Due Date as to which interest was last paid or advanced to
Certificateholders up to the Due Date in the Due Period related to the Distribution Date on
which such Realized Loss will be allocated pursuant to Section 4.05 on the Stated Principal
Balance of such Mortgage Loan (or REO Property) outstanding during each Due Period that such
interest was not paid or advanced, minus (iii) the proceeds, if any, received during the month
in which such Cash Liquidation (or REO Disposition) occurred, to the extent applied as
recoveries of interest at the Net Mortgage Rate and to principal of the Mortgage Loan, net of
the portion thereof reimbursable to the Master Servicer or any Subservicer with respect to
related Advances, Servicing Advances or other expenses as to which the Master Servicer or
Subservicer is entitled to reimbursement thereunder but which have not been previously
reimbursed,
(b) which is the subject of a Servicing Modification, (i) (1) the amount by which the interest
portion of a Monthly Payment or the principal balance of such Mortgage Loan was reduced or (2)
the sum of any other amounts owing under the Mortgage Loan that were forgiven and that
constitute Servicing Advances that are reimbursable to the Master Servicer or a Subservicer,
and (ii) any such amount with respect to a Monthly Payment that was or would have been due in
the month immediately following the month in which a Principal Prepayment or the Purchase Price
of such Mortgage Loan is received or is deemed to have been received,
(c) which has become the subject of a Deficient Valuation, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation, or
(d) which has become the object of a Debt Service Reduction, the amount of such Debt Service
Reduction.
Notwithstanding the above, neither a Deficient Valuation nor a Debt Service Reduction shall be deemed a
Realized Loss hereunder so long as the Master Servicer has notified the Trustee in writing that the Master
Servicer is diligently pursuing any remedies that may exist in connection with the representations and
warranties made regarding the related Mortgage Loan and either (A) the related Mortgage Loan is not in
default with regard to payments due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any premiums on any applicable primary hazard insurance policy and any related
escrow payments in respect of such Mortgage Loan are being advanced on a current basis by the Master Servicer
or a Subservicer, in either case without giving effect to any Debt Service Reduction.
To the extent the Master Servicer receives Subsequent Recoveries with respect to any Mortgage Loan, the
amount of the Realized Loss with respect to that Mortgage Loan will be reduced to the extent such recoveries
are applied to reduce the Certificate Principal Balance of any Class of Certificates on any Distribution Date.
Record Date: With respect to each Distribution Date, the close of business on the last Business Day
of the month next preceding the month in which the related Distribution Date occurs.
Regular Certificate: Any of the Certificates other than a Class R Certificate.
Regulation AB: Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R.
ss.ss.229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and
interpretation as have been provided by the Commission in the adopting release (Asset-Backed Securities,
Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (January 7, 2005)) or by the staff of the
Commission, or as may be provided by the Commission or its staff from time to time.
Reimbursement Amounts: As defined in Section 3.22.
REMIC: A "real estate mortgage investment conduit" within the meaning of Section 860D of the Code.
REMIC Administrator: Residential Funding Corporation. If Residential Funding Corporation is found by
a court of competent jurisdiction to no longer be able to fulfill its obligations as REMIC Administrator
under this Agreement the Master Servicer or Trustee acting as Master Servicer shall appoint a successor REMIC
Administrator, subject to assumption of the REMIC Administrator obligations under this Agreement.
REMIC Provisions: Provisions of the federal income tax law relating to real estate mortgage
investment conduits, which appear at Sections 860A through 860G of Subchapter M of Chapter 1 of the Code, and
related provisions, and temporary and final regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
REO Acquisition: The acquisition by the Master Servicer on behalf of the Trustee for the benefit of
the Certificateholders of any REO Property pursuant to Section 3.14.
REO Disposition: As to any REO Property, a determination by the Master Servicer that it has received
all Insurance Proceeds, Liquidation Proceeds, REO Proceeds and other payments and recoveries (including
proceeds of a final sale) which the Master Servicer expects to be finally recoverable from the sale or other
disposition of the REO Property.
REO Imputed Interest: As to any REO Property, for any period, an amount equivalent to interest (at
the Net Mortgage Rate that would have been applicable to the related Mortgage Loan had it been outstanding)
on the unpaid principal balance of the Mortgage Loan as of the date of acquisition thereof for such period.
REO Proceeds: Proceeds, net of expenses, received in respect of any REO Property (including, without
limitation, proceeds from the rental of the related Mortgaged Property or, with respect to a Cooperative
Loan, the related Cooperative Apartment) which proceeds are required to be deposited into the Custodial
Account only upon the related REO Disposition.
REO Property: A Mortgaged Property acquired by the Master Servicer through foreclosure or deed in
lieu of foreclosure in connection with a defaulted Mortgage Loan.
Reportable Modified Mortgage Loan: Any Mortgage Loan that (i) has been subject to an interest rate
reduction, (ii) has been subject to a term extension or (iii) has had amounts owing on such Mortgage Loan
capitalized by adding such amount to the Stated Principal Balance of such Mortgage Loan; provided, however,
that a Mortgage Loan modified in accordance with clause (i) above for a temporary period shall not be a
Reportable Modified Mortgage Loan if such Mortgage Loan has not been delinquent in payments of principal and
interest for six months since the date of such modification if that interest rate reduction is not made
permanent thereafter.
Request for Release: A request for release, the forms of which are attached as Exhibit F hereto, or
an electronic request in a form acceptable to the Custodian.
Required Insurance Policy: With respect to any Mortgage Loan, any insurance policy which is required
to be maintained from time to time under this Agreement, the Program Guide or the related Subservicing
Agreement in respect of such Mortgage Loan.
Required Surety Payment: With respect to any Additional Collateral Loan that becomes a Liquidated
Mortgage Loan, the lesser of (i) the principal portion of the Realized Loss with respect to such Mortgage
Loan and (ii) the excess, if any, of (a) the amount of Additional Collateral required at origination with
respect to such Mortgage Loan over (b) the net proceeds realized by the Subservicer from the related
Additional Collateral.
Residential Funding: Residential Funding Corporation, a Delaware corporation, in its capacity as
seller of the Mortgage Loans to the Company and any successor thereto.
Responsible Officer: When used with respect to the Trustee, any officer of the Corporate Trust
Department of the Trustee, including any Senior Vice President, any Vice President, any Assistant Vice
President, any Assistant Secretary, any Trust Officer or Assistant Trust Officer, or any other officer of the
Trustee customarily performing functions similar to those performed by any of the above designated officers
to whom, with respect to a particular matter, such matter is referred, in each case with direct
responsibility for the administration of the Agreement.
Retail Certificates: A Senior Certificate, if any, offered in smaller minimum denominations than
other Senior Certificates, and designated as such in the Series Supplement.
Schedule of Discount Fractions: The schedule setting forth the Discount Fractions with respect to the
Discount Mortgage Loans, attached as an exhibit to the Series Supplement.
Securitization Transaction: Any transaction involving a sale or other transfer of mortgage loans
directly or indirectly to an issuing entity in connection with an issuance of publicly offered or privately
placed, rated or unrated mortgage-backed securities.
Security Agreement: With respect to a Cooperative Loan, the agreement creating a security interest in
favor of the originator in the related Cooperative Stock.
Seller: As to any Mortgage Loan, a Person, including any Subservicer, that executed a Seller's
Agreement applicable to such Mortgage Loan.
Seller's Agreement: An agreement for the origination and sale of Mortgage Loans generally in the form
of the Seller Contract referred to or contained in the Program Guide, or in such other form as has been
approved by the Master Servicer and the Company, each containing representations and warranties in respect of
one or more Mortgage Loans consistent in all material respects with those set forth in the Program Guide.
Senior Accelerated Distribution Percentage: With respect to any Distribution Date occurring on or
prior to the 60th Distribution Date and, with respect to any Mortgage Pool comprised of two or more Loan
Groups, any Loan Group, 100%. With respect to any Distribution Date thereafter and any such Loan Group, if
applicable, as follows:
(i) for any Distribution Date after the 60th Distribution Date but on or prior to the 72nd Distribution
Date, the related Senior Percentage for such Distribution Date plus 70% of the related Subordinate
Percentage for such Distribution Date;
(ii) for any Distribution Date after the 72nd Distribution Date but on or prior to the 84th Distribution
Date, the related Senior Percentage for such Distribution Date plus 60% of the related Subordinate
Percentage for such Distribution Date;
(iii) for any Distribution Date after the 84th Distribution Date but on or prior to the 96th Distribution
Date, the related Senior Percentage for such Distribution Date plus 40% of the related Subordinate
Percentage for such Distribution Date;
(iv) for any Distribution Date after the 96th Distribution Date but on or prior to the 108th Distribution
Date, the related Senior Percentage for such Distribution Date plus 20% of the related Subordinate
Percentage for such Distribution Date; and
(v) for any Distribution Date thereafter, the Senior Percentage for such Distribution Date;
provided, however,
(i) that any scheduled reduction to the Senior Accelerated Distribution Percentage described above
shall not occur as of any Distribution Date unless either
(a)(1)(X) the outstanding principal balance of the Mortgage Loans delinquent 60 days or more
(including Mortgage Loans which are in foreclosure, have been foreclosed or otherwise liquidated, or
with respect to which the Mortgagor is in bankruptcy and any REO Property) averaged over the last six
months, as a percentage of the aggregate outstanding Certificate Principal Balance of the Subordinate
Certificates, is less than 50% or (Y) the outstanding principal balance of Mortgage Loans delinquent
60 days or more (including Mortgage Loans which are in foreclosure, have been foreclosed or otherwise
liquidated, or with respect to which the Mortgagor is in bankruptcy and any REO Property) averaged
over the last six months, as a percentage of the aggregate outstanding principal balance of all
Mortgage Loans averaged over the last six months, does not exceed 2% and (2) Realized Losses on the
Mortgage Loans to date for such Distribution Date if occurring during the sixth, seventh, eighth,
ninth or tenth year (or any year thereafter) after the Closing Date are less than 30%, 35%, 40%, 45%
or 50%, respectively, of the sum of the Initial Certificate Principal Balances of the Subordinate
Certificates or
(b)(1) the outstanding principal balance of Mortgage Loans delinquent 60 days or more
(including Mortgage Loans which are in foreclosure, have been foreclosed or otherwise liquidated, or
with respect to which the Mortgagor is in bankruptcy and any REO Property) averaged over the last six
months, as a percentage of the aggregate outstanding principal balance of all Mortgage Loans averaged
over the last six months, does not exceed 4% and (2) Realized Losses on the Mortgage Loans to date for
such Distribution Date, if occurring during the sixth, seventh, eighth, ninth or tenth year (or any
year thereafter) after the Closing Date are less than 10%, 15%, 20%, 25% or 30%, respectively, of the
sum of the Initial Certificate Principal Balances of the Subordinate Certificates, and
(ii) that for any Distribution Date on which the Senior Percentage is greater than the Senior
Percentage as of the Closing Date, the Senior Accelerated Distribution Percentage for such Distribution Date
shall be 100%, or, if the Mortgage Pool is comprised of two or more Loan Groups, for any Distribution Date on
which the weighted average of the Senior Percentages for each Loan Group, weighted on the basis of the Stated
Principal Balances of the Mortgage Loans in the related Loan Group (excluding the Discount Fraction of the
Discount Mortgage Loans in such Loan Group) exceeds the weighted average of the initial Senior Percentages
(calculated on such basis) for each Loan Group, each of the Senior Accelerated Distribution Percentages for
such Distribution Date will equal 100%.
Notwithstanding the foregoing, upon the reduction of the Certificate Principal Balances of the related Senior
Certificates (other than the Class A-P Certificates, if any) to zero, the related Senior Accelerated
Distribution Percentage shall thereafter be 0%.
Senior Certificate: As defined in the Series Supplement.
Senior Percentage: As defined in the Series Supplement.
Senior Support Certificate: A Senior Certificate that provides additional credit enhancement to
certain other classes of Senior Certificates and designated as such in the Preliminary Statement of the
Series Supplement.
Series: All of the Certificates issued pursuant to a Pooling and Servicing Agreement and bearing the
same series designation.
Series Supplement: The agreement into which this Standard Terms is incorporated and pursuant to
which, together with this Standard Terms, a Series of Certificates is issued.
Servicing Accounts: The account or accounts created and maintained pursuant to Section 3.08.
Servicing Criteria: The "servicing criteria" set forth in Item 1122(d) of Regulation AB, as such may
be amended from time to time.
Servicing Advances: All customary, reasonable and necessary "out of pocket" costs and expenses
incurred in connection with a default, delinquency or other unanticipated event by the Master Servicer or a
Subservicer in the performance of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property or, with respect to a Cooperative Loan,
the related Cooperative Apartment, (ii) any enforcement or judicial proceedings, including foreclosures,
including any expenses incurred in relation to any such proceedings that result from the Mortgage Loan being
registered on the MERS System, (iii) the management and liquidation of any REO Property, (iv) any mitigation
procedures implemented in accordance with Section 3.07, and (v) compliance with the obligations under
Sections 3.01, 3.08, 3.11, 3.12(a) and 3.14, including, if the Master Servicer or any Affiliate of the Master
Servicer provides services such as appraisals and brokerage services that are customarily provided by Persons
other than servicers of mortgage loans, reasonable compensation for such services.
Servicing Advance Reimbursement Amounts: As defined in Section 3.22.
Servicing Fee: With respect to any Mortgage Loan and Distribution Date, the fee payable monthly to
the Master Servicer in respect of master servicing compensation that accrues at an annual rate designated on
the Mortgage Loan Schedule as the "MSTR SERV FEE" for such Mortgage Loan, as may be adjusted with respect to
successor Master Servicers as provided in Section 7.02.
Servicing Modification: Any reduction of the interest rate on or the outstanding principal balance of
a Mortgage Loan, any extension of the final maturity date of a Mortgage Loan, and any increase to the
outstanding principal balance of a Mortgage Loan by adding to the Stated Principal Balance unpaid principal
and interest and other amounts owing under the Mortgage Loan, in each case pursuant to a modification of a
Mortgage Loan that is in default, or for which, in the judgment of the Master Servicer, default is reasonably
foreseeable in accordance with Section 3.07(a).
Servicing Officer: Any officer of the Master Servicer involved in, or responsible for, the
administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of
servicing officers furnished to the Trustee by the Master Servicer, as such list may from time to time be
amended.
Special Hazard Loss: Any Realized Loss not in excess of the cost of the lesser of repair or
replacement of a Mortgaged Property (or, with respect to a Cooperative Loan, the related Cooperative
Apartment) suffered by such Mortgaged Property (or Cooperative Apartment) on account of direct physical loss,
exclusive of (i) any loss of a type covered by a hazard policy or a flood insurance policy required to be
maintained in respect of such Mortgaged Property pursuant to Section 3.12(a), except to the extent of the
portion of such loss not covered as a result of any coinsurance provision and (ii) any Extraordinary Loss.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.,
or its successor in interest.
Stated Principal Balance: With respect to any Mortgage Loan or related REO Property, as of any
Distribution Date, (i) the sum of (a) the Cut-off Date Principal Balance of the Mortgage Loan plus (b) any
amount by which the Stated Principal Balance of the Mortgage Loan has been increased pursuant to a Servicing
Modification, minus (ii) the sum of (a) the principal portion of the Monthly Payments due with respect to
such Mortgage Loan or REO Property during each Due Period ending with the Due Period related to the previous
Distribution Date which were received or with respect to which an Advance was made, and (b) all Principal
Prepayments with respect to such Mortgage Loan or REO Property, and all Insurance Proceeds, Liquidation
Proceeds and REO Proceeds, to the extent applied by the Master Servicer as recoveries of principal in
accordance with Section 3.14 with respect to such Mortgage Loan or REO Property, in each case which were
distributed pursuant to Section 4.02 on any previous Distribution Date, and (c) any Realized Loss allocated
to Certificateholders with respect thereto for any previous Distribution Date.
Subclass: With respect to the Class A-V Certificates, any Subclass thereof issued pursuant to Section
5.01(c). Any such Subclass will represent the Uncertificated Class A-V REMIC Regular Interest or Interests
specified by the initial Holder of the Class A-V Certificates pursuant to Section 5.01(c).
Subordinate Certificate: Any one of the Class M Certificates or Class B Certificates, executed by the
Trustee and authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B
and Exhibit C, respectively.
Subordinate Class Percentage: With respect to any Distribution Date and any Class of Subordinate
Certificates, a fraction, expressed as a percentage, the numerator of which is the aggregate Certificate
Principal Balance of such Class of Subordinate Certificates immediately prior to such date and the
denominator of which is the aggregate Stated Principal Balance of all of the Mortgage Loans (or related REO
Properties) (other than the related Discount Fraction of each Discount Mortgage Loan) immediately prior to
such Distribution Date.
Subordinate Percentage: As of any Distribution Date and, with respect to any Mortgage Pool comprised
of two or more Loan Groups, any Loan Group, 100% minus the related Senior Percentage as of such Distribution
Date.
Subsequent Recoveries: As of any Distribution Date, amounts received by the Master Servicer (net of
any related expenses permitted to be reimbursed pursuant to Section 3.10) or surplus amounts held by the
Master Servicer to cover estimated expenses (including, but not limited to, recoveries in respect of the
representations and warranties made by the related Seller pursuant to the applicable Seller's Agreement and
assigned to the Trustee pursuant to Section 2.04) specifically related to a Mortgage Loan that was the
subject of a Cash Liquidation or an REO Disposition prior to the related Prepayment Period that resulted in a
Realized Loss.
Subserviced Mortgage Loan: Any Mortgage Loan that, at the time of reference thereto, is subject to a
Subservicing Agreement.
Subservicer: Any Person with whom the Master Servicer has entered into a Subservicing Agreement and
who generally satisfied the requirements set forth in the Program Guide in respect of the qualification of a
Subservicer as of the date of its approval as a Subservicer by the Master Servicer.
Subservicer Advance: Any delinquent installment of principal and interest on a Mortgage Loan which is
advanced by the related Subservicer (net of its Subservicing Fee) pursuant to the Subservicing Agreement.
Subservicing Account: An account established by a Subservicer in accordance with Section 3.08.
Subservicing Agreement: The written contract between the Master Servicer and any Subservicer relating
to servicing and administration of certain Mortgage Loans as provided in Section 3.02, generally in the form
of the servicer contract referred to or contained in the Program Guide or in such other form as has been
approved by the Master Servicer and the Company. With respect to Additional Collateral Loans subserviced by
MLCC, the Subservicing Agreement shall also include the Addendum and Assignment Agreement and the Pledged
Asset Mortgage Servicing Agreement. With respect to any Pledged Asset Loan subserviced by GMAC Mortgage
Corporation, the Addendum and Assignment Agreement, dated as of November 24, 1998, between the Master
Servicer and GMAC Mortgage Corporation, as such agreement may be amended from time to time.
Subservicing Fee: As to any Mortgage Loan, the fee payable monthly to the related Subservicer (or, in
the case of a Nonsubserviced Mortgage Loan, to the Master Servicer) in respect of subservicing and other
compensation that accrues at an annual rate equal to the excess of the Mortgage Rate borne by the related
Mortgage Note over the rate per annum designated on the Mortgage Loan Schedule as the "CURR NET" for such
Mortgage Loan.
Successor Master Servicer: As defined in Section 3.22.
Surety: Ambac, or its successors in interest, or such other surety as may be identified in the Series
Supplement.
Surety Bond: The Limited Purpose Surety Bond (Policy No. AB0039BE), dated February 28, 1996 in
respect to Mortgage Loans originated by MLCC, or the Surety Bond (Policy No. AB0240BE), dated March 17, 1999
in respect to Mortgage Loans originated by Novus Financial Corporation, in each case issued by Ambac for the
benefit of certain beneficiaries, including the Trustee for the benefit of the Holders of the Certificates,
but only to the extent that such Surety Bond covers any Additional Collateral Loans, or such other Surety
Bond as may be identified in the Series Supplement.
Tax Returns: The federal income tax return on Internal Revenue Service Form 1066, U.S. Real Estate
Mortgage Investment Conduit Income Tax Return, including Schedule Q thereto, Quarterly Notice to Residual
Interest Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed on
behalf of any REMIC formed under the Series Supplement and under the REMIC Provisions, together with any and
all other information, reports or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing authority under any applicable
provisions of federal, state or local tax laws.
Transaction Party: As defined in Section 12.02(a).
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or other form of assignment of
any Ownership Interest in a Certificate.
Transferee: Any Person who is acquiring by Transfer any Ownership Interest in a Certificate.
Transferor: Any Person who is disposing by Transfer of any Ownership Interest in a Certificate.
Trust Fund: The segregated pool of assets related to a Series, with respect to which one or more
REMIC elections are to be made pursuant to this Agreement, consisting of:
(i) the Mortgage Loans and the related Mortgage Files and collateral securing such Mortgage Loans,
(ii) all payments on and collections in respect of the Mortgage Loans due after the Cut-off Date as shall
be on deposit in the Custodial Account or in the Certificate Account and identified as belonging to
the Trust Fund, including the proceeds from the liquidation of Additional Collateral for any
Additional Collateral Loan or Pledged Assets for any Pledged Asset Loan, but not including amounts on
deposit in the Initial Monthly Payment Fund,
(iii) property that secured a Mortgage Loan and that has been acquired for the benefit of the
Certificateholders by foreclosure or deed in lieu of foreclosure,
(iv) the hazard insurance policies and Primary Insurance Policies, if any, the Pledged Assets with respect
to each Pledged Asset Loan, and the interest in the Surety Bond transferred to the Trustee pursuant to
Section 2.01, and
(v) all proceeds of clauses (i) through (iv) above.
Trustee Information: As specified in Section 12.05(a)(i)(A).
Uninsured Cause: Any cause of damage to property subject to a Mortgage such that the complete
restoration of such property is not fully reimbursable by the hazard insurance policies.
United States Person or U.S. Person: (i) A citizen or resident of the United States, (ii) a
corporation, partnership or other entity treated as a corporation or partnership for United States federal
income tax purposes organized in or under the laws of the United States or any state thereof or the District
of Columbia (unless, in the case of a partnership, Treasury regulations provide otherwise), provided that,
for purposes solely of the restrictions on the transfer of residual interests, no partnership or other entity
treated as a partnership for United States federal income tax purposes shall be treated as a United States
Person or U.S. Person unless all persons that own an interest in such partnership either directly or
indirectly through any chain of entities no one of which is a corporation for United States federal income
tax purposes are required by the applicable operating agreement to be United States Persons, (iii) an estate
the income of which is includible in gross income for United States tax purposes, regardless of its source,
or (iv) a trust if a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have authority to control all substantial
decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations, certain Trusts in existence on August 20, 1996, and treated as United States persons prior to
such date, that elect to continue to be treated as United States persons will also be a U.S. Person.
U.S.A. Patriot Act: Uniting and Strengthening America by Providing Appropriate Tools to Intercept and
Obstruct Terrorism Act of 2001, as amended.
Voting Rights: The portion of the voting rights of all of the Certificates which is allocated to any
Certificate, and more specifically designated in Article XI of the Series Supplement.
Section 1.02. Use of Words and Phrases.
"Herein," "hereby," "hereunder," `hereof," "hereinbefore," "hereinafter" and other equivalent words
refer to the Pooling and Servicing Agreement as a whole. All references herein to Articles, Sections or
Subsections shall mean the corresponding Articles, Sections and Subsections in the Pooling and Servicing
Agreement. The definitions set forth herein include both the singular and the plural.
--------------------------------------------------------------------------------
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Company, concurrently with the execution and delivery hereof, does hereby assign to the Trustee
for the benefit of the Certificateholders without recourse all the right, title and interest of the Company
in and to the Mortgage Loans, including all interest and principal received on or with respect to the
Mortgage Loans after the Cut-off Date (other than payments of principal and interest due on the Mortgage
Loans in the month of the Cut-off Date). In connection with such transfer and assignment, the Company does
hereby deliver to the Trustee the Certificate Policy (as defined in the Series Supplement), if any for the
benefit of the Holders of the Insured Certificates (as defined in the Series Supplement).
(b) In connection with such assignment, except as set forth in Section 2.01(c) and subject to Section
2.01(d) below, the Company does hereby deliver to, and deposit with, the Trustee, or to and with one or more
Custodians, as the duly appointed agent or agents of the Trustee for such purpose, the following documents or
instruments (or copies thereof as permitted by this Section) (I) with respect to each Mortgage Loan so
assigned (other than a Cooperative Loan):
(i) The original Mortgage Note, endorsed without recourse in blank or to the order of the Trustee, and
showing an unbroken chain of endorsements from the originator thereof to the Person endorsing it to
the Trustee, or with respect to any Destroyed Mortgage Note, an original lost note affidavit from the
related Seller or Residential Funding stating that the original Mortgage Note was lost, misplaced or
destroyed, together with a copy of the related Mortgage Note;
(ii) The original Mortgage, noting the presence of the MIN of the Mortgage Loan and language indicating
that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan, with evidence of recording
indicated thereon or a copy of the Mortgage with evidence of recording indicated thereon;
(iii) Unless the Mortgage Loan is registered on the MERS(R)System, an original Assignment of the Mortgage to
the Trustee with evidence of recording indicated thereon or a copy of such assignment with evidence of
recording indicated thereon;
(iv) The original recorded assignment or assignments of the Mortgage showing an unbroken chain of title
from the originator thereof to the Person assigning it to the Trustee (or to MERS, if the Mortgage
Loan is registered on the MERS(R)System and noting the presence of a MIN) with evidence of recordation
noted thereon or attached thereto, or a copy of such assignment or assignments of the Mortgage with
evidence of recording indicated thereon; and
(v) The original of each modification, assumption agreement or preferred loan agreement, if any, relating
to such Mortgage Loan or a copy of each modification, assumption agreement or preferred loan agreement.
and (II) with respect to each Cooperative Loan so assigned:
(i) The original Mortgage Note, endorsed without recourse to the order of the Trustee and showing an
unbroken chain of endorsements from the originator thereof to the Person endorsing it to the Trustee,
or with respect to any Destroyed Mortgage Note, an original lost note affidavit from the related
Seller or Residential Funding stating that the original Mortgage Note was lost, misplaced or
destroyed, together with a copy of the related Mortgage Note;
(ii) A counterpart of the Cooperative Lease and the Assignment of Proprietary Lease to the originator of
the Cooperative Loan with intervening assignments showing an unbroken chain of title from such
originator to the Trustee;
(iii) The related Cooperative Stock Certificate, representing the related Cooperative Stock pledged with
respect to such Cooperative Loan, together with an undated stock power (or other similar instrument)
executed in blank;
(iv) The original recognition agreement by the Cooperative of the interests of the mortgagee with respect
to the related Cooperative Loan;
(v) The Security Agreement;
(vi) Copies of the original UCC-1 financing statement, and any continuation statements, filed by the
originator of such Cooperative Loan as secured party, each with evidence of recording thereof,
evidencing the interest of the originator under the Security Agreement and the Assignment of
Proprietary Lease;
(vii) Copies of the filed UCC-3 assignments of the security interest referenced in clause (vi) above showing
an unbroken chain of title from the originator to the Trustee, each with evidence of recording
thereof, evidencing the interest of the originator under the Security Agreement and the Assignment of
Proprietary Lease;
(viii) An executed assignment of the interest of the originator in the Security Agreement, Assignment of
Proprietary Lease and the recognition agreement referenced in clause (iv) above, showing an unbroken
chain of title from the originator to the Trustee;
(ix) The original of each modification, assumption agreement or preferred loan agreement, if any, relating
to such Cooperative Loan; and
(x) A duly completed UCC-1 financing statement showing the Master Servicer as debtor, the Company as
secured party and the Trustee as assignee and a duly completed UCC-1 financing statement showing the
Company as debtor and the Trustee as secured party, each in a form sufficient for filing, evidencing
the interest of such debtors in the Cooperative Loans.
(c) The Company may, in lieu of delivering the original of the documents set forth in Section
2.01(b)(I)(ii), (iii), (iv) and (v) and Section (b)(II)(ii), (iv), (vii), (ix) and (x) (or copies thereof as
permitted by Section 2.01(b)) to the Trustee or the Custodian or Custodians, deliver such documents to the
Master Servicer, and the Master Servicer shall hold such documents in trust for the use and benefit of all
present and future Certificateholders until such time as is set forth in the next sentence. Within thirty
Business Days following the earlier of (i) the receipt of the original of all of the documents or instruments
set forth in Section 2.01(b)(I)(ii), (iii), (iv) and (v) and Section (b)(II)(ii), (iv), (vii), (ix) and (x)
(or copies thereof as permitted by such Section) for any Mortgage Loan and (ii) a written request by the
Trustee to deliver those documents with respect to any or all of the Mortgage Loans then being held by the
Master Servicer, the Master Servicer shall deliver a complete set of such documents to the Trustee or the
Custodian or Custodians that are the duly appointed agent or agents of the Trustee.
The parties hereto agree that it is not intended that any Mortgage Loan be included in the Trust Fund
that is either (i) a "High-Cost Home Loan" as defined in the New Jersey Home Ownership Act effective November
27, 2003, (ii) a "High-Cost Home Loan" as defined in the New Mexico Home Loan Protection Act effective
January 1, 2004, (iii) a "High Cost Home Mortgage Loan" as defined in the Massachusetts Predatory Home Loan
Practices Act effective November 7, 2004 or (iv) a "High-Cost Home Loan" as defined in the Indiana House
Enrolled Act No. 1229, effective as of January 1, 2005.
(d) Notwithstanding the provisions of Section 2.01(c), in connection with any Mortgage Loan, if the
Company cannot deliver the original of the Mortgage, any assignment, modification, assumption agreement or
preferred loan agreement (or copy thereof as permitted by Section 2.01(b)) with evidence of recording thereon
concurrently with the execution and delivery of this Agreement because of (i) a delay caused by the public
recording office where such Mortgage, assignment, modification, assumption agreement or preferred loan
agreement as the case may be, has been delivered for recordation, or (ii) a delay in the receipt of certain
information necessary to prepare the related assignments, the Company shall deliver or cause to be delivered
to the Trustee or the respective Custodian a copy of such Mortgage, assignment, modification, assumption
agreement or preferred loan agreement.
The Company shall promptly cause to be recorded in the appropriate public office for real property
records the Assignment referred to in clause (I)(iii) of Section 2.01(b), except (a) in states where, in the
opinion of counsel acceptable to the Trustee and the Master Servicer, such recording is not required to
protect the Trustee's interests in the Mortgage Loan against the claim of any subsequent transferee or any
successor to or creditor of the Company or the originator of such Mortgage Loan or (b) if MERS is identified
on the Mortgage or on a properly recorded assignment of the Mortgage as the mortgagee of record solely as
nominee for the Seller and its successors and assigns, and shall promptly cause to be filed the Form UCC-3
assignment and UCC-1 financing statement referred to in clause (II)(vii) and (x), respectively, of Section
2.01(b). If any Assignment, Form UCC-3 or Form UCC-1, as applicable, is lost or returned unrecorded to the
Company because of any defect therein, the Company shall prepare a substitute Assignment, Form UCC-3 or Form
UCC-1, as applicable, or cure such defect, as the case may be, and cause such Assignment to be recorded in
accordance with this paragraph. The Company shall promptly deliver or cause to be delivered to the Trustee
or the respective Custodian such Mortgage or Assignment or Form UCC-3 or Form UCC-1, as applicable, (or copy
thereof as permitted by Section 2.01(b)) with evidence of recording indicated thereon at the time specified
in Section 2.01(c). In connection with its servicing of Cooperative Loans, the Master Servicer will use its
best efforts to file timely continuation statements with regard to each financing statement and assignment
relating to Cooperative Loans as to which the related Cooperative Apartment is located outside of the State
of New York.
If the Company delivers to the Trustee or Custodian any Mortgage Note or Assignment of Mortgage in
blank, the Company shall, or shall cause the Custodian to, complete the endorsement of the Mortgage Note and
the Assignment of Mortgage in the name of the Trustee in conjunction with the Interim Certification issued by
the Custodian, as contemplated by Section 2.02.
Any of the items set forth in Sections 2.01(b)(I)(ii), (iii), (iv) and (v) and (II)(vi) and (vii) and
that may be delivered as a copy rather than the original may be delivered to the Trustee or the Custodian.
In connection with the assignment of any Mortgage Loan registered on the MERS(R)System, the Company
further agrees that it will cause, at the Company's own expense, within 30 Business Days after the Closing
Date, the MERS(R)System to indicate that such Mortgage Loans have been assigned by the Company to the Trustee
in accordance with this Agreement for the benefit of the Certificateholders by including (or deleting, in the
case of Mortgage Loans which are repurchased in accordance with this Agreement) in such computer files (a)
the code in the field which identifies the specific Trustee and (b) the code in the field "Pool Field" which
identifies the series of the Certificates issued in connection with such Mortgage Loans. The Company further
agrees that it will not, and will not permit the Master Servicer to, and the Master Servicer agrees that it
will not, alter the codes referenced in this paragraph with respect to any Mortgage Loan during the term of
this Agreement unless and until such Mortgage Loan is repurchased in accordance with the terms of this
Agreement.
(e) Residential Funding hereby assigns to the Trustee its security interest in and to any Additional
Collateral or Pledged Assets, its right to receive amounts due or to become due in respect of any Additional
Collateral or Pledged Assets pursuant to the related Subservicing Agreement and its rights as beneficiary
under the Surety Bond in respect of any Additional Collateral Loans. With respect to any Additional
Collateral Loan or Pledged Asset Loan, Residential Funding shall cause to be filed in the appropriate
recording office a UCC-3 statement giving notice of the assignment of the related security interest to the
Trust Fund and shall thereafter cause the timely filing of all necessary continuation statements with regard
to such financing statements.
(f) It is intended that the conveyance by the Company to the Trustee of the Mortgage Loans as provided for
in this Section 2.01 be and the Uncertificated REMIC Regular Interests, if any (as provided for in Section
2.06), be construed as a sale by the Company to the Trustee of the Mortgage Loans and any Uncertificated
REMIC Regular Interests for the benefit of the Certificateholders. Further, it is not intended that such
conveyance be deemed to be a pledge of the Mortgage Loans and any Uncertificated REMIC Regular Interests by
the Company to the Trustee to secure a debt or other obligation of the Company. Nonetheless, (a) this
Agreement is intended to be and hereby is a security agreement within the meaning of Articles 8 and 9 of the
New York Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction; (b)
the conveyance provided for in Section 2.01 shall be deemed to be, and hereby is, (1) a grant by the Company
to the Trustee of a security interest in all of the Company's right (including the power to convey title
thereto), title and interest, whether now owned or hereafter acquired, in and to any and all general
intangibles, payment intangibles, accounts, chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of credit and investment property and other
property of whatever kind or description now existing or hereafter acquired consisting of, arising from or
relating to any of the following: (A) the Mortgage Loans, including (i) with respect to each Cooperative
Loan, the related Mortgage Note, Security Agreement, Assignment of Proprietary Lease, Cooperative Stock
Certificate and Cooperative Lease, (ii) with respect to each Mortgage Loan other than a Cooperative Loan, the
related Mortgage Note and Mortgage, and (iii) any insurance policies and all other documents in the related
Mortgage File, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof,
(C) any Uncertificated REMIC Regular Interests and (D) all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other property, including without
limitation all amounts from time to time held or invested in the Certificate Account or the Custodial
Account, whether in the form of cash, instruments, securities or other property and (2) an assignment by the
Company to the Trustee of any security interest in any and all of Residential Funding's right (including the
power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to the
property described in the foregoing clauses (1)(A), (B), (C) and (D) granted by Residential Funding to the
Company pursuant to the Assignment Agreement; (c) the possession by the Trustee, the Custodian or any other
agent of the Trustee of Mortgage Notes or such other items of property as constitute instruments, money,
payment intangibles, negotiable documents, goods, deposit accounts, letters of credit, advices of credit,
investment property, certificated securities or chattel paper shall be deemed to be "possession by the
secured party," or possession by a purchaser or a person designated by such secured party, for purposes of
perfecting the security interest pursuant to the Minnesota Uniform Commercial Code and the Uniform Commercial
Code of any other applicable jurisdiction as in effect (including, without limitation, Sections 8-106, 9-313,
9-314 and 9-106 thereof); and (d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, securities intermediaries, bailees or agents of, or persons
holding for (as applicable) the Trustee for the purpose of perfecting such security interest under applicable
law.
The Company and, at the Company's direction, Residential Funding and the Trustee shall, to the extent
consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this
Agreement were determined to create a security interest in the Mortgage Loans, any Uncertificated REMIC
Regular Interests and the other property described above, such security interest would be determined to be a
perfected security interest of first priority under applicable law and will be maintained as such throughout
the term of this Agreement. Without limiting the generality of the foregoing, the Company shall prepare and
deliver to the Trustee not less than 15 days prior to any filing date and, the Trustee shall forward for
filing, or shall cause to be forwarded for filing, at the expense of the Company, all filings necessary to
maintain the effectiveness of any original filings necessary under the Uniform Commercial Code as in effect
in any jurisdiction to perfect the Trustee's security interest in or lien on the Mortgage Loans and any
Uncertificated REMIC Regular Interests, as evidenced by an Officers' Certificate of the Company, including
without limitation (x) continuation statements, and (y) such other statements as may be occasioned by (1) any
change of name of Residential Funding, the Company or the Trustee (such preparation and filing shall be at
the expense of the Trustee, if occasioned by a change in the Trustee's name), (2) any change of type or
jurisdiction of organization of Residential Funding or the Company, (3) any transfer of any interest of
Residential Funding or the Company in any Mortgage Loan or (4) any transfer of any interest of Residential
Funding or the Company in any Uncertificated REMIC Regular Interest.
(g) The Master Servicer hereby acknowledges the receipt by it of the Initial Monthly Payment Fund. The
Master Servicer shall hold such Initial Monthly Payment Fund in the Custodial Account and shall include such
Initial Monthly Payment Fund in the Available Distribution Amount for the initial Distribution Date.
Notwithstanding anything herein to the contrary, the Initial Monthly Payment Fund shall not be an asset of
any REMIC. To the extent that the Initial Monthly Payment Fund constitutes a reserve fund for federal income
tax purposes, (1) it shall be an outside reserve fund and not an asset of any REMIC, (2) it shall be owned by
the Seller and (3) amounts transferred by any REMIC to the Initial Monthly Payment Fund shall be treated as
transferred to the Seller or any successor, all within the meaning of Section 1.860G-2(h) of the Treasury
Regulations.
(h) The Company agrees that the sale of each Pledged Asset Loan pursuant to this Agreement will also
constitute the assignment, sale, setting-over, transfer and conveyance to the Trustee, without recourse (but
subject to the Company's covenants, representations and warranties specifically provided herein), of all of
the Company's obligations and all of the Company's right, title and interest in, to and under, whether now
existing or hereafter acquired as owner of the Mortgage Loan with respect to any and all money, securities,
security entitlements, accounts, general intangibles, payment intangibles, instruments, documents, deposit
accounts, certificates of deposit, commodities contracts, and other investment property and other property of
whatever kind or description consisting of, arising from or related to (i) the Assigned Contracts, (ii) all
rights, powers and remedies of the Company as owner of such Mortgage Loan under or in connection with the
Assigned Contracts, whether arising under the terms of such Assigned Contracts, by statute, at law or in
equity, or otherwise arising out of any default by the Mortgagor under or in connection with the Assigned
Contracts, including all rights to exercise any election or option or to make any decision or determination
or to give or receive any notice, consent, approval or waiver thereunder, (iii) the Pledged Amounts and all
money, securities, security entitlements, accounts, general intangibles, payment intangibles, instruments,
documents, deposit accounts, certificates of deposit, commodities contracts, and other investment property
and other property of whatever kind or description and all cash and non-cash proceeds of the sale, exchange,
or redemption of, and all stock or conversion rights, rights to subscribe, liquidation dividends or
preferences, stock dividends, rights to interest, dividends, earnings, income, rents, issues, profits,
interest payments or other distributions of cash or other property that secures a Pledged Asset Loan, (iv)
all documents, books and records concerning the foregoing (including all computer programs, tapes, disks and
related items containing any such information) and (v) all insurance proceeds (including proceeds from the
Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation or any other
insurance company) of any of the foregoing or replacements thereof or substitutions therefor, proceeds of
proceeds and the conversion, voluntary or involuntary, of any thereof. The foregoing transfer, sale,
assignment and conveyance does not constitute and is not intended to result in the creation, or an assumption
by the Trustee, of any obligation of the Company, or any other person in connection with the Pledged Assets
or under any agreement or instrument relating thereto, including any obligation to the Mortgagor, other than
as owner of the Mortgage Loan.
Section 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with respect to Mortgage Loans subject to a Custodial Agreement,
and based solely upon a receipt or certification executed by the Custodian, receipt by the respective
Custodian as the duly appointed agent of the Trustee) of the documents referred to in Section 2.01(b)(i)
above (except that for purposes of such acknowledgement only, a Mortgage Note may be endorsed in blank) and
declares that it, or a Custodian as its agent, holds and will hold such documents and the other documents
constituting a part of the Mortgage Files delivered to it, or a Custodian as its agent, and the rights of
Residential Funding with respect to any Pledged Assets, Additional Collateral and the Surety Bond assigned to
the Trustee pursuant to Section 2.01, in trust for the use and benefit of all present and future
Certificateholders. The Trustee or Custodian (such Custodian being so obligated under a Custodial Agreement)
agrees, for the benefit of Certificateholders, to review each Mortgage File delivered to it pursuant to
Section 2.01(b) within 45 days after the Closing Date to ascertain that all required documents (specifically
as set forth in Section 2.01(b)), have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule, as supplemented, that have been conveyed to it, and
to deliver to the Trustee a certificate (the "Interim Certification") to the effect that all documents
required to be delivered pursuant to Section 2.01(b) above have been executed and received and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan Schedule, except for any exceptions
listed on Schedule A attached to such Interim Certification. Upon delivery of the Mortgage Files by the
Company or the Master Servicer, the Trustee shall acknowledge receipt (or, with respect to Mortgage Loans
subject to a Custodial Agreement, and based solely upon a receipt or certification executed by the Custodian,
receipt by the respective Custodian as the duly appointed agent of the Trustee) of the documents referred to
in Section 2.01(c) above.
If the Custodian, as the Trustee's agent, finds any document or documents constituting a part of a
Mortgage File to be missing or defective, the Trustee shall promptly so notify the Master Servicer and the
Company. Pursuant to Section 2.3 of the Custodial Agreement, the Custodian will notify the Master Servicer,
the Company and the Trustee of any such omission or defect found by it in respect of any Mortgage File held
by it in respect of the items reviewed by it pursuant to the Custodial Agreement. If such omission or defect
materially and adversely affects the interests of the Certificateholders, the Master Servicer shall promptly
notify Residential Funding of such omission or defect and request Residential Funding to correct or cure such
omission or defect within 60 days from the date the Master Servicer was notified of such omission or defect
and, if Residential Funding does not correct or cure such omission or defect within such period, require
Residential Funding to purchase such Mortgage Loan from the Trust Fund at its Purchase Price, within 90 days
from the date the Master Servicer was notified of such omission or defect; provided that if the omission or
defect would cause the Mortgage Loan to be other than a "qualified mortgage" as defined in Section 860G(a)(3)
of the Code, any such cure or repurchase must occur within 90 days from the date such breach was discovered.
The Purchase Price for any such Mortgage Loan shall be deposited by the Master Servicer in the Custodial
Account maintained by it pursuant to Section 3.07 and, upon receipt by the Trustee of written notification of
such deposit signed by a Servicing Officer, the Trustee or any Custodian, as the case may be, shall release
to Residential Funding the related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment prepared by the Master Servicer, in each case without recourse, as shall be
necessary to vest in Residential Funding or its designee any Mortgage Loan released pursuant hereto and
thereafter such Mortgage Loan shall not be part of the Trust Fund. It is understood and agreed that the
obligation of Residential Funding to so cure or purchase any Mortgage Loan as to which a material and adverse
defect in or omission of a constituent document exists shall constitute the sole remedy respecting such
defect or omission available to Certificateholders or the Trustee on behalf of the Certificateholders.
Section 2.03. Representations, Warranties and Covenants
of the Master Servicer and the Company.
(a) The Master Servicer hereby represents and warrants to the Trustee for the benefit of the
Certificateholders that:
(i) The Master Servicer is a corporation duly organized, validly existing and in good standing under the
laws governing its creation and existence and is or will be in compliance with the laws of each state
in which any Mortgaged Property is located to the extent necessary to ensure the enforceability of
each Mortgage Loan in accordance with the terms of this Agreement;
(ii) The execution and delivery of this Agreement by the Master Servicer and its performance and compliance
with the terms of this Agreement will not violate the Master Servicer's Certificate of Incorporation
or Bylaws or constitute a material default (or an event which, with notice or lapse of time, or both,
would constitute a material default) under, or result in the material breach of, any material
contract, agreement or other instrument to which the Master Servicer is a party or which may be
applicable to the Master Servicer or any of its assets;
(iii) This Agreement, assuming due authorization, execution and delivery by the Trustee and the Company,
constitutes a valid, legal and binding obligation of the Master Servicer, enforceable against it in
accordance with the terms hereof subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights generally and to general
principles of equity, regardless of whether such enforcement is considered in a proceeding in equity
or at law;
(iv) The Master Servicer is not in default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or might have consequences that would materially
adversely affect its performance hereunder;
(v) No litigation is pending or, to the best of the Master Servicer's knowledge, threatened against the
Master Servicer which would prohibit its entering into this Agreement or performing its obligations
under this Agreement;
(vi) The Master Servicer will comply in all material respects in the performance of this Agreement with all
reasonable rules and requirements of each insurer under each Required Insurance Policy;
(vii) No information, certificate of an officer, statement furnished in writing or report delivered to the
Company, any Affiliate of the Company or the Trustee by the Master Servicer will, to the knowledge of
the Master Servicer, contain any untrue statement of a material fact or omit a material fact necessary
to make the information, certificate, statement or report not misleading;
(viii) The Master Servicer has examined each existing, and will examine each new, Subservicing Agreement and
is or will be familiar with the terms thereof. The terms of each existing Subservicing Agreement and
each designated Subservicer are acceptable to the Master Servicer and any new Subservicing Agreements
will comply with the provisions of Section 3.02; and
(ix) The Master Servicer is a member of MERS in good standing, and will comply in all material respects
with the rules and procedures of MERS in connection with the servicing of the Mortgage Loans that are
registered with MERS.
It is understood and agreed that the representations and warranties set forth in this Section 2.03(a) shall
survive delivery of the respective Mortgage Files to the Trustee or any Custodian.
Upon discovery by either the Company, the Master Servicer, the Trustee or any Custodian of a breach of
any representation or warranty set forth in this Section 2.03(a) which materially and adversely affects the
interests of the Certificateholders in any Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties (any Custodian being so obligated under a Custodial Agreement). Within
90 days of its discovery or its receipt of notice of such breach, the Master Servicer shall either (i) cure
such breach in all material respects or (ii) to the extent that such breach is with respect to a Mortgage
Loan or a related document, purchase such Mortgage Loan from the Trust Fund at the Purchase Price and in the
manner set forth in Section 2.02; provided that if the omission or defect would cause the Mortgage Loan to be
other than a "qualified mortgage" as defined in Section 860G(a)(3) of the Code, any such cure or repurchase
must occur within 90 days from the date such breach was discovered. The obligation of the Master Servicer to
cure such breach or to so purchase such Mortgage Loan shall constitute the sole remedy in respect of a breach
of a representation and warranty set forth in this Section 2.03(a) available to the Certificateholders or the
Trustee on behalf of the Certificateholders.
(b) Representations and warranties relating to the Mortgage Loans are set forth in Section 2.03(b) of the
Series Supplement.
Section 2.04. Representations and Warranties of Residential Funding.
The Company, as assignee of Residential Funding under the Assignment Agreement, hereby assigns to the
Trustee for the benefit of Certificateholders all of its right, title and interest in respect of the
Assignment Agreement applicable to a Mortgage Loan. Insofar as the Assignment Agreement relates to the
representations and warranties made by Residential Funding in respect of such Mortgage Loan and any remedies
provided thereunder for any breach of such representations and warranties, such right, title and interest may
be enforced by the Master Servicer on behalf of the Trustee and the Certificateholders. Upon the discovery
by the Company, the Master Servicer, the Trustee or any Custodian of a breach of any of the representations
and warranties made in the Assignment Agreement (which, for purposes hereof, will be deemed to include any
other cause giving rise to a repurchase obligation under the Assignment Agreement) in respect of any Mortgage
Loan which materially and adversely affects the interests of the Certificateholders in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to the other parties (any Custodian being
so obligated under a Custodial Agreement). The Master Servicer shall promptly notify Residential Funding of
such breach and request that Residential Funding either (i) cure such breach in all material respects within
90 days from the date the Master Servicer was notified of such breach or (ii) purchase such Mortgage Loan
from the Trust Fund at the Purchase Price and in the manner set forth in Section 2.02; provided that
Residential Funding shall have the option to substitute a Qualified Substitute Mortgage Loan or Loans for
such Mortgage Loan if such substitution occurs within two years following the Closing Date; provided that if
the breach would cause the Mortgage Loan to be other than a "qualified mortgage" as defined in Section
860G(a)(3) of the Code, any such cure, repurchase or substitution must occur within 90 days from the date the
breach was discovered. If a breach of the Compliance With Laws Representation has given rise to the
obligation to repurchase or substitute a Mortgage Loan pursuant to Section 4 of the Assignment Agreement,
then the Master Servicer shall request that Residential Funding pay to the Trust Fund, concurrently with and
in addition to the remedies provided in the preceding sentence, an amount equal to any liability, penalty or
expense that was actually incurred and paid out of or on behalf of the Trust Fund, and that directly resulted
from such breach, or if incurred and paid by the Trust Fund thereafter, concurrently with such payment. In
the event that Residential Funding elects to substitute a Qualified Substitute Mortgage Loan or Loans for a
Deleted Mortgage Loan pursuant to this Section 2.04, Residential Funding shall deliver to the Trustee or the
Custodian for the benefit of the Certificateholders with respect to such Qualified Substitute Mortgage Loan
or Loans, the original Mortgage Note, the Mortgage, an Assignment of the Mortgage in recordable form, if
required pursuant to Section 2.01, and such other documents and agreements as are required by Section 2.01,
with the Mortgage Note endorsed as required by Section 2.01. No substitution will be made in any calendar
month after the Determination Date for such month. Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution shall not be part of the Trust Fund and will be retained by the
Master Servicer and remitted by the Master Servicer to Residential Funding on the next succeeding
Distribution Date. For the month of substitution, distributions to the Certificateholders will include the
Monthly Payment due on a Deleted Mortgage Loan for such month and thereafter Residential Funding shall be
entitled to retain all amounts received in respect of such Deleted Mortgage Loan. The Master Servicer shall
amend or cause to be amended the Mortgage Loan Schedule, and, if the Deleted Mortgage Loan was a Discount
Mortgage Loan, the Schedule of Discount Fractions, for the benefit of the Certificateholders to reflect the
removal of such Deleted Mortgage Loan and the substitution of the Qualified Substitute Mortgage Loan or Loans
and the Master Servicer shall deliver the amended Mortgage Loan Schedule, and, if the Deleted Mortgage Loan
was a Discount Mortgage Loan, the amended Schedule of Discount Fractions, to the Trustee. Upon such
substitution, the Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement
and the related Subservicing Agreement in all respects, Residential Funding shall be deemed to have made the
representations and warranties with respect to the Qualified Substitute Mortgage Loan contained in the
related Assignment Agreement, and the Company and the Master Servicer shall be deemed to have made with
respect to any Qualified Substitute Mortgage Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in this Section 2.04, in Section 2.03 hereof and in Section 4 of the
Assignment Agreement, and the Master Servicer shall be obligated to repurchase or substitute for any
Qualified Substitute Mortgage Loan as to which a Repurchase Event (as defined in the Assignment Agreement)
has occurred pursuant to Section 4 of the Assignment Agreement.
In connection with the substitution of one or more Qualified Substitute Mortgage Loans for one or more
Deleted Mortgage Loans, the Master Servicer will determine the amount (if any) by which the aggregate
principal balance of all such Qualified Substitute Mortgage Loans as of the date of substitution is less than
the aggregate Stated Principal Balance of all such Deleted Mortgage Loans (in each case after application of
the principal portion of the Monthly Payments due in the month of substitution that are to be distributed to
the Certificateholders in the month of substitution). Residential Funding shall deposit the amount of such
shortfall into the Custodial Account on the day of substitution, without any reimbursement therefor.
Residential Funding shall give notice in writing to the Trustee of such event, which notice shall be
accompanied by an Officers' Certificate as to the calculation of such shortfall and (subject to Section
10.01(f)) by an Opinion of Counsel to the effect that such substitution will not cause (a) any federal tax to
be imposed on the Trust Fund, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after the startup date" under Section
860G(d)(1) of the Code or (b) any portion of any REMIC to fail to qualify as such at any time that any
Certificate is outstanding.
It is understood and agreed that the obligation of Residential Funding to cure such breach or
purchase, or to substitute for, a Mortgage Loan as to which such a breach has occurred and is continuing and
to make any additional payments required under the Assignment Agreement in connection with a breach of the
Compliance With Laws Representation shall constitute the sole remedy respecting such breach available to the
Certificateholders or the Trustee on behalf of Certificateholders. If the Master Servicer is Residential
Funding, then the Trustee shall also have the right to give the notification and require the purchase or
substitution provided for in the second preceding paragraph in the event of such a breach of a representation
or warranty made by Residential Funding in the Assignment Agreement. In connection with the purchase of or
substitution for any such Mortgage Loan by Residential Funding, the Trustee shall assign to Residential
Funding all of the Trustee's right, title and interest in respect of the Assignment Agreement applicable to
such Mortgage Loan.
Section 2.05. Execution and Authentication of Certificates/Issuance of Certificates Evidencing Interests in
REMIC I Certificates.
As provided in Section 2.05 of the Series Supplement.
Section 2.06. Conveyance of Uncertificated REMIC I and REMIC II Regular Interests; Acceptance by the Trustee.
As provided in Section 2.06 of the Series Supplement.
Section 2.07. Issuance of Certificates Evidencing Interests in REMIC II.
As provided in Section 2.07 of the Series Supplement.
Section 2.08. Purposes and Powers of the Trust.
The purpose of the trust, as created hereunder, is to engage in the following activities:
(a) to sell the Certificates to the Company in exchange for the Mortgage Loans;
(b) to enter into and perform its obligations under this Agreement;
(c) to engage in those activities that are necessary, suitable or convenient to accomplish the foregoing
or are incidental thereto or connected therewith; and
(d) subject to compliance with this Agreement, to engage in such other activities as may be required in
connection with conservation of the Trust Fund and the making of distributions to the Certificateholders.
The trust is hereby authorized to engage in the foregoing activities. Notwithstanding the
provisions of Section 11.01, the trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement while any Certificate is
outstanding, and this Section 2.08 may not be amended, without the consent of the Certificateholders
evidencing a majority of the aggregate Voting Rights of the Certificates.
--------------------------------------------------------------------------------
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01. Master Servicer to Act as Servicer.
(a) The Master Servicer shall service and administer the Mortgage Loans in accordance with the terms of
this Agreement and the respective Mortgage Loans and shall have full power and authority, acting alone or
through Subservicers as provided in Section 3.02, to do any and all things which it may deem necessary or
desirable in connection with such servicing and administration. Without limiting the generality of the
foregoing, the Master Servicer in its own name or in the name of a Subservicer is hereby authorized and
empowered by the Trustee when the Master Servicer or the Subservicer, as the case may be, believes it
appropriate in its best judgment, to execute and deliver, on behalf of the Certificateholders and the Trustee
or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or
discharge, or of consent to assumption or modification in connection with a proposed conveyance, or of
assignment of any Mortgage and Mortgage Note in connection with the repurchase of a Mortgage Loan and all
other comparable instruments, or with respect to the modification or re-recording of a Mortgage for the
purpose of correcting the Mortgage, the subordination of the lien of the Mortgage in favor of a public
utility company or government agency or unit with powers of eminent domain, the taking of a deed in lieu of
foreclosure, the commencement, prosecution or completion of judicial or non-judicial foreclosure, the
conveyance of a Mortgaged Property to the related Insurer, the acquisition of any property acquired by
foreclosure or deed in lieu of foreclosure, or the management, marketing and conveyance of any property
acquired by foreclosure or deed in lieu of foreclosure with respect to the Mortgage Loans and with respect to
the Mortgaged Properties. The Master Servicer further is authorized and empowered by the Trustee, on behalf
of the Certificateholders and the Trustee, in its own name or in the name of the Subservicer, when the Master
Servicer or the Subservicer, as the case may be, believes it appropriate in its best judgment to register any
Mortgage Loan on the MERS(R)System, or cause the removal from the registration of any Mortgage Loan on the
MERS(R)System, to execute and deliver, on behalf of the Trustee and the Certificateholders or any of them, any
and all instruments of assignment and other comparable instruments with respect to such assignment or
re-recording of a Mortgage in the name of MERS, solely as nominee for the Trustee and its successors and
assigns. Any expenses incurred in connection with the actions described in the preceding sentence shall be
borne by the Master Servicer in accordance with Section 3.16(c), with no right of reimbursement; provided,
that if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the
MERS System, it becomes necessary to remove any Mortgage Loan from registration on the MERS System and to
arrange for the assignment of the related Mortgages to the Trustee, then any related expenses shall be
reimbursable to the Master Servicer. Notwithstanding the foregoing, subject to Section 3.07(a), the Master
Servicer shall not permit any modification with respect to any Mortgage Loan that would both constitute a
sale or exchange of such Mortgage Loan within the meaning of Section 1001 of the Code and any proposed,
temporary or final regulations promulgated thereunder (other than in connection with a proposed conveyance or
assumption of such Mortgage Loan that is treated as a Principal Prepayment in Full pursuant to Section
3.13(d) hereof) and cause any REMIC formed under the Series Supplement to fail to qualify as a REMIC under
the Code. The Trustee shall furnish the Master Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Master Servicer to service and administer the Mortgage Loans. The
Trustee shall not be liable for any action taken by the Master Servicer or any Subservicer pursuant to such
powers of attorney. In servicing and administering any Nonsubserviced Mortgage Loan, the Master Servicer
shall, to the extent not inconsistent with this Agreement, comply with the Program Guide as if it were the
originator of such Mortgage Loan and had retained the servicing rights and obligations in respect thereof.
In connection with servicing and administering the Mortgage Loans, the Master Servicer and any Affiliate of
the Master Servicer (i) may perform services such as appraisals and brokerage services that are not
customarily provided by servicers of mortgage loans, and shall be entitled to reasonable compensation
therefor in accordance with Section 3.10 and (ii) may, at its own discretion and on behalf of the Trustee,
obtain credit information in the form of a "credit score" from a credit repository.
(b) All costs incurred by the Master Servicer or by Subservicers in effecting the timely payment of taxes
and assessments on the properties subject to the Mortgage Loans shall not, for the purpose of calculating
monthly distributions to the Certificateholders, be added to the amount owing under the related Mortgage
Loans, notwithstanding that the terms of such Mortgage Loan so permit, and such costs shall be recoverable to
the extent permitted by Section 3.10(a)(ii).
(c) The Master Servicer may enter into one or more agreements in connection with the offering of
pass-through certificates evidencing interests in one or more of the Certificates providing for the payment
by the Master Servicer of amounts received by the Master Servicer as servicing compensation hereunder and
required to cover certain Prepayment Interest Shortfalls on the Mortgage Loans, which payment obligation will
thereafter be an obligation of the Master Servicer hereunder.
Section 3.02. Subservicing Agreements Between Master Servicer and Subservicers; Enforcement of Subservicers'
and Sellers' Obligations.
(a) The Master Servicer may continue in effect Subservicing Agreements entered into by Residential Funding
and Subservicers prior to the execution and delivery of this Agreement, and may enter into new Subservicing
Agreements with Subservicers, for the servicing and administration of all or some of the Mortgage Loans.
Each Subservicer of a Mortgage Loan shall be entitled to receive and retain, as provided in the related
Subservicing Agreement and in Section 3.07, the related Subservicing Fee from payments of interest received
on such Mortgage Loan after payment of all amounts required to be remitted to the Master Servicer in respect
of such Mortgage Loan. For any Mortgage Loan that is a Nonsubserviced Mortgage Loan, the Master Servicer
shall be entitled to receive and retain an amount equal to the Subservicing Fee from payments of interest.
Unless the context otherwise requires, references in this Agreement to actions taken or to be taken by the
Master Servicer in servicing the Mortgage Loans include actions taken or to be taken by a Subservicer on
behalf of the Master Servicer. Each Subservicing Agreement will be upon such terms and conditions as are
generally required or permitted by the Program Guide and are not inconsistent with this Agreement and as the
Master Servicer and the Subservicer have agreed. A representative form of Subservicing Agreement is attached
hereto as Exhibit E. With the approval of the Master Servicer, a Subservicer may delegate its servicing
obligations to third-party servicers, but such Subservicer will remain obligated under the related
Subservicing Agreement. The Master Servicer and a Subservicer may enter into amendments thereto or a
different form of Subservicing Agreement, and the form referred to or included in the Program Guide is merely
provided for information and shall not be deemed to limit in any respect the discretion of the Master
Servicer to modify or enter into different Subservicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the provisions of either this
Agreement or the Program Guide in a manner which would materially and adversely affect the interests of the
Certificateholders. The Program Guide and any other Subservicing Agreement entered into between the Master
Servicer and any Subservicer shall require the Subservicer to accurately and fully report its borrower credit
files to each of the Credit Repositories in a timely manner.
(b) As part of its servicing activities hereunder, the Master Servicer, for the benefit of the Trustee and
the Certificateholders, shall use its best reasonable efforts to enforce the obligations of each Subservicer
under the related Subservicing Agreement and of each Seller under the related Seller's Agreement insofar as
the Company's rights with respect to Seller's obligation has been assigned to the Trustee hereunder, to the
extent that the non-performance of any such Seller's obligation would have a material and adverse effect on a
Mortgage Loan, including, without limitation, the obligation to purchase a Mortgage Loan on account of
defective documentation, as described in Section 2.02, or on account of a breach of a representation or
warranty, as described in Section 2.04. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Subservicing Agreements or Seller's Agreements, as appropriate, and the
pursuit of other appropriate remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer would employ in its good faith business judgment and which are normal and usual
in its general mortgage servicing activities. The Master Servicer shall pay the costs of such enforcement at
its own expense, and shall be reimbursed therefor only (i) from a general recovery resulting from such
enforcement to the extent, if any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys fees against the party against
whom such enforcement is directed. For purposes of clarification only, the parties agree that the foregoing
is not intended to, and does not, limit the ability of the Master Servicer to be reimbursed for expenses that
are incurred in connection with the enforcement of a Seller's obligations (insofar as the Company's rights
with respect to such Seller's obligations have been assigned to the Trustee hereunder) and are reimbursable
pursuant to Section 3.10(a)(viii).
Section 3.03. Successor Subservicers.
The Master Servicer shall be entitled to terminate any Subservicing Agreement that may exist in
accordance with the terms and conditions of such Subservicing Agreement and without any limitation by virtue
of this Agreement; provided, however, that in the event of termination of any Subservicing Agreement by the
Master Servicer or the Subservicer, the Master Servicer shall either act as servicer of the related Mortgage
Loan or enter into a Subservicing Agreement with a successor Subservicer which will be bound by the terms of
the related Subservicing Agreement. If the Master Servicer or any Affiliate of Residential Funding acts as
servicer, it will not assume liability for the representations and warranties of the Subservicer which it
replaces. If the Master Servicer enters into a Subservicing Agreement with a successor Subservicer, the
Master Servicer shall use reasonable efforts to have the successor Subservicer assume liability for the
representations and warranties made by the terminated Subservicer in respect of the related Mortgage Loans
and, in the event of any such assumption by the successor Subservicer, the Master Servicer may, in the
exercise of its business judgment, release the terminated Subservicer from liability for such representations
and warranties.
Section 3.04. Liability of the Master Servicer.
Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer or a Subservicer or reference to actions taken through
a Subservicer or otherwise, the Master Servicer shall remain obligated and liable to the Trustee and the
Certificateholders for the servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from the Subservicer or the Company and to the
same extent and under the same terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter into any agreement with a
Subservicer or Seller for indemnification of the Master Servicer and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship Between Subservicer and
Trustee or Certificateholders.
Any Subservicing Agreement that may be entered into and any other transactions or services relating to
the Mortgage Loans involving a Subservicer in its capacity as such and not as an originator shall be deemed
to be between the Subservicer and the Master Servicer alone and the Trustee and the Certificateholders shall
not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with
respect to the Subservicer in its capacity as such except as set forth in Section 3.06. The foregoing
provision shall not in any way limit a Subservicer's obligation to cure an omission or defect or to
repurchase a Mortgage Loan as referred to in Section 2.02 hereof.
Section 3.06. Assumption or Termination of Subservicing Agreements by Trustee.
(a) If the Master Servicer shall for any reason no longer be the master servicer (including by reason of
an Event of Default), the Trustee, its designee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer under each Subservicing Agreement that may have been entered into. The
Trustee, its designee or the successor servicer for the Trustee shall be deemed to have assumed all of the
Master Servicer's interest therein and to have replaced the Master Servicer as a party to the Subservicing
Agreement to the same extent as if the Subservicing Agreement had been assigned to the assuming party except
that the Master Servicer shall not thereby be relieved of any liability or obligations under the Subservicing
Agreement.
(b) The Master Servicer shall, upon request of the Trustee but at the expense of the Master Servicer,
deliver to the assuming party all documents and records relating to each Subservicing Agreement and the
Mortgage Loans then being serviced and an accounting of amounts collected and held by it and otherwise use
its best efforts to effect the orderly and efficient transfer of each Subservicing Agreement to the assuming
party.
Section 3.07. Collection of Certain Mortgage Loan Payments;
Deposits to Custodial Account.
(a) The Master Servicer shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Mortgage Loans, and shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any related Primary Insurance Policy, follow such collection
procedures as it would employ in its good faith business judgment and which are normal and usual in its
general mortgage servicing activities. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive any late payment charge or any prepayment charge or penalty interest in connection with
the prepayment of a Mortgage Loan and (ii) extend the Due Date for payments due on a Mortgage Loan in
accordance with the Program Guide; provided, however, that the Master Servicer shall first determine that any
such waiver or extension will not impair the coverage of any related Primary Insurance Policy or materially
adversely affect the lien of the related Mortgage. Notwithstanding anything in this Section to the contrary,
the Master Servicer shall not enforce any prepayment charge to the extent that such enforcement would violate
any applicable law. In the event of any such arrangement, the Master Servicer shall make timely advances on
the related Mortgage Loan during the scheduled period in accordance with the amortization schedule of such
Mortgage Loan without modification thereof by reason of such arrangements unless otherwise agreed to by the
Holders of the Classes of Certificates affected thereby; provided, however, that no such extension shall be
made if any such advance would be a Nonrecoverable Advance. Consistent with the terms of this Agreement, the
Master Servicer may also waive, modify or vary any term of any Mortgage Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to any Mortgagor if in the Master
Servicer's determination such waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Certificateholders (taking into account any estimated Realized Loss that might result
absent such action); provided, however, that the Master Servicer may not modify materially or permit any
Subservicer to modify any Mortgage Loan, including without limitation any modification that would change the
Mortgage Rate, forgive the payment of any principal or interest (unless in connection with the liquidation of
the related Mortgage Loan or except in connection with prepayments to the extent that such reamortization is
not inconsistent with the terms of the Mortgage Loan), capitalize any amounts owing on the Mortgage Loan by
adding such amount to the outstanding principal balance of the Mortgage Loan, or extend the final maturity
date of such Mortgage Loan, unless such Mortgage Loan is in default or, in the judgment of the Master
Servicer, such default is reasonably foreseeable; provided, further, that (1) no such modification shall
reduce the interest rate on a Mortgage Loan below one-half of the Mortgage Rate as in effect on the Cut-off
Date, but not less than the sum of the rates at which the Servicing Fee and the Subservicing Fee with respect
to such Mortgage Loan accrues plus the rate at which the premium paid to the Certificate Insurer, if any,
accrues, (2) the final maturity date for any Mortgage Loan shall not be extended beyond the Maturity Date,
(3) the Stated Principal Balance of all Reportable Modified Mortgage Loans subject to Servicing Modifications
(measured at the time of the Servicing Modification and after giving effect to any Servicing Modification)
can be no more than five percent of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, unless such limit is increased from time to time with the consent of the Rating Agencies and the
Certificate Insurer, if any. In addition, any amounts owing on a Mortgage Loan added to the outstanding
principal balance of such Mortgage Loan must be fully amortized over the remaining term of such Mortgage
Loan, and such amounts may be added to the outstanding principal balance of a Mortgage Loan only once during
the life of such Mortgage Loan. Also, the addition of such amounts described in the preceding sentence shall
be implemented in accordance with the Program Guide and may be implemented only by Subservicers that have
been approved by the Master Servicer for such purpose. In connection with any Curtailment of a Mortgage Loan,
the Master Servicer, to the extent not inconsistent with the terms of the Mortgage Note and local law and
practice, may permit the Mortgage Loan to be reamortized such that the Monthly Payment is recalculated as an
amount that will fully amortize the remaining Stated Principal Balance thereof by the original Maturity Date
based on the original Mortgage Rate; provided, that such re-amortization shall not be permitted if it would
constitute a reissuance of the Mortgage Loan for federal income tax purposes, except if such reissuance is
described in Treasury Regulation Section 1.860G-2(b)(3).
