Document:

ex10_1.htm

 

 

Exhibit 10.1

 

SECOND AMENDMENT TO SECOND AMENDED AND RESTATED

 

FIRST LIEN CREDIT AGREEMENT

 

This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (“Amendment”), dated as of May 24, 2012 (the “Effective Date”), is by and among Energy XXI Gulf Coast, Inc., a Delaware corporation (the “Borrower”), the lenders party to the First Lien Credit Agreement described below (the “Lenders”), and The Royal Bank of Scotland plc, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”), and the other parties in the capacities herein identified.

 

RECITALS

 

WHEREAS, the Borrower, the Lenders, the Administrative Agent and certain other Persons are parties to the Second Amended and Restated First Lien Credit Agreement, dated as of May 5, 2011, as amended by the First Amendment to Second Amended and Restated First Lien Credit Agreement dated as of October 4, 2011 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “First Lien Credit Agreement”); and

 

WHEREAS, the Borrower has requested that the Administrative Agent, the Swing Line Lender, the Issuer, and the Lenders amend the First Lien Credit Agreement in certain respects as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

AGREEMENT

 

Section 1. Definitions.

 

  Capitalized terms used herein but not defined herein shall have the meanings as given them in the First Lien Credit Agreement, unless the context otherwise requires.

 

Section 2. Amendments to First Lien Credit Agreement.

 

(a) Amendment to Preamble of First Lien Credit Agreement.  The Preamble of the First Lien Credit Agreement is amended by replacing it in its entirety with the following:

 

THIS SECOND AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT, dated as of May 5, 2011, is among ENERGY XXI GULF COAST, INC., a Delaware corporation (the “Borrower”), the various financial institutions and other Persons from time to time parties hereto (the “Lenders”), THE ROYAL BANK OF SCOTLAND plc (“RBS”), as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, RBS SECURITIES INC. (“RBS Securities”), UBS Securities LLC (“UBS Securities”) and WELLS FARGO BANK, N.A. (“WFBNA”), as Lead Arrangers (in such capacity the “Lead Arrangers”), WFBNA and UBS LOAN FINANCE LLC (“UBS”) as Co-Syndication Agents (in such capacity, each, a “Syndication Agent” and together, the “Co-Syndication Agents”) for the Lenders, and CAPITAL ONE, NATIONAL ASSOCIATION and REGIONS BANK, as Co-Documentation Agents (in such capacity, each, a “Documentation Agent” and together, the “Co-Documentation Agents”), and the Issuers herein identified.

 

  

 

  

(b) Amendment to Section 1.1 of the First Lien Credit Agreement.  Section 1.1 of the First Lien Credit Agreement is hereby amended by adding the following new defined terms in alphabetical order:

 

“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 September 15, 2019.  Notwithstanding the preceding sentence, any capital stock that would constitute Disqualified Stock solely because the holders of the capital stock have the right to require the Borrower to repurchase or redeem such capital stock upon the occurrence of a change of control or an asset sale will 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 Section 7.2.6 hereof.

 

“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).

 

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, as such price is determined in good faith by the Borrower.

 

“NGP” or “Energy XXI Natural Gas Partners LLC” means Energy XXI Natural Gas Partners, LLC, a Delaware limited liability company and Affiliate of Parent, engaged in the business of acquiring and operating certain types of natural gas and other hydrocarbon-related assets and other assets incidental or ancillary thereto.

 

(c) Amendment to Section 1.1 of the First Lien Credit Agreement.  Section 1.1 of the First Lien Credit Agreement is hereby amended by replacing the following defined terms in their entirety with the following:

 

“Hedging Obligations” means, with respect to any Person, all liabilities of such Person in respect of transactions under Hedging Agreements.

 

“Issuer” means, as applicable, RBS, WFBNA or UBS AG, Stamford Branch, in its capacity as an issuer of the Letters of Credit pursuant to the terms of this Agreement.  At the request of the Administrative Agent and with the Borrower’s consent (not to be unreasonably withheld), another Lender may issue one or more Letters of Credit hereunder.

 

  

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“Lenders” as defined in the preamble, and includes, without limitation, (i) the Revolving Lenders, (ii) the Swing Line Lender and (iii) for purposes of the Security Documents only, each Person (other than the Borrower or any Subsidiary of the Borrower) which is entitled to the benefits of Section 10.19 of this Agreement and, in such case, only for the purposes of the applicable Hedging Agreements entered into by such Person prior to the time such Person ceased to provide any Commitment hereunder.

 

“Obligations” means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of the Borrower and each other Obligor arising under or in connection with a Loan Document, including Reimbursement Obligations and the principal of and premium, if any, and interest (including interest accruing (or which would have accrued) during the pendency of any proceeding of the type described in Section 8.1.9, whether or not allowed in such proceeding) on the Loans and such obligations.  For sake of clarity, the Obligations shall include all Hedging Obligations of the Borrower (or, to the extent the Administrative Agent provides its consent pursuant to Section 7.2.20(f) or this Agreement is subsequently modified to permit hedging arrangements with a Subsidiary of the Borrower to be secured by Collateral, such Subsidiary) in respect of transactions under Hedging Agreements entered into with any Lender or Affiliate of any Lender at the time such Lender is a Lender hereunder.

