Document:

baner8k32612exh101.htm

 

  Exhibit  10.1   

 

AMENDED EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of March, 2012, by and between Banner Corporation (the “Company”) and its wholly owned subsidiary Banner Bank (the “Bank”), and Mark J. Grescovich (the “Employee”).

WHEREAS, on April 29, 2010, the parties entered into an employment agreement (the "Initial Employment Agreement");

WHEREAS, the Employee has made and is anticipated to continue making a major contribution to the success of the Company and the Bank;

WHEREAS, in light of the past, current and anticipated future contributions of the Employee, the parties desire to amend the Initial Employment Agreement, as provided for herein;

WHEREAS, the board of directors of the Company and the board of directors of the Bank (collectively, the “Board of Directors”, and separately, the “Company Board of Directors” and the “Bank Board of Directors”, respectively) believe that it is in the best interests of the Company and the Bank to enter into this Agreement with the Employee, which continues and amends the Initial Employment Agreement; and

WHEREAS, the Board of Directors has approved and authorized the execution of this Agreement with the Employee.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein, it is AGREED as follows:

1.           Definitions.

(a)   “Change in Control” means (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 Company, any Consolidated Subsidiaries (as hereinafter defined), any person (as hereinabove defined) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or the Bank, or 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), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company or the Bank representing 25% or more of the combined voting power of the Company's or the Bank’s then outstanding securities; (ii) individuals who are members of the Company Board of Directors  on the Effective Date (in each case, the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the Effective Date whose election was approved by a vote of at least three-

 

  

  

  

 

quarters of the directors comprising the Incumbent Board or whose nomination for election by the Company’s  stockholders was approved by the nominating committee serving under an Incumbent Board or who was appointed as a result of a change at the direction of the Washington Department of Financial Institutions (“DFI”) or the Federal Deposit Insurance Corporation (“FDIC”), shall be considered a member of the Incumbent Board; (iii) the stockholders of the Company or the Bank approve a merger or consolidation of the Company or the Bank with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company or the Bank 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% of the combined voting power of the voting securities of the Company or the Bank, or such surviving entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Company or the Bank (or similar transaction) in which no person (as hereinabove defined) acquires more than 25% of the combined voting power of the Company’s or the Bank’s then outstanding securities; or (iv) the stockholders of the Company or the Bank approve a plan of complete liquidation of the Company or the Bank, or an agreement for the sale or disposition by the Company or the Bank of all or substantially all of the Company’s or the Bank’s assets (or any transaction having a similar effect); provided that the term “Change in Control” shall not include an acquisition of securities by an employee benefit plan of the Company or the Bank or a change in the composition of the Company Board of Directors or the Bank Board of Directors at the direction of the DFI or the FDIC.  Notwithstanding anything herein to the contrary, no Change in Control shall be considered to have occurred pursuant to a transaction or event described herein, if such transaction or event occurred pursuant to, or in connection with, a public offering approved by the Company Board of Directors.

(b)         The term “Consolidated Subsidiaries” means any subsidiary or subsidiaries of the Company (or its successors) that are part of the affiliated group (as defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the “Code”), without regard to subsection (b) thereof) that includes the Bank, including but not limited to the Company.

(c)         The term “Date of Termination” means the date upon which the Employee experiences a Separation from Service, as specified in a notice of termination pursuant to Section 8 of this Agreement or the date a succession becomes effective under Section 11.

(d)         The term “Effective Date” means, with respect to the Initial Employment Agreement, February 22, 2010.  The term “Effective Date” means, with respect to this Agreement, is March 1, 2012.

(e)          The term “Involuntary Termination” means the Employee’s Separation from Service (i) by the Company and the Bank without the Employee's express written consent; or (ii) by the Employee by reason of a material diminution of or interference with his duties, responsibilities or benefits as described in this sentence, if the Employee sends written notice to the Company and the Bank in accordance with Section 8 of this Agreement that an Involuntary Termination has occurred within 30 days of  any of the following actions unless consented to in writing by the Employee:  (1) a requirement that the Employee be based at any place other than 

 

  

  

  

 

Seattle, Washington, or within a radius of 50 miles from the location of the Company’s administrative offices as of the Effective Date, except for (A) reasonable travel on Company or Bank business, and (B) services performed in Walla Walla, Washington (which is anticipated to be considerable and is understood by the Employee to constitute an essential part of his responsibilities hereunder); (2) a material demotion of the Employee (which shall include his removal by the respective Board of Directors as a director from the Company Board of Directors or the Bank Board of Directors or the failure of either Board of Directors to retain the Employee as Chief Executive Officer of the Company or the Bank subsequent to his appointment unless such action was effected in order to comply with TARP or any other regulatory compliance requirement, including but not limited to enforcement matters between the Bank, the FDIC and/or the DFI and the Company and the Federal Reserve Bank of San Francisco); (3) a material reduction in the Employee’s authority, duties or responsibilities (which shall include his removal by the respective Board of Directors as a director from the Company Board of Directors or the Bank Board of Directors or the failure of either Board of Directors to  retain the Employee as Chief Executive Officer of the Company or the Bank subsequent to his appointment unless such action was effected in order to comply with TARP or any other regulatory compliance requirement, including but not limited to enforcement matters between the Bank, the FDIC and/or the DFI and the Company and the Federal Reserve Bank of San Francisco); (4) a reduction in the Employee's Salary, other than (A) as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Company or the Bank, and (B) as required to comply with TARP or any other regulatory compliance requirement (including but not limited to enforcement matters between the Bank, the FDIC and/or the DFI and the Company and the Federal Reserve Bank of San Francisco); (5) the failure of the Company Board of Directors (or a board of directors of a successor of the Company) to elect the Employee as President of the Company (or a successor of the Company) or any action by the Company Board of Directors (or a board of directors of a successor of the Company) removing the Employee from such office, or the failure of the Bank Board of Directors (or a board of directors of a successor of the Bank) to elect the Employee as President of the Bank (or a successor of the Bank) or any action by the Bank Board of Directors (or a board of directors of a successor of the Bank) removing the Employee from such office; (6) involuntary discontinuance or material reduction in the Employee’s incentive compensation awards, without the Employee’s consent, other than (A) as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Company or the Bank, and (B) as required to comply with TARP or any other regulatory compliance requirement (including but not limited to enforcement matters between the Bank, the FDIC and/or the DFI and the Company and the Federal Reserve Bank of San Francisco); or (7) involuntary discontinuance of the Employee’s participation in any employee benefit or fringe benefit plan maintained by the Company or the Bank, without the Employee’s consent, unless such plan is discontinued (A) by reason of law, (B) on account of the loss of tax deductibility or material tax benefits to the Company or the Bank, on account of a material increase in the Company or Bank’s tax obligations arising from the continued maintenance of the plan, or (C) pursuant to the terms of the plan relating to plan termination, provided such terms are applied equally to all participants in such plans.  The term “Involuntary Termination” does not include Termination for Cause, Separation from Service due to death or permanent disability pursuant to Section 7(f) of this Agreement, retirement or suspension or temporary or permanent prohibition from participation in 

 

  

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the conduct of the Bank's affairs under Section 8 of the Federal Deposit Insurance Act (“FDIA”).

(f)           The term SEO shall mean “senior executive officer”, as that phrase is defined under the TARP Requirements.

(g)           The term “MHCE” shall mean “most highly compensated employee”, as that phrase is defined under the TARP Requirements.

