Document:

2015 Q1 10Q Exhibit 10.a.(xvi) 1st Amend to Cr Agmt

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of December 18, 2013 (this “Agreement”) is entered into by and among ALEXANDER & BALDWIN, LLC, a Hawaii limited liability company (the “Company”), GRACE PACIFIC LLC, a Hawaii limited liability company (“Grace” and together with the Company, the “Borrowers”), ALEXANDER & BALDWIN, INC., a Hawaii corporation (“Holdings”), A&B II, LLC, a Hawaii limited liability company (“Grace Holdings”; together with the Borrowers and Holdings, collectively, the “Loan Parties”), the Lenders party hereto, BANK OF AMERICA, N.A., as Agent (in such capacity, the “Agent”), Swing Line Lender and L/C Issuer and FIRST HAWAIIAN BANK, as L/C Issuer.  All capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as defined below).

RECITALS

WHEREAS, the Company has entered into a Credit Agreement dated as of June 4, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among the Company, the Lenders identified therein (the “Lenders”) and the Agent;

WHEREAS, in connection with the Credit Agreement, the Guaranty Agreement dated as of June 28, 2012 (the “Holdings Guaranty”) was entered into by Holdings;

WHEREAS, the Company has requested that the Lenders make certain amendments to the Credit Agreement, including the increase of the Aggregate Commitments to be provided by certain existing Lenders; and 

WHEREAS, the Required Lenders (including each of the Lenders providing a portion of the increase of the Aggregate Commitments) are willing to provide such amendments to the Credit Agreement, and certain of the existing Lenders are willing to provide a portion of the increase of the Aggregate Commitments, in each case, subject to the terms and conditions specified in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Amendments to Credit Agreement.  The Credit Agreement is hereby amended as of the First Amendment Effective Date (as defined herein) as follows:
(a)    The definition of “Aggregate Commitments” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Aggregate Commitments” means, as of any date of determination, the Commitments of all the Lenders.  The initial amount of the Aggregate Commitments in effect on the First Amendment Effective Date is $350,000,000.  The Aggregate Commitments may be increased or decreased from time to time as provided herein.

(b)    The definition of “Applicable Cap Rates” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

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“Applicable Cap Rates” means (i) 7.50% for Investment Properties, (ii) 9.50% for Agricultural Land which is leased to third parties, (iii) 8.25% for Leased Non-Agricultural Land which is located in the continental United States, and (iv) 7.75% for Leased Non-Agricultural Land which is located in the State of Hawaii.

(c)    The definition of “Borrower” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Borrower” means (a) prior to the First Amendment Effective Date, the Company and (b) following the First Amendment Effective Date, the Company and Grace (in each case, as a collective reference, unless otherwise set forth herein).  For the avoidance of doubt, any reference herein to the Borrower providing or receiving notice shall be deemed to be a reference to the Company, on behalf of itself and Grace.

(d)    The definition of “Change of Control” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Change of Control” means:

(a)    the acquisition, after the date hereof, by any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934) (but excluding any employee benefit plan of such persons or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) of outstanding shares of voting stock representing more than 50% of voting control of Holdings; or

(b)    the failure of Holdings to own 100% of the Equity Interests of the Company at any time thereafter; or

(c)    the failure of Holdings to directly or indirectly own 100% of the Equity Interests of Grace at any time.

(e)    The definition of “EBITDA” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“EBITDA” means, for any period, for Holdings and its Subsidiaries on a consolidated basis, Consolidated Net Income Before Taxes for such period plus, to the extent deducted in the calculation thereof, Consolidated Interest Expense, depreciation and amortization expense, non-cash stock-based compensation expense, non-cash pension, non-cash postretirement and non-cash nonqualified expenses, and one-time expenses in connection with the acquisition of Grace and its Subsidiaries and the Kaneohe Ranch Assets incurred during the fiscal year ended December 31, 2013 in an aggregate amount not to exceed $8,000,000; provided that EBITDA shall exclude non-cash gains or losses resulting from the write-up or write-down of assets.

(f)    The definition “Eurodollar Rate” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Eurodollar Rate” means:

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(a)    for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate (“LIBOR”), or a comparable or successor rate which rate is approved by the Agent, as published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Agent from time to time) (in such case, the “LIBOR Rate”) at or about 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; and

(b)    for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to the LIBOR Rate, at or about 11:00 a.m., London time, two (2) Business Days prior to such date for Dollar deposits with a term of one (1) month commencing that day;

provided that to the extent a comparable or successor rate is approved by the Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is not administratively feasible for the Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Agent.

(g)    The definition of “Guarantor” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Guarantor” means Holdings, Grace Holdings and each Additional Guarantor.

(h)    The definition of “Guaranty” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Guaranty” means the Guaranty, dated as of the Initial Funding Date, executed by Holdings in favor of the Agent, substantially in the form of Exhibit G and any additional guaranty in favor of the Agent provided pursuant to the terms of this Agreement.

(i)    The definition of “Principal Credit Facility” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Principal Credit Facility” means (a) the Note Purchase Agreement or (b) any other credit agreement, loan agreement, note purchase agreement or similar agreement under which credit facilities in the aggregate principal or commitment amount of at least $40,000,000 are provided for, in each case, as any of the same may be amended, restated, supplemented or otherwise modified from time to time; provided that the Bridge Loan Agreement shall not constitute a Principal Credit Facility; provided, further, that the immediately preceding clause (b) shall exclude (i) all purchase money debt, (ii) all construction and other project financings, and (iii) all Non-Recourse Debt.  