 

“WFBNA” is defined in the Preamble.

 

(d) Amendment to Section 7.2.6(d) of the First Lien Credit Agreement.  Section 7.2.6(d) of the First Lien Credit Agreement is hereby amended in its entirety to the following:

 

(d)           Restricted Payments,

 

(w) to Parent or Subsidiaries of Parent (so that such amounts can ultimately be paid to Parent) in an amount not to exceed $25,000,000 in the aggregate (on a cumulative basis for all payments pursuant to this clause (w) from the Closing Date) so that Parent may use such amounts for the purpose of paying premiums or other payments associated with inducing the early conversion of the Parent’s convertible preferred stock,

 

(x) to Parent or Subsidiaries of Parent (so that such amounts can ultimately be paid to Parent) in an aggregate amount not to exceed $17,000,000 in any calendar year (on a cumulative basis for all payments pursuant to this clause (x)) so that Parent may pay dividends on its outstanding preferred stock;

 

(y) to Parent or Subsidiaries of Parent in an amount not to exceed $150,000,000 in the aggregate (on a cumulative basis for all payments pursuant to this clause (y)) so that Parent or Subsidiaries of Parent (as the case may be) may use such amounts to make capital contributions to NGP within thirty (30) days of the making of such Restricted Payment (and if such contribution is not made and used by NGP to purchase assets within such thirty (30) days, such Restricted Payment will be returned immediately to the Borrower on or prior to such thirtieth day); provided that no Restricted Payment otherwise permitted by this clause (y) shall be made unless prior to, or contemporaneously with, the making of such Restricted Payment the Borrower shall have delivered to the Administrative Agent a copy of the Operating Agreement in form and substance satisfactory to the Administrative Agent and certified by the Borrower as being true, correct and complete; and

 

(z) to Parent or Subsidiaries of Parent in an amount not to exceed $100,000,000 in any calendar year (on a cumulative basis for all payments under this clause (z) during such calendar year);

 

  

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provided, however, that notwithstanding the foregoing, the aggregate of all Restricted Payments made from June 30, 2011 pursuant to clauses (w) through (z) shall not exceed an amount equal to the sum of $70,000,000 plus 50% of the Consolidated Net Income of the Borrower for the period (taken as one accounting period) from October 1, 2010 to the end of the Borrower’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit) plus 100% of the aggregate net cash proceeds received by the Borrower (and the Fair Market Value of any Property to the extent acquired in consideration of Equity Interests of the Borrower (other than Disqualified Stock)) after December 17, 2010 as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Borrower (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Borrower that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Borrower), provided, further, however, that such Restricted Payments under this Section 7.2.6(d) may be made only so long as (i) no Default or Borrowing Base Deficiency has occurred and is continuing, or shall be caused thereby, (ii) in the case of a Restricted Payment made pursuant to clause (w), (x) or (y) the Borrowing Base Utilization Percentage after giving effect to such proposed Restricted Payment would not exceed 50%, (iii) in the case of a Restricted Payment permitted pursuant to clause (w) or (x), the sum of (A) an amount equal to (I) the lesser of the Commitment Amount and the Borrowing Base less (II) the aggregate amount of the Credit Exposure of all Lenders plus (B) the aggregate amount of all cash and Cash Equivalent Investments of the Borrower and its Subsidiaries after giving effect to such proposed Restricted Payment, shall equal or exceed $150,000,000, (iv) in the case of a Restricted Payment made pursuant to clause (z), after giving effect to such Restricted Payment (1) there are no outstanding Loans and (2) the sum of (A) an amount equal to (I) the lesser of the Commitment Amount and the Borrowing Base less (II) the aggregate amount of the Credit Exposure of all Lenders plus (B) the aggregate amount of all cash and Cash Equivalent Investments of the Borrower and its Subsidiaries, shall equal or exceed $500,000,000; (v) prior to the making of any such Restricted Payment (or any Investment permitted pursuant to Section 7.2.5(m) in lieu of a Restricted Payment), the Borrower delivers a certificate substantially in the form of Exhibit K hereto with appropriate insertions to the Administrative Agent certifying as to the satisfaction of the conditions set forth in the immediately foregoing clauses (i)-(iv), to the extent applicable and certifying (A) in regards to a proposed Restricted Payment under clause (w) or (y) of this Section 7.2.6(d) or Investments in lieu thereof, the aggregate amount of all such Restricted Payments or Investments in lieu thereof (including the amount of the Restricted Payment or Investment proposed to be made) pursuant to such clause and (B) in regards to a proposed Restricted Payment under clause (x) or (z) of this Section 7.2.6.(d) or Investments in lieu thereof, the aggregate amount of all such Restricted Payments (and Investments in lieu thereof) made from January 1 of such year up to and including the date of such Restricted Payment; and

 

(e) Amendment to Section 7.2.20(e) of the First Lien Credit Agreement.  Section 7.2.20(e) of the First Lien Credit Agreement is hereby amended and restated in its entirety to the following:

 

“(e)           No Obligor will purchase any calls other than (i) calls corresponding to an existing permitted collar already executed or being executed in conjunction with such purchased call or (ii) with the consent of the Administrative Agent, calls for the purpose of mitigating physical delivery risk.”