(b) The Master Servicer shall establish and maintain a Custodial Account in which the Master Servicer
shall deposit or cause to be deposited on a daily basis, except as otherwise specifically provided herein,
the following payments and collections remitted by Subservicers or received by it in respect of the Mortgage
Loans subsequent to the Cut-off Date (other than in respect of principal and interest on the Mortgage Loans
due on or before the Cut-off Date):
(i) All payments on account of principal, including Principal Prepayments made by Mortgagors on the
Mortgage Loans and the principal component of any Subservicer Advance or of any REO Proceeds received
in connection with an REO Property for which an REO Disposition has occurred;
(ii) All payments on account of interest at the Adjusted Mortgage Rate on the Mortgage Loans, including
Buydown Funds, if any, and the interest component of any Subservicer Advance or of any REO Proceeds
received in connection with an REO Property for which an REO Disposition has occurred;
(iii) Insurance Proceeds, Subsequent Recoveries and Liquidation Proceeds (net of any related expenses of the
Subservicer);
(iv) All proceeds of any Mortgage Loans purchased pursuant to Section 2.02, 2.03, 2.04 or 4.07 (including
amounts received from Residential Funding pursuant to the last paragraph of Section 4 of the
Assignment Agreement in respect of any liability, penalty or expense that resulted from a breach of
the Compliance With Laws Representation and all amounts required to be deposited in connection with
the substitution of a Qualified Substitute Mortgage Loan pursuant to Section 2.03 or 2.04;
(v) Any amounts required to be deposited pursuant to Section 3.07(c) or 3.21;
(vi) All amounts transferred from the Certificate Account to the Custodial Account in accordance with
Section 4.02(a);
(vii) Any amounts realized by the Subservicer and received by the Master Servicer in respect of any
Additional Collateral; and
(viii) Any amounts received by the Master Servicer in respect of Pledged Assets.
The foregoing requirements for deposit in the Custodial Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, payments on the Mortgage Loans which are not
part of the Trust Fund (consisting of payments in respect of principal and interest on the Mortgage Loans due
on or before the Cut-off Date) and payments or collections in the nature of prepayment charges or late
payment charges or assumption fees may but need not be deposited by the Master Servicer in the Custodial
Account. In the event any amount not required to be deposited in the Custodial Account is so deposited, the
Master Servicer may at any time withdraw such amount from the Custodial Account, any provision herein to the
contrary notwithstanding. The Custodial Account may contain funds that belong to one or more trust funds
created for mortgage pass-through certificates of other series and may contain other funds respecting
payments on mortgage loans belonging to the Master Servicer or serviced or master serviced by it on behalf of
others. Notwithstanding such commingling of funds, the Master Servicer shall keep records that accurately
reflect the funds on deposit in the Custodial Account that have been identified by it as being attributable
to the Mortgage Loans.
With respect to Insurance Proceeds, Liquidation Proceeds, REO Proceeds and the proceeds of the
purchase of any Mortgage Loan pursuant to Sections 2.02, 2.03, 2.04 and 4.07 received in any calendar month,
the Master Servicer may elect to treat such amounts as included in the Available Distribution Amount for the
Distribution Date in the month of receipt, but is not obligated to do so. If the Master Servicer so elects,
such amounts will be deemed to have been received (and any related Realized Loss shall be deemed to have
occurred) on the last day of the month prior to the receipt thereof.
(c) The Master Servicer shall use its best efforts to cause the institution maintaining the Custodial
Account to invest the funds in the Custodial Account attributable to the Mortgage Loans in Permitted
Investments which shall mature not later than the Certificate Account Deposit Date next following the date of
such investment (with the exception of the Amount Held for Future Distribution) and which shall not be sold
or disposed of prior to their maturities. All income and gain realized from any such investment shall be for
the benefit of the Master Servicer as additional servicing compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments
attributable to the investment of amounts in respect of the Mortgage Loans shall be deposited in the
Custodial Account by the Master Servicer out of its own funds immediately as realized without any right of
reimbursement.
(d) The Master Servicer shall give notice to the Trustee and the Company of any change in the location of
the Custodial Account and the location of the Certificate Account prior to the use thereof.
Section 3.08. Subservicing Accounts; Servicing Accounts.
(a) In those cases where a Subservicer is servicing a Mortgage Loan pursuant to a Subservicing Agreement,
the Master Servicer shall cause the Subservicer, pursuant to the Subservicing Agreement, to establish and
maintain one or more Subservicing Accounts which shall be an Eligible Account or, if such account is not an
Eligible Account, shall generally satisfy the requirements of the Program Guide and be otherwise acceptable
to the Master Servicer and each Rating Agency. The Subservicer will be required thereby to deposit into the
Subservicing Account on a daily basis all proceeds of Mortgage Loans received by the Subservicer, less its
Subservicing Fees and unreimbursed advances and expenses, to the extent permitted by the Subservicing
Agreement. If the Subservicing Account is not an Eligible Account, the Master Servicer shall be deemed to
have received such monies upon receipt thereof by the Subservicer. The Subservicer shall not be required to
deposit in the Subservicing Account payments or collections in the nature of prepayment charges or late
charges or assumption fees. On or before the date specified in the Program Guide, but in no event later than
the Determination Date, the Master Servicer shall cause the Subservicer, pursuant to the Subservicing
Agreement, to remit to the Master Servicer for deposit in the Custodial Account all funds held in the
Subservicing Account with respect to each Mortgage Loan serviced by such Subservicer that are required to be
remitted to the Master Servicer. The Subservicer will also be required, pursuant to the Subservicing
Agreement, to advance on such scheduled date of remittance amounts equal to any scheduled monthly
installments of principal and interest less its Subservicing Fees on any Mortgage Loans for which payment was
not received by the Subservicer. This obligation to advance with respect to each Mortgage Loan will continue
up to and including the first of the month following the date on which the related Mortgaged Property is sold
at a foreclosure sale or is acquired by the Trust Fund by deed in lieu of foreclosure or otherwise. All such
advances received by the Master Servicer shall be deposited promptly by it in the Custodial Account.
(b) The Subservicer may also be required, pursuant to the Subservicing Agreement, to remit to the Master
Servicer for deposit in the Custodial Account interest at the Adjusted Mortgage Rate (or Modified Net
Mortgage Rate plus the rate per annum at which the Servicing Fee accrues in the case of a Modified Mortgage
Loan) on any Curtailment received by such Subservicer in respect of a Mortgage Loan from the related
Mortgagor during any month that is to be applied by the Subservicer to reduce the unpaid principal balance of
the related Mortgage Loan as of the first day of such month, from the date of application of such Curtailment
to the first day of the following month. Any amounts paid by a Subservicer pursuant to the preceding
sentence shall be for the benefit of the Master Servicer as additional servicing compensation and shall be
subject to its withdrawal or order from time to time pursuant to Sections 3.10(a)(iv) and (v).
(c) In addition to the Custodial Account and the Certificate Account, the Master Servicer shall for any
Nonsubserviced Mortgage Loan, and shall cause the Subservicers for Subserviced Mortgage Loans to, establish
and maintain one or more Servicing Accounts and deposit and retain therein all collections from the
Mortgagors (or advances from Subservicers) for the payment of taxes, assessments, hazard insurance premiums,
Primary Insurance Policy premiums, if applicable, or comparable items for the account of the Mortgagors.
Each Servicing Account shall satisfy the requirements for a Subservicing Account and, to the extent permitted
by the Program Guide or as is otherwise acceptable to the Master Servicer, may also function as a
Subservicing Account. Withdrawals of amounts related to the Mortgage Loans from the Servicing Accounts may
be made only to effect timely payment of taxes, assessments, hazard insurance premiums, Primary Insurance
Policy premiums, if applicable, or comparable items, to reimburse the Master Servicer or Subservicer out of
related collections for any payments made pursuant to Sections 3.11 (with respect to the Primary Insurance
Policy) and 3.12(a) (with respect to hazard insurance), to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to Mortgagors on balances in the Servicing Account
or to clear and terminate the Servicing Account at the termination of this Agreement in accordance with
Section 9.01 or in accordance with the Program Guide. As part of its servicing duties, the Master Servicer
shall, and the Subservicers will, pursuant to the Subservicing Agreements, be required to pay to the
Mortgagors interest on funds in this account to the extent required by law.
(d) The Master Servicer shall advance the payments referred to in the preceding subsection that are not
timely paid by the Mortgagors or advanced by the Subservicers on the date when the tax, premium or other cost
for which such payment is intended is due, but the Master Servicer shall be required so to advance only to
the extent that such advances, in the good faith judgment of the Master Servicer, will be recoverable by the
Master Servicer out of Insurance Proceeds, Liquidation Proceeds or otherwise.
Section 3.09. Access to Certain Documentation and
Information Regarding the Mortgage Loans.
If compliance with this Section 3.09 shall make any Class of Certificates legal for investment by
federally insured savings and loan associations, the Master Servicer shall provide, or cause the Subservicers
to provide, to the Trustee, the Office of Thrift Supervision or the FDIC and the supervisory agents and
examiners thereof access to the documentation regarding the Mortgage Loans required by applicable regulations
of the Office of Thrift Supervision, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices designated by the Master Servicer. The Master
Servicer shall permit such representatives to photocopy any such documentation and shall provide equipment
for that purpose at a charge reasonably approximating the cost of such photocopying to the Master Servicer.
Section 3.10. Permitted Withdrawals from the Custodial Account.
(a) The Master Servicer may, from time to time as provided herein, make withdrawals from the Custodial
Account of amounts on deposit therein pursuant to Section 3.07 that are attributable to the Mortgage Loans
for the following purposes:
(i) to make deposits into the Certificate Account in the amounts and in the manner provided for in Section
4.01;
(ii) to reimburse itself or the related Subservicer for previously unreimbursed Advances, Servicing
Advances or other expenses made pursuant to Sections 3.01, 3.07(a), 3.08, 3.11, 3.12(a), 3.14 and 4.04
or otherwise reimbursable pursuant to the terms of this Agreement, such withdrawal right being limited
to amounts received on the related Mortgage Loans (including, for this purpose, REO Proceeds,
Insurance Proceeds, Liquidation Proceeds and proceeds from the purchase of a Mortgage Loan pursuant to
Section 2.02, 2.03, 2.04 or 4.07) which represent (A) Late Collections of Monthly Payments for which
any such advance was made in the case of Subservicer Advances or Advances pursuant to Section 4.04 and
(B) recoveries of amounts in respect of which such advances were made in the case of Servicing
Advances;
(iii) to pay to itself or the related Subservicer (if not previously retained by such Subservicer) out of
each payment received by the Master Servicer on account of interest on a Mortgage Loan as contemplated
by Sections 3.14 and 3.16, an amount equal to that remaining portion of any such payment as to
interest (but not in excess of the Servicing Fee and the Subservicing Fee, if not previously retained)
which, when deducted, will result in the remaining amount of such interest being interest at the Net
Mortgage Rate (or Modified Net Mortgage Rate in the case of a Modified Mortgage Loan) on the amount
specified in the amortization schedule of the related Mortgage Loan as the principal balance thereof
at the beginning of the period respecting which such interest was paid after giving effect to any
previous Curtailments;
(iv) to pay to itself as additional servicing compensation any interest or investment income earned on
funds and other property deposited in or credited to the Custodial Account that it is entitled to
withdraw pursuant to Section 3.07(c);
(v) to pay to itself as additional servicing compensation any Foreclosure Profits, any amounts remitted by
Subservicers as interest in respect of Curtailments pursuant to Section 3.08(b), and any amounts paid
by a Mortgagor in connection with a Principal Prepayment in Full in respect of interest for any period
during the calendar month in which such Principal Prepayment in Full is to be distributed to the
Certificateholders;
(vi) to pay to itself, a Subservicer, a Seller, Residential Funding, the Company or any other appropriate
Person, as the case may be, with respect to each Mortgage Loan or property acquired in respect thereof
that has been purchased or otherwise transferred pursuant to Section 2.02, 2.03, 2.04, 4.07 or 9.01,
all amounts received thereon and not required to be distributed to the Certificateholders as of the
date on which the related Stated Principal Balance or Purchase Price is determined;
(vii) to reimburse itself or the related Subservicer for any Nonrecoverable Advance or Advances in the
manner and to the extent provided in subsection (c) below, and any Advance or Servicing Advance made
in connection with a modified Mortgage Loan that is in default or, in the judgment of the Master
Servicer, default is reasonably foreseeable pursuant to Section 3.07(a), to the extent the amount of
the Advance or Servicing Advance was added to the Stated Principal Balance of the Mortgage Loan in a
prior calendar month, or any Advance reimbursable to the Master Servicer pursuant to Section 4.02(a);
(viii) to reimburse itself or the Company for expenses incurred by and reimbursable to it or the Company
pursuant to Sections 3.01(a), 3.11, 3.13, 3.14(c), 6.03, 10.01 or otherwise, or in connection with
enforcing, in accordance with this Agreement, any repurchase, substitution or indemnification
obligation of any Seller (other than an Affiliate of the Company) pursuant to the related Seller's
Agreement;
(ix) to reimburse itself for Servicing Advances expended by it (a) pursuant to Section 3.14 in good faith
in connection with the restoration of property damaged by an Uninsured Cause, and (b) in connection
with the liquidation of a Mortgage Loan or disposition of an REO Property to the extent not otherwise
reimbursed pursuant to clause (ii) or (viii) above; and
(x) to withdraw any amount deposited in the Custodial Account that was not required to be deposited
therein pursuant to Section 3.07.
(b) Since, in connection with withdrawals pursuant to clauses (ii), (iii), (v) and (vi), the Master
Servicer's entitlement thereto is limited to collections or other recoveries on the related Mortgage Loan,
the Master Servicer shall keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis,
for the purpose of justifying any withdrawal from the Custodial Account pursuant to such clauses.
(c) The Master Servicer shall be entitled to reimburse itself or the related Subservicer for any advance
made in respect of a Mortgage Loan that the Master Servicer determines to be a Nonrecoverable Advance by
withdrawal from the Custodial Account of amounts on deposit therein attributable to the Mortgage Loans on any
Certificate Account Deposit Date succeeding the date of such determination. Such right of reimbursement in
respect of a Nonrecoverable Advance relating to an Advance pursuant to Section 4.04 on any such Certificate
Account Deposit Date shall be limited to an amount not exceeding the portion of such Advance previously paid
to Certificateholders (and not theretofore reimbursed to the Master Servicer or the related Subservicer).
Section 3.11. Maintenance of the Primary Insurance
Policies; Collections Thereunder.
(a) The Master Servicer shall not take, or permit any Subservicer to take, any action which would result
in non-coverage under any applicable Primary Insurance Policy of any loss which, but for the actions of the
Master Servicer or Subservicer, would have been covered thereunder. To the extent coverage is available, the
Master Servicer shall keep or cause to be kept in full force and effect each such Primary Insurance Policy
until the principal balance of the related Mortgage Loan secured by a Mortgaged Property is reduced to 80% or
less of the Appraised Value in the case of such a Mortgage Loan having a Loan-to-Value Ratio at origination
in excess of 80%, provided that such Primary Insurance Policy was in place as of the Cut-off Date and the
Company had knowledge of such Primary Insurance Policy. The Master Servicer shall be entitled to cancel or
permit the discontinuation of any Primary Insurance Policy as to any Mortgage Loan, if the Stated Principal
Balance of the Mortgage Loan is reduced below an amount equal to 80% of the appraised value of the related
Mortgaged Property as determined in any appraisal thereof after the Closing Date, or if the Loan-to-Value
Ratio is reduced below 80% as a result of principal payments on the Mortgage Loan after the Closing Date. In
the event that the Company gains knowledge that as of the Closing Date, a Mortgage Loan had a Loan-to-Value
Ratio at origination in excess of 80% and is not the subject of a Primary Insurance Policy (and was not
included in any exception to the representation in Section 2.03(b)(iv)) and that such Mortgage Loan has a
current Loan-to-Value Ratio in excess of 80% then the Master Servicer shall use its reasonable efforts to
obtain and maintain a Primary Insurance Policy to the extent that such a policy is obtainable at a reasonable
price. The Master Servicer shall not cancel or refuse to renew any such Primary Insurance Policy applicable
to a Nonsubserviced Mortgage Loan, or consent to any Subservicer canceling or refusing to renew any such
Primary Insurance Policy applicable to a Mortgage Loan subserviced by it, that is in effect at the date of
the initial issuance of the Certificates and is required to be kept in force hereunder unless the replacement
Primary Insurance Policy for such canceled or non-renewed policy is maintained with an insurer whose
claims-paying ability is acceptable to each Rating Agency for mortgage pass-through certificates having a
rating equal to or better than the lower of the then-current rating or the rating assigned to the
Certificates as of the Closing Date by such Rating Agency.
(b) In connection with its activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present or to cause the related Subservicer to present, on behalf of the Master Servicer,
the Subservicer, if any, the Trustee and Certificateholders, claims to the related Insurer under any Primary
Insurance Policies, in a timely manner in accordance with such policies, and, in this regard, to take or
cause to be taken such reasonable action as shall be necessary to permit recovery under any Primary Insurance
Policies respecting defaulted Mortgage Loans. Pursuant to Section 3.07, any Insurance Proceeds collected by
or remitted to the Master Servicer under any Primary Insurance Policies shall be deposited in the Custodial
Account, subject to withdrawal pursuant to Section 3.10.
Section 3.12. Maintenance of Fire Insurance and
Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each Mortgage Loan (other than a Cooperative
Loan) fire insurance with extended coverage in an amount which is equal to the lesser of the principal
balance owing on such Mortgage Loan or 100 percent of the insurable value of the improvements; provided,
however, that such coverage may not be less than the minimum amount required to fully compensate for any loss
or damage on a replacement cost basis. To the extent it may do so without breaching the related Subservicing
Agreement, the Master Servicer shall replace any Subservicer that does not cause such insurance, to the
extent it is available, to be maintained. The Master Servicer shall also cause to be maintained on property
acquired upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan (other than a Cooperative
Loan), fire insurance with extended coverage in an amount which is at least equal to the amount necessary to
avoid the application of any co-insurance clause contained in the related hazard insurance policy. Pursuant
to Section 3.07, any amounts collected by the Master Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the related Mortgaged Property or property thus acquired or
amounts released to the Mortgagor in accordance with the Master Servicer's normal servicing procedures) shall
be deposited in the Custodial Account, subject to withdrawal pursuant to Section 3.10. Any cost incurred by
the Master Servicer in maintaining any such insurance shall not, for the purpose of calculating monthly
distributions to the Certificateholders, be added to the amount owing under the Mortgage Loan,
notwithstanding that the terms of the Mortgage Loan so permit. Such costs shall be recoverable by the Master
Servicer out of related late payments by the Mortgagor or out of Insurance Proceeds and Liquidation Proceeds
to the extent permitted by Section 3.10. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired in respect of a Mortgage Loan
other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. Whenever the improvements securing a Mortgage Loan (other than a
Cooperative Loan) are located at the time of origination of such Mortgage Loan in a federally designated
special flood hazard area, the Master Servicer shall cause flood insurance (to the extent available) to be
maintained in respect thereof. Such flood insurance shall be in an amount equal to the lesser of (i) the
amount required to compensate for any loss or damage to the Mortgaged Property on a replacement cost basis
and (ii) the maximum amount of such insurance available for the related Mortgaged Property under the national
flood insurance program (assuming that the area in which such Mortgaged Property is located is participating
in such program).
If the Master Servicer shall obtain and maintain a blanket fire insurance policy with extended
coverage insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section 3.12(a), it being understood and
agreed that such policy may contain a deductible clause, in which case the Master Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged Property a policy complying with the
first sentence of this Section 3.12(a) and there shall have been a loss which would have been covered by such
policy, deposit in the Certificate Account the amount not otherwise payable under the blanket policy because
of such deductible clause. Any such deposit by the Master Servicer shall be made on the Certificate Account
Deposit Date next preceding the Distribution Date which occurs in the month following the month in which
payments under any such policy would have been deposited in the Custodial Account. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master Servicer agrees to present, on
behalf of itself, the Trustee and the Certificateholders, claims under any such blanket policy.
(b) The Master Servicer shall obtain and maintain at its own expense and keep in full force and effect
throughout the term of this Agreement a blanket fidelity bond and an errors and omissions insurance policy
covering the Master Servicer's officers and employees and other persons acting on behalf of the Master
Servicer in connection with its activities under this Agreement. The amount of coverage shall be at least
equal to the coverage that would be required by Fannie Mae or Freddie Mac, whichever is greater, with respect
to the Master Servicer if the Master Servicer were servicing and administering the Mortgage Loans for Fannie
Mae or Freddie Mac. In the event that any such bond or policy ceases to be in effect, the Master Servicer
shall obtain a comparable replacement bond or policy from an issuer or insurer, as the case may be, meeting
the requirements, if any, of the Program Guide and acceptable to the Company. Coverage of the Master
Servicer under a policy or bond obtained by an Affiliate of the Master Servicer and providing the coverage
required by this Section 3.12(b) shall satisfy the requirements of this Section 3.12(b).
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements; Certain Assignments.
(a) When any Mortgaged Property is conveyed by the Mortgagor, the Master Servicer or Subservicer, to the
extent it has knowledge of such conveyance, shall enforce any due-on-sale clause contained in any Mortgage
Note or Mortgage, to the extent permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage under any Required Insurance
Policy. Notwithstanding the foregoing:
(i) the Master Servicer shall not be deemed to be in default under this Section 3.13(a) by reason of any
transfer or assumption which the Master Servicer is restricted by law from preventing; and
(ii) if the Master Servicer determines that it is reasonably likely that any Mortgagor will bring, or if
any Mortgagor does bring, legal action to declare invalid or otherwise avoid enforcement of a
due-on-sale clause contained in any Mortgage Note or Mortgage, the Master Servicer shall not be
required to enforce the due-on-sale clause or to contest such action.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale clause to the extent set forth in
Section 3.13(a), in any case in which a Mortgaged Property is to be conveyed to a Person by a Mortgagor, and
such Person is to enter into an assumption or modification agreement or supplement to the Mortgage Note or
Mortgage which requires the signature of the Trustee, or if an instrument of release signed by the Trustee is
required releasing the Mortgagor from liability on the Mortgage Loan, the Master Servicer is authorized,
subject to the requirements of the sentence next following, to execute and deliver, on behalf of the Trustee,
the assumption agreement with the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other instruments as are reasonable
or necessary to carry out the terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged Property to such Person; provided,
however, none of such terms and requirements shall either (i) both (A) constitute a "significant
modification" effecting an exchange or reissuance of such Mortgage Loan under the REMIC Provisions and (B)
cause any portion of any REMIC formed under the Series Supplement to fail to qualify as a REMIC under the
Code or (subject to Section 10.01(f)), result in the imposition of any tax on "prohibited transactions" or
(ii) constitute "contributions" after the start-up date under the REMIC Provisions. The Master Servicer
shall execute and deliver such documents only if it reasonably determines that (i) its execution and delivery
thereof will not conflict with or violate any terms of this Agreement or cause the unpaid balance and
interest on the Mortgage Loan to be uncollectible in whole or in part, (ii) any required consents of insurers
under any Required Insurance Policies have been obtained and (iii) subsequent to the closing of the
transaction involving the assumption or transfer (A) the Mortgage Loan will continue to be secured by a first
mortgage lien pursuant to the terms of the Mortgage, (B) such transaction will not adversely affect the
coverage under any Required Insurance Policies, (C) the Mortgage Loan will fully amortize over the remaining
term thereof, (D) no material term of the Mortgage Loan (including the interest rate on the Mortgage Loan)
will be altered nor will the term of the Mortgage Loan be changed and (E) if the seller/transferor of the
Mortgaged Property is to be released from liability on the Mortgage Loan, such release will not (based on the
Master Servicer's or Subservicer's good faith determination) adversely affect the collectability of the
Mortgage Loan. Upon receipt of appropriate instructions from the Master Servicer in accordance with the
foregoing, the Trustee shall execute any necessary instruments for such assumption or substitution of
liability as directed in writing by the Master Servicer. Upon the closing of the transactions contemplated
by such documents, the Master Servicer shall cause the originals or true and correct copies of the assumption
agreement, the release (if any), or the modification or supplement to the Mortgage Note or Mortgage to be
delivered to the Trustee or the Custodian and deposited with the Mortgage File for such Mortgage Loan. Any
fee collected by the Master Servicer or such related Subservicer for entering into an assumption or
substitution of liability agreement will be retained by the Master Servicer or such Subservicer as additional
servicing compensation.
(c) The Master Servicer or the related Subservicer, as the case may be, shall be entitled to approve a
request from a Mortgagor for a partial release of the related Mortgaged Property, the granting of an easement
thereon in favor of another Person, any alteration or demolition of the related Mortgaged Property (or, with
respect to a Cooperative Loan, the related Cooperative Apartment) without any right of reimbursement or other
similar matters if it has determined, exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Mortgage Loan, that the security for, and the timely and full
collectability of, such Mortgage Loan would not be adversely affected thereby and that any portion of any
REMIC formed under the Series Supplement would not fail to continue to qualify as a REMIC under the Code as a
result thereof and (subject to Section 10.01(f)) that no tax on "prohibited transactions" or "contributions"
after the startup day would be imposed on any such REMIC as a result thereof. Any fee collected by the
Master Servicer or the related Subservicer for processing such a request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.
(d) Subject to any other applicable terms and conditions of this Agreement, the Trustee and Master
Servicer shall be entitled to approve an assignment in lieu of satisfaction with respect to any Mortgage
Loan, provided the obligee with respect to such Mortgage Loan following such proposed assignment provides the
Trustee and Master Servicer with a "Lender Certification for Assignment of Mortgage Loan" in the form
attached hereto as Exhibit M, in form and substance satisfactory to the Trustee and Master Servicer,
providing the following: (i) that the substance of the assignment is, and is intended to be, a refinancing of
such Mortgage; (ii) that the Mortgage Loan following the proposed assignment will have a rate of interest at
least 0.25 percent below or above the rate of interest on such Mortgage Loan prior to such proposed
assignment; and (iii) that such assignment is at the request of the borrower under the related Mortgage
Loan. Upon approval of an assignment in lieu of satisfaction with respect to any Mortgage Loan, the Master
Servicer shall receive cash in an amount equal to the unpaid principal balance of and accrued interest on
such Mortgage Loan and the Master Servicer shall treat such amount as a Principal Prepayment in Full with
respect to such Mortgage Loan for all purposes hereof.
Section 3.14. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall foreclose upon or otherwise comparably convert (which may include an REO
Acquisition) the ownership of properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.07. Alternatively, the Master Servicer may take other actions in respect of a
defaulted Mortgage Loan, which may include (i) accepting a short sale (a payoff of the Mortgage Loan for an
amount less than the total amount contractually owed in order to facilitate a sale of the Mortgaged Property
by the Mortgagor) or permitting a short refinancing (a payoff of the Mortgage Loan for an amount less than
the total amount contractually owed in order to facilitate refinancing transactions by the Mortgagor not
involving a sale of the Mortgaged Property), (ii) arranging for a repayment plan or (iii) agreeing to a
modification in accordance with Section 3.07. In connection with such foreclosure or other conversion, the
Master Servicer shall, consistent with Section 3.11, follow such practices and procedures as it shall deem
necessary or advisable, as shall be normal and usual in its general mortgage servicing activities and as
shall be required or permitted by the Program Guide; provided that the Master Servicer shall not be liable in
any respect hereunder if the Master Servicer is acting in connection with any such foreclosure or other
conversion in a manner that is consistent with the provisions of this Agreement. The Master Servicer,
however, shall not be required to expend its own funds or incur other reimbursable charges in connection with
any foreclosure, or attempted foreclosure which is not completed, or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will increase the proceeds of
liquidation of the Mortgage Loan to Holders of Certificates of one or more Classes after reimbursement to
itself for such expenses or charges and (ii) that such expenses or charges will be recoverable to it through
Liquidation Proceeds, Insurance Proceeds, or REO Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Custodial Account pursuant to Section 3.10, whether or not such expenses and
charges are actually recoverable from related Liquidation Proceeds, Insurance Proceeds or REO Proceeds). In
the event of such a determination by the Master Servicer pursuant to this Section 3.14(a), the Master
Servicer shall be entitled to reimbursement of such amounts pursuant to Section 3.10.
In addition to the foregoing, the Master Servicer shall use its best reasonable efforts to
realize upon any Additional Collateral for such of the Additional Collateral Loans as come into and continue
in default and as to which no satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.07; provided that the Master Servicer shall not, on behalf of the Trustee, obtain title
to any such Additional Collateral as a result of or in lieu of the disposition thereof or otherwise; and
provided further that (i) the Master Servicer shall not proceed with respect to such Additional Collateral in
any manner that would impair the ability to recover against the related Mortgaged Property, and (ii) the
Master Servicer shall proceed with any REO Acquisition in a manner that preserves the ability to apply the
proceeds of such Additional Collateral against amounts owed under the defaulted Mortgage Loan. Any proceeds
realized from such Additional Collateral (other than amounts to be released to the Mortgagor or the related
guarantor in accordance with procedures that the Master Servicer would follow in servicing loans held for its
own account, subject to the terms and conditions of the related Mortgage and Mortgage Note and to the terms
and conditions of any security agreement, guarantee agreement, mortgage or other agreement governing the
disposition of the proceeds of such Additional Collateral) shall be deposited in the Custodial Account,
subject to withdrawal pursuant to Section 3.10. Any other payment received by the Master Servicer in respect
of such Additional Collateral shall be deposited in the Custodial Account subject to withdrawal pursuant to
Section 3.10.
For so long as the Master Servicer is the Master Servicer under the Credit Support Pledge
Agreement, the Master Servicer shall perform its obligations under the Credit Support Pledge Agreement in
accordance with such Agreement and in a manner that is in the best interests of the Certificateholders.
Further, the Master Servicer shall use its best reasonable efforts to realize upon any Pledged Assets for
such of the Pledged Asset Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to Section 3.07; provided that the
Master Servicer shall not, on behalf of the Trustee, obtain title to any such Pledged Assets as a result of
or in lieu of the disposition thereof or otherwise; and provided further that (i) the Master Servicer shall
not proceed with respect to such Pledged Assets in any manner that would impair the ability to recover
against the related Mortgaged Property, and (ii) the Master Servicer shall proceed with any REO Acquisition
in a manner that preserves the ability to apply the proceeds of such Pledged Assets against amounts owed
under the defaulted Mortgage Loan. Any proceeds realized from such Pledged Assets (other than amounts to be
released to the Mortgagor or the related guarantor in accordance with procedures that the Master Servicer
would follow in servicing loans held for its own account, subject to the terms and conditions of the related
Mortgage and Mortgage Note and to the terms and conditions of any security agreement, guarantee agreement,
mortgage or other agreement governing the disposition of the proceeds of such Pledged Assets) shall be
deposited in the Custodial Account, subject to withdrawal pursuant to Section 3.10. Any other payment
received by the Master Servicer in respect of such Pledged Assets shall be deposited in the Custodial Account
subject to withdrawal pursuant to Section 3.10.
Concurrently with the foregoing, the Master Servicer may pursue any remedies that may be
available in connection with a breach of a representation and warranty with respect to any such Mortgage Loan
in accordance with Sections 2.03 and 2.04. However, the Master Servicer is not required to continue to
pursue both foreclosure (or similar remedies) with respect to the Mortgage Loans and remedies in connection
with a breach of a representation and warranty if the Master Servicer determines in its reasonable discretion
that one such remedy is more likely to result in a greater recovery as to the Mortgage Loan. Upon the
occurrence of a Cash Liquidation or REO Disposition, following the deposit in the Custodial Account of all
Insurance Proceeds, Liquidation Proceeds and other payments and recoveries referred to in the definition of
"Cash Liquidation" or "REO Disposition," as applicable, upon receipt by the Trustee of written notification of
such deposit signed by a Servicing Officer, the Trustee or any Custodian, as the case may be, shall release
to the Master Servicer the related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment prepared by the Master Servicer, in each case without recourse, as shall be
necessary to vest in the Master Servicer or its designee, as the case may be, the related Mortgage Loan, and
thereafter such Mortgage Loan shall not be part of the Trust Fund. Notwithstanding the foregoing or any
other provision of this Agreement, in the Master Servicer's sole discretion with respect to any defaulted
Mortgage Loan or REO Property as to either of the following provisions, (i) a Cash Liquidation or REO
Disposition may be deemed to have occurred if substantially all amounts expected by the Master Servicer to be
received in connection with the related defaulted Mortgage Loan or REO Property have been received, and (ii)
for purposes of determining the amount of any Liquidation Proceeds, Insurance Proceeds, REO Proceeds or any
other unscheduled collections or the amount of any Realized Loss, the Master Servicer may take into account
minimal amounts of additional receipts expected to be received or any estimated additional liquidation
expenses expected to be incurred in connection with the related defaulted Mortgage Loan or REO Property.
(b) If title to any Mortgaged Property is acquired by the Trust Fund as an REO Property by foreclosure or
by deed in lieu of foreclosure, the deed or certificate of sale shall be issued to the Trustee or to its
nominee on behalf of Certificateholders. Notwithstanding any such acquisition of title and cancellation of
the related Mortgage Loan, such REO Property shall (except as otherwise expressly provided herein) be
considered to be an Outstanding Mortgage Loan held in the Trust Fund until such time as the REO Property
shall be sold. Consistent with the foregoing for purposes of all calculations hereunder so long as such REO
Property shall be considered to be an Outstanding Mortgage Loan it shall be assumed that, notwithstanding
that the indebtedness evidenced by the related Mortgage Note shall have been discharged, such Mortgage Note
and the related amortization schedule in effect at the time of any such acquisition of title (after giving
effect to any previous Curtailments and before any adjustment thereto by reason of any bankruptcy or similar
proceeding or any moratorium or similar waiver or grace period) remain in effect.
(c) If the Trust Fund acquires any REO Property as aforesaid or otherwise in connection with a default or
imminent default on a Mortgage Loan, the Master Servicer on behalf of the Trust Fund shall dispose of such
REO Property as soon as practicable, giving due consideration to the interests of the Certificateholders, but
in all cases within three full years after the taxable year of its acquisition by the Trust Fund for purposes
of Section 860G(a)(8) of the Code (or such shorter period as may be necessary under applicable state
(including any state in which such property is located) law to maintain the status of any portion of any
REMIC formed under the Series Supplement as a REMIC under applicable state law and avoid taxes resulting from
such property failing to be foreclosure property under applicable state law) or, at the expense of the Trust
Fund, request, more than 60 days before the day on which such grace period would otherwise expire, an
extension of such grace period unless the Master Servicer (subject to Section 10.01(f)) obtains for the
Trustee an Opinion of Counsel, addressed to the Trustee and the Master Servicer, to the effect that the
holding by the Trust Fund of such REO Property subsequent to such period will not result in the imposition of
taxes on "prohibited transactions" as defined in Section 860F of the Code or cause any REMIC formed under the
Series Supplement to fail to qualify as a REMIC (for federal (or any applicable State or local) income tax
purposes) at any time that any Certificates are outstanding, in which case the Trust Fund may continue to
hold such REO Property (subject to any conditions contained in such Opinion of Counsel). The Master Servicer
shall be entitled to be reimbursed from the Custodial Account for any costs incurred in obtaining such
Opinion of Counsel, as provided in Section 3.10. Notwithstanding any other provision of this Agreement, no
REO Property acquired by the Trust Fund shall be rented (or allowed to continue to be rented) or otherwise
used by or on behalf of the Trust Fund in such a manner or pursuant to any terms that would (i) cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the
Code or (ii) subject the Trust Fund to the imposition of any federal income taxes on the income earned from
such REO Property, including any taxes imposed by reason of Section 860G(c) of the Code, unless the Master
Servicer has agreed to indemnify and hold harmless the Trust Fund with respect to the imposition of any such
taxes.
(d) The proceeds of any Cash Liquidation, REO Disposition or purchase or repurchase of any Mortgage Loan
pursuant to the terms of this Agreement, as well as any recovery resulting from a collection of Liquidation
Proceeds, Insurance Proceeds or REO Proceeds, will be applied in the following order of priority: first, to
reimburse the Master Servicer or the related Subservicer in accordance with Section 3.10(a)(ii); second, to
the Certificateholders to the extent of accrued and unpaid interest on the Mortgage Loan, and any related REO
Imputed Interest, at the Net Mortgage Rate (or the Modified Net Mortgage Rate in the case of a Modified
Mortgage Loan) to the Due Date prior to the Distribution Date on which such amounts are to be distributed;
third, to the Certificateholders as a recovery of principal on the Mortgage Loan (or REO Property); fourth,
to all Servicing Fees and Subservicing Fees payable therefrom (and the Master Servicer and the Subservicer
shall have no claims for any deficiencies with respect to such fees which result from the foregoing
allocation); and fifth, to Foreclosure Profits.
(e) In the event of a default on a Mortgage Loan one or more of whose obligors is not a United States
Person, in connection with any foreclosure or acquisition of a deed in lieu of foreclosure (together,
"foreclosure") in respect of such Mortgage Loan, the Master Servicer will cause compliance with the provisions
of Treasury Regulation Section 1.1445-2(d)(3) (or any successor thereto) necessary to assure that no
withholding tax obligation arises with respect to the proceeds of such foreclosure except to the extent, if
any, that proceeds of such foreclosure are required to be remitted to the obligors on such Mortgage Loan.
Section 3.15. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon becoming aware of the payment in full of any Mortgage Loan, or upon the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the
Master Servicer will immediately notify the Trustee (if it holds the related Mortgage File) or the Custodian
by a certification of a Servicing Officer (which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are required to be deposited in
the Custodial Account pursuant to Section 3.07 have been or will be so deposited), substantially in one of
the forms attached hereto as Exhibit F, or, in the case of the Custodian, an electronic request in a form
acceptable to the Custodian, requesting delivery to it of the Mortgage File. Within two Business Days of
receipt of such certification and request, the Trustee shall release, or cause the Custodian to release, the
related Mortgage File to the Master Servicer. The Master Servicer is authorized to execute and deliver to
the Mortgagor the request for reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage, together with the Mortgage Note with, as appropriate,
written evidence of cancellation thereon and to cause the removal from the registration on the MERS(R)System
of such Mortgage and to execute and deliver, on behalf of the Trustee and the Certificateholders or any of
them, any and all instruments of satisfaction or cancellation or of partial or full release. No expenses
incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the
Custodial Account or the Certificate Account.
(b) From time to time as is appropriate for the servicing or foreclosure of any Mortgage Loan, the Master
Servicer shall deliver to the Custodian, with a copy to the Trustee, a certificate of a Servicing Officer
substantially in one of the forms attached as Exhibit F hereto, or, in the case of the Custodian, an
electronic request in a form acceptable to the Custodian, requesting that possession of all, or any document
constituting part of, the Mortgage File be released to the Master Servicer and certifying as to the reason
for such release and that such release will not invalidate any insurance coverage provided in respect of the
Mortgage Loan under any Required Insurance Policy. Upon receipt of the foregoing, the Trustee shall deliver,
or cause the Custodian to deliver, the Mortgage File or any document therein to the Master Servicer. The
Master Servicer shall cause each Mortgage File or any document therein so released to be returned to the
Trustee, or the Custodian as agent for the Trustee when the need therefor by the Master Servicer no longer
exists, unless (i) the Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Custodial Account or (ii) the Mortgage File or such document has
been delivered directly or through a Subservicer to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and the Master Servicer has
delivered directly or through a Subservicer to the Trustee a certificate of a Servicing Officer certifying as
to the name and address of the Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery. In the event of the liquidation of a Mortgage Loan, the Trustee shall
deliver the Request for Release with respect thereto to the Master Servicer upon deposit of the related
Liquidation Proceeds in the Custodial Account.
(c) The Trustee or the Master Servicer on the Trustee's behalf shall execute and deliver to the Master
Servicer, if necessary, any court pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Together with such documents or pleadings (if signed by the Trustee), the Master Servicer
shall deliver to the Trustee a certificate of a Servicing Officer requesting that such pleadings or documents
be executed by the Trustee and certifying as to the reason such documents or pleadings are required and that
the execution and delivery thereof by the Trustee will not invalidate any insurance coverage under any
Required Insurance Policy or invalidate or otherwise affect the lien of the Mortgage, except for the
termination of such a lien upon completion of the foreclosure or trustee's sale.
Section 3.16. Servicing and Other Compensation; Compensating Interest.
(a) The Master Servicer, as compensation for its activities hereunder, shall be entitled to receive on
each Distribution Date the amounts provided for by clauses (iii), (iv), (v) and (vi) of Section 3.10(a),
subject to clause (e) below. The amount of servicing compensation provided for in such clauses shall be
accounted for on a Mortgage Loan-by-Mortgage Loan basis. In the event that Liquidation Proceeds, Insurance
Proceeds and REO Proceeds (net of amounts reimbursable therefrom pursuant to Section 3.10(a)(ii)) in respect
of a Cash Liquidation or REO Disposition exceed the unpaid principal balance of such Mortgage Loan plus
unpaid interest accrued thereon (including REO Imputed Interest) at a per annum rate equal to the related Net
Mortgage Rate (or the Modified Net Mortgage Rate in the case of a Modified Mortgage Loan), the Master
Servicer shall be entitled to retain therefrom and to pay to itself and/or the related Subservicer, any
Foreclosure Profits and any Servicing Fee or Subservicing Fee considered to be accrued but unpaid.
(b) Additional servicing compensation in the form of prepayment charges, assumption fees, late payment
charges, investment income on amounts in the Custodial Account or the Certificate Account or otherwise shall
be retained by the Master Servicer or the Subservicer to the extent provided herein, subject to clause (e)
below.
(c) The Master Servicer shall be required to pay, or cause to be paid, all expenses incurred by it in
connection with its servicing activities hereunder (including payment of premiums for the Primary Insurance
Policies, if any, to the extent such premiums are not required to be paid by the related Mortgagors, and the
fees and expenses of the Trustee and any co-trustee (as provided in Section 8.05) and the fees and expense of
any Custodian) and shall not be entitled to reimbursement therefor except as specifically provided in
Sections 3.10 and 3.14.
(d) The Master Servicer's right to receive servicing compensation may not be transferred in whole or in
part except in connection with the transfer of all of its responsibilities and obligations of the Master
Servicer under this Agreement.
(e) Notwithstanding any other provision herein, the amount of servicing compensation that the Master
Servicer shall be entitled to receive for its activities hereunder for the period ending on each Distribution
Date shall be reduced (but not below zero) by an amount equal to Compensating Interest (if any) for such
Distribution Date. Such reduction shall be applied during such period as follows: first, to any Servicing
Fee or Subservicing Fee to which the Master Servicer is entitled pursuant to Section 3.10(a)(iii), and
second, to any income or gain realized from any investment of funds held in the Custodial Account or the
Certificate Account to which the Master Servicer is entitled pursuant to Sections 3.07(c) or 4.01(b),
respectively. In making such reduction, the Master Servicer (i) will not withdraw from the Custodial Account
any such amount representing all or a portion of the Servicing Fee to which it is entitled pursuant to
Section 3.10(a)(iii), and (ii) will not withdraw from the Custodial Account or Certificate Account any such
amount to which it is entitled pursuant to Section 3.07(c) or 4.01(b).
Section 3.17. Reports to the Trustee and the Company.
Not later than fifteen days after it receives a written request from the Trustee or the Company, the
Master Servicer shall forward to the Trustee and the Company a statement, certified by a Servicing Officer,
setting forth the status of the Custodial Account as of the close of business on the immediately preceding
Distribution Date as it relates to the Mortgage Loans and showing, for the period covered by such statement,
the aggregate of deposits in or withdrawals from the Custodial Account in respect of the Mortgage Loans for
each category of deposit specified in Section 3.07 and each category of withdrawal specified in Section 3.10.
Section 3.18. Annual Statement as to Compliance and Servicing Assessment.
The Master Servicer will deliver to the Company and the Trustee on or before the earlier of (a) March
31 of each year or (b) with respect to any calendar year during which the Company's annual report on Form
10-K is required to be filed in accordance with the Exchange Act and the rules and regulations of the
Commission, the date on which the annual report on Form 10-K is required to be filed in accordance with the
Exchange Act and the rules and regulations of the Commission, (i) a servicing assessment as described in
Section 4.03(f)(ii) and (ii) a servicer compliance statement, signed by an authorized officer of the Master
Servicer, as described in Items 1122(a), 1122(b) and 1123 of Regulation AB, to the effect that:
(A) A review of the Master Servicer's activities during the reporting period and of its performance
under this Agreement has been made under such officer's supervision.
(B) To the best of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all of its obligations under this Agreement in all material respects throughout the reporting
period or, if there has been a failure to fulfill any such obligation in any material respect, specifying
each such failure known to such officer and the nature and status thereof.
The Master Servicer shall use commercially reasonable efforts to obtain from all other parties
participating in the servicing function any additional certifications required under Item 1122 and Item 1123
of Regulation AB to the extent required to be included in a Report on Form 10-K; provided, however, that a
failure to obtain such certifications shall not be a breach of the Master Servicer's duties hereunder if any
such party fails to deliver such a certification.
Section 3.19. Annual Independent Public Accountants' Servicing Report.
On or before the earlier of (a) March 31 of each year or (b) with respect to any calendar year during
which the Company's annual report on Form 10-K is required to be filed in accordance with the Exchange Act
and the rules and regulations of the Commission, the date on which the annual report on Form 10-K is required
to be filed in accordance with the Exchange Act and the rules and regulations of the Commission, the Master
Servicer at its expense shall cause a firm of independent public accountants, which shall be members of the
American Institute of Certified Public Accountants, to furnish to the Company and the Trustee the attestation
required under Item 1122(b) of Regulation AB. In rendering such statement, such firm may rely, as to matters
relating to the direct servicing of mortgage loans by Subservicers, upon comparable statements for
examinations conducted by independent public accountants substantially in accordance with standards
established by the American Institute of Certified Public Accountants (rendered within one year of such
statement) with respect to such Subservicers.
Section 3.20. Rights of the Company in Respect of the Master Servicer.
The Master Servicer shall afford the Company, upon reasonable notice, during normal business hours
access to all records maintained by the Master Servicer in respect of its rights and obligations hereunder
and access to officers of the Master Servicer responsible for such obligations. Upon request, the Master
Servicer shall furnish the Company with its most recent financial statements and such other information as
the Master Servicer possesses regarding its business, affairs, property and condition, financial or
otherwise. The Master Servicer shall also cooperate with all reasonable requests for information including,
but not limited to, notices, tapes and copies of files, regarding itself, the Mortgage Loans or the
Certificates from any Person or Persons identified by the Company or Residential Funding. The Company may,
but is not obligated to, enforce the obligations of the Master Servicer hereunder and may, but is not
obligated to, perform, or cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder or exercise the rights of the Master Servicer hereunder; provided that the Master Servicer shall
not be relieved of any of its obligations hereunder by virtue of such performance by the Company or its
designee. The Company shall not have any responsibility or liability for any action or failure to act by the
Master Servicer and is not obligated to supervise the performance of the Master Servicer under this Agreement
or otherwise.
Section 3.21. Administration of Buydown Funds
(a) With respect to any Buydown Mortgage Loan, the Subservicer has deposited Buydown Funds in an account
that satisfies the requirements for a Subservicing Account (the "Buydown Account"). The Master Servicer
shall cause the Subservicing Agreement to require that upon receipt from the Mortgagor of the amount due on a
Due Date for each Buydown Mortgage Loan, the Subservicer will withdraw from the Buydown Account the
predetermined amount that, when added to the amount due on such date from the Mortgagor, equals the full
Monthly Payment and transmit that amount in accordance with the terms of the Subservicing Agreement to the
Master Servicer together with the related payment made by the Mortgagor or advanced by the Subservicer.
(b) If the Mortgagor on a Buydown Mortgage Loan prepays such loan in its entirety during the period (the
"Buydown Period") when Buydown Funds are required to be applied to such Buydown Mortgage Loan, the Subservicer
shall be required to withdraw from the Buydown Account and remit any Buydown Funds remaining in the Buydown
Account in accordance with the related buydown agreement. The amount of Buydown Funds which may be remitted
in accordance with the related buydown agreement may reduce the amount required to be paid by the Mortgagor
to fully prepay the related Mortgage Loan. If the Mortgagor on a Buydown Mortgage Loan defaults on such
Mortgage Loan during the Buydown Period and the property securing such Buydown Mortgage Loan is sold in the
liquidation thereof (either by the Master Servicer or the insurer under any related Primary Insurance
Policy), the Subservicer shall be required to withdraw from the Buydown Account the Buydown Funds for such
Buydown Mortgage Loan still held in the Buydown Account and remit the same to the Master Servicer in
accordance with the terms of the Subservicing Agreement for deposit in the Custodial Account or, if
instructed by the Master Servicer, pay to the insurer under any related Primary Insurance Policy if the
Mortgaged Property is transferred to such insurer and such insurer pays all of the loss incurred in respect
of such default. Any amount so remitted pursuant to the preceding sentence will be deemed to reduce the
amount owed on the Mortgage Loan.
Section 3.22. Advance Facility
(a) The Master Servicer is hereby authorized to enter into a financing or other facility (any such
arrangement, an "Advance Facility") under which (1) the Master Servicer sells, assigns or pledges to another
Person (an "Advancing Person") the Master Servicer's rights under this Agreement to be reimbursed for any
Advances or Servicing Advances and/or (2) an Advancing Person agrees to fund some or all Advances and/or
Servicing Advances required to be made by the Master Servicer pursuant to this Agreement. No consent of the
Depositor, the Trustee, the Certificateholders or any other party shall be required before the Master
Servicer may enter into an Advance Facility. Notwithstanding the existence of any Advance Facility under
which an Advancing Person agrees to fund Advances and/or Servicing Advances on the Master Servicer's behalf,
the Master Servicer shall remain obligated pursuant to this Agreement to make Advances and Servicing
Advances pursuant to and as required by this Agreement. If the Master Servicer enters into an Advance
Facility, and for so long as an Advancing Person remains entitled to receive reimbursement for any Advances
including Nonrecoverable Advances ("Advance Reimbursement Amounts") and/or Servicing Advances including
Nonrecoverable Advances ("Servicing Advance Reimbursement Amounts" and together with Advance Reimbursement
Amounts, "Reimbursement Amounts") (in each case to the extent such type of Reimbursement Amount is included
in the Advance Facility), as applicable, pursuant to this Agreement, then the Master Servicer shall identify
such Reimbursement Amounts consistent with the reimbursement rights set forth in Section 3.10(a)(ii) and
(vii) and remit such Reimbursement Amounts in accordance with this Section 3.22 or otherwise in accordance
with the documentation establishing the Advance Facility to such Advancing Person or to a trustee, agent or
custodian (an "Advance Facility Trustee") designated by such Advancing Person in an Advance Facility Notice
described below in Section 3.22(b). Notwithstanding the foregoing, if so required pursuant to the terms of
the Advance Facility, the Master Servicer may direct, and if so directed in writing the Trustee is hereby
authorized to and shall pay to the Advance Facility Trustee the Reimbursement Amounts identified pursuant to
the preceding sentence. An Advancing Person whose obligations hereunder are limited to the funding of
Advances and/or Servicing Advances shall not be required to meet the qualifications of a Master Servicer or a
Subservicer pursuant to Section 3.02(a) or 6.02(c) hereof and shall not be deemed to be a Subservicer under
this Agreement. Notwithstanding anything to the contrary herein, in no event shall Advance Reimbursement
Amounts or Servicing Advance Reimbursement Amounts be included in the Available Distribution Amount or
distributed to Certificateholders.
(b) If the Master Servicer enters into an Advance Facility and makes the election set forth in Section
3.22(a), the Master Servicer and the related Advancing Person shall deliver to the Certificate Insurer and
the Trustee a written notice and payment instruction (an "Advance Facility Notice"), providing the Trustee
with written payment instructions as to where to remit Advance Reimbursement Amounts and/or Servicing Advance
Reimbursement Amounts (each to the extent such type of Reimbursement Amount is included within the Advance
Facility) on subsequent Distribution Dates. The payment instruction shall require the applicable
Reimbursement Amounts to be distributed to the Advancing Person or to an Advance Facility Trustee designated
in the Advance Facility Notice. An Advance Facility Notice may only be terminated by the joint written
direction of the Master Servicer and the related Advancing Person (and any related Advance Facility
Trustee). The Master Servicer shall provide the Certificate Insurer, if any, with notice of any termination
of any Advance Facility pursuant to this Section 3.22(b).
(c) Reimbursement Amounts shall consist solely of amounts in respect of Advances and/or Servicing Advances
made with respect to the Mortgage Loans for which the Master Servicer would be permitted to reimburse itself
in accordance with Section 3.10(a)(ii) and (vii) hereof, assuming the Master Servicer or the Advancing Person
had made the related Advance(s) and/or Servicing Advance(s). Notwithstanding the foregoing, except with
respect to reimbursement of Nonrecoverable Advances as set forth in Section 3.10(c) of this Agreement, no
Person shall be entitled to reimbursement from funds held in the Collection Account for future distribution
to Certificateholders pursuant to this Agreement. Neither the Company nor the Trustee shall have any duty or
liability with respect to the calculation of any Reimbursement Amount, nor shall the Company or the Trustee
have any responsibility to track or monitor the administration of the Advance Facility or have any
responsibility to track, monitor or verify the payment of Reimbursement Amounts to the related Advancing
Person or Advance Facility Trustee. The Master Servicer shall maintain and provide to any Successor Master
Servicer a detailed accounting on a loan-by-loan basis as to amounts advanced by, sold, pledged or assigned
to, and reimbursed to any Advancing Person. The Successor Master Servicer shall be entitled to rely on any
such information provided by the Master Servicer and the Successor Master Servicer shall not be liable for
any errors in such information.
(d) Upon the direction of and at the expense of the Master Servicer, the Trustee agrees to execute such
acknowledgments, certificates and other documents reasonably satisfactory to the Trustee provided by the
Master Servicer recognizing the interests of any Advancing Person or Advance Facility Trustee in such
Reimbursement Amounts as the Master Servicer may cause to be made subject to Advance Facilities pursuant to
this Section 3.22.
(e) Reimbursement Amounts collected with respect to each Mortgage Loan shall be allocated to outstanding
unreimbursed Advances or Servicing Advances (as the case may be) made with respect to that Mortgage Loan on a
"first-in, first out" ("FIFO") basis, subject to the qualifications set forth below:
(i) Any successor Master Servicer to Residential Funding (a "Successor Master Servicer")
and the Advancing Person or Advance Facility Trustee shall be required to apply all amounts available
in accordance with this Section 3.22(e) to the reimbursement of Advances and Servicing Advances in the
manner provided for herein; provided, however, that after the succession of a Successor Master
Servicer, (A) to the extent that any Advances or Servicing Advances with respect to any particular
Mortgage Loan are reimbursed from payments or recoveries, if any, from the related Mortgagor, and
Liquidation Proceeds or Insurance Proceeds, if any, with respect to that Mortgage Loan, reimbursement
shall be made, first, to the Advancing Person or Advance Facility Trustee in respect of Advances
and/or Servicing Advances related to that Mortgage Loan to the extent of the interest of the Advancing
Person or Advance Facility Trustee in such Advances and/or Servicing Advances, second to the Master
Servicer in respect of Advances and/or Servicing Advances related to that Mortgage Loan in excess of
those in which the Advancing Person or Advance Facility Trustee Person has an interest, and third, to
the Successor Master Servicer in respect of any other Advances and/or Servicing Advances related to
that Mortgage Loan, from such sources as and when collected, and (B) reimbursements of Advances and
Servicing Advances that are Nonrecoverable Advances shall be made pro rata to the Advancing Person or
Advance Facility Trustee, on the one hand, and any such Successor Master Servicer, on the other hand,
on the basis of the respective aggregate outstanding unreimbursed Advances and Servicing Advances that
are Nonrecoverable Advances owed to the Advancing Person, Advance Facility Trustee or Master Servicer
pursuant to this Agreement, on the one hand, and any such Successor Master Servicer, on the other
hand, and without regard to the date on which any such Advances or Servicing Advances shall have been
made. In the event that, as a result of the FIFO allocation made pursuant to this Section 3.22(e),
some or all of a Reimbursement Amount paid to the Advancing Person or Advance Facility Trustee relates
to Advances or Servicing Advances that were made by a Person other than Residential Funding or the
Advancing Person or Advance Facility Trustee, then the Advancing Person or Advance Facility Trustee
shall be required to remit any portion of such Reimbursement Amount to the Person entitled to such
portion of such Reimbursement Amount. Without limiting the generality of the foregoing, Residential
Funding shall remain entitled to be reimbursed by the Advancing Person or Advance Facility Trustee for
all Advances and Servicing Advances funded by Residential Funding to the extent the related
Reimbursement Amount(s) have not been assigned or pledged to an Advancing Person or Advance Facility
Trustee. The documentation establishing any Advance Facility shall require Residential Funding to
provide to the related Advancing Person or Advance Facility Trustee loan by loan information with
respect to each Reimbursement Amount distributed to such Advancing Person or Advance Facility Trustee
on each date of remittance thereof to such Advancing Person or Advance Facility Trustee, to enable the
Advancing Person or Advance Facility Trustee to make the FIFO allocation of each Reimbursement Amount
with respect to each Mortgage Loan.
(ii) By way of illustration, and not by way of limiting the generality of the foregoing, if
the Master Servicer resigns or is terminated at a time when the Master Servicer is a party to an
Advance Facility, and is replaced by a Successor Master Servicer, and the Successor Master Servicer
directly funds Advances or Servicing Advances with respect to a Mortgage Loan and does not assign or
pledge the related Reimbursement Amounts to the related Advancing Person or Advance Facility Trustee,
then all payments and recoveries received from the related Mortgagor or received in the form of
Liquidation Proceeds with respect to such Mortgage Loan (including Insurance Proceeds collected in
connection with a liquidation of such Mortgage Loan) will be allocated first to the Advancing Person
or Advance Facility Trustee until the related Reimbursement Amounts attributable to such Mortgage Loan
that are owed to the Master Servicer and the Advancing Person, which were made prior to any Advances
or Servicing Advances made by the Successor Master Servicer, have been reimbursed in full, at which
point the Successor Master Servicer shall be entitled to retain all related Reimbursement Amounts
subsequently collected with respect to that Mortgage Loan pursuant to Section 3.10 of this Agreement.
To the extent that the Advances or Servicing Advances are Nonrecoverable Advances to be reimbursed on
an aggregate basis pursuant to Section 3.10 of this Agreement, the reimbursement paid in this manner
will be made pro rata to the Advancing Person or Advance Facility Trustee, on the one hand, and the
Successor Master Servicer, on the other hand, as described in clause (i)(B) above.
(f) The Master Servicer shall remain entitled to be reimbursed for all Advances and Servicing
Advances funded by the Master Servicer to the extent the related rights to be reimbursed therefor have not
been sold, assigned or pledged to an Advancing Person.
(g) Any amendment to this Section 3.22 or to any other provision of this Agreement that may be
necessary or appropriate to effect the terms of an Advance Facility as described generally in this Section
3.22, including amendments to add provisions relating to a successor Master Servicer, may be entered into by
the Trustee, the Certificate Insurer, Company and the Master Servicer without the consent of any
Certificateholder, with written confirmation from each Rating Agency that the amendment will not result in
the reduction of the ratings on any class of the Certificates below the lesser of the then current or
original ratings on such Certificates, and an opinion of counsel as required by Section 11.01(c),
notwithstanding anything to the contrary in Section 11.01 of or elsewhere in this Agreement.
(h) Any rights of set-off that the Trust Fund, the Trustee, the Company, any Successor Master
Servicer or any other Person might otherwise have against the Master Servicer under this Agreement shall not
attach to any rights to be reimbursed for Advances or Servicing Advances that have been sold, transferred,
pledged, conveyed or assigned to any Advancing Person.
(i) At any time when an Advancing Person shall have ceased funding Advances and/or Servicing
Advances (as the case may be) and the Advancing Person or related Advance Facility Trustee shall have
received Reimbursement Amounts sufficient in the aggregate to reimburse all Advances and/or Servicing
Advances (as the case may be) the right to reimbursement for which were assigned to the Advancing Person,
then upon the delivery of a written notice signed by the Advancing Person and the Master Servicer or its
successor or assign) to the Trustee terminating the Advance Facility Notice (the "Notice of Facility
Termination"), the Master Servicer or its Successor Master Servicer shall again be entitled to withdraw and
retain the related Reimbursement Amounts from the Custodial Account pursuant to Section 3.10.
(j) After delivery of any Advance Facility Notice, and until any such Advance Facility Notice has
been terminated by a Notice of Facility Termination, this Section 3.22 may not be amended or otherwise
modified without the prior written consent of the related Advancing Person.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account.
(a) The Master Servicer on behalf of the Trustee shall establish and maintain a Certificate Account in
which the Master Servicer shall cause to be deposited on behalf of the Trustee on or before 2:00 P.M. New
York time on each Certificate Account Deposit Date by wire transfer of immediately available funds an amount
equal to the sum of (i) any Advance for the immediately succeeding Distribution Date, (ii) any amount
required to be deposited in the Certificate Account pursuant to Section 3.12(a), (iii) any amount required to
be deposited in the Certificate Account pursuant to Section 3.16(e) or Section 4.07, (iv) any amount required
to be paid pursuant to Section 9.01 and (v) all other amounts constituting the Available Distribution Amount
for the immediately succeeding Distribution Date.
(b) The Trustee shall, upon written request from the Master Servicer, invest or cause the institution
maintaining the Certificate Account to invest the funds in the Certificate Account in Permitted Investments
designated in the name of the Trustee for the benefit of the Certificateholders, which shall mature or be
payable on demand not later than the Business Day next preceding the Distribution Date next following the
date of such investment (except that (i) any investment in the institution with which the Certificate Account
is maintained may mature or be payable on demand on such Distribution Date and (ii) any other investment may
mature or be payable on demand on such Distribution Date if the Trustee shall advance funds on such
Distribution Date to the Certificate Account in the amount payable on such investment on such Distribution
Date, pending receipt thereof to the extent necessary to make distributions on the Certificates) and shall
not be sold or disposed of prior to maturity. Subject to Section 3.16(e), all income and gain realized from
any such investment shall be for the benefit of the Master Servicer and shall be subject to its withdrawal or
order from time to time. The amount of any losses incurred in respect of any such investments shall be
deposited in the Certificate Account by the Master Servicer out of its own funds immediately as realized
without any right of reimbursement. The Trustee or its Affiliates are permitted to receive compensation that
could be deemed to be in the Trustee's economic self-interest for (i) serving as investment adviser (with
respect to investments made through its Affiliates), administrator, shareholder servicing agent, custodian or
sub-custodian with respect to certain of the Permitted Investments, (ii) using Affiliates to effect
transactions in certain Permitted Investments and (iii) effecting transactions in certain Permitted
Investments.
Section 4.02. Distributions.
As provided in Section 4.02 of the Series Supplement.
Section 4.03. Statements to Certificateholders; Statements to Rating Agencies; Exchange Act Reporting.
(a) Concurrently with each distribution charged to the Certificate Account and with respect to each
Distribution Date the Master Servicer shall forward to the Trustee and the Trustee shall either forward by
mail or make available to each Holder and the Company, via the Trustee's internet website, a statement (and
at its option, any additional files containing the same information in an alternative format) setting forth
information as to each Class of Certificates, the Mortgage Pool and, if the Mortgage Pool is comprised of two
or more Loan Groups, each Loan Group, to the extent applicable. This statement will include the information
set forth in an exhibit to the Series Supplement. The Trustee shall mail to each Holder that requests a
paper copy by telephone a paper copy via first class mail. The Trustee may modify the distribution
procedures set forth in this Section provided that such procedures are no less convenient for the
Certificateholders. The Trustee shall provide prior notification to the Company, the Master Servicer and the
Certificateholders regarding any such modification. In addition, the Master Servicer shall provide to any
manager of a trust fund consisting of some or all of the Certificates, upon reasonable request, such
additional information as is reasonably obtainable by the Master Servicer at no additional expense to the
Master Servicer. Also, at the request of a Rating Agency, the Master Servicer shall provide the information
relating to the Reportable Modified Mortgage Loans substantially in the form attached hereto as Exhibit Q to
such Rating Agency within a reasonable period of time; provided, however, that the Master Servicer shall not
be required to provide such information more than four times in a calendar year to any Rating Agency.
(b) Within a reasonable period of time after it receives a written request from a Holder of a Certificate,
other than a Class R Certificate, the Master Servicer shall prepare, or cause to be prepared, and shall
forward, or cause to be forwarded, to each Person who at any time during the calendar year was the Holder of
a Certificate, other than a Class R Certificate, a statement containing the information set forth in clauses
(v) and (vi) of the exhibit to the Series Supplement referred to in subsection (a) above aggregated for such
calendar year or applicable portion thereof during which such Person was a Certificateholder. Such
obligation of the Master Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer pursuant to any requirements of the Code.
(c) Within a reasonable period of time after it receives a written request from a Holder of a Class R
Certificate, the Master Servicer shall prepare, or cause to be prepared, and shall forward, or cause to be
forwarded, to each Person who at any time during the calendar year was the Holder of a Class R Certificate, a
statement containing the applicable distribution information provided pursuant to this Section 4.03
aggregated for such calendar year or applicable portion thereof during which such Person was the Holder of a
Class R Certificate. Such obligation of the Master Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the Master Servicer pursuant to any
requirements of the Code.
(d) Upon the written request of any Certificateholder, the Master Servicer, as soon as reasonably
practicable, shall provide the requesting Certificateholder with such information as is necessary and
appropriate, in the Master Servicer's sole discretion, for purposes of satisfying applicable reporting
requirements under Rule 144A.
(e) The Master Servicer shall, on behalf of the Company and in respect of the Trust Fund, sign and cause
to be filed with the Commission any periodic reports required to be filed under the provisions of the
Exchange Act, and the rules and regulations of the Commission thereunder including, without limitation,
reports on Form 10-K, Form 10-D and Form 8-K. In connection with the preparation and filing of such periodic
reports, the Trustee shall timely provide to the Master Servicer (I) a list of Certificateholders as shown on
the Certificate Register as of the end of each calendar year, (II) copies of all pleadings, other legal
process and any other documents relating to any claims, charges or complaints involving the Trustee, as
trustee hereunder, or the Trust Fund that are received by a Responsible Officer of the Trustee, (III) notice
of all matters that, to the actual knowledge of a Responsible Officer of the Trustee, have been submitted to
a vote of the Certificateholders, other than those matters that have been submitted to a vote of the
Certificateholders at the request of the Company or the Master Servicer, and (IV) notice of any failure of
the Trustee to make any distribution to the Certificateholders as required pursuant to the Series Supplement.