(j)    The definition of “Priority Debt” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

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“Priority Debt” means, with respect to the Borrower, Holdings and their Subsidiaries, at any time of determination and without duplication, the sum of (a) Debt of the Company, Grace, Holdings and the other Guarantors secured by a Lien, plus (b) Debt of Subsidiaries of Holdings (other than the Company, Grace and the Subsidiaries of Holdings which are Guarantors), regardless of whether such Debt is secured or unsecured.

(k)    The definition of “Swing Line Sublimit” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Swing Line Sublimit” means an amount equal to the lesser of (a) $80,000,000 and (b) the Aggregate Commitments.  The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

(l)    The definition of “Total Adjusted Asset Value” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
 
“Total Adjusted Asset Value” means, at any date of determination thereof, without duplication, (a) real estate leasing property value (which shall be deemed to equal the sum of (i) Net Operating Income from Investment Properties divided by the Applicable Cap Rates, (ii) Net Operating Income from Leased Agricultural Land divided by the Applicable Cap Rates and (iii) Net Operating Income from Leased Non-Agricultural Land divided by the Applicable Cap Rates, plus (b) the greater of (x) EBITDA for the period of four (4) consecutive fiscal quarters most recently ended generated from the agricultural division of Holdings and its Subsidiaries (excluding, as an abundance of caution, Net Operating Income from Leased Agricultural Land and including, as an abundance of caution, income generated from electricity producing assets) divided by 20.0%, and (y) the Appraised Value of Agricultural Land which is not leased to third parties (provided that the determination of whether or not to obtain the appraisal necessary to determine the Appraised Value shall be made at the option of the Borrower and if the Borrower does not elect to have an appraisal performed, then clause (x) will be deemed to be greater than clause (y)), plus (c) the book value of Development Real Properties owned by Holdings or any of its Subsidiaries (with such book value, in the case of a less than wholly-owned subsidiary or any other entity (other than a Subsidiary) in which Holdings or any of its Subsidiaries owns an equity interest (each, a “Joint Venture Entity”), to be (i) with respect to a consolidated Joint Venture Entity, equal to the net assets of such Joint Venture Entity less the noncontrolling interest in such Joint Venture Entity as reflected on the consolidated balance sheet of Holdings required to be delivered pursuant to Section 6.01(a) or (b), or (ii) with respect to an unconsolidated Joint Venture Entity, equal to the book value of Holdings’ direct or indirect investment in such Joint Venture Entity), provided that the aggregate amount under this clause (c) shall not comprise more than 30% of consolidated total assets of Holdings and its Subsidiaries (less cash, cash equivalents, marketable securities, goodwill, noncontrolling interest and pension assets) in accordance with GAAP for the most recent fiscal quarter plus (d) the value of the assets of Grace and its Subsidiaries (which shall be deemed to be equal to EBITDA generated solely by Grace Holdings and its Subsidiaries for the period of four (4) consecutive fiscal quarters most recently ended divided by 16.67%).  

Notwithstanding anything to the contrary in the foregoing portions of this definition or Section 1.02(e):  (i) any asset or Person (together with such Person’s Subsidiaries) acquired by Holdings or any of its Subsidiaries, for purpose of determining the “Total Adjusted Asset 

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Value,” shall be valued at net book value during the period (the “Book Value Period”) from the consummation of such acquisition until the last day of the first full fiscal quarter occurring after the consummation of such acquisition; and (ii) with respect to clause (d) of this definition, following the relevant Book Value Period the calculation described in clause (d) of this definition shall include EBITDA (calculated solely with respect to Grace and its Subsidiaries) to the extent the applicable calculation described in clause (d) of this definition includes periods prior to the consummation of the acquisition by Holdings and its Subsidiaries of Grace and its Subsidiaries.

(m)    The definition of “Unencumbered EBITDA” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Unencumbered EBITDA” means, for any period, with respect to Holdings and its Subsidiaries on a consolidated basis, without duplication, EBITDA derived from (i) Unencumbered Investment Properties, (ii) Unencumbered Leased Agricultural Land, (iii) EBITDA generated from the agricultural division of Holdings and its Subsidiaries but only to the extent the assets in the agricultural division are Unencumbered Agricultural Division Assets and (iv) EBITDA calculated solely with respect to Grace Holdings and its Subsidiaries, provided that the amount of EBITDA under this clause (iv) shall be excluded from the calculation of Unencumbered EBITDA if, at any time during such period of determination, any Debt of Grace Holdings or its Subsidiaries is secured by a consensual Lien except that only EBITDA of GLP Asphalt LLC shall be excluded from the calculation of Unencumbered EBITDA if the only Debt of Grace Holdings or its Subsidiaries which is secured by a consensual Lien consists of (1) the bank facility from First Hawaiian Bank in favor of GLP Asphalt LLC in an aggregate commitment or outstanding principal amount not to exceed $40,000,000 (and only until August 31, 2014), or any extensions, refinancings, replacements, amendments or amendments and restatements of such bank facility in an aggregate commitment or outstanding principal amount not to exceed $30,000,000, and/or (2) the term loan from Bank of Hawaii in favor of GLP Asphalt LLC in an aggregate outstanding principal amount not to exceed the original aggregate principal amount of $14,000,000, as reduced from time to time in accordance with its originally scheduled principal amortization (and only until its final maturity date of March 1, 2021).