 

(f) Amendment to Section 7.2.20(f) of the First Lien Credit Agreement.  The second sentence of Section 7.2.20(f) of the First Lien Credit Agreement is hereby amended and restated in its entirety to the following:

 

“Notwithstanding anything herein to the contrary, no Obligor will enter into any Hedging Agreements other than in the ordinary course of business for the purpose of protecting against fluctuations in interest rates, commodity prices and/or basis risk and not for the purpose of speculation; provided that, for the avoidance of doubt, a Hedging Agreement shall be deemed not to be entered into for the purpose of speculation, for purposes of the foregoing, if the applicable call strike price thereunder does not vary by more than two percent (2%) from the call strike price of a corresponding prior Hedging Agreement transaction.”

 

(g) Amendment to Section 9.12 of the First Lien Credit Agreement.  Section 9.12 of the First Lien Credit Agreement is hereby amended by inserting the following new clause (c) at the end of such Section:

 

	
  

	
“(c)

	
Any Secured Party may assign or otherwise transfer (in whole or in part) its interest pursuant to any Hedging Agreement with the Borrower (or a Subsidiary thereof if permitted by Section 7.2.20) to an Approved Counterparty that is or becomes a Lender or an Affiliate of a Lender at the time of such transfer and such Hedging Agreement shall remain secured by the Loan Documents to the same extent that such Hedging Agreement was secured hereunder when the original Secured Party was the counterparty to such Hedging Agreement.”

 

  

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(h) Amendment to Schedule II to the First Lien Credit Agreement.  Schedule II to the First Lien Credit Agreement is hereby amended and restated in its entirety, as set forth on Annex I attached hereto.

 

(i) Amendment to Exhibit K to the First Lien Credit Agreement.  Exhibit K to the First Lien Credit Agreement is hereby amended by (1) deleting the following instruction from Section 3 of such Exhibit K “[if Proposed Restricted Payment (or Investment) is pursuant to (or in lieu of a Restricted Payment pursuant to) clause (w) or (y)]” and inserting in place of such instruction the following instruction “[if Proposed Restricted Payment (or Investment) is pursuant to(or in lieu of a Restricted Payment pursuant to) clause (w) or (x)]” and (2) deleting the first paragraph of Section 4 of such Exhibit K and inserting in place thereof the following:

 

“4.  Certification of Amounts of Restricted Payments.  [if Proposed Restricted Payment (or Investment) is pursuant to clause (w)]  The aggregate amount of all Restricted Payments (and Investments) from the Closing Date through and including the Proposed Restricted Payment (and Investments) made pursuant to (or in lieu of a Restricted Payment pursuant to) clause (w) of Section 7.2.6(d) is $[_____________].

 

Section 3. Conditions to Effectiveness.

 

  This Amendment shall be deemed effective (subject to the conditions herein contained) as of the Effective Date when the Administrative Agent has received counterparts hereof duly executed by the Borrower, the Administrative Agent, the Swing Line Lender, the Issuers and all of the Lenders and upon the prior or concurrent satisfaction of each of the following conditions:

 

(a) the Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Amendment signed on behalf of such party; and

 

  

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(b) the Administrative Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Section 3.3 of the First Lien Credit Agreement, the fee to each Lender agreed between the Borrower and the Administrative Agent and, if then invoiced, pursuant to Section 10.3 of the First Lien Credit Agreement.

 

Notwithstanding the foregoing, this Amendment shall not become effective and the agreements hereunder will be terminated unless each of the foregoing conditions is satisfied (or waived by all of the Lenders in writing) on or prior to May 31, 2012.

 

Section 4. Representations and Warranties.

 

  The Borrower hereby represents and warrants that after giving effect hereto:

 

(a) the representations and warranties of the Obligors contained in the Loan Documents are true and correct in all material respects, other than those representations and warranties that expressly relate solely to a specific earlier date, which shall remain correct in all material respects as of such earlier date;

 

(b) the execution, delivery and performance by the Borrower and each other Obligor of this Amendment and the other Loan Documents have been duly authorized by all necessary corporate or other action required on their part and this Amendment, along with the First Lien Credit Agreement as amended hereby and the other Loan Documents, constitutes the legal, valid and binding obligation of each Obligor a party thereto enforceable against them in accordance with its terms, except as its enforceability may be affected by the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally;

 

  

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(c) neither the execution, delivery and performance of this Amendment by the Borrower and each other Obligor, the performance by them of the First Lien Credit Agreement as amended hereby nor the consummation of the transactions contemplated hereby does or shall contravene, result in a breach of, or violate (i) any provision of any Obligor’s certificate or articles of incorporation or bylaws or other similar documents, or agreements, (ii) any law or regulation, or any order or decree of any court or government instrumentality, or (iii) any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Obligor or any of its Subsidiaries is a party or by which any Obligor or any of its Subsidiaries or any of their property is bound, except in any such case to the extent such conflict or breach has been waived by a written waiver document, a copy of which has been delivered to Administrative Agent on or before the date hereof;

 

(d) no Material Adverse Effect has occurred since May 5, 2011; and

 

(e) no Default or Event of Default or Borrowing Base Deficiency has occurred and is continuing.