Neither the Master Servicer nor the Trustee shall have any liability with respect to the Master Servicer's
failure to properly prepare or file such periodic reports resulting from or relating to the Master Servicer's
inability or failure to obtain any information not resulting from the Master Servicer's own negligence or
willful misconduct.
(f) Any Form 10-K filed with the Commission in connection with this Section 4.03 shall include, with
respect to the Certificates relating to such 10-K:
(i) A certification, signed by the senior officer in charge of the servicing functions of the Master
Servicer, in the form attached as Exhibit O hereto or such other form as may be required or permitted
by the Commission (the "Form 10-K Certification"), in compliance with Rules 13a-14 and 15d-14 under
the Exchange Act and any additional directives of the Commission.
(ii) A report regarding its assessment of compliance during the preceding calendar year with all applicable
servicing criteria set forth in relevant Commission regulations with respect to mortgage-backed
securities transactions taken as a whole involving the Master Servicer that are backed by the same
types of assets as those backing the certificates, as well as similar reports on assessment of
compliance received from other parties participating in the servicing function as required by relevant
Commission regulations, as described in Item 1122(a) of Regulation AB. The Master Servicer shall
obtain from all other parties participating in the servicing function any required assessments.
(iii) With respect to each assessment report described immediately above, a report by a registered public
accounting firm that attests to, and reports on, the assessment made by the asserting party, as set
forth in relevant Commission regulations, as described in Regulation 1122(b) of Regulation AB and
Section 3.19.
(iv) The servicer compliance certificate required to be delivered pursuant Section 3.18.
(g) In connection with the Form 10-K Certification, the Trustee shall provide the Master Servicer with a
back-up certification substantially in the form attached hereto as Exhibit P.
(h) This Section 4.03 may be amended in accordance with this Agreement without the consent of the
Certificateholders.
(i) The Trustee shall make available on the Trustee's internet website each of the reports filed with the
Commission by or on behalf of the Company under the Exchange Act, as soon as reasonably practicable upon
delivery of such reports to the Trustee.
Section 4.04. Distribution of Reports to the Trustee and
the Company; Advances by the Master Servicer.
(a) Prior to the close of business on the Determination Date, the Master Servicer shall furnish a written
statement to the Trustee, any Paying Agent and the Company (the information in such statement to be made
available to any Certificate Insurer and Certificateholders by the Master Servicer on request) setting forth
(i) the Available Distribution Amount and (ii) the amounts required to be withdrawn from the Custodial
Account and deposited into the Certificate Account on the immediately succeeding Certificate Account Deposit
Date pursuant to clause (iii) of Section 4.01(a). The determination by the Master Servicer of such amounts
shall, in the absence of obvious error, be presumptively deemed to be correct for all purposes hereunder and
the Trustee shall be protected in relying upon the same without any independent check or verification.
(b) On or before 2:00 P.M. New York time on each Certificate Account Deposit Date, the Master Servicer
shall either (i) deposit in the Certificate Account from its own funds, or funds received therefor from the
Subservicers, an amount equal to the Advances to be made by the Master Servicer in respect of the related
Distribution Date, which shall be in an aggregate amount equal to the aggregate amount of Monthly Payments
(with each interest portion thereof adjusted to the Net Mortgage Rate), less the amount of any related
Servicing Modifications, Debt Service Reductions or reductions in the amount of interest collectable from the
Mortgagor pursuant to the Servicemembers Civil Relief Act, as amended, or similar legislation or regulations
then in effect, on the Outstanding Mortgage Loans as of the related Due Date, which Monthly Payments were not
received as of the close of business as of the related Determination Date; provided that no Advance shall be
made if it would be a Nonrecoverable Advance, (ii) withdraw from amounts on deposit in the Custodial Account
and deposit in the Certificate Account all or a portion of the Amount Held for Future Distribution in
discharge of any such Advance, or (iii) make advances in the form of any combination of (i) and (ii)
aggregating the amount of such Advance. Any portion of the Amount Held for Future Distribution so used shall
be replaced by the Master Servicer by deposit in the Certificate Account on or before 11:00 A.M. New York
time on any future Certificate Account Deposit Date to the extent that funds attributable to the Mortgage
Loans that are available in the Custodial Account for deposit in the Certificate Account on such Certificate
Account Deposit Date shall be less than payments to Certificateholders required to be made on the following
Distribution Date. The Master Servicer shall be entitled to use any Advance made by a Subservicer as
described in Section 3.07(b) that has been deposited in the Custodial Account on or before such Distribution
Date as part of the Advance made by the Master Servicer pursuant to this Section 4.04. The amount of any
reimbursement pursuant to Section 4.02(a) in respect of outstanding Advances on any Distribution Date shall
be allocated to specific Monthly Payments due but delinquent for previous Due Periods, which allocation shall
be made, to the extent practicable, to Monthly Payments which have been delinquent for the longest period of
time. Such allocations shall be conclusive for purposes of reimbursement to the Master Servicer from
recoveries on related Mortgage Loans pursuant to Section 3.10.
The determination by the Master Servicer that it has made a Nonrecoverable Advance or that any
proposed Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate of the Master Servicer delivered to the Company and the Trustee.
If the Master Servicer determines as of the Business Day preceding any Certificate Account Deposit
Date that it will be unable to deposit in the Certificate Account an amount equal to the Advance required to
be made for the immediately succeeding Distribution Date, it shall give notice to the Trustee of its
inability to advance (such notice may be given by telecopy), not later than 3:00 P.M., New York time, on such
Business Day, specifying the portion of such amount that it will be unable to deposit. Not later than 3:00
P.M., New York time, on the Certificate Account Deposit Date the Trustee shall, unless by 12:00 Noon, New
York time, on such day the Trustee shall have been notified in writing (by telecopy) that the Master Servicer
shall have directly or indirectly deposited in the Certificate Account such portion of the amount of the
Advance as to which the Master Servicer shall have given notice pursuant to the preceding sentence, pursuant
to Section 7.01, (a) terminate all of the rights and obligations of the Master Servicer under this Agreement
in accordance with Section 7.01 and (b) assume the rights and obligations of the Master Servicer hereunder,
including the obligation to deposit in the Certificate Account an amount equal to the Advance for the
immediately succeeding Distribution Date.
The Trustee shall deposit all funds it receives pursuant to this Section 4.04 into the Certificate
Account.
Section 4.05. Allocation of Realized Losses.
As provided in Section 4.05 of the Series Supplement.
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged Property.
The Master Servicer or the Subservicers shall file information returns with respect to the receipt of
mortgage interests received in a trade or business, the reports of foreclosures and abandonments of any
Mortgaged Property and the information returns relating to cancellation of indebtedness income with respect
to any Mortgaged Property required by Sections 6050H, 6050J and 6050P, respectively, of the Code, and deliver
to the Trustee an Officers' Certificate on or before March 31 of each year stating that such reports have
been filed. Such reports shall be in form and substance sufficient to meet the reporting requirements
imposed by Sections 6050H, 6050J and 6050P of the Code.
Section 4.07. Optional Purchase of Defaulted Mortgage Loans.
(a) With respect to any Mortgage Loan that is delinquent in payment by 90 days or more, the Master
Servicer may, at its option, purchase such Mortgage Loan from the Trustee at the Purchase Price therefor;
provided, that such Mortgage Loan that becomes 90 days or more delinquent during any given Calendar Quarter
shall only be eligible for purchase pursuant to this Section during the period beginning on the first
Business Day of the following Calendar Quarter, and ending at the close of business on the second-to-last
Business Day of such following Calendar Quarter; and provided, further, that such Mortgage Loan is 90 days or
more delinquent at the time of repurchase. Such option if not exercised shall not thereafter be reinstated
as to any Mortgage Loan, unless the delinquency is cured and the Mortgage Loan thereafter again becomes
delinquent in payment by 90 days or more in a subsequent Calendar Quarter.
(b) If at any time the Master Servicer makes a payment to the Certificate Account covering the amount of
the Purchase Price for such a Mortgage Loan as provided in clause (a) above, and the Master Servicer provides
to the Trustee a certification signed by a Servicing Officer stating that the amount of such payment has been
deposited in the Certificate Account, then the Trustee shall execute the assignment of such Mortgage Loan at
the request of the Master Servicer, without recourse, to the Master Servicer, which shall succeed to all the
Trustee's right, title and interest in and to such Mortgage Loan, and all security and documents relative
thereto. Such assignment shall be an assignment outright and not for security. The Master Servicer will
thereupon own such Mortgage, and all such security and documents, free of any further obligation to the
Trustee or the Certificateholders with respect thereto.
If, however, the Master Servicer shall have exercised its right to repurchase a Mortgage Loan pursuant
to this Section 4.07 upon the written request of and with funds provided by the Junior Certificateholder and
thereupon transferred such Mortgage Loan to the Junior Certificateholder, the Master Servicer shall so notify
the Trustee in writing.
Section 4.08. Surety Bond.
(a) If a Required Surety Payment is payable pursuant to the Surety Bond with respect to any Additional
Collateral Loan, the Master Servicer shall so notify the Trustee as soon as reasonably practicable and the
Trustee shall promptly complete the notice in the form of Attachment 1 to the Surety Bond and shall promptly
submit such notice to the Surety as a claim for a Required Surety. The Master Servicer shall upon request
assist the Trustee in completing such notice and shall provide any information requested by the Trustee in
connection therewith.
(b) Upon receipt of a Required Surety Payment from the Surety on behalf of the Holders of Certificates,
the Trustee shall deposit such Required Surety Payment in the Certificate Account and shall distribute such
Required Surety Payment, or the proceeds thereof, in accordance with the provisions of Section 4.02.
(c) The Trustee shall (i) receive as attorney-in-fact of each Holder of a Certificate any Required Surety
Payment from the Surety and (ii) disburse the same to the Holders of such Certificates as set forth in
Section 4.02.
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ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Senior, Class X, Class M, Class B, Class P and Class R Certificates shall be substantially in the
forms set forth in Exhibits A, A-I, B, C, C-I and D, respectively, and shall, on original issue, be executed
and delivered by the Trustee to the Certificate Registrar for authentication and delivery to or upon the
order of the Company upon receipt by the Trustee or one or more Custodians of the documents specified in
Section 2.01. The Certificates shall be issuable in the minimum denominations designated in the Preliminary
Statement to the Series Supplement.
The Certificates shall be executed by manual or facsimile signature on behalf of an authorized officer
of the Trustee. Certificates bearing the manual or facsimile signatures of individuals who were at any time
the proper officers of the Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery of such Certificate or did not
hold such offices at the date of such Certificates. No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein executed by the Certificate Registrar by manual
signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence,
that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated
the date of their authentication.
(b) Except as provided below, registration of Book-Entry Certificates may not be transferred by the
Trustee except to another Depository that agrees to hold such Certificates for the respective Certificate
Owners with Ownership Interests therein. The Holders of the Book-Entry Certificates shall hold their
respective Ownership Interests in and to each of such Certificates through the book-entry facilities of the
Depository and, except as provided below, shall not be entitled to Definitive Certificates in respect of such
Ownership Interests. All transfers by Certificate Owners of their respective Ownership Interests in the
Book-Entry Certificates shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each Depository Participant shall
transfer the Ownership Interests only in the Book-Entry Certificates of Certificate Owners it represents or
of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures.
The Trustee, the Master Servicer and the Company may for all purposes (including the making of
payments due on the respective Classes of Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the respective Classes of Book-Entry Certificates
for the purposes of exercising the rights of Certificateholders hereunder. The rights of Certificate Owners
with respect to the respective Classes of Book-Entry Certificates shall be limited to those established by
law and agreements between such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of any Class of Book-Entry Certificates with respect to any particular matter shall not be deemed
inconsistent if they are made with respect to different Certificate Owners. The Trustee may establish a
reasonable record date in connection with solicitations of consents from or voting by Certificateholders and
shall give notice to the Depository of such record date.
If (i)(A) the Company advises the Trustee in writing that the Depository is no longer willing or able
to properly discharge its responsibilities as Depository and (B) the Company is unable to locate a qualified
successor or (ii) the Company notifies the Depository and the Trustee of its intent to terminate the
book-entry system and, upon receipt of notice of such intent from the Depository, the Depository Participants
holding beneficial interests in the Book-Entry Certificates agree to such termination through the Depository,
the Trustee shall notify all Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender
to the Trustee of the Book-Entry Certificates by the Depository, accompanied by registration instructions
from the Depository for registration of transfer, the Trustee shall execute, authenticate and deliver the
Definitive Certificates. In addition, if an Event of Default has occurred and is continuing, each
Certificate Owner materially adversely affected thereby may at its option request a Definitive Certificate
evidencing such Certificate Owner's Percentage Interest in the related Class of Certificates. In order to
make such a request, such Certificate Owner shall, subject to the rules and procedures of the Depository,
provide the Depository or the related Depository Participant with directions for the Certificate Registrar to
exchange or cause the exchange of the Certificate Owner's interest in such Class of Certificates for an
equivalent Percentage Interest in fully registered definitive form. Upon receipt by the Certificate
Registrar of instructions from the Depository directing the Certificate Registrar to effect such exchange
(such instructions shall contain information regarding the Class of Certificates and the Certificate
Principal Balance being exchanged, the Depository Participant account to be debited with the decrease, the
registered holder of and delivery instructions for the Definitive Certificate, and any other information
reasonably required by the Certificate Registrar), (i) the Certificate Registrar shall instruct the
Depository to reduce the related Depository Participant's account by the aggregate Certificate Principal
Balance of the Definitive Certificate, (ii) the Trustee shall execute and the Certificate Registrar shall
authenticate and deliver, in accordance with the registration and delivery instructions provided by the
Depository, a Definitive Certificate evidencing such Certificate Owner's Percentage Interest in such Class of
Certificates and (iii) the Trustee shall execute and the Certificate Registrar shall authenticate a new
Book-Entry Certificate reflecting the reduction in the aggregate Certificate Principal Balance of such Class
of Certificates by the Certificate Principal Balance of the Definitive Certificate.
None of the Company, the Master Servicer or the Trustee shall be liable for any actions taken by the
Depository or its nominee, including, without limitation, any delay in delivery of any instructions required
under Section 5.01 and may conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee and the Master Servicer shall recognize the Holders
of the Definitive Certificates as Certificateholders hereunder.
(c) If the Class A-V Certificates are Definitive Certificates, from time to time Residential Funding, as
the initial Holder of the Class A-V Certificates, may exchange such Holder's Class A-V Certificates for
Subclasses of Class A-V Certificates to be issued under this Agreement by delivering a "Request for Exchange"
substantially in the form attached to this Agreement as Exhibit N executed by an authorized officer, which
Subclasses, in the aggregate, will represent the Uncertificated Class A-V REMIC Regular Interests
corresponding to the Class A-V Certificates so surrendered for exchange. Any Subclass so issued shall bear a
numerical designation commencing with Class A-V-1 and continuing sequentially thereafter, and will evidence
ownership of the Uncertificated REMIC Regular Interest or Interests specified in writing by such initial
Holder to the Trustee. The Trustee may conclusively, without any independent verification, rely on, and shall
be protected in relying on, Residential Funding's determinations of the Uncertificated Class A-V REMIC
Regular Interests corresponding to any Subclass, the Initial Notional Amount and the initial Pass-Through
Rate on a Subclass as set forth in such Request for Exchange and the Trustee shall have no duty to determine
if any Uncertificated Class A-V REMIC Regular Interest designated on a Request for Exchange corresponds to a
Subclass which has previously been issued. Each Subclass so issued shall be substantially in the form set
forth in Exhibit A and shall, on original issue, be executed and delivered by the Trustee to the Certificate
Registrar for authentication and delivery in accordance with Section 5.01(a). Every Certificate presented or
surrendered for exchange by the initial Holder shall (if so required by the Trustee or the Certificate
Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer attached to such
Certificate and shall be completed to the satisfaction of the Trustee and the Certificate Registrar duly
executed by, the initial Holder thereof or his attorney duly authorized in writing. The Certificates of any
Subclass of Class A-V Certificates may be transferred in whole, but not in part, in accordance with the
provisions of Section 5.02.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at one of the offices or agencies to be appointed by the Trustee in
accordance with the provisions of Section 8.12 a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trustee is initially appointed Certificate
Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as herein
provided. The Certificate Registrar, or the Trustee, shall provide the Master Servicer with a certified list
of Certificateholders as of each Record Date prior to the related Determination Date.
(b) Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee
maintained for such purpose pursuant to Section 8.12 and, in the case of any Class M, Class B, Class P or
Class R Certificate, upon satisfaction of the conditions set forth below, the Trustee shall execute and the
Certificate Registrar shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class (or Subclass) and aggregate Percentage Interest.
(c) At the option of the Certificateholders, Certificates may be exchanged for other Certificates of
authorized denominations of a like Class (or Subclass) and aggregate Percentage Interest, upon surrender of
the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered
for exchange the Trustee shall execute and the Certificate Registrar shall authenticate and deliver the
Certificates of such Class which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing.
(d) No transfer, sale, pledge or other disposition of a Class B Certificate or Class P Certificate shall
be made unless such transfer, sale, pledge or other disposition is exempt from the registration requirements
of the Securities Act of 1933, as amended, and any applicable state securities laws or is made in accordance
with said Act and laws. In the event that a transfer of a Class B Certificate or Class P Certificate is to
be made either (i)(A) the Trustee shall require a written Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee and the Company that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being
made pursuant to said Act and laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Company or the Master Servicer (except that, if such transfer is made by the Company or the Master Servicer
or any Affiliate thereof, the Company or the Master Servicer shall provide such Opinion of Counsel at their
own expense); provided that such Opinion of Counsel will not be required in connection with the initial
transfer of any such Certificate by the Company or any Affiliate thereof to the Company or an Affiliate of
the Company and (B) the Trustee shall require the transferee to execute a representation letter,
substantially in the form of Exhibit H (with respect to any Class B Certificate) or Exhibit G-1 (with respect
to any Class P Certificate) hereto, and the Trustee shall require the transferor to execute a representation
letter, substantially in the form of Exhibit I hereto, each acceptable to and in form and substance
satisfactory to the Company and the Trustee certifying to the Company and the Trustee the facts surrounding
such transfer, which representation letters shall not be an expense of the Trustee, the Company or the Master
Servicer; provided, however, that such representation letters will not be required in connection with any
transfer of any such Certificate by the Company or any Affiliate thereof to the Company or an Affiliate of
the Company, and the Trustee shall be entitled to conclusively rely upon a representation (which, upon the
request of the Trustee, shall be a written representation) from the Company, of the status of such transferee
as an Affiliate of the Company or (ii) the prospective transferee of such a Certificate shall be required to
provide the Trustee, the Company and the Master Servicer with an investment letter substantially in the form
of Exhibit J attached hereto (or such other form as the Company in its sole discretion deems acceptable),
which investment letter shall not be an expense of the Trustee, the Company or the Master Servicer, and which
investment letter states that, among other things, such transferee (A) is a "qualified institutional buyer"
as defined under Rule 144A, acting for its own account or the accounts of other "qualified institutional
buyers" as defined under Rule 144A, and (B) is aware that the proposed transferor intends to rely on the
exemption from registration requirements under the Securities Act of 1933, as amended, provided by Rule 144A.
The Holder of any such Certificate desiring to effect any such transfer, sale, pledge or other disposition
shall, and does hereby agree to, indemnify the Trustee, the Company, the Master Servicer and the Certificate
Registrar against any liability that may result if the transfer, sale, pledge or other disposition is not so
exempt or is not made in accordance with such federal and state laws.
(e) (i) In the case of any Class B, Class P or Class R Certificate presented for registration in the
name of any Person, either (A) the Trustee shall require an Opinion of Counsel acceptable to
and in form and substance satisfactory to the Trustee, the Company and the Master Servicer to
the effect that the purchase or holding of such Class B, Class P or Class R Certificate is
permissible under applicable law, will not constitute or result in any non-exempt prohibited
transaction under Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code (or comparable provisions of any subsequent
enactments), and will not subject the Trustee, the Company or the Master Servicer to any
obligation or liability (including obligations or liabilities under ERISA or Section 4975 of
the Code) in addition to those undertaken in this Agreement, which Opinion of Counsel shall not
be an expense of the Trustee, the Company or the Master Servicer or (B) the prospective
Transferee shall be required to provide the Trustee, the Company and the Master Servicer with a
certification to the effect set forth in paragraph six of Exhibit H (with respect to any Class
B Certificate) or paragraph fifteen of Exhibit G-1 (with respect to any Class R Certificate or
Class P Certificate), which the Trustee may rely upon without further inquiry or investigation,
or such other certifications as the Trustee may deem desirable or necessary in order to
establish that such Transferee or the Person in whose name such registration is requested
either (a) is not an employee benefit plan or other plan subject to the prohibited transaction
provisions of ERISA or Section 4975 of the Code, or any Person (including an investment
manager, a named fiduciary or a trustee of any such plan) who is using "plan assets" of any
such plan to effect such acquisition (each, a "Plan Investor") or (b) in the case of any Class
B Certificate, the following conditions are satisfied: (i) such Transferee is an insurance
company, (ii) the source of funds used to purchase or hold such Certificate (or interest
therein) is an "insurance company general account" (as defined in U.S. Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60, and (iii) the conditions set forth in
Sections I and III of PTCE 95-60 have been satisfied (each entity that satisfies this clause
(b), a "Complying Insurance Company").
(ii) Any Transferee of a Class M Certificate will be deemed to have represented by virtue of
its purchase or holding of such Certificate (or interest therein) that either (a) such
Transferee is not a Plan Investor, (b) it has acquired and is holding such Certificate in
reliance on Prohibited Transaction Exemption ("PTE") 94-29, as most recently amended, PTE
2002-41, 67 Fed. Reg. 54487 (August 22, 2002) (the "RFC Exemption"), and that it understands
that there are certain conditions to the availability of the RFC Exemption including that such
Certificate must be rated, at the time of purchase, not lower than "BBB-" (or its equivalent)
by Standard & Poor's, Fitch or Moody's or (c) such Transferee is a Complying Insurance Company.
(iii) (A) If any Class M Certificate (or any interest therein) is acquired or held by any
Person that does not satisfy the conditions described in paragraph (ii) above, then the last
preceding Transferee that either (i) is not a Plan Investor, (ii) acquired such Certificate in
compliance with the RFC Exemption, or (iii) is a Complying Insurance Company shall be restored,
to the extent permitted by law, to all rights and obligations as Certificate Owner thereof
retroactive to the date of such Transfer of such Class M Certificate. The Trustee shall be
under no liability to any Person for making any payments due on such Certificate to such
preceding Transferee.
(B) Any purported Certificate Owner whose acquisition or holding of any Class M
Certificate (or interest therein) was effected in violation of the restrictions in this Section
5.02(e) shall indemnify and hold harmless the Company, the Trustee, the Master Servicer, any
Subservicer, the Underwriters and the Trust Fund from and against any and all liabilities,
claims, costs or expenses incurred by such parties as a result of such acquisition or holding.
(f) (i) Each Person who has or who acquires any Ownership Interest in a Class R Certificate shall be
deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its designee under clause (iii)(A)
below to deliver payments to a Person other than such Person and to negotiate the terms of any mandatory sale
under clause (iii)(B) below and to execute all instruments of transfer and to do all other things necessary
in connection with any such sale. The rights of each Person acquiring any Ownership Interest in a Class R
Certificate are expressly subject to the following provisions:
(A) Each Person holding or acquiring any Ownership Interest in a Class R Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee.
(B) In connection with any proposed Transfer of any Ownership Interest in a Class R Certificate, the
Trustee shall require delivery to it, and shall not register the Transfer of any Class R
Certificate until its receipt of, (I) an affidavit and agreement (a "Transfer Affidavit and
Agreement," in the form attached hereto as Exhibit G-1) from the proposed Transferee, in form
and substance satisfactory to the Master Servicer, representing and warranting, among other
things, that it is a Permitted Transferee, that it is not acquiring its Ownership Interest in
the Class R Certificate that is the subject of the proposed Transfer as a nominee, trustee or
agent for any Person who is not a Permitted Transferee, that for so long as it retains its
Ownership Interest in a Class R Certificate, it will endeavor to remain a Permitted Transferee,
and that it has reviewed the provisions of this Section 5.02(f) and agrees to be bound by them,
and (II) a certificate, in the form attached hereto as Exhibit G-2, from the Holder wishing to
transfer the Class R Certificate, in form and substance satisfactory to the Master Servicer,
representing and warranting, among other things, that no purpose of the proposed Transfer is to
impede the assessment or collection of tax.
(C) Notwithstanding the delivery of a Transfer Affidavit and Agreement by a proposed Transferee under
clause (B) above, if a Responsible Officer of the Trustee who is assigned to this Agreement has
actual knowledge that the proposed Transferee is not a Permitted Transferee, no Transfer of an
Ownership Interest in a Class R Certificate to such proposed Transferee shall be effected.
(D) Each Person holding or acquiring any Ownership Interest in a Class R Certificate shall agree (x) to
require a Transfer Affidavit and Agreement from any other Person to whom such Person attempts
to transfer its Ownership Interest in a Class R Certificate and (y) not to transfer its
Ownership Interest unless it provides a certificate to the Trustee in the form attached hereto
as Exhibit G-2.
(E) Each Person holding or acquiring an Ownership Interest in a Class R Certificate, by purchasing an
Ownership Interest in such Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of Temporary Treasury Regulations Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an Ownership Interest in a Class R Certificate,
if it is, or is holding an Ownership Interest in a Class R Certificate on behalf of, a
"pass-through interest holder."
(ii) The Trustee shall register the Transfer of any Class R Certificate only if it shall have received the
Transfer Affidavit and Agreement, a certificate of the Holder requesting such transfer in the form
attached hereto as Exhibit G-2 and all of such other documents as shall have been reasonably required
by the Trustee as a condition to such registration. Transfers of the Class R Certificates to
Non-United States Persons and Disqualified Organizations (as defined in Section 860E(e)(5) of the
Code) are prohibited.
(iii) (A) If any Disqualified Organization shall become a holder of a Class R Certificate, then
the last preceding Permitted Transferee shall be restored, to the extent permitted by law, to all
rights and obligations as Holder thereof retroactive to the date of registration of such Transfer of
such Class R Certificate. If a Non-United States Person shall become a holder of a Class R
Certificate, then the last preceding United States Person shall be restored, to the extent permitted
by law, to all rights and obligations as Holder thereof retroactive to the date of registration of
such Transfer of such Class R Certificate. If a transfer of a Class R Certificate is disregarded
pursuant to the provisions of Treasury Regulations Section 1.860E-1 or Section 1.860G-3, then the last
preceding Permitted Transferee shall be restored, to the extent permitted by law, to all rights and
obligations as Holder thereof retroactive to the date of registration of such Transfer of such Class R
Certificate. The Trustee shall be under no liability to any Person for any registration of Transfer of
a Class R Certificate that is in fact not permitted by this Section 5.02(f) or for making any payments
due on such Certificate to the holder thereof or for taking any other action with respect to such
holder under the provisions of this Agreement.
(B) If any purported Transferee shall become a Holder of a Class R Certificate in violation of the
restrictions in this Section 5.02(f) and to the extent that the retroactive restoration of the
rights of the Holder of such Class R Certificate as described in clause (iii)(A) above shall be
invalid, illegal or unenforceable, then the Master Servicer shall have the right, without
notice to the holder or any prior holder of such Class R Certificate, to sell such Class R
Certificate to a purchaser selected by the Master Servicer on such terms as the Master Servicer
may choose. Such purported Transferee shall promptly endorse and deliver each Class R
Certificate in accordance with the instructions of the Master Servicer. Such purchaser may be
the Master Servicer itself or any Affiliate of the Master Servicer. The proceeds of such sale,
net of the commissions (which may include commissions payable to the Master Servicer or its
Affiliates), expenses and taxes due, if any, shall be remitted by the Master Servicer to such
purported Transferee. The terms and conditions of any sale under this clause (iii)(B) shall be
determined in the sole discretion of the Master Servicer, and the Master Servicer shall not be
liable to any Person having an Ownership Interest in a Class R Certificate as a result of its
exercise of such discretion.
(iv) The Master Servicer, on behalf of the Trustee, shall make available, upon written request from the
Trustee, all information necessary to compute any tax imposed (A) as a result of the Transfer of an
Ownership Interest in a Class R Certificate to any Person who is a Disqualified Organization,
including the information regarding "excess inclusions" of such Class R Certificates required to be
provided to the Internal Revenue Service and certain Persons as described in Treasury Regulations
Sections 1.860D-1(b)(5) and 1.860E-2(a)(5), and (B) as a result of any regulated investment company,
real estate investment trust, common trust fund, partnership, trust, estate or organization described
in Section 1381 of the Code that holds an Ownership Interest in a Class R Certificate having as among
its record holders at any time any Person who is a Disqualified Organization. Reasonable compensation
for providing such information may be required by the Master Servicer from such Person.
(v) The provisions of this Section 5.02(f) set forth prior to this clause (v) may be modified, added to or
eliminated, provided that there shall have been delivered to the Trustee the following:
(A) written notification from each Rating Agency to the effect that the modification, addition to or
elimination of such provisions will not cause such Rating Agency to downgrade its then-current
ratings, if any, of any Class of the Senior (in the case of the Insured Certificates (as
defined in the Series Supplement), such determination shall be made without giving effect to
the Certificate Policy (as defined in the Series Supplement)), Class M or Class B Certificates
below the lower of the then-current rating or the rating assigned to such Certificates as of
the Closing Date by such Rating Agency; and
(B) subject to Section 10.01(f), an Officers' Certificate of the Master Servicer stating that the Master
Servicer has received an Opinion of Counsel, in form and substance satisfactory to the Master
Servicer, to the effect that such modification, addition to or absence of such provisions will
not cause any portion of any REMIC formed under the Series Supplement to cease to qualify as a
REMIC and will not cause (x) any portion of any REMIC formed under the Series Supplement to be
subject to an entity-level tax caused by the Transfer of any Class R Certificate to a Person
that is a Disqualified Organization or (y) a Certificateholder or another Person to be subject
to a REMIC-related tax caused by the Transfer of a Class R Certificate to a Person that is not
a Permitted Transferee.
(g) No service charge shall be made for any transfer or exchange of Certificates of any Class, but the
Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange shall be destroyed by the Certificate Registrar.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate Registrar, or the Trustee and the
Certificate Registrar receive evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate Registrar such security or
indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the
Trustee or the Certificate Registrar that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute and the Certificate Registrar shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor, Class and
Percentage Interest but bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith. Any duplicate Certificate
issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust
Fund, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 5.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer, the Company, the Master
Servicer, the Trustee, any Certificate Insurer, the Certificate Registrar and any agent of the Company, the
Master Servicer, the Trustee, any Certificate Insurer or the Certificate Registrar may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.02 and for all other purposes whatsoever, except as and to the extent
provided in the definition of "Certificateholder," and neither the Company, the Master Servicer, the Trustee,
any Certificate Insurer, the Certificate Registrar nor any agent of the Company, the Master Servicer, the
Trustee, any Certificate Insurer or the Certificate Registrar shall be affected by notice to the contrary
except as provided in Section 5.02(f).
Section 5.05. Appointment of Paying Agent.
The Trustee may appoint a Paying Agent for the purpose of making distributions to the
Certificateholders pursuant to Section 4.02. In the event of any such appointment, on or prior to each
Distribution Date the Master Servicer on behalf of the Trustee shall deposit or cause to be deposited with
the Paying Agent a sum sufficient to make the payments to the Certificateholders in the amounts and in the
manner provided for in Section 4.02, such sum to be held in trust for the benefit of the Certificateholders.
The Trustee shall cause each Paying Agent to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee that such Paying Agent shall hold all sums held by it for the
payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until
such sums shall be distributed to such Certificateholders. Any sums so held by such Paying Agent shall be
held only in Eligible Accounts to the extent such sums are not distributed to the Certificateholders on the
date of receipt by such Paying Agent.
Section 5.06. U.S.A. Patriot Act Compliance.
In order for it to comply with its duties under the U.S.A. Patriot Act, the Trustee may obtain and
verify certain information from the other parties hereto, including but not limited to such parties' name,
address and other identifying information.
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ARTICLE VI
THE COMPANY AND THE MASTER SERVICER
Section 6.01. Respective Liabilities of the Company and the Master Servicer.
The Company and the Master Servicer shall each be liable in accordance herewith only to the extent of
the obligations specifically and respectively imposed upon and undertaken by the Company and the Master
Servicer herein. By way of illustration and not limitation, the Company is not liable for the servicing and
administration of the Mortgage Loans, nor is it obligated by Section 7.01 or Section 10.01 to assume any
obligations of the Master Servicer or to appoint a designee to assume such obligations, nor is it liable for
any other obligation hereunder that it may, but is not obligated to, assume unless it elects to assume such
obligation in accordance herewith.
Section 6.02. Merger or Consolidation of the Company or the Master Servicer; Assignment of Rights and
Delegation of Duties by Master Servicer.
(a) The Company and the Master Servicer shall each keep in full effect its existence, rights and
franchises as a corporation under the laws of the state of its incorporation, and shall each obtain and
preserve its qualification to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Mortgage Loans and to perform its respective duties under this Agreement.
(b) Any Person into which the Company or the Master Servicer may be merged or consolidated, or any
corporation resulting from any merger or consolidation to which the Company or the Master Servicer shall be a
party, or any Person succeeding to the business of the Company or the Master Servicer, shall be the successor
of the Company or the Master Servicer, as the case may be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to the Master Servicer shall be
qualified to service mortgage loans on behalf of Fannie Mae or Freddie Mac; and provided further that each
Rating Agency's ratings, if any, of the Senior (in the case of the Insured Certificates (as defined in the
Series Supplement), such determination shall be made without giving effect to the Certificate Policy (as
defined in the Series Supplement)), Class M or Class B Certificates in effect immediately prior to such
merger or consolidation will not be qualified, reduced or withdrawn as a result thereof (as evidenced by a
letter to such effect from each Rating Agency).
(c) Notwithstanding anything else in this Section 6.02 and Section 6.04 to the contrary, the Master
Servicer may assign its rights and delegate its duties and obligations under this Agreement; provided that
the Person accepting such assignment or delegation shall be a Person which is qualified to service mortgage
loans on behalf of Fannie Mae or Freddie Mac, is reasonably satisfactory to the Trustee and the Company, is
willing to service the Mortgage Loans and executes and delivers to the Company and the Trustee an agreement,
in form and substance reasonably satisfactory to the Company and the Trustee, which contains an assumption by
such Person of the due and punctual performance and observance of each covenant and condition to be performed
or observed by the Master Servicer under this Agreement; provided further that each Rating Agency's rating of
the Classes of Certificates (in the case of the Insured Certificates (as defined in the Series Supplement),
such determination shall be made without giving effect to the Certificate Policy (as defined in the Series
Supplement)) that have been rated in effect immediately prior to such assignment and delegation will not be
qualified, reduced or withdrawn as a result of such assignment and delegation (as evidenced by a letter to
such effect from each Rating Agency). In the case of any such assignment and delegation, the Master Servicer
shall be released from its obligations under this Agreement, except that the Master Servicer shall remain
liable for all liabilities and obligations incurred by it as Master Servicer hereunder prior to the
satisfaction of the conditions to such assignment and delegation set forth in the next preceding sentence.
Notwithstanding the foregoing, in the event of a pledge or assignment by the Master Servicer solely of its
rights to purchase all assets of the Trust Fund under Section 9.01(a) (or, if so specified in Section
9.01(a), its rights to purchase the Mortgage Loans and property acquired related to such Mortgage Loans or
its rights to purchase the Certificates related thereto), the provisos of the first sentence of this
paragraph will not apply.
Section 6.03. Limitation on Liability of the Company,
the Master Servicer and Others.
Neither the Company, the Master Servicer nor any of the directors, officers, employees or agents of
the Company or the Master Servicer shall be under any liability to the Trust Fund or the Certificateholders
for any action taken or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Company,
the Master Servicer or any such Person against any breach of warranties or representations made herein or any
liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The
Company, the Master Servicer and any director, officer, employee or agent of the Company or the Master
Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Company, the Master Servicer and any director,
officer, employee or agent of the Company or the Master Servicer shall be indemnified by the Trust Fund and
held harmless against any loss, liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder.
Neither the Company nor the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal or administrative action, proceeding, hearing or examination that is not incidental to its
respective duties under this Agreement and which in its opinion may involve it in any expense or liability;
provided, however, that the Company or the Master Servicer may in its discretion undertake any such action,
proceeding, hearing or examination that it may deem necessary or desirable in respect to this Agreement and
the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action, proceeding, hearing or examination and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Company and the
Master Servicer shall be entitled to be reimbursed therefor out of amounts attributable to the Mortgage Loans
on deposit in the Custodial Account as provided by Section 3.10 and, on the Distribution Date(s) following
such reimbursement, the aggregate of such expenses and costs shall be allocated in reduction of the Accrued
Certificate Interest on each Class entitled thereto in the same manner as if such expenses and costs
constituted a Prepayment Interest Shortfall.
Section 6.04. Company and Master Servicer Not to Resign.
Subject to the provisions of Section 6.02, neither the Company nor the Master Servicer shall resign
from its respective obligations and duties hereby imposed on it except upon determination that its duties
hereunder are no longer permissible under applicable law. Any such determination permitting the resignation
of the Company or the Master Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No such resignation by the Master Servicer shall become effective until the Trustee or a
successor servicer shall have assumed the Master Servicer's responsibilities and obligations in accordance
with Section 7.02.
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ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
Event of Default, wherever used herein, means any one of the following events (whatever reason for
such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative
or governmental body):
(i) the Master Servicer shall fail to deposit or cause to be deposited into the Certificate Account any
amounts required to be so deposited therein at the time required pursuant to Section 4.01 or otherwise
or the Master Servicer shall fail to distribute or cause to be distributed to the Holders of
Certificates of any Class any distribution required to be made under the terms of the Certificates of
such Class and this Agreement and, in each case, such failure shall continue unremedied for a period
of 5 days after the date upon which written notice of such failure, requiring such failure to be
remedied, shall have been given to the Master Servicer by the Trustee or the Company or to the Master
Servicer, the Company and the Trustee by the Holders of Certificates of such Class evidencing
Percentage Interests aggregating not less than 25%; or
(ii) the Master Servicer shall fail to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer contained in the Certificates of any Class
or in this Agreement and such failure shall continue unremedied for a period of 30 days (except that
such number of days shall be 15 in the case of a failure to pay the premium for any Required Insurance
Policy) after the date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Trustee or the Company, or to the Master Servicer,
the Company and the Trustee by the Holders of Certificates of any Class evidencing, in the case of any
such Class, Percentage Interests aggregating not less than 25%; or
(iii) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law
or appointing a conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or
(iv) the Master Servicer shall consent to the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities, or similar proceedings of, or
relating to, the Master Servicer or of, or relating to, all or substantially all of the property of
the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
(vi) the Master Servicer shall notify the Trustee pursuant to Section 4.04(b) that it is unable to deposit
in the Certificate Account an amount equal to the Advance.
If an Event of Default described in clauses (i)-(v) of this Section shall occur, then, and in each and
every such case, so long as such Event of Default shall not have been remedied, either the Company or the
Trustee may, and at the direction of Holders of Certificates entitled to at least 51% of the Voting Rights,
the Trustee shall, by notice in writing to the Master Servicer (and to the Company if given by the Trustee or
to the Trustee if given by the Company), terminate all of the rights and obligations of the Master Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. If an Event of Default described in clause (vi) hereof shall occur, the Trustee
shall, by notice to the Master Servicer and the Company, immediately terminate all of the rights and
obligations of the Master Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof, other than its rights as a Certificateholder hereunder as provided in Section 4.04(b). On or after
the receipt by the Master Servicer of such written notice, all authority and power of the Master Servicer
under this Agreement, whether with respect to the Certificates (other than as a Holder thereof) or the
Mortgage Loans or otherwise, shall subject to Section 7.02 pass to and be vested in the Trustee or the
Trustee's designee appointed pursuant to Section 7.02; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination, whether to complete the
transfer and endorsement or assignment of the Mortgage Loans and related documents, or otherwise. The Master
Servicer agrees to cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the transfer to the Trustee or its
designee for administration by it of all cash amounts which shall at the time be credited to the Custodial
Account or the Certificate Account or thereafter be received with respect to the Mortgage Loans. No such
termination shall release the Master Servicer for any liability that it would otherwise have hereunder for
any act or omission prior to the effective time of such termination.
Notwithstanding any termination of the activities of Residential Funding in its capacity as Master
Servicer hereunder, Residential Funding shall be entitled to receive, out of any late collection of a Monthly
Payment on a Mortgage Loan which was due prior to the notice terminating Residential Funding's rights and
obligations as Master Servicer hereunder and received after such notice, that portion to which Residential
Funding would have been entitled pursuant to Sections 3.10(a)(ii), (vi) and (vii) as well as its Servicing
Fee in respect thereof, and any other amounts payable to Residential Funding hereunder the entitlement to
which arose prior to the termination of its activities hereunder. Upon the termination of Residential
Funding as Master Servicer hereunder the Company shall deliver to the Trustee a copy of the Program Guide.
Section 7.02. Trustee or Company to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice of termination pursuant to Section 7.01 or
resigns in accordance with Section 6.04, the Trustee or, upon notice to the Company and with the Company's
consent (which shall not be unreasonably withheld) a designee (which meets the standards set forth below) of
the Trustee, shall be the successor in all respects to the Master Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master Servicer (except for the
responsibilities, duties and liabilities contained in Sections 2.02 and 2.03(a), excluding the duty to notify
related Subservicers or Sellers as set forth in such Sections, and its obligations to deposit amounts in
respect of losses incurred prior to such notice or termination on the investment of funds in the Custodial
Account or the Certificate Account pursuant to Sections 3.07(c) and 4.01(b) by the terms and provisions
hereof); provided, however, that any failure to perform such duties or responsibilities caused by the
preceding Master Servicer's failure to provide information required by Section 4.04 shall not be considered a
default by the Trustee hereunder. As compensation therefor, the Trustee shall be entitled to all funds
relating to the Mortgage Loans which the Master Servicer would have been entitled to charge to the Custodial
Account or the Certificate Account if the Master Servicer had continued to act hereunder and, in addition,
shall be entitled to the income from any Permitted Investments made with amounts attributable to the Mortgage
Loans held in the Custodial Account or the Certificate Account. If the Trustee has become the successor to
the Master Servicer in accordance with Section 6.04 or Section 7.01, then notwithstanding the above, the
Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so act, appoint, or petition a
court of competent jurisdiction to appoint, any established housing and home finance institution, which is
also a Fannie Mae- or Freddie Mac-approved mortgage servicing institution, having a net worth of not less
than $10,000,000 as the successor to the Master Servicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Master Servicer hereunder. Pending appointment of a
successor to the Master Servicer hereunder, the Trustee shall become successor to the Master Servicer and
shall act in such capacity as hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of payments on Mortgage Loans
as it and such successor shall agree; provided, however, that no such compensation shall be in excess of that
permitted the initial Master Servicer hereunder. The Company, the Trustee, the Custodian and such successor
shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicing Fee for any successor Master Servicer appointed pursuant to this Section 7.02 will
be lowered with respect to those Mortgage Loans, if any, where the Subservicing Fee accrues at a rate of less
than 0.20% per annum in the event that the successor Master Servicer is not servicing such Mortgage Loans
directly and it is necessary to raise the related Subservicing Fee to a rate of 0.20% per annum in order to
hire a Subservicer with respect to such Mortgage Loans. The Master Servicer shall pay the reasonable
expenses of the Trustee in connection with any servicing transition hereunder.
(b) In connection with the termination or resignation of the Master Servicer hereunder, either (i)
the successor Master Servicer, including the Trustee if the Trustee is acting as successor Master Servicer,
shall represent and warrant that it is a member of MERS in good standing and shall agree to comply in all
material respects with the rules and procedures of MERS in connection with the servicing of the Mortgage
Loans that are registered with MERS, in which case the predecessor Master Servicer shall cooperate with the
successor Master Servicer in causing MERS to revise its records to reflect the transfer of servicing to the
successor Master Servicer as necessary under MERS' rules and regulations, or (ii) the predecessor Master
Servicer shall cooperate with the successor Master Servicer in causing MERS to execute and deliver an
assignment of Mortgage in recordable form to transfer the Mortgage from MERS to the Trustee and to execute
and deliver such other notices, documents and other instruments as may be necessary or desirable to effect a
transfer of such Mortgage Loan or servicing of such Mortgage Loan on the MERS(R)System to the successor Master
Servicer. The predecessor Master Servicer shall file or cause to be filed any such assignment in the
appropriate recording office. The predecessor Master Servicer shall bear any and all fees of MERS, costs of
preparing any assignments of Mortgage, and fees and costs of filing any assignments of Mortgage that may be
required under this subsection (b). The successor Master Servicer shall cause such assignment to be
delivered to the Trustee or the Custodian promptly upon receipt of the original with evidence of recording
thereon or a copy certified by the public recording office in which such assignment was recorded.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment of a successor to the Master Servicer, the Trustee shall give
prompt written notice thereof to the Certificateholders at their respective addresses appearing in the
Certificate Register.
(b) Within 60 days after the occurrence of any Event of Default, the Trustee shall transmit by mail to all
Holders of Certificates notice of each such Event of Default hereunder known to the Trustee, unless such
Event of Default shall have been cured or waived.
Section 7.04. Waiver of Events of Default.
The Holders representing at least 66% of the Voting Rights affected by a default or Event of Default
hereunder may waive such default or Event of Default; provided, however, that (a) a default or Event of
Default under clause (i) of Section 7.01 may be waived only by all of the Holders of Certificates affected by
such default or Event of Default and (b) no waiver pursuant to this Section 7.04 shall affect the Holders of
Certificates in the manner set forth in Section 11.01(b)(i) or (ii). Upon any such waiver of a default or
Event of Default by the Holders representing the requisite percentage of Voting Rights affected by such
default or Event of Default, such default or Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose hereunder. No such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon except to the extent expressly so waived.
--------------------------------------------------------------------------------
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default and after the curing or waiver of all
Events of Default which may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. In case an Event of Default has occurred (which has not been cured
or waived), the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent investor would exercise or use under the
circumstances in the conduct of such investor's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant
to any provision of this Agreement, shall examine them to determine whether they conform to the requirements
of this Agreement. The Trustee shall notify the Certificateholders of any such documents which do not
materially conform to the requirements of this Agreement in the event that the Trustee, after so requesting,
does not receive satisfactorily corrected documents.
The Trustee shall forward or cause to be forwarded in a timely fashion the notices, reports and
statements required to be forwarded by the Trustee pursuant to Sections 4.03, 4.06, 7.03 and 10.01. The
Trustee shall furnish in a timely fashion to the Master Servicer such information as the Master Servicer may
reasonably request from time to time for the Master Servicer to fulfill its duties as set forth in this
Agreement. The Trustee covenants and agrees that it shall perform its obligations hereunder in a manner so
as to maintain the status of any portion of any REMIC formed under the Series Supplement as a REMIC under the
REMIC Provisions and (subject to Section 10.01(f)) to prevent the imposition of any federal, state or local
income, prohibited transaction, contribution or other tax on the Trust Fund to the extent that maintaining
such status and avoiding such taxes are reasonably within the control of the Trustee and are reasonably
within the scope of its duties under this Agreement.
(c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after the curing or waiver of all such Events of
Default which may have occurred, the duties and obligations of the Trustee shall be determined solely
by the express provisions of this Agreement, the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in this Agreement, no implied
covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of
bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee by the Company or the Master Servicer and which on their face, do not
contradict the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of judgment made in good faith by a
Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of Certificateholders of any Class holding
Certificates which evidence, as to such Class, Percentage Interests aggregating not less than 25% as
to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Agreement;
(iv) The Trustee shall not be charged with knowledge of any default (other than a default in payment to the
Trustee) specified in clauses (i) and (ii) of Section 7.01 or an Event of Default under clauses (iii),
(iv) and (v) of Section 7.01 unless a Responsible Officer of the Trustee assigned to and working in
the Corporate Trust Office obtains actual knowledge of such failure or event or the Trustee receives
written notice of such failure or event at its Corporate Trust Office from the Master Servicer, the
Company or any Certificateholder; and
(v) Except to the extent provided in Section 7.02, no provision in this Agreement shall require the
Trustee to expend or risk its own funds (including, without limitation, the making of any Advance) or
otherwise incur any personal financial liability in the performance of any of its duties as Trustee
hereunder, or in the exercise of any of its rights or powers, if the Trustee shall have reasonable
grounds for believing that repayment of funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(d) The Trustee shall timely pay, from its own funds, the amount of any and all federal, state and local
taxes imposed on the Trust Fund or its assets or transactions including, without limitation, (A) "prohibited
transaction" penalty taxes as defined in Section 860F of the Code, if, when and as the same shall be due and
payable, (B) any tax on contributions to a REMIC after the Closing Date imposed by Section 860G(d) of the
Code and (C) any tax on "net income from foreclosure property" as defined in Section 860G(c) of the Code, but
only if such taxes arise out of a breach by the Trustee of its obligations hereunder, which breach
constitutes negligence or willful misconduct of the Trustee.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed
by it to be genuine and to have been signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of
an Event of Default (which has not been cured or waived), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the conduct of such investor's own
affairs;
(iv) The Trustee shall not be personally liable for any action taken, suffered or omitted by it in good
faith and believed by it to be authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder and after the curing or waiver of all Events
of Default which may have occurred, the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or document, unless requested in
writing so to do by Holders of Certificates of any Class evidencing, as to such Class, Percentage
Interests, aggregating not less than 50%; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity
against such expense or liability as a condition to so proceeding. The reasonable expense of every
such examination shall be paid by the Master Servicer, if an Event of Default shall have occurred and
is continuing, and otherwise by the Certificateholder requesting the investigation;
(vi) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys; and
(vii) To the extent authorized under the Code and the regulations promulgated thereunder, each Holder of a
Class R Certificate hereby irrevocably appoints and authorizes the Trustee to be its attorney-in-fact
for purposes of signing any Tax Returns required to be filed on behalf of the Trust Fund. The Trustee
shall sign on behalf of the Trust Fund and deliver to the Master Servicer in a timely manner any Tax
Returns prepared by or on behalf of the Master Servicer that the Trustee is required to sign as
determined by the Master Servicer pursuant to applicable federal, state or local tax laws, provided
that the Master Servicer shall indemnify the Trustee for signing any such Tax Returns that contain
errors or omissions.
(b) Following the issuance of the Certificates, the Trustee shall not accept any contribution of assets to
the Trust Fund unless (subject to Section 10.01(f)) it shall have obtained or been furnished with an Opinion
of Counsel to the effect that such contribution will not (i) cause any portion of any REMIC formed under the
Series Supplement to fail to qualify as a REMIC at any time that any Certificates are outstanding or (ii)
cause the Trust Fund to be subject to any federal tax as a result of such contribution (including the
imposition of any federal tax on "prohibited transactions" imposed under Section 860F(a) of the Code).
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the execution of the Certificates
and relating to the acceptance and receipt of the Mortgage Loans) shall be taken as the statements of the
Company or the Master Servicer as the case may be, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or sufficiency of this Agreement or of
the Certificates (except that the Certificates shall be duly and validly executed and authenticated by it as
Certificate Registrar) or of any Mortgage Loan or related document, or of MERS or the MERS(R)System. Except
as otherwise provided herein, the Trustee shall not be accountable for the use or application by the Company
or the Master Servicer of any of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Company or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Custodial Account or the Certificate Account by the Company or the Master
Servicer.
Section 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee.
Section 8.05. Master Servicer to Pay Trustee's Fees
and Expenses; Indemnification.
(a) The Master Servicer covenants and agrees to pay to the Trustee and any co-trustee from time to time,
and the Trustee and any co-trustee shall be entitled to, reasonable compensation (which shall not be limited
by any provision of law in regard to the compensation of a trustee of an express trust) for all services
rendered by each of them in the execution of the trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee and any co-trustee, and the Master Servicer will pay or
reimburse the Trustee and any co-trustee upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee or any co-trustee in accordance with any of the provisions of this Agreement
(including the reasonable compensation and the expenses and disbursements of its counsel and of all persons
not regularly in its employ, and the expenses incurred by the Trustee or any co-trustee in connection with
the appointment of an office or agency pursuant to Section 8.12) except any such expense, disbursement or
advance as may arise from its negligence or bad faith.
(b) The Master Servicer agrees to indemnify the Trustee for, and to hold the Trustee harmless against, any
loss, liability or expense incurred without negligence or willful misconduct on the Trustee's part, arising
out of, or in connection with, the acceptance and administration of the Trust Fund, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself against any claim in connection
with the exercise or performance of any of its powers or duties under this Agreement and the Custodial
Agreement, and the Master Servicer further agrees to indemnify the Trustee for, and to hold the Trustee
harmless against, any loss, liability or expense arising out of, or in connection with, the provisions set
forth in the second paragraph of Section 2.01(c) hereof, including, without limitation, all costs,
liabilities and expenses (including reasonable legal fees and expenses) of investigating and defending itself
against any claim, action or proceeding, pending or threatened, relating to the provisions of this paragraph,
provided that:
(i) with respect to any such claim, the Trustee shall have given the Master Servicer written notice
thereof promptly after the Trustee shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Trustee shall cooperate and consult fully with
the Master Servicer in preparing such defense; and
(iii) notwithstanding anything in this Agreement to the contrary, the Master Servicer shall not be liable
for settlement of any claim by the Trustee entered into without the prior consent of the Master
Servicer which consent shall not be unreasonably withheld.
No termination of this Agreement shall affect the obligations created by this Section 8.05(b) of the Master
Servicer to indemnify the Trustee under the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the Master Servicer in this Section
8.05(b) shall not be available (A) for any loss, liability or expense of the Trustee, including the costs and
expenses of defending itself against any claim, incurred in connection with any actions taken by the Trustee
at the direction of the Certificateholders pursuant to the terms of this Agreement or (B) where the Trustee
is required to indemnify the Master Servicer pursuant to Section 12.05(a).
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or a national banking association having its
principal office in a state and city acceptable to the Company and organized and doing business under the
laws of such state or the United States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination
by federal or state authority and the short-term rating of such institution shall be A-1 in the case of
Standard & Poor's if Standard & Poor's is a Rating Agency. If such corporation or national banking
association publishes reports of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with
the effect specified in Section 8.07.
Section 8.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint
a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section
8.06 and shall fail to resign after written request therefor by the Company, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or
of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Company may
remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. In addition,
in the event that the Company determines that the Trustee has failed (i) to distribute or cause to be
distributed to the Certificateholders any amount required to be distributed hereunder, if such amount is held
by the Trustee or its Paying Agent (other than the Master Servicer or the Company) for distribution or (ii)
to otherwise observe or perform in any material respect any of its covenants, agreements or obligations
hereunder, and such failure shall continue unremedied for a period of 5 days (in respect of clause (i) above)
or 30 days (in respect of clause (ii) above other than any failure to comply with the provisions of Article
XII, in which case no notice or grace period shall be applicable) after the date on which written notice of
such failure, requiring that the same be remedied, shall have been given to the Trustee by the Company, then
the Company may remove the Trustee and appoint a successor trustee by written instrument delivered as
provided in the preceding sentence. In connection with the appointment of a successor trustee pursuant to
the preceding sentence, the Company shall, on or before the date on which any such appointment becomes
effective, obtain from each Rating Agency written confirmation that the appointment of any such successor
trustee will not result in the reduction of the ratings on any class of the Certificates below the lesser of
the then current or original ratings on such Certificates.
(c) The Holders of Certificates entitled to at least 51% of the Voting Rights may at any time remove the
Trustee and appoint a successor trustee by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which instruments shall be delivered
to the Company, one complete set to the Trustee so removed and one complete set to the successor so appointed.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of
the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 8.08.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 8.07 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor trustee shall become effective and such successor trustee shall
become effective and such successor trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect
as if originally named as trustee herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements held by it hereunder (other than any Mortgage Files at
the time held by a Custodian, which shall become the agent of any successor trustee hereunder), and the
Company, the Master Servicer and the predecessor trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly vesting and confirming in the
successor trustee all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this Section unless at the time of such
acceptance such successor trustee shall be eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a successor trustee as provided in this Section, the Company shall
mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Company fails to mail such notice within 10 days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or national banking association into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation or national banking association resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or national
banking association succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation or national banking association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Trustee shall mail notice of any such
merger or consolidation to the Certificateholders at their address as shown in the Certificate Register.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Trust Fund or property securing the same may at the
time be located, the Master Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such title to the Trust Fund, or any
part thereof, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Master Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request so to
do, or in case an Event of Default shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee hereunder shall be required to meet the
terms of eligibility as a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.
(b) In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 8.10 all
rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee, and such separate trustee or co-trustee jointly, except to
the extent that under any law of any jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each
of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this
Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time, constitute the Trustee, its agent or
attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies
and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 8.11. Appointment of Custodians.
The Trustee may, with the consent of the Master Servicer and the Company, or shall, at the direction
of the Company and the Master Servicer, appoint one or more Custodians who are not Affiliates of the Company,
the Master Servicer or any Seller to hold all or a portion of the Mortgage Files as agent for the Trustee, by
entering into a Custodial Agreement. Subject to Article VIII, the Trustee agrees to comply with the terms of
each Custodial Agreement and to enforce the terms and provisions thereof against the Custodian for the
benefit of the Certificateholders. Each Custodian shall be a depository institution subject to supervision
by federal or state authority, shall have a combined capital and surplus of at least $15,000,000 and shall be
qualified to do business in the jurisdiction in which it holds any Mortgage File. Each Custodial Agreement
may be amended only as provided in Section 11.01. The Trustee shall notify the Certificateholders of the
appointment of any Custodian (other than the Custodian appointed as of the Closing Date) pursuant to this
Section 8.11.
Section 8.12. Appointment of Office or Agency.
The Trustee will maintain an office or agency in the United States at the address designated in
Section 11.05 of the Series Supplement where Certificates may be surrendered for registration of transfer or
exchange. The Trustee will maintain an office at the address stated in Section 11.05 of the Series Supplement
where notices and demands to or upon the Trustee in respect of this Agreement may be served.
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ARTICLE IX
TERMINATION OR OPTIONAL PURCHASE OF ALL CERTIFICATES
Section 9.01. Optional Purchase by the Master Servicer of All Certificates; Termination Upon Purchase by the
Master Servicer or Liquidation of All Mortgage Loans
(a) Subject to Section 9.02, the respective obligations and responsibilities of the Company, the Master
Servicer and the Trustee created hereby in respect of the Certificates (other than the obligation of the
Trustee to make certain payments after the Final Distribution Date to Certificateholders and the obligation
of the Company to send certain notices as hereinafter set forth) shall terminate upon the last action
required to be taken by the Trustee on the Final Distribution Date pursuant to this Article IX following the
earlier of:
(i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund or the disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any Mortgage Loan, or
(ii) the purchase by the Master Servicer of all Mortgage Loans and all property acquired in respect of any
Mortgage Loan remaining in the Trust Fund at a price equal to 100% of the unpaid principal balance of
each Mortgage Loan or, if less than such unpaid principal balance, the fair market value of the
related underlying property of such Mortgage Loan with respect to Mortgage Loans as to which title has
been acquired if such fair market value is less than such unpaid principal balance (net of any
unreimbursed Advances attributable to principal) on the day of repurchase plus accrued interest
thereon at the Net Mortgage Rate (or Modified Net Mortgage Rate in the case of any Modified Mortgage
Loan) to, but not including, the first day of the month in which such repurchase price is distributed,
provided, however, that in no event shall the trust created hereby continue beyond the expiration of
21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date hereof and provided
further that the purchase price set forth above shall be increased as is necessary, as determined by
the Master Servicer, to avoid disqualification of any portion of any REMIC formed under the Series
Supplement as a REMIC. The purchase price paid by the Master Servicer shall also include any amounts
owed by Residential Funding pursuant to the last paragraph of Section 4 of the Assignment Agreement in
respect of any liability, penalty or expense that resulted from a breach of the Compliance With Laws
Representation, that remain unpaid on the date of such purchase.
The right of the Master Servicer to purchase all the assets of the Trust Fund pursuant to clause (ii)
above is conditioned upon the Pool Stated Principal Balance as of the Final Distribution Date, prior to
giving effect to distributions to be made on such Distribution Date, being less than ten percent of the
Cut-off Date Principal Balance of the Mortgage Loans.
If such right is exercised by the Master Servicer, the Master Servicer shall be deemed to have been
reimbursed for the full amount of any unreimbursed Advances theretofore made by it with respect to the
Mortgage Loans. In addition, the Master Servicer shall provide to the Trustee the certification required by
Section 3.15 and the Trustee and any Custodian shall, promptly following payment of the purchase price,
release to the Master Servicer the Mortgage Files pertaining to the Mortgage Loans being purchased.
In addition to the foregoing, on any Distribution Date on which the Pool Stated Principal Balance,
prior to giving effect to distributions to be made on such Distribution Date, is less than ten percent of the
Cut-off Date Principal Balance of the Mortgage Loans, the Master Servicer shall have the right, at its
option, to purchase the Certificates in whole, but not in part, at a price equal to the outstanding
Certificate Principal Balance of such Certificates plus the sum of Accrued Certificate Interest thereon for
the related Interest Accrual Period and any previously unpaid Accrued Certificate Interest. If the Master
Servicer exercises this right to purchase the outstanding Certificates, the Master Servicer will promptly
terminate the respective obligations and responsibilities created hereby in respect of the Certificates
pursuant to this Article IX.
(b) The Master Servicer shall give the Trustee not less than 40 days' prior notice of the
Distribution Date on which the Master Servicer anticipates that the final distribution will be made to
Certificateholders (whether as a result of the exercise by the Master Servicer of its right to
purchase the assets of the Trust Fund or otherwise) or on which the Master Servicer anticipates that
the Certificates will be purchased (as a result of the exercise by the Master Servicer to purchase the
outstanding Certificates). Notice of any termination specifying the anticipated Final Distribution
Date (which shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee (if so required by the terms
hereof) for payment of the final distribution and cancellation or notice of any purchase of the
outstanding Certificates, specifying the Distribution Date upon which the Holders may surrender their
Certificates to the Trustee for payment, shall be given promptly by the Master Servicer (if it is
exercising its right to purchase the assets of the Trust Fund or to purchase the outstanding
Certificates), or by the Trustee (in any other case) by letter. Such notice shall be prepared by the
Master Servicer (if it is exercising its right to purchase the assets of the Trust Fund or to purchase
the outstanding Certificates), or by the Trustee (in any other case) and mailed by the Trustee to the
Certificateholders not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of such final distribution specifying:
(iii) the anticipated Final Distribution Date upon which final payment of the Certificates is anticipated to
be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein
designated where required pursuant to this Agreement or, in the case of the purchase by the Master
Servicer of the outstanding Certificates, the Distribution Date on which such purchase is to be made,
(iv) the amount of any such final payment, or in the case of the purchase of the outstanding Certificates,
the purchase price, in either case, if known, and
(v) that the Record Date otherwise applicable to such Distribution Date is not applicable, and in the case
of the Senior Certificates, or in the case of all of the Certificates in connection with the exercise
by the Master Servicer of its right to purchase the Certificates, that payment will be made only upon
presentation and surrender of the Certificates at the office or agency of the Trustee therein
specified.
If the Master Servicer is obligated to give notice to Certificateholders as aforesaid, it shall give such
notice to the Certificate Registrar at the time such notice is given to Certificateholders and, if the Master
Servicer is exercising its rights to purchase the outstanding Certificates, it shall give such notice to each
Rating Agency at the time such notice is given to Certificateholders. As a result of the exercise by the
Master Servicer of its right to purchase the assets of the Trust Fund, the Master Servicer shall deposit in
the Certificate Account, before the Final Distribution Date in immediately available funds an amount equal to
the purchase price for the assets of the Trust Fund, computed as provided above. As a result of the exercise
by the Master Servicer of its right to purchase the outstanding Certificates, the Master Servicer shall
deposit in an Eligible Account, established by the Master Servicer on behalf of the Trustee and separate from
the Certificate Account in the name of the Trustee in trust for the registered holders of the Certificates,
before the Distribution Date on which such purchase is to occur in immediately available funds an amount
equal to the purchase price for the Certificates, computed as above provided, and provide notice of such
deposit to the Trustee. The Trustee will withdraw from such account the amount specified in subsection (c)
below.
(b) In the case of the Senior Certificates, upon presentation and surrender of the Certificates by the
Certificateholders thereof, and in the case of the Class M and Class B Certificates, upon presentation and
surrender of the Certificates by the Certificateholders thereof in connection with the exercise by the Master
Servicer of its right to purchase the Certificates, and otherwise in accordance with Section 4.01(a), the
Trustee shall distribute to the Certificateholders (i) the amount otherwise distributable on such
Distribution Date, if not in connection with the Master Servicer's election to repurchase the assets of the
Trust Fund or the outstanding Certificates, or (ii) if the Master Servicer elected to so repurchase the
assets of the Trust Fund or the outstanding Certificates, an amount determined as follows: (A) with respect
to each Certificate the outstanding Certificate Principal Balance thereof, plus Accrued Certificate Interest
for the related Interest Accrual Period thereon and any previously unpaid Accrued Certificate Interest,
subject to the priority set forth in Section 4.02(a), and (B) with respect to the Class R Certificates, any
excess of the amounts available for distribution (including the repurchase price specified in clause (ii) of
subsection (a) of this Section) over the total amount distributed under the immediately preceding clause
(A). Notwithstanding the reduction of the Certificate Principal Balance of any Class of Subordinate
Certificates to zero, such Class will be outstanding hereunder until the termination of the respective
obligations and responsibilities of the Company, the Master Servicer and the Trustee hereunder in accordance
with Article IX.
(c) If any Certificateholders shall not surrender their Certificates for final payment and cancellation on
or before the Final Distribution Date (if so required by the terms hereof), the Trustee shall on such date
cause all funds in the Certificate Account not distributed in final distribution to Certificateholders to be
withdrawn therefrom and credited to the remaining Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Certificateholders, and the Master Servicer (if it exercised its right
to purchase the assets of the Trust Fund), or the Trustee (in any other case) shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the
final distribution with respect thereto. If within six months after the second notice any Certificate shall
not have been surrendered for cancellation, the Trustee shall take appropriate steps as directed by the
Master Servicer to contact the remaining Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the escrow account and of contacting Certificateholders shall be paid out
of the assets which remain in the escrow account. If within nine months after the second notice any
Certificates shall not have been surrendered for cancellation, the Trustee shall pay to the Master Servicer
all amounts distributable to the holders thereof and the Master Servicer shall thereafter hold such amounts
until distributed to such Holders. No interest shall accrue or be payable to any Certificateholder on any
amount held in the escrow account or by the Master Servicer as a result of such Certificateholder's failure
to surrender its Certificate(s) for final payment thereof in accordance with this Section 9.01.
(d) If any Certificateholders do not surrender their Certificates on or before the Distribution Date on
which a purchase of the outstanding Certificates is to be made, the Trustee shall on such date cause all
funds in the Certificate Account deposited therein by the Master Servicer pursuant to Section 9.01(b) to be
withdrawn therefrom and deposited in a separate escrow account for the benefit of such Certificateholders,
and the Master Servicer shall give a second written notice to such Certificateholders to surrender their
Certificates for payment of the purchase price therefor. If within six months after the second notice any
Certificate shall not have been surrendered for cancellation, the Trustee shall take appropriate steps as
directed by the Master Servicer to contact the Holders of such Certificates concerning surrender of their
Certificates. The costs and expenses of maintaining the escrow account and of contacting Certificateholders
shall be paid out of the assets which remain in the escrow account. If within nine months after the second
notice any Certificates shall not have been surrendered for cancellation in accordance with this Section
9.01, the Trustee shall pay to the Master Servicer all amounts distributable to the Holders thereof and the
Master Servicer shall thereafter hold such amounts until distributed to such Holders. No interest shall
accrue or be payable to any Certificateholder on any amount held in the escrow account or by the Master
Servicer as a result of such Certificateholder's failure to surrender its Certificate(s) for payment in
accordance with this Section 9.01. Any Certificate that is not surrendered on the Distribution Date on which
a purchase pursuant to this Section 9.01 occurs as provided above will be deemed to have been purchased and
the Holder as of such date will have no rights with respect thereto except to receive the purchase price
therefor minus any costs and expenses associated with such escrow account and notices allocated thereto. Any
Certificates so purchased or deemed to have been purchased on such Distribution Date shall remain outstanding
hereunder until the Master Servicer has terminated the respective obligations and responsibilities created
hereby in respect of the Certificates pursuant to this Article IX. The Master Servicer shall be for all
purposes the Holder thereof as of such date.