(h)           The term “Section 409A” shall mean Section 409A of the Code and the regulations and guidance of general applicability issued thereunder.

(i)           The term “Separation from Service” shall have the same meaning as in Section 409A, taking into account the rules and presumptions provided for in Treasury Regulation Section 1.409A-1(h) or any successor regulation. Notwithstanding the foregoing, for purposes of determining whether the Employee is entitled to a payment on account of Involuntary Termination under Section 7(a) or Section 7(d) of this Agreement, the term “Separation from Service” shall require the complete cessation of services to the Bank, the Company and all Consolidated Subsidiaries.

(j)           The term “TARP” shall mean the Troubled Asset Relief Program of the United States Department of the Treasury.

(k)           The term “TARP Period” shall mean the period beginning with the Company’s receipt of any financial assistance under TARP and ending on the last date upon which any obligation arising from such financial assistance remains outstanding (disregarding any warrants to purchase common stock of the Company that may be held by the United States Treasury). For purposes of this definition of “TARP Period” an obligation is treated as no longer outstanding upon Treasury’s transferring the obligation to a third party that is not a federal government entity (nor an entity organized by Treasury or another federal government entity to hold interests formerly held by Treasury).

(l)           The term “TARP Recipient” shall mean an entity receiving financial assistance under TARP.

(m)           The term “TARP Requirements” shall mean the regulations and guidance of general applicability issued by the United States Department of the Treasury pursuant to TARP (including but not limited to the interim final rule issued under TARP), as well as any TARP-related restrictions that specifically apply to the Company or the Bank.

(n)           The terms “Termination for Cause” and “Terminated for Cause” mean the Employee’s Separation from Service with the Company or the Bank because of the Employee's personal dishonesty, misconduct (whether or not willful), breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties (unless Employee is prevented from performing such duties because he is disabled (within the meaning of Section 7(f)) or suffering from a medical condition that reasonably prevents him from performing such duties despite 

 

  

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following a treatment plan provided by a physician or licensed medical specialist), willful violation of any law, rule, or regulation (other than traffic violations or offenses that are classified as misdemeanors) or final cease-and-desist order, acts or failures to act that may have a material detrimental effect on the reputation or business of the Company or the Bank or would be reasonably likely to result in  regulatory sanctions, penalties or restrictions on the Company’s or the Bank’s operations, material violations of TARP, or material breach of any provision of this Agreement unless the Employee cures such material breach within thirty (30) days after a written notice describing such material breach is received by the Employee.   The Employee shall not be deemed to have been Terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the Board of Directors at a meeting of the Board of Directors duly called and held for such purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with the Employee's counsel, to be heard before the Board), stating that in the good faith opinion of the Board of Directors the Employee has engaged in conduct described in the preceding sentence and specifying the particulars thereof in detail.

(o)           The term “Voluntary Termination” means the Employee’s Separation From Service pursuant to Section 7(c).

2.           Term.  The initial term of this amended Agreement shall be a period of three years, commencing on March 1, 2012, subject to earlier termination as provided herein. Beginning on June 1, 2013, and each anniversary thereafter, the term of this Agreement shall be extended for a period of one year from that June 1 anniversary date, provided that (i) neither the Employee nor the Company has given notice to the other in writing at least 90 days prior to the end of the then current three-year term that this Agreement shall not be extended further; and (ii) prior to the end of the then current three-year term, the Board of Directors, or with respect to the Company Board of Directors and the Bank Board of Directors, as the case may be, a committee of such Board of Directors which has been delegated authority to act on such matters by such Board of Directors (with respect to each Board of Directors, the “Committee”), explicitly reviews and approves the extension.  Reference herein to the term of this Agreement shall refer to both the initial term and any extended terms.

3.           Employment; Appointment as Director.  The Employee shall be employed as the President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank.  All employees other than the Chief Executive Officer of the Company and the Bank shall report to the Employee in his capacity as President of the Company and the Bank.  The Employee shall render all services and possess the powers as are customarily performed by persons situated in similar executive capacities, and shall have such other powers and duties as the Board of Directors may prescribe from time to time.  The Employee shall also render services to any subsidiary or subsidiaries of the Company or the Bank as requested by the Company or the Bank from time to time consistent with his executive position.  The Employee shall devote his best efforts and reasonable time and attention to the business and affairs of the Company and the Bank to the extent necessary to discharge his responsibilities hereunder.  The Employee shall perform his duties under this Agreement in accordance with such reasonable standards expected of persons with comparable positions in comparable organizations and as 

 

  

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may be established from time to time by the Board of Directors.  The Employee may (i) serve on charitable or civic boards or committees and, in addition, on such corporate boards as are approved in a resolution adopted by a majority of the Board of Directors or the Committee, which approval shall not be withheld unreasonably, and (ii) manage personal investments, so long as such activities do not interfere materially with performance of his responsibilities hereunder.  The Employee also shall be appointed as a Director of the Company and the Bank, subject to any shareholder and regulatory approval that may be required.  If the Employee ceases to be an officer of the Company, the Employee shall immediately resign as a Director of the Company.  If the Employee ceases to be an officer of the Bank, then the Employee shall immediately resign as a Director of the Bank.

4.           Cash Compensation; Restricted Stock.

(a)           Salary.

(1)           The Company and the Bank jointly agree to pay the Employee during the term of this Agreement a base salary (the “Salary”) in the annualized amount of $715,000.   The Employee’s Salary shall be paid in accordance with the Company and the Bank's regular payroll practices and subject to customary tax and other withholdings.  The amount of the Employee's Salary shall be increased (but shall not be decreased) from time to time in accordance with the amounts of salary approved by both of the Board of Directors or their Committees.  The amount of the Salary shall be reviewed by the both of the Board of Directors of the Company and the Board of Directors of the Bank, or their Committees, at least annually during the term of this Agreement.

(2)           If the Company shareholders do not approve the grant of Restricted Stock provided for in Section 4(d)(1), then the annual base Salary described in Section 4(a)(1) shall increase from $715,000 to $975,000, retroactive to the Effective Date of this amended Agreement.

(b)           Bonuses.   The Employee shall be entitled to participate in an equitable manner with all other executive officers of the Company and the Bank in such performance-based and discretionary bonuses, if any, as are authorized and declared by the Board of Directors or the Committee for executive officers.  Bonuses provided for under this Agreement shall be paid no later than 21⁄2 months after the end of the year in which the Employee obtains a legally binding right to such payments (or such other time that still qualifies the payment as a “short-term deferral” under Section 409A).  Notwithstanding the foregoing, during such time as the Company is a TARP Recipient, if the TARP Requirements would preclude the payment of such bonuses to the Employee (on account of his being an SEO, MHCE, or otherwise), then any bonuses payable hereunder shall be reduced or eliminated to the extent necessary to comply with the TARP Requirements.

(c)           Expenses.  The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in performing services under this Agreement in accordance with the policies and procedures applicable to the executive 

 

  

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officers of the Company and the Bank, provided that the Employee accounts for such expenses as required under such policies and procedures.

(d)           Restricted Stock.  In addition to the Restricted Stock (as herein defined) previously granted under the Initial Employment Agreement (the terms and conditions of which shall continue to apply to such Restricted Stock):

(1)           Upon approval by the Company shareholders, the Employee will receive a grant of Company common stock (“Restricted Stock”) with the number of shares then granted equal in aggregate market value to three hundred thousand dollars ($300,000) (with the value being determined based on the average of the closing stock price of the Company common stock for the ten (10) day period immediately preceding the grant date).  The Restricted Stock shall be subject to Sections 4(d)(2)-(4) below.