 

Section 5. Loan Document; Ratification.

 

(a) This Amendment is a Loan Document.

 

(b) The Borrower and each other Obligor hereby ratifies, approves and confirms in every respect all the terms, provisions, conditions and obligations of the First Lien Credit Agreement as amended hereby and each of the other Loan Documents including without limitation all Mortgages, Security Agreements, Guaranties, Control Agreements and other Security Documents, to which it is a party.

 

Section 6. Consent to Amendment of Mortgages.

 

  In order to conform the treatment of secured Hedging Agreements under the Security Documents, to the treatment of secured Hedging Agreements under the Credit Agreement (after giving effect to this Amendment), the Administrative Agent is hereby authorized to make such amendments as it may deem appropriate to one or more of the Security Documents.

 

Section 7. Costs and Expenses.

 

  As provided in Section 10.3 of the First Lien Credit Agreement, the Borrower agrees to reimburse Administrative Agent for all fees, costs, and expenses, including the reasonable fees, costs, and expenses of counsel or other advisors for advice, assistance, or other representation, in connection with this Amendment and any other agreements, documents, instruments, releases, terminations or other collateral instruments delivered by the Administrative Agent in connection with this Amendment.

 

  

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Section 8. GOVERNING LAW.

 

  THIS AMENDMENT SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

Section 9. Severability.

 

  Any provision of this Amendment that 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 Amendment or affecting the validity or enforceability of such provision in any other jurisdiction.

 

Section 10. Counterparts.

 

  This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts.  Any signature hereto delivered by a party by facsimile or electronic transmission shall be deemed to be an original signature hereto.

 

Section 11. No Waiver.

 

  The express waivers set forth herein are limited to the extent expressly provided in this Amendment and, except as expressly set forth in this Amendment, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any default of the Borrower or any other Obligor or any right, power or remedy of the Administrative Agent or the other Secured Parties under any of the Loan Documents, nor constitute a waiver of (or consent to departure from) any terms, provisions, covenants, warranties or agreements of any of the Loan Documents.  The parties hereto reserve the right to exercise any rights and remedies available to them in connection with any present or future defaults with respect to the First Lien Credit Agreement or any other provision of any Loan Document.

 

Section 12. Successors and Assigns.

 

  This Amendment shall be binding upon the Borrower and its successors and permitted assigns and shall inure, together with all rights and remedies of each Secured Party hereunder, to the benefit of each Secured Party and the respective successors, transferees and assigns.

 

Section 13. Entire Agreement.

 

  THIS AMENDMENT, THE FIRST LIEN CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

  

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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

(Signature Pages Follow)

 ---EXXI Second Amendment-

	  	  	  

  

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In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first written above.

 

	
  

	
BORROWER:

 

	
  

	
ENERGY XXI GULF COAST, INC.

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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ADMINISTRATIVE AGENT, ISSUERS AND LENDERS:

 

	
  

	
THE ROYAL BANK OF SCOTLAND plc, as Administrative Agent, Issuer and Lender

 

	
  

	
By:

	
  /s/ Sanjay Remond

 

	
  

	
Name:  Sanjay Remond

 

	
  

	
Title:  Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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BNP PARIBAS, as Lender

 

	
  

	
By:  /s/ Mylene Dao

	 

 

	
  

	
Name:  Mylene Dao

 

	
  

	
Title:  Managing Director

 

	
  

	
By:

	
  /s/Michiel V. M. Van Der Voort

 

	
  

	
Name:  Michiel M. Van Der Voort

 

	
  

	
Title:  Managing Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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WELLS FARGO BANK, N.A., as Issuer and Lender

 

	
  

	
By:

	
/s/ Greg Smothers

 

	
  

	
Name:  Greg Smothers

 

	
  

	
Title:  Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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AMEGY BANK NATIONAL ASSOCIATION, as Lender

 

	
  

	
By:

	
  /s/ Wakeford Thompson

 

	
  

	
Name:  Wakeford Thompson

 

	
  

	
Title:  Vice President

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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THE BANK OF NOVA SCOTIA, as Lender

 

	
  

	
By:

	
  /s/ Terry Donovan

 

	
  

	
Name:  Terry Donovan

 

	
  

	
Title:  Managing Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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TORONTO DOMINION (TEXAS) LLC, as Lender