Notwithstanding anything to the contrary in the foregoing portions of this definition, the calculation described in clause (iv) of this definition shall include EBITDA (calculated solely with respect to Grace (or Grace Pacific Corporation, as applicable, for periods prior to the limited liability company conversion of Grace Pacific Corporation) and its Subsidiaries) to the extent the applicable calculation described in clause (iv) of this definition includes periods prior to the consummation of the acquisition by Holdings and its Subsidiaries of Grace and its Subsidiaries.

(n)    The definition of “Unencumbered Income Producing Assets Value” in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“Unencumbered Income Producing Assets Value” means, at any time of determination thereof, without duplication, the sum of (i) the Net Operating Income from Unencumbered Investment Properties divided by the Applicable Cap Rates, (ii) the Net Operating Income from Unencumbered Leased Agricultural Land divided by the Applicable Cap Rates, (iii) the Net Operating Income from Unencumbered Leased Non-Agricultural 

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Land divided by the Applicable Cap Rate, (iv) the greater of (x) EBITDA for the period of four (4) consecutive fiscal quarters most recently ended generated from the agricultural division of Holdings and its Subsidiaries but only to the extent the assets in the agricultural division are Unencumbered Agricultural Division Assets (excluding, as an abundance of caution, Net Operating Income from Leased Agricultural Land) divided by 20.0%, and (y) the Appraised Value of Unencumbered Agricultural Land which is not leased to third parties (provided that the determination of whether or not to obtain the appraisal necessary to determine the Appraised Value shall be made at the option of the Borrower and if the Borrower does not elect to have an appraisal performed, then clause (x) will be deemed to be greater than clause (y)) and (v) the value of the assets of Grace and its Subsidiaries (which shall be deemed to be equal to EBITDA generated solely by Grace Holdings and its Subsidiaries for the period of four (4) consecutive fiscal quarters most recently ended divided by 16.67%), provided that the amount of EBITDA under this clause (v) shall be excluded from the calculation of Unencumbered Income Producing Assets Value if, at such time of determination or at any time during such then or most recently ended period of four consecutive fiscal quarters, any Debt of Grace Holdings or its Subsidiaries is or was secured by a consensual Lien, except that only the value of GLP Asphalt LLC (which shall be deemed to be equal to EBITDA (but calculated solely with respect to GLP Asphalt LLC and its Subsidiaries for the then or most recently ended period of four consecutive fiscal quarters) divided by 16.67%) shall be excluded from the calculation of Unencumbered Income Producing Assets Value if the only Debt of Grace Holdings or its Subsidiaries which is or was secured by a consensual Lien consists or consisted of (1) the bank facility from First Hawaiian Bank in favor of GLP Asphalt LLC in an aggregate commitment or outstanding principal amount not to exceed $40,000,000 (and only until August 31, 2014), or any extensions, refinancings, replacements, amendments or amendments and restatements of such bank facility in an aggregate commitment or outstanding principal amount not to exceed $30,000,000, and/or (2) the term loan from Bank of Hawaii in favor of GLP Asphalt LLC in an aggregate outstanding principal amount not to exceed the original aggregate principal amount of $14,000,000, as reduced from time to time in accordance with its originally scheduled principal amortization (and only until its final maturity date of March 1, 2021).  

Notwithstanding anything to the contrary in the foregoing portions of this definition or in Section 1.02(e):  (i) any asset or Person (together with such Person’s Subsidiaries) acquired by Holdings or any of its Subsidiaries, for purpose of determining the “Unencumbered Income Producing Asset Value,” shall be valued at net book value during the period (the “Book Value Period”) from the consummation of such acquisition until the last day of the first full fiscal quarter occurring after the consummation of such acquisition; and (ii) with respect to clause (v) of this definition, following the relevant Book Value Period the calculation described in clause (v) of this definition shall include EBITDA (calculated solely with respect to Grace (or Grace Pacific Corporation, as applicable, for periods prior to the limited liability company conversion of Grace Pacific Corporation) and its Subsidiaries) to the extent the applicable calculation described in clause (v) of this definition includes periods prior to the consummation of the acquisition by Holdings and its Subsidiaries of Grace and its Subsidiaries.

(o)    Section 1.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the appropriate alphabetical order therein:
    

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“Bridge Loan Agreement” means that certain Unsecured Loan Agreement, dated as of December 18, 2013 between the Borrower and Bank of America, N.A., as the same may be amended, amended and restated, restated, supplemented or otherwise modified from time to time.

“Company” means Alexander & Baldwin, LLC, a Hawaii limited liability company. 

“Covenant Relief Period” means the period from the First Amendment Effective Date through and including March 30, 2014.

“First Amendment Effective Date” means December 18, 2013.

“Grace” means Grace Pacific LLC, a Hawaii limited liability company.

“Grace Holdings” means A&B II, LLC, a Hawaii limited liability company, the direct holding company of Grace.

“Kaneohe Ranch Acquisition” means the acquisition of the Kaneohe Ranch Assets subject to (i) that certain Purchase and Sale Agreement and Joint Escrow Instructions, dated as of October 18, 2013, among Castle Family LLC, Castle 1974 LLC, Castle Residuary LLC, Castle Kaopa LLC and Holdings and (ii) that certain Purchase and Sale Agreement and Joint Escrow Instructions, dated as of October 18, 2013, between Harold K.L. Castle Foundation and Holdings, in each case, as amended, restated, supplemented or otherwise modified prior to the First Amendment Effective Date.
 
“Kaneohe Ranch Assets” means those certain Kaneohe Ranch Hawaii Portfolio assets acquired by Holdings pursuant to the Kaneohe Ranch Acquisition.

