Document:

exh10-1.htm

     

    
      Exhibit
10.1

    SECOND
AMENDMENT TO

    FORBEARANCE
AGREEMENT AND

    AMENDMENT
TO CREDIT AGREEMENT

    

    This
Second Amendment to Forbearance Agreement and Amendment to Credit Agreement (the
“Second
Amendment”), dated as of December 18,
2008, is among SEMGROUP ENERGY PARTNERS, L.P., a Delaware limited partnership
(the “Borrower”), the
Guarantors (as defined in the Credit Agreement referred to below) party hereto
(collectively, the “Guarantors”) WACHOVIA
BANK, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative
Agent”), L/C Issuer and Swing Line Lender under the Credit Agreement
referred to below and the Lenders signatory hereto.

    

    R
E C I T A L S:

    

    A. The
Borrower, the Administrative Agent and certain lenders that are parties thereto
(the “Lenders”)
entered into that certain Amended and Restated Credit Agreement dated as of
February 20, 2008 (as amended, modified, supplemented and waived from time to
time, the “Credit
Agreement”).

     

    B. The
Borrower, the Guarantors, the Administrative Agent and certain of the Lenders
entered into that certain Forbearance Agreement and Amendment to Credit
Agreement dated as of September 12, 2008 (as amended, supplemented or modified
from time to time, including without limitation by the First Amendment to
Forbearance Agreement and Amendment to Credit Agreement, dated as of December
11, 2008, among the Borrower, the Guarantors, the Administrative Agent and
certain of the Lenders, the “Forbearance
Agreement”), pursuant to which the Administrative Agent and such Lenders,
among other things, agreed to forbear from exercising their rights and remedies
under the Credit Agreement and the other Loan Documents relating to certain
Events of Default as described in the Forbearance Agreement as amended hereby
(the “Existing Events
of Default”).

     

    C. The
Existing Events of Default are continuing.

     

    D. The
Borrower and the Guarantors have requested that the Administrative Agent and the
Lenders further amend the Forbearance Agreement to, among other things, extend
the Forbearance Period.

     

    E. The
Administrative Agent and the Lenders have agreed to further amend the
Forbearance Agreement and to enter into this Second Amendment subject to and
upon the terms and conditions set forth herein.

     

    NOW,
THEREFORE, the parties agree as follows:

    

    1. Definitions.  All
capitalized terms used in this Second Amendment which are not otherwise defined
shall have the meanings given to those terms in the Credit Agreement, as amended
by the Forbearance Agreement (after taking into account the amendments contained
herein).

     

    2. Amendment to Section 3 of
the Forbearance Agreement.  Section 3 of the
Forbearance Agreement is hereby amended by

     

    (a) (i)
adding the following at the end of clause (i) of subsection (b)
thereof:  “its annual report on Form 10-K with the SEC within the time
period required by the Credit Agreement, the Securities Exchange Act of 1934 or
applicable law, with respect to the Borrower’s fiscal year ended December 31,
2008, or”, (ii) deleting the word “and” at the end of subsection (c) thereof,
(iii) adding the word “and” to the end of subsection (d) thereof and (iv)
inserting the following new subsection (e):

     

    (e) any
Default or Event of Default arising under Sections 7.16, 7.17 and 8.01(b) as a
result of the Borrower’s noncompliance with the financial covenants set forth in
Sections 7.16 and 7.17 for the Borrower’s fiscal quarter ended December 31, 2008
(the “Covenant
Default”); and

     

    (b) deleting
the words “December 18, 2008” and replacing them with the words “March 18,
2009.”

     

    3. Amendment to Section 5 of
the Forbearance Agreement.  Section 5 of the
Forbearance Agreement is hereby amended by deleting such section in its
entirety, and replacing it with the following:

     

                          “5.           Amendment to Section 1.01 of
the Credit Agreement.  Section 1.01 of the Credit Agreement is
hereby amended, effective as of December 12, 2008, by deleting the defined terms
“Applicable Rate” and “Interest Payment Date” in their entirety and replacing
them with the following:

     

    “Applicable Rate”
means, from time to time, (i) with respect to any Base Rate Loan, 5.0% per
annum, (ii) with respect to any Eurodollar Rate Loan, 6.0% per annum, and (iii)
with respect to any commitment fee, 1.0%.

     

    “Interest Payment
Date” means (i) with respect to Base Rate Loans (including Swing Line
Loans), the last Business Day of each month (commencing September 30, 2008) and
(ii) with respect to Eurodollar Rate Loans, the last day of the Interest Period
applicable to each such Loan.”

     

    4. Default Rate and Eurodollar
Rate Loans During Forbearance Period.  During the Forbearance
Period, (a) the Default Rate shall not apply and (b) Interest Periods for
Eurodollar Rate Loans shall not exceed 30 days and shall not extend beyond the
Forbearance Termination Date.

     

    5. Amendment to Section 6 of
the Forbearance Agreement.  Section 6 of the
Forbearance Agreement is hereby amended by deleting such section in its
entirety, and replacing it with the following:

     

    “6.           Further Amendment to Section
1.01 of the Credit Agreement.  Section 1.01 of the Credit
Agreement is further amended by

     

    (a) inserting
the following defined terms in their appropriate alphabetical
order:

     

     “First Amendment to
Forbearance Agreement” shall mean that certain First Amendment to
Forbearance Agreement and Amendment to Credit Agreement, dated as of December
11, 2008, among the Borrower, the Guarantors, the Administrative Agent and
certain of the Lenders.