Section 9.02. Additional Termination Requirements.
(a) Each REMIC that comprises the Trust Fund shall be terminated in accordance with the following
additional requirements, unless (subject to Section 10.01(f)) the Trustee and the Master Servicer have
received an Opinion of Counsel (which Opinion of Counsel shall not be an expense of the Trustee) to the
effect that the failure of each such REMIC to comply with the requirements of this Section 9.02 will not (i)
result in the imposition on the Trust Fund of taxes on "prohibited transactions," as described in Section
860F of the Code, or (ii) cause any such REMIC to fail to qualify as a REMIC at any time that any Certificate
is outstanding:
(i) The Master Servicer shall establish a 90-day liquidation period for each such REMIC and specify the
first day of such period in a statement attached to the Trust Fund's final Tax Return pursuant to
Treasury regulations Section 1.860F-1. The Master Servicer also shall satisfy all of the requirements
of a qualified liquidation for a REMIC under Section 860F of the Code and regulations thereunder;
(ii) The Master Servicer shall notify the Trustee at the commencement of such 90-day liquidation period
and, at or prior to the time of making of the final payment on the Certificates, the Trustee shall
sell or otherwise dispose of all of the remaining assets of the Trust Fund in accordance with the
terms hereof; and
(iii) If the Master Servicer or the Company is exercising its right to purchase the assets of the Trust
Fund, the Master Servicer shall, during the 90-day liquidation period and at or prior to the Final
Distribution Date, purchase all of the assets of the Trust Fund for cash.
(b) Each Holder of a Certificate and the Trustee hereby irrevocably approves and appoints the Master
Servicer as its attorney-in-fact to adopt a plan of complete liquidation for each REMIC at the expense of the
Trust Fund in accordance with the terms and conditions of this Agreement.
Section 9.03. Termination of Multiple REMICs.
If the REMIC Administrator makes two or more separate REMIC elections, the applicable REMIC shall be
terminated on the earlier of the Final Distribution Date and the date on which it is deemed to receive the
last deemed distributions on the related Uncertificated REMIC Regular Interests and the last distribution due
on the Certificates is made.
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ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration.
(a) The REMIC Administrator shall make an election to treat the Trust Fund as one or more REMICs under the
Code and, if necessary, under applicable state law. The assets of each such REMIC will be set forth in the
Series Supplement. Such election will be made on Form 1066 or other appropriate federal tax or information
return (including Form 8811) or any appropriate state return for the taxable year ending on the last day of
the calendar year in which the Certificates are issued. For the purposes of each REMIC election in respect
of the Trust Fund, Certificates and interests to be designated as the "regular interests" and the sole class
of "residual interests" in the REMIC will be set forth in Section 10.03 of the Series Supplement. The REMIC
Administrator and the Trustee shall not permit the creation of any "interests" (within the meaning of Section
860G of the Code) in any REMIC elected in respect of the Trust Fund other than the "regular interests" and
"residual interests" so designated.
(b) The Closing Date is hereby designated as the "startup day" of the Trust Fund within the meaning of
Section 860G(a)(9) of the Code.
(c) The REMIC Administrator shall hold a Class R Certificate representing a 0.01% Percentage Interest each
Class of the Class R Certificates and shall be designated as "the tax matters person" with respect to each
REMIC in the manner provided under Treasury regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1. The REMIC Administrator, as tax matters person, shall (i) act on behalf of each REMIC in
relation to any tax matter or controversy involving the Trust Fund and (ii) represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any governmental taxing
authority with respect thereto. The legal expenses, including without limitation attorneys' or accountants'
fees, and costs of any such proceeding and any liability resulting therefrom shall be expenses of the Trust
Fund and the REMIC Administrator shall be entitled to reimbursement therefor out of amounts attributable to
the Mortgage Loans on deposit in the Custodial Account as provided by Section 3.10 unless such legal expenses
and costs are incurred by reason of the REMIC Administrator's willful misfeasance, bad faith or gross
negligence. If the REMIC Administrator is no longer the Master Servicer hereunder, at its option the REMIC
Administrator may continue its duties as REMIC Administrator and shall be paid reasonable compensation not to
exceed $3,000 per year by any successor Master Servicer hereunder for so acting as the REMIC Administrator.
(d) The REMIC Administrator shall prepare or cause to be prepared all of the Tax Returns that it
determines are required with respect to each REMIC created hereunder and deliver such Tax Returns in a timely
manner to the Trustee and the Trustee shall sign and file such Tax Returns in a timely manner. The expenses
of preparing such returns shall be borne by the REMIC Administrator without any right of reimbursement
therefor. The REMIC Administrator agrees to indemnify and hold harmless the Trustee with respect to any tax
or liability arising from the Trustee's signing of Tax Returns that contain errors or omissions. The Trustee
and Master Servicer shall promptly provide the REMIC Administrator with such information as the REMIC
Administrator may from time to time request for the purpose of enabling the REMIC Administrator to prepare
Tax Returns.
(e) The REMIC Administrator shall provide (i) to any Transferor of a Class R Certificate such information
as is necessary for the application of any tax relating to the transfer of a Class R Certificate to any
Person who is not a Permitted Transferee, (ii) to the Trustee, and the Trustee shall forward to the
Certificateholders, such information or reports as are required by the Code or the REMIC Provisions including
reports relating to interest, original issue discount and market discount or premium (using the Prepayment
Assumption) and (iii) to the Internal Revenue Service the name, title, address and telephone number of the
person who will serve as the representative of each REMIC.
(f) The Master Servicer and the REMIC Administrator shall take such actions and shall cause each REMIC
created hereunder to take such actions as are reasonably within the Master Servicer's or the REMIC
Administrator's control and the scope of its duties more specifically set forth herein as shall be necessary
or desirable to maintain the status of each REMIC as a REMIC under the REMIC Provisions (and the Trustee
shall assist the Master Servicer and the REMIC Administrator, to the extent reasonably requested by the
Master Servicer and the REMIC Administrator to do so). The Master Servicer and the REMIC Administrator shall
not knowingly or intentionally take any action, cause the Trust Fund to take any action or fail to take (or
fail to cause to be taken) any action reasonably within their respective control that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the status of any portion of any
REMIC formed under the Series Supplement as a REMIC or (ii) result in the imposition of a tax upon any such
REMIC (including but not limited to the tax on prohibited transactions as defined in Section 860F(a)(2) of
the Code and the tax on contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, in the absence of an Opinion of Counsel or the indemnification referred to in this sentence, an
"Adverse REMIC Event") unless the Master Servicer or the REMIC Administrator, as applicable, has received an
Opinion of Counsel (at the expense of the party seeking to take such action or, if such party fails to pay
such expense, and the Master Servicer or the REMIC Administrator, as applicable, determines that taking such
action is in the best interest of the Trust Fund and the Certificateholders, at the expense of the Trust
Fund, but in no event at the expense of the Master Servicer, the REMIC Administrator or the Trustee) to the
effect that the contemplated action will not, with respect to each REMIC created hereunder, endanger such
status or, unless the Master Servicer, the REMIC Administrator or both, as applicable, determine in its or
their sole discretion to indemnify the Trust Fund against the imposition of such a tax, result in the
imposition of such a tax. Wherever in this Agreement a contemplated action may not be taken because the
timing of such action might result in the imposition of a tax on the Trust Fund, or may only be taken
pursuant to an Opinion of Counsel that such action would not impose a tax on the Trust Fund, such action may
nonetheless be taken provided that the indemnity given in the preceding sentence with respect to any taxes
that might be imposed on the Trust Fund has been given and that all other preconditions to the taking of such
action have been satisfied. The Trustee shall not take or fail to take any action (whether or not authorized
hereunder) as to which the Master Servicer or the REMIC Administrator, as applicable, has advised it in
writing that it has received an Opinion of Counsel to the effect that an Adverse REMIC Event could occur with
respect to such action. In addition, prior to taking any action with respect to any REMIC created hereunder
or any related assets thereof, or causing any such REMIC to take any action, which is not expressly permitted
under the terms of this Agreement, the Trustee will consult with the Master Servicer or the REMIC
Administrator, as applicable, or its designee, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to any such REMIC, and the Trustee shall not take any such action
or cause any such REMIC to take any such action as to which the Master Servicer or the REMIC Administrator,
as applicable, has advised it in writing that an Adverse REMIC Event could occur. The Master Servicer or the
REMIC Administrator, as applicable, may consult with counsel to make such written advice, and the cost of
same shall be borne by the party seeking to take the action not expressly permitted by this Agreement, but in
no event at the expense of the Master Servicer or the REMIC Administrator. At all times as may be required
by the Code, the Master Servicer will to the extent within its control and the scope of its duties more
specifically set forth herein, maintain substantially all of the assets of each REMIC created hereunder as
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and "permitted investments" as defined in
Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited transactions" of any REMIC created hereunder as
defined in Section 860F(a)(2) of the Code, on "net income from foreclosure property" of any such REMIC as
defined in Section 860G(c) of the Code, on any contributions to any such REMIC after the Startup Day therefor
pursuant to Section 860G(d) of the Code, or any other tax is imposed by the Code or any applicable provisions
of state or local tax laws, such tax shall be charged (i) to the Master Servicer, if such tax arises out of
or results from a breach by the Master Servicer of any of its obligations under this Agreement or the Master
Servicer has in its sole discretion determined to indemnify the Trust Fund against such tax, (ii) to the
Trustee, if such tax arises out of or results from a breach by the Trustee of any of its obligations under
this Article X, or (iii) otherwise against amounts on deposit in the Custodial Account as provided by Section
3.10 and on the Distribution Date(s) following such reimbursement the aggregate of such taxes shall be
allocated in reduction of the Accrued Certificate Interest on each Class entitled thereto in the same manner
as if such taxes constituted a Prepayment Interest Shortfall.
(h) The Trustee and the Master Servicer shall, for federal income tax purposes, maintain books and records
with respect to each REMIC created hereunder on a calendar year and on an accrual basis or as otherwise may
be required by the REMIC Provisions.
(i) Following the Startup Day, neither the Master Servicer nor the Trustee shall accept any contributions
of assets to any REMIC created hereunder unless (subject to Section 10.01(f)) the Master Servicer and the
Trustee shall have received an Opinion of Counsel (at the expense of the party seeking to make such
contribution) to the effect that the inclusion of such assets in such REMIC will not cause the REMIC to fail
to qualify as a REMIC at any time that any Certificates are outstanding or subject the REMIC to any tax under
the REMIC Provisions or other applicable provisions of federal, state and local law or ordinances.
(j) Neither the Master Servicer nor the Trustee shall (subject to Section 10.01(f)) enter into any
arrangement by which any REMIC created hereunder will receive a fee or other compensation for services nor
permit any such REMIC to receive any income from assets other than "qualified mortgages" as defined in
Section 860G(a)(3) of the Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.
(k) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest
possible maturity date" by which the Certificate Principal Balance of each Class of Certificates (other than
the Interest Only Certificates) representing a regular interest in the applicable REMIC and the
Uncertificated Principal Balance of each Uncertificated REMIC Regular Interest (other than each
Uncertificated REMIC Regular Interest represented by a Class A-V Certificate, if any) and the rights to the
Interest Only Certificates and Uncertificated REMIC Regular Interest represented by a Class A-V Certificate
would be reduced to zero is the Maturity Date for each such Certificate and Interest.
(l) Within 30 days after the Closing Date, the REMIC Administrator shall prepare and file with the
Internal Revenue Service Form 8811, "Information Return for Real Estate Mortgage Investment Conduits (REMIC)
and Issuers of Collateralized Debt Obligations" for each REMIC created hereunder.
(m) Neither the Trustee nor the Master Servicer shall sell, dispose of or substitute for any of the
Mortgage Loans (except in connection with (i) the default, imminent default or foreclosure of a Mortgage
Loan, including but not limited to, the acquisition or sale of a Mortgaged Property acquired by deed in lieu
of foreclosure, (ii) the bankruptcy of any REMIC created hereunder, (iii) the termination of any such REMIC
pursuant to Article IX of this Agreement or (iv) a purchase of Mortgage Loans pursuant to Article II or III
of this Agreement) nor acquire any assets for any such REMIC, nor sell or dispose of any investments in the
Custodial Account or the Certificate Account for gain nor accept any contributions to any such REMIC after
the Closing Date unless it has received an Opinion of Counsel that such sale, disposition, substitution or
acquisition will not (a) affect adversely the status of such REMIC as a REMIC or (b) unless the Master
Servicer has determined in its sole discretion to indemnify the Trust Fund against such tax, cause such REMIC
to be subject to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC Provisions.
Section 10.02. Master Servicer, REMIC Administrator and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the Company, the REMIC Administrator and the Master
Servicer for any taxes and costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Company or the Master Servicer, as a result of a breach of the Trustee's
covenants set forth in Article VIII or this Article X.
(b) The REMIC Administrator agrees to indemnify the Trust Fund, the Company, the Master Servicer and the
Trustee for any taxes and costs (including, without limitation, any reasonable attorneys' fees) imposed on or
incurred by the Trust Fund, the Company, the Master Servicer or the Trustee, as a result of a breach of the
REMIC Administrator's covenants set forth in this Article X with respect to compliance with the REMIC
Provisions, including without limitation, any penalties arising from the Trustee's execution of Tax Returns
prepared by the REMIC Administrator that contain errors or omissions; provided, however, that such liability
will not be imposed to the extent such breach is a result of an error or omission in information provided to
the REMIC Administrator by the Master Servicer in which case Section 10.02(c) will apply.
(c) The Master Servicer agrees to indemnify the Trust Fund, the Company, the REMIC Administrator and the
Trustee for any taxes and costs (including, without limitation, any reasonable attorneys' fees) imposed on or
incurred by the Trust Fund, the Company, the REMIC Administrator or the Trustee, as a result of a breach of
the Master Servicer's covenants set forth in this Article X or in Article III with respect to compliance with
the REMIC Provisions, including without limitation, any penalties arising from the Trustee's execution of Tax
Returns prepared by the Master Servicer that contain errors or omissions.
Section 10.03. Designation of REMIC(s).
As provided in Section 10.03 of the Series Supplement.
Section 10.04. Distributions on the Uncertificated REMIC I and REMIC II Regular Interests.
As provided in Section 10.04 of the Series Supplement.
Section 10.05. Compliance with Withholding Requirements.
As provided in Section 10.05 of the Series Supplement.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
(a) This Agreement or any Custodial Agreement may be amended from time to time by the Company, the Master
Servicer and the Trustee, without the consent of any of the Certificateholders:
(i) to cure any ambiguity,
(ii) to correct or supplement any provisions herein or therein, which may be inconsistent with any other
provisions herein or therein or to correct any error,
(iii) to modify, eliminate or add to any of its provisions to such extent as shall be necessary or desirable
to maintain the qualification of the Trust Fund as a REMIC at all times that any Certificate is
outstanding or to avoid or minimize the risk of the imposition of any tax on the Trust Fund pursuant
to the Code that would be a claim against the Trust Fund, provided that the Trustee has received an
Opinion of Counsel to the effect that (A) such action is necessary or desirable to maintain such
qualification or to avoid or minimize the risk of the imposition of any such tax and (B) such action
will not adversely affect in any material respect the interests of any Certificateholder,
(iv) to change the timing and/or nature of deposits into the Custodial Account or the Certificate Account
or to change the name in which the Custodial Account is maintained, provided that (A) the Certificate
Account Deposit Date shall in no event be later than the related Distribution Date, (B) such change
shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Certificateholder and (C) such change shall not result in a reduction of the rating
assigned to any Class of Certificates below the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing Date (in the case of the Insured Certificates (as
defined in the Series Supplement), such determination shall be made without giving effect to the
Certificate Policy (as defined in the Series Supplement)), as evidenced by a letter from each Rating
Agency to such effect,
(v) to modify, eliminate or add to the provisions of Section 5.02(f) or any other provision hereof
restricting transfer of the Class R Certificates, by virtue of their being the "residual interests" in
a REMIC, provided that (A) such change shall not result in reduction of the rating assigned to any
such Class of Certificates below the lower of the then-current rating or the rating assigned to such
Certificates as of the Closing Date (in the case of the Insured Certificates (as defined in the Series
Supplement), such determination shall be made without giving effect to the Certificate Policy (as
defined in the Series Supplement)), as evidenced by a letter from each Rating Agency to such effect,
and (B) such change shall not (subject to Section 10.01(f)), as evidenced by an Opinion of Counsel (at
the expense of the party seeking so to modify, eliminate or add such provisions), cause any REMIC
created hereunder or any of the Certificateholders (other than the transferor) to be subject to a
federal tax caused by a transfer to a Person that is not a Permitted Transferee,
(vi) to make any other provisions with respect to matters or questions arising under this Agreement or such
Custodial Agreement which shall not be materially inconsistent with the provisions of this Agreement,
provided that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder or
(vii) to amend any provision herein or therein that is not material to any of the
Certificateholders.
(b) This Agreement or any Custodial Agreement may also be amended from time to time by the Company, the
Master Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate
not less than 66% of the Percentage Interests of each Class of Certificates with a Certificate Principal
Balance greater than zero affected thereby for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or such Custodial Agreement or of modifying in
any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment
shall:
(i) reduce in any manner the amount of, or delay the timing of, payments which are required to be
distributed on any Certificate without the consent of the Holder of such Certificate,
(ii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment, in any such case without the consent of the Holders of all Certificates
of such Class then outstanding.
(c) Notwithstanding any contrary provision of this Agreement, the Trustee shall not consent to any
amendment to this Agreement unless it shall have first received an Opinion of Counsel (subject to Section
10.01(f) and at the expense of the party seeking such amendment) to the effect that such amendment or the
exercise of any power granted to the Master Servicer, the Company or the Trustee in accordance with such
amendment is permitted hereunder and will not result in the imposition of a federal tax on the Trust Fund or
cause any REMIC created under the Series Supplement to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(d) Promptly after the execution of any such amendment the Trustee shall furnish written notification of
the substance of such amendment to the Custodian and each Certificateholder. It shall not be necessary for
the consent of Certificateholders under this Section 11.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.
(e) The Company shall have the option, in its sole discretion, to obtain and deliver to the Trustee any
corporate guaranty, payment obligation, irrevocable letter of credit, surety bond, insurance policy or
similar instrument or a reserve fund, or any combination of the foregoing, for the purpose of protecting the
Holders of the Class B Certificates against any or all Realized Losses or other shortfalls. Any such
instrument or fund shall be held by the Trustee for the benefit of the Class B Certificateholders, but shall
not be and shall not be deemed to be under any circumstances included in the Trust Fund. To the extent that
any such instrument or fund constitutes a reserve fund for federal income tax purposes, (i) any reserve fund
so established shall be an outside reserve fund and not an asset of the Trust Fund, (ii) any such reserve
fund shall be owned by the Company, and (iii) amounts transferred by the Trust Fund to any such reserve fund
shall be treated as amounts distributed by the Trust Fund to the Company or any successor, all within the
meaning of Treasury Regulations Section 1.860G-2(h) as it reads as of the Cut-off Date. In connection with
the provision of any such instrument or fund, this Agreement and any provision hereof may be modified, added
to, deleted or otherwise amended in any manner that is related or incidental to such instrument or fund or
the establishment or administration thereof, such amendment to be made by written instrument executed or
consented to by the Company but without the consent of any Certificateholder and without the consent of the
Master Servicer or the Trustee being required unless any such amendment would impose any additional
obligation on, or otherwise adversely affect the interests of the Senior Certificateholders, the Class M
Certificateholders, the Master Servicer or the Trustee, as applicable; provided that the Company obtains
(subject to Section 10.01(f)) an Opinion of Counsel (which need not be an opinion of Independent counsel) to
the effect that any such amendment will not cause (a) any federal tax to be imposed on the Trust Fund,
including without limitation, any federal tax imposed on "prohibited transactions" under Section 860F(a)(1)
of the Code or on "contributions after the startup date" under Section 860G(d)(1) of the Code and (b) any
REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding. In
the event that the Company elects to provide such coverage in the form of a limited guaranty provided by
General Motors Acceptance Corporation, the Company may elect that the text of such amendment to this
Agreement shall be substantially in the form attached hereto as Exhibit K (in which case Residential
Funding's Subordinate Certificate Loss Obligation as described in such exhibit shall be established by
Residential Funding's consent to such amendment) and that the limited guaranty shall be executed in the form
attached hereto as Exhibit L, with such changes as the Company shall deem to be appropriate; it being
understood that the Trustee has reviewed and approved the content of such forms and that the Trustee's
consent or approval to the use thereof is not required.
Section 11.02. Recordation of Agreement; Counterparts.
(a) To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable jurisdictions in which any
or all of the properties subject to the Mortgages are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Master Servicer and at its expense on direction
by the Trustee (pursuant to the request of Holders of Certificates entitled to at least 25% of the Voting
Rights), but only upon direction accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders.
(b) For the purpose of facilitating the recordation of this Agreement as herein provided and for other
purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same
instrument.
Section 11.03. Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the
Trust Fund, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the Trust Fund, nor otherwise
affect the rights, obligations and liabilities of any of the parties hereto.
(b) No Certificateholder shall have any right to vote (except as expressly provided herein) or in any
manner otherwise control the operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members of an association; nor shall
any Certificateholder be under any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any provision of this Agreement to institute
any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless
such Holder previously shall have given to the Trustee a written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the Holders of Certificates of any Class evidencing in the
aggregate not less than 25% of the related Percentage Interests of such Class, shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or
proceeding it being understood and intended, and being expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of Certificates of any Class shall
have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or
prejudice the rights of the Holders of any other of such Certificates of such Class or any other Class, or to
obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under
this Agreement, except in the manner herein provided and for the common benefit of Certificateholders of such
Class or all Classes, as the case may be. For the protection and enforcement of the provisions of this
Section 11.03, each and every Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 11.04. Governing Law.
This agreement and the Certificates shall be governed by and construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined
in accordance with such laws.
Section 11.05. Notices.
As provided in Section 11.05 of the Series Supplement.
Section 11.06. Required Notices to Rating Agency and Subservicer.
The Company, the Master Servicer or the Trustee, as applicable, (i) shall notify each Rating Agency at
such time as it is otherwise required pursuant to this Agreement to give notice of the occurrence of, any of
the events described in clause (a), (b), (c), (d), (g), (h), (i) or (j) below, (ii) shall notify the
Subservicer at such time as it is otherwise required pursuant to this Agreement to give notice of the
occurrence of, any of the events described in clause (a), (b), (c)(1), (g)(1), or (i) below, or (iii)
provide a copy to each Rating Agency at such time as otherwise required to be delivered pursuant to this
Agreement of any of the statements described in clauses (e) and (f) below:
(a) a material change or amendment to this Agreement,
(b) the occurrence of an Event of Default,
(c) (1) the termination or appointment of a successor Master Servicer or (2) the termination or
appointment of a successor Trustee or a change in the majority ownership of the Trustee,
(d) the filing of any claim under the Master Servicer's blanket fidelity bond and the errors and omissions
insurance policy required by Section 3.12 or the cancellation or modification of coverage under any
such instrument,
(e) the statement required to be delivered to the Holders of each Class of Certificates pursuant to
Section 4.03,
(f) the statements required to be delivered pursuant to Sections 3.18 and 3.19,
(g) (1) a change in the location of the Custodial Account or (2) a change in the location of the
Certificate Account,
(h) the occurrence of any monthly cash flow shortfall to the Holders of any Class of Certificates
resulting from the failure by the Master Servicer to make an Advance pursuant to Section 4.04,
(i) the occurrence of the Final Distribution Date, and
(j) the repurchase of or substitution for any Mortgage Loan,
provided, however, that with respect to notice of the occurrence of the events described in clauses (d), (g)
or (h) above, the Master Servicer shall provide prompt written notice to each Rating Agency and the
Subservicer, if applicable, of any such event known to the Master Servicer.
Section 11.07. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the
rights of the Holders thereof.
Section 11.08. Supplemental Provisions for Resecuritization.
This Agreement may be supplemented by means of the addition of a separate Article hereto (a
"Supplemental Article") for the purpose of resecuritizing any of the Certificates issued hereunder, under the
following circumstances. With respect to any Class or Classes of Certificates issued hereunder, or any
portion of any such Class, as to which the Company or any of its Affiliates (or any designee thereof) is the
registered Holder (the "Resecuritized Certificates"), the Company may deposit such Resecuritized Certificates
into a new REMIC, grantor trust or custodial arrangement (a "Restructuring Vehicle") to be held by the
Trustee pursuant to a Supplemental Article. The instrument adopting such Supplemental Article shall be
executed by the Company, the Master Servicer and the Trustee; provided, that neither the Master Servicer nor
the Trustee shall withhold their consent thereto if their respective interests would not be materially
adversely affected thereby. To the extent that the terms of the Supplemental Article do not in any way
affect any provisions of this Agreement as to any of the Certificates initially issued hereunder, the
adoption of the Supplemental Article shall not constitute an "amendment" of this Agreement.
Each Supplemental Article shall set forth all necessary provisions relating to the holding of the
Resecuritized Certificates by the Trustee, the establishment of the Restructuring Vehicle, the issuing of
various classes of new certificates by the Restructuring Vehicle and the distributions to be made thereon,
and any other provisions necessary for the purposes thereof. In connection with each Supplemental Article,
the Company shall deliver to the Trustee an Opinion of Counsel to the effect that (i) the Restructuring
Vehicle will qualify as a REMIC, grantor trust or other entity not subject to taxation for federal income tax
purposes and (ii) the adoption of the Supplemental Article will not endanger the status of the Trust Fund as
a REMIC or (subject to Section 10.01(f)) result in the imposition of a tax upon the Trust Fund (including but
not limited to the tax on prohibited transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC as set forth in Section 860G(d) of the Code).
Section 11.09. Allocation of Voting Rights.
As provided in Section 11.09 of the Series Supplement.
Section 11.10. No Petition.
As provided in Section 11.10 of the Series Supplement.
--------------------------------------------------------------------------------
ARTICLE XII
COMPLIANCE WITH REGULATION AB
Section 12.01. Intent of the Parties; Reasonableness.
The Company, the Trustee and the Master Servicer acknowledge and agree that the purpose of this
Article XII is to facilitate compliance by the Company with the provisions of Regulation AB and related rules
and regulations of the Commission. The Company shall not exercise its right to request delivery of
information or other performance under these provisions other than in good faith, or for purposes other than
compliance with the Securities Act, the Exchange Act and the rules and regulations of the Commission under
the Securities Act and the Exchange Act. Each of the Master Servicer and the Trustee acknowledges that
interpretations of the requirements of Regulation AB may change over time, whether due to interpretive
guidance provided by the Commission or its staff, consensus among participants in the mortgage-backed
securities markets, advice of counsel, or otherwise, and agrees to comply with reasonable requests made by
the Company in good faith for delivery of information under these provisions on the basis of evolving
interpretations of Regulation AB. Each of the Master Servicer and the Trustee shall cooperate reasonably
with the Company to deliver to the Company (including any of its assignees or designees), any and all
disclosure, statements, reports, certifications, records and any other information necessary in the
reasonable, good faith determination of the Company to permit the Company to comply with the provisions of
Regulation AB.
Section 12.02. Additional Representations and Warranties of the Trustee.
(a)....The Trustee shall be deemed to represent and warrant to the Company as of the date
hereof and on each date on which information is provided to the Company under Sections 12.01, 12.02(b) or
12.03 that, except as disclosed in writing to the Company prior to such date: (i) it is not aware and has
not received notice that any default, early amortization or other performance triggering event has occurred
as to any other Securitization Transaction due to any default of the Trustee; (ii) there are no aspects of
its financial condition that could have a material adverse effect on the performance by it of its trustee
obligations under this Agreement or any other Securitization Transaction as to which it is the trustee; (iii)
there are no material legal or governmental proceedings pending (or known to be contemplated) against it that
would be material to Certificateholders; (iv) there are no relationships or transactions (as described in
Item 1119(b) of Regulation AB) relating to the Trustee with respect to the Company or any sponsor, issuing
entity, servicer, trustee, originator, significant obligor, enhancement or support provider or other material
transaction party (as each of such terms are used in Regulation AB) relating to the Securitization
Transaction contemplated by the Agreement, as identified by the Company to the Trustee in writing as of the
Closing Date (each, a "Transaction Party") that are outside the ordinary course of business or on terms other
than would be obtained in an arm's length transaction with an unrelated third party, apart from the
Securitization Transaction, and that are material to the investors' understanding of the Certificates; and
(v) the Trustee is not an affiliate (as contemplated by Item 1119(a) of Regulation AB) of any Transaction
Party. The Company shall notify the Trustee of any change in the identity of a Transaction Party after the
Closing Date.
(b)....If so requested by the Company on any date following the Closing Date, the Trustee
shall, within five Business Days following such request, confirm in writing the accuracy of the
representations and warranties set forth in paragraph (a) of this Section or, if any such representation and
warranty is not accurate as of the date of such confirmation, provide the pertinent facts, in writing, to the
Company. Any such request from the Company shall not be given more than once each calendar quarter, unless
the Company shall have a reasonable basis for questioning the accuracy of any of the representations and
warranties.
Section 12.03. Information to Be Provided by the Trustee.
For so long as the Certificates are outstanding, for the purpose of satisfying the Company's
reporting obligation under the Exchange Act with respect to any class of Certificates, the Trustee shall
provide to the Company a written description of (a) any litigation or governmental proceedings pending
against the Trustee as of the last day of each calendar month that would be material to Certificateholders,
and (b) any affiliations or relationships (as described in Item 1119 of Regulation AB) that develop following
the Closing Date between the Trustee and any Transaction Party of the type described in Section 12.02(a)(iv)
or 12.02(a)(v) as of the last day of each calendar year. Any descriptions required with respect to legal
proceedings, as well as updates to previously provided descriptions, under this Section 12.03 shall be given
no later than five Business Days prior to the Determination Date following the month in which the relevant
event occurs, and any notices and descriptions required with respect to affiliations, as well as updates to
previously provided descriptions, under this Section 12.03 shall be given no later than January 31 of the
calendar year following the year in which the relevant event occurs. As of the related Distribution Date
with respect to each Report on Form 10-D with respect to the Certificates filed by or on behalf of the
Company, and as of March 15 preceding the date each Report on Form 10-K with respect to the Certificates is
filed, the Trustee shall be deemed to represent and warrant that any information previously provided by the
Trustee under this Article XII is materially correct and does not have any material omissions unless the
Trustee has provided an update to such information. The Company will allow the Trustee to review any
disclosure relating to material litigation against the Trustee prior to filing such disclosure with the
Commission to the extent the Company changes the information provided by the Trustee.
Section 12.04. Report on Assessment of Compliance and Attestation.
On or before March 15 of each calendar year, the Trustee shall:
(a) deliver to the Company a report (in form and substance reasonably satisfactory to the Company)
regarding the Trustee's assessment of compliance with the applicable Servicing Criteria during the
immediately preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item
1122 of Regulation AB. Such report shall be signed by an authorized officer of the Trustee, and shall
address each of the Servicing Criteria specified on Exhibit R hereto; and
(b) deliver to the Company a report of a registered public accounting firm satisfying the requirements of
Rule 2-01 of Regulation S-X under the Securities Act and the Exchange Act that attests to, and reports on,
the assessment of compliance made by the Trustee and delivered pursuant to the preceding paragraph. Such
attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities
Act and the Exchange Act.
Section 12.05. Indemnification; Remedies.
(a) The Trustee shall indemnify the Company, each affiliate of the Company, the Master Servicer and each
affiliate of the Master Servicer, and the respective present and former directors, officers, employees and
agents of each of the foregoing, and shall hold each of them harmless from and against any losses, damages,
penalties, fines, forfeitures, legal fees and expenses and related costs, judgments, and any other costs,
fees and expenses that any of them may sustain arising out of or based upon:
......................(i)(A) any untrue statement of a material fact contained or alleged to be contained in
any information, report, certification, accountants' attestation or other material provided under this
Article XII by or on behalf of the Trustee (collectively, the "Trustee Information"), or (B) the omission or
alleged omission to state in the Trustee Information a material fact required to be stated in the Trustee
Information or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; or
......................(ii) any failure by the Trustee to deliver any information, report, certification or
other material when and as required under this Article XII, other than a failure by the Trustee to deliver an
accountants' attestation.
(b) In the case of any failure of performance described in clause (ii) of Section 12.05(a), as well as a
failure to deliver an accountants' attestation, the Trustee shall (i) promptly reimburse the Company for all
costs reasonably incurred by the Company in order to obtain the information, report, certification,
accountants' attestation or other material not delivered by the Trustee as required and (ii) cooperate with
the Company to mitigate any damages that may result from such failure.
(c) The Company and the Master Servicer shall indemnify the Trustee, each affiliate of the Trustee and the
respective present and former directors, officers, employees and agents of the Trustee, and shall hold each
of them harmless from and against any losses, damages, penalties, fines, forfeitures, legal fees and expenses
and related costs, judgments, and any other costs, fees and expenses that any of them may sustain arising out
of or based upon (i) any untrue statement of a material fact contained or alleged to be contained in any
information provided under this Agreement by or on behalf of the Company or Master Servicer for inclusion in
any report filed with Commission under the Exchange Act (collectively, the "RFC Information"), or (ii) the
omission or alleged omission to state in the RFC Information a material fact required to be stated in the RFC
Information or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) Notwithstanding any provision in this Section 12.05 to the contrary, the parties agree that none of
the Trustee, the Company or the Master Servicer shall be liable to the other for any consequential or
punitive damages whatsoever, whether in contract, tort (including negligence and strict liability), or any
other legal or equitable principle; provided, however, that such limitation shall not be applicable with
respect to third party claims made against a party.
--------------------------------------------------------------------------------
EXHIBIT A
FORM OF CLASS A CERTIFICATE, [PRINCIPAL ONLY/CLASS A-P] CERTIFICATE AND [INTEREST ONLY/CLASS A-V] CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX
ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ___________
__, ____. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT [___]% OF THE PREPAYMENT SPEED ASSUMPTION (AS DESCRIBED
IN THE PROSPECTUS SUPPLEMENT), [AND ASSUMING A CONSTANT PASS-THROUGH RATE EQUAL TO THE INITIAL PASS-THROUGH
RATE,] THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $[ ] OF OID PER [$1,000] [$100,000] OF
[INITIAL CERTIFICATE PRINCIPAL BALANCE] [NOTIONAL AMOUNT], THE YIELD TO MATURITY IS [ ]% AND THE AMOUNT
OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $[ ] PER [$1,000] [$100,000]
OF [INITIAL CERTIFICATE PRINCIPAL BALANCE] [NOTIONAL AMOUNT], COMPUTED USING THE APPROXIMATE METHOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT SPEED ASSUMPTION
OR AT ANY OTHER RATE OR AS TO THE CONSTANCY OF THE PASS-THROUGH RATE.]
Certificate No. [ %][Variable] Pass-Through Rate
[based on a Notional Amount]
Class A- Senior
Date of Pooling and Servicing [Percentage Interest: %]
Agreement and Cut-off Date:
___________ 1, ____ Aggregate Initial [Certificate Principal
Balance] [[Interest Only/Class A-V] Notional
First Distribution Date: Amount] [Subclass Notional Amount] of the
_________ 25, ____ Class A- Certificates:
Master Servicer: [Initial] [Certificate Principal
Residential Funding Balance] [Interest Only/Class A-V] [Subclass]
Corporation Notional Amount] of this Certificate:
$ ]
Assumed Final
Distribution Date: CUSIP 76110F-
___________ 25, ____
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE
SERIES ____-___
evidencing a percentage interest in the distributions allocable to the Class
A- Certificates with respect to a Trust Fund consisting primarily of a pool
of [conventional one- to four-family fixed interest rate first mortgage loans]
formed and sold by RESIDENTIAL ACCREDIT LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that is the
registered owner of the Percentage Interest evidenced by this Certificate [(obtained by dividing the [Initial
Certificate Principal Balance] [Initial [Interest Only/Class A-V] Notional Amount] of this Certificate by the
aggregate [Initial Certificate Principal Balance of all Class A- Certificates] [Initial [Interest
Only/Class A-V] Notional Amounts of all [Interest Only/Class A-V] Certificates], both as specified above)] in
certain distributions with respect to the Trust Fund consisting primarily of an interest in a pool of
[conventional one- to four-family fixed interest rate first mortgage loans] (the "Mortgage Loans"), formed and
sold by Residential Accredit Loans, Inc. (hereinafter called the "Company," which term includes any successor
entity under the Agreement referred to below). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement") among the Company, the Master Servicer and
__________________, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each
month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing as described in the Agreement, to the Person in whose name this Certificate is registered
at the close of business on the last day (or if such last day is not a Business Day, the Business Day
immediately preceding such last day) of the month immediately preceding the month of such distribution (the
"Record Date"), from the Available Distribution Amount in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount [(of interest and principal, if any)] required to be
distributed to Holders of Class A- Certificates on such Distribution Date. [The [Interest Only/Class
A-V] Notional Amount of the [Interest Only/Class A-V] Certificates as of any date of determination is equal
to the aggregate Stated Principal Balance of the Mortgage Loans corresponding to the Uncertificated REMIC
Regular Interests represented by such [Interest Only/Class A-V] Certificates.] [The Subclass Notional Amount
of the [Interest Only/Class A-V]- Certificates as of any date of determination is equal to the aggregate
Stated Principal Balance of the Mortgage Loans corresponding to the Uncertificated REMIC Regular Interests
represented by such [Interest Only/Class A-V]- Certificates immediately prior to such date.] [The [Interest
Only/Class A-V][- ] Certificates have no Certificate Principal Balance.]
Distributions on this Certificate will be made either by the Master Servicer acting on behalf
of the Trustee or by a Paying Agent appointed by the Trustee in immediately available funds (by wire transfer
or otherwise) for the account of the Person entitled thereto if such Person shall have so notified the Master
Servicer or such Paying Agent, or by check mailed to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose in the City and State of New York. The
[Initial Certificate Principal Balance] [Initial [Interest Only/Class A-V] Notional Amount] [initial Subclass
Notional Amount] of this Certificate is set forth above.] [The Certificate Principal Balance hereof will be
reduced to the extent of distributions allocable to principal and any Realized Losses allocable hereto.]
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries
respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event
Master Servicer funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the
Master Servicer, to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or
from other cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate
Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time
for purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement
and the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and
the rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and
the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of
the Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of any of the Certificates and,
in certain additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer
of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of
the Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of
New York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund
created thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the
maturity or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the
Master Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of
such Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does
not require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all
remaining Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole,
but not in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar,
by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT A-1
FORM OF CLASS X CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
--------------------------------------------------------------------------------
Certificate No. ____ Variable Pass-Through Rate
Class X Senior
Date of Pooling and Servicing Agreement Percentage Interest: 100%
and Cut-off Date: __________ 1, ____
Master Servicer: Aggregate Initial Notional Amount of the
Residential Funding Corporation Class X Certificates: $__________
First Distribution Date: Initial Notional Amount of this Certificate:
__________ 25, ____ $_____________
Assumed Final Distribution Date: CUSIP ________
_____________
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE
SERIES ____-____
Evidencing a percentage interest in the distributions allocable to the Class X Certificates
with respect to a Trust Fund consisting primarily of a pool of [one- to four-family
residential, payment-option, adjustable-rate first lien mortgage loans with a negative
amortization feature] formed and sold by RESIDENTIAL ACCREDIT LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that _________________________ is the registered owner of the Percentage Interest
evidenced by this Certificate (obtained by dividing the Initial Notional Amount of this Certificate by the
Aggregate Notional Amount of all Class X Certificates, both as specified above) in certain distributions with
respect to the Trust Fund consisting primarily of an interest in a pool of [one- to four-family residential,
payment-option, adjustable-rate first lien mortgage loans with a negative amortization feature] (the
"Mortgage Loans"), formed and sold by Residential Accredit Loans, Inc. (hereinafter called the "Company,"
which term includes any successor entity under the Agreement referred to below). The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the "Agreement") among the Company,
the Master Servicer and ________________________, as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each month or,
if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution Date"),
commencing as described in the Agreement, to the Person in whose name this Certificate is registered at the
close of business on the last day (or if such last day is not a Business Day, the Business Day immediately
preceding such last day) of the month immediately preceding the month of such distribution (the "Record
Date"), from the Available Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to Holders of Class X Certificates on
such Distribution Date. The Class X Certificates have no Certificate Principal Balance.
Distributions on this Certificate will be made either by the Master Servicer acting on behalf of the
Trustee or by a Paying Agent appointed by the Trustee in immediately available funds (by wire transfer or
otherwise) for the account of the Person entitled thereto if such Person shall have so notified the Master
Servicer or such Paying Agent, or by check mailed to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be made after due notice of
the pendency of such distribution and only upon presentation and surrender of this Certificate at the office
or agency appointed by the Trustee for that purpose in the City and State of New York. The Initial Notional
Amount of this Certificate is set forth above.
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries respecting the
Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event Master Servicer
funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the Master Servicer, to
the extent provided in the Agreement, from related recoveries on such Mortgage Loan or from other cash that
would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate Account
created for the benefit of Certificateholders may be made by the Master Servicer from time to time for
purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement and
the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and the
rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and the
Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of the
Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future holders of this Certificate
and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or
not notation of such consent is made upon the Certificate. The Agreement also permits the amendment thereof
in certain circumstances without the consent of the Holders of any of the Certificates and, in certain
additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer of
this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of the
Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of New
York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund created
thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of the
Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the maturity
or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the Master
Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of such
Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does not
require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all remaining
Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole, but not
in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar, by
manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for
any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT B
FORM OF CLASS M CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR CERTIFICATES [CLASS M-1
CERTIFICATES] [AND CLASS M-2 CERTIFICATES] AS DESCRIBED IN THE AGREEMENT (AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX
ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ___________
__, ____. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT [___]% OF THE PREPAYMENT SPEED ASSUMPTION (AS DESCRIBED
IN THE PROSPECTUS SUPPLEMENT), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $[____] OF OID PER $[1,000]
OF INITIAL CERTIFICATE PRINCIPAL BALANCE, THE YIELD TO MATURITY IS [_____]% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $[____] PER $[1,000] OF INITIAL CERTIFICATE
PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD. NO REPRESENTATION IS MADE THAT THE MORTGAGE LOANS
WILL PREPAY AT A RATE BASED ON THE PREPAYMENT SPEED ASSUMPTION OR AT ANY OTHER RATE.
ANY TRANSFEREE OF THIS CERTIFICATE WILL BE DEEMED TO HAVE REPRESENTED BY VIRTUE OF ITS PURCHASE
OR HOLDING OF THIS CERTIFICATE (OR INTEREST HEREIN) THAT EITHER (A) SUCH TRANSFEREE IS NOT AN
INVESTMENT MANAGER, A NAMED FIDUCIARY OR A TRUSTEE OF ANY PLAN, OR ANY OTHER PERSON, ACTING, DIRECTLY
OR INDIRECTLY, ON BEHALF OF OR PURCHASING ANY CERTIFICATE WITH "PLAN ASSETS" OF ANY PLAN (A "PLAN
INVESTOR"), (B) IT HAS ACQUIRED AND IS HOLDING SUCH CERTIFICATE IN RELIANCE ON PROHIBITED TRANSACTION
EXEMPTION ("PTE") 94-29, AS MOST RECENTLY AMENDED, PTE 2002-41, 67 FED. REG. 54487 (AUGUST 22, 2002)
(THE "RFC EXEMPTION"), AND THAT IT UNDERSTANDS THAT THERE ARE CERTAIN CONDITIONS TO THE AVAILABILITY
OF THE RFC EXEMPTION INCLUDING THAT SUCH CERTIFICATE MUST BE RATED, AT THE TIME OF PURCHASE, NOT LOWER
THAN "BBB-" (OR ITS EQUIVALENT) BY STANDARD & POOR'S, FITCH OR MOODY'S OR (C) (I) THE TRANSFEREE IS AN
INSURANCE COMPANY, (II) THE SOURCE OF FUNDS TO BE USED BY IT TO PURCHASE THE CERTIFICATE IS AN
"INSURANCE COMPANY GENERAL ACCOUNT" (WITHIN THE MEANING OF U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 95-60), AND (III) THE CONDITIONS SET FORTH IN SECTIONS I AND III
OF PTCE 95-60 HAVE BEEN SATISFIED (EACH ENTITY THAT SATISFIES THIS CLAUSE (C), A "COMPLYING INSURANCE
COMPANY).
IF THIS CERTIFICATE (OR ANY INTEREST HEREIN) IS ACQUIRED OR HELD BY ANY PERSON THAT DOES NOT
SATISFY THE CONDITIONS DESCRIBED IN THE PRECEDING PARAGRAPH, THEN THE LAST PRECEDING TRANSFEREE THAT
EITHER (I) IS NOT A PLAN INVESTOR, (II) ACQUIRED SUCH CERTIFICATE IN COMPLIANCE WITH THE RFC
EXEMPTION, OR (III) IS A COMPLYING INSURANCE COMPANY SHALL BE RESTORED, TO THE EXTENT PERMITTED BY
LAW, TO ALL RIGHTS AND OBLIGATIONS AS CERTIFICATE OWNER THEREOF RETROACTIVE TO THE DATE OF SUCH
TRANSFER OF THIS CERTIFICATE. THE TRUSTEE SHALL BE UNDER NO LIABILITY TO ANY PERSON FOR MAKING ANY
PAYMENTS DUE ON THIS CERTIFICATE TO SUCH PRECEDING TRANSFEREE.
ANY PURPORTED CERTIFICATE OWNER WHOSE ACQUISITION OR HOLDING OF THIS CERTIFICATE (OR INTEREST HEREIN)
WAS EFFECTED IN VIOLATION OF THE RESTRICTIONS IN SECTION 5.02(e) OF THE POOLING AND SERVICING AGREEMENT SHALL
INDEMNIFY AND HOLD HARMLESS THE COMPANY, THE TRUSTEE, THE MASTER SERVICER, ANY SUBSERVICER, AND THE TRUST
FUND FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, COSTS OR EXPENSES INCURRED BY SUCH PARTIES AS A RESULT
OF SUCH ACQUISITION OR HOLDING.
Certificate No. [ ]% Pass-Through Rate
Class M- Subordinate Aggregate Certificate
Principal Balance
Date of Pooling and Servicing of the Class M Certificates:
Agreement and Cut-off Date: $
___________ 1, ____
Initial Certificate Principal
First Distribution Date: Balance of this Certificate:
_________ 25, ____ $
Master Servicer: CUSIP: 76110F-
Residential Funding Corporation
Assumed Final Distribution Date:
___________ 25, ____
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE,
SERIES ____-___
evidencing a percentage interest in any distributions allocable to the Class M-
Certificates with respect to the Trust Fund consisting primarily of a pool of [conventional
one- to four-family fixed interest rate first mortgage loans] formed and sold by RESIDENTIAL
ACCREDIT LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that is the registered owner
of the Percentage Interest evidenced by this Certificate (obtained by dividing the Certificate Principal
Balance of this Certificate by the aggregate Certificate Principal Balance of all Class M- Certificates,
both as specified above) in certain distributions with respect to a Trust Fund consisting primarily of a pool
of [conventional one- to four-family fixed interest rate first mortgage loans] (the "Mortgage Loans"), formed
and sold by Residential Accredit Loans, Inc. (hereinafter called the "Company," which term includes any
successor entity under the Agreement referred to below). The Trust Fund was created pursuant to a Pooling
and Servicing Agreement dated as specified above (the "Agreement") among the Company, the Master Servicer and
__________________, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each
month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing as described in the Agreement, to the Person in whose name this Certificate is registered
at the close of business on the last day (or if such last day is not a Business Day, the Business Day
immediately preceding such last day) of the month immediately preceding the month of such distribution (the
"Record Date"), from the Available Distribution Amount in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount (of interest and principal, if any) required to be
distributed to Holders of Class M- Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Master Servicer acting on behalf
of the Trustee or by a Paying Agent appointed by the Trustee in immediately available funds (by wire transfer
or otherwise) for the account of the Person entitled thereto if such Person shall have so notified the Master
Servicer or such Paying Agent, or by check mailed to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose in the City and State of New York. The
Initial Certificate Principal Balance of this Certificate is set forth above. The Certificate Principal
Balance hereof will be reduced to the extent of the distributions allocable to principal and any Realized
Losses allocable hereto.
Any transferee of this Certificate will be deemed to have represented by virtue of its purchase
or holding of this Certificate (or interest herein) that either (a) such transferee is not an investment
manager, a named fiduciary or a trustee of any plan, or any other person, acting, directly or indirectly, on
behalf of or purchasing any Certificate with "plan assets" of any plan (a "plan investor"), (b) it has
acquired and is holding such Certificate in reliance on prohibited transaction exemption ("PTE") 94-29, as
most recently amended, PTE 2002-41, 67 fed. Reg. 54487 (August 22, 2002) (the "RFC Exemption"), and that it
understands that there are certain conditions to the availability of the RFC Exemption including that such
Certificate must be rated, at the time of purchase, not lower than "BBB-" (or its equivalent) by Standard &
Poor's, Fitch or Moody's or (c) (i) the transferee is an insurance company, (ii) the source of funds to be
used by it to purchase the Certificate is an "insurance company general account" (within the meaning of U.S.
Department of Labor prohibited transaction class exemption ("PTCE") 95-60), and (iii) the conditions set
forth in Sections I and III of PTCE 95-60 have been satisfied (each entity that satisfies this clause (c), a
"complying insurance company).
If this Certificate (or any interest herein) is acquired or held by any person that does not
satisfy the conditions described in the preceding paragraph, then the last preceding transferee that either
(i) is not a plan investor, (ii) acquired such Certificate in compliance with the RFC Exemption, or (iii) is
a complying insurance company shall be restored, to the extent permitted by law, to all rights and
obligations as Certificate owner thereof retroactive to the date of such transfer of this Certificate. The
Trustee shall be under no liability to any person for making any payments due on this Certificate to such
preceding transferee.
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries
respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event
Master Servicer funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the
Master Servicer, to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or
from other cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate
Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time
for purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement
and the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and
the rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and
the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of
the Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of any of the Certificates and,
in certain additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer
of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of
the Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of
New York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund
created thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the
maturity or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the
Master Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of
such Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does
not require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all
remaining Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole,
but not in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar,
by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT C
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR CERTIFICATES AND CLASS M CERTIFICATES [AND
CLASS B-1] [CLASS B-2 CERTIFICATES] DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN).
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH
ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE PROVIDES EITHER A
CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
MASTER SERVICER, THE COMPANY AND THE TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER SERVICER, THE
COMPANY OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
CODE. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX
ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ___________
__, ____. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT 100% OF THE PREPAYMENT SPEED ASSUMPTION (AS DESCRIBED
IN THE PROSPECTUS SUPPLEMENT), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $[ ] OF OID PER
$[1,000] OF INITIAL CERTIFICATE PRINCIPAL BALANCE, THE YIELD TO MATURITY IS [ ]% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $[ ] PER $[1,000] OF INITIAL CERTIFICATE
PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD. NO REPRESENTATION IS MADE THAT THE MORTGAGE LOANS
WILL PREPAY AT A RATE BASED ON THE PREPAYMENT SPEED ASSUMPTION OR AT ANY OTHER RATE.
Certificate No. [ ]% Pass-Through Rate
Class B- Subordinate Aggregate Certificate
Principal Balance
Date of Pooling and Servicing of the Class B-
Agreement and Cut-off Date: Certificates as of
___________ 1, ____ the Cut-off Date:
$
First Distribution Date:
_________ 25, ____ Initial Certificate Principal
Balance of this Certificate:
Master Servicer: $
Residential Funding Corporation
Assumed Final Distribution Date:
___________ 25, ____
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE,
SERIES ____-___
evidencing a percentage interest in any distributions allocable to the Class B-
Certificates with respect to the Trust Fund consisting primarily of a pool of [conventional
one- to four-family fixed interest rate first mortgage loans] formed and sold by RESIDENTIAL
ACCREDIT LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that Residential Accredit Loans, Inc. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the Certificate Principal Balance of this
Certificate by the aggregate Certificate Principal Balance of all Class B- Certificates, both as
specified above) in certain distributions with respect to a Trust Fund consisting primarily of a pool of
[conventional one- to four-family fixed interest rate first mortgage loans] (the "Mortgage Loans"), formed and
sold by Residential Accredit Loans, Inc. (hereinafter called the "Company," which term includes any successor
entity under the Agreement referred to below). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement") among the Company, the Master Servicer and
__________________, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each
month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing on the first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last day (or if such last day is not a Business
Day, the Business Day immediately preceding such last day) of the month next preceding the month of such
distribution (the "Record Date"), from the Available Distribution Amount in an amount equal to the product of
the Percentage Interest evidenced by this Certificate and the amount (of interest and principal, if any)
required to be distributed to Holders of Class B Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Master Servicer acting on behalf
of the Trustee or by a Paying Agent appointed by the Trustee in immediately available funds (by wire transfer
or otherwise) for the account of the Person entitled thereto if such Person shall have so notified the Master
Servicer or such Paying Agent, or by check mailed to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose in the City and State of New York. The
Initial Certificate Principal Balance of this Certificate is set forth above. The Certificate Principal
Balance hereof will be reduced to the extent of the distributions allocable to principal and any Realized
Losses allocable hereto.
No transfer of this Class B Certificate will be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws
or is made in accordance with said Act and laws. In the event that such a transfer is to be made, (i) the
Trustee or the Company may require an opinion of counsel acceptable to and in form and substance satisfactory
to the Trustee and the Company that such transfer is exempt (describing the applicable exemption and the
basis therefor) from or is being made pursuant to the registration requirements of the Securities Act of
1933, as amended, and of any applicable statute of any state and (ii) the transferee shall execute an
investment letter in the form described by the Agreement. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Company, the Master Servicer and the Certificate
Registrar acting on behalf of the Trustee against any liability that may result if the transfer is not so
exempt or is not made in accordance with such Federal and state laws. In connection with any such transfer,
the Trustee will also require either (i) an opinion of counsel acceptable to and in form and substance
satisfactory to the Trustee, the Company and the Master Servicer with respect to the permissibility of such
transfer under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of
the Internal Revenue Code (the "Code") and stating, among other things, that the transferee's acquisition of
a Class B Certificate will not constitute or result in a non-exempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code or (ii) a representation letter, in the form as described by Section
5.02(e) of the Agreement, either stating that the transferee is not an employee benefit or other plan subject
to the prohibited transaction provisions of ERISA or Section 4975 of the Code (a "Plan"), or any other person
(including an investment manager, a named fiduciary or a trustee of any Plan) acting, directly or indirectly,
on behalf of or purchasing any Certificate with "plan assets" of any Plan, or stating that the transferee is
an insurance company, the source of funds to be used by it to purchase the Certificate is an "insurance
company general account" (within the meaning of Department of Labor Prohibited Transaction Class Exemption
("PTCE") 95-60), and the purchase is being made in reliance upon the availability of the exemptive relief
afforded under Sections I and III of PTCE 95-60..
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries
respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event
Master Servicer funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the
Master Servicer, to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or
from other cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate
Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time
for purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement
and the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and
the rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and
the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of
the Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of any of the Certificates and,
in certain additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer
of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of
the Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of
New York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund
created thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the
maturity or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the
Master Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of
such Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does
not require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all
remaining Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole,
but not in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar,
by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT C-I
FORM OF CLASS P CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH
ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT).
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE PROVIDES EITHER A
CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
MASTER SERVICER, THE COMPANY AND THE TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER SERVICER, THE
COMPANY OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
--------------------------------------------------------------------------------
C-I-6
Certificate No. ___ Prepayment Charge
Class P - Prepayment Charge Aggregate Certificate Principal Balance
of the Class P
Date of Pooling and Servicing Certificates as of
Agreement and Cut-off Date: the Cut-off Date:
__________ 1, ____ $0.00
First Distribution Date: Initial Certificate Principal Balance of this
__________ 25, ____ Certificate: $____
Master Servicer: Percentage Interest of this Certificate:
Residential Funding Corporation 100%
Assumed Final Distribution Date: CUSIP: __________
__________ 25, ____
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE,
SERIES ____-___
evidencing a percentage interest in any distributions allocable to the Class P Certificates
with respect to the Trust Fund consisting primarily of a pool of [one- to four-family
residential, payment-option, adjustable-rate first lien mortgage loans with a negative
amortization feature] formed and sold by RESIDENTIAL ACCREDIT LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that ____________________________ is the registered owner of the Percentage
Interest evidenced by this Certificate (as specified above) in certain distributions with respect to a Trust
Fund consisting primarily of a pool of [one- to four-family residential, payment-option, adjustable-rate
first lien mortgage loans with a negative amortization feature] (the "Mortgage Loans"), formed and sold by
Residential Accredit Loans, Inc. (hereinafter called the "Company," which term includes any successor entity
under the Agreement referred to below). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement") among the Company, the Master Servicer and
____________________, as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which
is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each
month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing on the first Distribution Date specified above, to the Person in whose name this
Certificate at the close of business on the last day (or if such last day is not a Business Day, the Business
Day immediately preceding such last day) of the month immediately preceding the month of such distribution
(the "Record Date"), in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Class P Certificates on such Distribution
Date.
Distributions on this Certificate will be made either by the Master Servicer acting on behalf
of the Trustee or by a Paying Agent appointed by the Trustee in immediately available funds (by wire transfer
or otherwise) for the account of the Person entitled thereto if such Person shall have so notified the Master
Servicer or such Paying Agent, or by check mailed to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose in the City and State of New York.
No transfer of this Class P Certificate will be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws
or is made in accordance with said Act and laws. In the event that such a transfer is to be made, (i) the
Trustee or the Company may require an opinion of counsel acceptable to and in form and substance satisfactory
to the Trustee and the Company that such transfer is exempt (describing the applicable exemption and the
basis therefor) from or is being made pursuant to the registration requirements of the Securities Act of
1933, as amended, and of any applicable statute of any state and (ii) the transferee shall execute an
investment letter in the form described by the Agreement. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Company, the Master Servicer and the Certificate
Registrar acting on behalf of the Trustee against any liability that may result if the transfer is not so
exempt or is not made in accordance with such Federal and state laws. In connection with any such transfer,
the Trustee will also require either (i) an opinion of counsel acceptable to and in form and substance
satisfactory to the Trustee, the Company and the Master Servicer with respect to the permissibility of such
transfer under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of
the Internal Revenue Code (the "Code") and stating, among other things, that the transferee's acquisition of
a Class P Certificate will not constitute or result in a non-exempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code or (ii) a representation letter, in the form as described by Section
5.02(e) of the Agreement, either stating that the transferee is not an employee benefit or other plan subject
to the prohibited transaction provisions of ERISA or Section 4975 of the Code (a "Plan"), or any other person
(including an investment manager, a named fiduciary or a trustee of any Plan) acting, directly or indirectly,
on behalf of or purchasing any Certificate with "plan assets" of any Plan.
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries
respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event
Master Servicer funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the
Master Servicer, to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or
from other cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate
Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time
for purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement
and the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and
the rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and
the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of
the Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of any of the Certificates and,
in certain additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer
of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of
the Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of
New York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund
created thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the
maturity or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the
Master Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of
such Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does
not require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all
remaining Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole,
but not in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar,
by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT D
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED STATES PERSON OR A DISQUALIFIED
ORGANIZATION (AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE PROVIDES EITHER A
CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
MASTER SERVICER, THE COMPANY AND THE TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER SERVICER, THE
COMPANY OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE
PROVIDES A TRANSFER AFFIDAVIT TO THE MASTER SERVICER AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED STATES, OR ANY AGENCY
OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY WHICH IS A CORPORATION IF ALL OF
ITS ACTIVITIES ARE SUBJECT TO TAX AND EXCEPT FOR FREDDIE MAC, A MAJORITY OF ITS BOARD OF DIRECTORS IS NOT
SELECTED BY SUCH GOVERNMENTAL UNIT), (B) A FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY
OR INSTRUMENTALITY OF EITHER OF THE FOREGOING, (C) ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS
SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE (INCLUDING THE TAX IMPOSED BY
SECTION 511 OF THE CODE ON UNRELATED BUSINESS TAXABLE INCOME), (D) RURAL ELECTRIC AND TELEPHONE COOPERATIVES
DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (E) AN ELECTING LARGE PARTNERSHIP UNDER SECTION 775(a) OF THE
CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B), (C), (D) OR (E) BEING HEREIN REFERRED TO
AS A "DISQUALIFIED ORGANIZATION"), OR (F) AN AGENT OF A DISQUALIFIED ORGANIZATION, (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX AND (3) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE
REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY
PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
HOLDER OF THIS CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE
PROVISIONS OF THIS PARAGRAPH.
Certificate No. [ ]% Pass-Through Rate
Class R Senior Aggregate Initial Certificate
Principal Balance of the
Date of Pooling and Servicing Class R Certificates:
Agreement and Cut-off Date: $100.00
___________ 1, ____
Initial Certificate Principal
First Distribution Date: Balance of this Certificate:
_________ 25, ____ $
Master Servicer: Percentage Interest:
Residential Funding Corporation %
Assumed Final Distribution Date: CUSIP 76110F-
___________ 25, ____
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATE,
SERIES ____-___
evidencing a percentage interest in any distributions allocable to the Class R Certificates
with respect to the Trust Fund consisting primarily of a pool of [conventional one- to
four-family fixed interest rate first mortgage loans] formed and sold by RESIDENTIAL ACCREDIT
LOANS, INC.
This Certificate is payable solely from the assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Accredit Loans, Inc., the Master Servicer, the Trustee referred to
below or GMAC Mortgage Group, Inc. or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or instrumentality or by Residential
Accredit Loans, Inc., the Master Servicer, the Trustee or GMAC Mortgage Group, Inc. or any of their
affiliates. None of the Company, the Master Servicer, GMAC Mortgage Group, Inc. or any of their affiliates
will have any obligation with respect to any certificate or other obligation secured by or payable from
payments on the Certificates.
This certifies that is the registered owner
of the Percentage Interest evidenced by this Certificate (obtained by dividing the Initial Certificate
Principal Balance of this Certificate by the aggregate Initial Certificate Principal Balance of all Class R
Certificates, both as specified above) in certain distributions with respect to the Trust Fund consisting
primarily of a pool of [conventional one- to four-family fixed interest rate first mortgage loans] (the
"Mortgage Loans"), formed and sold by Residential Accredit Loans, Inc. (hereinafter called the "Company,"
which term includes any successor entity under the Agreement referred to below). The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the "Agreement") among the Company,
the Master Servicer and __________________, as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by
virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each
month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing as described in the Agreement, to the Person in whose name this Certificate is registered
at the close of business on the last day (or if such last day is not a Business Day, the Business Day
immediately preceding such last day) of the month immediately preceding the month of such distribution (the
"Record Date"), from the Available Distribution Amount in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount (of interest and principal, if any) required to be
distributed to Holders of Class R Certificates on such Distribution Date.
Each Holder of this Certificate will be deemed to have agreed to be bound by the restrictions
set forth in the Agreement to the effect that (i) each person holding or acquiring any Ownership Interest in
this Certificate must be a United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to the Trustee of, among other
things, an affidavit to the effect that it is a United States Person and Permitted Transferee, (iii) any
attempted or purported transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the purported transferee, and (iv)
if any person other than a United States Person and a Permitted Transferee acquires any Ownership Interest in
this Certificate in violation of such restrictions, then the Company will have the right, in its sole
discretion and without notice to the Holder of this Certificate, to sell this Certificate to a purchaser
selected by the Company, which purchaser may be the Company, or any affiliate of the Company, on such terms
and conditions as the Company may choose.
Notwithstanding the above, the final distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose in the City and State of New York. The
Initial Certificate Principal Balance of this Certificate is set forth above. The Certificate Principal
Balance hereof will be reduced to the extent of distributions allocable to principal and any Realized Losses
allocable hereto. Notwithstanding the reduction of the Certificate Principal Balance hereof to zero, this
Certificate will remain outstanding under the Agreement and the Holder hereof may have additional obligations
with respect to this Certificate, including tax liabilities, and may be entitled to certain additional
distributions hereon, in accordance with the terms and provisions of the Agreement.
No transfer of this Class R Certificate will be made unless the Trustee has received either (i)
an opinion of counsel acceptable to and in form and substance satisfactory to the Trustee, the Company and
the Master Servicer with respect to the permissibility of such transfer under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code (the "Code") and
stating, among other things, that the transferee's acquisition of a Class R Certificate will not constitute
or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or
(ii) a representation letter, in the form as described by the Agreement, stating that the transferee is not
an employee benefit or other plan subject to the prohibited transaction provisions of ERISA or Section 4975
of the Code (a "Plan"), or any other person (including an investment manager, a named fiduciary or a trustee
of any Plan) acting, directly or indirectly, on behalf of or purchasing any Certificate with "plan assets" of
any Plan.
This Certificate is one of a duly authorized issue of Certificates issued in several Classes
designated as Mortgage Asset-Backed Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates").
The Certificates are limited in right of payment to certain collections and recoveries
respecting the Mortgage Loans, all as more specifically set forth herein and in the Agreement. In the event
Master Servicer funds are advanced with respect to any Mortgage Loan, such advance is reimbursable to the
Master Servicer, to the extent provided in the Agreement, from related recoveries on such Mortgage Loan or
from other cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account and/or the Certificate
Account created for the benefit of Certificateholders may be made by the Master Servicer from time to time
for purposes other than distributions to Certificateholders, such purposes including without limitation
reimbursement to the Company and the Master Servicer of advances made, or certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein provided, the amendment of the Agreement
and the modification of the rights and obligations of the Company, the Master Servicer and the Trustee and
the rights of the Certificateholders under the Agreement at any time by the Company, the Master Servicer and
the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of
the Percentage Interests of each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of any of the Certificates and,
in certain additional circumstances, without the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein set forth, the transfer
of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the offices or agencies appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same Class and aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar and any agent of
the Company, the Master Servicer, the Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither the Company, the Master
Servicer, the Trustee nor any such agent shall be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with the laws of the State of
New York.
The obligations created by the Agreement in respect of the Certificates and the Trust Fund
created thereby shall terminate upon the payment to Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to the Agreement following the earlier of (i) the
maturity or other liquidation of the last Mortgage Loan subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (ii) the purchase by the
Master Servicer from the Trust Fund of all remaining Mortgage Loans and all property acquired in respect of
such Mortgage Loans, thereby effecting early retirement of the Certificates. The Agreement permits, but does
not require, the Master Servicer to (i) purchase at a price determined as provided in the Agreement all
remaining Mortgage Loans and all property acquired in respect of any Mortgage Loan or (ii) purchase in whole,
but not in part, all of the Certificates from the Holders thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of the Cut-off Date Principal
Balance of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate set forth on the reverse
hereof, which further provisions shall for all purpose have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Certificate Registrar,
by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: __________________ [_________________________],
as Trustee
By: ________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A- Certificates referred to in the within-mentioned Agreement.
[___________________________],
as Certificate Registrar
By: __________________________
Authorized Signatory
--------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
___________________________________________________________________________(Please print or typewrite name and
address including postal zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Asset-Backed Pass-Through Certificate and hereby authorizes the transfer of registration of such interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________________________________________
Dated: _______________________ _________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately available funds to
_________________________________________________________________ for the account of
_______________________________account number _________________, or, if mailed by check, to
__________________________________________________. Applicable statements should be mailed to
__________________________________________________________________.
This information is provided by _______________________________, the assignee named above, or
___________________________, as its agent.
--------------------------------------------------------------------------------
EXHIBIT E
FORM OF SELLER/SERVICER CONTRACT
This Seller/Servicer Contract (as may be amended, supplemented or otherwise modified from time to
time, this "Contract") is made this ____________ day of _____________________, 20 __________, by and between
Residential Funding Corporation, its successors and assigns ("Residential Funding") and
_________________________________________ (the "Seller/Servicer," and, together with Residential Funding, the
"parties" and each, individually, a "party").