(p)    Section 1.02(e) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(e)    For purposes of all calculations made under the financial covenants set forth in Section 7.01 and the Priority Debt covenant set forth in Section 7.05 for an applicable period, (i) if during such period Holdings, the Borrower or any Subsidiary shall have consummated an acquisition of a Significant Subsidiary or a Significant Line of Business, (x) EBITDA or Unencumbered EBITDA, as the case may be, for such period shall be calculated after giving pro forma effect thereto as if such transaction occurred on the first day of such period; provided, that if the aggregate purchase price for any such acquisition is greater than or equal to $25,000,000, EBITDA or Unencumbered EBITDA, as the case may be, shall only be calculated on a pro forma basis to the extent such pro forma calculations are based on audited financial statements or other financial statements reasonably satisfactory to the Required Lenders (subject to adjustments set forth in the second paragraphs of each of the definitions of Total Adjusted Asset Value and Unencumbered Income Producing Assets Value, as applicable) and (y) any Debt incurred or assumed by any Loan Party or Subsidiary (including the Person or property acquired) in connection with such transaction and any Debt of the Person or property acquired which is not retired in connection with such transaction (1) shall be deemed to have been incurred as of the last day of the previous period and (2) if such Debt has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined 

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by utilizing the rate which is or would be in effect with respect to such Debt as at the relevant date of determination, and (ii) if during such period Holdings, the Borrower or any Subsidiary shall have consummated a disposition of all or substantially all of the assets of Holdings, the Borrower or a Subsidiary or of a majority of the equity interests of a Subsidiary or of a Significant Line of Business, (x) EBITDA or Unencumbered EBITDA, as the case may be, for such period shall be calculated after giving pro forma effect thereto as if such transaction occurred on the last day of the previous period and (y) any Debt which is retired in connection with such transaction shall be excluded and deemed to have been retired as of the last day of the previous period. 
(q)    Section 2.14(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(a)    Request for Increase.  Provided there exists no Default, upon notice to the Agent (which shall promptly notify the Lenders), the Borrower may from time to time, after the Initial Funding Date, but no more than one time in any calendar year, request an increase in the Aggregate Commitments by an amount (for all such requests) not exceeding $100,000,000; provided that any such request for an increase shall be in a minimum amount of $10,000,000.  At the time of sending such notice, the Borrower (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

(r)    Article II of the Credit Agreement is hereby inserting the following new Section 2.17 at the end thereof:

Section 2.17    Joint and Several Obligations. Except as specifically provided herein, the Obligations of the Borrowers shall be joint and several in nature regardless of which such Person actually receives Credit Extensions hereunder or the amount of such Credit Extensions received or the manner in which the Lender accounts for such Credit Extensions on its books and records.  Notwithstanding the foregoing, Grace hereby irrevocably appoints the Company to act as its agent for all purposes of this Agreement and the other Loan Documents and agrees that (i) the Company may execute such documents on behalf of Grace (in its capacity as Borrower) as the Company deems appropriate in its sole discretion and Grace shall be obligated by all of the terms of any such document executed on its behalf (ii) any notice or communication delivered by the Agent or the Lender to the Company shall be deemed delivered to Grace and (iii) the Agent or the Lenders may accept, and be permitted to rely on, any document, instrument or agreement executed by the Company on behalf of Grace.

(s)    Section 3.03 of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

3.03    Inability to Determine Rates.  

(a)     If in connection with any request for a Eurodollar Loan or a conversion to or continuation thereof, (i)  the Agent determines that (A)  deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Loan or (B) adequate and reasonable means do not exist for 

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determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan or in connection with an existing or proposed Base Rate Loan (in each case with respect to clause (i), “Impacted Loans”), or (ii) the Agent or the Required Lenders determine that for any reason Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agent will promptly so notify the Borrower and each Lender.  Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Loans shall be suspended (to the extent of the affected Eurodollar Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Loans (to the extent of the affected Eurodollar Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein. 

(b)    Notwithstanding the foregoing, if the Agent has made the determination described in clause (a)(i) of this Section, the Agent in consultation with the Borrower and the Required Lenders, may establish an alternative interest rate for the Impacted Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Agent revokes the notice delivered with respect to the Impacted Loans under clause (a)(i) of this Section, (2) the Agent or the Required Lenders notify the Agent and the Borrower that such alternative interest rate does not adequately and fairly reflect the cost to the Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Agent and the Borrower written notice thereof.

(t)    Section 6.01(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(a)    as soon as practicable and in any event within 60 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year (or if earlier, 10 Business Days after the date required to be filed with the SEC), or the date on which another creditor of the Borrower first receives such information, (i) consolidated statements of income and cash flows of Holdings and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by an authorized financial officer of the Borrower, subject only to changes resulting from year-end adjustments, and (ii) financial statements of Grace and its Subsidiaries that correspond to the periods occurring prior to the acquisition of Grace and its Subsidiaries by Holdings and its Subsidiaries for which EBITDA of Grace and its Subsidiaries is reported for such quarterly period (for the avoidance of doubt, such separate financial statements of Grace and its Subsidiaries shall not be required to be provided 

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at any time after the four fiscal quarter period following the acquisition of Grace and its Subsidiaries by Holdings and its Subsidiaries);