     

    “Forbearance
Agreement” shall mean that certain Forbearance Agreement and Amendment to
Credit Agreement, dated as of September 12, 2008, among the Borrower, the
Guarantors, the Administrative Agent and the Lenders party thereto, as may be
amended from time to time, including, without limitation, by the First Amendment
to Forbearance Agreement and the Second Amendment to Forbearance
Agreement.

     

    “Forbearance Fee
Letter” means that certain letter agreement, dated September 12, 2008,
between the Borrower and the Administrative Agent.

     

    “Forbearance Period Effective
Date” shall mean the “Effective Date” as defined in Section 17 of the
Forbearance Agreement.

     

    “Forbearance Period”
shall mean the “Forbearance Period” as defined in Section 3 of the Forbearance
Agreement.

     

    “Investment Bank”
shall mean UBS Securities LLC or an Affiliate thereof retained by the Borrower
to provide recommendations to the Borrower regarding strategic alternatives for
the Borrower, its Subsidiaries and their respective assets.

     

    “Second Amendment to
Forbearance Agreement” shall mean that certain Second Amendment to
Forbearance Agreement and Amendment to Credit Agreement, dated as of December
18, 2008, among the Borrower, the Guarantors, the Administrative Agent and
certain of the Lenders.

     

    “Transformation
Officer” shall mean an individual hired by the Borrower to oversee the
Borrower’s operational and financial transformation, which officer shall report
directly to the Board of Directors of the General Partner.”; and

     

    (b) deleting
the definition of “Excess Sale Proceeds”.

     

    6. Amendment to Section 7 of
the Forbearance Agreement.  Section 7 of the
Forbearance Agreement is hereby amended by deleting such section in its
entirety, and replacing it with the following:

     

    “7.           Amendment to Article II of
the Credit Agreement.  Article II of the Credit Agreement is
hereby amended by:

     

    (a) amending
Section 2.05(d) in its entirety to read as follows: “Any Net Cash Proceeds shall
be immediately applied (and in any event, within two Business Days of the
receipt thereof) as a mandatory prepayment on the Loans.”;

     

    (b) amending
Section 2.05(e) in its entirety to read as follows: “Any Extraordinary Receipts
shall be immediately applied (and in any event, within two Business Days of the
receipt thereof) as a mandatory prepayment on the Loans.”;

     

    (c) amending
Section 2.05(h) in its entirety to read as follows: “Any net cash proceeds of an
offering of Equity Interests of the Borrower shall be immediately applied (and
in any event, within two Business Days of the receipt thereof) as a mandatory
prepayment of the Term Loan.”; and

     

    (d) amending
subsection 2.08(a) by adding the following sentence to the end thereof:
“Notwithstanding anything to the contrary contained herein, in no event shall
any Base Rate be lower than 4.0% per annum and in no event shall any Eurodollar
Rate be lower than 3.0% per annum.””

     

    7. Amendment to Section 9 of
the Forbearance Agreement.  Section 9 of the
Forbearance Agreement is hereby amended by

     

    (a) deleting
subsection 6.02(n) of the Credit Agreement provided for therein in its entirety
and replacing it with the following text:

     

    “(n)           by
no later than 5:00 p.m. Eastern time on Tuesday of each week, a Weekly Flash
Report, substantially in the form attached to the Forbearance Agreement as
Exhibit 2, setting forth, among other things, the Borrowers’ Receipts, Operating
Disbursements, Non-Operating Disbursements, and Change in Book Cash (as such
terms are used in such Exhibit) for the week ended on the prior Friday with a
comparison of such figures to the amounts for such items set forth on Schedule 2
to the Forbearance Agreement for such week;” and

     

    (b) deleting
subsection 6.02(q) of the Credit Agreement provided for therein in its entirety
and replacing it with the following
text:  “(q)  [Intentionally Omitted]”.

     

    8. Amendment to Section 11 of
the Forbearance Agreement.  Section 11 of the
Forbearance Agreement is hereby amended by deleting such section in its
entirety, and replacing it with the following:

     

    “11.           Amendment to Article VII of
the Credit Agreement.  Article VII of the Credit Agreement is
hereby amended by:

     

    (a) amending Section 7.06(c) of the
Credit Agreement by:

     

    (i) deleting
clause (iv) in its entirety and replacing it with the following
text:  “no Default or Event of Default shall exist prior to or after
giving effect to such sale, other than the Existing Events of Default, the
Reporting Default, the Material Contract Defaults, the Swap Default and the
Covenant Default during the Forbearance Period”;

     

    (ii) deleting
clause (v) in its entirety and replacing it with the following text: “the Net
Cash Proceeds of such sale shall have been applied to prepay the Loans as
provided in Section 2.05”; and

     

    (iii) deleting
clause (vi) in its entirety, and renumbering clauses (vii) and (viii) as clauses
(vi) and (vii); and

     

    (b) during the Forbearance Period,
adding the following Sections 7.20, 7.21 and 7.22:

     

    7.20           Disbursements.  Beginning
September 27, 2008 and on a weekly basis thereafter, allow either Total
Operating Disbursements and Total Non-Operating Disbursements as reflected on
the Weekly Flash Report provided pursuant to Section 6.02(n) on a cumulative
basis from September 14, 2008, to vary by greater than fifteen percent (15%)
from the Total Operating Disbursements and Total Non-Operating Disbursements
provided for such period set forth on Schedule 2 to the Forbearance Agreement,
unless such variance is a result of Total Operating Disbursements and/or Total
Non-Operating Disbursements being less than forecasted.