(2)           (A)           On each of the first three anniversaries of the date of the grant of Restricted Stock pursuant to Section 4(d)(1), the Employee shall become vested in one-third (1/3) of the shares of Restricted Stock included in such grant, provided the Employee is an Employee of the Company and the Bank (or is on vacation or leave as provided for in Section 6) on such date.

(B)           Special TARP Rules.  Notwithstanding Section 4(d)(2)(A), while the TARP Requirements apply to the Company or the Bank, the Employee shall forfeit the Restricted Stock (whether or not vested in accordance with Section 4(d)(2)(A)) if the Employee does not continue to perform substantial services for the Company and the Bank for at least two years from the date the Restricted Stock was granted, other than due to the Employee’s death, disability or a “change in control event” (as defined in Treasury Regulation Section 1.409A-3(i)(5)(i)).   Any Restricted Stock that would have vested in accordance with Section 4(d)(2)(A), but which is forfeited under this Section 4(d)(2)(B), shall vest (or revest) in the Employee in accordance with Section 4(d)(2)(A) when the TARP Requirements no longer apply to the Company and the Bank.

(C)           Accelerated Vesting.   Notwithstanding Section 4(d)(2)(A), if the Employee dies or becomes disabled (within the meaning of Section 409A) while actively employed by the Company and the Bank, or if a Change in Control occurs while the Employee is actively employed by the Company and the Bank, then the Employee shall have a 100 percent vested interest in the Restricted Stock upon such death, disability or Change in Control.   The preceding sentence shall apply only to the extent it does not violate the TARP Requirements, or the TARP Requirements do not apply.

(3)           The Restricted Stock may not be sold while the Employee is employed by the Company, the Bank or a Consolidated Subsidiary.

(4)           The Employee’s Restricted Stock shall be subject to the TARP Requirements during the TARP Period (and thereafter if required under the TARP Requirements).  Accordingly, during such time, the following restrictions shall apply (in addition 

 

  

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to any other restrictions provided for under this Agreement):

(A)           The amount of Restricted Stock granted may not exceed more than one-third of the Employee’s annual compensation for the year it is granted.  For this purpose, the value of the Restricted Stock is taken into account (at its full value on the grant date) as annual compensation.   Restricted Stock that may not be granted on account of Section 4(d)(A) shall be granted as of the next grant date provided for in Section 4(d)(1), or if not then permitted, as soon as possible during any subsequent year in which the grant would be permitted under the TARP Requirements, or as soon as possible after the TARP Requirements do not apply.

(B)           The Restricted Stock is subject to the following transferability restrictions (regardless of vested status and in addition to the restrictions contained in Section 4(d)(3) of this Agreement):  Prior to 25 percent of the Company’s financial assistance under TARP being repaid, no Restricted Stock shall be transferable. When 25 percent of the Company’s financial assistance under TARP is repaid, 25 percent of the Restricted Stock shares shall become transferable (if vested).  When 50 percent of the Company’s financial assistance under TARP is repaid, an additional 25 percent of the Restricted Stock shall become transferable (if vested).   When 75 percent of the Company’s financial assistance under TARP is repaid, an additional 25 percent of the Restricted Stock shall become transferable (if vested).  Upon full repayment of the Company’s TARP financial assistance, all of the Restricted Stock shall be transferable (if vested).  Notwithstanding the foregoing provisions of this Section 4(d)(4)(B), vested Restricted Stock may be transferred to pay for tax liabilities triggered by the vesting of the shares (except in the case of an election under Code Section 83(b)).  The preceding sentence shall not operate to accelerate the transferability of the Restricted Stock under Section 4(d)(3) of this Agreement.

5.           Benefits.

(a)           Participation in Benefit Plans.  The Employee shall be entitled to participate, to the same extent as executive officers of the Company and the Bank generally, in all plans of the Company and the Bank relating to pension, retirement, thrift, profit-sharing, savings, group or other life insurance, hospitalization, medical and dental coverage, travel and accident insurance, education, cash bonuses, and other retirement or employee benefits or combinations thereof.  In addition, the Employee shall be entitled to be considered for benefits under all of the stock and stock option related plans in which the Company and the Bank's executive officers are eligible or become eligible to participate.  Notwithstanding the foregoing, if during the TARP Period the TARP Requirements would preclude the payment, provision or grant of any of the items described in this Section 5(a) to the Employee (on account of his being an SEO, an MHCE or otherwise), then the payment, provision or granting of any such items payable hereunder shall be prohibited to the extent necessary to comply with the TARP Requirements.

(b)           Fringe Benefits.  The Employee shall be eligible to participate in, and receive benefits under, any other fringe benefit plans or perquisites which are or may become 

 

  

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generally available to the Bank's executive officers, including but not limited to supplemental retirement, deferred compensation program, supplemental medical or life insurance plans, physical examinations, financial planning and tax preparation services, except as limited or prohibited under TARP while the Company is a TARP Recipient.  In addition, a life insurance policy will be acquired on the life of the Employee that provides him a death benefit of $250,000 while he is employed as President of the Company and the Bank.  This life insurance policy shall be acquired as soon as practical after the Effective Date, and all premiums thereunder shall be paid by the Company or the Bank.  The Employee shall have no interest in the life insurance policy other than the above-referenced death benefit (e.g., no interest in any cash value in the policy), and no rights under the policy other than to name a beneficiary(ies).  The Employee shall reasonably cooperate in obtaining the policy, including submitting to insurance physicals as necessary.

(c)           Automobile.   The Employee shall be provided an automobile for his business use, at the Company and the Bank’s joint expense.  The automobile provided shall be determined by the Company Board of Directors in its sole discretion, taking into account the reasonable preferences of the Employee and his position with the Company and the Bank.  The initial value of the automobile shall not exceed $45,000.

(d)           Country Club.  The Company and the Bank shall continue to jointly pay the Employee's monthly membership dues for the Walla Walla Country Club through December 31, 2012.  The Company and the Bank shall jointly pay the initiation fee (up to $50,000) for the Employee to join a golf country club in the greater Seattle, Washington area (which club shall be agreed upon by the parties), as well as the related monthly membership dues. The Company and the Bank shall not pay for meals, including meal minimums, with respect to a country club, except if such meals represent a legitimate business expense that is reimbursable under Section 4(c).

           6.           Vacations; Leave.  At such reasonable times as the Board of Directors or the Committee shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent himself  voluntarily from the performance of his  employment under this Agreement, all such voluntary absences to count as vacation time; provided that:

(a)              The Employee shall be entitled to any annual vacation in accordance with the policies as periodically established by the Board of Directors or the Committee for senior management officials of the Company and the Bank, which shall in no event be less than the current policies of the Company and the Bank.

(b)              The timing of vacations shall be scheduled in a reasonable manner by the Employee.  The Employee shall not be entitled to receive any additional compensation from the Company or the Bank on account of his or her failure to take a vacation; nor shall he be entitled to accumulate unused vacation from one fiscal year to the next except to the extent authorized by the Board or the Committee for senior management officials of the Company or the Bank.