(u)    Section 6.01(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(b)    as soon as practicable and in any event within the earlier to occur of 120 days after the end of each fiscal year of the Borrower (or if earlier, 10 Business Days after the date required to be filed with the SEC) or the date on which another creditor of the Borrower first receives such information, (i) consolidated statements of income and cash flows of Holdings and its Subsidiaries for such year and a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form corresponding figures from the preceding annual audit, all in reasonable detail and reasonably satisfactory in scope to the Required Lenders and certified by independent public accountants of recognized standing whose opinion shall be unqualified and otherwise satisfactory in scope and substance to the Required Lenders, provided that such opinion shall be deemed otherwise satisfactory if prepared in accordance with GAAP and generally accepted accounting standards, and (ii) financial statements of Grace and its Subsidiaries that correspond to the periods occurring prior to the acquisition of Grace and its Subsidiaries by Holdings and its Subsidiaries for which EBITDA of Grace and its Subsidiaries is reported for such annual period (for the avoidance of doubt, such separate financial statements of Grace and its Subsidiaries shall not be required to be provided at any time after the four fiscal quarter period following the acquisition of Grace and its Subsidiaries by Holdings and its Subsidiaries); 

(v)    Section 6.01(f) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(f)    promptly after the furnishing thereof, copies of any certificate, statement or report furnished to any other holder of the debt securities of any Loan Party pursuant to the terms of the Note Purchase Agreement or any other indenture, loan, credit or similar agreement or instrument and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 6.01;

(w)    Section 7.01(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(a)    Minimum Consolidated Shareholders’ Equity.  Holdings shall not permit the Consolidated Shareholders’ Equity at any time to be less than the sum of (a) $791,440,000, plus (b) to the extent positive, 25% of Consolidated Net Income for each fiscal quarter ended after December 31, 2013 (such required minimum consolidated shareholders’ equity amount not to be reduced by any consolidated net loss during any such fiscal quarter). 

(x)    Section 7.01(c) of the Credit Agreement is hereby amended by deleting the first paragraph thereof in its entirety and replaced with the following:

(c)    Maximum Total Debt to Total Adjusted Asset Value Ratio.  

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(i)     Holdings shall not permit the Total Debt to Total Adjusted Asset Value Ratio at any time to exceed 0.50 to 1.0; provided that, for the purposes of the calculation in this clause (i), during the Covenant Relief Period only, the Debt of Holdings and its Subsidiaries incurred to consummate the Kaneohe Ranch Acquisition shall be excluded.  

(ii)    During the Covenant Relief Period only, Holdings shall not permit the Total Debt to Total Adjusted Asset Value Ratio any time during such Covenant Relief Period to exceed 0.575 to 1.00; provided that, for the purposes of the calculation in this clause (ii), during the Covenant Relief Period only, the Debt of Holdings and its Subsidiaries incurred to consummate the Kaneohe Ranch Acquisition shall be included.

(y)    Section 7.01(d) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(d)    Minimum Unencumbered Income Producing Assets Value to Unsecured Debt Ratio.  

(i)    The Borrower shall not permit the Unencumbered Income Producing Assets Value to Unsecured Debt Ratio at any time to be less than 1.75 to 1.0; provided that, for the purposes of the calculation in this clause (i), during the Covenant Relief Period only, the Unsecured Debt incurred to consummate the Kaneohe Ranch Acquisition shall be excluded. 

(ii)     During the Covenant Relief Period only, the Borrower shall not permit the Unencumbered Income Producing Assets Value to Unsecured Debt Ratio at any time to be less than 1.40 to 1.0; provided that, for the purposes of the calculation in this clause (ii), during the Covenant Relief Period only, the Unsecured Debt incurred to consummate the Kaneohe Ranch Acquisition shall be included.

(z)    Section 7.04(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(a) (i) any Subsidiary of the Borrower may merge with the Borrower, so long as the Borrower is the surviving Person, (ii) Grace may merge with the Company, so long as the Company is the surviving Person and (iii) Grace Holdings may merge with the Company, so long as the Company is the surviving Person;

(aa)    Section 7.04(d)(ii) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

(ii) such assets, together with all other assets sold or otherwise disposed of to Third Parties pursuant to this clause (d) did not contribute more than 10% of EBITDA, determined as of the four quarter period ending as of the most recent fiscal quarter with respect to which financial statements are required to be delivered pursuant to Section 6.01(a) or (b); provided that, notwithstanding the percentage limitations appearing in clauses (i) and (ii), above, sales or dispositions in excess thereof in a twelve month period may be made for cash if the proceeds of each such excess sale or disposition (net of taxes thereon) are fully utilized in 

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the acquisition of Permitted Assets and/or applied to the repayment of Permitted Debt, in each case within 365 days from the date of such sale or disposition;

(bb)    Schedule 2.01 [Commitments and Applicable Percentages] to the Credit Agreement is hereby amended in its entirety to read in the form of such Schedule attached hereto as Annex I to this Agreement. 

(cc)    Exhibit C [Form of Note] to the Credit Agreement is hereby amended in its entirety to read in the form of such Exhibit attached hereto as Annex II to this Agreement. 
2.    Joinder.
Grace hereby acknowledges, agrees and confirms that, by its execution of this Agreement, it will be deemed to be (a) a party to the Credit Agreement and a “Borrower” for all purposes of the Credit Agreement and the other Loan Documents, and shall have all of the obligations of as a Borrower thereunder as if it had executed the Credit Agreement.  Grace hereby ratifies, as of the First Amendment Effective Date, and agrees to be bound by, all of the terms, provisions and conditions applicable to the Borrowers contained in the Credit Agreement.  Without limiting the generality of the foregoing terms of this paragraph, the Company and Grace hereby acknowledge, agree and confirm that the Obligations of the Company and Grace as Borrowers shall be joint and several in nature in accordance with the terms set forth in the Credit Agreement.  
3.    Conditions Precedent.  This Agreement shall be effective as of the date hereof (the “First Amendment Effective Date”) when all of the conditions set forth below have been satisfied (or waived in accordance with the terms of the Credit Agreement:
(a)    The Agent shall have received counterparts of this Agreement, duly executed by each Loan Party, the Agent and the Required Lenders (including each of the Lenders providing a portion of the increase of the Aggregate Commitments).
(b)    The Agent’s receipt of the following, each of which shall be originals, PDF copies or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer, each dated the First Amendment Effective Date (or, in the case of certificates of governmental officials, a recent date before the First Amendment Effective Date) and each in form and substance satisfactory to the Agent: 
(i)    an amended and restated Note executed by the Company and Grace in favor of each existing Lender that received a Note on the Closing Date; 