     

    7.21           Minimum
Liquidity.  Allow the sum of all Ending  Book Cash as
reflected on the Weekly Flash Report provided pursuant to Section 6.02(n) to be
less than the amount set forth on Schedule 2 to the Forbearance Agreement for
the period indicated.”

     

    7.22           Receipts.  Beginning
with the week ending January 17, 2009 and on a weekly basis thereafter, allow
Total Receipts as reflected on the Weekly Flash Report provided pursuant to
Section 6.02(n) on a cumulative basis from the week ending December 20, 2008 to
vary by greater than fifteen percent (15%) from the Total Receipts provided for
such period set forth on Schedule 2 to the Forbearance Agreement, unless such
variance is a result of the Total Receipts being greater than
forecasted.

     

    9. Amendment to Section 12 of
the Forbearance Agreement.  Section 12 of the
Forbearance Agreement is hereby amended by deleting the period at the end of the
new Section 8.01(m) provided for therein and inserting the following language as
a continuation of such subsection:

     

    “provided, that
notwithstanding the foregoing, a rejection by SemMaterials, L.P. of the
Terminalling and Storage Agreement shall not constitute an Event of Default
during the Forbearance Period so long as the payment due thereunder (as modified
by the Agreed Order Regarding Motion by SemGroup Energy Partners, L.P. dated
September 8, 2008, entered in the Chapter 11 cases of SemGroup L.P. and its
affiliated debtors), in January 2009 is timely received by the Borrower or the
applicable affiliate thereof, it being understood and agreed that (i) any
rejection of a Material Contract other than the Terminalling and Storage
Contract as described in this subsection (m) shall constitute an Event of
Default, subject to the 5-day renegotiation and/or replacement period described
above, and (ii) any rejection of such Terminalling and Storage Agreement as
described in this subsection (m), whether such rejection occurs during or after
the Forbearance Period shall constitute an Event of Default upon the expiration
of the Forbearance Period) (in the case of a rejection occurring during the
Forbearance Period) or, subject to the 5-day renegotiation and/or replacement
period described above, upon such rejection (in the case of a rejection
occurring after the Forbearance Period); or”.

     

    10. Amendment to Section 14 of
the Forbearance Agreement.  Section 14 of the
Forbearance Agreement is hereby amended by deleting the number “$300,000,000”
and replacing it with the number “220,000,000”.

     

    11. Amendment to Section 18 of
the Forbearance Agreement.  Section 18 of the
Forbearance Agreement is hereby amended by deleting such section in its entirety
and replacing it with the following:

     

    “Effect of Forbearance
Termination Date.  Except as expressly set forth in the
Forbearance Agreement (as amended by the First Amendment to Forbearance
Agreement and the Second Amendment to Forbearance Agreement), all amendments to
the Credit Agreement, the terms of the First Amendment to Forbearance Agreement
and the terms of the Second Amendment to Forbearance Agreement and Sections 14,
16, 17(e) (with respect to confidentiality), 19, 20, 21, 22 and 23 of the
Forbearance Agreement shall survive the termination of the Forbearance
Agreement.”

     

    12. Amendment to Schedules 1, 2
and 2.01 to the Forbearance Agreement.  Schedules 1, 2 and
2.01 to the
Forbearance Agreement are hereby amended by deleting such Schedules in their
entirety and replacing them with Schedules 1, 2 and 2.01 hereto,
respectively.

     

    13. Amendment to Exhibit 1 to
the Forbearance Agreement.  Exhibit 1 to the
Forbearance Agreement is hereby amended by deleting such Exhibit in its entirety
and replacing it with Exhibit 1 hereto.

     

    14. Continuing
Obligations.  During the Forbearance Period:

     

    (a) the
Borrower shall continue to retain (i) the Investment Bank or another investment
banking firm reasonably acceptable to the Administrative Agent and the Lenders
and (ii) Zolfo Cooper or another advisory and interim management firm reasonably
acceptable to the Administrative Agent and the Lenders, a senior managing
director or equivalent employee of which shall act as Transformation
Officer.

     

    (b) the
Borrower shall continue to pay all reasonable attorneys’ and financial advisors’
fees and disbursements incurred in connection with the enforcement and
protection of the Lenders’ rights under the Credit Agreement and the Loan
Documents in accordance with Section 10.04 of the Credit Agreement.

     

    15. Conditions to
Effectiveness.  This Second Amendment shall be effective on the
date when and if each of the following conditions is satisfied:

     

    (a) Execution and
Delivery.  The Administrative Agent shall have received a
counterpart of this Second Amendment executed and delivered by the Borrower,
each of the Guarantors, the Administrative Agent, and the Required
Lenders.