WHEREAS, the Seller/Servicer desires to sell Loans to, and/or service Loans for, Residential Funding,
and Residential Funding desires to purchase Loans from the Seller/Servicer and/or have the Seller/Servicer
service various of its Loans, pursuant to the terms of this Contract and the Residential Funding Seller and
Servicer Guides incorporated herein by reference, as amended, supplemented or otherwise modified, from time
to time (together, the "Guides").
NOW, THEREFORE, in consideration of the premises, and the terms, conditions and agreements set forth
below, the parties agree as follows:
1. INCORPORATION OF GUIDES BY REFERENCE.
The Seller/Servicer acknowledges that it has received and read the Guides. All provisions of the
Guides are incorporated by reference into and made a part of this Contract, and shall be binding upon the
parties; provided, however, that the Seller/Servicer shall be entitled to sell Loans to and/or service Loans
for Residential Funding only if and for so long as it shall have been authorized to do so by Residential
Funding in writing. Specific reference in this Contract to particular provisions of the Guides and not to
other provisions does not mean that those provisions of the Guides not specifically cited in this Contract
are not applicable. All terms used herein shall have the same meanings as such terms have in the Guides,
unless the context clearly requires otherwise.
2. AMENDMENTS.
This Contract may not be amended or modified orally, and no provision of this Contract may be waived
or amended except in writing signed by the party against whom enforcement is sought. Such a written waiver
or amendment must expressly reference this Contract. However, by their terms, the Guides may be amended or
supplemented by Residential Funding from time to time. Any such amendment(s) to the Guides shall be binding
upon the parties hereto.
3. REPRESENTATIONS AND WARRANTIES.
a. Reciprocal Representations and Warranties.
The Seller/Servicer and Residential Funding each represents and warrants to the other that as
of the date of this Contract:
(1) Each party is duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, is qualified, if necessary, to do business and in good
standing in each jurisdiction in which it is required to be so qualified, and has the
requisite power and authority to enter into this Contract and all other agreements
which are contemplated by this Contract and to carry out its obligations hereunder and
under the Guides and under such other agreements.
(2) This Contract has been duly authorized, executed and delivered by each party and constitutes a valid
and legally binding agreement of each party enforceable in accordance with its terms.
(3) There is no action, proceeding or investigation pending or threatened, and no basis therefor is known
to either party, that could affect the validity or prospective validity of this
Contract.
(4) Insofar as its capacity to carry out any obligation under this Contract is concerned, neither party is
in violation of any charter, articles of incorporation, bylaws, mortgage, indenture,
indebtedness, agreement, instrument, judgment, decree, order, statute, rule or
regulation and none of the foregoing adversely affects its capacity to fulfill any of
its obligations under this Contract. Its execution of, and performance pursuant to,
this Contract will not result in a violation of any of the foregoing.
b. Seller/Servicer's Representations, Warranties and Covenants.
In addition to the representations, warranties and covenants made by the Seller/Servicer
pursuant to subparagraph (a) of this paragraph 3, the Seller/Servicer makes the
representations, warranties and covenants set forth in the Guides and, upon request, agrees to
deliver to Residential Funding the certified Resolution of Board of Directors which authorizes
the execution and delivery of this Contract.
4. REMEDIES OF RESIDENTIAL FUNDING.
If an Event of Seller Default or an Event of Servicer Default shall occur, Residential Funding may, at
its option, exercise one or more of those remedies set forth in the Guides.
5. SELLER/SERVICER'S STATUS AS INDEPENDENT CONTRACTOR.
At no time shall the Seller/Servicer represent that it is acting as an agent of Residential Funding.
The Seller/Servicer shall, at all times, act as an independent contractor.
6. PRIOR AGREEMENTS SUPERSEDED.
This Contract restates, amends and supersedes any and all prior Seller Contracts or Servicer Contracts
between the parties except that any subservicing agreement executed by the Seller/Servicer in connection with
any loan-security exchange transaction shall not be affected.
7. ASSIGNMENT.
This Contract may not be assigned or transferred, in whole or in part, by the Seller/Servicer without
the prior written consent of Residential Funding. Residential Funding may sell, assign, convey, hypothecate,
pledge or in any other way transfer, in whole or in part, without restriction, its rights under this Contract
and the Guides with respect to any Commitment or Loan.
8. NOTICES.
All notices, requests, demands or other communications that are to be given under this Contract shall
be in writing, addressed to the appropriate parties and sent by telefacsimile or by overnight courier or by
United States mail, postage prepaid, to the addresses and telefacsimile numbers specified below. However,
another name, address and/or telefacsimile number may be substituted by the Seller/Servicer pursuant to the
requirements of this paragraph 8, or Residential Funding pursuant to an amendment to the Guides.
If to Residential Funding, notices must be sent to the appropriate address or telefacsimile number specified
in the Guides.
If to the Seller/Servicer, notice must be sent to:
Attention:
Telefacsimile Number: (________) _____-____________
9. JURISDICTION AND VENUE.
Each of the parties irrevocably submits to the jurisdiction of any state or federal court located in
Hennepin County, Minnesota, over any action, suit or proceeding to enforce or defend any right under this
Contract or otherwise arising from any loan sale or servicing relationship existing in connection with this
Contract, and each of the parties irrevocably agrees that all claims in respect of any such action or
proceeding may be heard or determined in such state or federal court. Each of the parties irrevocably waives
the defense of an inconvenient forum to the maintenance of any such action or proceeding and any other
substantive or procedural rights or remedies it may have with respect to the maintenance of any such action
or proceeding in any such forum. Each of the parties agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in
any other manner provided by law. Each of the parties further agrees not to institute any legal actions or
proceedings against the other party or any director, officer, employee, attorney, agent or property of the
other party, arising out of or relating to this Contract in any court other than as hereinabove specified in
this paragraph 9.
10. MISCELLANEOUS.
This Contract, including all documents incorporated by reference herein, constitutes the entire
understanding between the parties hereto and supersedes all other agreements, covenants, representations,
warranties, understandings and communications between the parties, whether written or oral, with respect to
the transactions contemplated by this Contract. All paragraph headings contained herein are for convenience
only and shall not be construed as part of this Contract. Any provision of this Contract that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction, and, to this end, the provisions hereof are
severable. This Contract shall be governed by, and construed and enforced in accordance with, applicable
federal laws and the laws of the State of Minnesota.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the duly authorized officers of the Seller/Servicer and Residential Funding have
executed this Seller/Servicer Contract as of the date first above written.
ATTEST: SELLER/SERVICER
[Corporate Seal]
(Name of Seller/Servicer)
By: By:
(Signature) (Signature)
By: By:
(Typed Name) (Typed Name)
Title: Title:
======================================= =========================================================
ATTEST: RESIDENTIAL FUNDING CORPORATION
[Corporate Seal]
By: By:
(Signature) (Signature)
By: By:
(Typed Name) (Typed Name)
Title: Title:
--------------------------------------------------------------------------------
EXHIBIT F
FORMS OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of Mortgage Loans held by you for the referenced pool, we
request the release of the Mortgage Loan File described below.
Pooling and Servicing Agreement Dated:
Series#:
Account#:
Pool#:
Loan#:
MIN#:
Borrower Name(s):
Reason for Document Request: (circle one)
Mortgage Loan Prepaid in Full Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection with such payments which are
required to be deposited have been or will be so deposited as provided in the Pooling and Servicing
Agreement."
Residential Funding Corporation
Authorized Signature
******************************************************************************
TO CUSTODIAN/TRUSTEE: Please acknowledge this request, and check off documents being enclosed with a copy of
this form. You should retain this form for your files in accordance with the terms of the Pooling and
Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed of Trust
[ ] Title Insurance Policy
[ ] Other:
Name: _______________________
Title:
Date:
--------------------------------------------------------------------------------
EXHIBIT G-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
) ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record or beneficial owner of the Mortgage
Asset-Backed Pass-Through Certificates, Series ____-___, Class R (the "Owner")), a [savings institution]
[corporation] duly organized and existing under the laws of [the State of ____________________________]
[the United States], on behalf of which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified organization" or an electing large
partnership as of [date of transfer] within the meaning of Sections 860E(e)(5) and 775, respectively, of the
Internal Revenue Code of 1986, as amended (the "Code") or an electing large partnership under Section 775(a)
of the Code, (ii) will endeavor to remain other than a disqualified organization for so long as it retains
its ownership interest in the Class R Certificates, and (iii) is acquiring the Class R Certificates for its
own account or for the account of another Owner from which it has received an affidavit and agreement in
substantially the same form as this affidavit and agreement. (For this purpose, a "disqualified organization"
means an electing large partnership under Section 775 of the Code, the United States, any state or political
subdivision thereof, any agency or instrumentality of any of the foregoing (other than an instrumentality all
of the activities of which are subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental entity) or any foreign
government, international organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax unless such organization is subject to the tax
on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be imposed on transfers of Class R Certificates to
disqualified organizations or electing large partnerships, under the Code, that applies to all transfers of
Class R Certificates after March 31, 1988; (ii) that such tax would be on the transferor (or, with respect to
transfers to electing large partnerships, on each such partnership), or, if such transfer is through an agent
(which person includes a broker, nominee or middleman) for a disqualified organization, on the agent; (iii)
that the person (other than with respect to transfers to electing large partnerships) otherwise liable for
the tax shall be relieved of liability for the tax if the transferee furnishes to such person an affidavit
that the transferee is not a disqualified organization and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that the Class R Certificates may be "noneconomic
residual interests" within the meaning of Treasury regulations promulgated pursuant to the Code and that the
transferor of a noneconomic residual interest will remain liable for any taxes due with respect to the income
on such residual interest, unless no significant purpose of the transfer was to impede the assessment or
collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through entity" holding Class R Certificates if
either the pass-through entity is an electing large partnership under Section 775 of the Code or if at any
time during the taxable year of the pass-through entity a disqualified organization is the record holder of
an interest in such entity. (For this purpose, a "pass through entity" includes a regulated investment
company, a real estate investment trust or common trust fund, a partnership, trust or estate, and certain
cooperatives.)
5. The Owner is either (i) a citizen or resident of the United States, (ii) a corporation, partnership or
other entity treated as a corporation or a partnership for U.S. federal income tax purposes and created or
organized in or under the laws of the United States, any state thereof or the District of Columbia (other
than a partnership that is not treated as a United States person under any applicable Treasury regulations),
(iii) an estate that is described in Section 7701(a)(30)(D) of the Code, or (iv) a trust that is described in
Section 7701(a)(30)(E) of the Code.
6. The Owner hereby agrees that it will not cause income from the Class R Certificates to be attributable
to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of
the Owner or another United States taxpayer.
7. That the Owner is aware that the Trustee will not register the transfer of any Class R Certificates
unless the transferee, or the transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. The Owner expressly agrees that it
will not consummate any such transfer if it knows or believes that any of the representations contained in
such affidavit and agreement are false.
8. That the Owner has reviewed the restrictions set forth on the face of the Class R Certificates and the
provisions of Section 5.02(f) of the Pooling and Servicing Agreement under which the Class R Certificates
were issued (in particular, clause (iii)(A) and (iii)(B) of Section 5.02(f) which authorize the Trustee to
deliver payments to a person other than the Owner and negotiate a mandatory sale by the Trustee in the event
the Owner holds such Certificates in violation of Section 5.02(f)). The Owner expressly agrees to be bound
by and to comply with such restrictions and provisions.
9. That the Owner consents to any additional restrictions or arrangements that shall be deemed necessary
upon advice of counsel to constitute a reasonable arrangement to ensure that the Class R Certificates will
only be owned, directly or indirectly, by an Owner that is not a disqualified organization.
10. The Owner's Taxpayer Identification Number is ______________________________.
11. This affidavit and agreement relates only to the Class R Certificates held by the Owner and not to any
other holder of the Class R Certificates. The Owner understands that the liabilities described herein relate
only to the Class R Certificates.
12. That no purpose of the Owner relating to the transfer of any of the Class R Certificates by the Owner
is or will be to impede the assessment or collection of any tax; in making this representation, the Owner
warrants that the Owner is familiar with (i) Treasury Regulation Section 1.860E-1(c) and recent amendments
thereto, effective as of July 19, 2002, and (ii) the preamble describing the adoption of the amendments to
such regulation, which is attached hereto as Exhibit 1.
13. That the Owner has no present knowledge or expectation that it will be unable to pay any United States
taxes owed by it so long as any of the Certificates remain outstanding. In this regard, the Owner hereby
represents to and for the benefit of the person from whom it acquired the Class R Certificate that the Owner
intends to pay taxes associated with holding such Class R Certificate as they become due, fully understanding
that it may incur tax liabilities in excess of any cash flows generated by the Class R Certificate.
14. That the Owner has no present knowledge or expectation that it will become insolvent or subject to a
bankruptcy proceeding for so long as any of the Class R Certificates remain outstanding.
15. The Purchaser is not an employee benefit plan or other plan subject to the prohibited transaction
provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code, or an investment manager, named fiduciary or a trustee of any such plan, or any other Person
acting, directly or indirectly, on behalf of or purchasing any Certificate with "plan assets" of any such
plan.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Owner has caused this instrument to be executed on its behalf, pursuant
to the authority of its Board of Directors, by its [Title of Officer] and its corporate seal to be hereunto
attached, attested by its [Assistant] Secretary, this day of , 200 .
[NAME OF OWNER]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known or proved to me to be
the same person who executed the foregoing instrument and to be the [Title of Officer] of the Owner, and
acknowledged to me that he executed the same as his free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this _________ day of __________, 200__.
NOTARY PUBLIC
COUNTY OF __________________________
STATE OF
My Commission expires the _____ day of _____, 20 .
--------------------------------------------------------------------------------
EXHIBIT 1
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9004]
RIN 1545-AW98
Real Estate Mortgage Investment Conduits
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to safe
harbor transfers of noneconomic residual interests in real estate
mortgage investment conduits (REMICs). The final regulations provide
additional limitations on the circumstances under which transferors may
claim safe harbor treatment.
DATES: Effective Date: These regulations are effective July 19, 2002.
Applicability Date: For dates of applicability, see Sec. 1.860E-
(1)(c)(10).
FOR FURTHER INFORMATION CONTACT: Courtney Shepardson at (202) 622-3940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information in this final rule has been reviewed
and, pending receipt and evaluation of public comments, approved by the
Office of Management and Budget (OMB) under 44 U.S.C. 3507 and assigned
control number 1545-1675.
The collection of information in this regulation is in Sec. 1.860E-
1(c)(5)(ii). This information is required to enable the IRS to verify
that a taxpayer is complying with the conditions of this regulation.
The collection of information is mandatory and is required. Otherwise,
the taxpayer will not receive the benefit of safe harbor treatment as
provided in the regulation. The likely respondents are businesses and
other for-profit institutions.
Comments on the collection of information should be sent to the
Office of Management and Budget, Attn: Desk Officer for the Department
of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC, 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, W:CAR:MP:FP:S, Washington, DC
20224. Comments on the collection of information should be received by
September 17, 2002. Comments are specifically requested concerning:
Whether the collection of information is necessary for the proper
performance of the functions of the Internal Revenue Service, including
whether the information will have practical utility;
The accuracy of the estimated burden associated with the collection
of information (see below);
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the collection of information may
be minimized, including through the application of automated collection
techniques or other forms of information technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of service to provide information.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
The estimated total annual reporting burden is 470 hours, based on
an estimated number of respondents of 470 and an estimated average
annual burden hours per respondent of one hour.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains final regulations regarding the proposed
amendments to 26 CFR part 1 under section 860E of the Internal Revenue
Code (Code). The regulations provide the circumstances under which a
transferor of a noneconomic REMIC residual interest meeting the
investigation and representation requirements may avail itself of the
safe harbor by satisfying either the formula test or the asset test.
Final regulations governing REMICs, issued in 1992, contain rules
governing the transfer of noneconomic REMIC residual interests. In
general, a transfer of a noneconomic residual interest is disregarded
for all tax purposes if a significant purpose of the transfer is to
[[Page 47452]]
enable the transferor to impede the assessment or collection of tax. A
purpose to impede the assessment or collection of tax (a wrongful
purpose) exists if the transferor, at the time of the transfer, either
knew or should have known that the transferee would be unwilling or
unable to pay taxes due on its share of the REMIC's taxable income.
Under a safe harbor, the transferor of a REMIC noneconomic residual
interest is presumed not to have a wrongful purpose if two requirements
are satisfied: (1) the transferor conducts a reasonable investigation
of the transferee's financial condition (the investigation
requirement); and (2) the transferor secures a representation from the
transferee to the effect that the transferee understands the tax
obligations associated with holding a residual interest and intends to
pay those taxes (the representation requirement).
The IRS and Treasury have been concerned that some transferors of
noneconomic residual interests claim they satisfy the safe harbor even
in situations where the economics of the transfer clearly indicate the
transferee is unwilling or unable to pay the tax associated with
holding the interest. For this reason, on February 7, 2000, the IRS
published in the Federal Register (65 FR 5807) a notice of proposed
rulemaking (REG-100276-97; REG-122450-98) designed to clarify the safe
harbor by adding the "formula test," an economic test. The proposed
regulation provides that the safe harbor is unavailable unless the
present value of the anticipated tax liabilities associated with
holding the residual interest does not exceed the sum of: (1) The
present value of any consideration given to the transferee to acquire
the interest; (2) the present value of the expected future
distributions on the interest; and (3) the present value of the
anticipated tax savings associated with holding the interest as the
REMIC generates losses.
The notice of proposed rulemaking also contained rules for FASITs.
Section 1.860H-6(g) of the proposed regulations provides requirements
for transfers of FASIT ownership interests and adopts a safe harbor by
reference to the safe harbor provisions of the REMIC regulations.
In January 2001, the IRS published Rev. Proc. 2001-12 (2001-3
I.R.B. 335) to set forth an alternative safe harbor that taxpayers
could use while the IRS and the Treasury considered comments on the
proposed regulations. Under the alternative safe harbor, if a
transferor meets the investigation requirement and the representation
requirement but the transfer fails to meet the formula test, the
transferor may invoke the safe harbor if the transferee meets a two-
prong test (the asset test). A transferee generally meets the first
prong of this test if, at the time of the transfer, and in each of the
two years preceding the year of transfer, the transferee's gross assets
exceed $100 million and its net assets exceed $10 million. A transferee
generally meets the second prong of this test if it is a domestic,
taxable corporation and agrees in writing not to transfer the interest
to any person other than another domestic, taxable corporation that
also satisfies the requirements of the asset test. A transferor cannot
rely on the asset test if the transferor knows, or has reason to know,
that the transferee will not comply with its written agreement to limit
the restrictions on subsequent transfers of the residual interest.
Rev. Proc. 2001-12 provides that the asset test fails to be
satisfied in the case of a transfer or assignment of a noneconomic
residual interest to a foreign branch of an otherwise eligible
transferee. If such a transfer or assignment were permitted, a
corporate taxpayer might seek to claim that the provisions of an
applicable income tax treaty would resource excess inclusion income as
foreign source income, and that, as a consequence, any U.S. tax
liability attributable to the excess inclusion income could be offset
by foreign tax credits. Such a claim would impede the assessment or
collection of U.S. tax on excess inclusion income, contrary to the
congressional purpose of assuring that such income will be taxable in
all events. See, e.g., sections 860E(a)(1), (b), (e) and 860G(b) of the
Code.
The Treasury and the IRS have learned that certain taxpayers
transferring noneconomic residual interests to foreign branches have
attempted to rely on the formula test to obtain safe harbor treatment
in an effort to impede the assessment or collection of U.S. tax on
excess inclusion income. Accordingly, the final regulations provide
that if a noneconomic residual interest is transferred to a foreign
permanent establishment or fixed base of a U.S. taxpayer, the transfer
is not eligible for safe harbor treatment under either the asset test
or the formula test. The final regulations also require a transferee to
represent that it will not cause income from the noneconomic residual
interest to be attributable to a foreign permanent establishment or
fixed base.
Section 1.860E-1(c)(8) provides computational rules that a taxpayer
may use to qualify for safe harbor status under the formula test.
Section 1.860E-1(c)(8)(i) provides that the transferee is presumed to
pay tax at a rate equal to the highest rate of tax specified in section
11(b). Some commentators were concerned that this presumed rate of
taxation was too high because it does not take into consideration
taxpayers subject to the alternative minimum tax rate. In light of the
comments received, this provision has been amended in the final
regulations to allow certain transferees that compute their taxable
income using the alternative minimum tax rate to use the alternative
minimum tax rate applicable to corporations.
Additionally, Sec. 1.860E-1(c)(8)(iii) provides that the present
values in the formula test are to be computed using a discount rate
equal to the applicable Federal short-term rate prescribed by section
1274(d). This is a change from the proposed regulation and Rev. Proc.
2001-12. In those publications the provision stated that "present
values are computed using a discount rate equal to the applicable
Federal rate prescribed in section 1274(d) compounded semiannually"
and that "[a] lower discount rate may be used if the transferee can
demonstrate that it regularly borrows, in the course of its trade or
business, substantial funds at such lower rate from an unrelated third
party." The IRS and the Treasury Department have learned that, based
on this provision, certain taxpayers have been attempting to use
unrealistically low or zero interest rates to satisfy the formula test,
frustrating the intent of the test. Furthermore, the Treasury
Department and the IRS believe that a rule allowing for a rate other
than a rate based on an objective index would add unnecessary
complexity to the safe harbor. As a result, the rule in the proposed
regulations that permits a transferee to use a lower discount rate, if
the transferee can demonstrate that it regularly borrows substantial
funds at such lower rate, is not included in the final regulations; and
the Federal short-term rate has been substituted for the applicable
Federal rate. To simplify taxpayers' computations, the final
regulations allow use of any of the published short-term rates,
provided that the present values are computed with a corresponding
period of compounding. With the exception of the provisions relating to
transfers to foreign branches, these changes generally have the
proposed applicability date of February 4, 2000, but taxpayers may
choose to apply the interest rate formula set forth in the proposed
regulation and Rev. Proc. 2001-12 for transfers occurring before August
19, 2002.
It is anticipated that when final regulations are adopted with
respect to
[[Page 47453]]
FASITs, Sec. 1.860H-6(g) of the proposed regulations will be adopted in
substantially its present form, with the result that the final
regulations contained in this document will also govern transfers of
FASIT ownership interests with substantially the same applicability
date as is contained in this document.
Effect on Other Documents
Rev. Proc. 2001-12 (2001-3 I.R.B. 335) is obsolete for transfers of
noneconomic residual interests in REMICs occurring on or after August
19, 2002.
Special Analyses
It is hereby certified that these regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the fact that it is unlikely that a
substantial number of small entities will hold REMIC residual
interests. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. It has
been determined that this Treasury decision is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
sections 553(b) and 553(d) of the Administrative Procedure Act (5
U.S.C. chapter 5) do not apply to these regulations.
Drafting Information
The principal author of these regulations is Courtney Shepardson.
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record keeping requirements.
26 CFR Part 602
Reporting and record keeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
--------------------------------------------------------------------------------
EXHIBIT G-2
FORM OF TRANSFEROR CERTIFICATE
______________, 20
Residential Accredit Loans, Inc.
8400 Normandale Lake Boulevard
Suite 250
Minneapolis, Minnesota 55437
__________________
__________________
__________________
Attention: Residential Funding Corporation Series ____-___
Re: Mortgage Asset-Backed Pass-Through Certificates,
Series ____-___, Class R
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer by
______________________________________________________(the "Seller") to
________________________________________________________________________________(the "Purchaser") of
$ _________________________ Initial Certificate Principal Balance of Mortgage Asset-Backed Pass-Through
Certificates, Series ____-___, Class R (the "Certificates"), pursuant to Section 5.02 of the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of ___________ 1, ____ among
Residential Accredit Loans, Inc., as seller (the "Company"), Residential Funding Corporation, as master
servicer (the "Master Servicer"), and __________________, as trustee (the "Trustee"). All terms used herein
and not otherwise defined shall have the meanings set forth in the Pooling and Servicing Agreement. The
Seller hereby certifies, represents and warrants to, and covenants with, the Company and the Trustee that:
1. No purpose of the Seller relating to the transfer of the Certificate by the Seller to the Purchaser is
or will be to impede the assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to the Trustee and the Master Servicer a
transfer affidavit and agreement in the form attached to the Pooling and Servicing Agreement as Exhibit G-1.
The Seller does not know or believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a reasonable investigation of the financial
condition of the Purchaser as contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Seller has determined that the Purchaser has historically paid its debts as they
become due and has found no significant evidence to indicate that the Purchaser will not continue to pay its
debts as they become due in the future. The Seller understands that the transfer of a Class R Certificate
may not be respected for United States income tax purposes (and the Seller may continue to be liable for
United States income taxes associated therewith) unless the Seller has conducted such an investigation.
4. The Seller has no actual knowledge that the proposed Transferee is not both a United States Person and
a Permitted Transferee.
Very truly yours,
(Seller)
By:
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT H
FORM OF INVESTOR REPRESENTATION LETTER
______________, 20
Residential Accredit Loans, Inc.
8400 Normandale Lake Boulevard
Suite 250
Minneapolis, MN 55437
__________________
__________________
__________________
Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 250
Minneapolis, MN 55437
Attention: Residential Funding Corporation Series ____-___
RE: Mortgage Asset-Backed Pass-Through Certificates,
Series ____-___, [Class B-]
Ladies and Gentlemen:
________________(the "Purchaser") intends to purchase from
_____________________________________________________(the "Seller") $__________________________ Initial
Certificate Principal Balance of Mortgage Asset-Backed Pass-Through Certificates, Series ____-___, Class
(the "Certificates"), issued pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of ___________ 1, ____ among Residential Accredit Loans, Inc., as seller (the
"Company"), Residential Funding Corporation, as master servicer (the "Master Servicer"), and
__________________, as trustee (the "Trustee"). All terms used herein and not otherwise defined shall have
the meanings set forth in the Pooling and Servicing Agreement. The Purchaser hereby certifies, represents
and warrants to, and covenants with, the Company, the Trustee and the Master Servicer that:
1. The Purchaser understands that (a) the Certificates have not been and will not be registered or
qualified under the Securities Act of 1933, as amended (the "Act") or any state securities law,
(b) the Company is not required to so register or qualify the Certificates, (c) the
Certificates may be resold only if registered and qualified pursuant to the provisions of the
Act or any state securities law, or if an exemption from such registration and qualification is
available, (d) the Pooling and Servicing Agreement contains restrictions regarding the transfer
of the Certificates and (e) the Certificates will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account for investment only and not with a
view to or for sale in connection with any distribution thereof in any manner that would
violate the Act or any applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated institutional investor having such knowledge and
experience in financial and business matters, and, in particular, in such matters related to
securities similar to the Certificates, such that it is capable of evaluating the merits and
risks of investment in the Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of Rule 501(a) promulgated
pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity to review (a) [a copy of the Private
Placement Memorandum, dated , 20 , relating to the
Certificates (b)] a copy of the Pooling and Servicing Agreement and [b] [c] such other
information concerning the Certificates, the Mortgage Loans and the Company as has been
requested by the Purchaser from the Company or the Seller and is relevant to the Purchaser's
decision to purchase the Certificates. The Purchaser has had any questions arising from such
review answered by the Company or the Seller to the satisfaction of the Purchaser. [If the
Purchaser did not purchase the Certificates from the Seller in connection with the initial
distribution of the Certificates and was provided with a copy of the Private Placement
Memorandum (the "Memorandum") relating to the original sale (the "Original Sale") of the
Certificates by the Company, the Purchaser acknowledges that such Memorandum was provided to it
by the Seller, that the Memorandum was prepared by the Company solely for use in connection
with the Original Sale and the Company did not participate in or facilitate in any way the
purchase of the Certificates by the Purchaser from the Seller, and the Purchaser agrees that it
will look solely to the Seller and not to the Company with respect to any damage, liability,
claim or expense arising out of, resulting from or in connection with (a) error or omission, or
alleged error or omission, contained in the Memorandum, or (b) any information, development or
event arising after the date of the Memorandum.]
5. The Purchaser has not and will not nor has it authorized or will it authorize any person to (a) offer,
pledge, sell, dispose of or otherwise transfer any Certificate, any interest in any Certificate
or any other similar security to any person in any manner, (b) solicit any offer to buy or to
accept a pledge, disposition of other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) otherwise approach
or negotiate with respect to any Certificate, any interest in any Certificate or any other
similar security with any person in any manner, (d) make any general solicitation by means of
general advertising or in any other manner or (e) take any other action, that (as to any of (a)
through (e) above) would constitute a distribution of any Certificate under the Act, that would
render the disposition of any Certificate a violation of Section 5 of the Act or any state
securities law, or that would require registration or qualification pursuant thereto. The
Purchaser will not sell or otherwise transfer any of the Certificates, except in compliance
with the provisions of the Pooling and Servicing Agreement.
6. The Purchaser
(a) is not an employee benefit or other plan subject to the prohibited transaction provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (a "Plan"), or any other person (including an
investment manager, a named fiduciary or a trustee of any Plan) acting, directly or indirectly,
on behalf of or purchasing any Certificate with "plan assets" of any Plan within the meaning of
the Department of Labor ("DOL") regulation at 29 C.F.R.ss.2510.3-101; or
(b) is an insurance company, the source of funds to be used by it to purchase the Certificates is an
"insurance company general account" (within the meaning of DOL Prohibited Transaction Class
Exemption ("PTCE") 95-60), and the purchase is being made in reliance upon the availability of
the exemptive relief afforded under Sections I and III of PTCE 95-60.
In addition, the Purchaser hereby certifies, represents and warrants to, and covenants with, the
Company, the Trustee and the Master Servicer that the Purchaser will not transfer such Certificates to any
Plan or person unless such Plan or person meets the requirements set forth in either 6(a) or (b) above.
Very truly yours,
By:
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT I
FORM OF TRANSFEROR REPRESENTATION LETTER
_________ , 20
Residential Accredit Loans, Inc.
8400 Normandale Lake Boulevard
Suite 250
Minneapolis, MN 55437
__________________
__________________
__________________
Attention: Residential Funding Corporation Series ____-___
Re: Mortgage Asset-Backed Pass-Through Certificates,
Series ____-___, [Class B-]
Ladies and Gentlemen:
In connection with the sale by ________________ (the "Seller") to ___________________ (the
"Purchaser") of $_____________ Initial Certificate Principal Balance of Mortgage Asset-Backed Pass-Through
Certificates, Series ____-___, Class (the "Certificates"), issued pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of ___________ 1, ____ among Residential Accredit
Loans, Inc., as seller (the "Company"), Residential Funding Corporation, as master servicer, and
__________________, as trustee (the "Trustee"). The Seller hereby certifies, represents and warrants to, and
covenants with, the Company and the Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered, pledged, sold, disposed of
or otherwise transferred any Certificate, any interest in any Certificate or any other similar security to
any person in any manner, (b) has solicited any offer to buy or to accept a pledge, disposition or other
transfer of any Certificate, any interest in any Certificate or any other similar security from any person in
any manner, (c) has otherwise approached or negotiated with respect to any Certificate, any interest in any
Certificate or any other similar security with any person in any manner, (d) has made any general
solicitation by means of general advertising or in any other manner, or (e) has taken any other action, that
(as to any of (a) through (e) above) would constitute a distribution of the Certificates under the Securities
Act of 1933 (the "Act"), that would render the disposition of any Certificate a violation of Section 5 of the
Act or any state securities law, or that would require registration or qualification pursuant thereto. The
Seller will not act, in any manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates, except in compliance with the
provisions of the Pooling and Servicing Agreement.
Very truly yours,
(Seller)
By:
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT J
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
The undersigned seller, as registered holder (the "Seller"), intends to transfer the Rule 144A
Securities described above to the undersigned buyer (the "Buyer").
1. In connection with such transfer and in accordance with the agreements pursuant to which the Rule 144A
Securities were issued, the Seller hereby certifies the following facts: Neither the Seller nor anyone
acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar security to, or solicited any offer
to buy or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security from, or otherwise approached or negotiated with respect
to the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security with, any
person in any manner, or made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the Rule 144A Securities under the
Securities Act of 1933, as amended (the "1933 Act"), or that would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require registration pursuant thereto, and that the
Seller has not offered the Rule 144A Securities to any person other than the Buyer or another "qualified
institutional buyer" as defined in Rule 144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the Seller, the Trustee and the Master
Servicer (as defined in the Pooling and Servicing Agreement (the "Agreement"), dated as of ___________ 1,
____ among Residential Funding Corporation as Master Servicer, Residential Accredit Loans, Inc. as depositor
pursuant to Section 5.02 of the Agreement and __________________, as trustee, as follows:
(a) The Buyer understands that the Rule 144A Securities have not been registered under the 1933 Act or the
securities laws of any state.
(b) The Buyer considers itself a substantial, sophisticated institutional investor having such knowledge
and experience in financial and business matters that it is capable of evaluating the merits and risks
of investment in the Rule 144A Securities.
(c) The Buyer has been furnished with all information regarding the Rule 144A Securities that it has
requested from the Seller, the Trustee or the Servicer.
(d) Neither the Buyer nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security from, or
otherwise approached or negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken any other action, that
would constitute a distribution of the Rule 144A Securities under the 1933 Act or that would render
the disposition of the Rule 144A Securities a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor has it authorized or will it authorize any person
to act, in such manner with respect to the Rule 144A Securities.
(e) The Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the 1933 Act
and has completed either of the forms of certification to that effect attached hereto as Annex 1 or
Annex 2. The Buyer is aware that the sale to it is being made in reliance on Rule 144A. The Buyer is
acquiring the Rule 144A Securities for its own account or the accounts of other qualified
institutional buyers, understands that such Rule 144A Securities may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
[3. The Buyer
[(a) is not an employee benefit or other plan subject to the prohibited transaction
provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended (a "Plan"), or any other person (including an
investment manager, a named fiduciary or a trustee of any Plan) acting, directly or indirectly, on
behalf of or purchasing any Certificate with "plan assets" of any Plan within the meaning of the
Department of Labor ("DOL") regulation at 29 C.F.R.ss.2510.3-101](1); or
(b) is an insurance company, the source of funds to be used by it to purchase the
Certificates is an "insurance company general account" (within the meaning of DOL Prohibited
Transaction Class Exemption ("PTCE") 95-60), and the purchase is being made in reliance upon the
availability of the exemptive relief afforded under Sections I and III of PTCE 95-60.](2)
4. This document may be executed in one or more counterparts and by the different parties
hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original;
such counterparts, together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this document as of the date set forth
below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification:
No. No:
Date: Date:
--------------------------------------------------------------------------------
ANNEX 1 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A Investment
Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President
or other executive officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified institutional buyer" as that term
is defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis $_________________________________________ in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount
being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the criteria in the category
marked below.
-- Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan association or
similar institution), Massachusetts or similar business trust, partnership, or charitable
organization described in Section 501(c)(3) of the Internal Revenue Code.
-- Bank. The Buyer (a) is a national bank or banking institution organized under the laws of any State,
territory or the District of Columbia, the business of which is substantially confined to
banking and is supervised by the State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy of which is
attached hereto.
-- Savings and Loan. The Buyer (a) is a savings and loan association, building and loan association,
cooperative bank, homestead association or similar institution, which is supervised and
examined by a State or Federal authority having supervision over any such institutions or is a
foreign savings and loan association or equivalent institution and (b) has an audited net worth
of at least $25,000,000 as demonstrated in its latest annual financial statements.
-- Broker-Dealer. The Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act
of 1934.
-- Insurance Company. The Buyer is an insurance company whose primary and predominant business activity
is the writing of insurance or the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a similar official or agency
of a State or territory or the District of Columbia.
-- State or Local Plan. The Buyer is a plan established and maintained by a State, its political
subdivisions, or any agency or instrumentality of the State or its political subdivisions, for
the benefit of its employees.
-- ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974.
-- Investment Adviser. The Buyer is an investment adviser registered under the Investment Advisers Act
of 1940.
-- SBIC. The Buyer is a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
-- Business Development Company. The Buyer is a business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
-- Trust Fund. The Buyer is a trust fund whose trustee is a bank or trust company and whose participants
are exclusively (a) plans established and maintained by a State, its political subdivisions, or
any agency or instrumentality of the State or its political subdivisions, for the benefit of
its employees, or (b) employee benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund that includes as participants
individual retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does not include (i) securities of issuers that are affiliated
with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the
Buyer is a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v)
repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities owned and/or invested on a
discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include
any of the securities referred to in the preceding paragraph. Further, in determining such aggregate amount,
the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries
are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed under the Buyer's direction.
However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and
other parties related to the Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees that, in connection with any
purchase of securities sold to the Buyer for the account of a third party (including any separate account) in
reliance on Rule 144A, the Buyer will only purchase for the account of a third party that at the time is a
"qualified institutional buyer" within the meaning of Rule 144A. In addition, the Buyer agrees that the Buyer
will not purchase securities for a third party unless the Buyer has obtained a current representation letter
from such third party or taken other appropriate steps contemplated by Rule 144A to conclude that such third
party independently meets the definition of "qualified institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this certification is made of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's purchase of Rule 144A Securities
will constitute a reaffirmation of this certification as of the date of such purchase.
Print Name of Buyer
By: __________________________________
Name:
Title:
Date:
--------------------------------------------------------------------------------
ANNEX 2 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A Investment
Representation to which this Certification is attached:
8. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President
of the Buyer or, if the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of Investment Companies (as
defined below), is such an officer of the Adviser.
9. In connection with purchases by Buyer, the Buyer is a "qualified institutional buyer" as defined in
SEC Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of Investment Companies, owned at
least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or
the Buyer's Family of Investment Companies, the cost of such securities was used.
-- The Buyer owned $______________________________________________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount
being calculated in accordance with Rule 144A).
-- The Buyer is part of a Family of Investment Companies which owned in the aggregate
$_______________________in securities (other than the excluded securities referred to
below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
10. The term "Family of Investment Companies" as used herein means two or more registered investment
companies (or series thereof) that have the same investment adviser or investment advisers that are
affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
11. The term "securities" as used herein does not include (i) securities of issuers that are affiliated
with the Buyer or are part of the Buyer's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase agreements, (v) securities owned but
subject to a repurchase agreement and (vi) currency, interest rate and commodity swaps.
12. The Buyer is familiar with Rule 144A and understands that each of the parties to which this
certification is made are relying and will continue to rely on the statements made herein because one or more
sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.
13. The undersigned will notify each of the parties to which this certification is made of any changes in
the information and conclusions herein. Until such notice, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification by the undersigned as of the date of such purchase.
Print Name of Buyer
By:_____________________________________
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
--------------------------------------------------------------------------------
EXHIBIT K
[TEXT OF AMENDMENT TO POOLING AND SERVICING
AGREEMENT PURSUANT TO SECTION 11.01(E) FOR A
LIMITED GUARANTY]
ARTICLE XIII
Subordinate Certificate Loss Coverage; Limited Guaranty
Section 13.01. Subordinate Certificate Loss Coverage; Limited Guaranty. (a) Subject to
subsection (c) below, prior to the later of the third Business Day prior to each Distribution Date or the
related Determination Date, the Master Servicer shall determine whether it or any Sub-Servicer will be
entitled to any reimbursement pursuant to Section 4.02(a) on such Distribution Date for Advances or
Sub-Servicer Advances previously made, (which will not be Advances or Sub-Servicer Advances that were made
with respect to delinquencies which were subsequently determined to be Excess Special Hazard Losses, Excess
Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses) and, if so, the Master Servicer shall demand
payment from Residential Funding of an amount equal to the amount of any Advances or Sub-Servicer Advances
reimbursed pursuant to Section 4.02(a), to the extent such Advances or Sub-Servicer Advances have not been
included in the amount of the Realized Loss in the related Mortgage Loan, and shall distribute the same to
the Class B Certificateholders in the same manner as if such amount were to be distributed pursuant to
Section 4.02(a).
(b) Subject to subsection (c) below, prior to the later of the third Business Day prior to
each Distribution Date or the related Determination Date, the Master Servicer shall determine whether any
Realized Losses (other than Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud Losses and
Extraordinary Losses) will be allocated to the Class B Certificates on such Distribution Date pursuant to
Section 4.05, and, if so, the Master Servicer shall demand payment from Residential Funding of the amount of
such Realized Loss and shall distribute the same to the Class B Certificateholders in the same manner as if
such amount were to be distributed pursuant to Section 4.02(a); provided, however, that the amount of such
demand in respect of any Distribution Date shall in no event be greater than the sum of (i) the additional
amount of Accrued Certificate Interest that would have been paid for the Class B Certificateholders on such
Distribution Date had such Realized Loss or Losses not occurred plus (ii) the amount of the reduction in the
Certificate Principal Balances of the Class B Certificates on such Distribution Date due to such Realized
Loss or Losses. Notwithstanding such payment, such Realized Losses shall be deemed to have been borne by the
Certificateholders for purposes of Section 4.05. Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses and Extraordinary Losses allocated to the Class B Certificates will not be covered by the
Subordinate Certificate Loss Obligation.
(c) Demands for payments pursuant to this Section shall be made prior to the later of the
third Business Day prior to each Distribution Date or the related Determination Date by the Master Servicer
with written notice thereof to the Trustee. The maximum amount that Residential Funding shall be required to
pay pursuant to this Section on any Distribution Date (the "Amount Available") shall be equal to the lesser
of (X) minus the sum of (i) all previous payments made under subsections (a) and (b) hereof
and (ii) all draws under the Limited Guaranty made in lieu of such payments as described below in subsection
(d) and (Y) the then outstanding Certificate Principal Balances of the Class B Certificates, or such lower
amount as may be established pursuant to Section 13.02. Residential Funding's obligations as described in
this Section are referred to herein as the "Subordinate Certificate Loss Obligation."
(d) The Trustee will promptly notify General Motors Acceptance Corporation of any failure
of Residential Funding to make any payments hereunder and shall demand payment pursuant to the limited
guaranty (the "Limited Guaranty"), executed by General Motors Acceptance Corporation, of Residential
Funding's obligation to make payments pursuant to this Section, in an amount equal to the lesser of (i) the
Amount Available and (ii) such required payments, by delivering to General Motors Acceptance Corporation a
written demand for payment by wire transfer, not later than the second Business Day prior to the Distribution
Date for such month, with a copy to the Master Servicer.
(e) All payments made by Residential Funding pursuant to this Section or amounts paid under
the Limited Guaranty shall be deposited directly in the Certificate Account, for distribution on the
Distribution Date for such month to the Class B Certificateholders.
(f) The Company shall have the option, in its sole discretion, to substitute for either or
both of the Limited Guaranty or the Subordinate Certificate Loss Obligation another instrument in the form of
a corporate guaranty, an irrevocable letter of credit, a surety bond, insurance policy or similar instrument
or a reserve fund; provided that (i) the Company obtains (subject to the provisions of Section 10.01(f) as if
the Company was substituted for the Master Servicer solely for the purposes of such provision) an Opinion of
Counsel (which need not be an opinion of Independent counsel) to the effect that obtaining such substitute
corporate guaranty, irrevocable letter of credit, surety bond, insurance policy or similar instrument or
reserve fund will not cause either (a) any federal tax to be imposed on the Trust Fund, including without
limitation, any federal tax imposed on "prohibited transactions" under Section 860(F)(a)(1) of the Code or on
"contributions after the startup date" under Section 860(G)(d)(1) of the Code or (b) the Trust Fund to fail
to qualify as a REMIC at any time that any Certificate is outstanding, and (ii) no such substitution shall be
made unless (A) the substitute Limited Guaranty or Subordinate Certificate Loss Obligation is for an initial
amount not less than the then current Amount Available and contains provisions that are in all material
respects equivalent to the original Limited Guaranty or Subordinate Certificate Loss Obligation (including
that no portion of the fees, reimbursements or other obligations under any such instrument will be borne by
the Trust Fund), (B) the long term debt obligations of any obligor of any substitute Limited Guaranty or
Subordinate Certificate Loss Obligation (if not supported by the Limited Guaranty) shall be rated at least
the lesser of (a) the rating of the long term debt obligations of General Motors Acceptance Corporation as of
the date of issuance of the Limited Guaranty and (b) the rating of the long term debt obligations of General
Motors Acceptance Corporation at the date of such substitution and (C) the Company obtains written
confirmation from each nationally recognized credit rating agency that rated the Class B Certificates at the
request of the Company that such substitution shall not lower the rating on the Class B Certificates below
the lesser of (a) the then-current rating assigned to the Class B Certificates by such rating agency and (b)
the original rating assigned to the Class B Certificates by such rating agency. Any replacement of the
Limited Guaranty or Subordinate Certificate Loss Obligation pursuant to this Section shall be accompanied by
a written Opinion of Counsel to the substitute guarantor or obligor, addressed to the Master Servicer and the
Trustee, that such substitute instrument constitutes a legal, valid and binding obligation of the substitute
guarantor or obligor, enforceable in accordance with its terms, and concerning such other matters as the
Master Servicer and the Trustee shall reasonably request. Neither the Company, the Master Servicer nor the
Trustee shall be obligated to substitute for or replace the Limited Guaranty or Subordinate Certificate Loss
Obligation under any circumstance.
Section 13.02. Amendments Relating to the Limited Guaranty. Notwithstanding Sections 11.01 or
13.01: (i) the provisions of this Article XIII may be amended, superseded or deleted, (ii) the Limited
Guaranty or Subordinate Certificate Loss Obligation may be amended, reduced or canceled, and (iii) any other
provision of this Agreement which is related or incidental to the matters described in this Article XIII may
be amended in any manner; in each case by written instrument executed or consented to by the Company and
Residential Funding but without the consent of any Certificateholder and without the consent of the Master
Servicer or the Trustee being required unless any such amendment would impose any additional obligation on,
or otherwise adversely affect the interests of, the Master Servicer or the Trustee, as applicable; provided
that the Company shall also obtain a letter from each nationally recognized credit rating agency that rated
the Class B Certificates at the request of the Company to the effect that such amendment, reduction, deletion
or cancellation will not lower the rating on the Class B Certificates below the lesser of (a) the
then-current rating assigned to the Class B Certificates by such rating agency and (b) the original rating
assigned to the Class B Certificates by such rating agency, unless (A) the Holder of 100% of the Class B
Certificates is Residential Funding or an Affiliate of Residential Funding, or (B) such amendment, reduction,
deletion or cancellation is made in accordance with Section 11.01(e) and, provided further that the Company
obtains (subject to the provisions of Section 10.01(f) as if the Company was substituted for the Master
Servicer solely for the purposes of such provision), in the case of a material amendment or supercession (but
not a reduction, cancellation or deletion of the Limited Guaranty or the Subordinate Certificate Loss
Obligation), an Opinion of Counsel (which need not be an opinion of Independent counsel) to the effect that
any such amendment or supercession will not cause either (a) any federal tax to be imposed on the Trust Fund,
including without limitation, any federal tax imposed on "prohibited transactions" under Section 860F(a)(1)
of the Code or on "contributions after the startup date" under Section 860G(d)(1) of the Code or (b) the
Trust Fund to fail to qualify as a REMIC at any time that any Certificate is outstanding. A copy of any such
instrument shall be provided to the Trustee and the Master Servicer together with an Opinion of Counsel that
such amendment complies with this Section 13.02.
--------------------------------------------------------------------------------
EXHIBIT L
[FORM OF LIMITED GUARANTY]
LIMITED GUARANTY
RESIDENTIAL ACCREDIT LOANS, INC.
Mortgage Asset-Backed Pass-Through Certificates
Series ____-___
_____________, 200
__________________
__________________
__________________
Attention: Residential Funding Corporation Series ____-___
Ladies and Gentlemen:
WHEREAS, Residential Funding Corporation, a Delaware corporation ("Residential Funding"), an
indirect wholly-owned subsidiary of General Motors Acceptance Corporation, a New York corporation ("GMAC"),
plans to incur certain obligations as described under Section 13.01 of the Pooling and Servicing Agreement
dated as of ___________ 1, ____ (the "Servicing Agreement"), among Residential Accredit Loans, Inc. (the
"Company"), Residential Funding and __________________ (the "Trustee") as amended by Amendment No.
thereto, dated as of , with respect to the Mortgage Asset-Backed Pass-Through Certificates,
Series ____-___ (the "Certificates"); and
WHEREAS, pursuant to Section 13.01 of the Servicing Agreement, Residential Funding agrees to
make payments to the Holders of the Class B Certificates with respect to certain losses on the Mortgage Loans
as described in the Servicing Agreement; and
WHEREAS, GMAC desires to provide certain assurances with respect to the ability of Residential
Funding to secure sufficient funds and faithfully to perform its Subordinate Certificate Loss Obligation;
NOW THEREFORE, in consideration of the premises herein contained and certain other good and
valuable consideration, the receipt of which is hereby acknowledged, GMAC agrees as follows:
1. Provision of Funds. (a) GMAC agrees to contribute and deposit in the Certificate Account on behalf of
Residential Funding (or otherwise provide to Residential Funding, or to cause to be made available to
Residential Funding), either directly or through a subsidiary, in any case prior to the related Distribution
Date, such moneys as may be required by Residential Funding to perform its Subordinate Certificate Loss
Obligation when and as the same arises from time to time upon the demand of the Trustee in accordance with
Section 13.01 of the Servicing Agreement.
(b) The agreement set forth in the preceding clause (a) shall be absolute, irrevocable and
unconditional and shall not be affected by the transfer by GMAC or any other person of all or any part of its
or their interest in Residential Funding, by any insolvency, bankruptcy, dissolution or other proceeding
affecting Residential Funding or any other person, by any defense or right of counterclaim, set-off or
recoupment that GMAC may have against Residential Funding or any other person or by any other fact or
circumstance. Notwithstanding the foregoing, GMAC's obligations under clause (a) shall terminate upon the
earlier of (x) substitution for this Limited Guaranty pursuant to Section 13.01(f) of the Servicing
Agreement, or (y) the termination of the Trust Fund pursuant to the Servicing Agreement.
2. Waiver. GMAC hereby waives any failure or delay on the part of Residential Funding, the Trustee or
any other person in asserting or enforcing any rights or in making any claims or demands hereunder. Any
defective or partial exercise of any such rights shall not preclude any other or further exercise of that or
any other such right. GMAC further waives demand, presentment, notice of default, protest, notice of
acceptance and any other notices with respect to this Limited Guaranty, including, without limitation, those
of action or nonaction on the part of Residential Funding or the Trustee.
3. Modification, Amendment and Termination. This Limited Guaranty may be modified, amended or terminated
only by the written agreement of GMAC and the Trustee and only if such modification, amendment or termination
is permitted under Section 13.02 of the Servicing Agreement. The obligations of GMAC under this Limited
Guaranty shall continue and remain in effect so long as the Servicing Agreement is not modified or amended in
any way that might affect the obligations of GMAC under this Limited Guaranty without the prior written
consent of GMAC.
4. Successor. Except as otherwise expressly provided herein, the guarantee herein set forth shall be
binding upon GMAC and its respective successors.
5. Governing Law. This Limited Guaranty shall be governed by the laws of the State of New York.
6. Authorization and Reliance. GMAC understands that a copy of this Limited Guaranty shall be delivered
to the Trustee in connection with the execution of Amendment No. 1 to the Servicing Agreement and GMAC hereby
authorizes the Company and the Trustee to rely on the covenants and agreements set forth herein.
7. Definitions. Capitalized terms used but not otherwise defined herein shall have the meaning given
them in the Servicing Agreement.
8. Counterparts. This Limited Guaranty may be executed in any number of counterparts, each of which
shall be deemed to be an original and such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, GMAC has caused this Limited Guaranty to be executed and delivered by its
respective officers thereunto duly authorized as of the day and year first above written.
GENERAL MOTORS ACCEPTANCE
CORPORATION
By: _______________________
Name:
Title:
Acknowledged by:
__________________,
as Trustee
By:
Name:
Title:
RESIDENTIAL ACCREDIT LOANS, INC.
By:
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT M
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF MORTGAGE LOAN
_____________, 20
Residential Accredit Loans, Inc.
8400 Normandale Lake Boulevard
Suite 250
Minneapolis, Minnesota 55437
__________________
__________________
__________________
Attention: Residential Funding Corporation Series ____-___
Re: Mortgage Asset-Backed Pass-Through Certificates, Series ____-___
Assignment of Mortgage Loan
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment by
___________________________________(the "Trustee") to _______________________________________________ (the
"Lender") of ______________________________ (the "Mortgage Loan") pursuant to Section 3.13(d) of the Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of ___________ 1, ____ among
Residential Accredit Loans, Inc., as seller (the "Company"), Residential Funding Corporation, as Master
Servicer, and the Trustee. All terms used herein and not otherwise defined shall have the meanings set forth
in the Pooling and Servicing Agreement. The Lender hereby certifies, represents and warrants to, and
covenants with, the Master Servicer and the Trustee that:
(i) the Mortgage Loan is secured by Mortgaged Property located in a jurisdiction in which an assignment in
lieu of satisfaction is required to preserve lien priority, minimize or avoid mortgage recording taxes or
otherwise comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a refinancing of such Mortgage Loan
and the form of the transaction is solely to comply with, or facilitate the transaction under, such local
laws;
(iii) the Mortgage Loan following the proposed assignment will be modified to have a rate of interest
at least 0.25 percent below or above the rate of interest on such Mortgage Loan prior to such proposed
assignment; and
(iv) such assignment is at the request of the borrower under the related Mortgage Loan.
Very truly yours,
(Lender)
By: ______________________
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT N
FORM OF REQUEST FOR EXCHANGE
[DATE]
__________________
__________________
__________________
Re: Residential Accredit Loans, Inc.,
Mortgage Asset-Backed Pass-Through Certificates,
Series ____-___
Residential Funding Corporation, as the Holder of a _________% Percentage Interest of the
[Interest Only/Class A-V][-1] Certificates, hereby requests the Trustee to exchange the above-referenced
Certificates for the Subclasses referred to below:
1. [Interest Only/Class A-V]- Certificates, corresponding to the following Uncertificated REMIC Regular
Interests: [List numbers corresponding to the related loans and Pool Strip Rates from
the Mortgage Loan Schedule]. The initial Subclass Notional Amount and the Initial
Pass-Through Rate on the [Interest Only/Class A-V]- Certificates will be
$ ___________________ and __________%, respectively.
2. [Repeat as appropriate.]
The Subclasses requested above will represent in the aggregate all of the Uncertificated REMIC
Regular Interests represented by the [Interest Only/Class A-V][-1] Certificates surrendered for exchange.
All capitalized terms used but not defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement, dated as of ___________ 1, ____, among Residential Accredit Loans, Inc.,
Residential Funding Corporation and __________________, as trustee.
RESIDENTIAL FUNDING CORPORATION
By: __________________________
Name:
Title:
--------------------------------------------------------------------------------
EXHIBIT O
Form of Form 10-K Certification
I, [identify the certifying individual], certify that:
1. I have reviewed this report on Form 10-K and all reports on Form 10-D required to be filed in
respect of the period covered by this report on Form 10-K of the trust (the "Exchange Act periodic reports")
created pursuant to the Series Supplement dated ___________________ to the Standard Terms of Pooling and
Servicing Agreement dated ____________________ (together, the "P&S Agreement") among Residential Accredit
Loans, Inc., Residential Funding Corporation (the "Master Servicer") and [Name of Trustee] (the "Trustee");
2. Based on my knowledge, the Exchange Act periodic reports, taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, all of the distribution, servicing and other information required to be
provided under Form 10-D for the period covered by this report is included in the Exchange Act periodic
reports;
4. I am responsible for reviewing the activities performed by the Master Servicer and based on my
knowledge and the compliance review conducted in preparing the servicer compliance statement required in this
report under Item 1123 of Regulation AB, and except a disclosed in the Exchange Act periodic reports, the
Master Servicer has fulfilled its obligations under the P&S Agreement; and
5. All of the reports on assessment of compliance with servicing criteria for asset-backed
securities and their related attestation reports on assessment of compliance with servicing criteria for
asset-backed securities required to be included in this report in accordance with Item 1122 of Regulation AB
and Exchange Act Rules 13a-18 and 15d-18 have been included as an exhibit to this report, except as otherwise
disclosed in this report. Any material instances of noncompliance described in such reports have been
disclosed in this report on Form 10-K.
In giving the certifications above, I have reasonably relied on the information provided to me by the
following unaffiliated parties: [the Trustee].
Date:_______________________
____________________________*
[Signature]
[Title:]
* to be signed by the senior officer in charge of the servicing functions of the Master Servicer
--------------------------------------------------------------------------------
EXHIBIT P
[FORM OF BACK-UP CERTIFICATION TO FORM 10-K CERTIFICATE]
The undersigned, a Responsible Officer of [_________] (the "Trustee") certifies that:
(a) The Trustee has performed all of the duties specifically required to be performed by it
pursuant to the provisions of the Pooling and Servicing Agreement dated as of [_________], 20[__] (the
"Agreement") by and among [__________], as depositor, Residential Funding Corporation, as Master Servicer, and
the Trustee in accordance with the standards set forth therein.
(b) Based on my knowledge, the list of Certificateholders as shown on the Certificate Register as
of the end of each calendar year that is provided by the Trustee pursuant to the Agreement is accurate as of
the last day of the 20[__] calendar year.
Capitalized terms used and not defined herein shall have the meanings given such terms in the Agreement.
IN WITNESS WHEREOF, I have duly executed this certificate as of _________, 20__.]
Name:______________________________
Title:
--------------------------------------------------------------------------------
EXHIBIT Q
INFORMATION TO BE PROVIDED BY THE MASTER SERVICER TO THE RATING AGENCIES RELATING TO REPORTABLE MODIFIED
MORTGAGE LOANS
Account number
Transaction Identifier
Unpaid Principal Balance prior to Modification
Next Due Date
Monthly Principal and Interest Payment
Total Servicing Advances
Current Interest Rate
Original Maturity Date
Original Term to Maturity (Months)
Remaining Term to Maturity (Months)
Trial Modification Indicator
Mortgagor Equity Contribution
Total Servicer Advances
Trial Modification Term (Months)
Trial Modification Start Date
Trial Modification End Date
Trial Modification Period Principal and Interest Payment
Trial Modification Interest Rate
Trial Modification Term
Rate Reduction Indicator
Interest Rate Post Modification
Rate Reduction Start Date
Rate Reduction End Date
Rate Reduction Term
Term Modified Indicator
Modified Amortization Period
Modified Final Maturity Date
Total Advances Written Off
Unpaid Principal Balance Written Off
Other Past Due Amounts Written Off
Write Off Date
Unpaid Principal Balance Post Write Off
Capitalization Indicator
Mortgagor Contribution
Total Capitalized Amount
Modification Close Date
Unpaid Principal Balance Post Capitalization Modification
Next Payment Due Date per Modification Plan
Principal and Interest Payment Post Modification
Interest Rate Post Modification
Payment Made Post Capitalization
Delinquency Status to Modification Plan
--------------------------------------------------------------------------------
EXHIBIT R
SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE
The assessment of compliance to be delivered by the Trustee shall address, at a minimum, the criteria
identified as below as "Applicable Servicing Criteria":
-------------------------------------------------------------------------- ------------------
APPLICABLE
SERVICING
SERVICING CRITERIA CRITERIA
-------------------------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
REFERENCE CRITERIA
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
GENERAL SERVICING CONSIDERATIONS
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(1)(i) Policies and procedures are instituted to monitor any
performance or other triggers and events of default in
accordance with the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(1)(ii) If any material servicing activities are outsourced to
third parties, policies and procedures are instituted
to monitor the third party's performance and
compliance with such servicing activities.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(1)(iii) Any requirements in the transaction agreements to
maintain a back-up servicer for the pool assets are
maintained.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(1)(iv) A fidelity bond and errors and omissions policy is in
effect on the party participating in the servicing
function throughout the reporting period in the amount
of coverage required by and otherwise in accordance
with the terms of the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
CASH COLLECTION AND ADMINISTRATION
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(i) Payments on pool assets are deposited into the |X| (as to
appropriate custodial bank accounts and related bank
clearing accounts no more than two business days
following receipt, or such other number of days accounts held by
specified in the transaction agreements. Trustee)
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(ii) Disbursements made via wire transfer on behalf of an |X| (as to
obligor or to an investor are made only by authorized investors only)
personnel.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(iii) Advances of funds or guarantees regarding collections,
cash flows or distributions, and any interest or other
fees charged for such advances, are made, reviewed and
approved as specified in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
The related accounts for the transaction, such as cash
reserve accounts or accounts established as a form of |X| (as to
overcollateralization, are separately maintained accounts held by
(e.g., with respect to commingling of cash) as set Trustee)
1122(d)(2)(iv) forth in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(v) Each custodial account is maintained at a federally
insured depository institution as set forth in the
transaction agreements. For purposes of this
criterion, "federally insured depository institution"
with respect to a foreign financial institution means
a foreign financial institution that meets the
requirements of Rule 13k-1(b)(1) of the Securities
Exchange Act.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(vi) Unissued checks are safeguarded so as to prevent
unauthorized access.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(2)(vii) Reconciliations are prepared on a monthly basis for
all asset-backed securities related bank accounts,
including custodial accounts and related bank clearing
accounts. These reconciliations are (A) mathematically
accurate; (B) prepared within 30 calendar days after
the bank statement cutoff date, or such other number
of days specified in the transaction agreements; (C)
reviewed and approved by someone other than the person
who prepared the reconciliation; and (D) contain
explanations for reconciling items. These reconciling
items are resolved within 90 calendar days of their
original identification, or such other number of days
specified in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
INVESTOR REMITTANCES AND REPORTING
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(3)(i) Reports to investors, including those to be filed with
the Commission, are maintained in accordance with the
transaction agreements and applicable Commission
requirements. Specifically, such reports (A) are
prepared in accordance with timeframes and other terms
set forth in the transaction agreements; (B) provide
information calculated in accordance with the terms
specified in the transaction agreements; (C) are filed
with the Commission as required by its rules and
regulations; and (D) agree with investors' or the
trustee's records as to the total unpaid principal
balance and number of pool assets serviced by the
servicer.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(3)(ii) Amounts due to investors are allocated and remitted in |X|
accordance with timeframes, distribution priority and
other terms set forth in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
Disbursements made to an investor are posted within
two business days to the servicer's investor records,
or such other number of days specified in the |X|
1122(d)(3)(iii) transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
Amounts remitted to investors per the investor reports
agree with cancelled checks, or other form of payment, |X|
1122(d)(3)(iv) or custodial bank statements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
POOL ASSET ADMINISTRATION
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(i) Collateral or security on pool assets is maintained as
required by the transaction agreements or related
asset pool documents.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
Pool assets and related documents are safeguarded as
1122(d)(4)(ii) required by the transaction agreements
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(iii) Any additions, removals or substitutions to the asset
pool are made, reviewed and approved in accordance
with any conditions or requirements in the transaction
agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(iv) Payments on pool assets, including any payoffs, made
in accordance with the related pool asset documents
are posted to the servicer's obligor records
maintained no more than two business days after
receipt, or such other number of days specified in the
transaction agreements, and allocated to principal,
interest or other items (e.g., escrow) in accordance
with the related pool asset documents.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(v) The servicer's records regarding the pool assets agree
with the servicer's records with respect to an
obligor's unpaid principal balance.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(vi) Changes with respect to the terms or status of an
obligor's pool asset (e.g., loan modifications or
re-agings) are made, reviewed and approved by
authorized personnel in accordance with the
transaction agreements and related pool asset
documents.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(vii) Loss mitigation or recovery actions (e.g., forbearance
plans, modifications and deeds in lieu of foreclosure,
foreclosures and repossessions, as applicable) are
initiated, conducted and concluded in accordance with
the timeframes or other requirements established by
the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(viii) Records documenting collection efforts are maintained
during the period a pool asset is delinquent in
accordance with the transaction agreements. Such
records are maintained on at least a monthly basis, or
such other period specified in the transaction
agreements, and describe the entity's activities in
monitoring delinquent pool assets including, for
example, phone calls, letters and payment rescheduling
plans in cases where delinquency is deemed temporary
(e.g., illness or unemployment).
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(ix) Adjustments to interest rates or rates of return for
pool assets with variable rates are computed based on
the related pool asset documents.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(x) Regarding any funds held in trust for an obligor (such
as escrow accounts): (A) such funds are analyzed, in
accordance with the obligor's pool asset documents, on
at least an annual basis, or such other period
specified in the transaction agreements; (B) interest
on such funds is paid, or credited, to obligors in
accordance with applicable pool asset documents and
state laws; and (C) such funds are returned to the
obligor within 30 calendar days of full repayment of
the related pool asset, or such other number of days
specified in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(xi) Payments made on behalf of an obligor (such as tax or
insurance payments) are made on or before the related
penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments,
provided that such support has been received by the
servicer at least 30 calendar days prior to these
dates, or such other number of days specified in the
transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(xii) Any late payment penalties in connection with any
payment to be made on behalf of an obligor are paid
from the servicer's funds and not charged to the
obligor, unless the late payment was due to the
obligor's error or omission.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
Disbursements made on behalf of an obligor are posted
within two business days to the obligor's records
maintained by the servicer, or such other number of
1122(d)(4)(xiii) days specified in the transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
1122(d)(4)(xiv) Delinquencies, charge-offs and uncollectible accounts
are recognized and recorded in accordance with the
transaction agreements.
----------------- -------------------------------------------------------- ------------------
----------------- -------------------------------------------------------- ------------------
Any external enhancement or other support, identified
in Item 1114(a)(1) through (3) or Item 1115 of
Regulation AB, is maintained as set forth in the |X|
1122(d)(4)(xv) transaction agreements.
----------------- -------------------------------------------------------- ------------------
--------------------------------------------------------------------------------
EXHIBIT FOUR
CERTIFICATE POLICY OF XL CAPITAL ASSURANCE INC.
|
SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 1
Exhibit 10.1
CO-PUBLISHING AGREEMENT
THIS CO-PUBLISHING AGREEMENT (“Agreement”) is made and entered into as of March
30, 2005 (the “Effective Date”) in San Diego, California, USA by and between Red
Mile Entertainment, Inc., with principal offices located at 4000 Bridgeway,
Suite 101, Sausalito, CA 94965 (“Red Mile”) and Sony Online Entertainment Inc.,
a Delaware corporation (“SOE”) with principal offices located at 8928 Terman
Court, San Diego, California, 92121, USA.
1.
Definitions
1.1 “Collateral Materials” means any and all advertising, marketing,
packaging and/or promotional materials relating to the Product.
1.2
“Copyright Act” means Title 17, United States Code, § 101 et. seq, as amended.
1.3 “Costs” means (a) actual cost of collection (such as credit
card/payment processing/merchant fees), (b) actual credits, markdowns, price
protection and returns, (c) cooperative advertising payments actually made
and/or cooperative advertising credits actually issued, (d) actual cost of
manufacturing, assembly and shipping of the Product and associated packaging and
packaging inserts, (e) format royalties (both for packaged goods and online
exploitation) actually paid to Sony Computer Entertainment
America/Europe/Inc./(Korea) Inc. (collectively, “SCE”) and (f) duties and taxes
(excluding income taxes).
1.4 “Intellectual Property Rights” means any and all now known or
hereafter known tangible and intangible (i) rights associated with works of
authorship including, without limitation, copyrights, moral rights and
mask-works, (ii) trademark and trade name rights and similar rights, (iii) trade
secret rights, (iv) patents, designs, algorithms and other similar rights, (v)
all other intellectual property rights of every kind and nature and however
designated, whether arising by operation of law, contract, license or otherwise,
including any software, ideas, concepts, know-how, development tools, techniques
or any other proprietary material or information, and (vi) all registrations,
initial applications, renewals, extensions, continuations, divisions or reissues
thereof now or hereafter made, existing, or in force (including any rights in
any of the foregoing), including, without limitation, all current and future
worldwide patents and other patent rights, copyrights, trademarks, service
marks, trade names, mask work rights, trade secret rights, technical
information, know-how, moral rights and the equivalents of the foregoing under
the laws of any jurisdiction, and all other proprietary or intellectual property
rights throughout the universe, including without limitation all applications
and registrations (and all renewals and extensions) relating to any of the
above.