(c)              In addition to the aforesaid paid vacations, the Employee shall be entitled 

 

  

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without loss of pay, to absent himself voluntarily from the performance of his employment with the Company and the Bank for such additional period of time and for such valid and legitimate reasons as each Board of Directors or its Committee in its sole discretion may determine.  Further, each Board of Directors or its Committee shall be entitled to grant to the Employee a leave or leaves of absence with or without pay at such time or times and upon such terms and conditions as each Board of Directors or its Committee in its sole discretion may determine.

(d)              In addition, the Employee shall be entitled to annual sick leave as established by each Board of Directors or its Committee for senior management officials of the Company and the Bank.  In the event any sick leave time shall not have been used during any year, such leave shall accrue to subsequent years only to the extent authorized by each Board of Directors or its Committee in its sole discretion.  Upon termination of the Employee’s employment with the Company and the Bank, the Employee shall not be entitled to receive any additional compensation from the Company and the Bank for unused sick leave, except to the extent authorized by each Board of Directors or its Committee.

7.           Termination of Employment.

(a)           Involuntary Termination.  Subject to the notice provisions in Section 8, the Board of Directors may terminate the Employee's employment at any time, but, except in the case of Termination for Cause, termination of employment shall not prejudice the Employee's right to compensation or other benefits under this Agreement.  In the event of Involuntary Termination by the Company and the Bank or the Employee, other than after a Change in Control, the Company and the Bank jointly shall (in addition to amounts due the Employee in connection with services performed for the Company and the Bank prior to the Date of Termination): (1) continue to pay to the Employee the Salary provided in Section 4(a) of this Agreement at the rate in effect immediately prior to the Date of Termination for an additional 12 month period commencing on the Date of Termination, subject to the approval of the Federal Deposit Insurance Corporation and the Federal Reserve Bank of San Francisco prior to such payment, and (2) provide to the Employee, during the remaining term of this Agreement, substantially the same group life insurance, hospitalization, medical, dental, prescription drug and other health benefits, and long-term disability insurance (if any) for the benefit of the Employee and his dependents and beneficiaries who would have been eligible for such benefits if the Employee had not suffered Involuntary Termination, on terms substantially as favorable to the Employee, taking into account the amounts of coverage and deductibles and other costs to him, as if he had not suffered Involuntary Termination.  Notwithstanding the foregoing, to the extent the taxable payments under this Section 7(a) would be considered deferred compensation, and the Employee is considered a “specified employee” (as defined in Section 409A), then no deferred compensation shall be paid until the 185th day following the Employee’s Separation from Service (and any deferred compensation the payment of which is delayed on account of the foregoing shall be paid on such 185th day).The preceding sentence shall be applied by (i) treating as much of the payment due under this Section 7(a) as “separation pay due to involuntary separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(b)(9)) (“Separation Pay”) as is possible, so that such Separation Pay may be paid without regard to the preceding sentence, and (ii) treating the Separation Pay as paid prior to the deferred 

 

  

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compensation, to the extent permitted by Section 409A.  Furthermore, and notwithstanding anything herein to the contrary, no amount shall be payable under this Section 7(a) if such payment becomes an obligation of the Company or the Bank while the Company is a TARP Recipient during the TARP Period and the Employee is not permitted to receive those payments under the TARP Requirements (on account of being an SEO, MHCE, or otherwise).  In addition, no payment shall be made under this Section 7(a) that would cause the Bank to be “undercapitalized” for purposes of 12 C.F.R. Part 225 or any successor provision.  Payments due under this Section 7(a) shall be conditioned on the Employee’s compliance with Section 9(b) of this Agreement.

(b)           Termination for Cause.  In the event of Termination for Cause, the Company and the Bank shall jointly pay to the Employee the Salary and provide benefits under this Agreement only through the Date of Termination, and shall have no further obligation to the Employee under this Agreement.

(c)           Voluntary Termination.  The Employee's employment may be voluntarily terminated by the Employee at any time upon at least 90 days' written notice to the Company and the Bank or such shorter period as may be agreed upon between the Employee and the Board of Directors.  In the event of such voluntary termination, the Company and the Bank shall be jointly obligated to continue to pay to the Employee the Salary and provide benefits under this Agreement only through the Date of Termination, at the time such payments are due, and shall have no further obligation to the Employee under this Agreement.

(d)           Change in Control.  In the event of an Involuntary Termination within 12 months after a Change in Control, the Company and the Bank jointly shall (in addition to amounts due the Employee in connection with services performed for the Company and the Bank prior to the Date of Termination): (i) pay to the Employee in a lump sum in cash within 25 business days after the Date of Termination an amount equal to one (1) times the Employee’s annual Salary as in effect on the Date of Termination, subject to the approval of the Federal Deposit Insurance Corporation and the Federal Reserve Bank of San Francisco prior to such payment; and (ii) provide to the Employee during the remaining term of this Agreement substantially the same group life insurance, hospitalization, medical, dental, prescription drug and other health benefits, and long-term disability insurance (if any) for the benefit of the Employee and his dependents and beneficiaries who would have been eligible for such benefits if the Employee had not suffered Involuntary Termination, on terms substantially as favorable to the Employee, taking into account the amounts of coverage and deductibles and other costs to him, as if he had not suffered Involuntary Termination; provided, however, that no payment shall be made under this Section 7(d) that would cause the Bank to be “undercapitalized” for purposes of 12 C.F.R. Part 225 or any successor provision.  Notwithstanding the foregoing, to the extent the taxable payments under this Section 7(d) would be considered deferred compensation, and the Employee is considered a “specified employee” (as defined in Section 409A), then such deferred compensation shall be paid on the 185th day following the Employee’s Separation from Service.  Furthermore, and notwithstanding anything herein to the contrary, no amount shall be payable under this Section 7(d) if such payment becomes an obligation of the Company and the Bank while the Company is a TARP Recipient during the TARP Period, and the Employee is not 

 

  

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permitted to receive those payments under the TARP Requirements (on account of being an SEO, MHCE, or otherwise).  Payments due under this Section 7(d) shall be conditioned on the  Employee’s compliance with Section 9(b) of this Agreement.

(e)           Death.  In the event of the death of the Employee while employed under this Agreement and prior to any termination of employment, the Company and the Bank jointly shall pay to the Employee's estate, or such person as the Employee may have previously designated in writing, the Salary which was not previously paid to the Employee and which he would have earned if he had continued to be employed under this Agreement through the last day of the calendar month in which the Employee died, together with the benefits provided hereunder through such date.

(f)           Disability.  If the Employee becomes entitled to benefits under the terms of the then-current disability plan, if any, of the Company or the Bank (the “Disability Plan”) or becomes otherwise unable to fulfill his duties under this Agreement, he shall be entitled to receive such group and other disability benefits, if any, as are then provided by the Company or the Bank for executive employees.  In the event of such disability, this Agreement shall not be suspended, except that (i) the obligation to pay the Salary to the Employee shall be reduced in accordance with the amount of disability income benefits received by the Employee, if any, pursuant to this paragraph such that, on an after-tax basis, the Employee shall realize from the sum of disability income benefits and the Salary the same amount as he would realize on an after-tax basis from the Salary if the obligation to pay the Salary were not reduced pursuant to this Section 7(f); and (ii) upon a resolution adopted by a majority of the disinterested members of the Board of Directors or the Committee, the Company or the Bank may discontinue payment of the Salary beginning six months following a determination that the Employee has become entitled to benefits under the Disability Plan or otherwise unable to fulfill his duties under this Agreement. If the Employee’s disability does not constitute a disability within the meaning of Section 409A, and the Employee is a “specified employee” within the meaning of Section 409A, then payments under this Section 7(f) shall not commence until the earlier of the Employee’s death or the sixth month anniversary of the Employee’s Separation from Service, with any delayed payments being made with the first permissible payment.