     

    (b) No Default or Event of Default;
Accuracy of Representations and Warranties.  The Borrower shall
deliver to the Administrative Agent a certificate of a Responsible Officer
certifying that, after giving effect to this Second Amendment, no Default or
Event of Default (other than (i) the Existing Events of Default and (ii) the
Reporting Default, the Material Contract Defaults, the Swap Default and the
Covenant Default (as each is defined in the Forbearance Agreement)) shall exist
and each of the representations and warranties made by the Borrower and the
Guarantors in the Forbearance Agreement and in or pursuant to the Credit
Agreement and the other Loan Documents shall be true and correct in all material
respects as if made on and as of the date on which this Second Amendment becomes
effective, except to the extent such representations and warranties expressly
relate to an earlier date.

     

    (c) Fees.  The Borrower
shall have paid to the Agent for the benefit of the Lenders who execute and
deliver a counterpart of this Second Amendment to the Administrative Agent by
5:00 p.m. (Eastern Time) on December 22, 2008, a fee equal to 0.375% of the
Aggregate Commitments (after giving effect to the Revolver Commitment reductions
provided for herein) of all of the Lenders (whether or not party
hereto).

     

    (d) Expense
Reimbursements.  The Borrower shall have paid all reasonable
invoices presented to the Borrower for expense reimbursements (including
reasonable attorneys’ and financial advisors’ fees and disbursements) due to the
Administrative Agent and for the period from and after July 18, 2008, the
Lenders in accordance with Section 10.04 of the Credit Agreement.

     

    16. Release.  For
purposes of this Section 16, the
following terms shall have the following definitions:

     

    “Related Parties”
shall mean, with respect to any released party, such party’s parents,
subsidiaries, affiliates, successors, assigns, predecessors in interest,
officers, directors, employees, agents, representatives, attorneys, financial
advisors, accountants and shareholders, if any.

     

    “Claims” shall
mean  any and all claims, losses, debts, liabilities, demands,
obligations, promises, acts, omissions, agreements, costs, expenses, damages,
injuries, suits, actions, causes of action, including without limitation, any
and all rights of setoff, recoupment or counterclaim of any kind or nature
whatsoever, in law or in equity, known or unknown, suspected or unsuspected,
contingent or fixed.

     

    Excluding
only the continuing obligations of the Lenders and the Administrative Agent
under the Credit Agreement, the Loan Documents and this Agreement, the Borrower
and each Guarantor, effective as of the effective date of this Second Amendment,
hereby releases, acquits and forever discharges the Lenders and the
Administrative Agent, and each of them, and their respective Related Parties, of
and from any and all Claims arising out of, related or in any way connected with
the Credit Agreement, the Loan Documents or the transactions contemplated by any
thereof, including, without limitation, any action or failure to act, prior to
the effective date of this Second Amendment, in response to or otherwise in
connection with the events or circumstances arising under or otherwise related
to the Credit Agreement, the Loan Documents or any Defaults or Events of Default
occurring under the Credit Agreement or the Loan Documents, in each case to the
extent, and only to the extent, that (i) such Claims arose prior to the
effective date of this Second Amendment, (ii) such Claims result or derive from
actions taken or not taken by a releasee in its capacity(ies) as a Lender(s) or
as Administrative Agent under the Credit Agreement or the Loan Documents, and
(iii) such Claims do not result or derive from actions taken or not taken by a
releasee with respect to or in relation to SemGroup, SemCrude L.P.,
SemMaterials, L.P., K.C. Asphalt, L.L.C. or any of their affiliates (other than
the Borrower and the Guarantors).

     

    17. Acknowledgement.  The
Borrower hereby confirms and acknowledges as of the date hereof that it is
validly and justly indebted to the Administrative Agent and the Lenders for the
payment of all obligations under the Credit Agreement without offset, defense,
cause of action or counterclaim of any kind or nature whatsoever, and the Loan
Parties hereby release the Administrative Agent and the Lenders from any and all
Claims (as defined in Section 16 of this Second Amendment) other than as
provided in Section 16 of this Second Amendment.

     

    18. Confirmation of Forbearance
Agreement.  Except as amended by this Second Amendment, all the
provisions of the Forbearance Agreement remain in full force and effect from and
after the date hereof, and each Loan Party hereby ratifies and confirms each
Loan Document to which it is a party.  This Second Amendment shall be
limited precisely as written and shall not be deemed (a) to be a consent granted
pursuant to, or a waiver or modification of, any other term or condition of the
Forbearance Agreement or any of the instruments or agreements referred to
therein or (b) to prejudice any right or rights which the Administrative Agent
or the Lenders may now have or have in the future under or in connection with
the Forbearance Agreement or any of the instruments or agreements referred to
therein.  From and after the date hereof, all references in the
Forbearance Agreement to “this Agreement”, “hereof”, “herein”, or similar terms,
shall refer to the Forbearance Agreement as amended by this First
Amendment.  Each of the Borrower and the Guarantors also hereby
ratifies and confirms that the Security Documents remain in full force and
effect in accordance with their terms and are not impaired or affected by this
Second Amendment.