 

	
  

	
By:

	
  /s/ Kelly Hundal

 

	
  

	
Name:  Kelly Hundal

 

	
  

	
Title:  Authorized Signatory

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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CAPITAL ONE, NATIONAL ASSOCIATION, as Lender

 

	
  

	
By:

	
  /s/ Peter Shen

 

	
  

	
Name:  Peter Shen

 

	
  

	
Title:  Vice President

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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NATIXIS, as Lender

 

	
  

	
By:

	
  /s/ Louis P. Laville, III

 

	
  

	
Name:  Louis P. Laville, III

 

	
  

	
Title:  Managing Director

 

	
  

	
By:

	
  /s/ Timothy L. Polvado

 

	
  

	
Name:  Timothy L. Polvado

 

	
  

	
Title:  Senior Managing Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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BARCLAYS BANK PLC, as Lender

 

	
  

	
By:

	
  /s/ Vanessa A. Kurbatsky

 

	
  

	
Name:  Vanessa A. Kurbatsky

 

	
  

	
Title:  Vice President

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender

 

	
  

	
By:  /s/ Mikhail Faybusovich

	 

 

	
  

	
Name:  Mikhail Faybusovich

 

	
  

	
Title:  Director

 

	
  

	
By:

	
  /s/ Michael D. Spaight

 

	
  

	
Name:  Michael D. Spaight

 

	
  

	
Title:  Associate

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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UBS LOAN FINANCE LLC, as Lender

 

	
  

	
By:

	
  /s/ Irja R. Otsa

 

	
  

	
Name:  Irja R. Otsa

 

	
  

	
Title:  Associate Director

 

	
  

	
By:

	
  /s/ Mary E. Evans

 

	
  

	
Name:  Mary E. Evans

 

	
  

	
Title:  Associate Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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ING CAPITAL LLC, as Lender

 

	
  

	
By:

	
  /s/ Juli Bieser

 

	
  

	
Name:  Juli Bieser

 

	
  

	
Title:  Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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REGIONS BANK, as Lender and

 

	
  

	
as Swing Line Lender

 

	
  

	
By:

	
  /s/ Daniel G. Steele

 

	
  

	
Name:  Daniel G. Steele

 

	
  

	
Title:  Senior Vice President

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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UBS AG, STAMFORD BRANCH, as Issuer

 

	
  

	
By:

	
  /s/ Irja R. Otsa

 

	
  

	
Name:  Irja R. Otsa

 

	
  

	
Title:  Associate Director

 

	
  

	
By:

	
  /s/ Mary E. Evans

 

	
  

	
Name:  Mary E. Evans

 

	
  

	
Title:  Associate Director

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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CITIBANK, N.A., as Lender

 

	
  

	
By:

	
  /s/ Phil Ballard

 

	
  

	
Name:  Phil Ballard

 

	
  

	
Title:  Vice President

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

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ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:

 

	
  

	
ENERGY XXI GOM, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

	
  

	
ENERGY XXI TEXAS ONSHORE, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

	
  

	
ENERGY XXI ONSHORE, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

	
  

	
ENERGY XXI PIPELINE, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

	
  

	
ENERGY XXI LEASEHOLD, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

	
  

	
ENERGY XXI PIPELINE II, LLC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 

 

 

	
  

	
ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN IN ITS CAPACITY AS GUARANTOR UNDER ITS LIMITED RECOURSE GUARANTY AND GRANTOR UNDER ITS PLEDGE AGREEMENT AND IRREVOCABLE PROXY DELIVERED IN CONNECTION WITH THE FIRST LIEN CREDIT AGREEMENT:

 

	
  

	
ENERGY XXI U.S.A., INC

 

	
  

	
By:

	
  /s/ Rick Fox

 

	
  

	
Name:  Rick Fox

 

	
  

	
Title:  Chief Financial Officer

 S--Signature page to

 EXXI Second Amendment-

	  	  	  

  

- 26 -vlov_ex41.htm

EXHIBIT 4.1

VLOV INC.

2012 STOCK PLAN

ARTICLE 1

PURPOSE

The purpose of the VLOV Inc. 2012 Stock Plan (the “Plan”) is to promote the success and enhance the value of VLOV Inc., a Nevada corporation (the “Company”) by linking the personal interests of the members of the Board, Employees, and Consultants to those of the Company’s shareholders and by providing such individuals with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees and Consultants upon whose judgment and contribution the Company’s business is largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

2.1 “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards granted to residents therein.

2.2 “Award” means a Restricted Share or Restricted Share Unit award granted to a Participant pursuant to the Plan.

 

2.3 “Award Agreement” means any agreement, contract, or other instrument or document, in writing or through electronic medium, evidencing an Award, including a Shares Award Agreement or a Share Units Award Agreement, each as defined herein.

 

2.4 “Board” means the Board of Directors of the Company.

 

2.5 “Code” means the Internal Revenue Code of 1986 of the United States, as amended.

 

2.6 “Committee” means a committee of the Board described in Article 9.