(g)           Temporary Suspension or Prohibition.  If the Employee is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and (g)(1), or pursuant to Section 30.12.040 of the Revised Code of Washington (R.C.W.), the Bank'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, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its obligations under this Agreement were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended, all in a manner that does not violate Section 409A.

(h)           Permanent Suspension or Prohibition.  If the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(4) and (g)(1), or pursuant 

 

  

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to R.C.W. Section 30.12.040, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(i)           Default of the Bank.  If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the contracting parties.

(j)           Termination by Regulators.  All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank: (1) at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the FDIA; or (2) by the FDIC, at the time it approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by any such action.

(k)           Reductions of Benefits. Notwithstanding any other provision of this Agreement, if payments and the value of benefits received or to be received under this Agreement, together with any other amounts and the value of benefits received or to be received by the Employee, would cause any amount to be nondeductible by the Company or any of the Consolidated Subsidiaries for federal income tax purposes pursuant to or by reason of Code Section 280G, then payments and benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize the economic present value of benefits to be received by the Employee, as determined by the Compensation Committee of the Company Board of Directors as of the date of the Change in Control using the discount rate required by Code Section 280G(d)(4), without causing any amount to become nondeductible pursuant to or by reason of Code Section 280G.

(l)           Further Reductions.  Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

8.           Notice of Termination.  In the event that the Company or the Bank, or both, desire to terminate the employment of the Employee during the term of this Agreement, the Company or the Bank, or both, shall deliver to the Employee a written notice of termination, stating whether such termination constitutes Termination for Cause or Involuntary Termination, setting forth in reasonable detail the facts and circumstances that are the basis for the termination, and specifying the date upon which employment shall terminate, which date shall be at least 30 days after the date upon which the notice is delivered, except in the case of Termination for Cause.  In the event that the Employee determines in good faith that he has experienced an Involuntary Termination of his employment, he shall send a written notice to the Company and the Bank stating the circumstances that constitute such Involuntary Termination and the date upon which his employment shall have ceased due to such Involuntary Termination.  In the event that the Employee desires to effect a Voluntary Termination, he shall deliver a written notice to the 

 

  

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Company and the Bank, stating the date upon which employment shall terminate, which date shall be at least 90 days after the date upon which the notice is delivered, unless the parties agree to a date sooner.

9.           Loyalty; Noncompetition.

(a)           The Employee shall devote his full time and best efforts to the performance of his employment under this Agreement.  During the term of this Agreement, the Executive shall not, at any time or place, either directly or indirectly, engage in any business or activity in competition with the business affairs or interests of the Company or the Bank or be a director, officer or executive of or consultant to any bank, savings and loan association, credit union or similar thrift, savings bank or institution or holding company of any such entity in any county  in which the Company, the Bank or any other affiliate of the Company operates a full service branch office.

(b)           Upon termination of this Agreement for any reason other than the reasons set forth in Section 7(a) and (d) of this Agreement, for a period of one (1) year from the termination of this Agreement, the Employee shall not be a director, officer or employee of or consultant to any bank, savings and loan association, credit union or similar thrift, savings bank or institution or holding company of any such entity in any county  in which the Company, the Bank or any other affiliate of the Company operates a full service branch office on the Date of Termination of this Agreement.

(c)           Nothing in Sections 9(a) and 9(b) shall limit the right of the Employee to invest in the capital stock or other securities of any business dissimilar from that of Company or the Bank, or solely as a passive investor in any business.

(d)           Directly or indirectly engaging in any business or activity in competition with the business affairs or interests of the Company or the Bank shall include engaging in business as owner, partner, agent or employee of any person, firm or corporation engaged in such business individually or as beneficiary by interest in any partnership, corporation or other business entity or in being interested directly or indirectly in any such business conducted by any person, firm or corporation.  The preceding sentence shall not apply with respect to ownership by the Employee of less than one percent of a publicly traded entity.

(e)           In the event of violation by the Employee of this Agreement for loyalty and noncompetition, the Employee will be subject to damages and because of the relationship of employer and employee, it is hereby agreed injunctive relief is necessary for the Company and the Bank to enforce these provisions of the Agreement to protect its business and good will.

 

10.           Attorneys' Fees.  The Company and the Bank jointly shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Employee as a result of (i) the Employee's contesting or disputing any termination of employment, or (ii) the Employee's seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company or the Bank (or a successor) or the Consolidated Subsidiaries under which the Employee is or may be entitled to receive benefits;

 

  

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provided that the Company’s and the Bank's obligation to pay such fees and expenses is subject to the Employee's prevailing with respect to the matters in dispute in any action initiated by the Employee or the Employee's having been determined to have acted reasonably and in good faith with respect to any action initiated by the Company or the Bank.

11.           No Assignments.

(a)           This Agreement is personal to each of the parties hereto, and no party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that the Company and the Bank shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) by an assumption agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company and/or the Bank would be required to perform it, if no such succession or assignment had taken place.  Failure to obtain such an assumption agreement prior to the effectiveness of any such succession or assignment shall be a breach of this Agreement and shall entitle the Employee to compensation and benefits from the Company and the Bank in the same amount and on the same terms as the compensation and benefits that would be payable to Employee pursuant to Section 7(d) of this Agreement without regard to whether a Change in Control has occurred.  For purposes of implementing the provisions of this Section 11(a), the date on which any such succession becomes effective shall be deemed the Date of Termination.

(b)             This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

12.           Notice.  For the purposes 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 personally delivered or sent by certified mail, return receipt requested, postage prepaid, to the  Company and the Bank at their home offices, to the attention of the Board of Directors with a copy to the Secretary of the Company and the Secretary of the Bank, or, if to the Employee, to such home or other address as the Employee has most recently provided in writing to the Company or the Bank.

 

13.           Amendments.  No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.

 

14.           Headings.  The headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

 

15.           Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

 

16.           Governing Law. This Agreement shall be governed by the laws of the State of 

 

  

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Washington.

 

17.           Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator's award in any court having jurisdiction.  Notwithstanding the foregoing, the Company, the  Bank or both may resort to the Superior Court of Walla Walla  County, Washington for injunctive and such other relief as may be available in the event that the Employee engages in conduct, after termination of the Agreement that amounts to a violation of the Washington Trade Secrets Act or amounts to unlawful interference with the business expectations of the Company or the Bank. The FDIC may appear at any arbitration hearing but the decision is not binding on the FDIC.

18.           Deferral of Non-Deductible Compensation. In the event that the Employee's aggregate compensation (including compensatory benefits which are deemed remuneration for purposes of Code Section 162(m)) from the Company and the Consolidated Subsidiaries for any calendar year exceeds the maximum amount of compensation deductible by the Company or any of the Consolidated Subsidiaries in any calendar year under Code Section 162(m) (the “maximum allowable amount”), then any such amount in excess of the maximum allowable amount shall be mandatorily deferred with interest thereon at four percent (4%) per annum to a calendar year such that the amount to be paid to the Employee in such calendar year, including deferred amounts and interest thereon, does not exceed the maximum allowable amount.  Subject to the foregoing, deferred amounts including interest thereon shall be payable at the earliest time permissible, as required by Section 409A.