     

    19. GOVERNING
LAW.  THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     

    20. Loan
Document.  This Second Amendment shall constitute a Loan
Document under the Credit Agreement, and all obligations included in this Second
Amendment shall constitute Obligations under the Credit Agreement and shall be
secured by the Collateral.

     

    21. Counterparts.  This
Second Amendment may be signed in any number of counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.  Delivery of an executed signature page
to this Second Amendment by facsimile transmission or electronic photocopy (i.e.
a “.pdf”) shall be as effective as delivery of a manually signed
counterpart.

     

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties have caused this Second Amendment to be duly executed as of the day and
year first above written.

     

    SEMGROUP
ENERGY PARTNERS, L.P.

    

    

    By:
SemGroup Energy Partners GP, L.L.C.

           its
General Partner

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    Guarantors:

    

    SemGroup
Energy Partners Operating, L.L.C.

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    SemMaterials
Energy Partners, L.L.C.

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    SemGroup
Energy Partners, L.L.C.

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    SemGroup
Crude Storage, L.L.C.

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    SemPipe,
L.P.

        By:  SemPipe,
G.P., L.L.C., its General Partner

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    SemPipe,
G.P., L.L.C.

    

    

    By: /s/ Michael J.
Brochetti                                                                  

    Name:
Michael J. Brochetti

    Title:
Chief Financial Officer

    

    

    

    Lenders:

    

    Wachovia
Bank, National Association,

        as L/C
Issuer,

        Swing
Line Lender and Lender

    

    By:_/s/ C. Mark
Hedrick____________

    Name: C. Mark Hedrick

    Title: Managing Director

    

    

    ABN AMRO Bank N.V., as a
Lender

    

    By:_____________________________

    Name:

    Title:

    

    

    Bank of America, N.A., as a
Lender

    

    

    By:_/s/ John W. Woodiel III
_________

    Name: John W. Woodiel III

    Title: Senior Vice
President

    

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    The Bank of Nova Scotia, as a
Lender

    

    

    By:_/s/ Ron
Dooley     _____________

    Name: Ron Dooley

    Title: Director

    

    

    

    Bank of Scotland PLC, as a
Lender

    

    

    By:_____________________________

    Name:

    Title:

    

    

    Blue Ridge Investments LLC, as
a Lender

    

    

    By:_/s/ Dayley W.
Misho___________

    Name: Dayley W. Misho

    Title: Vice President of
Finance

    

    

    BMO Capital Markets Financing Inc.,
as a Lender

    

    

    By:_/s/ Richard A.
Garcia__________

    Name: Richard A. Garcia

    Title: Director

    

    

    Calyon New York Branch, as a
Lender

    

    

    By:_/s/ Alan
Sidrane_______________

    Name: Alan Sidrane

    Title: Managing Director

    

    By:_/s/ Anne G. Shean
_____________

    Name: Anne G. Shean

    Title: Director

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    Citibank, N.A., as a
Lender

    

    

    By:_/s/ John S.
Dowd_______________

    Name: John S. Dowd

    Title: Managing Director

    

    

    Fortis Capital Corporation, as
a Lender

    

    

    By: /s/ Casey
Lowary                                                          

    Name:
Casey Lowary

    Title:
Director

    

    By: /s/ Darrell
Holley                                                          

    Name:
Darrell Holley

    Title:
Managing Director

    

    

    Guaranty Bank And Trust Company,
as a Lender

    

    By:_/s/ Gail J.
Nofoinger_____________

    Name: Gail J. Nofoinger

    Title: Senior Vice
President

    

    Halbis Distressed Opportunities
Master Fund LTD, as a Lender

    

    

    By:_____________________________

    Name:

    Title:

    

    JPMorgan Chase Bank, N.A., as
a Lender

    

    By:_/s/ Phillip D.
Martin____________

    Name: Phillip D. Martin

    Title: Senior Vice
President

    

    

    Lehman Brothers Commercial Bank,
as a Lender

    

    By:_____________________________

    Name:

    Title:

    

    

    Lehman Commercial Paper, Inc.,
as a Lender

    

    By:_____________________________

    Name:

    Title:

    

    

    GE Business Financial Services, Inc.,
fka Merrill Lynch Business Financial Services, Inc., as a
Lender

    

    By:_____________________________

    Name:

    Title:

    

    

    GE Business Financial Services, Inc.,
fka Merrill Lynch Business Financial Services, Inc., as a
Lender

    

    By:_____________________________

    Name:

    Title:

    

    

    One East Liquidity Master LP,
as a Lender

    

    

    By:_/s/ Nat
Klipper                _________

    Name: Nat Klipper

    Title: Authorized
Signatory

    

    

    One East Partners Master LP,
as a Lender

    

    

    By:_/s/ Nat
Klipper                _________

    Name: Nat Klipper

    Title: Authorized
Signatory

    

    

    Raymond James Bank FSB, as a
Lender

    

    

    By:_/s/ Garrett McKinnon
___________

    Name: Garrett McKinnon

    Title: Senior Vice
President

    

    

    Royal Bank of Canada, as a
Lender

    

    

    By:_____________________________

    Name:

    Title:

    

    

    SunTrust Bank, N.A., as a
Lender

    

    