(ii)    a guaranty executed by Grace Holdings (the “Grace Holdings Guaranty”);

(iii)    such certificates of resolutions or other action, incumbency certificates (including specimen signatures) and/or other certificates of the secretary or assistant secretary of each Loan Party as the Agent may require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with this Agreement and the other Loan Documents;

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(iv)    such documents and certifications as the Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing and in good standing in its jurisdiction of organization; 
(v)    a favorable customary opinion of (I) Skadden, Arps, Slate, Meagher & Flom LLP, as legal counsel to the Loan Parties and (II) General Counsel to the Loan Parties addressed to the Agent and each Lender, as to such customary matters concerning the Loan Parties and the Loan Documents as the Agent may reasonably request;
(vi)    a certificate of a Responsible Officer of the Company either (A) attaching copies of all documents evidencing other necessary actions, approval or consents with respect to this Agreement or (B) stating that no such actions, approvals or consents are so required; 
(vii)    a certificate signed by a Responsible Officer of the Company certifying that (A) the representations and warranties of the Borrowers and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document are true and correct in all material respects (except for any representation and warranty that is qualified by materiality or reference to Material Adverse Effect which such representation and warranty shall be true and correct in all respects) on and as of the First Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and (B) no Default exists or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document; 
(viii)    a copy, certified by a Responsible Officer of the Company as true and complete, of an amendment to the Note Purchase Agreement, in form and substance reasonably satisfactory to the Agent; 

(ix)    consolidated statements of income of (1) Grace (or Grace Pacific Corporation, as applicable, for periods prior to the limited liability company conversion of Grace Pacific Corporation) and its Subsidiaries, and (2) GLP Asphalt LLC and its Subsidiaries, in each case for each of the fiscal quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, and a consolidated balance sheet of (1) Grace (or Grace Pacific Corporation, as applicable, for dates prior to the limited liability company conversion of Grace Pacific Corporation) and its Subsidiaries, and (2) GLP Asphalt LLC and its Subsidiaries, in each case for each of the fiscal quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, all in reasonable detail and certified by an authorized financial officer of Grace (or Grace Pacific Corporation, as applicable), subject only to changes resulting from year-end adjustments; and

(x)    such other assurances, certificates, documents, consents, opinions or additional financial information as the Agent or any Lender reasonably may require.

(c)    The representations and warranties set forth in Section 4 hereof shall be true in all material respects and correct on the First Amendment Effective Date and no Default or Event of Default shall exist.

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(d)    The Agent shall have received (i) an amendment fee, for the account of each Lender that provides the Agent with an executed counterpart of this Agreement on or before 5 p.m. Eastern time on December 18, 2013, in the amount equal to 0.05% of the amount of the Commitment of such Lender as of the First Amendment Effective Date (but prior to giving effect to this Agreement) and (ii) an upfront fee, for the account of each Lender providing an increase to the Commitments, in an amount equal to 0.35% of the final allocated amount of such increase in the Commitments of such Lender (after giving effect to this Agreement).  
(e)    The Company shall have paid in full all other fees due and payable in connection with this Agreement and all reasonable out-of-pocket fees and expenses of the Agent in connection with the preparation, execution and delivery of this Agreement, including without limitation, the reasonable fees and expenses of Moore & Van Allen PLLC, special counsel to the Agent. 
4.    Representations and Warranties.
(a)    Each Loan Party hereby represents and warrants as follows:
(i)    It has taken all necessary action to authorize the execution, delivery and performance of this Agreement.
(ii)    This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).
(iii)    No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by it of this Agreement. 
(b)    Each Loan Party represents and warrants to the Lenders that, (i) the representations and warranties of the Borrowers and each other Loan Party set forth in Article V of the Credit Agreement and/or in each other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, are true and correct in all material respects (except for any representation and warranty that is qualified by materiality or reference to Material Adverse Effect which such representation and warranty shall be true and correct in all respects) on and as of the date hereof with the same effect as if made on and as of the date hereof, except to the extent such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.02 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement and (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default.
5.    No Prejudice or Waiver; Ratification; Loan Document.  The Credit Agreement, and the obligations of each Loan Party thereunder and under the other Loan Documents, are hereby ratified and confirmed and shall remain in full force and effect according to their terms.  The terms of this Agreement shall not operate as a waiver by the Lenders of, or otherwise prejudice the Lenders’ rights, remedies or powers 

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under, the Credit Agreement, any other Loan Document or applicable law.  Except as expressly provided herein:
(a)    no terms and provisions of any agreement are modified or changed by this Agreement; 
(b)    the terms and provisions of the Credit Agreement and all other Loan Documents shall continue in full force and effect; and
(c)    this Agreement shall constitute a “Loan Document” under, and as defined in, the Credit Agreement.