19.           Global TARP Limitation.   Notwithstanding anything herein to the contrary: during the TARP Period all amounts payable hereunder shall be subject to and limited by the TARP Requirements as in effect from time to time (regardless of whether the terms hereof specifically refer to TARP or the TARP Requirements).  The Employee hereby voluntarily waives any claim against the Company or the Bank for any changes to his compensation, bonus, incentive and other benefit plans, arrangements, policies and agreements (including golden parachute agreements and tax gross-ups) that are required to comply with the TARP Requirements (regardless of whether the compensation, benefit or other amount is payable under this Agreement).  This waiver includes all claims the Employee may have under the laws of the United States or any state related to the requirements imposed by the TARP Requirements, including, without limitation, a claim for any compensation or other payments Employee would otherwise receive.

20.           Scope of Company and Bank Obligations.  Although the Company and the Bank have jointly obligated themselves to the Employee under certain provisions of this Agreement, in no event is the Employee entitled to more than what is provided for hereunder, i.e., no duplicative payments shall be provided for hereunder.

21.           Knowing and Voluntary Agreement.  Employee represents and agrees that he has read this Agreement, understands its terms, and that he has the right to consult counsel of choice and has either done so or knowingly waives the right to do so.  Employee also represents that he has had ample time to read and understand the Agreement before executing it and that he enters 

 

  

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into this Agreement without duress or coercion from any source.

 

* * * * *

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

 

	BANNER CORPORATION	 
	 	 
	 	 
	
/s/Albert H. Marshall                     

	By: /s/Gary Sirmon                             
	Secretary 	       
	 	Its: Chairman                                       
	 	 
	 	 
	
BANNER BANK

	 
	 	 
	 	 
	/s/Albert H. Marshall                      	By: /s/Robert J. Lane                           
	Secretary 	 
	 	Its: Director                                          
	 	 
	 	 
	 	
EMPLOYEE

	 	 
	 	 
	 	/s/Mark J. Grescovich                        
	 	Mark J. Grescovich 

 

                                                                         

 

 

 

17Exhibit 4.(p)

 

 

EXECUTION VERSION

 

 

Registration Rights Agreement

 

 

Dated as of June 15, 2011

 

 

 

between

 

 

THE AES CORPORATION

 

 

and

 

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated

 

J.P. Morgan Securities LLC

 

Morgan Stanley & Co. LLC

 

As Representatives of the Initial Purchasers

 

 

  

  

  

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into this 15th day of June, 2011 between The AES Corporation, a Delaware corporation (the “Company”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC as representatives (the “Representatives”) of the initial purchasers named in Schedule I hereto (collectively, the “Initial Purchasers”).

 

This Agreement is made pursuant to the Purchase Agreement, dated June 1, 2011 among the Company and the Representatives (the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of an aggregate of $1,000,000,000 principal amount of the Company’s 7.375% Senior Notes Due 2021 (the “Securities”).  In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Purchase Agreement.

 

In consideration of the foregoing, the parties hereto agree as follows:

 

1.           Definitions.

 

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

 

“1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

 

“1934 Act” shall mean the Securities Exchange Act of l934, as amended from time to time.

 

“Additional Interest” shall have the meaning set forth in Section 2.5.

 

“Business Day” shall mean any day except (i) a Saturday, Sunday or other day in The City of New York on which banks are required or authorized to close or (ii) any other day on which the SEC is closed.

 

“Closing Date” shall mean June 15, 2011, the date the Securities were originally issued.

 

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

 

“Depositary” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York.

 

“Effectiveness Period” shall have the meaning set forth in Section 2.2(b) herein.

 

  

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“Exchange Offer” shall mean the offer by the Company to exchange the Exchange Securities for Securities pursuant to Section 2.1 hereof.

 

“Exchange Offer Registration” shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

 

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.

 

“Exchange Period” shall have the meaning set forth in Section 2.1 hereof.

 

“Exchange Securities” shall mean the 7.375% Senior Notes Due 2021 issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except that the additional interest rate, restrictions on transfers and restrictive legends shall be eliminated), to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

 

“Holder” shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture and each Participating Broker- Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

 

“Indenture” shall mean the Indenture relating to the Securities, dated as of December 8, 1998, between the Company and Wells Fargo Bank, N.A., as successor to Bank One National Association (formerly known as The First National Bank of Chicago), as trustee, as the same has been or may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

 

“Initial Purchaser” or “Initial Purchasers” shall have the meaning set forth in the preamble.

 

“Issuer FWP” shall have the meaning set forth in Section 4(a)(i).

 

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any Affiliate (as defined in the Indenture) of the Company shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

 

“Participating Broker-Dealer” shall mean each of the Initial Purchasers and any other broker-dealer which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities.

 

  

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“Person” shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

 

“Private Exchange” shall have the meaning set forth in Section 2.1 hereof.

 

“Private Exchange Securities” shall have the meaning set forth in Section 2.1 hereof.

 

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all materials incorporated by reference therein.

 

“Purchase Agreement” shall have the meaning set forth in the preamble.

 

“Registrable Securities” shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that Securities and, if issued, the Private Exchange Securities, shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities or Private Exchange Securities shall have become or been declared effective under the 1933 Act and such Securities or Private Exchange Securities shall have been disposed of pursuant to such Registration Statement, (ii) when such Securities or Private Exchange Securities have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144(A)) under the 1933 Act, (iii) when such Securities or Private Exchange Securities shall have ceased to be outstanding or (iv) when the Exchange Offer is consummated (except in the case of Securities and Private Exchange Securities purchased from the Company and continued to be held by the Initial Purchasers).

 

“Registration Default” shall have the meaning set forth in Section 2.5.

 

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation:  (i) all SEC registration and filing fees, (ii) all fees and expenses incurred by the Company in connection with compliance with state securities or blue sky laws in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with the Financial Industry Regulatory Authority, (iii) all expenses of the Company in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, incurred by the Company, if any, (v) the reasonable and documented fees and disbursements of counsel for the Company and of the independent registered public accounting firm of the Company, including the expenses of any special audits required by or incident to such performance and compliance, (vi) the reasonable and documented fees and expenses of the Trustee, and any escrow agent or custodian, (vii) the reasonable and documented fees and disbursements of one firm special counsel representing the Holders of Registrable Securities and (viii) the reasonable and documented fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but

 

  

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excluding any transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

 

“Registration Statement” shall mean any registration statement of the Company which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein.

 

“SEC” shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

 

“Securities” shall have the meaning set forth in the preamble.

 

“Shelf Registration” shall mean a registration effected pursuant to Section 2.2 hereof.

 

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein.

 

“Suspension Period” shall have the meaning set forth in Section 2.2 hereof.

 

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

 

2.           Registration Under the 1933 Act.

 

2.1         Exchange Offer.  Unless the Exchange Offer shall not be permissible under applicable law or SEC policy, prior to the 365th calendar day following the Closing Date the Company shall, for the benefit of the Holders, at the Company’s cost, use its commercially reasonable efforts to, (A) prepare and file with the SEC, an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) cause the Exchange Offer Registration Statement to become or be declared effective under the 1933 Act, (C) keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) cause the Exchange Offer to be consummated on or prior to the 425th calendar day following the Closing Date.  Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the

 

  

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Company for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder’s business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

 

In connection with the Exchange Offer, the Company shall:

 

(a)           mail as promptly as practicable after the commencement of the Exchange Offer to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

 

(b)           keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders but not more than 60 calendar days (unless otherwise required by applicable law) (such period referred to herein as the “Exchange Period”);

 

(c)           utilize the services of the Depositary for the Exchange Offer;

 

(d)           permit Holders to withdraw tendered Securities at any time prior to the expiration of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder’s election to have such Securities exchanged;

 

(e)           notify each Holder that any Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

 

(f)           otherwise comply in all material respects with all applicable laws relating to the Exchange Offer.