    By:_/s/ Samuel M.
Ballesteros_______

    Name: Samuel M.
Ballesteros

    Title: Senior Vice
President

    

    

    UBS Loan Finance LLC, as a
Lender

    

    

    By:_____________________________

    Name:

    Title:

    

    

    

    Acknowledged:

    

    Wachovia
Bank, National Association,

        as
Administrative Agent

    

    

    By:_/s/ C. Mark
Hedrick_____________

    Name: C. Mark Hedrick

    Title: Managing Director

    

    

    

    

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
1

    TO

    FORBEARANCE
AGREEMENT AND

    AMENDMENT
TO CREDIT AGREEMENT

    

    

    A Default
and Event of Default has occurred and is continuing under clause (k) of Section
8.01 of the Credit Agreement with respect to the General Partner or may occur
with respect to the Qualifying Owners, including as a result of actions taken by
the Red Apple Group, Inc. and/or John A. Catsimatidis, provided, however, the
change of control at the General Partner shall not prevent any further change of
control at the General Partner from constituting an Event of
Default.

     

    Defaults
and Events of Default have occurred and are continuing under clause (b) of
Section 8.01 of the Credit Agreement (as a result of breaches of Section 6.05 of
the Credit Agreement), under clause (c) of Section 8.01 of the Credit Agreement
(as a result of breaches of Section 6.17 of the Credit Agreement) and under
clause (m) of Section 8.01 of the Credit Agreement, due to the termination of
certain provisions of the Omnibus Agreement.

     

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
2

     

    TO

     

    FORBEARANCE
AGREEMENT AND

     

    AMENDMENT
TO CREDIT AGREEMENT

     

    

     

    [The
amounts of ending book cash range from $14,500,000 to $21,500,000 on a week by
week basis for the weeks ending December 20, 2008 through March 14,
2009.]

     

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
2.01

     

    TO

     

    FORBEARANCE
AGREEMENT AND

     

    AMENDMENT
TO CREDIT AGREEMENT

     

    
      
        
          	
                  Institution

                	
                  Revolver

                	 
      	
                  Term
      Loan

                	 
      	
                  Total
      Commitment

                
	
                  ABN
      AMRO

                	
                  15,400,000.00

                	 
      	
                         17,500,000.00

                	 
      	
                              32,900,000.00

                
	
                  BANK
      OF AMERICA

                	
                  18,097,619.05

                	 
      	
                         16,636,904.76

                	 
      	
                              34,734,523.81

                
	
                  BANK
      OF NOVA SCOTIA

                	
                  9,166,666.67

                	 
      	
                         10,416,666.67

                	 
      	
                              19,583,333.34

                
	
                  BANK
      OF SCOTLAND

                	
                  15,400,000.00

                	 
      	
                         17,500,000.00

                	 
      	
                              32,900,000.00

                
	
                  BLUE
      RIDGE INVESTMENTS LLC

                	
                  5,683,333.33

                	 
      	
                           8,601,190.47

                	 
      	
                              14,284,523.80

                
	
                  BMO
      CAPITAL MARKETS

                	
                  14,666,666.67

                	 
      	
                         16,666,666.67

                	 
      	
                              31,333,333.34

                
	
                  CALYON
      NEW YORK BRANCH

                	
                  18,333,333.33

                	 
      	
                         20,833,333.33

                	 
      	
                              39,166,666.66

                
	
                  CITIBANK

                	
                  14,666,666.67

                	 
      	
                         16,666,666.67

                	 
      	
                              31,333,333.34

                
	
                  FORTIS
      CAPITAL CORPORATION

                	
                  6,233,333.33

                	 
      	
                           7,083,333.33

                	 
      	
                              13,316,666.66

                
	
                  GE
      BUS FINCL SVC (FKA ML BFS)

                	
                  7,333,333.33

                	 
      	
                           8,333,333.33

                	 
      	
                              15,666,666.66

                
	
                  GUARANTY
      BANK AND TRUST

                	
                  7,333,333.33

                	 
      	
                           8,333,333.33

                	 
      	
                              15,666,666.66

                
	
                  HALBIS
      DISTRESSED OPPOR MASTER

                	
                  733,333.33

                	 
      	
                              833,333.33

                	 
      	
                                1,566,666.66

                
	
                  JPMORGAN
      CHASE

                	
                  6,233,333.33

                	 
      	
                           7,083,333.33

                	 
      	
                              13,316,666.66

                
	
                  LEHMAN
      BROTHER COMMERCIAL BANK

                	
                  10,685,714.28

                	 
      	
                         20,000,000.00

                	 
      	
                              30,685,714.28

                
	
                  ONE
      EAST LIQUIDITY MASTER LP

                	
                  1,131,428.57

                	 
      	
                           1,250,000.00

                	 
      	
                                2,381,428.57

                
	
                  ONE
      EAST PARTNERS MASTER LP

                	
                  8,951,904.76

                	 
      	
                         10,208,333.34

                	 
      	
                              19,160,238.10

                
	
                  RAYMOND
      JAMES BANK

                	
                  14,666,666.67

                	 
      	
                         16,666,666.67

                	 
      	
                              31,333,333.34

                
	
                  ROYAL
      BANK OF CANADA

                	
                  14,666,666.67

                	 
      	