1.5 “Net Sales Receipts” means gross amounts received by SOE from the
sale, distribution or ancillary exploitation attributable to the Product (but
excluding Net Sublicensing Receipts), less SOE’s Costs.
1.6 “Net Sublicensing Receipts” means gross amounts received by SOE from
the sublicensing of distribution rights to the Product outside North America,
less SOE’s actual Costs (if any) related thereto.
1.7
“Product” means Gripshift for the PSP Handheld Entertainment System.
1.8 “Term” means the period beginning on the Effective Date and ending
three (3) years thereafter.
--------------------------------------------------------------------------------
SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 2
1.9
“Territory” means worldwide.
1.10
“Red Mile Trademarks” means those trademarks set forth in Schedule A.
1.11 “Product Developer” means Prodigy Design Limited, doing business as
Sidhe Interactive, a New Zealand corporation.
1.12
“Product Developer Trademarks” means those trademarks set forth in Schedule A.
2.
Intentionally Omitted
3.
Grant of Rights, Restrictions and Reserved Rights
3.1 Subject to the terms and conditions hereof, Red Mile hereby grants to
SOE the (a) exclusive right and license, for the Term and in the Territory, in
any and all media (known and unknown) and through any and all means of
distribution (known and unknown), to market, promote, advertise, manufacture,
publicly display, distribute, sell and provide customer service and technical
support for the Product, and to use and display the Red Mile Trademarks, the
Product Developer Trademarks, and the Product and all audio/visual material
therein in connection with all of the above and, separately and in addition
thereto, (b) subject to section 3.6 below, a perpetual, irrevocable, royalty
free, nonexclusive worldwide right and license to use,and exploit all executable
files within the Product (the “Licensed Executable Files”) for any and all
purposes.
3.2 Notwithstanding any contrary provision of this Agreement, Red Mile
hereby grants to SOE the unrestricted right to sublicense and assign any or all
of its rights hereunder, for the Term and throughout the Territory, to any
person or entity, on either an exclusive or non-exclusive basis, or otherwise
exploit, any or all rights, licenses or privileges with respect to the Product
by such manner and means and on such terms and conditions as Licensee deems
appropriate, including without limitation the assignment or licensing of (a)
customer service and technical support, (b) advertising and media creation, (c)
public relations, (d) disc or other storage media, and Collateral Materials
replication and assembly, (e) hosting, (f) website creation and management, (g)
community management, (h) sales and distribution, (i) billing and collection and
(j) translation and localization, and the granting to such other persons or
entities the right to further license and assign the rights granted to them by
SOE. With respect to all such direct and indirect sublicensees, this section 3.2
is intended by the parties to be a specific consent by Red Mile to such
licensing and assignment (and further licensing and assignment by SOE and its
assignees and licensees) and to overcome any restrictions on such licensing or
assignment arising under the case Gardner v. Nike.
3.3 SOE’s use of any such sublicensee(s) shall in no way derogate from
or relieve SOE of any of its obligations under this Agreement, including, but
not limited to the obligation to make payments, and any and all representations,
warranties, covenants and terms of this Agreement. SOE further acknowledges and
agrees that it shall be responsible and primarily liable for all activities and
obligations of all direct and indirect sublicensees with respect to the Product.
3.4 SOE shall not use or register the Red Mile Trademarks or any other
trademarks or trade name of Red Mile or any word, symbol, or design confusingly
similar thereto, as part of its corporate name, or as part of the name of any
product of SOE or other Product distributed or promoted by SOE. SOE hereby
renounces all goodwill accruing in or to the Red Mile Trademarks, and SOE agrees
that all such goodwill in any and all Red Mile Trademarks shall accrue solely
and exclusively for the benefit of Red Mile.
--------------------------------------------------------------------------------
SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 3
3.5 The parties hereto (on behalf of themselves and any successor,
including any trustee) acknowledge and agree that any Intellectual Property
Rights conveyed or licensed hereunder is (i) “intellectual property” as that
term is defined in Section 101(35) of the Title 11 of the United States Code
(the “Bankruptcy Code”) and (ii) subject to all of the protections afforded
under Section 365(n) of the Bankruptcy Code, including without limitation, the
right of SOE to retain all Intellectual Property Rights conveyed or licensed
hereunder, notwithstanding any putative effort to reject this Agreement or any
part thereof. Without limiting the generality of the foregoing, SOE shall at all
times have the right to obtain access to any Intellectual Property Rights
conveyed or licensed hereunder and the embodiment thereof and Red Mile (and any
successor thereto including a bankruptcy trustee) shall facilitate such access.
Furthermore, Red Mile (and any successor thereto including any trustee under the
Bankruptcy Code) shall refrain from interfering with the rights of SOE to the
Intellectual Property Rights conveyed or licensed hereunder (including the
embodiment thereof) and the rights of SOE to obtain such Intellectual Property
Rights or the embodiment thereof from any entity. All of the foregoing rights
shall apply, irrespective of any effort to reject this Agreement or any
provisions thereof. Red Mile hereby agrees and acknowledges that with respect to
any Intellectual Property Rights licensed to SOE hereunder (i) Red Mile is
granting the licenses hereunder in the ordinary course of its business, (ii) Red
Mile is in a business that includes the making of such licenses covering such
general intangibles, (iii) the licenses hereunder comport with the usual and
customary practices in Red Mile’s business and with Red Mile’s own customary
practices, and (iv) SOE is a licensee in the ordinary course of business as that
term is used in the Uniform Commercial Code.
3.6 SOE shall not, directly or indirectly modify, disassemble, decompile
or otherwise reverse engineer or attempt to reverse engineer or derive source
code from, all or any portion of the Licensed Executable Files.
3.7 All rights to the Red Mile Trademarks, the Product Developer
Trademarks, and the Product not specifically granted herein are expressly
reserved by Red Mile and the Product Developer, as applicable.
4.
Development and Delivery
4.1 Red Mile shall, at its sole cost and expense, perform or ensure the
performance of all services necessary to develop a working, saleable, top
quality Product to (a) meet the milestone dates attached hereto as Schedule B,
(b) develop the Product so as to ensure ease of translation into the languages
below (including, but not limited to, “double byte” compatibility) and (c)
secure final approval by SCE in each portion of the Territory (collectively,
“Final Approval”). Red Mile’s services hereunder shall not be considered
complete until the Product is localized into English, French, German, Spanish
and Japanese, and Final Approval is granted in writing. Text translations shall
be at SOE’s expense; integration of such translations shall be at Red Mile’s
expense. As between the parties, Red Mile shall bear all cost and expense of
programming, artwork, sound, music and other developmental services for the
Product up through Final Approval (and any post-approval bug fixes which may
reasonably be required by SOE or SCE); provided, however, that if SOE requires
Red Mile to incorporate sound and/or music into the Product that is in addition
to or different than the sound or music that had been incorporated into the
Product as it exists as of the Effective Date, SOE shall provide such additional
and/or different sound/music to the Product Developer at SOE’s expense (and the
sound/music shall be incorporated into the Product at no additional charge).
4.2 SOE shall, at its sole cost and expense, test the Product (or ensure
that the Product is tested) for bugs and full compliance with TRC’s and all
other requirements and standards promulgated by SCE. Red Mile and the Product
Developer shall, at their expense, make whatever changes and fixes are necessary
to correct such bugs and comply with such TRC’s and requirements and standards,
and provide the appropriate number of gold masters for replication.
--------------------------------------------------------------------------------
SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 4
4.3 Promptly following the Effective Date, SOE and Red Mile (in
consultation with the Product Developer) shall agree on a list of Product
content enhancements and changes (which may be updated throughout the remainder
of the development cycle) – the implementation of which shall require no more
than, in the aggregate, six weeks of industry standard development time. Each
Milestone delivery to SOE shall include all executable files necessary for SOE
to rebuild and test the deliverable. Following receipt of each delivery, SOE
shall have a period of seven (7) days to test and evaluate the deliverable and
notify Red Mile in writing of (i) any content tweaks which SOE shall reasonably
require, (ii) any material failures to meet SOE’s reasonable acceptance criteria
for such deliverable, and (iii) any bugs or defects of which SOE has become
aware. Following receipt of each such written report, Red Mile shall have a
period of seven (7) days (or, with respect to changes, such longer period of
time which is reasonable and customary in the industry) to make the necessary
revisions and provide the corrected deliverable to SOE.
4.4 Red Mile shall promptly provide SOE, in each instance upon SOE’s
written request and at no cost to SOE, with any other files and materials (e.g.
screenshots, art files, game play description and ongoing cooperation for manual
creation and the like) that SOE may reasonably required for SOE’s creation of
any Collateral Materials.
4.5 Red Mile shall promptly provide SOE, in each instance upon SOE’s
written request, with (a) Red Mile’s logo artwork, (b) the logo artwork for the
Product Developer, (c) text of the appropriate copyright notice for the Product,
and (d) a list of credits for Red Mile personnel, the Product Developer’s
personnel, and any other entities required under existing contract to receive
credit in the Product and/or Product manual.
4.6 For a one (1) year period following commercial launch of the Product
in North America, Red Mile shall, at no additional charge, cause the Product
Developer to (a) provide SOE with reasonable assistance with any consumer
inquiries that SOE may receive regarding the Product and (b) make reasonable
efforts to correct any bugs or errors in the Product of which SOE notifies Red
Mile in writing.
4.7 SOE shall have the right, at any time and on an ongoing and regular
basis prior to Final Acceptance, to interface and work directly with the Product
Developer regarding the Product – provided, however, that a representative of
Red Mile is included in the discussions of and agreement upon the content
enhancements and changes referenced in section 4.3 above (and any further
content enhancements and/or changes to which the parties may agree).
5.
Marketing
5.1 Subject only to sections 5.2 – 5.6 below, SOE shall have complete
and exclusive control of all aspects of the marketing, distribution,
exploitation and sale of the Product and may elect at any time to delay, limit
or cancel commercial release of the Product at its sole and absolute discretion.
SOE shall have complete and exclusive control over the business model of
exploitation of the Product. If SOE does not release the Product in at least
some portion of the Territory within ninety (90) days of any Final Acceptance,
Red Mile shall have the right, but not the obligation, for a period of one
hundred eighty (180) days thereafter (the “Negative Pickup Period”), to
reacquire all rights granted herein by, within the Negative Pickup Period, (a)
sending SOE a written notice to that effect and (b) tendering payment to SOE of
all amounts that SOE previously paid to Red Mile – following which, all rights
granted herein shall immediately and irrevocably revert to Red Mile . Red Mile
acknowledges that the sale of games is speculative, business models are
developing and hereby agrees that, notwithstanding the Royalty provisions
herein, no liability shall be imposed upon SOE, for Royalties or otherwise,
based upon any failure or delay by SOE to release the Product at all or in any
territory, based upon any particular business model that SOE may choose and/or
based on any claim that (i) more sales could have been made, (ii) a better
foreign distribution deal could have been obtained and/or (iii) better prices or
terms could have been obtained.
--------------------------------------------------------------------------------
SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 5
5.2 All of the below subject to (a) the approval of SCE and (b) Red Mile
and its developer having executed appropriate written agreements with SCE, Red
Mile and the Product Developer shall receive text and logo credits in the
Product, in Collateral Material and on the front of the Product package – with
Red Mile being credited as the Co-publisher. The size and manner of such credits
shall be at SOE’s reasonable discretion. No casual or inadvertent failure by SOE
to accord such credit, and no failure of any third party to abide by its
agreement with SOE to accord such credit, shall be construed as a breach of this
Agreement. Upon receipt of written notice from Red Mile specifying in reasonable
detail any failure by SOE to accord the credit required hereunder, SOE shall use
commercially reasonable efforts prospectively to cure such failure in future
pressings of the Product and further creation of Collateral Material.
5.3 SOE shall be entitled to use and publish and permit others to use
and publish the names of the Product Developer and its personnel (including any
professional or business identity adopted by the developer), photographs,
biographical material, or any reproduction or simulation thereof in connection
with the promotion, marketing and/or distribution of the Product. The Product
Developer shall have the right to reasonably approve any photograph or
biographical materials concerning the developer or its personnel; failure to not
disapprove such material in writing within five (5) business days of
presentation shall be deemed approval. Once the Product Developer has approved
any particular photograph or biographical material, Red Mile and Product
Developer shall be deemed to have approved such photograph or material for all
subsequent uses. Red Mile shall cause the Product Developer to make its
employees available for any press interviews or trailer/video shoots as SOE may
request from time to time at SOE’s expense and upon reasonable notice.
5.4 SOE shall spend at least $500,000 in media creation, media placement
and cooperative advertising payments or allowances in conjunction with the
Product, with no more than 25% of the above sum spent on cooperative advertising
payments or allowances.
5.5 SOE shall provide Red Mile, on a weekly basis, with written sell
through reports listing the total sales by Product and also listing each of its
major accounts and the sales of each major account by Product, to the extent
that the major accounts provide such information to SOE.
5.6 Prior to the publication, manufacturing, distribution, display, use,
or sale of any marketing, advertising or packaging materials for the Product,
SOE shall submit to Red Mile for its prior written approval samples of all such
materials. Red Mile shall have a period of five (5) business days from receipt
(the “Approval Period) to review and approve or disapprove any such materials,
such approval not to be unreasonably withheld; any disapproval shall be in
writing and shall contain a detailed summary of the issues and proposed
corrective actions. If Red Mile does not provide a written approval or
disapproval within the Approval Period, the material submitted shall be deemed
approved. Once a particular item has been approved or deemed approved for one
use, it shall be deemed approved for all substantially similar uses (e.g. an
approved counter card shall be deemed approved for use as a poster, standee,
etc.) without requiring any submission; once the English language version of any
item has been approved or deemed approved, exact translations shall be deemed
approved without requiring any submission. SOE shall provide Red Mile with
thirty (30) free copies of each version (e.g. SCEA, SCEE, SCEI) of the Product.
6.
SOE’s Responsibilities
As between the parties hereto, SOE shall bear all cost and expense of (i)
development and execution of its marketing and public relations plan related to
the Product, (ii) development and maintenance of one or more promotional
websites and community forums related to the Product, (iii) interfacing with SCE
to manage the SCE approval process, (iv) creation and distribution of all
Collateral Materials, (v) fielding a retail sales force and/or third party sales
representatives, (vi) manufacture, assembly and shipping and order fulfillment
of Product, and (vii) customer service and technical support
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 6
related to Product. For avoidance of doubt, the reference to SOE bearing the
cost and expense of each of the above in the first instance shall not be
construed as modifying the deductions set forth in the definition of “Costs” in
section 1.3 herein.
7.
Development Fee, Royalty, Reserves, Price Protection and Reimbursements
7.1 Development Fee for Executables. For the rights granted in section
3.1(b) above, SOE shall pay Red Mile the sum of xxxxxx (the “Development Fee”),
not to be applied against Royalties hereunder. The Development Fee shall be paid
xxxxxx within five (5) days of the Effective Date, and xxxxx within five (5)
days of Final Acceptance in North America.
7.2 Royalties. For all other rights granted hereunder, SOE shall pay Red
Mile a running royalty in accordance with both (a) and (b) below:
(a) For the first 200,000 units of the Product that are sold throughout
the Territory, xxxxxxx of Net Sales Receipts, for the next 200,000 units of the
Product that are sold throughout the Territory, xxxxxxxxxxxxxxxxx of Net Sales
Receipts, for all units of the Product above 400,000 that are sold throughout
the Territory, xxxxxxxxxxxxxxxxxxx of Net Sales Receipts. For avoidance of
doubt, the Royalty rate “bumps” set forth above shall only apply to Net Sales
Receipts within each tranche, and not applied retroactively to the first dollar
or units within a previous traunch. Ancillary exploitation revenue within Net
Sales Receipts shall be subject to the royalty rate that is in effect at the
time such revenue is collected by SOE; price protection (including credits,
discounts, markdowns and returns) shall be subject to the royalty rate that is
in effect at the time such price protection is actually granted.
(b)
xxxxxx percent (xxxx%) of Net Sublicensing Receipts.
7.3 Royalty statements and payments thereon shall be mailed within thirty
(30) days after the end of each calendar quarter commencing with the first month
after the initial commercial release of a Product and for so long as Net Sales
Receipts and/or Net Sublicensing Receipts subject to Royalties are generated.
SOE shall be entitled to withhold a quarterly reserve of fifteen percent (15%)
of Royalties against credits, markdowns, returns and refunds (including
so-called price protection); each such reserve, once established, shall be
liquidated within six (6) months on a rolling basis. The Royalty statements
shall be made available to Red Mile in electronic human-readable form and shall
include the following information: (i) total number of units sold by SOE by
account, (ii) aggregate gross amounts received by SOE by Product from sales,
(iii) aggregate gross amounts received by SOE from ancillary exploitation, (iv)
sublicensing amounts received by SOE by payor, broken out by major territory and
with Australia and New Zealand reported separately, (v) Costs detailed by
category, (v) computation of Net Sales Receipts and Net Sublicensing Receipts,
and (iv) computation of Royalties due to Red Mile.
7.4 SOE shall, at all times, be free to unilaterally establish its own
resale prices and terms with respect to all Product distributed hereunder using
its best business judgment, including price protection granted to the channel in
accordance with the customs and practices of the industry, and advertise and or
otherwise merchandise such prices and terms independently in advertisements
and/or merchandising programs. Red Mile and its employees or sales agents shall
have no authority to instruct SOE as to what its resale prices must be, nor to
interfere with the SOE’s independent establishment of resale prices.
7.5 SOE will compute the royalties payable to Red Mile for revenue
generated from outside North America (“Foreign Receipts”) in the same currency
in which SOE receives payment for that sale. For royalty purposes, SOE will
credit such payment in United States dollars at the rate of exchange on the last
day of the quarter covered under the applicable royalty report. For purposes of
accounting to Red Mile, SOE will treat any Foreign Receipts as a sale made
during the calendar quarter in which SOE receives accounting and payment for
that sale. If SOE is unable to repatriate currency from any foreign
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 7
country to the United States, SOE shall promptly notify Red Mile in writing and
shall, upon Red Mile’s written request, deposit any such blocked funds to the
credit of Red Mile in a local bank or banks or other depository designated in
writing by Red Mile, or pay them promptly within such country or countries to
such persons or entities as Red Mile may designate in writing. If any taxes are
deducted or withheld from payments to SOE, SOE may deduct a proportionate amount
of such taxes from the Royalties payable hereunder.
7.6 All payments set forth in this section 7 represent full and complete
compensation for all rights granted or assigned to SOE in connection with the
Product, and for Red Mile’s complete performance of its other obligations under
this Agreement. Except as may be set forth in section 11 below, Red Mile further
acknowledges and agrees that it has no expectancy with respect to any payment
other than the payments expressly set forth in this section 7.
8.
Audit Rights
8.1 SOE will maintain reasonable and complete books and records that will
enable Red Mile to determine the Royalties payable under this Agreement. Red
Mile may, once every 12 months, examine those books and records of SOE in the
United States, solely for the purpose of verifying the accuracy of the Royalty
statements and reports sent to Red Mile under section 7 and the marketing spend
in section 5.4. Any auditor or reviewer must enter into a confidentiality
agreement with Red Mile and shall only report to Red Mile, with a copy to SOE,
the amount of any underpayment or overpayment of Royalties for the reviewed
period, if any. Under such confidentiality agreement, the auditor or reviewer
may make copies of pertinent books, records and supporting documentation and
take such records offsite for use in completion of the audit and retain such
records as supporting documentation for their findings. Red Mile may make an
examination of a particular statement only once, and only within twenty-four
(24) months after the date when SOE provides Red Mile with that statement. Such
examination must be conducted in a manner that does not interrupt or interfere
with SOE’s business, upon thirty (30) days prior written notice, and will
normally be completed within a period of five (5) business days, but may be
extended by another five (5) business days if the extension is appropriate and
fair given the scope of the examination. All information to which such auditor
is provided access during such examination shall be deemed confidential
information. SOE shall make good any applicable undisputed underpayment within
ten (10) business days of receipt of written notice of same; in the event such
examination demonstrates an underpayment by SOE in excess of seven and one half
percent (7.5%) of Royalties paid to Red Mile, SOE shall also pay all reasonable
accounting, legal and expert witness fees associated with the examination.
8.2 If Red Mile has any objection to a Royalty statement, it will give
SOE specific notice of that objection with specific documentation to support
such objection and its reasons for the objection within twenty four (24) months
following the date SOE first sent the statement to Red Mile. Each royalty
statement will become conclusively binding on Red Mile at the end of the
applicable 24-month period, and Red Mile waives any further right to object
and/or sue upon such statement. Red Mile’s recovery of any such Royalties will
be the sole remedy available to it by reason of any claim related to SOE’s
Royalty accounting.
8.3 If SOE makes an overpayment to Red Mile hereunder for any reason (or
if retained reserves are insufficient to cover price protection), SOE shall have
the election to deduct an amount equal to such overpayment (or insufficiency)
from any sums that may become due or payable to Red Mile by SOE, in lieu of Red
Mile’s reimbursement to SOE.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 9
9. General Relationship
SOE and Red Mile shall, in all matters relating to this Agreement, act as an
independent contractor. In all such matters, neither of the parties nor its
employees are, or shall act as, employees, agents or partners of the other for
any purposes whatsoever including without limitation with respect to any laws or
regulations of any jurisdiction which would impute any obligations or liability
to the other for any reason.
10.
Intellectual Property Rights and Insurance
10.1 (a) Subject to the license granted hereunder and section 10.2
below, as between the parties hereto, the Red Mile Trademarks, and those
portions of any Collateral Materials which depict any element of the Red Mile
Trademarks (collectively, “Red Mile’s Property”) shall be the sole and exclusive
property of Red Mile throughout the world in perpetuity. SOE hereby irrevocably
assigns, transfers, releases and conveys to Red Mile, from the moment of its
creation, all right, title and interest in and to Red Mile’s Property, all
Intellectual Property Rights embodied in or pertaining to any of the foregoing,
and (subject to the rights granted in this Agreement) all rights to exploit the
Intellectual Property Rights in and to Red Mile’s Property in any way, free and
clear of any and all rights, liens, claims and encumbrances by SOE or any other
third party. SOE shall, at Red Mile’s expense, cooperate with Red Mile in the
procurement and maintenance of Red Mile’s rights in Red Mile’s Property or
Intellectual Property Rights related to the Product, and shall sign all papers
that Red Mile may reasonably deem necessary or desirable for vesting Red Mile
with all rights granted hereunder to it throughout the world.
(b) Subject to the license granted hereunder and section 10.2 below, SOE
acknowledges and agrees that the Product, the Product Developer’s Trademarks,
the Product and everything therein, and those portions of any Collateral
Materials which depict any element of the Product (collectively, “Product
Developer’s Property”) shall be the sole and exclusive property of Product
Developer throughout the world in perpetuity. SOE hereby irrevocably assigns,
transfers, releases and conveys to Product Developer, from the moment of its
creation, all right, title and interest in and to Product Developer’s Property,
all Intellectual Property Rights embodied in or pertaining to any of the
foregoing, and (subject to the rights granted in this Agreement) all rights to
exploit the Intellectual Property Rights in and to Product Developer’s Property
in any way, free and clear of any and all rights, liens, claims and encumbrances
by SOE or any other third party. SOE shall, at Product Developer’s expense,
cooperate with Product Developer in the procurement and maintenance of Product
Developer’s rights in Product Developer’s Property or Intellectual Property
Rights related to the Product, and shall sign all papers that Product Developer
may reasonably deem necessary or desirable for vesting Product Developer with
all rights granted hereunder to it throughout the world.
10.2 SOE’s trademarks, service marks, and those portions of any Collateral
Materials which do not depict an element of the Property (collectively, “SOE’s
Property”) shall be the sole and exclusive property of SOE throughout the world
in perpetuity. Red Mile hereby irrevocably assigns, transfers, releases and
conveys to SOE, from the moment of its creation, all right, title and interest
in and to SOE’s Property, all Intellectual Property Rights embodied in or
pertaining to any of the foregoing, and (subject to the rights granted in this
Agreement) all rights to exploit the Intellectual Property Rights in and to
SOE’s Property in any way, free and clear of any and all rights, liens, claims
and encumbrances by Red Mile or any other third party. Red Mile shall, at SOE’s
expense, cooperate with SOE in the procurement and maintenance of SOE’s rights
in SOE’s Property, and shall sign all papers that SOE may reasonably deem
necessary or desirable for vesting SOE with all rights granted hereunder to it
throughout the world.
10.3 Red Mile or Product Developer shall, at their expense and prior to
commercial launch of the Product, register or cause to be registered the Red
Mile Trademarks and the Product Developer Trademarks and file copyright
registrations for the Product in at least the United States, the European Union,
Japan, Taiwan, Korea and the People’s Republic of China.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 10
10.4 SOE shall execute written agreements with all persons or entities
that develop Collateral Materials for SOE. Each such written agreement shall
contain (i) a “work made for hire” provision, (ii) written, signed assignments
to SOE (for the benefit of Red Mile) from each person or entity of all
Intellectual Property Rights embodied in or pertaining to the Collateral
Materials, free and clear of any and all rights and claims by that person or
entity or any third party, (iii) waivers from each such person or entity any
right to assert any moral rights against Red Mile with respect to the Collateral
Materials and (iv) written, irrevocable worldwide clearances for any talent
(including, but not limited to, name, voice and likeness) that is used in any
Collateral Materials. If and to the extent SOE is deemed to have retained, under
applicable law, any right, title or interest in or to any portion of the
Collateral Materials that is part of Red Mile’s Property then, subject to the
license granted to SOE herein, SOE hereby grants to Red Mile, its successors and
assigns, the sole and exclusive, irrevocable, worldwide, paid-up right and
license to do those things set forth in section 106 of the Copyright Act (e.g.
(i) reproduce them, (ii) prepare derivative works from them, (iii) distribute
copies of them to the public, by sale, rental or otherwise, (iv) publicly
perform them and/or (v) publicly display them).
10.5 All lists, names and records of consumers of the Product that SOE
creates or compiles in connection with SOE’s rights under this Agreement shall
be the sole property of SOE.
10.6 Red Mile shall obtain -- at its own expense and maintain during the
Term of this Agreement and for three (3) years thereafter -- each in the amount
of $3 million per occurrence and $3 million in the aggregate, (a) commercial
general liability insurance including advertising, blanket contractual, product
liability and completed operations liability coverage (“CGL”) and (b) multimedia
liability insurance (which shall be obtained no later than sixty (60) days after
the Effective Date) which provides coverage for claims arising out of published
material and shall include but not be limited to the allegations of defamation,
copyright infringement, invasion of right of privacy, or other personal injury
and breach of implied contract (“Media Insurance”). All insurance must be
provided by a recognized insurance company having a Best’s Rating of no less
than “A -.” Each insurance policy shall be primary and non-contributory with
respect to any insurance carried by SOE. Promptly following the Effective Date
for CGL, and promptly upon securing the Media Insurance, Red Mile shall provide
to SOE certificates for each, naming “Sony Online Entertainment Inc., its
parent, subsidiary, related and affiliated companies, and their officers,
directors and employees” as additional insureds, indicating that the policies
are non-cancelable except after thirty (30) days prior written notice to SOE,
and are be primary and any insurance maintained by SOE shall be
non-contributory.
11.
Sequel and Noncompete
11.1 To the extent that Red Mile has acquired such rights from the Product
Developer, from the Effective Date until the earlier of (i) sixty (60) days
following commercial launch of the Product in North America or (ii) October 31,
2005 (the “Exclusive Negotiating Period”), Red Mile shall negotiate exclusively
with SOE, in good faith, with respect to the terms and conditions under which
SOE may secure exclusive worldwide distribution rights to a Product sequel. If
Red Mile and SOE are unable to reach agreement within the Exclusive Negotiating
Period, to the extent that Red Mile has acquired such rights from the Product
Developer, SOE may elect (in its sole discretion) to pay Red Mile the sum of
xxxxxxx, receipt of which shall automatically extend the Exclusive Negotiating
Period through December 31, 2005. If Red Mile and SOE are unable to reach
agreement within such extended Exclusive Negotiating Period, following good
faith negotiations, Red Mile shall refund to SOE the xxxxxx referenced in this
section by no later than March 31, 2006. To the extent that Red Mile has
acquired such rights from the Product Developer, during the Exclusive
Negotiating Period (including any extension as set forth herein), neither Red
Mile nor its developer shall take any action with respect to a sequel which is
inconsistent with exclusive negotiation with SOE as is set forth herein. In the
event that Red Mile has not acquired from the Product Developer any portion of
the rights set forth above within the time frame(s) set forth above, SOE shall
be free to negotiate directly with the Product Developer to acquire such rights
for SOE – without any payment or other obligation to Red Mile.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 11
11.2 Neither Red Mile nor the Product Developer shall directly or
indirectly, develop, distribute or sell (a) a competing PSP automobile/kart
racing game that is commercially released within thirteen (13) months after
Final Acceptance of the Product and (b) a competing PSP automobile/kart puzzle
game which is commercially released during the Term, subject to the sequel
provision immediately below. In the case where SOE’s Exclusive Negotiating
Period ends without the parties coming to agreement (for SOE, either with Red
Mile or directly with the Product Developer pursuant to section 11.1 above), Red
Mile and the Product Developer shall be free to directly or indirectly
distribute or sell a sequel to the Product, provided that such sequel is not
commercially released within thirteen (13) months of Final Acceptance of the
Product.
12.
Representations, Warranties and Covenants
12.1
Red Mile represents, warrants and promises that:
(a) It has and shall continue to have all necessary rights and authority
to execute and deliver this Agreement and perform its obligations hereunder and
to grant to SOE all rights purported to be granted herein, and nothing contained
in this Agreement or in the performance of this Agreement will place Red Mile in
breach of any other contract or obligation.
(b) It is a corporation, validly existing and in good standing under the
laws of the jurisdiction in which it was incorporated.
(c) It is solely responsible for and shall pay all sums due to the
Product Developer and any and all parties engaged by Red Mile and/or the Product
Developer who are entitled to receive compensation for the development of the
Product.
(d) There is no demand, claim, suit, action, arbitration or other
proceeding pending or threatened which questions or challenges the ability or
right of Red Mile to enter into this Agreement or to perform any of its
obligations hereunder or which might affect SOE’s rights under the terms of this
Agreement, nor, to its knowledge, does there exist any reasonable basis for any
such demand, claim, suit, action, arbitration or other proceeding.
(e) It, in combination with the Product Developer, possesses the
technical resources and abilities required to fulfill its obligations hereunder,
and any change in such status shall be immediately communicated in writing to
SOE.
(f) It is financially sound and fiscally capable of performing its
obligations, and any material change in such status shall be immediately
communicated in writing to SOE.
(g) Nothing that Red Mile or the Product Developer provides or creates
hereunder shall infringe any Intellectual Property Right, right to privacy or
publicity of any third party.
(h) The Product shall contain no computer code specifically designed to
(i) disrupt, disable or harm a computer program or computer system or (ii)
damage or destroy any data files residing on a computer system without the
user’s consent and shall not adversely affect the hardware or other software of
any user thereof in any way.
(i) It shall comply with all laws and regulations in the U.S. and in
all jurisdictions in which it has operations.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 12
12.2
SOE represents, warrants and promises that:
(a) It has and shall continue to have all necessary rights and authority
to execute and deliver this Agreement and perform its obligations hereunder, and
nothing contained in this Agreement or in the performance of this Agreement will
place it in breach of any other contract or obligation.
(b) It is a corporation, validly existing and in good standing under the
laws of the jurisdiction in which it was incorporated.
(c) There is no demand, claim, suit, action, arbitration or other
proceeding pending or threatened which questions or challenges the ability or
right of SOE to enter into this Agreement or to perform any of its obligations
hereunder or which might affect Red Mile’s rights under the terms of this
Agreement, nor, to its knowledge, does there exist any reasonable basis for any
such demand, claim, suit, action, arbitration or other proceeding.
(d) It possesses the technical resources and abilities required to
fulfill its obligations hereunder, and any change in such status shall be
immediately communicated in writing to Red Mile.
(e) It is financially sound and fiscally capable of performing its
obligations, and any material change in such status shall be immediately
communicated in writing to Red Mile.
(f) Nothing that SOE provides or creates hereunder shall infringe any
Intellectual Property Right, right to privacy or publicity of any third party.
(g) It shall comply with all laws and regulations in the U.S. and in all
jurisdictions in which it has operations.
13.
Indemnification
Red Mile agrees to indemnify, defend and hold harmless SOE and its officers,
directors, employees and agents (a “SOE Party”) from and against any and all
losses, judgments, damages, liabilities, settlements, costs and expenses,
including reasonable attorneys’ fees and costs (collectively, “Damages”) arising
from or related to any third party claim, suit or proceeding (a “Third Party
Claim”) brought against any SOE Party which arises from or is related to (i) Red
Mile’s breach of any covenant, representation or warranty in the Agreement, (ii)
a claim that the Product or any content provided or created by Red Mile or the
Product Developer for inclusion in the Collateral Materials infringe or violate
any Intellectual Property Rights of a third party or (iii) any act or omission
of Red Mile or the Product Developer in connection with this Agreement. SOE
agrees to indemnify, defend and hold harmless Red Mile and its officers,
directors, employees and agents (a “Red Mile Party”) from and against any and
all Damages arising from or related to any Third Party Claim brought against a
Red Mile Party which arises from or is related to (i) SOE’s breach of any
covenant, representation or warranty in the Agreement, (ii) a claim that any
content or Collateral Material provided or created by SOE (or its contractors)
infringe or violate any Intellectual Property Rights of a third party, (iii) the
direct or indirect marketing or distribution of the Product hereunder (except to
the extent related to anything provided by Red Mile hereunder or caused by the
performance of the Product); or (iv) any act or omission of SOE in connection
with this Agreement.
If a third party asserts any claim or allegation which, if proven, would
constitute such a breach, the Indemnitor shall be promptly notified in writing
of such claim and given control of the defense and/or settlement thereof with
counsel reasonably acceptable to the Indemnitee. No party, however, may settle
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 13
any pending or threatened proceeding in a manner which admits wrongdoing by the
Indemnitee and/or without obtaining an unconditional release of the Indemnitee
from all such liability on claims that are the subject matter of such
proceeding. Notwithstanding the foregoing, in the event that, by reason of a
claim by a third party of infringement by Red Mile or its developer (or by SOE
arising from Product or Collateral Material content provided by Red Mile under
this Agreement), and SOE or its distributors are temporarily or preliminarily
enjoined from distributing the Product then, if Red Mile is unable, within ten
(10) business days from the signing of the order of injunction, to provide SOE
with non-infringing Product, SOE shall, at its sole discretion after discussions
with Red Mile, have the right to obtain a license from the third party to
continue with the marketing, distribution and sale of the Product, and Red Mile
shall reimburse SOE for any license/settlement fee paid by SOE to the third
party.
14.
Termination and Expiration
14.1 Termination by SOE. Subject to the provisions of section 14.2, SOE may
immediately terminate all of its duties and obligations under this Agreement
without any further liability whatsoever to Red Mile if:
(a) SOE, in its sole discretion, has elected to discontinue, terminate or
abandon distribution of the Product (a “Termination for Convenience”);
(b) Red Mile breaches, at any time during the Term, any provision,
representation, warranty or covenant in this Agreement or in any other agreement
with any Sony Computer Entertainment entity in any material respect and fails to
cure such breach within ten (10) days after SOE gives written notice of the
breach, specifying the breach in reasonable detail;
(c) One of the following occurs with respect to either or both of Red
Mile or the Product Developer prior to Final Acceptance: (i) its failure to pay,
or an acknowledgment by it that it is unable to pay, its debts generally as they
shall become due; (ii) the filing of an application for or the consenting to or
directing the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of all or substantially all of its property,
whether tangible or intangible, wherever located; (iii) the making of a general
assignment of its assets for the benefit of creditors; (iv) the commencement or
the intention to commence a voluntary case under the federal bankruptcy laws or
similar foreign laws; (v) the entry of an order for relief against it under such
bankruptcy or similar foreign laws; (vi) the filing of or the intent to file a
petition by or on behalf of it seeking to take advantage of any other law
providing for the relief of debtors, or (vii) the acquiescence to, or the
failure to have dismissed within ninety (90) days, by or on behalf of it any
petition filed against it any involuntary case under such bankruptcy or similar
foreign law;
(d) One of the following occurs prior to Final Acceptance: (i) Red Mile
assigns this Agreement or delegates or subcontracts any of its obligations
hereunder (except to the Product Developer) absent SOE’s prior written approval
or to any third party, (ii) any non-Sony third party obtains direct or indirect
beneficial ownership or control of more than 50% of Red Mile’s or the Product
Developer’s capital stock (or other equity interest ordinarily having voting
rights); (iii) any non-Sony third party obtains direct or indirect beneficial
ownership or control of all or substantially all of the assets of Red Mile
and/or the Product Developer or (iv) Red Mile and/or the Product Developer
merges with any non-Sony third party; or
(e) At any time during the Term, any (i) representation or warranty
herein or in any written statement made or delivered by Red Mile to or for the
benefit of SOE is untrue or incorrect in any material respect as of the date
when made or deemed made, or (ii) material provision of this Agreement for any
reason ceases to be valid, binding and enforceable in accordance with its terms
or Red Mile shall challenge the enforceability of this Agreement or shall assert
in writing, or engage in any action or inaction based on any such assertion,
that any provision of any of this Agreement has ceased to be or
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 14
otherwise is not valid, binding and enforceable in accordance with its terms.
14.2
Effect of Termination by SOE.
(a) If SOE terminates this Agreement pursuant to section 14.1(a) above,
then (i) all rights granted herein, except for the nonexclusive license set
forth in section 3.1(b), shall automatically revert to Red Mile, (ii) SOE shall
be relieved of and released from all its duties and obligations under this
Agreement, (iii) section 11 shall be of no force and effect with respect to
either party, (iv) Red Mile shall retain the Development Fee that had previously
been paid to it under section 7.1, and (v) SOE shall have no further liability
or duty whatsoever to Red Mile under this Agreement.
(b) If SOE terminates this Agreement pursuant to section 14.1(b), (c),
(d) or (e) above, then (i) SOE shall retain all of its rights under the terms of
this Agreement, (ii) SOE shall be relieved of and released from all its duties
and obligations under this Agreement, and (iii) SOE shall be entitled to
exercise all of its rights and remedies under applicable law which may include,
but not be limited to, recovery of all amounts previously paid to Red Mile.
(c) No termination by SOE of its duties and obligations under this
Agreement in accordance with this section 14 shall vest in Red Mile any rights,
title or interests in and to any SOE’s Property. The rights and remedies
provided to SOE in this section 14.2 will not be exclusive and will be in
addition to all other rights and remedies available at law or in equity.
14.3 Expiration. After expiration of the Term, SOE shall cease the
manufacture of units of the Product, but may sell off existing Product inventory
for a period of six (6) months. Except as may be necessary for such sales, all
rights granted herein except for those in section 3.1(b) shall immediately
revert to Red Mile. Following the sell off period, SOE shall destroy or dispose
of all remaining units of Product and Collateral Materials and shall certify the
destruction or disposal in writing to Red Mile.
14.4 Following payment of the xxxxxxxx Development Fee set forth in
section 7.1 herein, Red Mile shall have no right to terminate this Agreement for
any reason. If SOE breaches this Agreement in any material respect and fails to
cure the breach prospectively within ten (10) days of receipt of written notice
specifying the breach in reasonable detail, then Red Mile shall be excused from
providing further services hereunder and shall be entitled to seek recovery from
SOE for any actual, direct damages suffered or incurred by Red Mile arising out
of the breach. THE RIGHTS AND REMEDIES PROVIDED TO RED MILE IN THIS SECTION ARE
EXCLUSIVE. IN NO EVENT SHALL RED MILE OR THE PRODUCT DEVELOPER HAVE ANY RIGHT
TO: (A) RECOVER OR OBTAIN ANY RIGHTS IN OR TO SOE’S PROPERTY OR ANY INTELLECTUAL
PROPERTY RIGHTS IN AND TO THE FOREGOING, OR (B) ENJOIN OR OTHERWISE INTERFERE
WITH SOE’S LICENSING, PUBLISHING, MARKETING, ADVERTISING, DISTRIBUTION OR
EXPLOITATION OF THE PRODUCT AND/OR ANY RIGHTS LICENSED, ASSIGNED, TRANSFERRED OR
RESERVED TO SOE HEREUNDER
14.5 Termination by Red Mile. In the case of non-payment by SOE of either
of the payments called for in Section 7.1, Red Mile may notify SOE in writing of
SOE’s breach of SOE’s payment obligation and if such breach is not cured within
five (5) days after Red Mile gives written notice of the breach, Red Mile may
terminate this Agreement. In such case, all rights granted herein shall
immediately revert to Red Mile.
14.6 Survival. The provisions of sections 3.1(b) and 8-15, inclusive,
shall survive the expiration or termination of this Agreement.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 15
15. Miscellaneous
15.1 Notice to the parties under this Agreement shall be in writing and
sent by overnight courier, hand-delivered or mailed to the addresses below.
Notices shall take effect as of the date sent by overnight courier, of receipt
of hand delivery, or ten (10) business days after the date sent by regular mail
-- whichever comes first.
TO SOE:
TO RED MILE:
Sony Online Entertainment, Inc.
Red Mile Entertainment, Inc.
8928 Terman Court
4000 Bridgeway, Suite 101
San Diego, CA 92121
Sausalito, CA 94965
Attn: Dept. of Business & Legal Affairs
Attn: CFO
Facsimile: (858) 577-3307
Facsimile: (415) 339-4249
15.2 Force Majeure. Neither party shall be liable for any loss or damage or
be deemed to be in breach of this Agreement to the extent that performance of
such party’s obligations or attempts to cure any breach under this Agreement are
delayed or prevented as a result of any event or circumstance beyond its
reasonable control, including without limitation, war, invasion, act of foreign
enemy, hostilities, civil war or rebellion (whether war be declared or not),
strike, lockout or other industrial dispute, or act of God; then, for the
duration of such contingency, or for a period of thirty (30) days, whichever is
shorter, either party may suspend the term of this Agreement by providing
written notice to the other to such effect. If the force majeure lasts more than
thirty (30) days, and it materially impacts upon a party’s ability to perform
its obligations hereunder, the other party may terminate this Agreement for
convenience by providing to the other written notice to such effect.
15.3 No Partnership or Joint Venture. The parties hereto are independent
contractors and neither party is the legal representative, agent, joint
venturer, partner, or employee of the other party for any purpose whatsoever.
Neither party has any right or authority to assume or create any obligations of
any kind or to make any representation or warranty on behalf of the other party,
whether express or implied, or to bind the other party in any respect
whatsoever.
15.4 Limitation of Liability. EXCEPT WITH RESPECT TO THE OBLIGATION TO MAKE
THE OTHER WHOLE FOR THIRD PARTY CLAIMS PURSUANT TO SECTION 13 ABOVE, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR ITS
TERMINATION, WHETHER FOR BREACH OF WARRANTY OR ANY OBLIGATION ARISING THEREFROM
OR OTHERWISE, WHETHER LIABILITY IS ASSERTED IN CONTRACT OR TORT (INCLUDING
NEGLIGENCE AND STRICT PRODUCT LIABILITY), AND IRRESPECTIVE OF WHETHER THE
PARTIES HAVE ADVISED OR BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR
DAMAGE. EACH PARTY ACKNOWLEDGES AND AGREES THAT THE FOREGOING LIMITATIONS ARE AN
ESSENTIAL ELEMENT OF THE BARGAIN BETWEEN THE PARTIES, AND IN THEIR ABSENCE THE
ECONOMIC TERMS OF THIS AGREEMENT WOULD BE SUBSTANTIALLY DIFFERENT.
15.5 Waivers; Modifications; Cumulative Remedies. No failure or delay by
either party in exercising any right, power, or remedy under this Agreement
shall operate as a waiver of any such right, power, or remedy. No waiver or
modification of any provision of this Agreement shall be effective unless in
writing and signed by both parties. Any waiver by either party of any provision
of this Agreement shall not be construed as a waiver of any other provision of
this Agreement, nor shall such waiver operate as or be construed as a waiver of
such provision respecting any future event or circumstance. All remedies
provided for in this Agreement shall be cumulative and in addition to and not in
lieu of any other remedies available to either party at law, in equity or
otherwise.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 16
15.6 Assignment. Subject to (a) SOE’s right to subcontract as set forth in
section 3 above and (b) Red Mile’s retention of the Product Developer to perform
development services hereunder, neither party may assign its rights or delegate
its duties hereunder without the prior written approval of the other, not to be
unreasonably withheld. An assignment by SOE in a corporate reorganization within
Sony or in a merger or sale of some or all of the stock or assets of SOE or any
parent corporation of SOE shall not be deemed to be in breach of or require
approval pursuant to this section; following Final Acceptance, an assignment by
Red Mile in a corporate reorganization or in a merger or sale of some of the
stock or assets of Red Mile or any parent corporation of Red Mile shall not be
deemed to be in breach of or require approval pursuant to this section. Subject
to the foregoing, this Agreement shall bind and inure to the benefit of the
parties, and their respective successors and permitted assigns.
15.7 Governing Law, Jurisdiction and Agreement to Arbitrate. This Agreement
shall be governed by and construed under the laws of the State of California,
except with respect to conflict of law provisions. Any action or proceeding
brought to enforce the terms of this Agreement or adjudicate any dispute arising
out of this Agreement, if injunctive in nature, shall exclusively be brought in
the County of Los Angeles, State of California (if under state law) or the
Central District of California (if under Federal law); any other action or
proceeding brought to enforce the terms of this Agreement or adjudicate any
dispute arising out of this Agreement shall be resolved solely by mandatory,
confidential, binding, private arbitration exclusively brought in front of the
Judicial Arbitration and Mediation Service (“JAMS”) or Action Dispute Resolution
Services (“ADR Services”) in Los Angeles, California, in accordance with the
provisions of section 15.8 below. The parties will not raise in connection
therewith, and hereby waive, any defenses based upon the venue, the
inconvenience of the forum, the lack of personal jurisdiction, the sufficiency
of service of process or the like in any such action, suit or proceeding brought
within the State of California.
15.8 Arbitration. The parties agree that any and all disputes or
controversies of any nature between them arising at any time, excluding claims
for injunctive relief, shall be determined by binding arbitration in accordance
with the rules of JAMS or ADR before a single neutral arbitrator (“Arbitrator”).
The Arbitrator shall be an attorney or retired judge with at least ten (10)
years experience in the software industry and shall be mutually agreed upon by
the parties. If the parties are unable to agree on an Arbitrator, the Arbitrator
shall be appointed by the respective arbitration service. The fees of the
Arbitrator shall be borne equally by the parties, provided that the Arbitrator
may require that such fees be borne in such other manner as the Arbitrator
determines is required in order for this arbitration clause to be enforceable
under applicable law. The parties shall be entitled to conduct discovery in
accordance with Section 1283.05 of the California Code of Civil Procedure,
provided that (a) the Arbitrator must authorize all such discovery in advance
based on findings that the material sought is relevant to the issues in dispute
and that the nature and scope of such discovery is reasonable under the
circumstances, and (b) discovery shall be limited to depositions and production
of documents unless the Arbitrator finds that another method of discovery (e.g.,
interrogatories) is the most reasonable and cost efficient method of obtaining
the information sought. There shall be a record of the proceedings at the
arbitration hearing and the Arbitrator shall issue a Statement of Decision
setting forth the factual and legal basis for the Arbitrator’s decision. If
neither party gives written notice requesting an appeal within ten (10) business
days after the issuance of the Statement of Decision, the Arbitrator’s decision
shall be final and binding as to all matters of substance and procedure, and may
be enforced by a petition to the California Superior Court, which may be made ex
parte, for confirmation and enforcement of the award. If either party gives
written notice requesting an appeal within ten (10) business days after the
issuance of the Statement of Decision, the award of the Arbitrator shall be
appealed to three (3) neutral arbitrators (the “Appellate Arbitrators”), each of
whom shall have the same qualifications and be selected through the same
procedure as the Arbitrator. The appealing party shall file its appellate brief
within thirty (30) days after its written notice requesting the appeal and the
other party shall file its brief within thirty (30) days thereafter. The
Appellate Arbitrators shall thereupon review the decision of the Arbitrator
applying the same standards of review and all of the same presumptions) as if
the Appellate Arbitrators were a California
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 17
Court of Appeals reviewing a judgment of the California Superior Court, except
that the Appellate Arbitrators shall in all cases issue a final award and shall
not remand the matter to the Arbitrator. The decision of the Appellate
Arbitrators shall be final and binding as to all matters of substance and
procedure, and may be enforced by a petition to the California Superior Court,
which may be made ex parte, for confirmation and enforcement of the award. The
party appealing the decision of the Arbitrator shall pay all costs and expenses
of the appeal, including the fees of the Appellate Arbitrators and the
reasonable outside attorneys’ fees of the opposing party, unless the decision of
the Arbitrator is reversed, in which event the expenses of the appeal shall be
borne as determined by the Appellate Arbitrators. The Arbitrator shall have the
power to enter temporary restraining orders, preliminary and permanent
injunctions. Prior to the appointment of the Arbitrator or for remedies beyond
the jurisdiction of an arbitrator, at any time, either party may seek pendente
lite relief in a court of competent jurisdiction in Los Angeles County,
California without thereby waiving its right to arbitration of the dispute or
controversy under this section. All arbitration proceedings (including
proceedings before the Appellate Arbitrators) shall be closed to the public and
confidential and all records relating thereto shall be permanently sealed,
except as necessary to obtain court confirmation of the arbitration award. The
provisions of this paragraph shall supersede any inconsistent provisions of any
prior agreement between the parties. Nothing in this paragraph shall prevent SOE
from seeking interlocutory and/or injunctive relief from a court of competent
jurisdiction pursuant to section 15.7.
THE PARTIES HEREBY WAIVE THEIR RIGHT TO JURY TRIAL WITH RESPECT TO ALL CLAIMS
AND ISSUES ARISING OUT OF OR RELATING TO THIS AGREEMENT WHETHER SOUNDING IN
CONTRACT OR TORT, AND INCLUDING ANY CLAIM FOR FRAUDULENT INDUCEMENT THEREOF.
15.9 Severability. In the event that any provision of this Agreement (or
portion thereof) is determined by a court of competent jurisdiction to be
invalid or otherwise unenforceable, such provision (or part thereof) shall be
enforced or, if incapable of such enforcement, shall be deemed to be deleted
from this Agreement, while the remainder of this Agreement shall continue in
full force and remain in effect according to its stated terms and conditions.
15.10 Headings. The section headings used in this Agreement are for reference
and shall not determine the construction or interpretation of this Agreement or
any portion hereof.
15.11 Entire Agreement. This Agreement (together with the Schedules and
Non-Disclosure Agreement attached hereto) constitutes the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations, and
understandings between the parties, both oral and written. Notwithstanding the
foregoing, the terms and conditions of this Agreement shall supersede any other
written agreements between the parties hereto.
15.12 Contract Interpretation. Any inconsistencies, ambiguities, or conflicts
in this Agreement shall not be strictly construed against the drafter of the
language but will be resolved according to its fair meaning. In the event of any
inconsistency, ambiguity or conflict between the terms of this Agreement and any
Exhibit hereto, the terms of this Agreement shall control.
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SOE – Red Mile Co-publishing Agreement
Execution Version dated March 30, 2005
Page 18
15.13 Counterparts. This Agreement may be executed in two (2)
or more counterparts, by facsimile, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument.
15.14 Use of Name. Red Mile may not use any name, logo, trade mark or service
mark of SOE or the SONY name without SOE’s prior, written consent for each use,
which consent may be given or withheld in SOE’s sole discretion; provided,
however, that SOE shall not unreasonably withhold consent to Red Mile’s making
factual reference to SOE’s publishing of the Product on its corporate website
and in Red Mile’s future fund raising materials.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date
first above written.
RED MILE ENTERTAINMENT, INC.
SONY ONLINE ENTERTAINMENT INC.
By: Ed Roffman
By: Andrew S. Zaffron
Name: Ed Roffman
Andrew S. Zaffron
Title:
CFO
SVP and General Counsel
|
Exhibit 10.1
EMPLOYMENT AGREEMENT BETWEEN ASAHI TEC CORPORATION AND TIMOTHY LEULIETTE
This Agreement is made by and between Asahi Tec Corporation, a Japanese
corporation (“Company”), and Timothy D. Leuliette (“Executive”), effective as of
the Effective Time (as defined in the Agreement and Plan of Merger, dated as of
August 31, 2006, among Company, Argon Acquisition Corp. and Metaldyne
Corporation ("Metaldyne") (the “Merger Agreement”)) (hereinafter, the “Effective
Date”). This Agreement replaces and supercedes the Employment Agreement between
Metaldyne and Executive with an Effective Date of January 1, 2001, as amended
July 31, 2003, March 31, 2004, September 10, 2004, and February 9, 2006 (as so
amended, the “Original Employment Agreement”). In order to induce Executive to
be employed as described herein, Company enters into this Agreement with
Executive to set out the terms and conditions that will apply to Executive’s
employment. Executive is willing to accept such employment and assignment and to
perform services on the terms and conditions hereinafter set forth. It is
therefore hereby agreed by and between the parties as follows:
SECTION 1. Employment and Directorship. (a) Company agrees to (i) employ
Executive, and shall appoint Executive, as its Co-Chairman and Co-Chief
Executive Officer (for clarification, such position shall be shikko-yaku
(executive officer) under the Japanese Corporation Act), (ii) cause Metaldyne to
continue to employ Executive as President and Chief Executive Officer of
Metaldyne and (iii) appoint Executive as a director of Company, subject to
shareholder approval. In his capacity as Co-Chairman of Company, Executive shall
be primarily responsible for establishing, together with the Board of Directors
of Company (the "Board"), strategies, business goals and other long-term plans
for the business and operations of Company and its subsidiaries (including
Metaldyne) and such other duties commensurate with his position as directed from
time to time by the Board, except that the other Co-Chairman of Company shall be
primarily responsible for matters relating to technology and research and
development and shall participate in matters relating to sales efforts on key
global accounts. In his capacity as Co-Chief Executive Officer of Company and as
President and Chief Executive Officer of Metaldyne, Executive shall be
responsible for the day-to-day management and operations of Metaldyne and its
subsidiaries and their businesses and such other duties commensurate with his
position as directed from time to time by the Board. In each capacity, Executive
shall report to the Board. Executive accepts employment in accordance with this
Agreement and agrees to devote his full business time and efforts to the
performance of his duties and responsibilities hereunder, subject at all times
to review and control of the Board; provided that Company hereby acknowledges
that Executive will enter into an agreement with RHJ International, S.A. or one
of its affiliates ("RHJI") to provide services to RHJI as an industrial partner
and Company agrees that Executive shall be permitted under this Agreement to
provide such services to RHJI and that the provision of such services shall not
constitute Cause (as defined below) or violate any provision of this Agreement.
During the Term of Employment (as defined below), Executive also agrees to
serve, if elected, as an officer or director, or both, of Company or any
subsidiary, limited liability company or other
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business entity of which Company or Metaldyne holds at least a fifty percent
(50%) ownership interest, without the payment of any additional compensation
therefor, provided that if Executive serves as an officer or director of Company
or any such subsidiary, limited liability company or other business entity,
Executive shall be entitled to the same director and officer liability
protections as the other officers or directors, as applicable, of Company or
such subsidiary, limited liability company or other business entity.
(b) Nothing in this Agreement shall preclude Executive from engaging in
charitable and community affairs, from managing any passive investment (i.e., an
investment with respect to which Executive is in no way involved with the
management or operation of the entity in which Executive has invested) made by
him in publicly traded equity securities or other property (provided that no
such investment may exceed five percent (5%) of the equity of any entity,
without the prior approval of the Board) or from serving, subject to the prior
approval of the Board, as a member of boards of directors or as a trustee of any
other corporation, association or entity, to the extent that any of the above
activities do not conflict with any provision of this Agreement.
(c) During the Term of Employment, Executive's principal place of employment
shall be at such location or locations as determined from time to time by
agreement of the Board and Executive, consistent with the needs of Company and
Metaldyne and as required in connection with the performance of Executive's
duties and responsibilities hereunder; provided that Executive may be required
to spend up to 50% of his business time in Japan as required in connection with
the performance of his duties and responsibilities; provided, however, that
Executive shall not be required to establish a permanent residence in Japan.
Executive acknowledges that his duties and responsibilities hereunder shall
require him to travel on business, including to Japan, to the extent necessary
to perform such duties and responsibilities.
(d) Effective as of the Effective Time, this Agreement shall become effective
and the parties hereto shall be bound hereby and the Original Employment
Agreement shall terminate and have no further force or effect. Without limiting
the generality of the foregoing, Executive shall not be entitled to, and Company
and Metaldyne shall have no obligation to provide, any payments, benefits,
gross-ups or other entitlements pursuant to Sections 6(d) or 8 of the Original
Employment Agreement.
(e) For the avoidance of doubt, Executive acknowledges and agrees that, during
the Term of Employment, he is not an “employee” of Company for purposes of the
Labor Standard Law of Japan and as such he does not have the rights of an
“employee” for purposes of the Labor Standard Law of Japan.
SECTION 2. Term of Employment. The term of Executive's employment under this
Agreement (“Term of Employment”) shall commence on the Effective Date and,
subject to the terms hereof, shall terminate on the earlier of the fifth
anniversary of the Effective Date (“Initial Period”) and the date that either
party terminates Executive’s employment under this Agreement; provided that the
Term of Employment shall automatically renew on the fifth anniversary of the
Effective Date and on each
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subsequent anniversary thereof for one year (“Renewal Period”), unless either
party terminates Executive's employment or Company delivers to Executive or
Executive delivers to Company written notice at least 180 days in advance of the
expiration of the Initial Period or any Renewal Period that the Term of
Employment shall not be extended, in which case the Term of Employment shall end
at the end of the Initial Period or the Renewal Period in which such notice was
delivered and shall not be further extended except by written agreement of
Company and Executive. The expiration of the Term of Employment under this
Agreement shall not be a termination of this Agreement to the extent that other
provisions of this Agreement by their terms survive the Term of Employment. At
the expiration of the Term of Employment, Executive shall resign from all
employment and director positions with Company, Metaldyne and their subsidiaries
and affiliates, unless otherwise requested by Company.
SECTION 3. Compensation.
(a) Salary. As of the Effective Date, Company shall pay Executive, for all
services rendered hereunder, at the rate of One Million Five Hundred Thousand
Dollars ($1,500,000) per annum (“Base Salary”). Base Salary shall be payable in
accordance with the ordinary payroll practices of Company and shall be subject
to all applicable federal, state and local withholding and reporting
requirements.
(b) Metaldyne Annual Value Creation Plan (“AVCP”). During the Term of
Employment, Executive shall continue to be eligible to participate in the AVCP,
a copy of which has been provided to Executive, subject to all the terms and
conditions of such plan, as such plan may be modified from time to time. For
purposes of the 2006 AVCP, Executive’s award shall be subject to the terms of
any communication previously provided by Metaldyne to Executive regarding
Executive’s participation in the AVCP. For purposes of the AVCP for Company’s
subsequent fiscal years, Executive’s target bonus opportunity shall be 100% of
Base Salary, which shall be payable based on achievement of a consolidated
business plan that reflects both Company’s and Metaldyne’s performance, subject
to such other terms and conditions as the Board may establish from time to time.
(c) Special Bonus. On the Effective Date, Company shall pay Executive a
one-time bonus consisting of (i) $2,000,000 in cash and (ii) a number of fully
vested shares of common stock of Company with an aggregate value of $2,000,000,
based on the Purchase Price (as defined in the Parent Stock Purchase Agreement
(as defined in the Merger Agreement)). Executive shall be responsible for the
payment of all taxes required to be deducted or withheld or otherwise paid with
respect to such bonus.
SECTION 4. Employee Benefits.
(a) Employee Retirement Benefit Programs, Welfare Benefit Programs, Plans and
Practices. Company and Metaldyne shall provide Executive with retirement and
welfare benefits that are commensurate with the benefits that are provided on
the date of this agreement.
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(b) Vacation. During the Term of Employment, Executive shall be entitled to
twenty (20) business days of paid vacation each calendar year, which shall be
taken at such times as are consistent with Executive’s responsibilities
hereunder. Vacation days shall be subject to Company’s and Metaldyne's general
policies regarding vacation days, as such policies may be modified from time to
time.
(c) Perquisites. During Metaldyne’s 2006 fiscal year and, subject to review
and approval by the Compensation Committee of the Board (the “Compensation
Committee”), during the remainder of the Term of Employment, Company or
Metaldyne shall provide Executive (i) the annual costs of a country club
membership in the Detroit area; (ii) tax preparation and financial planning
assistance; (iii) an annual physical examination; (iv) participation in
Metaldyne’s Executive Vehicle Program, as such program exists on the date of
this Agreement; (v) use of a corporate chartered aircraft; (vi) life insurance
coverage equal to two and one-half (2-1/2) times Base Salary; and (vii)
long-term disability insurance coverage. Executive acknowledges that some
portion of his benefits or his personal use of perquisites will represent
additional personal income to him and will be reported to him as such.
(d) Stock Options. All stock options with respect to Metaldyne stock that
Executive holds as of the Effective Date shall be treated in the manner provided
in the Merger Agreement; provided that Executive acknowledges and agrees that
(i) each of his Metaldyne Options will, in accordance with the Merger Agreement
and the terms of the 2001 Long Term Equity Incentive Plan, be converted on the
Effective Date into a right to receive the excess, if any, of the Common Merger
Consideration (as defined in the Merger Agreement) over the exercise price per
share of Metaldyne common stock subject to such Metaldyne Option, and (ii) both
before and after the adjustment of the exercise price of each of his Metaldyne
Options to reflect the decrease in the fair market value of Metaldyne common
stock as a result of the distribution of all the TriMas shares held by Metaldyne
to its shareholders, as provided for in the Merger Agreement, the excess
referred to in clause 4(d)(i) will be $0. Accordingly, Executive agrees that,
contingent on the Closing (as defined in the Merger Agreement) and effective on
the Effective Date, each of his Metaldyne Options will be cancelled and
Executive will not, at any time, be entitled to any payment in respect of, or
arising out of, such cancellation and he will not otherwise have any right or
claim relating in any way to, or arising out of, any of his Metaldyne Options.
In addition, on the Effective Date, Executive shall be granted stock options
with respect to Company common stock in an amount and subject to the terms set
forth in the Merger Agreement and the schedules thereto.
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SECTION 5. Expenses. Subject to prevailing Company policy or such guidelines
as may be established by the Board, Company will reimburse Executive for all
reasonable expenses incurred by Executive in carrying out his duties.
SECTION 6. Termination of Employment. Executive’s employment during or after
the Term of Employment shall be terminable at will by either party at any time
for any reason; provided that any termination of employment, whether by Company
or Executive, shall apply to Executive's employment with both Company and
Metaldyne.
(a) Termination Without Cause or for Good Reason. If Executive’s employment is
terminated during the Term of Employment (i) by Company for any reason other
than Cause (as defined in Section 6(c) hereof), Disability (as defined in
Section 6(d) hereof) or death or (ii) by Executive for Good Reason (as defined
in Section 6(a)(ii) hereof) on or after the first anniversary of the Effective
Date, then, in each case, Company shall pay Executive the Severance Package. A
termination by Executive without Good Reason, or with Good Reason prior to the
first anniversary of the Effective Date, shall be deemed to be a termination
under Section 6(b) below and not a termination under this Section 6(a).
(i) For purposes of this Agreement, “Severance Package” shall mean:
(A) Base Salary continuation for twenty-four (24) months (the “Severance
Period”) at Executive’s annual Base Salary rate in effect on the date of
termination, subject to all applicable federal, state and local withholding and
reporting requirements. These salary continuation payments shall be paid in
accordance with usual Company payroll practices;
(B) A bonus equal to two hundred percent (200%) of the target bonus
opportunity under AVCP, payable in equal installments over the Severance Period,
subject to the same withholding and reporting requirements described in Section
6(a)(i)(A). In addition, Executive shall receive the bonus for the most recently
completed bonus term if a bonus has been earned and declared for such term but
not paid, which bonus shall be paid in accordance with customary practices for
payment of bonuses under AVCP;
(C) Continuation of benefits under any life, group health, and dental
insurance benefits substantially similar to those which Executive was receiving
immediately prior to termination of employment until the earlier of:
(1) the end of the Severance Period and
(2) the date on which Executive becomes eligible to receive any benefits under
any plan or program of any other employer.
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The continuing coverage provided under this Section 6(a)(i)(C) is subject to
Executive’s eligibility to participate in such plans and all other terms and
conditions of such plans, including Company’s and Metaldyne's ability to modify
or terminate such plans or coverages. Company may satisfy this obligation in
whole or in part by paying the premium otherwise payable by Executive for
continuing coverage under Section 601 et seq. of the Employee Retirement Income
Security Act of 1974, as it may be amended or replaced from time to time, or
under any similar provision of non-United States law. If Executive is not
eligible for continued coverage under one of the benefit plans noted in this
paragraph (C) that he was participating in during his employment, Company shall
pay Executive the cash equivalent of the insurance cost for the duration of the
applicable period at the rate of Company’s or Metaldyne's cost of coverage for
Executive’s benefits as of the date of termination. Any obligation to pay the
cash equivalent of such cost under this item may be settled, at Company’s
discretion, by a lump-sum payment of any remaining premiums; and
(D) If Executive’s employment is terminated under this subsection, Company
shall pay to Executive a lump sum in the amount of his account under the Simpson
Industries Deferred Compensation Plan, or any successor plan to that plan,
whether vested or unvested, reduced by the amount of any benefits paid or
payable to Executive out of such plan on account of such termination.
(ii) For purposes of this Agreement, a termination of employment by Executive
for “Good Reason” shall be a termination by Executive following the occurrence
of any of the following events unless Company has cured as provided below:
(A) Removal from the position of Co-Chairman or Co-Chief Executive Officer of
Company or President or Chief Executive Officer of Metaldyne (other than as a
result of a promotion or a change in position which is not material);
(B) Any material and permanent diminution in Executive’s duties or
responsibilities hereunder as set forth in Section 1(a);
(C) A material reduction in the aggregate value of Base Salary or bonus
opportunity or a material and permanent reduction in the aggregate value of
other benefits provided to Executive by Company and Metaldyne; or
(D) A permanent reassignment of Executive, without his advance written
consent, to another primary office, or a relocation of the office that is
Executive’s primary office as of the Effective Date, unless Executive’s primary
office following such reassignment or relocation is within a thirty-
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five (35) mile radius of Executive’s primary office before the reassignment or
relocation or Executive’s permanent residence on the date of the reassignment or
relocation; provided that no such reassignment or relocation shall be deemed to
have occurred as a result of Executive's travel to and from, or provision of
services in, Japan in accordance with Section 1(c).
Executive must notify Company of any event constituting Good Reason within one
hundred twenty (120) days after Executive becomes aware of such event or such
event shall not constitute Good Reason for purposes of this Agreement, provided
that Company shall have fifteen (15) days from the date of such notice to cure
the Good Reason event. Executive cannot terminate his employment for Good Reason
if Cause exists at the time of such termination. A termination by Executive
following cure shall not be a termination for Good Reason. A failure of
Executive to notify Company after the first occurrence of an event constituting
Good Reason shall not preclude any subsequent occurrences of such event (or
similar event) from constituting Good Reason.