 

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Company upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the “Private Exchange”) for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company on a senior basis, that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Securities (the “Private Exchange Securities”).

 

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the “TIA”), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject

 

  

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to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions.  The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class of securities under the Indenture and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter under the Indenture.  If the customary procedures of the Depositary and the CUSIP Bureau allow, the Private Exchange Securities shall be of the same series as and the Company shall use all commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities.  The Company shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

 

As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Company shall:

 

(i)           accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto;

 

(ii)          accept for exchange all Securities properly tendered pursuant to the Private Exchange;

 

(iii)         deliver to the Trustee for cancellation all Registrable Securities so accepted for exchange; and

 

(iv)         cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange.

 

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the Closing Date.  The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law, rule or regulation or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that (A) it is not an affiliate (as defined in Rule 405 under the 1933 Act) of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the 1933 Act, to the extent applicable; (B) all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities, (C) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities, (D) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for the Securities that were

 

  

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acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities and (E) shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Company’s judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer or the Private Exchange.  The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.

 

2.2           Shelf Registration.  (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer is not consummated within 425 calendar days of the Closing Date, (iii) upon receipt of a request of any of the Initial Purchasers that they are not permitted under the applicable law or interpretations of the SEC to participate in the Exchange Offer or (iv) if and to the extent that a Holder is not permitted to participate in the Exchange Offer or does not receive fully tradable Exchange Securities pursuant to the Exchange Offer, then in case of each of clauses (i) through (iv) the Company shall, at its cost, use commercially reasonable efforts to:

 

(a)           as promptly as practicable, and in any event on or prior to the 30th calendar day after such filing obligation arises, but in no event earlier than the 425th calendar day after the Closing Date, file with the SEC, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement;

 

(b)           cause such Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 90th calendar day after such filing;

 

(c)           keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for (i) a period of two years from the Closing Date, or (ii) for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the “Effectiveness Period”); and

 

(d)           notwithstanding any other provisions hereof, use its commercially reasonable efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, 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 (iii) any

 

  

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Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading; provided that clauses (ii) and (iii) of this paragraph shall not apply to any information furnished in writing by or on behalf of the Initial Purchasers or any Holder for inclusion therein.

 

Subject to the limitation set forth in the next succeeding paragraph and subject to the provisions of Section 3, the Company shall be entitled to suspend its obligation to file any amendment to the Shelf Registration Statement, furnish any supplement or amendment to a Prospectus included in the Shelf Registration Statement, make any other filing with the SEC, cause the Shelf Registration Statement or other filing with the SEC to remain effective or take any similar action (collectively, “Registration Actions”) upon (A) the issuance by the SEC of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the 1933 Act (or successor provision), (B) the occurrence of any event or the existence of any fact as a result of which the Shelf Registration Statement would or shall 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 not misleading, or the related Prospectus would or shall 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 the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any corporate development that, in the discretion of the Company, makes it appropriate to postpone or suspend the availability of the Shelf Registration Statement and the related Prospectus, it being understood that the Company may not invoke this clause (C) for the purpose of avoiding its obligations under this Agreement.  Upon the occurrence of any of the conditions described in (A), (B) or (C) above, the Company shall give prompt notice (a “Suspension Notice”) thereof to the Holders. Upon the termination of such condition, the Company shall give prompt notice thereof to the Holders and shall promptly proceed with all Registration Actions that were suspended pursuant to this paragraph and comply as promptly as practicable with the requirements of Section 3(1) hereof, if applicable.

 

The Company may suspend Registration Actions pursuant to the preceding paragraph for one or more periods (each, a “Suspension Period”) not to exceed, in the aggregate, 120 days in any twelve month period, during which no Additional Interest (as defined in Section 2.5) shall be payable.  If one or more Suspension Periods exceed 120 days in any twelve month period, then Additional Interest will begin to accrue on the 121st day until such Registration Default is cured.  Each Suspension Period shall be deemed to begin on the date the relevant Suspension Notice is given to the Holders and shall end on the date on which the Company gives the Holders a notice that the Suspension Period has terminated.  The Company shall extend the Effectiveness Period (or the period during which Participating Broker-Dealers are entitled to use the Prospectus included in the Exchange Offer Registration Statement in connection with the resale of the Exchange Securities described in Section 3(f) below) by the total number of days during which a Suspension Period was in effect, so long as there are Registrable Securities. Notwithstanding anything to the foregoing, the Company shall at all times use its reasonable best efforts to end any Suspension Period at the earliest possible time.

 

  

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The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

 

2.3           Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

 

2.4           Effectiveness.

 

(a)           Other than with respect to a Suspension Period, the Company will be deemed not to have used its commercially reasonable efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not becoming or being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law, rule, regulation, order, judgment or decree.

 

(b)           An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless either it has been declared effective by the SEC or it automatically becomes effective pursuant to the rules and regulations under the 1933 Act; provided, however, that if, after it has become or been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

 

2.5           Interest.  If (i) the Exchange Offer is not consummated on or prior to the 425th calendar day following the Closing Date, (ii) a Shelf Registration Statement applicable to the Registrable Securities, if required, is not filed or declared effective when required, or (iii) a Registration Statement applicable to the Securities is declared effective as required but thereafter fails to remain effective or usable in connection with resales for more than 120 calendar days in the aggregate in any twelve month period (each such event referred to in clauses (i) through (iii) above, a “Registration Default”), the interest rate borne by the Registrable Securities shall be increased (“Additional Interest”) by one-quarter of one percent per annum upon the occurrence of each Registration Default, which rate will increase by one quarter of one percent (0.25%) each 90-day period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed half of one percent (0.50%) per annum.  Following the cure of all Registration Defaults, the accrual of Additional Interest on such Registrable Securities will cease and the interest rate will revert to the original rate.

 

  

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Subject to the Company’s ability to declare Suspension Periods, if the Shelf Registration Statement is unusable by the Holders for any reason, and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 90 days in the aggregate, then the interest rate borne by the Registrable Securities will be increased by 0.25% per annum of the principal amount of the Registrable Securities for the first 90-day period (or portion thereof) beginning on the 91st such date that such Shelf Registration Statement ceases to be usable, which rate shall be increased by an additional 0.25% per annum of the principal amount of the Registrable Securities at the beginning of each subsequent 90-day period, provided that the maximum aggregate increase in the interest rate will in no event exceed half of one percent (0.50%) per annum.  Any amounts payable under this paragraph shall also be deemed “Additional Interest” for purposes of this Agreement.  Upon the Shelf Registration Statement once again becoming usable, the interest rate borne by the Registrable Securities will be reduced to the original interest rate if the Company is otherwise in compliance with this Agreement at such time.

 

Additional Interest shall be computed based on the actual number of days elapsed in each 90-day period in which the Shelf Registration Statement is unusable.