 

2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to a Service Recipient; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c) the consultant or adviser is a natural person who has contracted directly with the Service Recipient to render such services.

 

2.8 “Corporate Transaction”, unless otherwise defined in an Award Agreement, means any of the following transactions, provided, however, that the Committee shall determine under (d) and (e) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

  

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(a) an amalgamation, arrangement or consolidation or scheme of arrangement (i) in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated or (ii) following which the holders of the voting securities of the Company do not continue to hold more than 50% of the combined voting power of the voting securities of the surviving entity;

(b) the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(c) the complete liquidation or dissolution of the Company;

 

(d) any reverse takeover or series of related transactions culminating in a reverse takeover (including, but not limited to, a tender offer followed by a reverse takeover) in which the Company is the surviving entity but (A) the Company’s equity securities outstanding immediately prior to such takeover are converted or exchanged by virtue of the takeover into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such takeover or the initial transaction culminating in such takeover, but excluding any such transaction or series of related transactions that the Committee determines shall not be a Corporate Transaction; or

 

(e) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Committee determines shall not be a Corporate Transaction.

2.9 “Disability”, unless otherwise defined in an Award Agreement, means that a Participant is unable to carry out the responsibilities and functions of the position held by the Participant by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Participant will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Committee in its discretion.

2.10 “Effective Date” shall have the meaning set forth in Section 10.1.

 

2.11 “Employee” means any person, including an officer or a member of the Board of the Company or any Parent or Subsidiary of the Company, who is in the employment of a Service Recipient, subject to the control and direction of the Service Recipient as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by a Service Recipient shall not be sufficient to constitute “employment” by the Service Recipient.

 

2.12 “Exchange Act” means the Securities Exchange Act of 1934 of the United States, as amended.

 

2.13 “Fair Market Value” means, as of any date, the value of Shares determined as follows:

(a) If the Shares are listed on one or more established stock exchanges or national market systems, including without limitation, The NASDAQ Capital Market, its Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Shares are listed (as determined by the Committee) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable;

 

  

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(b) If the Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such shares as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a Share shall be the mean between the high bid and low asked prices for the Shares on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

 

(c) In the absence of an established market for the Shares of the type described in (a) and (b), above, the Fair Market Value thereof shall be determined by the Committee in good faith and in its discretion by reference to (i) the placing price of the latest private placement of the Shares and the development of the Company’s business operations and the general economic and market conditions since such latest private placement, (ii) other third party transactions involving the Shares and the development of the Company’s business operation and the general economic and market conditions since such sale, (iii) an independent valuation of the Shares, or (iv) such other methodologies or information as the Committee determines to be indicative of Fair Market Value.

2.14 “Participant” means a person who, as a member of the Board, Consultant or Employee, has been granted an Award pursuant to the Plan.

2.15 “Parent” means a parent corporation under Section 424(e) of the Code.

 

2.16 “Permitted Transfer” means the following:

(a) transfer to the Company or a Subsidiary;

(b) transfer by gift to “immediate family” as that term is defined in SEC Rule 16a-1(e) promulgated under the U.S. Securities Exchange Act of 1934, as amended;

 

(c) the designation of a beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to the Participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution;

 

(d) if the Participant has suffered a Disability, permitted transfers on behalf of the Participant by the Participant’s duly authorized legal representative; or

 

(e) subject to the prior approval of the Committee, transfer to one or more natural persons who are the Participant’s family members or entities owned and controlled by the Participant and/or the Participant’s family members, including but not limited to trusts or other entities whose beneficiaries or beneficial owners are the Participant and/or the Participant’s family members, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish.

2.17 “Plan” means this VLOV Inc. 2012 Stock Plan, as it may be amended from time to time.

2.18 “Related Entity” means any business, corporation, partnership, limited liability company or other entity in which the Company, a Parent or Subsidiary of the Company holds a substantial ownership interest, directly or indirectly, but which is not a Subsidiary and which the Board designates as a Related Entity for purposes of the Plan.

 

2.19 “Restricted Share” means a Share awarded to a Participant pursuant to Article 5 that is subject to certain restrictions and may be subject to risk of forfeiture.

 

2.20 “Restricted Share Unit” means the right granted to a Participant pursuant to Article 6 to receive a Share at a future date.

 

2.21 “Securities Act” means the Securities Act of 1933 of the United States, as amended.

 

2.22 “Service Recipient” means the Company, any Parent or Subsidiary of the Company and any Related Entity to which a Participant provides services as an Employee, a Consultant or a Director.

 

2.23 “Share” means common stock, par value US$0.00001 per share, of the Company, and such other securities of the Company that may be substituted for Shares pursuant to Article 8.

 

2.24 “Subsidiary” means any corporation or other entity of which a majority of the outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company.

 

  

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ARTICLE 3

SHARES SUBJECT TO THE PLAN

3.1 Number of Shares.

(a) Subject to the provisions of Article 8 and Section 3.1(b), the maximum aggregate number of Shares which may be issued pursuant to all Awards shall be 800,000.