6.    Miscellaneous.
(a)    This Agreement shall be binding upon and enforceable by and against the parties hereto and their respective successors and assigns.
(b)    Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.  This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original.  Execution of this Agreement by any of the parties may be evidenced by way of a faxed or electronic transmission of such party’s signature and such faxed or electronic signature shall be deemed to constitute the original signature of such party to this Agreement and shall be admissible into evidence for all purposes.
(c)    THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.
7.    Survival.  All warranties, representations, certifications and covenants made by or on behalf of the Loan Parties herein shall be considered to have been relied upon by the Agent and the Lenders and shall survive the execution of this Agreement, regardless of any investigation made by or on behalf of the Agent and the Lenders.
8.    Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
9.    Acknowledgment of Guarantors.  Each of Holdings and Grace Holdings acknowledge and consent to all of the terms and conditions of this Agreement and agree that this Agreement and any documents executed in connection herewith do not operate to reduce or discharge Holdings’ and Grace Holdings’ respective obligations under the Holdings Guaranty, the Grace Holdings Guaranty, as applicable, or the other Loan Documents, except as otherwise modified by paragraph 2 hereof.

10.    Entirety. This Agreement and the other Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject 

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matter hereof.  These Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no oral agreements between the parties.

11.    Reallocation of Commitments.  On the First Amendment Effective Date, the Company shall prepay any Committed Loans outstanding on the First Amendment Effective Date (and pay any additional amounts required pursuant to Section 3.05 of the Credit Agreement) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments on the First Amendment Effective Date.  Each of the Lenders acknowledges and agrees that as of the First Amendment Effective Date, (i) the aggregate Commitments of the Lenders shall be as set forth on Schedule 2.01 to the Credit Agreement (and attached hereto as Annex I) and (ii) any outstanding obligations of the Lenders immediately before giving effect to this Amendment shall be automatically reallocated in accordance with such Lender’s Applicable Percentage as set forth on Schedule 2.01 to the Credit Agreement (and attached hereto as Annex I).  In order to effect such reallocations, assignments shall be deemed to be made among the Lenders in such amounts as may be necessary, and with the same force and effect as if such assignments were evidenced by the applicable Assignment and Assumptions (but without the payment of any related assignment fee), and no other documents or instruments shall be required to be executed in connection with such assignments (all of which such requirements are hereby waived).

[remainder of page intentionally left blank]

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Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

BORROWERS:                ALEXANDER & BALDWIN, LLC

By:  /s/ Nelson N.S. Chun
Name:  Nelson N.S. Chun
Title:  Senior Vice President and Chief Legal Officer

By:  /s/ Paul K. Ito
Name:  Paul K. Ito 
Title:  Senior Vice President, Chief Financial Officer, 
           Treasurer and Controller 

GRACE PACIFIC LLC
By: A&B II, LLC, its sole member

By:  /s/ Stanley M. Kuriyama
Name:  Stanley M. Kuriyama
Title: Its Sole Manager

		
	GUARANTORS:
	ALEXANDER & BALDWIN, INC.

By:  /s/ Nelson N.S. Chun
Name:  Nelson N.S. Chun
Title:  Senior Vice President and Chief Legal Officer

By:  /s/ Paul K. Ito
Name:  Paul K. Ito 
Title:  Senior Vice President, Chief Financial Officer, 
           Treasurer and Controller 

A&B II, LLC

By:  /s/ Stanley M. Kuriyama
Name:  Stanley M. Kuriyama
Title: Its Sole Manager

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT 

		
	AGENT:
	BANK OF AMERICA, N.A., 
as Agent

By:  /s/ Brenda Schriner
Name:  Brenda Schriner
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT 

BANK OF AMERICA, N.A., 
as a Lender, L/C Issuer and Swing Line Lender

By:  /s/ Sarah E. Young
Name:  Sarah E. Young
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

FIRST HAWAIIAN BANK,
as L/C Issuer and a Lender

By:  /s/ Jon T. Fukagawa
Name:  Jon T. Fukagawa
Title: Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

WELLS FARGO BANK, N.A.,
as a Lender

By:  /s/ Guy Churchill
Name:  Guy Churchill
Title:  Senior Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

AMERICAN AGCREDIT, PCA,
as a Lender

By:  /s/ Janice T. Thede
Name:  Janice T. Thede
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

BANK OF HAWAII,
as a Lender

By:  /s/ Darrell McCorquodale
Name:  Darrell McCorquodale
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

AMERICAN SAVINGS BANK, F.S.B.,
as a Lender

By:  /s/ Edward Chin
Name:  Edward Chin
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

CENTRAL PACIFIC BANK,
as a Lender

By:  /s/ Fernando Lopez
Name:  Fernando Lopez
Title:  Vice President

ALEXANDER & BALDWIN, LLC
FIRST AMENDMENT TO CREDIT AGREEMENT

ANNEX I

Schedule 2.01

COMMITMENTS AND APPLICABLE PERCENTAGES

[see attached]

CHAR1\1338557v10

ANNEX II

Exhibit C

FORM OF NOTE

[see attached]

CHAR1\1338557v10Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of May 5, 2015, between Sanchez Energy Corporation, a Delaware corporation (the “Company”), and Brian Carney (“Indemnitee”).

 

WITNESSETH THAT:

 

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.  Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions.  At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or the business enterprise itself.  The By-laws of the Company (the “By-laws”) require indemnification of the officers and directors of the Company.  Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“DGCL”).  The By-laws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

 

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

 

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

 

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

 

WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

 

 

WHEREAS, Indemnitee does not regard the protection available under the By-laws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity.  Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.