(b) Voluntary Termination by Executive; Nonrenewal of Agreement. If Executive
terminates his employment with Company without Good Reason during or after the
Term of Employment (or with Good Reason prior to the first anniversary of the
Effective Date), or if the Term of Employment expires following notice of
nonrenewal by either party under Section 2, then Company shall pay Executive his
accrued unpaid Base Salary through the date of termination and the AVCP award
for the most recently completed year if an award has been earned and declared
for such year but not paid. The accrued unpaid Base Salary amounts payable under
this Section 6(b) shall be payable in a lump sum within ten (10) days of
termination of employment. Any accrued unpaid bonus amounts payable under this
Section 6(b) shall be payable in accordance with customary practices for payment
of bonuses under AVCP. No prorated bonus for the year of termination shall be
paid. Any other benefits under other plans and programs of Company or Metaldyne
in which Executive is participating at the time of Executive’s termination of
employment shall be paid, distributed or settled, or shall expire, in each case
in accordance with their terms, and Company and Metaldyne shall have no further
obligations hereunder with respect to Executive following the date of
termination of employment.
(c) Termination for Cause. If Executive’s employment is terminated for Cause,
Company shall pay Executive his accrued but unpaid Base Salary through the date
of the termination of employment, and no further payments or benefits shall be
owed. The accrued unpaid Base Salary amounts payable under this Section 6(c)
shall be payable in a lump sum within ten (10) days of termination of
employment. As used herein, the term “Cause” shall be limited to:
(i) Executive’s conviction of or plea of guilty or nolo contendere to a crime
constituting a felony under the laws of the United States or any state thereof,
a crime under Japanese law with respect to which imprisonment is the
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minimum prescribed penalty or any similar crime in any other jurisdiction in
which Company or Metaldyne conducts business;
(ii) Executive’s willful misconduct in the performance of his duties
hereunder;
(iii) Executive’s willful and continued failure to follow the reasonable and
lawful instructions of the Board; or
(iv) Executive’s willful and/or continued neglect of duties (other than any
such neglect resulting from incapacity of Executive due to physical or mental
illness);
provided, however, that Cause shall arise under items (iii) or (iv) only
following ten (10) days' written notice thereof from Company which specifically
identifies such failure or neglect and the continuance of such failure or
neglect during such notice period. Any failure by Company to notify Executive
after the first occurrence of an event constituting Cause shall not preclude any
subsequent occurrences of such event (or a similar event) from constituting
Cause.
(d) Disability. In the event that Executive is unable to perform his duties
during the Term of Employment on account of a disability which continues for one
hundred eighty (180) consecutive days or more, or for an aggregate of one
hundred eighty (180) days in any period of twelve (12) months, Company may, in
its discretion, terminate Executive’s employment hereunder. Company’s obligation
to make payments under this Agreement shall, except for earned but unpaid Base
Salary and earned and declared but unpaid AVCP awards and the payment described
in the next sentence, cease on the first to occur of (i) the date that is six
(6) months after such termination or (ii) the date Executive becomes entitled to
benefits under a long-term disability program of Company or Metaldyne. If
Executive’s employment is terminated under this subsection, Company shall pay to
Executive a lump sum in the amount of his account under the Simpson Industries
Deferred Compensation Plan, or any successor plan to that plan, whether vested
or unvested, reduced by the amount of any benefits paid or payable to Executive
out of such plan on account of such termination. For purposes of this Agreement,
“Disability” shall be defined by the terms of Metaldyne’s long-term disability
policy, or, in the absence of such policy, as a physical or mental disability
that prevents Executive from performing substantially all of his duties under
this Agreement and which is expected to be permanent. Company may only terminate
Executive on account of Disability after giving due consideration to whether
reasonable accommodations can be made under which Executive is able to fulfill
his duties under this Agreement. The commencement date and expected duration of
any physical or mental condition that prevents Executive from performing his
duties hereunder shall be determined by a medical doctor selected by Company.
Company may, in its discretion, require written confirmation from a physician of
Disability during any extended absence.
(e) Death. In the event of Executive’s death during the Term of Employment,
all obligations of Company to make any further payments, other than an
8
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obligation to pay any accrued but unpaid Base Salary to the date of death and
any earned and declared but unpaid bonuses under AVCP to the date of death and
the payment described in the next sentence, shall terminate upon Executive’s
death. If Executive’s employment is terminated under this subsection, Company
shall pay to Executive a lump sum in the amount of his account under the Simpson
Industries Deferred Compensation Plan, or any successor plan to that plan,
whether vested or unvested, reduced by the amount of any benefits paid or
payable to Executive out of such plan on account of such termination.
(f) No Duplication of Benefits. Notwithstanding any provision of this
Agreement to the contrary, if Executive’s employment is terminated for any
reason, in no event shall Executive be eligible for payments under more than one
subsection of this Section 6.
(g) Payments Not Compensation. Any participation by Executive in, and any
terminating distributions and vested rights under, retirement or savings plans,
regardless of whether such plans are qualified or nonqualified for tax purposes,
shall be governed by the terms of those respective plans. For purposes of
determining benefits and the amounts to be paid to Executive under such plans,
any salary continuation or severance benefits other than salary or bonus accrued
before termination shall not be compensation for purposes of accruing additional
benefits under such plans.
(h) Executive’s Duty to Provide Materials. Upon the termination of Executive’s
employment for any reason, Executive or his estate shall surrender to Company
all correspondence, letters, files, contracts, mailing lists, customer lists,
advertising material, ledgers, supplies, equipment, checks and all other
materials and records of any kind that are the property of Company or any of its
subsidiaries or affiliates, that may be in Executive’s possession or under his
control, including all copies of any of the foregoing.
SECTION 7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To Company:
Asahi Tec Corporations
547-1 Horinouchi, Kikugawa City,
Shizuoka 439-8651, Japan
Fax: 81-537-36-4160
Attention: Suguru Kimura
with a copy to:
Anderson Mori & Tomotsune
Izumi Garden Tower
1-6-1, Roppongi, Minato-ku,
Tokyo 106-6036, Japan
Fax: (03) 6888-3067
Attention: Noritaka Niwano, Esq.
9
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To Executive:
Timothy D. Leuliette
[omitted]
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third (3rd) business day
after the actual date of mailing shall constitute the time at which notice was
given.
SECTION 8. Separability; Legal Fees. If any provision of this Agreement shall
be declared to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. In the event of a dispute by Company, Executive
or others as to the validity or enforceability of, or liability under, any
provision of this Agreement, Company shall reimburse Executive for all
reasonable legal fees and expenses incurred by him in connection with such
dispute if Executive substantially prevails in the dispute, but in all other
cases Executive shall be responsible for such fees and expenses.
SECTION 9. Assignment and Assumption. This contract shall be binding upon and
inure to the benefit of the heirs and representatives of Executive and the
assigns and successors of Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by Company, except that Company may assign this Agreement to any
successor (whether by merger, purchase or otherwise) to all or substantially all
of the stock, assets or business of Company.
SECTION 10. Amendment. This Agreement may only be amended by written agreement
of the parties hereto.
SECTION 11. Non-Competition; Non-Solicitation; Confidentiality. (a) Executive
represents that acceptance of employment under this Agreement and performance
under this Agreement are not in violation of any restrictions or covenants under
the terms of any other agreements to which Executive is a party.
(b) Executive acknowledges and recognizes the highly competitive nature of the
business of Company and accordingly agrees that, in consideration of this
Agreement, the rights conferred hereunder, and any payment hereunder, Executive
shall not engage, either directly or indirectly, as a principal for Executive’s
own account or jointly with others, or as a stockholder in any corporation or
joint stock association, or as a partner or member of a general or limited
liability entity, or as an employee, officer, director, agent, consultant or in
any other advisory capacity, (i) while employed by Company and for the 18-month
period following the termination of Executive’s employment for any reason
(“Non-Compete Term”), in any business (other than Company, Metaldyne or their
respective subsidiaries) which designs, develops,
10
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manufactures, distributes, sells or markets the type of products or services
sold, distributed or provided by Company, Metaldyne or any of their respective
subsidiaries during the two (2) year period prior to the date of termination of
Executive’s employment (the “Business”) or (ii) while employed by Company and
for the six-month period following the termination of Executive’s employment for
any reason, in any private equity firm (the activities described in clauses
(b)(i) and (ii), collectively, “Competitive Activities”), it being understood
that the activities and business of a private equity firm shall be deemed to
include, without limitation, researching, analyzing and evaluating portfolio
companies (including any such companies that Company, Metaldyne or any of their
respective subsidiaries have previously evaluated for possible investment by or
on behalf of Company, Metaldyne or any of their respective subsidiaries) with
the intent to acquire, make an investment in and/or dispose of such companies or
assets thereof for the benefit of Executive or any other person.
Nothing herein shall prevent Executive from owning, directly or indirectly, not
more than five percent (5%) of the outstanding shares of, or any other equity
interest in, any entity engaged in Competitive Activities and listed or traded
on a national securities exchange or in an over-the-counter securities market.
(c) During the Non-Compete Term, Executive shall not (i) directly or
indirectly employ, solicit or receive or accept the performance of services by,
any active employee of Company, Metaldyne or any of their respective
subsidiaries who is employed primarily in connection with the Business, except
in connection with general, non-targeted recruitment efforts such as
advertisements and job listings, or directly or indirectly induce any employee
of Company, Metaldyne or any of their respective subsidiaries to leave Company,
Metaldyne or any of their respective subsidiaries, or assist in any of the
foregoing, or (ii) solicit for any business that is engaged in the Business any
person who is a customer or former customer of Company, Metaldyne or any of
their respective subsidiaries, unless such person shall have ceased to have been
such a customer for a period of at least six (6) months.
(d) Executive shall not at any time (whether during or after his employment
with Company) disclose or use for Executive’s own benefit or purposes or the
benefit or purposes of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise
other than Company, Metaldyne or any of their respective subsidiaries, any trade
secrets, information, data or other confidential information of Company,
Metaldyne or any of their respective Subsidiaries, including but not limited to
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data,
financing methods, plans or the business and affairs of Company, Metaldyne or
any of their respective subsidiaries generally, unless required to do so by
applicable law or court order, subpoena or decree or otherwise required by law,
with reasonable evidence of such determination promptly provided to Company. The
preceding sentence of this paragraph (d) shall not apply to information which is
not unique to Company, Metaldyne or any of their respective subsidiaries or
which is generally known to the industry or the public other than as a result of
Executive’s breach of this covenant. Executive agrees that upon termination of
employment with Company
11
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for any reason, Executive will return to Company immediately all memoranda,
books, papers, plans, information, letters and other data, and all copies
thereof or therefrom, in any way relating to the business of Company, Metaldyne
or any of their respective subsidiaries, except that Executive may retain
personal notes, notebooks and diaries. Executive further agrees that Executive
will not retain or use for Executive’s account at any time any trade names,
trademark or other proprietary business designation used or owned in connection
with the business of Company, Metaldyne or any of their respective subsidiaries.
(e) It is expressly understood and agreed that although Executive and Company
consider the restrictions contained in this Section 11 to be reasonable, if a
final judicial determination is made by a court of competent jurisdiction that
the time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
(f) As a condition to the receipt of any benefits described in this Agreement,
Executive shall be required to execute an agreement pursuant to which Executive
releases any claims he may have against Company, Metaldyne or any of their
respective subsidiaries and agrees to the continuing enforceability of the
restrictive covenants of this Agreement.
(g) This Section 11 will survive the termination of the Term of Employment and
the termination of this Agreement.
SECTION 12. Remedies. Executive acknowledges and agrees that Company’s
remedies at law for a breach or threatened breach of any of the provisions of
Section 11 would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, Executive shall forfeit all payments otherwise due under
this Agreement and shall return any Severance Package payment made. Moreover,
Company, without posting any bond, shall be entitled to seek equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
SECTION 13. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
SECTION 14. Governing Law; Revenue and Jurisdiction. If any judicial or
administrative proceeding or claim relating to or pertaining to this Agreement
is
12
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initiated by either party hereto, such proceeding or claim shall and must be
filed in a state or federal court located in Wayne County, Michigan and such
proceeding or claim shall be governed by and construed under Michigan law,
without regard to conflict of law and principals.
SECTION 15. Dispute Resolution. Except with respect to enforcement actions
brought under Section 12, any dispute related to or arising under this Agreement
shall be resolved in accordance with the Metaldyne Dispute Resolution Policy in
effect at the time such dispute arises. The Metaldyne Dispute Resolution Policy
in effect at the time of this Agreement is attached to this Agreement.
SECTION 16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between
Company, Metaldyne, any affiliate of Company or Metaldyne, any predecessor of
Company or Metaldyne or any affiliate of any such predecessor and Executive,
including the Original Employment Agreement; provided that this Agreement shall
have no force or effect, and the Original Employment Agreement shall remain in
effect, unless and until the Effective Time occurs.
SECTION 17. Withholding. Company shall be entitled to withhold from payment
any amount of withholding required by law.
SECTION 18. Section Headings and Construction. The headings of sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to “Section” or “Sections” refer
to the corresponding section or sections of this Agreement unless otherwise
specified. All words used in this Agreement will be construed to be of such
gender or number as circumstances require.
SECTION 19. Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same Agreement.
13
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Intending to be legally bound hereby, the parties have executed this Agreement
on the dates set forth next to their names below.
August 31, 2006
ASAHI TEC CORPORATION,
by /s/ Akira Nakamura
Name: Akira Nakamura
Title: President and Chief Executive Officer
August 31, 2006
TIMOTHY D. LEULIETTE,
by /s/ Timothy D. Leuliette
|
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Date: March 3, 2006
To: RAMP Series 2006-RS2 Trust, acting through JPMorgan Chase Bank,
N.A.,
not in its individual capacity but solely in its capacity as
Trustee for the benefit of the RAMP Series 2006-RS2 Trust
600 Travis, 9th Floor
Houston, TX 77002
Attention: Joanne Murray
Tel: (713) 216-2117
Facsimile no.: (713) 216-4880
Cc: Michael Scarseth
Facsimile no: (952) 921-9133
Our Reference: Global No. N453262N
Re: Interest Rate Cap Transaction
Ladies and Gentlemen:
The purpose of this letter agreement is to set forth the terms and conditions of the
Transaction entered into between Deutsche Bank AG ("DBAG") and RAMP Series 2006-RS2
Trust, acting through JPMorgan Chase Bank, N.A., not in its individual capacity, but
solely as Trustee for the benefit of RAMP Series 2006-RS2 Trust ("Counterparty") on
the Trade Date specified below (the "Transaction"). This letter agreement constitutes
a "Confirmation" as referred to in the Agreement specified below.
The definitions and provisions contained in the 2000 ISDA Definitions (the
"Definitions") as published by the International Swaps and Derivatives Association,
Inc. are incorporated by reference herein. In the event of any inconsistency between
the Definitions and this Confirmation, this Confirmation will govern. For purposes of
this Transaction, any capitalized and undefined terms contained herein (other than the
capitalized terms the definitions of which are contained in the Definitions) shall
have the meanings ascribed to them in the Pooling and Servicing Agreement dated as of
February 1, 2006 (the "Pooling and Servicing Agreement") relating to the RAMP Series
2006-RS2 Trust Mortgage Asset-Backed Pass-Through Certificates, Series 2006-RS2, which
is hereby incorporated by reference into this Confirmation.
1. This Confirmation evidences a complete and binding agreement between DBAG ("Party
A") and Counterparty ("Party B") as to the terms of the Transaction to which this
Confirmation relates. This Confirmation, together with all other documents
referring to the ISDA Form, as defined below, confirming the Transaction entered
into between us shall supplement, form a part of, and be subject to an agreement
in the form of the 1992 ISDA Master Agreement (Multicurrency-Cross Border) (the
"ISDA Form") (as may be amended, modified or supplemented from time to time, the
"Agreement") as if we had executed an agreement on the Trade Date of the first such
Transaction between us in such form, with the Schedule thereto specifying only
that (a) the governing law is the laws of the State of New York, without reference
to choice of law doctrine, and (b) the Termination Currency is U.S. Dollars. In
the event of any inconsistency between the terms of this Confirmation, and the
terms of the Agreement, this Confirmation will prevail for the purpose of this
Transaction.
2. The terms of the particular Transaction to which this Confirmation relates are as
follows:-
Notional Amount: With respect to any Calculation Period, the
lesser of:
(i) as set forth in Exhibit I, which is attached hereto and incorporated by
reference into this Confirmation,
and
(ii) The outstanding principal balance of the Class A Certificates, and Class M
Certificates immediately prior to
the last day of such calculation
period
Trade Date: February 24, 2006
Effective Date: March 3, 2006
Termination Date: February 25, 2011, subject to adjustment in
accordance with the Following Business Day
Convention.
Fixed Amounts:
Fixed Amount Payer: Counterparty
Fixed Amount Payer
Payment Date: March 3, 2006
Fixed Amount: USD 10,640,000
Floating Amounts:
Floating Rate Payer: DBAG
Cap Rate: 4.57 percent
Floating Rate Payer
Period End Dates: The 25th day of each month of each year,
commencing March 25, 2006, through and
including the Termination Date, subject to
adjustment in accordance with the Following
Business Day Convention.
Floating Rate Payer
Payment Dates: Two Business Days prior to each Floating
Rate Payer Period End Date, subject to
adjustment in accordance with the Following
Business Day Convention.
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One month
Spread: None
Floating Rate Day
Count Fraction: Actual/360
Floating Rate for initial
Calculation Period: To be determined
Reset Dates: The first Business Day in each Calculation
Period.
Compounding: Inapplicable
Business Days: New York
Administration Fee: Counterparty agrees to pay USD 26,000 to
DBAG for value on the Effective Date
--------------------------------------------------------------------------------
3. ACCOUNT DETAILS:
USD DBAG Payment Instructions:
Account With: DB Trust Co. Americas, New York
SWIFT Code BKTRUS33
Favor Of: Deutsche Bank AG, New York
Account Number: 01 473 969
Reference: N453262N
f
USD Counterparty Payment Instructions:
Account With: JPMorgan Chase Bank, National
Association.
ABA No: 021000021
Account Number: 00103409232
(Texas Structured Finance)
Reference: RAMP Series 2006-RS2
Attention: Joanne M. Murray
4. OFFICES:
The Office for DBAG for this Transaction is New York.
The Office of Counterparty for this Transaction is Houston, TX
5. CALCULATION AGENT: DBAG
6. REPRESENTATIONS.
Each party will be deemed to represent to the other party on the date on which it
enters into this Transaction that (absent a written agreement between the parties that
expressly imposes affirmative obligations to the contrary for this Transaction):-
(i) NON-RELIANCE. It is acting for its own account, and it has made its own
independent decisions to enter into this Transaction and as to whether this
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisers as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment advice or as a
recommendation to enter into this Transaction; it being understood that information
and explanations related to the terms and conditions of this Transaction shall not be
considered investment advice or a recommendation to enter into this Transaction. No
communication (written or oral) received from the other party shall be deemed to be an
assurance or guarantee as to the expected results of this Transaction.
Notwithstanding the foregoing, the parties agree that the JPMorgan Chase Bank, N.A.
has executed this letter agreement pursuant to the direction received by it pursuant
to the Pooling and Servicing Agreement.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks of this Transaction. It is
also capable of assuming, and assumes, the risks of this Transaction. Notwithstanding
the foregoing, the parties agree that the JPMorgan Chase Bank, N.A. has executed this
letter agreement pursuant to the direction received by it pursuant to the Pooling and
Servicing Agreement.
(iii) STATUS OF PARTIES. The other party is not acting as a fiduciary for, or an
adviser to it in respect of this Transaction.
7. ISDA FORM.
(a) "Specified Entity" means, in relation to DBAG, for the purpose of
Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii) and Section 5(b)(iv): Not
Applicable.
(b) "Specified Entity" means, in relation to the Counterparty, for the
purpose of Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii) and Section 5(b)(iv):
Not Applicable.
(c) "Specified Transaction" will have the meaning specified in Section 14
of the ISDA Form.
(d) Sections 5(a)(ii) through 5(a)(vi), Section 5(a)(vii)(2) and Sections 5(b)(ii)
and 5(b)(iii) of the ISDA Form will not apply to DBAG or the Counterparty.
(e) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) of the
ISDA Form will not apply to DBAG or the Counterparty.
(f) The "Automatic Early Termination" provision of Section 6(a) of the ISDA
Form will not apply to DBAG or the Counterparty.
(g) The ISDA Form will be governed by, and construed in accordance with,
the laws of the State of New York without reference to its conflict of laws provisions
(except for Sections 5-1401 and 5-1402 of the New York General Obligations Law).
(h) The phrase "Termination Currency" means United States Dollars.
(i) For the purpose of Section 6(e) of the ISDA Form, Market Quotation and
Second Method will apply.
(j) Section 12(a)(ii) of the ISDA Form is deleted in its entirety.
(k) Party A may assign or transfer its rights and obligations hereunder to
any entity so long as the Rating Agency Condition is satisfied. This Transaction
shall not be amended or modified pursuant to Section 9(b) of the ISDA Form unless the
Rating Agency Condition is satisfied.
(l) Notwithstanding any provision of this Transaction or any other existing
or future agreement, each party irrevocably waives any and all rights it may have to
set off, net, recoup or otherwise withhold or suspend or condition payment or
performance of any obligation between it and the other party hereunder against any
obligation between it and the other party under any other agreements. The provisions
for Set-off set forth in Section 6(e) of the Agreement shall not apply for purposes of
this Transaction.
8. LIMITATION OF LIABILITY.
Notwithstanding anything herein to the contrary, it is expressly understood and
agreed by the parties hereto that (a) this letter agreement is executed and delivered
by JPMorgan Chase Bank, N.A. ("JPMorgan"), not individually or personally, but solely
as Trustee of the RAMP Series 2006-RS2 Trust, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations, undertakings
and agreements herein made on the part of the RAMP Series 2006-RS2 Trust is made and
intended not as personal representations, undertakings and agreements by JPMorgan but
is made and intended for the purpose of binding only the RAMP Series 2006-RS2 Trust,
(c) nothing herein contained shall be construed as creating any liability on JPMorgan,
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto; provided
that nothing in this paragraph shall relieve JPMorgan from performing its duties and
obligations under the Pooling and Servicing Agreement in accordance with the standard
of care set forth therein, and (d) under no circumstances shall JPMorgan be personally
liable for the payment of any indebtedness or expenses of the RAMP Series 2006-RS2
Trust or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the RAMP Series 2006-RS2 Trust under this
letter agreement or any other related documents.
9. ADDITIONAL PROVISIONS.
Downgrade of Party A. If a Ratings Event (as defined below) shall occur and be
continuing with respect to Party A, then Party A shall (A) within 5 Business Days of
such Ratings Event, give notice to Party B of the occurrence of such Ratings Event,
and (B) use reasonable efforts to transfer (at its own cost) Party A's rights and
obligations hereunder to another party, subject to satisfaction of the Rating Agency
Condition (as defined below). Unless such a transfer by Party A has occurred within
20 Business Days after the occurrence of a Ratings Event, Party A shall immediately,
at its own cost, post Eligible Collateral (as designated in the approved Credit
Support Annex), to secure Party B's exposure or potential exposure to Party A, and
such Eligible Collateral shall be provided in accordance with a Credit Support Annex
to be attached hereto and made a part hereof. The Eligible Collateral to be posted
and the Credit Support Annex to be executed and delivered shall be subject to the
Rating Agency Condition. Valuation and posting of Eligible Collateral shall be made
weekly. Notwithstanding the addition of the Credit Support Annex and the posting of
Eligible Collateral, Party A shall continue to use reasonable efforts to transfer its
rights and obligations hereunder to an acceptable third party; provided, however, that
Party A's obligations to find a transferee and to post Eligible Collateral under such
Credit Support Annex shall remain in effect only for so long as a Ratings Event is
continuing with respect to Party A. For the purpose hereof, a "Ratings Event" shall
occur with respect to Party A if the long-term and short-term senior unsecured deposit
ratings of Party A cease to be at least A and A-1 by Standard & Poor's Ratings Service
("S&P") and at least A1 and P-1 by Moody's Investors Service, Inc. ("Moody's") and at
least A and F1 by Fitch, Inc. ("Fitch"), to the extent such obligations are rated by
S&P and Moody's and Fitch.
If a Ratings Withdrawal (as defined below) shall occur and be continuing with
respect to Party A, then Party A shall within 2 Business Days of such Ratings
Withdrawal, (A) give notice to Party B of the occurrence of such Ratings Withdrawal,
and (B) (i) transfer (at its own cost) Party A's rights and obligations hereunder to
another party, subject to satisfaction of the Rating Agency Condition or (ii) obtain a
guaranty of its obligations hereunder from another party, subject to the satisfaction
of the Rating Agency Condition, and such guaranty shall remain in effect only for so
long as a Ratings Withdrawal is continuing with respect to Party A. For the purpose
hereof, a "Ratings Withdrawal" shall occur with respect to Party A if the long-term
and short-term senior unsecured deposit ratings of Party A are withdrawn by S&P or
cease to be at least A-3 and BBB- by S&P.
"Rating Agency Condition" means, with respect to any action taken or to be
taken, a condition that is satisfied when S&P, Moody's and Fitch have confirmed in
writing that such action would not result in the downgrade, qualification (if
applicable) or withdrawal of the rating then assigned by such Rating Agency to the
Certificates.
10. ADDITIONAL TERMINATION EVENT.
The failure by Party A to post Eligible Collateral in accordance with Section 9
hereof or to transfer its rights and obligations hereunder in accordance with Section
9 shall constitute an Additional Termination Event for which Party A shall be the sole
Affected Party.
11. NON-PETITION.
DBAG hereby irrevocably and unconditionally agrees that it will not institute
against, or join any other person in instituting against or cause any other person to
institute against the Counterparty, any bankruptcy, reorganization, arrangement,
insolvency, or similar proceeding under the laws of the United States, or any other
jurisdiction for the non-payment of any amount due hereunder or any other reason until
the payment in full of the certificates issued by the Counterparty under the Pooling
and Servicing Agreement and the expiration of a period of one year plus ten days (or,
if longer, the applicable preference period) following such payment.
12. TAX REPRESENTATIONS.
(a) Payer Representations. For the purpose of Section 3(e) of the ISDA Agreement,
Party A and Party B will make the following representations:
It is not required by any applicable law, as modified by the practice of any
relevant governmental revenue authority, of any Relevant Jurisdiction to make
any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e) of the Agreement) to
be made by it to the other party under this Agreement. In making this
representation, it may rely on:
(i) the accuracy of any representations made by the other party pursuant to
Section 3(f) of the Agreement;
(ii) the satisfaction of the agreement contained in Section 4(a)(iii) of the
Agreement and the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(iii) of the Agreement; and
(iii) the satisfaction of the agreement of the other party contained in
Section 4(d) of the Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other party does
not deliver a form or document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
(b) Payee Representations. For the purpose of Section 3(f) of the Agreement, each
of Party A and Party B make the following representations.
The following representation will apply to Party A:
Party A is a "foreign person" within the meaning of the applicable U.S.
Treasury Regulations concerning information reporting and backup withholding
tax (as in effect on January 1, 2001), unless Party A provides written notice
to Party B that it is no longer a foreign person. In respect of each
Transaction it enters into through an office or discretionary agent in the
United States or which otherwise is allocated for United States federal income
tax purposes to such United States trade or business, each payment received or
to be received by it under such Transaction will be effectively connected with
its conduct of a trade or business in the United States.
The following representation will apply to Party B:
JPMorgan Chase Bank, N.A. is the Trustee under the Pooling and Servicing
Agreement.
13. NON-RECOURSE PROVISIONS.
Notwithstanding anything to the contrary contained herein, none of Party B or
any of its officers, directors, or shareholders (the "Non-recourse Parties") shall be
personally liable for the payment by or on behalf of the RAMP Series 2006-RS2 Trust
hereunder, and Party A shall be limited to a proceeding against the Collateral or
against any other third party other than the Non-recourse Parties, and Party A shall
not have the right to proceed directly against the RAMP Series 2006-RS2 Trust for the
satisfaction of any monetary claim against the Non-recourse Parties or for any
deficiency judgment remaining after foreclosure of any property included in such
Collateral and following the realization of the Collateral, any claims of Party A
shall be extinguished.
14. DOCUMENTS TO BE DELIVERED. For the purpose of Section 4(a) (i) and 4(a) (iii):
(1) Tax forms, documents, or certificates to be delivered are:
--------------------------------- -------------------------- ---------------------------------------
PARTY REQUIRED TO DELIVER FORM/DOCUMENT/ DATE BY WHICH TO BE DELIVERED
DOCUMENT CERTIFICATE
--------------------------------- -------------------------- ---------------------------------------
--------------------------------- -------------------------- ---------------------------------------
Party A and Any document required or Promptly after the earlier of (i)
Party B reasonably requested to reasonable demand by either party or
allow the other party to (ii) learning that such form or
make payments under this document is required
Agreement without any
deduction or withholding
for or on the account of
any Tax or with such
deduction or withholding
at a reduced rate
--------------------------------- -------------------------- ---------------------------------------
(2) Other documents to be delivered are:
------------------------ --------------------------- ------------------------- --------------------
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION
DELIVER DOCUMENT CERTIFICATE DELIVERED 3(D) REPRESENTATION
------------------------ --------------------------- ------------------------- --------------------
------------------------ --------------------------- ------------------------- --------------------
Party A and Party B Any documents to evidence Upon the execution and Yes
the authority of the delivery of this
delivering party for it Agreement and such
to execute and deliver Confirmation.
this Confirmation.
------------------------ --------------------------- ------------------------- --------------------
------------------------ --------------------------- ------------------------- --------------------
Party A and Party B A certificate of an Upon the execution and Yes
authorized officer of the delivery of this
party, as to the Confirmation.
incumbency and authority
of the respective
officers of the party
signing this Confirmation.
------------------------ --------------------------- ------------------------- --------------------
------------------------ --------------------------- ------------------------- --------------------
Party A Legal opinion(s) with Within 5 Local Business No
respect to such party and Days of execution hereof
its Credit Support
Provider, if any, for it,
reasonably satisfactory in
form and substance to the
other party relating to the
enforceability of the
party's obligations under
this Agreement.
------------------------ --------------------------- ------------------------- --------------------
------------------------ --------------------------- ------------------------- --------------------
Party A A copy of the most recent To be made available on Yes
annual report of such www.deutsche-bank.de/ir/en/
party (only if available) as soon as available
and its Credit Support and in any event within
Provider, if any, 90 days after the end
containing in all cases of each fiscal year of
audited consolidated Party A
financial statements for
each fiscal year
certified by independent
certified public
accountants and prepared
in accordance with
generally accepted
accounting principles in
the United States or in
the country in which such
party is organized.
------------------------ --------------------------- ------------------------- --------------------
------------------------ --------------------------- ------------------------- --------------------
Party B Each other report or Promptly upon request Yes
other document required by Party A, or with
to be delivered by or to respect to any
Party B under the terms particular type of
of the Pooling and report or other
Servicing Agreement, document as to which
other than those required Party A has previously
to be delivered directly made request to receive
by the Trustee to Party A all reports or
thereunder. documents of that type,
promptly upon delivery
or receipt of such
report or document by
Party B.
------------------------ --------------------------- ------------------------- --------------------
15. WAIVER OF RIGHT TO TRIAL BY JURY.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH
RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS TRANSACTION.
16. ELIGIBLE CONTRACT PARTICIPANT.
Each party represents to the other party that it is an "eligible contract
participant" as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as
amended.
17. NOTICE BY FACSIMILE TRANSMISSION.
Section 12(a) of the ISDA Form is hereby amended by deleting the parenthetical
"(except that a notice or other communication under Section 5 or 6 may not be given by
facsimile transmission or electronic messaging system)."
18. FULLY-PAID PARTY PROTECTED.
Notwithstanding the terms of Sections 5 and 6 of the ISDA Form, if Party B has
satisfied its payment obligations under Section 2(a)(i) of the ISDA Form, then unless
Party A is required pursuant to appropriate proceedings to return to Party B or
otherwise returns to Party B upon demand of Party B any portion of such payment, the
occurrence of an event described in Section 5(a) of the ISDA Form with respect to
Party B with respect to this Transaction shall not constitute an Event of Default or
Potential Event of Default with respect to Party B as the Defaulting Party. For
purposes of the Transaction to which this letter agreement relates, Party B's only
payment obligation under Section 2(a)(i) of the ISDA Form is to pay the Fixed Amount
on the Fixed Amount Payer Payment Date.
--------------------------------------------------------------------------------
Please confirm that the foregoing correctly sets forth the terms and conditions of our
agreement by returning an executed copy of this letter agreement to the attention of
Derivative Documents via facsimile to 44 20 7545 9761, or via e-mail to
Derivative.Documentation@db.com.
Yours sincerely,
DEUTSCHE AG, NEW YORK BRANCH
By: /s/ Gaby Bolton
Name: Gaby Bolton
Title: Authorized Signatory
By: /s/ Jamie Hunt
Name: Jamie Hunt
Title: Authorized Signatory
Confirmed as of the date above:
RAMP SERIES 2006-RS2 TRUST
By: JPMorgan Chase Bank, N.A. not in its individual capacity
but solely in its capacity as Trustee for the benefit of the
RAMP Series 2006-RS2 Trust
By: /s/ Joanne Murray
Name: Joanne Murray
Title: Assistant Vice President
--------------------------------------------------------------------------------
EXHIBIT I
With respect to calculating a Floating Amount for any Calculation Period falling
within the periods set forth below, the Notional Amount and Cap Rate shall be the
amount set forth opposite the relevant period and underneath the caption Notional
Amount and Cap Rate, as follows:
FROM AND INCLUDING* TO BUT EXCLUDING* NOTIONAL AMOUNT (USD)
Effective Date 25-Mar-06 785,601,000
25-Mar-06 25-Apr-06 779,160,212
25-Apr-06 25-May-06 770,651,747
25-May-06 25-Jun-06 760,083,215
25-Jun-06 25-Jul-06 747,454,087
25-Jul-06 25-Aug-06 732,796,666
25-Aug-06 25-Sep-06 716,180,225
25-Sep-06 25-Oct-06 697,664,371
25-Oct-06 25-Nov-06 677,334,155
25-Nov-06 25-Dec-06 656,090,989
25-Dec-06 25-Jan-07 634,203,918
25-Jan-07 25-Feb-07 613,032,640
25-Feb-07 25-Mar-07 592,584,171
25-Mar-07 25-Apr-07 572,832,818
25-Apr-07 25-May-07 553,753,914
25-May-07 25-Jun-07 535,298,459
25-Jun-07 25-Jul-07 517,471,775
25-Jul-07 25-Aug-07 500,251,514
25-Aug-07 25-Sep-07 483,584,174
25-Sep-07 25-Oct-07 467,154,902
25-Oct-07 25-Nov-07 450,031,793
25-Nov-07 25-Dec-07 425,259,708
25-Dec-07 25-Jan-08 401,945,811
25-Jan-08 25-Feb-08 380,234,104
25-Feb-08 25-Mar-08 360,134,682
25-Mar-08 25-Apr-08 342,024,698
25-Apr-08 25-May-08 329,428,825
25-May-08 25-Jun-08 317,436,020
25-Jun-08 25-Jul-08 305,905,004
25-Jul-08 25-Aug-08 294,817,029
25-Aug-08 25-Sep-08 284,153,191
25-Sep-08 25-Oct-08 273,895,985
25-Oct-08 25-Nov-08 264,028,529
25-Nov-08 25-Dec-08 254,534,751
25-Dec-08 25-Jan-09 245,400,494
25-Jan-09 25-Feb-09 236,609,759
25-Feb-09 25-Mar-09 228,148,472
25-Mar-09 25-Apr-09 225,964,660
25-Apr-09 25-May-09 218,404,806
25-May-09 25-Jun-09 211,125,303
25-Jun-09 25-Jul-09 204,114,844
25-Jul-09 25-Aug-09 197,362,516
25-Aug-09 25-Sep-09 190,857,818
25-Sep-09 25-Oct-09 184,590,916
25-Oct-09 25-Nov-09 178,552,287
25-Nov-09 25-Dec-09 172,732,815
25-Dec-09 25-Jan-10 167,123,774
25-Jan-10 25-Feb-10 161,716,809
25-Feb-10 25-Mar-10 156,503,925
25-Mar-10 25-Apr-10 151,477,458
25-Apr-10 25-May-10 146,630,074
25-May-10 25-Jun-10 141,954,746
25-Jun-10 25-Jul-10 137,444,746
25-Jul-10 25-Aug-10 133,093,630
25-Aug-10 25-Sep-10 128,895,222
25-Sep-10 25-Oct-10 124,843,606
25-Oct-10 25-Nov-10 120,933,115
25-Nov-10 25-Dec-10 117,158,317
25-Dec-10 25-Jan-11 113,514,005
25-Jan-11 Termination Date 109,995,317
* For Floating Amounts: All dates listed above (with the exception of the Effective
Date) are subject to adjustment in accordance with the Following Business Day
Convention
|
EXHIBIT 10.4
FORM OF RESTRICTED STOCK AGREEMENT
ALLIED WASTE INDUSTRIES, INC.
RESTRICTED STOCK AGREEMENT
(Under the 2006 Incentive Stock Plan)
THIS RESTRICTED STOCK AGREEMENT (“Agreement”), is dated
, 200___ (the “Grant Date”), between ALLIED WASTE
INDUSTRIES, INC., a Delaware corporation (the “Company”), and
(the “Grantee”):
R E C I T A L S:
The Company has adopted the Allied Waste Industries, Inc. 2006 Incentive
Stock Plan, as such plan may subsequently be modified, amended, or supplemented
(the “Plan”), all of the terms and provisions of which are incorporated herein
by reference and made a part of this Agreement. All capitalized terms used but
not defined in this Agreement have the meanings given to them in the Plan.
The Management Development/Compensation Committee of the Board of Directors
(the “Committee”) has determined that it is in the best interests of the Company
and its stockholders to grant to the Grantee the Restricted Stock provided for
herein as an inducement for Grantee to [continue to] serve as [an employee of][a
consultant to] the Company and to provide Grantee with a proprietary interest in
the future of the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. Grant of Restricted Stock. Subject in all respects to the terms,
conditions, and provisions of this Agreement and the Plan, the Company hereby
grants to Grantee shares of Restricted Stock (the
“Shares”).
2. Vesting.
(a) Vesting Dates. The Shares shall vest according to the following
schedule:
Number of Vesting Date Shares Vested
___/___/20___
#####
___/___/20___
#####
___/___/20___
#####
___/___/20___
#####
___/___/20___
#####
The remaining Shares shall vest upon the attainment of
certain performance goals, as provided in Schedule A attached to this Agreement.
(b) Acceleration of Vesting Upon Change in Control. Notwithstanding
Section 2(a) and except as otherwise provided in the Grantee’s written
employment agreement or
--------------------------------------------------------------------------------
other written agreement with the Company or any policy of the Company, if any,
upon the occurrence of a Change in Control of the Company any unvested Shares
shall become fully and immediately vested immediately prior to the consummation
of the Change in Control.
(c) Issuance of Share Certificates. On or within a reasonable time
after the Grant Date, the Company shall issue in the name of Grantee one or more
certificate(s) for the Shares, which certificate(s) shall be held in escrow by
the Company pending vesting of such Shares. The certificate(s) shall be stamped
or otherwise imprinted with a legend in such form as the Company or its counsel
may require with respect to any applicable restrictions on the sale or transfer
of the Shares, and the stock transfer records of the Company will reflect
stop-transfer instructions with respect to such Shares. Within a reasonable time
following the vesting of Shares, the Company will re-issue one or more
certificate(s) for such Shares without the restrictive stock legend and shall
deliver such certificate(s) to the Grantee.
3. Effect of Termination of Service with the Company. Except as otherwise
provided in the Grantee’s written employment agreement or another written
agreement with the Company or any policy of the Company, if any, [and except as
provided in the following sentence,] if the Grantee’s Service with the Company
terminates due to any reason or for no reason, any Shares that are not vested as
of the commencement of business on the date of such termination shall
immediately be forfeited. [Notwithstanding the foregoing, if the Grantee’s
Service with the Company is terminated as the result of the Grantee’s Disability
or death, any unvested Shares shall continue to vest for a period of three years
after such termination, on which date they shall expire.]
4. Transferability. The Shares granted pursuant to this Agreement (a) may
not be transferred for value, and (b) are not transferable or assignable by the
Grantee except (i) by will or the laws of descent and distribution,
(ii) pursuant to a Qualified Domestic Relations Order, or (iii) pursuant to
Section 16(b) of the Plan.
5. Tax Withholding; Other Deductions.
(a) General. The Company’s obligation to deliver Shares under this
Agreement shall be subject to the Grantee’s satisfaction of all applicable
federal, state, and local income tax withholding requirements. Grantee agrees to
make appropriate arrangements with the Company for the satisfaction of any
applicable federal, state, or local income tax withholding or similar
requirements, including the payment to the Company at the time of vesting of any
Shares of all such taxes and the satisfaction of all such requirements. If tax
withholdings are to be transmitted to the Company and are not timely received by
the Company in order to satisfy its withholding obligation, the Company may
withhold a portion of the Shares that vest on the applicable Vesting Date, sell
such Shares, and use the proceeds from such Shares to satisfy the Company’s
withholding obligations.
(b) Shares to Pay for Withholding. The Committee may, in its
discretion and in accordance with the provisions of this Section 5(b) and such
supplemental rules as it may from time to time adopt (including any applicable
safe-harbor provisions of Rule 16b-3 under the Exchange Act), provide the
Grantee with the right to use shares of Common Stock in satisfaction of all or
part of the federal, state, and local income tax liabilities incurred by the
Grantee in
2
--------------------------------------------------------------------------------
connection with the vesting of Shares (“Taxes”). Such right may be provided to
the Grantee in either or both of the following formats:
(i) Stock Withholding. The Grantee may be provided with the election
to have the Company withhold, from the Shares that vest on a given Vesting Date,
a portion of those Shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed 100 percent of such Taxes), as
designated by the Grantee.
(ii) Stock Delivery. The Committee may, in its discretion, provide the
Grantee with the election to deliver to the Company, on the Vesting Date for any
Share, one or more shares of Common Stock previously acquired by the Grantee
(other than pursuant to the transaction triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes incurred in connection
with such vesting of Shares (not to exceed 100 percent of such Taxes), as
designated by the Grantee.
6. Tender Offer or Merger; Adjustment of Shares. Notwithstanding anything
contained herein to the contrary:
(a) The Committee, in its discretion (i) may accelerate vesting of all
or any portion of the Shares so that such Shares can be tendered in response to
a tender offer for, or a request or invitation to tender of, greater than 50% of
the outstanding Common Stock of the Company or (ii) may provide that all or any
portion of the Shares may be surrendered in a merger, consolidation or share
exchange involving the Company (other than a transaction that would result in a
Change in Control), provided that the securities or other consideration received
in exchange thereof shall thereafter be subject to such restrictions and
conditions as may be determined by the Committee, in its discretion.
(b) The number and type of Shares subject to this Agreement shall be
proportionately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock of the Company in the manner set forth in
Section 20(a) of the Plan. If the Company is the surviving entity in any merger
or consolidation as described in Section 20(d) of the Plan, the Shares granted
herein shall pertain to and apply to the number and type of securities of the
surviving entity to which a holder of such Shares would have been entitled if
such Shares had vested in full immediately prior to such merger or
consolidation.
7. Rights as Stockholder. Subject to the terms of this Agreement, Grantee
shall be entitled to all of the rights of a stockholder of the Company with
respect to the Shares, including the right to vote such Shares and to receive
dividends and other distributions payable with respect to such Shares subsequent
to the Grant Date.
8. No Employment or Service Contract. Nothing in this Agreement or in the
Plan shall confer upon the Grantee any right to continue in the Service of the
Company (or any Parent or Subsidiary employing or retaining the Grantee) for any
period of time or to interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Grantee)
or the Grantee, which rights are hereby expressly reserved by each, to terminate
the Service of Grantee at any time for any reason whatsoever, with or without
Cause.
3
--------------------------------------------------------------------------------
9. Limitation on Liability of the Company.
(a) If the number of Shares covered by this Agreement (individually,
or in combination with other Awards granted under the Plan) exceeds, as of the
Grant Date, the number of shares of the Company’s Common Stock that may be
issued under the Plan without stockholder approval, then this Agreement shall be
void with respect to such excess Shares unless the Company obtains stockholder
approval of an amendment to the Plan increasing the number of shares of Common
Stock issuable under the Plan prior to the Vesting Date(s) with respect to such
excess Shares.
(b) The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance of any Shares pursuant to this Agreement shall relieve the
Company of any liability with respect to the nonissuance of the Shares as to
which such approval shall not have been obtained.
10. Compliance With Laws and Regulations; Securities Matters.
(a) The issuance of any Shares pursuant to this Agreement shall be
subject to compliance by the Company and the Grantee with all applicable
requirements of law relating thereto and with all applicable regulations of any
stock exchange or trading market on which the shares of Common Stock may be
listed at the time of such exercise and issuance. Notwithstanding any of the
other provisions of this Agreement or of the Plan, the Grantee agrees that the
Company will not be obligated to issue any of the Shares pursuant to this
Agreement if the issuance of such Shares would constitute a violation by the
Grantee or by the Company of any provision of any law or regulation of any
governmental authority or national securities exchange or trading market on
which the Common Stock is then listed or traded. The Company, in its sole
discretion, may defer the effectiveness of any Vesting Date in order to allow
the vesting of Shares pursuant thereto to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the Grantee in
writing of its decision to defer the effectiveness of such Vesting Date. In
connection with the issuance or vesting of any Shares, the Grantee shall execute
and deliver to the Company such representations in writing as may be requested
by the Company in order for it to comply with applicable requirements of federal
and state securities laws.
(b) The Grantee acknowledges and agrees that the Company is under no
obligation to register, under the Securities Act or any other applicable
securities laws, any of the Shares or to take any action that would make
available any exemption from registration. The Grantee further acknowledges and
agrees that if the Shares have not been registered under the Securities Act and
all other applicable securities laws, those Shares will be “restricted
securities” within the meaning of Rule 144 under the Securities Act and must be
held indefinitely without any transfer, sale or other disposition unless (i) the
Shares are subsequently registered under the Securities Act and all other
applicable securities laws, or (ii) the Grantee obtains an opinion of counsel
that is satisfactory in form and substance to counsel for the Company that the
Shares may be sold in reliance on an exemption from registration requirements.
In the event that the Shares are “restricted securities,” the certificate(s)
representing the Shares shall be stamped or otherwise imprinted with a legend in
such form as the Company or its counsel may require with respect to any
applicable restrictions on the sale or transfer of such Shares and the stock
transfer records of the Company will reflect stop-transfer instructions with
respect to such Shares.
4
--------------------------------------------------------------------------------
11. Notices; Deliveries. Any notice required to be given or delivered to
the Company under the terms of this Agreement shall be in writing and addressed
to the Company, in care of its Secretary, at its principal office at 15880 N.
Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260. Any notice to be
given or delivered to the Grantee shall be in writing and addressed to him at
the address given by him beneath his signature hereto. Either party hereto may
hereafter designate a different address in writing to the other party. Any
notice shall be deemed to have been given or delivered (a) upon personal
delivery; or (b) upon receipt of facsimile transmission; or (c) one business day
after deposit with a nationally recognized overnight courier for overnight
delivery; or (d) three business days after deposit in the U.S. mail, first class
postage prepaid, and properly addressed to the party to be notified.
12. Disputes. As a condition of the granting of the Shares, Grantee and his
heirs and successors or permitted transferees agree that (a) any dispute or
disagreement that may arise hereunder shall be determined by the Committee in
its sole discretion and judgment, (b) all decisions of the Committee with
respect to any questions or issues arising under the Plan or under this
Agreement shall be conclusive on all persons having an interest in the Shares,
and (c) any such determination and any interpretation by the Committee of the
terms of the Plan and this Agreement shall be final and shall be binding and
conclusive, for all purposes, upon the Company, Grantee, his heirs, personal
representatives, and permitted transferees.
13. Shares Subject to Plan [and Employment Agreement]. The Grantee
acknowledges that he has received and carefully reviewed a copy of the Plan on
or prior to the Grant Date. This Agreement and the Shares evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan[and that certain
Employment Agreement dated , 20___, between the Company and
Grantee (the “Employment Agreement”)]. Unless otherwise explicitly stated
herein, in the event of a conflict between any term or provision contained
herein and a term or provision of the Plan, the applicable terms and provisions
of the Plan shall govern and prevail under all circumstances. [In the event of a
conflict between any term or provision contained herein and a term or provision
of the Employment Agreement, the applicable terms and provisions of the
Employment Agreement shall govern and prevail under all circumstances.]
14. Miscellaneous.
(a) Nothing herein contained shall affect Grantee’s right to
participate in and receive benefits from and in accordance with the then current
provisions of any employee pension, welfare, or fringe benefit plan or program
of the Company.
(b) Whenever the term “Grantee” is used herein under circumstances
applicable to any other person or persons to whom the Shares, in accordance with
the provisions of this Agreement or the Plan, may be transferred, the word
“Grantee” shall be deemed to include such person or persons. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
(c) If any provision of this Agreement or of the Plan would disqualify
the Agreement or the Plan under Rule 16b-3 promulgated under the Exchange Act,
or would
5
--------------------------------------------------------------------------------
otherwise comply with Rule 16b-3, such provision shall be construed or deemed
amended to conform to Rule 16b-3 to the extent permitted by applicable law and
deemed advisable by the Board.
(d) This Agreement shall be binding upon and inure to the benefit of
the Company and the Grantee and their respective heirs, administrators,
successors, or permitted assigns.
(e) The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of Arizona, notwithstanding any
Arizona or other conflicts-of-law principles to the contrary.
[Signature page follows.]
6
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Company and Grantee have executed and delivered
this Agreement as of the date and place first above written, which date is the
Grant Date of the Shares.
ALLIED WASTE INDUSTRIES, INC.
By:
Name:
Title:
GRANTEE
Name:
Address:
7 |
EXHIBIT 10.16
OMNIBUS AMENDMENT AGREEMENT
TO
EMPLOYMENT AGREEMENT
THIS OMNIBUS AMENDMENT AGREEMENT (this “Amendment”) is made as of
December 8, 2005, by and between Century Aluminum Company, a Delaware
corporation (the “Company”), and David W, Beckley (the “Executive”).
RECITALS
A. The Company and the Executive are parties to an Employment Agreement,
made as of January 1, 2002, as amended by that Amendment Agreement, dated as of
December 9, 2003, as amended by that Amendment Agreement, dated as of March 22,
2005, and as further amended by that Second Amendment to Employment Agreement,
dated as of June 28, 2005 (collectively, the “Employment Agreement”);
B. The Company and the Executive are parties to a Severance Protection
Agreement, dated as of August 1, 2005 (the “SPA”);
C. The Company desires to (i) extend the term of the Employment Agreement
and the SPA through March 31, 2006; and (ii) amend the Employment Agreement to
reflect Executive’s current Base Salary and additional compensation payments;
D. Executive is willing to continue his employment on the terms and
conditions set forth in this Amendment;
E. Executive and the Company have agreed to amend the Employment Agreement,
the SPA and the Consulting Agreement on the terms and conditions set forth in
this Amendment;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Term of Employment. Section 1 of the Employment Agreement is hereby
amended by substituting “March 31, 2006” for “December 31, 2005” in line two.
2. Base Salary. Section 2.1(a)(i) of the Employment Agreement is
hereby amended by substituting “25,417” for “22,667” in line one and “305,000”
for “272,000” in line six, The following new sentence in its entirety shall be
added at the end of Section 2.1(a)(i):
“In addition to the foregoing Base Salary, Executive shall, beginning January 1,
2006, be paid an additional payment of $24,000 each month during the term of
this Agreement.”
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3. Term of Severance Protection Agreement. Section 1 of the SPA is
hereby amended by substituting “March 31, 2006” for “December 31, 2005” in line
three.
4. Incorporation of Amendment Agreement. Except as explicitly set
forth in this Amendment, the parties do not intend to modify the terms and
conditions of the Employment Agreement, the SPA or the Consulting Agreement;
those terms and conditions shall remain in full force and effect, and they shall
be incorporated into this Amendment by this reference.
CENTURY ALUMINUM COMPANY
By:
/s/ Craig A. Davis
Craig A. Davis
Chairman and Chief Executive Officer
/s/ David W. Beckley
David W. Beckley
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Exhibit 10.1
[CLAYTON HOLDINGS, INC. LETTERHEAD]
October 18, 2006
Mr. Lou Iannaccone
16 Lookout Drive, No.
Fairfield, CT 06825
Dear Lou:
This letter confirms your separation from employment with Clayton Holdings, Inc.
(formerly known as CMH Holdings, Inc.) and any and all of its subsidiaries or
affiliates, including but not limited to Clayton Technologies, Inc.
(collectively, the “Company”). This letter also confirms the agreement that you
have reached with the Company with respect to your separation. The purpose of
this Agreement is to establish an amicable arrangement for ending your
employment relationship, including releasing the Company and related persons or
entities from any claims, permitting you to receive separation pay and related
benefits, and acknowledging your continuing obligations to the Company. If you
agree to the terms of this Agreement, you acknowledge that you are entering into
this Agreement voluntarily.
With those understandings, you and the Company agree as follows:
1. RESIGNATION FROM EMPLOYMENT
This confirms that, subject to your continued good faith performance of the
responsibilities of your position and your not otherwise providing the Company
with Cause to terminate your employment, you will resign from employment with
the Company and your position as the Company’s Chief Information Officer
effective on February 28, 2007 (the “Resignation Date”).
2. SEVERANCE BENEFITS
(A) SEVERANCE PAY. THE COMPANY SHALL PAY YOU SEVERANCE PAY
(“SEVERANCE PAY”) CONSISTING OF SALARY CONTINUATION AT YOUR FINAL BASE SALARY
RATE OF $ 260,000 PER YEAR EFFECTIVE FOR THE PERIOD FROM THE DATE IMMEDIATELY
FOLLOWING THE RESIGNATION DATE TO AND INCLUDING FEBRUARY 29, 2008 (THE
“SEVERANCE PAY PERIOD”). THE COMPANY SHALL PAY YOU SEVERANCE PAY ON ITS REGULAR
PAYROLL DATES APPLICABLE TO YOUR POSITION WITH THE COMPANY, PROVIDED THAT THE
COMPANY IS NOT OBLIGATED TO INCLUDE YOU ON THE PAYROLL DURING THE SEVERANCE PAY
PERIOD UNLESS THIS AGREEMENT BECOMES EFFECTIVE IN ACCORDANCE WITH SECTION 20,
BELOW.
(B) HEALTH BENEFITS. YOUR RIGHTS AND OBLIGATIONS UNDER COBRA WILL BE
EXPLAINED IN A SEPARATE LETTER TO YOU DESCRIBING YOUR MEDICAL AND DENTAL
INSURANCE CONTINUATION RIGHTS UNDER COBRA. TO CONTINUE YOUR MEDICAL AND DENTAL
INSURANCE COVERAGE, YOU MUST ELECT COBRA CONTINUATION COVERAGE. IF YOU ELECT
COBRA CONTINUATION COVERAGE AND PROVIDED THAT YOU AND ANY BENEFICIARIES REMAIN
ELIGIBLE FOR COBRA CONTINUATION COVERAGE, THE COMPANY SHALL CONTINUE TO PAY FOR
MEDICAL AND DENTAL INSURANCE PREMIUMS FOR COVERAGE OF YOU AND ANY BENEFICIARIES
TO THE SAME EXTENT AS IF YOU HAD REMAINED EMPLOYED TO THE END OF THE SEVERANCE
PAY PERIOD. YOU
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WILL BE RESPONSIBLE FOR THE REMAINING PORTION OF SUCH COVERAGE AS IF YOU
REMAINED EMPLOYED. YOU HEREBY AUTHORIZE THE DEDUCTION OF THE PORTION FOR WHICH
YOU ARE RESPONSIBLE FROM YOUR SEVERANCE PAY. IF YOU ELECT COBRA CONTINUATION
COVERAGE, YOU MAY CONTINUE COVERAGE FOR YOURSELF AND ANY BENEFICIARIES AFTER THE
END OF THE SEVERANCE PAY PERIOD AT YOUR OWN EXPENSE FOR THE REMAINDER OF THE
COBRA PERIOD, TO THE EXTENT YOU AND THEY REMAIN ELIGIBLE.
3. INCENTIVE COMPENSATION
The Company shall pay you incentive compensation for the year ending December
31, 2006 in an amount set by the Company’s Board of Directors, which target
amount shall be $156,000, adjusted to reflect the level of certain Company
performance objectives, except that you understand and agree that any bonus paid
to you will be reduced by $35,000 to the extent that you materially fail to
ensure, as determined in good faith by the Company’s Board of Directors, that
the Company has by December 31, 2006, met certain technology development
milestones agreed to between you and the Company’s Chief Financial Officer, that
relate to the Company’s (1) Sarbanes-Oxley Act of 2002 requirements, and (2)
remediation of significant internal control deficiencies set forth in Grant
Thornton’s memo to the Company dated December 31, 2005. You understand and
agree that you will not be eligible to receive any incentive compensation for
any period beginning January 1, 2007 or thereafter.
4. STOCK OPTIONS
All options that you hold to purchase shares of the Company’s common stock
pursuant to the CMH Holdings, Inc. 2005 Stock Option and Grant Plan or any
predecessor plan that are not vested as of your Resignation Date shall lapse on
that date and will not be exercisable. As you know, you and the Company entered
into an Incentive Stock Option Agreement with a grant date of November 5, 2004
(the “Incentive Stock Option Agreement”) pursuant to which the Company granted
you options to purchase 178,360 shares of common stock in the Company at an
exercise price of $0.243889964 per share pursuant to a vesting schedule set
forth in the Incentive Stock Option Agreement. You acknowledge that on or about
March 1, 2006, the Company effected a reverse stock split by which the number of
any options held by you was divided by four (4) and the exercise price was
multiplied by four (4). Based on that reverse stock split, the following
summarizes all vested options issued to you in the Incentive Stock Option
Agreement that have not been exercised as of the date of this Agreement and that
shall remain exercisable by you as of the Resignation Date, assuming that your
employment does not terminate prior to the Resignation Date and that you do not
exercise any options prior to the Resignation Date:
Vested and
Exercisable Shares
Unvested Shares
Exercise
Grant Date
No. of Shares
as of 2/28/07
as of 2/28/07
Price
11/5/04
44,590
37,158
7,432
0.975559856
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The exercise of any such stock options shall be subject to the terms of the CMH
Holdings, Inc. Stock Option and Grant Plan and the Incentive Stock Option
Agreement, including, without limitation, the time limits on exercise.
5. TAX TREATMENT
The Company shall undertake to make deductions, withholdings and tax reports
with respect to payments and benefits under this Agreement to the extent that it
reasonably and in good faith determines that it is required to make such
deductions, withholdings and tax reports. Payments under this Agreement shall
be in amounts net of any such deductions or withholdings. Nothing in this
Agreement shall be construed to require the Company to make any payments to
compensate you for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
6. RETURN OF PROPERTY
You confirm that, on the Resignation Date, you will return to the Company all
Company property, including, without limitation, computer equipment, software,
keys and access cards, cell phones, personal data assistants, credit cards,
files and any documents (including computerized data and any copies made of any
computerized data or software) containing information concerning the Company,
its business or its business relationships (in the latter two cases, actual or
prospective). You also commit to deleting and finally purging any duplicates of
files or documents that may contain Company information from any computer or
other device that remains your property after the Resignation Date. In the
event that you discover that you continue to retain any such property, you shall
return it to the Company immediately.
7. ACKNOWLEDGEMENT OF ENFORCEABILITY OF
EMPLOYEE AGREEMENT
You understand and agree that you entered into an Employee Agreement with the
Company on or about September 6, 2005, a copy of which is attached at Tab A (the
“Employee Agreement”) and that, in addition to governing terms for your
employment through February 28, 2007, the Employee Agreement also contains
certain provisions that survive the termination of your employment with the
Company including, but not limited to, agreements related to Proprietary
Information (Sections 1 and 2), return of Company property upon termination of
employment (Section 6), Enforcement of Intellectual Property Rights (Section 7)
and Restrictions on post-termination activities (Section 8). You acknowledge
and agree that your continued employment as an at-will employee of the Company
constituted adequate consideration for the Employee Agreement when you executed
it and that the payments and benefits provided to you by the Company pursuant to
this Agreement constitute additional consideration to support the Employee
Agreement as it is acknowledged and agreed to herein.
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8. RELEASE OF YOUR CLAIMS
In consideration for, among other terms, the payments and benefits described in
Section 2, to which you acknowledge you would otherwise not be entitled, you
voluntarily release and forever discharge the Company, its affiliated and
related entities, its and their respective predecessors, successors and assigns,
its and their respective employee benefit plans and fiduciaries of such plans,
and the current and former officers, directors, shareholders, employees,
attorneys, accountants and agents of each of the foregoing in their official and
personal capacities (collectively referred to as the “Releasees”) generally from
all claims, demands, debts, damages and liabilities of every name and nature,
known or unknown (“Claims”) that, as of the date when you sign this Agreement,
you have, ever had, now claim to have or ever claimed to have had against any or
all of the Releasees. This release includes, without limitation, all Claims:
· relating to your employment by the Company and the
termination of your employment with the Company;
· of wrongful discharge;
· of breach of contract, including, but not limited to, breach
of the Employment Agreement between you and Clayton Technologies, Inc. dated
September 15, 2004 (the “Employment Agreement”);
· of retaliation or discrimination under federal, state or
local law (including, without limitation, Claims of age discrimination or
retaliation under the Age Discrimination in Employment Act, Claims of disability
discrimination or retaliation under the Americans with Disabilities Act, Claims
of discrimination or retaliation under Title VII of the Civil Rights Act of 1964
and/or Claims brought pursuant to the Connecticut Human Rights Law);
· under any other federal or state statute (including, without
limitation, Claims under the Worker Adjustment and Retraining Notification Act);
· of defamation or other torts;
· of violation of public policy;
· for wages, bonuses, incentive compensation, stock, stock
options, vacation pay or any other compensation or benefits; and
· for damages or other remedies of any sort, including, without
limitation, compensatory damages, punitive damages, injunctive relief and
attorney’s fees;
provided, however, that this release shall not affect your vested rights under
the Company’s Section 401(k) plan or your rights under this Agreement.
You agree that you shall not seek or accept damages of any nature, other
equitable or legal remedies for your own benefit, attorney’s fees, or costs from
any of the Releasees with respect to any Claim released by this Agreement. As a
material inducement to the Company to enter into this Agreement, you represent
that you have not assigned to any third party and you have not filed with any
agency or court any Claim released by this Agreement.
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9. NONDISPARAGEMENT
You agree not to make any disparaging statements concerning the Company or any
of its affiliates or current or former officers, directors, shareholders,
employees or agents. You further agree not to take any actions or conduct
yourself in any way that would reasonably be expected to affect adversely the
reputation or goodwill of the Company or any of its affiliates or any of its
current or former officers, directors, shareholders, employees or agents.
10. INFORMATION CONCERNING ACTUAL, POTENTIAL OR
ALLEGED FINANCIAL IRREGULARITIES
You represent that you are not aware of any actual, potential or alleged
financial irregularities concerning the Company.
11. FUTURE COOPERATION
You agree to cooperate reasonably with the Company and all of its affiliates
(including its and their outside counsel) in connection with the contemplation,
prosecution and defense of all phases of existing, past and future litigation
about which the Company believes you may have knowledge or information. You
further agree to make yourself available at mutually convenient times during and
outside of regular business hours as reasonably deemed necessary by the
Company’s counsel. The Company shall not utilize this Section 11 to require you
to make yourself available to an extent that would unreasonably interfere with
full-time employment responsibilities that you may have. You agree to appear
without the necessity of a subpoena to testify truthfully in any legal
proceedings in which the Company calls you as a witness. The Company shall also
reimburse you for any pre-approved reasonable business travel expenses that you
incur on the Company’s behalf as a result of your litigation cooperation
services, after receipt of appropriate documentation consistent with the
Company’s business expense reimbursement policy.
12. SUSPENSION OR TERMINATION OF PAYMENTS
In the event that you fail to comply with any of your obligations under this
Agreement, in addition to any other legal or equitable remedies it may have for
such breach the Company shall have the right to terminate or suspend its
payments to you under this Agreement. The termination or suspension of such
payments in the event of such breach by you will not affect your continuing
obligations under this Agreement. Notwithstanding the foregoing, this provision
shall not apply to the extent that your breach of this Agreement consists of
initiating a legal action in which you contend that the release set forth in
Section 8 is invalid, in whole or in part, due to the provisions of 29 U.S.C.
§ 626(f).
13. LEGAL REPRESENTATION
This Agreement is a legally binding document and your signature will commit you
to its terms. You acknowledge that you have been advised to discuss all aspects
of this Agreement with your
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attorney, that you have carefully read and fully understand all of the
provisions of this Agreement and that you are voluntarily entering into this
Agreement.
14. ABSENCE OF RELIANCE
In signing this Agreement, you are not relying upon any promises or
representations made by anyone at or on behalf of the Company.
15. ENFORCEABILITY
If any portion or provision of this Agreement (including, without limitation,
any portion or provision of any section of this Agreement) shall to any extent
be declared illegal or unenforceable by a court of competent jurisdiction, then
the remainder of this Agreement, or the application of such portion or provision
in circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
16. WAIVER
No waiver of any provision of this Agreement shall be effective unless made in
writing and signed by the waiving party. The failure of any party to require
the performance of any term or obligation of this Agreement, or the waiver by
any party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
17. ENFORCEMENT
(a) Jurisdiction. You and the Company hereby agree that the Superior
Court of the State of Connecticut and the United States District Court for the
District of Connecticut shall have the exclusive jurisdiction to consider any
matters related to this Agreement, including without limitation any claim for
violation of this Agreement. With respect to any such court action, you (i)
submit to the jurisdiction of such courts, (ii) consent to service of process,
and (iii) waive any other requirement (whether imposed by statute, rule of court
or otherwise) with respect to personal jurisdiction or venue.
(b) Relief. You agree that it would be difficult to measure any harm
caused to the Company that might result from any breach by you of your promises
set forth in Sections 6, 7, 8, 9 or 11, and that in any event money damages
would be an inadequate remedy for any such breach. Accordingly, you agree that
if you breach, or propose to breach, any portion of your obligations under
Sections 6, 7, 8, 9 or 11, the Company shall be entitled, in addition to all
other remedies it may have, to an injunction or other appropriate equitable
relief to restrain any such breach, without showing or proving any actual damage
to the Company and without the necessity of posting a bond. In the event that
the Company prevails in any action to enforce Sections 6, 7, 8, 9 or 11, then
you also shall be liable to the Company for attorney’s fees and costs incurred
by the
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Company in enforcing such provision(s). In addition, in the event that you
breach your continuing obligations under any portion of Section 7 of the
Employee Agreement you agree that the restrictions of Section 7 of the Employee
Agreement shall remain in effect for the period of such breach notwithstanding
the period of one (1) year set forth in Section 7 of the Employee Agreement and
you further agree that the same restrictions shall apply for a period of one (1)
year commencing effective upon the cessation of any such breach.
18. GOVERNING LAW; INTERPRETATION
This Agreement shall be interpreted and enforced under the laws of the State of
Connecticut, without regard to conflict of law principles. In the event of any
dispute, this Agreement is intended by the parties to be construed as a whole,
to be interpreted in accordance with its fair meaning, and not to be construed
strictly for or against either you or the Company or the “drafter” of all or any
portion of this Agreement.
19. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between you and the Company.
This Agreement supersedes any previous agreements or understandings between you
and the Company, including but not limited to the Employment Agreement. This
Agreement does not, however, supersede your continuing obligations to the
Company as set forth in the Employee Agreement (Tab A), which remain in full
force and effect.
20. TIME FOR CONSIDERATION; EFFECTIVE DATE
You have the opportunity to consider this Agreement for twenty-one (21) days
before signing it. To accept this Agreement, you must return a signed original
of this Agreement so that it is received by the undersigned at or before the
expiration of this twenty-one (21) day period. If you sign this Agreement
within less than twenty-one (21) days of the date of its delivery to you, you
acknowledge by signing this Agreement that such decision was entirely voluntary
and that you had the opportunity to consider this Agreement for the entire
twenty-one (21) day period. For the period of seven (7) days from the date when
this Agreement becomes fully executed, you have the right to revoke this
Agreement by written notice to the undersigned. For such a revocation to be
effective, it must be delivered so that it is received by the undersigned at or
before the expiration of the seven (7) day revocation period. This Agreement
shall not become effective or enforceable during the revocation period. This
Agreement shall become effective on the first business day following the
expiration of the revocation period (the “Effective Date”).