(b) To the extent that an Award terminates, expires, or lapses for any reason, any Shares subject to the Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by Applicable Laws, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form or combination by the Company or any Parent or Subsidiary of the Company shall not be counted against Shares available for grant pursuant to the Plan. Shares under the Plan delivered by the Participant or withheld by the Company in payment of the tax withholding thereon may again be granted or awarded hereunder, subject to the limitations of Section 3.1(a). If any Restricted Shares are forfeited by the Participant or repurchased by the Company, such Shares may again be granted or awarded hereunder, subject to the limitations of Section 3.1(a).

 

 

3.2 Shares Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury Shares (subject to Applicable Laws) or Shares purchased on the open market.

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility. Persons eligible to participate in this Plan include Employees, Consultants, and all members of the Board, as determined by the Committee.

4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to this Plan.

 

4.3 Jurisdictions. In order to assure the viability of Awards granted to Participants employed in various jurisdictions, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom applicable in the jurisdiction in which the Participant resides or is employed. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Section 3.1 of the Plan. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate any Applicable Laws.

 

  

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ARTICLE 5

RESTRICTED SHARES

5.1 Grant of Restricted Shares. The Committee, at any time and from time to time, may grant Restricted Shares to Participants as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion, shall determine the number of Restricted Shares to be granted to each Participant.

5.2 Restricted Shares Award Agreement. Each Award of Restricted Shares shall be evidenced by a Restricted Shares Award Agreement that shall specify the period of restriction, the number of Restricted Shares granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine. Unless the Committee determines otherwise, Restricted Shares shall be held by the Company as escrow agent until the restrictions on such Restricted Shares have lapsed.

 

5.3 Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Shares or the right to receive dividends on the Restricted Share). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

 

5.4 Forfeiture/Repurchase. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Shares that are at that time subject to restrictions shall be forfeited or repurchased in accordance with the Restricted Shares Award Agreement; provided, however, the Committee may (a) provide in any Restricted Shares Award Agreement that restrictions or forfeiture and repurchase conditions relating to Restricted Shares will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture and repurchase conditions relating to Restricted Shares.

 

5.5 Certificates for Restricted Shares. Restricted Shares granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Shares are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

 

5.6 Removal of Restrictions. Except as otherwise provided in this Article 5, Restricted Shares granted under the Plan shall be released from escrow as soon as practicable after the last day of the period of restriction. The Committee, in its discretion, may accelerate the time at which any restrictions shall lapse or be removed. After the restrictions have lapsed, the Participant shall be entitled to have any legend or legends under Section 5.5 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to applicable legal restrictions. The Committee, in its discretion, may establish procedures regarding the release of Shares from escrow and the removal of legends, as necessary or appropriate to minimize administrative burdens on the Company.

 

  

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ARTICLE 6

RESTRICTED SHARE UNITS

6.1 Grant of Restricted Share Units. The Committee, at any time and from time to time, may grant Restricted Share Units to Participants as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion, shall determine the number of Restricted Share Units to be granted to each Participant.

6.2 Restricted Share Units Agreement. Each Award of Restricted Share Units shall be evidenced by a Restricted Share Units Award Agreement that shall specify any vesting conditions, the number of Restricted Share Units granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.

 

6.3 Performance Objectives and Other Terms. The Committee, in its discretion, shall set performance objectives or other vesting criteria which, depending on the extent to which they are met, will determine the number or value of Restricted Share Units that will be paid out to the Participants.

 

6.4 Form and Timing of Payment of Restricted Share Units. At the time of grant, the Committee shall specify the date or dates on which the Restricted Share Units shall become fully vested and nonforfeitable. Upon vesting, the Committee, in its sole discretion, may pay Restricted Share Units in the form of cash, in Shares or in a combination thereof.

 

6.5 Forfeiture/Repurchase. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Share Units that are at that time unvested shall be forfeited or repurchased in accordance with the Restricted Share Units Award Agreement; provided, however, the Committee may (a) provide in any Restricted Share Units Award Agreement that restrictions or forfeiture and repurchase conditions relating to Restricted Share Units will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture and repurchase conditions relating to Restricted Share Units.

ARTICLE 7

PROVISIONS APPLICABLE TO AWARDS

7.1 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

7.2 Limits on Transfer. Except for a Permitted Transfer or as otherwise expressly approved by the Committee, no right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party. Any Permitted Transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for the purposes set forth of the definition of “Permitted Transfer” in Section 2.16 hereof and on a basis consistent with the Company’s lawful issue of securities.