 

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director from and after the date hereof, the parties hereto agree as follows:

 

1.                                      Indemnity of Indemnitee.  The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time.  In furtherance of the foregoing indemnification, and without limiting the generality thereof:

 

(a)                                 Proceedings Other Than Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company.  Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

 

(b)                                 Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company.  Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware (the “Delaware Court”) shall determine that such indemnification may be made.

 

(c)                                  Indemnification for Expenses of a Party Who is Wholly or Partly Successful.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee

 

2

 

against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter.  For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

2.                                      Additional Indemnity.  In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee.  The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

 

3.                                      Contribution.

 

(a)                                 Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such Proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee.  The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

 

(b)                                 Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such Proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.  The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with

 

3

 

Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

 

(c)                                  The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

 

(d)                                 To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding, and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

4.                                      Indemnification for Expenses of a Witness.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

 

5.                                      Advancement of Expenses.  Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within 30 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.  Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.

 

6.                                      Procedures and Presumptions for Determination of Entitlement to Indemnification.  It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware.  Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

 

(a)                                 To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and

 

4

 

information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification.  The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.  Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

 

(b)                                 Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board:  (1) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum, (2) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (3) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee or (4) if so directed by the Board, by the stockholders of the Company.

 

(c)                                  If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c).  The Independent Counsel shall be selected by the Board.  Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel,” and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit.  If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected or shall have been selected and objected to, either the Company or Indemnitee may petition the Delaware Court or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof.  The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

 

(d)                                 In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement.  Anyone seeking to

 

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overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.  Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

(e)                                  Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise.  In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.  Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(f)                                   If the person, persons or entity empowered or selected under this Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within 15 days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat.

 

(g)                                  Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any

 

6

 

documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

 

(h)                                 The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty.  In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such Proceeding.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(i)                                     The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

7.                                      Remedies of Indemnitee.

 

(a)                                 In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within 10 days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification.  Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a).  The Company shall not oppose Indemnitee’s right to seek any such adjudication.

 

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(b)                                 In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).

 

(c)                                  If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d)                                 In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all Expenses actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

 

(e)                                  The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.  The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within 10 days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

 

(f)                                   Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

 

8.                                      Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

 

(a)                                 The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation of the Company (the “Certificate of Incorporation”), the By-laws, any agreement, a vote of stockholders, a resolution of directors of the Company, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment,

 

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alteration or repeal.  To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate of Incorporation, the By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

(b)                                 To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies.  If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(c)                                  The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided by certain affiliates of Indemnitee (collectively, the “Third Party Indemnitors”).  The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Third Party Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Certificate of Incorporation or the By-laws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Third Party Indemnitors, and, (iii)  that it irrevocably waives, relinquishes and releases the Third Party Indemnitors from any and all claims against the Third Party Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Company further agrees that no advancement or payment by the Third Party Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Third Party Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company.  The Company and Indemnitee agree that the Third Party Indemnitors are express third party beneficiaries of the terms of this Section 8(c).

 

(d)                                 Except as provided in Section 8(c), in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Third Party Indemnitors), who shall

 

9

 

execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(e)                                  Except as provided in Section 8(c), the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

(f)                                   Except as provided in Section 8(c), the Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

 

9.                                      Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

 

(a)                                 for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing shall not affect the rights of Indemnitee or the Third Party Indemnitors set forth in Section 8(c);

 

(b)                                 for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law;

 

(c)                                  in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any such part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

 

(d)                                 if prohibited by applicable law, except as noted in Section 12(d).

 

10.                               Duration of Agreement.  All agreements and obligations of the Company contained herein shall continue for so long as Indemnitee may have any liability or potential liability by virtue of serving or having served as an officer or director of the Company or at the request of the Company as a director, officer, partner, trustee, member, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by

 

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purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

 

11.                               Security.  To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral.  Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

 

12.                               Miscellaneous.

 

(a)                                 The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

 

(b)                                 This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

 

(c)                                  The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

 

(d)                                 Mutual Acknowledgment.  Both the Company and Indemnitee acknowledge that in certain instances, federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise.  For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain Employee Retirement Income Security Act of 1974 (ERISA)  violations.  Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

 

13.                               Definitions.  For purposes of this Agreement:

 

(a)                                 “Corporate Status” describes the status of a person who is or was a director, officer, partner, trustee, member, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, limited liability company, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

 

11

 

(b)                                 “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

(c)                                  “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

 

(d)                                 “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent.  Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(e)                                  “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.  The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

(f)                                   “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this

 

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Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

 

14.                               Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.  Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws.  In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

 

15.                               Modification and Waiver.  No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

16.                               Notice By Indemnitee.  Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder.  The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

 

17.                               Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent:

 

(a)                                 To Indemnitee at the address set forth below Indemnitee signature hereto.

 

(b)                                 To the Company at:

 

1000 Main Street, Suite 3000
 Houston, Texas 77002
 Attention: Chief Executive Officer

 

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

18.                               Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.  This Agreement may also be executed and delivered by facsimile

 

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signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

19.                               Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

20.                               Governing Law and Consent to Jurisdiction.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

SIGNATURE PAGE TO FOLLOW

 

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

 

	
 
    	
SANCHEZ ENERGY CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Antonio R. Sanchez, III
    
	
 
    	
 
    	
Name:
    	
Antonio R. Sanchez, III
    
	
 
    	
 
    	
Title:
    	
President and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INDEMNITEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian Carney
    
	
 
    	
 
    	
Name:
    	
Brian Carney
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
1202 West Texas Avenue
    
	
 
    	
 
    	
Midland, Texas 79701
    
					

 

Indemnification Agreement Signature Page — Brian Carney

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