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21. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be taken to be an original, but all of which
together shall constitute one and the same document.
Please indicate your agreement to the terms of this Agreement by signing and
returning to me the original of this letter within the time period set forth
above.
Very truly yours,
CLAYTON HOLDINGS, INC.
By:
/s/ Frederick Herbst
October 18, 2006
Frederick Herbst
Date
Chief Financial Officer
Enclosure (Tab A – Employee Agreement)
You are advised to consult with an attorney before signing this Agreement. The
foregoing is agreed to and accepted by:
/s/ Louis A. Iannaccone
October 18, 2006
Louis A. Iannaccone
Date
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Exhibit 10.5
ATTORNEY-CLIENT PRIVILEGED
HIGHLY CONFIDENTIAL
FORM OF INDEMNITY AGREEMENT
This Indemnity Agreement (“Agreement”) is made as of ________, ____ by and
between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and
______________ (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation.
WHEREAS, the Board of Directors of the Company (the “Board”) has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The Certificate
of Incorporation (the “Charter”) and the Bylaws of the Company require
indemnification of the officers and directors of the Company. Indemnitee may
also be entitled to indemnification pursuant to applicable provisions of the
Delaware General Corporation Law (“DGCL”). The Charter, the Bylaws and the DGCL
expressly provide that the indemnification provisions set forth therein are not
exclusive, and thereby contemplate that contracts may be entered into between
the Company and members of the board of directors, officers and other persons
with respect to indemnification, hold harmless, exoneration, advancement and
reimbursement rights.
WHEREAS, the uncertainties relating to such insurance and to indemnification
have increased the difficulty of attracting and retaining such persons.
WHEREAS, the Board has determined that the increased difficulty in attracting
and retaining such persons is detrimental to the best interests of the Company’s
stockholders and that the Company should act to assure such persons that there
will be increased certainty of such protection in the future.
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WHEREAS, it is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify, hold harmless, exonerate and to advance
expenses on behalf of, such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so protected against liabilities.
WHEREAS, this Agreement is a supplement to and in furtherance of the Charter,
the Bylaws of the Company and any resolutions adopted pursuant thereto, and
shall not be deemed a substitute therefor, nor to diminish or abrogate any
rights of Indemnitee thereunder.
WHEREAS, Indemnitee does not regard the protection available under the
Company’s Charter, Bylaws and insurance as adequate in the present
circumstances, and may not be willing to serve as an officer or director without
adequate protection, and the Company desires Indemnitee to serve in such
capacity. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the Company and Indemnitee do hereby covenant and agree as follows:
1. Services To The Company. Indemnitee will serve or continue to serve as an
officer, director or key employee of the Company for so long as Indemnitee is
duly elected or appointed or until Indemnitee tenders his resignation.
2. Definitions. As used in this Agreement:
(a) References to “agent” shall mean any person who is or was a director,
officer, or employee of the Company or a subsidiary of the Company or other
person authorized by the Company to act for the Company, to include such person
serving in such capacity as a director, officer, employee, fiduciary or other
official of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise at the request of, for the convenience of, or
to represent the interests of the Company or a subsidiary of the Company.
(b) The terms “Beneficial Owner” and “Beneficial Ownership” shall have the
meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as defined
below) as in effect on the date hereof.
(c) A “Change in Control” shall be deemed to occur upon the earliest to occur
after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined below) is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing fifteen percent (15%) or more of the combined voting power
of the Company’s then outstanding securities entitled to vote generally in the
election of directors, unless (1) the change in the relative Beneficial
Ownership of the Company’s securities by any Person results solely from a
reduction in the aggregate number of outstanding shares of securities entitled
to vote generally in the election of directors, or (2) such acquisition was
approved in advance by the Continuing Directors (as defined below) and such
acquisition would not constitute a Change in Control under part (iii) of this
definition;
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(ii) Change in Board of Directors. Individuals who, as of the date hereof,
constitute the Board, and any new director whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two thirds of the directors then still in office who were directors on
the date hereof or whose election for nomination for election was previously so
approved (collectively, the “Continuing Directors”), cease for any reason to
constitute at least a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a reorganization, merger
or consolidation of the Company (a “Business Combination”), in each case,
unless, following such Business Combination: (1) all or substantially all of the
individuals and entities who were the Beneficial Owners of securities entitled
to vote generally in the election of directors immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 51% of
the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the securities entitled to vote generally in the
election of directors; (2) no Person (excluding any corporation resulting from
such Business Combination) is the Beneficial Owner, directly or indirectly, of
15% or more of the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors of such corporation
except to the extent that such ownership existed prior to the Business
Combination; and (3) at least a majority of the Board of Directors of the
corporation resulting from such Business Combination were Continuing Directors
at the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination;
(iv) Liquidation. The approval by the stockholders of the Company of a
complete liquidation of the Company or an agreement or series of agreements for
the sale or disposition by the Company of all or substantially all of the
Company’s assets, other than factoring the Company’s current receivables or
escrows due (or, if such approval is not required, the decision by the Board to
proceed with such a liquidation, sale, or disposition in one transaction or a
series of related transactions); or
(v) Other Events. There occurs any other event of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or a response to any similar item on any similar schedule or form)
promulgated under the Exchange Act (as defined below), whether or not the
Company is then subject to such reporting requirement.
(d) “Corporate Status” describes the status of a person who is or was a
director, officer, trustee, general partner, managing member, fiduciary,
employee or agent of the Company or of any other Enterprise (as defined below)
which such person is or was serving at the request of the Company.
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(e) “Delaware Court” shall mean the Court of Chancery of the State of
Delaware.
(f) “Disinterested Director” shall mean a director of the Company who is not
and was not a party to the Proceeding (as defined below) in respect of which
indemnification is sought by Indemnitee.
(g) “Enterprise” shall mean the Company and any other corporation, constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger to which the Company (or any of its wholly owned
subsidiaries) is a party, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise of which Indemnitee is or was
serving at the request of the Company as a director, officer, trustee, general
partner, managing member, fiduciary, employee or agent.
(h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(i) “Expenses” shall include attorneys’ fees and costs, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses in connection
with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, or otherwise participating in, a
Proceeding (as defined below). Expenses also shall include Expenses incurred in
connection with any appeal resulting from any Proceeding (as defined below),
including without limitation the premium, security for, and other costs relating
to any cost bond, supersedeas bond, or other appeal bond or its equivalent.
Expenses, however, shall not include amounts paid in settlement by Indemnitee or
the amount of judgments or fines against Indemnitee.
(j) “Independent Counsel” shall mean a law firm or a member of a law firm that
is experienced in matters of corporation law and neither presently is, nor in
the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party (other than with respect
to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements); or (ii) any other party
to the Proceeding (as defined below) giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee’s rights
under this Agreement.
(k) References to “fines” shall include any excise tax assessed on Indemnitee
with respect to any employee benefit plan; references to “serving at the request
of the Company” shall include any service as a director, officer, employee,
agent or fiduciary of the Company which imposes duties on, or involves services
by, such director, officer, employee, agent or fiduciary with respect to an
employee benefit plan, its participants or beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the
best interests of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the
best interests of the Company” as referred to in this Agreement.
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(l) The term “Person” shall have the meaning as set forth in Sections 13(d)
and 14(d) of the Exchange Act as in effect on the date hereof; provided,
however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries (as
defined below) of the Company; (iii) any employment benefit plan of the Company
or of a Subsidiary (as defined below) of the Company or of any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company;
and (iv) any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Subsidiary (as defined below) of the Company
or of a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company.
(m) A “Potential Change in Control” shall be deemed to have occurred if: (i)
the Company enters into an agreement or arrangement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any Person or the
Company publicly announces an intention to take or consider taking actions which
if consummated would constitute a Change in Control; (iii) any Person who
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 5% or more of the combined voting power of the Company’s
then outstanding securities entitled to vote generally in the election of
directors increases his Beneficial Ownership of such securities by 5% or more
over the percentage so owned by such Person on the date hereof; or (iv) the
Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(n) The term “Proceeding” shall include any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or
otherwise and whether of a civil (including intentional or unintentional tort
claims), criminal, administrative or investigative nature, in which Indemnitee
was, is or will be involved as a party or otherwise by reason of the fact that
Indemnitee is or was a director or officer of the Company, by reason of any
action (or failure to act) taken by him or of any action (or failure to act) on
his part while acting as a director or officer of the Company, or by reason of
the fact that he is or was serving at the request of the Company as a director,
officer, trustee, general partner, managing member, fiduciary, employee or agent
of any other Enterprise, in each case whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification,
reimbursement, or advancement of expenses can be provided under this Agreement.
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(o) The term “Subsidiary,” with respect to any Person, shall mean any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
that Person.
3. Indemnity In Third-Party Proceedings. The Company shall indemnify and hold
harmless Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee was, is, or is threatened to be made, a party to or a participant (as
a witness or otherwise) in any Proceeding, other than a Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
Section 3, Indemnitee shall be indemnified against all Expenses, judgments,
liabilities, fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by Indemnitee or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and, in the case of a
criminal Proceeding, had no reasonable cause to believe that his conduct was
unlawful.
4. Indemnity In Proceedings By Or In The Right Of The Company. The Company
shall indemnify and hold harmless Indemnitee in accordance with the provisions
of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to
or a participant (as a witness or otherwise) in any Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
Section 4, Indemnitee shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if Indemnitee acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company. No indemnification, hold harmless or exoneration for Expenses shall
be made under this Section 4 in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudged by a court to be liable to the
Company, unless and only to the extent that any court in which the Proceeding
was brought or the Delaware Court shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnification., to be held
harmless or to exoneration.
5. Indemnification For Expenses Of A Party Who Is Wholly Or Partly Successful.
Notwithstanding any other provisions of this Agreement, to the extent that
Indemnitee is a party to (or a participant in) and is successful, on the merits
or otherwise, in any Proceeding or in defense of any claim, issue or matter
therein, in whole or in part, the Company shall indemnify and hold harmless
Indemnitee against all Expenses actually and reasonably incurred by him in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
and hold harmless Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each successfully resolved
claim, issue or matter. If the Indemnitee is not wholly successful in such
Proceeding, the Company also shall indemnify and hold harmless Indemnitee
against all Expenses reasonably incurred in connection with a claim, issue or
matter related to any claim, issue, or matter on which the Indemnitee was
successful. For purposes of this Section and without limitation, the termination
of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
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6. Indemnification For Expenses Of A Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding to which Indemnitee is not a
party, he shall be indemnified and held harmless against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith.
7. Additional Indemnification, Hold Harmless and Exoneration Rights.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall
indemnify and hold harmless Indemnitee if Indemnitee is a party to or threatened
to be made a party to any Proceeding (including a Proceeding by or in the right
of the Company to procure a judgment in its favor) against all Expenses,
judgments, fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by Indemnitee in connection with
the Proceeding. No indemnification, hold harmless or exoneration rights shall be
made under this Section 7(a) on account of Indemnitee’s conduct which
constitutes a breach of Indemnitee’s duty of loyalty to the Company or its
stockholders or is an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the Company
shall indemnify and hold harmless Indemnitee if Indemnitee is a party to or
threatened to be made a party to any Proceeding (including a Proceeding by or in
the right of the Company to procure a judgment in its favor) against all
Expenses, judgments, fines, penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by Indemnitee in connection with
the Proceeding.
8. Contribution In The Event Of Joint Liability.
(a) To the fullest extent permissible under applicable law, if the
indemnification and hold harmless rights provided for in this Agreement are
unavailable to Indemnitee in whole or in part for any reason whatsoever, the
Company, in lieu of indemnifying and holding harmless Indemnitee, shall pay, in
the first instance, the entire amount incurred by Indemnitee, whether for
judgments, liabilities, fines, penalties, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any Proceeding without
requiring Indemnitee to contribute to such payment, and the Company hereby
waives and relinquishes any right of contribution it may have at any time
against Indemnitee.
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(b) The Company shall not enter into any settlement of any Proceeding in which
the Company is jointly liable with Indemnitee (or would be if joined in such
Proceeding) unless such settlement provides for a full and final release of all
claims asserted against Indemnitee.
(c) The Company hereby agrees to fully indemnify and hold harmless Indemnitee
from any claims for contribution which may be brought by officers, directors or
employees of the Company other than Indemnitee who may be jointly liable with
Indemnitee.
9. Exclusions. Notwithstanding any provision in this Agreement, the Company
shall not be obligated under this Agreement to make any indemnification, hold
harmless or exoneration payments in connection with any claim made against
Indemnitee:
(a) for which payment has actually been received by or on behalf of Indemnitee
under any insurance policy or other indemnity provision, except with respect to
any excess beyond the amount actually received under any insurance policy,
contract, agreement, other indemnity provision or otherwise;
(b) for an accounting of profits made from the purchase and sale (or sale and
purchase) by Indemnitee of securities of the Company within the meaning of
Section 16(b) of the Exchange Act or similar provisions of state statutory law
or common law; or
(c) except as otherwise provided in Sections 14(e)-(f) hereof, prior to a
Change in Control, in connection with any Proceeding (or any part of any
Proceeding) initiated by Indemnitee, including any Proceeding (or any part of
any Proceeding) initiated by Indemnitee against the Company or its directors,
officers, employees or other indemnitees, unless (i) the Board authorized the
Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the
Company provides the indemnification, hold harmless or exoneration payment, in
its sole discretion, pursuant to the powers vested in the Company under
applicable law.
10. Advances Of Expenses; Defense Of Claim.
(a) Notwithstanding any provision of this Agreement to the contrary, and to
the fullest extent permitted by applicable law, the Company shall advance the
Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be
incurred by Indemnitee within three months) in connection with any Proceeding
within ten (10) days after the receipt by the Company of a statement or
statements requesting such advances from time to time, whether prior to or after
final disposition of any Proceeding. Advances shall be unsecured and interest
free. Advances shall be made without regard to Indemnitee’s ability to repay the
Expenses and without regard to Indemnitee’s ultimate entitlement to be
indemnified, held harmless or exonerated under the other provisions of this
Agreement. Advances shall include any and all reasonable Expenses incurred
pursuing a Proceeding to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. The Indemnitee shall qualify for advances, to the fullest
extent permitted by applicable law, solely upon the execution and delivery to
the Company of an undertaking providing that the Indemnitee undertakes to repay
the advance to the extent that it is ultimately determined that Indemnitee is
not entitled to be indemnified by the Company under the provisions of this
Agreement, the Charter, the Bylaws of the Company, applicable law or otherwise.
This Section 10(a) shall not apply to any claim made by Indemnitee for which an
indemnification, hold harmless or exoneration payment is excluded pursuant to
Section 9.
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(b) The Company will be entitled to participate in the Proceeding at its own
expense.
(c) The Company shall not settle any action, claim or Proceeding (in whole or
in part) which would impose any Expense, judgment, fine, penalty or limitation
on the Indemnitee without the Indemnitee’s prior written consent.
11. Procedure For Notification And Application For Indemnification.
(a) Indemnitee agrees to notify promptly the Company in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to
indemnification, hold harmless or exoneration rights, or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement, or otherwise.
(b) Indemnitee may deliver to the Company a written application to indemnify
and hold harmless Indemnitee in accordance with this Agreement. Such
application(s) may be delivered from time to time and at such time(s) as
Indemnitee deems appropriate in his or her sole discretion. Following such a
written application for indemnification by Indemnitee, the Indemnitee’s
entitlement to indemnification shall be determined according to Section 12(a) of
this Agreement.
12. Procedure Upon Application For Indemnification.
(a) A determination, if required by applicable law, with respect to
Indemnitee’s entitlement to indemnification shall be made in the specific case
by one of the following methods, which shall be at the election of Indemnitee:
(i) by a majority vote of the Disinterested Directors, even though less than a
quorum of the Board or (ii) by Independent Counsel in a written opinion to the
Board, a copy of which shall be delivered to Indemnitee. The Company promptly
will advise Indemnitee in writing with respect to any determination that
Indemnitee is or is not entitled to indemnification, including a description of
any reason or basis for which indemnification has been denied. If it is so
determined that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within ten (10) days after such determination. Indemnitee shall
reasonably cooperate with the person, persons or entity making such
determination with respect to Indemnitee’s entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any costs or Expenses (including
attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
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(b) In the event the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to Section 12(a) hereof, the Independent
Counsel shall be selected as provided in this Section 12(b). The Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board), and Indemnitee shall give written notice
to the Company advising it of the identity of the Independent Counsel so
selected and certifying that the Independent Counsel so selected meets the
requirements of “Independent Counsel” as defined in Section 2 of this Agreement.
If the Independent Counsel is selected by the Board, the Company shall give
written notice to Indemnitee advising him of the identity of the Independent
Counsel so selected and certifying that the Independent Counsel so selected
meets the requirements of “Independent Counsel” as defined in Section 2 of this
Agreement. In either event, Indemnitee or the Company, as the case may be, may,
within ten (10) days after such written notice of selection shall have been
received, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of “Independent Counsel” as defined in Section 2 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. Absent a proper and timely objection, the person so
selected shall act as Independent Counsel. If such written objection is so made
and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court of
competent jurisdiction has determined that such objection is without merit. If,
within twenty (20) days after submission by Indemnitee of a written request for
indemnification pursuant to Section 11(a) hereof, no Independent Counsel shall
have been selected and not objected to, either the Company or Indemnitee may
petition the Delaware Court for resolution of any objection which shall have
been made by the Company or Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Delaware Court, and the person with respect to whom all objections are so
resolved or the person so appointed shall act as Independent Counsel under
Section 12(a) hereof. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
(c) The Company agrees to pay the reasonable fees and expenses of Independent
Counsel and to fully indemnify and hold harmless such Independent Counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
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13. Presumptions and Effect Of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification
hereunder, the person, persons or entity making such determination shall presume
that Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
Section 11(b) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making by any person,
persons or entity of any determination contrary to that presumption. Neither the
failure of the Company (including by its directors or Independent Counsel) to
have made a determination prior to the commencement of any action pursuant to
this Agreement that indemnification is proper in the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including by its directors or Independent Counsel)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under Section 12 of
this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for
indemnification, or (ii) a final judicial determination that any or all such
indemnification is expressly prohibited under applicable law; provided, however,
that such 30-day period may be extended for a reasonable time, not to exceed an
additional fifteen (15) days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) For purposes of any determination of good faith, Indemnitee shall be
deemed to have acted in good faith if Indemnitee’s action is based on the
records or books of account of the Enterprise, including financial statements,
or on information supplied to Indemnitee by the officers of the Enterprise in
the course of their duties, or on the advice of legal counsel for the Enterprise
or on information or records given or reports made to the Enterprise by an
independent certified public accountant or by an appraiser or other expert
selected by the Enterprise. The provisions of this Section 13(d) shall not be
deemed to be exclusive or to limit in any way the other circumstances in which
the Indemnitee may be deemed or found to have met the applicable standard of
conduct set forth in this Agreement.
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(e) The knowledge and/or actions, or failure to act, of any other director,
officer, trustee, partner, managing member, fiduciary, agent or employee of the
Enterprise shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement.
14. Remedies Of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 12 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses, to the fullest extent permitted by
applicable law, is not timely made pursuant to Section 10 of this Agreement,
(iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 12(a) of this Agreement within thirty (30) days after
receipt by the Company of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of
Section 12(a) of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, (v) a contribution payment is not made in
a timely manner pursuant to Section 8 of this Agreement, (vi) payment of
indemnification pursuant to Section 3 or 4 of this Agreement is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification, or (vii) payments to Indemnitee pursuant to any hold harmless
or exoneration rights under this Agreement or otherwise is not made within ten
(10) days after receipt by the Company of a written request therefor, Indemnitee
shall be entitled to an adjudication by the Delaware Court to such
indemnification, hold harmless, exoneration, contribution or advancement rights.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. Except as set forth herein, the provisions
of Delaware law (without regard to its conflict of laws rules) shall apply to
any such arbitration. The Company shall not oppose Indemnitee’s right to seek
any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section
12(a) of this Agreement that Indemnitee is not entitled to indemnification, any
judicial proceeding or arbitration commenced pursuant to this Section 14 shall
be conducted in all respects as a de novo trial, or arbitration, on the merits
and Indemnitee shall not be prejudiced by reason of that adverse determination.
In any judicial proceeding or arbitration commenced pursuant to this Section 14,
Indemnitee shall be presumed to be entitled to be indemnified, held harmless,
exonerated and to receive advances of Expenses under this Agreement and the
Company shall have the burden of proving Indemnitee is not entitled to be
indemnified, held harmless, exonerated or receive advances of Expenses as the
case may be, and the Company may not refer to or introduce into evidence any
determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee
for any purpose. If Indemnitee commences a judicial proceeding or arbitration
pursuant to this Section 14, Indemnitee shall not be required to reimburse the
Company for any advances pursuant to Section 10 until a final determination is
made with respect to Indemnitee’s entitlement to indemnification (as to which
all rights of appeal have been exhausted or lapsed).
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(c) If a determination shall have been made pursuant to Section 12(a) of this
Agreement that Indemnitee is entitled to indemnification, the Company shall be
bound by such determination in any judicial proceeding or arbitration commenced
pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.
(d) The Company shall be precluded from asserting in any judicial proceeding
or arbitration commenced pursuant to this Section 14 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court or before any such arbitrator that the Company is
bound by all the provisions of this Agreement.
(e) The Company shall indemnify and hold harmless Indemnitee to the fullest
extent permitted by law against all Expenses and, if requested by Indemnitee,
shall (within ten (10) days after the Company’s receipt of such written request)
advance to Indemnitee, to the fullest extent permitted by applicable law, such
Expenses which are incurred by Indemnitee in connection with any judicial
proceeding or arbitration brought by Indemnitee (i) to enforce his rights under,
or to recover damages for breach of, this Agreement or any other
indemnification, hold harmless, exoneration, advancement or contribution
agreement or provision of the Charter, or the Company’s Bylaws now or hereafter
in effect; or (ii) for recovery or advances under any insurance policy
maintained by any person for the benefit of Indemnitee, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance, contribution or insurance recovery, as the case may be.
(f) Interest shall be paid by the Company to Indemnitee at the legal rate
under Delaware law for amounts which the Company indemnifies, holds harmless or
exonerates or is obliged to indemnify, hold harmless or exonerate for the period
commencing with the date on which Indemnitee requests indemnification, to be
held harmless, exonerated, contribution, reimbursement or advancement of any
Expenses and ending with the date on which such payment is made to Indemnitee by
the Company.
15. Establishment Of Trust. In the event of a Potential Change in Control, the
Company shall, upon written request by Indemnitee, create a “Trust” for the
benefit of Indemnitee and from time to time upon written request of Indemnitee
shall fund such Trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for, participating in or defending any
Proceedings, and any and all judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines penalties and
amounts paid in settlement) in connection with any and all Proceedings from time
to time actually paid or claimed, reasonably anticipated or proposed to be paid.
The trustee of the Trust (the “Trustee”) shall be a bank or trust company or
other individual or entity chosen by the Indemnitee and reasonably acceptable to
the Company. Nothing in this Section 15 shall relieve the Company of any of its
obligations under this Agreement. The amount or amounts to be deposited in the
Trust pursuant to the foregoing funding obligation shall be determined by mutual
agreement of the Indemnitee and the Company or, if the Company and the
Indemnitee are unable to reach such an agreement, by Independent Counsel
selected in accordance with Section 12(b) of this Agreement. The terms of the
Trust shall provide that, except upon the consent of both the Indemnitee and the
Company, upon a Change in Control: (a) the Trust shall not be revoked or the
principal thereof invaded, without the written consent of the Indemnitee; (b)
the Trustee shall advance, to the fullest extent permitted by applicable law,
within two (2) business days of a request by the Indemnitee and upon the
execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified, held harmless or
exonerated by the Company; (c) the Trust shall continue to be funded by the
Company in accordance with the funding obligations set forth above; (d) the
Trustee shall promptly pay to the Indemnitee all amounts for which the
Indemnitee shall be entitled to indemnification, or to be held harmless or
exonerated pursuant to this Agreement or otherwise; and (e) all unexpended funds
in such Trust shall revert to the Company upon mutual agreement by the
Indemnitee and the Company or, if the Indemnitee and the Company are unable to
reach such an agreement, by Independent Counsel selected in accordance with
Section 12(b) of this Agreement, that the Indemnitee has been fully indemnified,
held harmless and exonerated under the terms of this Agreement. The Trust shall
be governed by Delaware law (without regard to its conflicts of laws rules) and
the Trustee shall consent to the exclusive jurisdiction of the Delaware Court in
accordance with Section 23 of this Agreement.
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16. Security. Notwithstanding anything herein to the contrary, to the extent
requested by the Indemnitee and approved by the Board, the Company may at any
time and from time to time provide security to the Indemnitee for the Company’s
obligations hereunder through an irrevocable bank line of credit, funded trust
or other collateral. Any such security, once provided to the Indemnitee, may not
be revoked or released without the prior written consent of the Indemnitee.
17. Non-Exclusivity; Survival Of Rights; Insurance; Subrogation.
(a) The rights of Indemnitee as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Charter, the Company’s Bylaws, any agreement, a vote
of stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in applicable law,
whether by statute or judicial decision, permits greater indemnification, hold
harmless or exoneration rights or advancement of Expenses than would be afforded
currently under the Charter, the Company’s Bylaws or this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change. No right or remedy herein conferred
is intended to be exclusive of any other right or remedy, and every other right
and remedy shall be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other right or
remedy.
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(b) The DGCL, the Charter and the Company’s Bylaws permit the Company to
purchase and maintain insurance or furnish similar protection or make other
arrangements including, but not limited to, providing a trust fund, letter of
credit, or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee
against any liability asserted against him or incurred by or on behalf of him or
in such capacity as a director, officer, employee or agent of the Company, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of this
Agreement or under the DGCL, as it may then be in effect. The purchase,
establishment, and maintenance of any such Indemnification Arrangement shall not
in any way limit or affect the rights and obligations of the Company or of the
Indemnitee under this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Company and the Indemnitee shall
not in any way limit or affect the rights and obligations of the Company or the
other party or parties thereto under any such Indemnification Arrangement.
(c) To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, trustees, partners,
managing members, fiduciaries, employees, or agents of the Company or of any
other Enterprise which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, trustee, partner, managing member, fiduciary, employee or
agent under such policy or policies. If, at the time the Company receives notice
from any source of a Proceeding as to which Indemnitee is a party or a
participant (as a witness or otherwise), the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of such
Proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such Proceeding in accordance with the terms of
such policies.
(d) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
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(e) The Company’s obligation to indemnify, hold harmless, exonerate or advance
Expenses hereunder to Indemnitee who is or was serving at the request of the
Company as a director, officer, trustee, partner, managing member, fiduciary,
employee or agent of any other Enterprise shall be reduced by any amount
Indemnitee has actually received as indemnification, hold harmless or
exoneration payments or advancement of expenses from such Enterprise.
18. Duration Of Agreement. All agreements and obligations of the Company
contained herein shall continue during the period Indemnitee serves as a
director or officer of the Company or as a director, officer, trustee, partner,
managing member, fiduciary, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other Enterprise
which Indemnitee serves at the request of the Company and shall continue
thereafter so long as Indemnitee shall be subject to any possible Proceeding
(including any rights of appeal thereto and any Proceeding commenced by
Indemnitee pursuant to Section 14 of this Agreement) by reason of his Corporate
Status, whether or not he is acting in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement.
19. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any Section, paragraph
or sentence of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and shall remain
enforceable to the fullest extent permitted by law; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section, paragraph or
sentence of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested thereby.
20. Enforcement And Binding Effect.
(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby in order to induce
Indemnitee to serve as a director, officer or key employee of the Company, and
the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as a director, officer or key employee of the Company.
(b) Without limiting any of the rights of Indemnitee under the Charter or
Bylaws of the Company as they may be amended from time to time, this Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral, written and implied, between the parties hereto with respect to the
subject matter hereof.
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(c) The indemnification, hold harmless, exoneration and advancement of
expenses rights provided by or granted pursuant to this Agreement shall be
binding upon and be enforceable by the parties hereto and their respective
successors and assigns (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
or assets of the Company), shall continue as to an Indemnitee who has ceased to
be a director, officer, employee or agent of the Company or of any other
Enterprise at the Company’s request, and shall inure to the benefit of
Indemnitee and his or her spouse, assigns, heirs, devisees, executors and
administrators and other legal representatives.
(d) The Company shall require and cause any successor (whether direct or
indirect by purchase, merger, consolidation or otherwise) to all, substantially
all or a substantial part, of the business and/or assets of the Company, by
written agreement in form and substance satisfactory to the Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place.
(e) The Company and Indemnitee agree herein that a monetary remedy for breach
of this Agreement, at some later date, may be inadequate, impracticable and
difficult of proof, and further agree that such breach may cause Indemnitee
irreparable harm. Accordingly, the parties hereto agree that Indemnitee may
enforce this Agreement by seeking injunctive relief and/or specific performance
hereof, without any necessity of showing actual damage or irreparable harm and
that by seeking injunctive relief and/or specific performance, Indemnitee shall
not be precluded from seeking or obtaining any other relief to which he may be
entitled. The Company and Indemnitee further agree that Indemnitee shall be
entitled to such specific performance and injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions, without
the necessity of posting bonds or other undertaking in connection therewith. The
Company acknowledges that in the absence of a waiver, a bond or undertaking may
be required of Indemnitee by the Court, and the Company hereby waives any such
requirement of such a bond or undertaking.
21. Modification And Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions of this Agreement nor shall any
waiver constitute a continuing waiver.
22. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(i) if delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third (3rd) business day after the
date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature page of this
Agreement, or such other address as Indemnitee shall provide in writing to the
Company.
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(b) If to the Company, to:
ARIAD Pharmaceuticals, Inc.
26 Landsdowne Street
Cambridge, MA 02139
Attention: Chief Legal Officer
or to any other address as may have been furnished to Indemnitee in writing by
the Company.
23. Applicable Law And Consent To Jurisdiction. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to its
conflict of laws rules. Except with respect to any arbitration commenced by
Indemnitee pursuant to Section 14(a) of this Agreement, the Company and
Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Delaware Court and not in any other state or federal court in the
United States of America or any court in any other country; (b) consent to
submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement; (c)
appoint irrevocably, to the extent such party is not a resident of the State of
Delaware, RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King
Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as
such party’s agent for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force and validity
as if served upon such party personally within the State of Delaware; (d) waive
any objection to the laying of venue of any such action or proceeding in the
Delaware Court; and (e) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or inconvenient forum, or is subject (in whole or in part) to a jury
trial.
24. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
25. Miscellaneous. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate. The headings of the paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of
the day and year first above written.
ARIAD PHARMACEUTICALS, INC.
INDEMNITEE
By:
Harvey J. Berger, M.D.
Name:
Chairman and Chief Executive Officer
Address:
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Exhibit No. 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, entered into on February 6, 2006
and effective as of May 19, 2005 (the “Agreement Date”), between Monro Muffler
Brake, Inc. (the “Company”) and Catherine D’Amico (the “Executive”).
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated as of December 1, 2000, as amended and restated as of May 15,
2003 (the “Prior Agreement”).
WHEREAS, the Company and the Executive wish for the Executive to
continue to be employed by the Company upon the terms and conditions hereinafter
provided; and
WHEREAS, the Company and the Executive have agreed to amend and
restate the Prior Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment and Duties.
1.1 Employment by the Company. The Company hereby agrees to
employ the Executive for the Term (as herein defined) to render exclusive and
full-time services in the capacity of Executive Vice President and Chief
Financial Officer of the Company, subject to the control and direction of the
Company’s President and Board of Directors.
1.2 Duties/Authority. The Executive shall have responsibility for
the conduct of the business and the fiscal affairs of the Company and the
general supervision of and control over the assets, business interests, and
agents of the Company, in each case subject to the control and direction of the
President. The Executive’s duties hereunder shall be consistent with the duties,
responsibilities, and authority generally recognized for the offices of Chief
Financial Officer and Executive Vice President.
2. Term of Employment. The term of the Executive’s employment under
this Agreement (the “Term”) shall continue beginning on the Agreement Date and
ending on June 30, 2008, unless sooner terminated as provided herein.
3. Compensation.
3.1 Salary. As compensation for all services to be rendered
pursuant to this Agreement, the Company shall pay the Executive during the Term
a salary of $200,000 per annum (the “Base Salary”) effective April 1, 2005,
payable not less frequently than monthly, less such amounts as shall be required
to be withheld by applicable law and regulations. The Executive’s Base Salary
will be reviewed annually by the Compensation Committee of the Board of
Directors (the “Committee”) and may be adjusted upward (but not downward) to
reflect the Executive’s performance and responsibilities.
3.2 Annual Bonus. Pursuant to the Company’s bonus plan (the
“Bonus Plan”), the Company shall pay the Executive, within 120 days of its
fiscal year end, a bonus in respect of each prior fiscal year during the Term
beginning with the fiscal year ending in March 2006, of 35% of Base Salary if
the Company
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achieves its performance targets set by the Board of Directors with respect to
such year, increased up to a maximum of 87.5% of Base Salary if the Company
exceeds such performance targets by amounts to be determined by the Committee
(the “Annual Bonus”), less such amounts as shall be required to be withheld by
applicable law and regulations. If this Agreement terminates other than at the
end of a fiscal year and if the Executive is entitled to a pro rata bonus for
such partial year pursuant to Section 4.5, such pro rata bonus shall be equal to
the bonus the Executive would have received under the Bonus Plan had she been
employed by the Company for the entire fiscal year multiplied by a fraction, the
numerator of which shall be the number of days during such fiscal year she was
so employed and the denominator of which shall be 365.
3.3 Participation in Employee Benefit Plans. The Executive shall
be permitted during the Term, if and to the extent eligible, to participate in
any group life, hospitalization or disability insurance plan, health program, or
any pension plan or similar benefit plan of the Company, which is available
generally to other senior executives of the Company.
3.4 Expenses. Subject to such policies generally applicable to
senior executives of the Company as may from time to time be established by the
Board of Directors, the Company shall pay or reimburse the Executive for all
reasonable expenses (including travel expenses) actually incurred or paid by the
Executive during the Term in the performance of the Executive’s services under
this Agreement (“Expenses”) upon presentation of expense statements or vouchers
or such other supporting information as it may require.
3.5 Vacation. The Executive shall be entitled to such amount of
vacation which is available generally to other senior executives of the Company.
3.6 Additional Benefits. The Executive shall be entitled to the
following additional benefits under this Agreement:
(a) The use of an automobile comparable to that
provided to other senior executives in connection with the rendering of services
to the Company pursuant to this Agreement, together with reimbursement for all
gas, maintenance, insurance and repairs required by reason of her use of such
vehicle.
4. Termination, Removal from Duties or Resignation.
4.1 Termination Upon Death. If the Executive dies during the
Term, this Agreement shall terminate and the Company shall have no further
obligations under this Agreement with regard to salary. All other obligations of
the Company shall be pro-rated through the date of death in accordance with
Section 4.5.
4.2 Removal from Position Upon Disability. If, during the Term,
the Executive becomes physically or mentally disabled, whether totally or
partially, so that the Executive is unable to perform the essential functions of
her job, with or without reasonable accommodation, for a period or periods
aggregating 90 days during any twelve month period, the Company may at any time
after such 90th day of disability, by written notice to the Executive, remove
her from her position for the remainder of the Term of the Executive’s
employment hereunder. The Executive’s employment status with the Company will
continue after such removal for a period of time so that the Executive may
receive certain benefits as outlined in Section 4.6. The Company shall have no
obligation to reinstate her position or otherwise continue the Executive’s
employment if she should recover from her disability and such termination shall
not constitute a termination without Cause (as defined in Section 4.3).
4.3 Termination for Cause. The Company may at any time, by
written notice to the Executive, terminate the Term of the Executive’s
employment hereunder for Cause and the Executive shall have no right to receive
any compensation or benefits hereunder on and after the effective date of such
notice, except for the payment of any Base Salary earned, and any Expenses
incurred but not yet paid to the Executive and benefits in accordance with
Section 4.5 hereof. For purposes hereof, the term “Cause” shall mean:
(a) conviction of, or a plea of nolo contendere or guilty by, the Executive for
any crime constituting a felony in the jurisdiction in which committed or for
any other criminal act against the Company; (b) failure or refusal of the
Executive in any material respect (i) to perform the duties of her employment or
to follow the lawful and proper directives of the Board of
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Directors, provided such duties or directives are consistent with this Agreement
and such duties or directives have been given to the Executive in writing, or
(ii) to comply with the reasonable and substantial written policies, practices,
standards or regulations of the Company as may be established from time to time,
if such failure or refusal under either clause (i) or clause (ii) continues
uncured for a period of 10 days after written notice thereof, specifying the
nature of such failure or refusal and requesting that it be cured, is given by
the Company to the Executive; (c) any willful or intentional act of the
Executive committed for the purpose, or having the reasonably foreseeable
effect, of injuring the Company, its business or reputation or of improperly or
unlawfully converting for the Executive’s own personal benefit any property of
the Company; or (d) any violation or breach of the provisions of Section 6 of
this Agreement.
4.4 Termination Without Cause. During the Term, the Company may
terminate the Executive’s employment without Cause upon 30 days’ written notice.
If the Company terminates the Executive’s employment without Cause, upon the
Executive’s execution of a general release of the Company’s officers, directors,
employees and agents from any and all liability arising from the Executive’s
employment relationship with the Company (which release shall include an
agreement between both parties not to disparage the other and which shall not
prohibit the Executive from making good faith disclosures in compliance with any
legal or regulatory obligations or requirements to which she is subject), the
Executive shall receive (i) her Base Salary, payable in accordance with the
provisions of Section 3.1 hereof, for one year from the date of such
termination, (ii) the Annual Bonus for the year prior to the year in which the
Executive is terminated, to the extent not yet paid (the “Preceding Bonus”); and
(iii) the Annual Bonus for the fiscal year in which the Executive is terminated,
pro rata to the date of termination (the “Pro Rata Bonus”). The Executive shall
be entitled to receive the Preceding Bonus or the Pro Rata Bonus, as applicable:
(i) at the same time the annual bonuses for the same periods are paid to other
senior-level executives of the Company; and (ii) only to the extent the
Company’s Board of Directors or any Committee designated by the Board determines
to pay such bonus to the executive-level employees of the Company. Termination
by the Company any time prior to June 21, 2008 will require payments in
accordance with the preceding sentence. All stock options that have been granted
to the Executive through the termination date shall be deemed fully vested and
exercisable on such termination date and for a period of 90 days following such
date, all in accordance with the other terms of any such plan or grant.
4.5 Benefits upon Termination. Notwithstanding termination of
this Agreement pursuant to Section 4.1, the Executive shall continue to be
entitled to compensation and benefits accrued through the date of death. Except
as provided in Sections 4.4 and 5 hereof, all of the Executive’s rights to
bonuses and fringe benefits accruing after any termination of this Agreement, if
any, shall cease upon such termination; provided, however, that (i) the
Executive shall be entitled to any amounts payable to the Executive under any
Company profit sharing or other employee benefit plan up to the date of
termination; (ii) nothing contained in this Agreement is intended to limit or
otherwise restrict the availability of any benefits to the Executive required to
be provided pursuant to Section 4980B of the Code; and (iii) if the employment
of the Executive terminates pursuant to Section 4.1 or 4.4 other than at the end
of a fiscal year, she shall be entitled to a pro rata bonus under the Bonus Plan
in respect of such year as provided in Section 3.2.
4.6 Benefits upon Removal. If the Executive is removed from her
position pursuant to Section 4.2, the Executive, for a period of time (a) during
which her disability continues, and (b) consistent with the then-current policy
of the Company applicable to the Executive, shall continue to participate in
certain of the employee benefit plans in which she participated immediately
prior to her removal. These benefits would include participation in, as
applicable and to the extent defined in the Company’s applicable plans, group
life, medical/dental and disability insurance plans, each at the same ratio of
employer/employee contribution as applicable to the Executive immediately prior
to her removal. In addition, the Executive shall be entitled to compensation and
benefits accrued through the date of her removal from her duties. However, the
Executive’s rights to bonuses and fringe benefits accruing after her removal, if
any, shall cease upon such removal; provided, however that (i) the Executive
shall be entitled to any amounts payable to the Executive under any Company
profit sharing or other employee benefit plan up to the date of termination;
(ii) nothing contained in this Agreement is intended to limit or otherwise
restrict the availability of any benefits to the Executive required to be
provided pursuant to Section 4980B of the Code; and (iii) if the employment of
the Executive terminates pursuant to Section 4.2 other than at the end of a
fiscal year, she shall be entitled to a pro rata bonus under the Bonus Plan in
respect of such year as provided in Section 3.2, to the date of such removal.
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4.7 Termination upon Resignation. Notwithstanding anything stated
in this Agreement to the contrary, with fifteen (15) days prior written notice,
the Executive may resign from her position for the remainder of the Term of the
Executive’s employment hereunder. Such notice shall explicitly state in
reasonable detail the reason(s) for such resignation. Upon receipt of such
written notice, the Company, in its sole discretion, may shorten the fifteen
(15) day prior notice requirement. Upon a resignation by the Executive pursuant
to this Section, the Executive shall be entitled to compensation and benefits
accrued through the effective date of her resignation. All other rights and
obligations of the parties shall be determined as provided for in this
Agreement. In addition, if the Company requires the Executive, as a condition of
continued employment under the terms of this Agreement, that the Executive be
based anywhere beyond fifty (50) miles from the Company’s current offices in
Rochester, New York except for required travel on Company business, such
resignation shall be treated as a termination without Cause pursuant to
Section 4.4. Any resignation pursuant to the terms of this Section shall not
constitute a breach of this Agreement by either party.
5. Change in Control. In the event of the occurrence of a Change in
Control of the Company, the Executive shall remain employed by the Company,
pursuant to the terms and conditions of this Agreement. If, after the Change in
Control, the Executive’s employment is terminated without Cause, the Executive
resigns following: (a) a material diminution in her duties as set forth in
Section 1.2 of this Agreement or, (b) in the case of the sale of the Company,
the Executive either: (i) is not offered a comparable position by the buyer; or
(ii) is required by the buyer to be based anywhere beyond fifty (50) miles from
the Company’s current offices in Rochester, New York except for required travel
on Company business to an extent substantially consistent with that preceding
the Change in Control, then the Executive shall continue to receive her Base
Salary for one year and the stock options granted to the Executive shall become
fully vested and exercisable as of the date of termination or resignation, as
the case may be. The options will remain exercisable for a period of 90 days
following such date, all in accordance with the other terms of the stock option
plan under which they were granted. In addition, the Executive shall be entitled
to receive the Preceding Bonus and the Pro Rata Bonus, as defined and in the
manner calculated, in Section 4.4 hereof. For purposes of this Agreement, a
“Change in Control” shall mean any of the following: (i) any person who is not
an “affiliate” (as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended) of the Company as of the date of this Agreement becomes the
beneficial owner, directly or indirectly, of 50% or more of the combined voting
power of the then outstanding securities of the Company except pursuant to a
public offering of securities of the Company; (ii) the sale of the Company
substantially as an entirety (whether by sale of stock, sale of assets, merger,
consolidation, or otherwise) to a person who is not an affiliate of the Company
as of the date of this Agreement; or (iii) there occurs a merger, consolidation
or other reorganization of the Company with a person who is not an affiliate of
the Company as of the date of this Agreement, and in which shareholders of the
Company immediately preceding the merger hold less than 50% (the voting and
consent rights of Class C Preferred Stock shall be disregarded in this
calculation) of the combined voting power for the election of directors of the
Company immediately following the merger. A change of Control shall not be
deemed to occur because of the sale or conversion of any or all of Class C
Preferred Stock of the Company unless there is a simultaneous change described
in clauses (i), (ii) or (iii) of the preceding sentence.
6. Non-Competition and Confidentiality.
6.1 Non-Disclosure. The Executive will not, during the period of
the Executive’s employment with the Company or at any time thereafter,
regardless of the reason for the cessation of the Executive’s employment:
(i) use any Confidential Information for the Executive’s own benefit or for the
benefit of any person or entity other than the Company; (ii) disclose to any
person or entity any Confidential Information; or (iii) remove from the
Company’s premises or make copies of any Confidential Information, in any form;
except, in each case, as may be required within the scope of the Executive’s
duties during the Executive’s employment by the Company. Upon termination of the
Executive’s employment, or at any such time as the Company may request, the
Executive will deliver to the Company all copies in the Executive’s possession
of any Confidential Information, in any form. The Executive will not at any time
assert any rights as against the Company in or with respect to any Confidential
Information.
For purposes of this Agreement, “Confidential
Information” means any and all technical, research, operational, manufacturing,
marketing, sales and financial information, customer lists and trade secrets of
the Company or of any vendor, supplier, distributor or customer of the Company,
regardless of how
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acquired or developed by the Company or any such vendor, supplier, distributor
or customer, concerning any of their respective businesses. Confidential
Information does not include information, knowledge or data which the Executive
can prove was in the Executive’s possession prior to the commencement of the
Executive’s employment with the Company or information, knowledge or data which
was or is in the public domain by reason other than the wrongful acts of the
Executive.
6.2 Non-Competition. The Executive will not, during the period of
the Executive’s employment with the Company, and for (i) a period of two years
after the termination of the Executive’s employment with the Company for any
reason other than termination by the Company without Cause, or (ii) if for
termination by the Company without Cause, for the period she continues to
receive her Base Salary pursuant to Section 4.4, directly or indirectly, on the
Executive’s behalf or on behalf of any other person or entity, in any way,
whether as an individual proprietor, partner, stockholder, officer, employee,
consultant, director, joint venturer, investor, lender (other than as an
employee of a bank or other financial institution) or in any other capacity with
any entity materially engaged in the business of the Company, compete within the
territory served, or contemplated to be entered, by the Company on the date of
such termination of employment. Nothing contained herein shall be construed as
preventing the Executive from owning beneficially or of record not more than
five percent (5%) of the outstanding equity security of any entity whose equity
securities are registered under the Securities Act of 1933, as amended, or are
listed for trading on any recognizable United States or foreign stock exchange
or market. The business of the Company shall be defined to include the undercar
and tire service and repair of automobile and light truck brake, exhaust and
suspension systems, and related activities, as well as the sale and service of
tires and related accessories.
6.3 Non-Solicitation of Employees. Except in a case of
termination without Cause, the Executive will not, during the period of the
Executive’s employment with the Company, and for a period of two years after the
termination of the Executive’s employment with the Company for any reason,
directly or indirectly, recruit, solicit or otherwise induce or attempt to
induce any employee of the Company to leave the employment of the Company, nor
hire any such employee at any enterprise with which the Executive is then
affiliated.
6.4 Enforceability of Provisions. If any restriction set forth in
this Section 6 is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted
to extend only over the maximum period of time, range of activities or
geographic area as to which it may be enforceable, it being understood and
agreed that by the execution of this Agreement, the parties hereto regard the
restrictions herein as reasonable and compatible with their respective rights.
6.5 Remedy for Breach. The Executive hereby acknowledges that the
provisions of this paragraph 6 are reasonable and necessary for the protection
of the Company and its respective subsidiaries and affiliates. In addition, the
Executive further acknowledges that the Company and its respective subsidiaries
and affiliates will be irrevocably damaged if such covenants are not
specifically enforced. Accordingly, the Executive agrees that, in addition to
any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from an actual or threatened breach of such covenants. In addition,
and without limiting the Company’s other remedies, in the event of any breach by
the Executive of such covenants, the Company will have no obligation to pay any
of the amounts that remain payable by the Company under paragraphs 4 and 5 of
this Agreement, as applicable.
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7. Executive Representations.
(a) The Executive hereby represents and warrants to the Company
that (i) the execution, delivery and performance of this Agreement by the
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Executive is a party or by which he is bound, (ii) the Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of the Executive, enforceable in accordance
with its terms, and (iv) the Executive is under no physical or mental disability
that would hinder him in the performance of her duties hereunder.
(b) The Executive shall indemnify and hold harmless the Company
from and against any and all claims, liabilities, damages and reasonable costs
of defense and investigation arising out of any breach or inaccuracy in any of
the foregoing representations and warranties.
8. Other Provisions.
8.1 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
telecopied, or sent by certified, registered or express mail, postage prepaid,
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally, telecopied or if mailed, two days after the date of
mailing, as follows:
(a) if to the Company, to it at:
Monro Muffler Brake, Inc.
200 Holleder Parkway
Rochester, New York 14615
Attention: Robert G. Gross
(b) if to the Executive, to her at:
55 Great Wood Circle
Fairport, New York 14450
8.2 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto except
(a) such Stock Option Contracts written or otherwise extended to the Executive
including those referenced herein and those extended to the Executive prior
hereto and (b) and the Monro Muffler Employee Handbook, to the extent same
provides additional benefits to the Executive as a senior executive-level
employee of the Company.
8.3 Waivers, Amendments and Renewal. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. Notwithstanding the foregoing, Executive agrees to any changes made
by the Company to the terms of this Agreement if the Company determines, in its
sole reasonable good faith discretion, that such changes are reasonably
necessary to comply with Section 409A of the Code, and any regulations and other
guidance of general applicability that are issued thereunder. The Company will
notify the Executive whether or not
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it intends to negotiate in good faith the terms of a renewal of this Agreement
no later than thirty (30) days before the end of the Term.
8.4 Governing Law; Jurisdiction. This Agreement shall be governed
by and construed and enforced in accordance with and subject to, the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state. The courts of New York and the United States District Courts
for New York shall have jurisdiction over the parties with respect to any
dispute or controversy between them arising under or in connection with this
Agreement.
8.5 Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the Company and its successors and permitted assigns and
upon the Executive and his heirs, executors, legal representatives, successors
and permitted assigns. However, neither party may voluntarily assign, transfer,
pledge, encumber, hypothecate or otherwise dispose of this Agreement or any of
its or his rights hereunder without the prior written consent of the other
party, and any such attempted assignment, transfer, pledge, encumbrance,
hypothecation or other disposition without such consent shall be null and void
without effect.
8.6 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
8.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
8.8 Severability. If any term, provision, covenant or restriction
of this Agreement, or any part thereof, is held by a court of competent
jurisdiction of any foreign, federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority to be
invalid, void, unenforceable or against public policy for any reason, 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.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date first above written.
MONRO MUFFLER BRAKE, INC.
By: /s/ Robert G. Gross
Robert G. Gross, President and Chief Executive Officer
/s/ Catherine D’Amico
Catherine D’Amico
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Table of Contents
EXHIBIT 10.1
FIRST AMENDMENT
THIS FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT (this ‘‘Amendment’’) is made as
of May 3, 2006 by and among Journal Register Company (the ‘‘Company’’) and
Robert M. Jelenic.
WITNESSETH:
WHEREAS, the parties to this Amendment (the ‘‘Parties’’) are the parties to an
Employment Agreement dated March 5, 2003 (the ‘‘Employment Agreement’’), and
desire to amend the Agreement as set forth herein.
NOW, THEREFORE, the Parties agree as follows:
1. Position and Duties. The reference to ‘‘Chairman, President, and Chief
Executive Officer’’ in Section 3(a)(1) of the Employment Agreement is replaced
by a reference to ‘‘Chairman and Chief Executive Officer.’’
2. Clarifying Change. The reference to ‘‘the Effective Date’’ in the final
paragraph of Section 4(c) of the Employment Agreement is replaced by a reference
to ‘‘a Change of Control.’’
3. Section 409A Delay. The following language is added to the Employment
Agreement as a new Section 5(e): ‘‘Notwithstanding the foregoing provisions of
this Section 5, to the extent required in order to comply with Section 409A of
the Code (as defined in Section 7), amounts and benefits to be paid or provided
under this Section 5 shall be paid (with interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Code) or
provided to the Executive on the first business day after the date that is six
months following the Date of Termination.’’
4. Section 409A Savings Clause. The following language is added to the
Employment Agreement as a new Section 11(g): ‘‘If any compensation or benefits
provided by this Agreement may result in the application of Section 409A of the
Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to exclude such
compensation from the definition of ‘‘deferred compensation’’ within the meaning
of such Section 409A or in order to otherwise comply with the provisions of
Section 409A, other applicable provisions of the Code and/or any rules,
regulations or other regulatory guidance issued under such statutory provisions
and without any diminution in the value of the payments to the Executive.’’
5. Miscellaneous. This Amendment may be executed by facsimile and in one or
more counterparts, all of which shall be considered one and the same agreement.
Except as expressly amended hereby, the terms and conditions of the Employment
Agreement shall remain in full force and effect. This Amendment shall be
governed by and construed in accordance with, the laws of the State of Delaware
without regard to conflict or choice of law provisions that would compel the
application of the substantive laws of another jurisdiction.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties have
executed the foregoing Amendment this 3rd day of May, 2006.
[spacer.gif] JOURNAL REGISTER COMPANY
[spacer.gif] By: /s/ Joseph A. Lawrence
Name: Joseph A. Lawrence
Title: Chairman, Compensation Committee
[spacer.gif] /s/ Robert M. Jelenic
Robert M. Jelenic
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|
Exhibit 10.41
February 15, 2006
Mr. Jerome Perez
President
Leapfrog Enterprises
6401 Hollis Street, Suite 100
Emeryville, CA 94608-1071
Re: Separation and Consulting Agreement
Dear Jerry:
On behalf of LeapFrog Enterprises, Inc. (the “Company”), I am writing to set
forth the terms and conditions of the Separation and Consulting Agreement (the
“Agreement”) that the Company is offering to you with respect to your employment
transition. As set forth below, this Agreement is intended to modify and
supplement your Employment Agreement with the Company, executed effective as of
February 10, 2004 (the “Employment Agreement”), which is attached as Exhibit A
hereto, but not to nullify or replace any provision of the Employment Agreement
that is not inconsistent with this Agreement.
1. Resignation Date. You have submitted your resignation from employment with
the Company for “Good Reason,” as that term is defined in Section 3.3.3 (Good
Reason) of the Employment Agreement. (All capitalized terms used in this
Agreement shall have the meaning given to them in the Employment Agreement,
unless they are expressly defined differently in this Agreement.) Due to the
effect of the reorganization of the Company’s senior executive structure,
effected as of February 15, 2006 by the Company’s Board of Directors, on your
role, responsibilities, and authority, the Company hereby waives the requirement
of Section 3.3.3 of the Employment Agreement for thirty (30) days notice of such
a resignation. Accordingly, you and the Company have agreed that as of
February 15, 2006 (the “Separation Date”) you have resigned from your positions
as President and Director of the Company, and from any and all other offices,
directorships, or positions you may hold with the Company or any of its
subsidiaries or other affiliated entities, and the Company accepts those
resignations. On or as soon as practicable after the Resignation Date, you shall
receive a final paycheck from the Company for all accrued wages and all accrued
and unused vacation through the Resignation Date, subject to standard
withholdings and deductions.
2. Compensation and Benefits After Resignation. The parties acknowledge and
agree that Section 3.2 (Compensation and Benefits Upon Termination) of the
Employment Agreement was intended to provide all of the same benefits for a
termination for Good Reason (rather than “without Good Reason”) that otherwise
would have been provided for a termination without Cause under those sections.
Under this Agreement, you shall receive all of the compensation and benefits
that would be available under Section 3.2 of the Employment Agreement for a
termination without Cause, except as certain terms (including but not limited to
certain stock option vesting, the payment of Consulting Fees and health
insurance
1.
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reimbursement, and certain terms governing your consulting relationship with the
Company) shall be modified as provided in this Agreement.
(a) Vesting. As provided in Section 3.2(ii) (After First Year) of the Employment
Agreement, one half of the shares subject to the Option that have not otherwise
vested as of the Separation Date shall accelerate vesting and become fully
exercisable as of the Separation Date, however the parties acknowledge and agree
that all such Option shares have previously vested. All other shares subject to
any other equity award (including any stock options, performance shares, and
restricted stock grants) (the “Other Equity Awards”) shall cease vesting as of
the Separation Date; except that the restricted stock grant dated November 10,
2004 of 40,000 shares shall continue to vest in accordance with its terms during
the Consulting Period. Pursuant to the terms of the grants, all vested stock
options under both the Option and the Other Equity Awards shall be exercisable
until the date that is three (3) months after the end of the Consulting Period.
The Option and Other Equity Awards shall continue to be governed by the
Company’s 2002 Equity Incentive Plan and the terms of the applicable grant
documents.
(b) Consulting Fees. The Consulting Fees that would otherwise have been payable
monthly under Section 3.2(iii) (Three Year Post-Employment Consulting) of the
Employment Agreement, shall be paid as follows: no payments shall be made during
the first six (6) months of the Consulting Period. Six (6) months after the
Separation Date, the Company shall pay you an initial Consulting Fee of
$262,500, provided that: (i) you are not in material breach of the terms of the
Employment Agreement or this Agreement; and (ii) you have not provided any
services or assistance in any capacity to a Competitive Business (as defined in
Section 3.2(iii)(j) of the Employment Agreement), provided further that, in the
event that you have provided such services or assistance to a Competitive
Business, you shall receive a prorated portion of the initial Consulting Fee of
$262,500 reflecting the portion of the six month period after the Separation
Date that elapsed prior to the commencement of your services or assistance to a
Competitive Business. Thereafter, if you have not previously breached or
provided competitive services or assistance as described in the preceding
sentence, monthly payments of the Consulting Fees shall commence as provided in
Section 3.2(iii)(c) (Consulting Fees) of the Employment Agreement.
(c) Health Reimbursements. The Company’s reimbursement of your premiums for
continued health insurance coverage after the Separation Date pursuant to
Section 3.2(vii) (Health Reimbursements) of the Employment Agreement shall be
made as follows: no reimbursement payment shall be made for the first six
(6) months after the Separation Date; on the six (6) month anniversary of the
Separation Date, the Company shall reimburse you in one lump sum for the total
amount of your premium payments since the Separation Date; and beginning with
your next monthly premium payment after that lump sum payment is made, the
Company shall reimburse you on a monthly basis as provided in Section 3.2(vii)
of the Employment Agreement.
3. Protection of Consulting Information. You agree that, during the Consulting
Period and thereafter, you will not use or disclose any confidential or
proprietary information or materials of the Company that you obtain or develop
in the course of performing the Services, except: (a) with permission of a
duly-authorized Company officer, (b) for the purpose of performing the Services,
or (c) as required by compulsion of law (after providing notice of such
2.
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compulsion to the Company so as to afford the Company an opportunity to object
to such compulsion and disclosure).
4. Employment Expense Reimbursements. No later than forty-five (45) days after
the Separation Date, you shall submit your final documented employee expense
reimbursement statement reflecting all business expenses you incurred through
the Separation Date for which you seek reimbursement. The Company will reimburse
you for such expenses pursuant to its regular business practice. The Company
agrees that, six (6) months after the Separation Date, it will: (a) reimburse
you in the amount of $5,000 for your life insurance premiums, as provided in
Section 2.4(iii) of the Employment Agreement; and (b) reimburse you in the
amount of $5,000 for attorneys fees you have incurred in the negotiation and
review of this Agreement.
5. Deferred Compensation. In the event that the Company reasonably determines
that any payments or other compensation to you under this Agreement, the
Employment Agreement, or a written employee benefit plan subject to ERISA, fail
to satisfy the distribution requirement of Section 409A(a)(2)(A) of the Internal
Revenue Code (the “Code”) as a result of Section 409A(a)(2)(B)(i) of the Code,
then the payment of such benefits shall not be made pursuant to the payment
schedules provided herein and instead the payment of such benefits shall be
delayed or otherwise restructured to the minimum extent necessary so that such
benefits are not subject to the provisions of Section 409A(a)(1) of the Code.
6. Return of Company Property. Within ten (10) days of the Separation Date, you
shall return to the Company all documents (and all copies thereof) and other
property belonging to the Company that you have in your possession or control,
with the exception of any property that the Company authorizes you in writing to
retain in connection with your consulting Services hereunder, which property
shall be returned promptly upon the request of the Company. The documents and
property to be returned by you include, but are not limited to, all files,
correspondence, email, memoranda, notes, notebooks, drawings, records, plans,
forecasts, reports, studies, analyses, compilations of data, proposals,
agreements, financial information, research and development information, sales
and marketing information, operational and personnel information,
specifications, code, software, databases, computer-recorded information,
tangible property and equipment (including, but not limited to, facsimile
machines, mobile telephones, and servers), credit cards, entry cards,
identification badges and keys; and any materials of any kind which contain or
embody any proprietary or confidential information of the Company or any of its
Affiliates (and all reproductions thereof in whole or in part). You agree to
make a diligent search to locate any such documents, property and information.
If you have used any personally owned computer, server, or e-mail system to
receive, store, review, prepare or transmit any Company confidential or
proprietary data, materials or information, within fifteen (15) business days
after the Separation Date, you shall provide the Company with a computer-useable
copy of all such information and then permanently delete and expunge such
confidential or proprietary information from those systems; and you agree to
provide the Company access to your system as requested to verify that the
necessary copying and/or deletion is done.
7. Disclosure. You hereby acknowledge and agree that this Agreement and a
description of the terms set forth herein will be filed by the Company with the
Securities and Exchange Commission pursuant to its obligations as a reporting
company under the Securities
3.
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Exchange Act of 1934, as amended and the rules and regulations promulgated
thereunder, and consequently shall be publicly available.
8. Nondisparagement. For the three (3) year period following the Separation
Date, you agree not to disparage the Company and its officers, directors, and
employees in any manner intended to be harmful to them or their business,
business reputation or personal reputation; and the Company (through its
executive officers and directors) agrees not to disparage you in any manner
intended to be harmful to you or your business, business reputation or personal
reputation. Notwithstanding anything else in this paragraph, both the Company
and you may respond accurately and fully to any inquiry or request for
information to the extent required by legal process.
9. No Admissions. The promises and payments in consideration of this Agreement
shall not be construed to be an admission of any liability or obligation by
either party to the other party, and neither party makes any such admission.
10. No Voluntary Adverse Assistance. You agree that you will not voluntarily
assist any other person in preparing, bringing, or pursuing any litigation,
arbitration, administrative claim or other formal proceeding against the
Company, its parents, subsidiaries, Affiliates, distributors, officers,
directors, employees or agents, with respect to any matters arising prior to the
end of the Consulting Period, unless pursuant to subpoena or other compulsion of
law.
11. Acts Necessary To Effect This Agreement. You and the Company agree to timely
execute any instruments or perform any other acts that are or may be necessary
or appropriate to effect and carry out the transactions contemplated by this
Agreement.
12. Release. In exchange for the consideration under this Agreement to which you
would not otherwise be entitled, you hereby generally and completely release the
Company and its directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers,
affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring at any time prior to or at the time you
sign this Agreement. This general release includes, but is not limited to:
(1) all claims arising out of or in any way related to your employment with the
Company or the termination of that employment; (2) all claims related to your
compensation or benefits from the Company, including salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership or equity interests in
the Company; (3) all claims for breach of contract, wrongful termination, and
breach of the implied covenant of good faith and fair dealing; (4) all tort
claims, including claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including claims for discrimination, harassment, retaliation,
attorneys’ fees, or other claims arising under the federal Civil Rights Act of
1964 (as amended), the federal Americans with Disabilities Act of 1990, the
federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal
Family and Medical Leave Act, the California Family Rights Act, and the
California Fair Employment and Housing Act (as amended). Notwithstanding the
foregoing, you are not releasing the Company hereby from: (a) any obligation to
indemnify you pursuant to the
4.
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articles and bylaws of the Company, any valid fully executed indemnification
agreement with the Company, any applicable directors and officers liability
insurance policy, and applicable law; or (b) any obligations to make payments to
you under Section 3.2(iv) (Loss Reimbursement) or Section 3.2(vi) (Pro Rata
Bonus) of the Employment Agreement. You represent that you have no lawsuits,
claims or actions pending in your name, or on behalf of any other person or
entity, against the Company or any other person or entity subject to the release
granted in this paragraph.
13. ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving
and releasing any rights you may have under the ADEA, and that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which you are already entitled. You further
acknowledge that you have been advised, as required by the ADEA, that: (a) your
waiver and release do not apply to any rights or claims that may arise after the
date that you sign this Agreement; (b) you should consult with an attorney prior
to signing this Agreement (although you may choose voluntarily not to do so);
(c) you have twenty-one (21) days from the date you receive this Agreement to
consider this Agreement (although you may choose voluntarily to sign it
earlier); (d) you have seven (7) days following the date you sign this Agreement
to revoke the Agreement by providing written notice of your revocation to the
Board; and (e) this Agreement will not be effective until the date upon which
the revocation period has expired, which will be the eighth day after the date
that this Agreement is signed by you (the “Effective Date”).
14. Section 1542 Waiver. In giving the releases set forth in this Agreement,
which include claims which may be unknown to you at present, you acknowledge
that you have read and understand Section 1542 of the California Civil Code
which reads as follows: “A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor.” You hereby expressly waive and relinquish all rights and
benefits under that section and any law or legal principle of similar effect in
any jurisdiction with respect to your release of claims herein, including but
not limited to the release of unknown and unsuspected claims.
15. Dispute Resolution. To ensure rapid and economical resolution of any
disputes regarding this Agreement, the parties hereby agree that any and all
claims, disputes or controversies of any nature whatsoever arising out of, or
relating to, this Agreement, or its interpretation, enforcement, breach,
performance or execution, your employment with the Company, or the termination
of such employment, shall be resolved, to the fullest extent permitted by law,
by final, binding and confidential arbitration in San Francisco, California
conducted pursuant to the provisions of Section 12 (Arbitration) of the
Employment Agreement.
16. Miscellaneous. This Agreement, including the Employment Agreement attached
hereto as an exhibit, constitutes the complete, final and exclusive embodiment
of the entire agreement between you and the Company with regard to the subject
matter hereof. It is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other agreements, promises, warranties or representations
concerning its subject matter. Notwithstanding the provision of the previous
sentence, this Agreement shall be construed to modify and supplement the
Employment Agreement, but not to
5.
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nullify or replace any provision of the Employment Agreement that is not
inconsistent with this Agreement. This Agreement may not be modified or amended
except in a writing signed by both you and a duly authorized officer of the
Company. This Agreement will bind the heirs, personal representatives,
successors and assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination shall not affect any other provision of this Agreement
and the provision in question shall be modified so as to be rendered enforceable
in a manner consistent with the intent of the parties insofar as possible under
applicable law. This Agreement shall be construed and enforced in accordance
with the laws of the State of California without regard to conflicts of law
principles. Any ambiguity in this Agreement shall not be construed against
either party as the drafter. Any waiver of a breach of this Agreement, or rights
hereunder, shall be in writing and shall not be deemed to be a waiver of any
successive breach or rights hereunder. This Agreement may be executed in
counterparts which shall be deemed to be part of one original, and facsimile
signatures shall be equivalent to original signatures.
If this Agreement is acceptable to you, please sign below on or within
twenty-one (21) days of your receipt of this letter and return the original to
me. If I do not receive the fully executed Agreement from you by such date, the
Company’s offer contained herein will expire.
We very much look forward to continuing to work with you.
Sincerely,
LEAPFROG ENTERPRISES, INC. By: /s/ Thomas J. Kalinske Thomas J. Kalinske
Chief Executive Officer
Exhibit A – Employment Agreement
Understood and Agreed: /s/ Jerome Perez 2/15/06 Jerome Perez Date
6.
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EXHIBIT A
EMPLOYMENT AGREEMENT
[Employment Agreement, effective as of February 10, 2004, between Jerome Perez
and
LeapFrog filed as Exhibit 10.28 with LeapFrog Enteprises, Inc.’s Form 10-K
filed on March 12, 2004 (SEC File No. 001-31396)]
7. |
Exhibit 10.5
Jerry DeBoer was hired by the Company pursuant to an offer letter, dated
November 20, 2000, which letter is attached as Exhibit 10.20 to the Company’s
Annual Report on Form 10-K for the year ended February 3, 2001. Effective
February 26, 2006, Mr. DeBoer’s annual base salary shall be $236,900.
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