 

7.3 Beneficiaries. Notwithstanding Section 7.2, a Participant may, in the manner determined by the Committee, designate a beneficiary to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

 

  

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7.4 Share Certificates. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of the Share, unless and until the Committee has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all Applicable Laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded. All Share certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with all Applicable Laws, and the rules of The NASDAQ Capital Market or any other national securities exchange or automated quotation system where the Shares are listed, quoted, or traded. The Committee may place legends on any Share certificate to reference restrictions applicable to the Shares. In addition to the terms and conditions provided herein, the Committee may require that a Participant make such reasonable covenants, agreements, and representations as the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

ARTICLE 8

CHANGES IN CAPITAL STRUCTURE

8.1 Adjustments. In the event of any dividend, share split, combination or exchange of Shares, amalgamation, arrangement or consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to its shareholders, or any other change affecting Shares or the price of a Share, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant price per share for any outstanding Awards under the Plan.

8.2 Corporate Transactions. Except as may otherwise be provided in any Award Agreement or any other written agreement entered into by and between the Company and a Participant, if the Committee anticipates the occurrence, or upon the occurrence, of a Corporate Transaction, the Committee may, in its sole discretion, provide for (i) the replacement of such Award with other rights or property selected by the Committee in its sole discretion or the assumption of or substitution of such Award by the successor or surviving corporation, or a Parent or Subsidiary thereof, with appropriate adjustments as to the number and kind of Shares and prices, or (ii) payment of Award in cash based on the value of Shares on the date of the Corporate Transaction plus reasonable interest on the Award through the date when such Award would otherwise be vested or have been paid in accordance with its original terms, if necessary to comply with Section 409A of the Code.

8.3 Outstanding Awards – Other Changes. In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 8, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share grant of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

 

8.4 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of Shares of any class, the payment of any dividend, any increase or decrease in the number of shares of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares subject to an Award or the grant price of any Award.

 

  

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ARTICLE 9

ADMINISTRATION

9.1 Committee. The Plan shall be administered by the Compensation Committee of the Board (the “Committee”). Any grant or amendment of Awards to any Committee member shall require an affirmative vote of a majority of the Board members who are not on the Committee.

9.2 Action by the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

 

9.3 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

(a) Designate Participants to receive Awards;

(b) Determine the type or types of Awards to be granted to each Participant;

 

(c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

 

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the grant price or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

 

(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

 

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

 

(g) Decide all other matters that must be determined in connection with an Award;

 

(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

 

(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

9.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

 

  

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ARTICLE 10

EFFECTIVE AND EXPIRATION DATE

10.1 Effective Date. The Plan is effective as of the date the Plan is adopted and approved by the Board (the “Effective Date”).

10.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.

ARTICLE 11

AMENDMENT, MODIFICATION, AND TERMINATION

11.1 Amendment, Modification, And Termination. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with Applicable Laws, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the Plan that (i) increases the number of Shares available under the Plan (other than any adjustment as provided by Article 8), (ii) permits the Committee to extend the term of the Plan beyond ten years from the date of grant, or (iii) results in a material increase in benefits or a change in eligibility requirements.

11.2 Awards Previously Granted. Except with respect to amendments made pursuant to Section 11.1, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

ARTICLE 12

GENERAL PROVISIONS

12.1 No Rights to Awards. No Participant or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Participants and other persons uniformly.

12.2 No Shareholders Rights. No Award gives the Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

 

12.3 Taxes. No Shares shall be delivered under the Plan to any Participant until such Participant has made arrangements acceptable to the Committee for the satisfaction of any income and employment tax withholding obligations under Applicable Laws. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy all applicable taxes (including the Participant’s payroll tax obligations) required or permitted by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the return of Shares) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of Shares which may be withheld with respect to the issuance, vesting or payment of any Award (or which may be repurchased from the Participant of such Award after such Shares were acquired by the Participant from the Company) in order to satisfy any income and payroll tax liabilities applicable to the Participant with respect to the issuance, vesting or payment of the Award shall, unless specifically approved by the Committee, be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for the applicable income and payroll tax purposes that are applicable to such supplemental taxable income.

 

  

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12.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Service Recipient to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of any Service Recipient.

 

12.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

 

12.6 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Articles of Incorporation and Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

12.7 Relationship to Other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

12.8 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

 

12.9 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

12.10 Fractional Shares. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down as appropriate.

 

12.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by the Applicable Laws, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

  

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12.12 Government and Other Regulations. The obligation of the Company to make payment of awards in Share or otherwise shall be subject to all Applicable Laws, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register any of the Shares paid pursuant to the Plan under the Securities Act or any other similar law in any applicable jurisdiction. If the Shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act or other Applicable Laws, the Company may restrict the transfer of such Shares in such manner as it deems advisable to ensure the availability of any such exemption.

 

12.13 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Nevada.

 

12.14 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is or may become subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and the Award Agreements shall be interpreted in accordance with Section 409A of the Code and the U.S. Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulation or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and /or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance.

12.15 Appendices. The Committee may approve such supplements, amendments or appendices to the Plan as it may consider necessary or appropriate for purposes of compliance with applicable laws or otherwise and such supplements, amendments or appendices shall be considered a part of the Plan; provided, however, that no such supplements shall increase the share limitation contained in Section 3.1 of the Plan without the approval of the Board.

 

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