                         16,666,666.67

                	 
      	
                              31,333,333.34

                
	
                  SUNTRUST

                	
                  6,233,333.33

                	 
      	
                           7,083,333.33

                	 
      	
                              13,316,666.66

                
	
                  UBS
      LOAN FINANCE LLC

                	
                  6,285,714.28

                	 
      	
                           5,000,000.00

                	 
      	
                              11,285,714.28

                
	
                  WBNA

                	
                  18,097,619.07

                	 
      	
                         16,636,904.77

                	 
      	
                              34,734,523.84

                
	 
      	
                  220,000,000.00

                	 
      	
                  250,000,000.00

                	 
      	
                  470,000,000.00

                

        

      

    

    

     

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -

                  

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
1

     

    TO

     

    FORBEARANCE
AGREEMENT AND

     

    AMENDMENT
TO CREDIT AGREEMENT

     

    FORM
OF FORECAST

     

    
      
        
          
            	
                     

                  	
                    --

                  	
                    -Exhibit 10.1

 

December 15, 2008

 

Ms. Christine Larson

 

Dear Christine:

 

On behalf of PDL BioPharma, Inc. (‘PDL’
or ‘we’), I am pleased to extend to you an employment offer for the position of
Senior Financial Advisor.  Your
employment with PDL will begin on December 15, 2008 (the ‘Employment Date’).

 

As we have discussed, PDL is undertaking to
spin off of its biotechnology operations into a separate publicly traded
company, currently named Facet Biotech Corporation (‘Facet’ and such spin-off
transaction, the ‘Spin-off’).  You and
PDL agree that, subject to and in connection with the Spin-off, PDL shall
appoint you, effective as of the Spin-off date, as its Vice President and Chief
Financial Officer, reporting to its President and Chief Executive Officer (the ‘CEO’),
and you would continue to be employed on the terms and conditions set forth in
this offer letter (the ‘Offer Letter’) and you agree to accept such appointment
on such terms and conditions.  While we
plan to complete the Spin-off by the end of 2008, it is possible for various
reasons that the Spin-off may not occur by that time or at all.  If PDL does not complete the Spin-off, for
any reason, within six (6) months following the Employment Date (the ‘Spin-off
Period’), you will be entitled to resign and PDL will pay to you, within five (5) days
of your separation from service, a special lump sum severance amount equal to
six (6) months’ Base Salary; provided, however, that you
tender your resignation no later than three (3) months following the end of
the Spin-off Period.

 

You agree that you will devote your full
business time and efforts to PDL.  You
agree that you will not engage in any other business or serve in any position
with or as a consultant or adviser to any other corporation or entity (including
as a member of such corporation’s or entity’s board of directors or other
governing or advising body), without the prior written consent of the
Board.  Notwithstanding the foregoing,
but only for so long as such activities in the aggregate do not materially
interfere with your duties hereunder or create a business or fiduciary
conflict, you will not be prohibited from (i) participating in charitable,
civic, educational, professional, community or industry affairs (including
membership on boards of directors), (ii) managing your passive personal
investments, and (iii) continuing your service in the positions that you
held as of the date of this Offer Letter, which positions you have disclosed to
the Board, provided that any such service obligation is not materially
increased beyond what you have disclosed to us.

 

Your monthly base salary (as in effect from
time to time, ‘Base Salary’) will be $350,000 annually, less applicable taxes
and withholdings, and will be payable in accordance PDL’s 

 

 

payroll procedures.  Your Base Salary shall be reviewed each year
but will not be subject to decrease unless such decrease is part of an overall
reduction effected for executive officers of PDL.  Your annual target bonus will be set at forty
percent (40%) of your annual Base Salary. 
Your bonus will be based on your contribution to PDL’s achievement of
its goals and objectives and your individual performance during this period as
determined by the CEO and the Compensation Committee of the Board.

 

Effective fifteen (15) days following the
Spin-off date, PDL will grant you a special retention incentive award (the ‘Special
Retention Incentive’) comprised of two components: (i) the right to
receive $420,000 in cash; and (ii) a number of unvested restricted shares
of PDL common stock with a Grant Value equal to $180,000.  For this purpose, ‘Grant Value’ means the
average of the closing prices of PDL’s common stock for the first ten (10) trading
days following the Spin-off date. 
Subject to your continued employment, the Special Retention Incentive
will vest and become payable upon the earlier to occur of (i) the second
anniversary of the Spin-off date, or (ii) a Monetization Event.  For purposes of this Offer Letter, ‘Monetization
Event’ means (i) a merger or sale of PDL or a sale of all or substantially
all of PDL’s assets, or (ii) any securitization or other monetization of
all or substantially all of PDL’s assets. 
In the event any dividends or other distributions are paid on PDL’s
common stock following the grant of the Special Retention Incentive but prior
to the vesting and payment thereof, the amount of the dividends or other
distributions payable on the restricted stock component of the Special
Retention Incentive shall be withheld, credited to an account in your name, and
shall vest and become payable if and when the Special Retention Incentive vests
and becomes payable.

 

If you are terminated without Cause or resign
for Good Reason following your accession to the Chief Financial Officer
position, but prior to your entitlement to the Special Retention Incentive, you
will receive, within five (5) days of your separation from service, a lump
sum cash payment equal to fifty percent (50%) of the sum of your annual base
salary and target bonus.