 

The Company shall notify the Trustee within five business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an “Event Date”).  Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due.  The Additional Interest due shall be payable on each interest payment date to the record Holder of Registrable Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture.  Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date.

 

3.           Registration Procedures.

 

In connection with the obligations of the Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall, subject to the rights of the Company to invoke and maintain a Suspension Period in accordance with Section 2.2 without being in violation of any of the provisions hereunder:

 

(a)           prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all material respects with the applicable requirements of Regulation S-T under the 1933 Act, and use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

 

  

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(b)           prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the Effectiveness Period (subject to Company’s ability to declare Suspension Periods) and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply during the Effectiveness Period with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder required to enable the disposition of all Registrable Securities covered by each Registration Statement in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer);

 

(c)           in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities of the filing of the Shelf Registration Statement with respect to the Registrable Securities; (ii) furnish to each Holder of Registrable Securities, without charge, electronic copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto;

 

(d)           use its commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement becomes or is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

 

(e)           notify as promptly as practicable each Holder of Registrable Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Company that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any

 

  

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proceedings for that purpose, (iv) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein (in the case of the Prospectus in light of the circumstances under which they were made) not misleading, provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into such Registration Statement, which, in either case, contains the requisite information with respect to such event or facts that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or, to the Company’s knowledge, threatening of any proceeding for such purpose and (vii) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate, other than post-effective amendment solely to add selling Holders;

 

(f)           in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled “Plan of Distribution” which section shall be reasonably acceptable to the Representatives on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential “underwriter” status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Representatives on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer, without charge, electronic copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request for a period not to exceed 90 days after the consummation of the Exchange Offer, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by

 

  

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an exchange offeree in order to participate in the Exchange Offer (x) the following provision:

 

“If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer;” and

 

(y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act;

 

(g)           use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable;

 

(h)           in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested);

 

(i)           if electronic global certificates for the Registrable Securities are not then available, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends (other than as required by applicable law); and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least three business days prior to the closing of any sale of Registrable Securities;

 

(j)           in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(ii), (iii), (iv), (v), (vi) and (vii) hereof and subject to the Company’s ability to declare Suspension Periods, as promptly as practicable after the occurrence of such an event, use its commercially reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case, to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder Registrable Securities covered by such Registration

 

  

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Statement of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request;

 

(k)           the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus (except for any document filed under the 1934 Act and which is to be incorporated by reference into a Registration Statement or a Prospectus, and except for amendments and supplements that are filed solely to name selling Holders) after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document;

 

(l)           obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary;

 

(m)           (i) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

 

(n)           in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection during business hours by representatives of the Holders of the Registrable Securities, any Participating Broker-Dealer and one legal firm counsel or accountant retained by any of the foregoing, all financial and other records, pertinent corporate documents of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers;

 

(o)           (i) in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide electronic copies of such document to the Initial Purchasers and to counsel to the Initial Purchasers and make such changes in any such document prior to the filing thereof as the Initial Purchasers may reasonably

 

  

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request, and make the representatives of the Company available for discussion of such documents as shall be reasonably requested by the Initial Purchasers;

 

(ii)           in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus (except for amendments and supplements that are filed solely to name selling Holders), provide electronic copies of such document to the Holders of Registrable Securities, to the Initial Purchasers and to counsel for the Holders, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers or the counsel to the Holders reasonably request, and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Holders of Registrable Securities, the Initial Purchasers on behalf of such Holders or counsel for the Holders of Registrable Securities; and

 

(p)           otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.

 

In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder’s participation in the Shelf Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

 

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii), (iii), (iv), (v), (vi) and (vii) hereof or a Suspension Period, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(l) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.

 

4.           Indemnification; Contribution.

 

(a)           The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, and each Person, if any, who controls any Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

 

(i)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) or in any Preliminary Prospectus or “issuer free writing prospectus,” as defined in Rule 433 (“Issuer FWP”) of the

 

  

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1933 Act, relating to a Shelf Registration, pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Company; and

 

(iii)           against any and all expense whatsoever, as incurred (including the reasonable and documented fees and disbursements of one firm of counsel chosen by any indemnified party), reasonably incurred and documented in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or in any Preliminary Prospectus or Issuer FWP.

 

(b)           Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company, the Initial Purchasers, and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Company, the Initial Purchasers, or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred and documented, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in any Registration Statement (or any amendment thereto), any Prospectus included therein (or any amendment or supplement thereto) or in any Preliminary Prospectus or Issuer FWP in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by or on behalf of such Holder expressly for use therein; provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement (or any amendment thereto).

 

  

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(c)           Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of the indemnity agreement in this Section 4.  An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) 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.

 

(d)           If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

 

(e)           If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative fault of the Company on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Holders or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

  

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The Company, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

Notwithstanding the provisions of this Section 4, no Initial Purchaser, Holder or Participating Broker-Dealer shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which it has otherwise been required to pay by reason of such 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 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to indemnification and contribution as such Initial Purchaser or Holder, and each officer and director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Initial Purchasers’ respective obligations to contribute pursuant to this Section 4 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint.

 

5.             Miscellaneous.

 

5.1           Rule 144 and Rule 144A.  If the Company ceases to be so required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.

 

5.2           No Inconsistent Agreements.  The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent

 

  

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with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company’s other issued and outstanding securities under any such agreements.

 

5.3           Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure.

 

5.4           Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Company, initially at the Company’s address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4.

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

 

Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture.

 

5.5           Successor 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; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable 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, including the restrictions on resale set forth in this Agreement, the Indenture and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof.

 

5.6           Third Party Beneficiaries.  The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Holders, on the other

 

  

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hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.  Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder.

 

5.7           Restriction on Resales.  Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its “affiliates” (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation.

 

5.8           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.

 

5.9           Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

5.10           GOVERNING LAW.  THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

 

5.11           Severability. In the event that 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.

 

  

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IN WITNESS WHEREOF, the parties  have executed  this Agreement as of the date first written above.

 

 

	
THE AES CORPORATION

	 
	 	 
	 	 	 	 
	By:	
/s/ Willard C. Hoagland, III

	 
	 	Name: 	Willard C. Hoagland, III	 
	 	Title: 	Vice President and Treasurer	 

 

  

 

  

 

Confirmed and accepted

as of the date first above

written:

 

	
MERRILL LYNCH, PIERCE FENNER & SMITH

INCORPORATED

	 
	 	 
	 	 	 	 
	By:	
/s/ Henrik Dahlback

	 
	 	Name: 	Henrik Dahlback	 
	 	Title: 	Director	 

 

 

	

J.P. MORGAN SECURITIES LLC

	 
	 	 
	 	 	 	 
	By:	
/s/ Lawrence S. Landry

	 
	 	Name: 	Lawrence S. Landry	 
	 	Title: 	Managing Director	 

 

 

	

MORGAN STANLEY & CO. LLC

	 
	 	 
	 	 	 	 
	By:	
/s/ William Graham

	 
	 	Name: 	William Graham	 
	 	Title: 	Authorized Signatory	 

 

For themselves and the other several Initial

Purchasers named in Schedule I hereto

 

  

  

  

 

Schedule I

 

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

J.P. Morgan Securities LLC

Morgan Stanley & Co. LLC

Barclays Capital Inc.

BNP Paribas Securities Corp.

Credit Agricole Securities (USA) Inc.

Mitsubishi UFJ Securities (USA), Inc.

Scotia Capital (USA) Inc.

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