 

For purposes of this Offer Letter, ‘Cause’
means the occurrence of any of the following: (i) your intentional theft,
dishonesty, willful misconduct, breach of fiduciary duty for personal profit,
or falsification of any PDL documents or records; (ii) your material
failure to abide by the PDL’s code of conduct or other written policies
(including, without limitation, policies relating to confidentiality and
reasonable workplace conduct); (iii) your material and intentional
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of PDL (including, without
limitation, your improper use or disclosure of PDL confidential or proprietary
information); (iv) any willful act by you that has a material detrimental
effect on PDL’s reputation or business; (v) your repeated failure or
inability to perform any reasonable assigned duties after written notice from
the CEO of, and a reasonable opportunity to cure, such failure or inability; (vi) any
material breach by you of any employment, service, non-disclosure,
non-competition, non-solicitation or other similar agreement between you and
PDL, which breach is not cured pursuant to the terms of such agreement or
within twenty (20) days of receiving written notice of such breach; (vii) your
conviction (including any plea of guilty or nolo contendere) of any criminal
act involving fraud, dishonesty, misappropriation or moral turpitude, or which
impairs your ability to perform your duties with PDL.  For purposes of the foregoing, no act or omission
will be deemed ‘willful’ unless done, or 

 

 

omitted to be done, by you without a
reasonable good faith belief that you were acting in the best interest of PDL.

 

For purposes of this Offer Letter, ‘Good
Reason’ means the occurrence of any of the following conditions without your
informed written consent: (i) a material diminution in your authority,
duties or responsibilities, causing your position to be of materially lesser
rank or responsibility within PDL; (ii) a requirement that you report to a
corporate officer or other employee rather than directly to the CEO; (iii) a
material reduction in your Base Salary or bonus, unless reductions comparable
in amount and duration are concurrently made for all other PDL officers; or (iv) any
action or inaction by a PDL that constitutes, with respect to the you, a
material breach of this Offer Letter.

 

We currently also offer to our employees a
welfare benefits package, including a comprehensive medical policy and dental
plan, as well as life insurance coverage, in which you will be eligible to
participate in accordance with PDL guidelines. 
You acknowledge that in connection with the Spin-off, PDL will transfer
its welfare benefit plans to Facet and PDL would need to establish a new set of
welfare benefit plans following the Spin-off. 
The new welfare benefit plans to be established following the Spin-off
will be reasonably comparable to those currently maintained by the company, and
to the extent the transition involves your making a COBRA or similar election
in connection with the Spin-off and PDL’s transfer of its welfare benefit plans
to Facet, PDL will reimburse you for the incremental cost of the transitional
coverage provided pursuant to any such election.

 

Because PDL is re-domiciling PDL in Nevada
and because of the difficulties in selling a home in the Bay Area at an
acceptable price, PDL will provide assistance to you to rent housing in Nevada
proximate to PDL’s offices.  PDL will pay
you a housing allowance of $4,000 per month for the duration of your employment
by PDL.  In addition, to defray your
moving expenses, PDL will reimburse you for such expenses up to $10,000.

 

Your employment with PDL will not be for a
set term, and you will be an at-will employee. 
As a PDL employee, you will be free to resign at any time, just as we
will be free to terminate your employment at any time, with or without
Cause.  There will be no express or
implied agreements to the contrary.  By
signing this Offer Letter, you agree to waive any right to participate in the
PDL Executive Retention and Severance Plan or any other severance plan
maintained by PDL from time to time.

 

PDL intends that payments and benefits
provided to you pursuant to this Offer Letter be exempt from or comply with all
applicable requirements of Section 409A of the Internal Revenue Code of
1986, as amended.  Any ambiguities in
this Offer Letter shall be construed in a manner consistent with such intent.

 

For purposes of federal immigration law, you
will be required to provide PDL documentary evidence of your identity and
eligibility for employment in the United States.

 

To indicate your acceptance of our offer,
please sign and date this Offer Letter in the space provided below and return
it, along with a signed copy of the enclosed Proprietary Information 

 

 

and Invention Assignment Agreement, to John
McLaughlin.  By executing this Offer
Letter, you hereby represent that your execution hereof and performance of your
obligations hereunder do not and will not contravene or otherwise conflict with
any other agreement to which you are a party or any other legal obligation
applicable to you.  This Offer Letter,
along with the Proprietary Information and Invention Assignment Agreement,
supersedes any prior representations or agreements, whether written or oral,
with respect to our offer of employment to you. 
This Offer Letter may not be modified or amended except by a written
agreement, signed by PDL and you.

 

We are very excited at the prospect of your
joining PDL.

 

 

Sincerely,

 

	
  PDL BioPharma, Inc.

  	
   

  	
  Accepted by:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ John P. McLaughlin

  	
   

  	
  /s/ Christine Larson

  
	
  John P. McLaughlin

  	
   

  	
  Christine Larson

  	
   

  
	
  President & CEO

  	
   

  	
   

  	
   

  
	
  PDL BioPharma, Inc.
  (post-spin-off)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  12/15/08

  
	
   

  	
   

  	
  Date

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