Document:

exv10w10

 

Exhibit 10.10

SPORT
SUPPLY GROUP, INC.

AMENDED AND RESTATED

STOCK OPTION PLAN

	1.	 	Purpose

     The purpose of the Sport Supply Group, Inc. Amended and Restated Stock Option Plan
(hereinafter called the “Plan”) is to advance the interests of Sport Supply Group, Inc.
(hereinafter called the “Company”) by strengthening the ability of the Company to attract
and retain key personnel of high caliber through encouraging a sense of proprietorship by
means of stock ownership.

     Certain options granted under this Plan are intended to qualify as “incentive stock
options” pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”), while certain other options granted under the Plan will constitute nonqualified
options.

	2.	 	Definitions

     As used in this Plan, and in any Option Agreement, as hereinafter defined, the
following terms shall have the following meanings, unless the context otherwise requires:

     (a) “Common Stock” shall mean the Common Stock of the Company, par value $.01 per
share.

     (b) “Date of Grant” shall mean the date on which a stock option is granted pursuant to
this Plan.

     (c) “Non-Employee Director” shall mean an individual who is a “non-employee director”
within the meaning set forth in Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the
“Exchange Act”), and also an “outside director” within the meaning of Treasury
Regulation Section 1.162-27 (e)(3).

     (d) “Fair Market Value” shall mean the closing sale price (or average of the quoted
closing
bid and asked prices if there is no closing sale price reported) of the Common Stock on
the date specified
as reported by NASDAQ or by the principal national stock exchange on which the Common
Stock is
then listed. If there is no reported price information for such date, the Fair Market
Value will be
determined by the reported price information for Common Stock on the day nearest preceding such
date.

     (e) “Optionee” shall mean the person to whom an option is granted under the Plan or
who has obtained the right to exercise an option in accordance with the provisions of the
Plan.

     (f) “Subsidiary” shall mean any now existing or hereinafter organized or acquired
corporation of which more than fifty percent (50%) of the issued and outstanding
voting stock is owned
or controlled directly or indirectly by the Company or through one or more
Subsidiaries of the Company.

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	3.	 	Shares Subject to the Plan

     Subject to the provisions of Section 9 of this Plan, the aggregate amount of Common
Stock for which options may be granted under this Plan shall not exceed 2,000,000 shares of
Common Stock. The number of shares of Common Stock subject to awards granted to any single
Optionee shall not exceed the number set forth in the immediately preceding sentence, as such
number may be amended from time to time. Such shares may be authorized and previously unissued
shares or previously issued shares that have been reacquired by the Company. Any shares subject
to unexercised portions of options granted under this Plan which shall have terminated, been
canceled, or expired may again be subject to options under this Plan.

	4.	 	Administration

     (a) The Plan shall be administered by the Board of Directors or, at the option of the
Board of Directors, by a committee of two or more Non-Employee Directors appointed by the Board of
Directors of the Company (the group responsible for administering the Plan is referred to herein
as the “Committee”). Options may be granted under this Section 4(a) only if (i) the transaction is
approved by the Board of Directors or by the unanimous agreement of the members of the Committee
or (ii) the transaction is approved or ratified, in compliance with Section 14 of the Exchange
Act, by either (A) the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held in accordance with
the applicable laws of the Company’s state of incorporation
or (B) the written consent of the
holders of a majority of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the Company’s first annual meeting of stockholders
following the date of grant. The Committee may create a subcommittee for purposes of making grants
to officers, directors and consultants if the Committee would otherwise not qualify for making
such grants under Rule 16b-3 of the Exchange Act or Section 162(m) of the Code. References herein
to the “Committee” shall include any such subcommittee. Stock option agreements (“Option
Agreements”), in the forms as approved by the Committee, and containing such terms and conditions
not inconsistent with the provisions of this Plan as shall have been determined by the Committee,
may be executed on behalf of the Company by the Chairman of the Board, the Chief Executive
Officer, the President or any Vice President of the Company. Except
with respect to Section
4(b)
of this Plan, the Committee shall have complete authority to construe, interpret and administer
the provisions of the Plan and the provisions of the Option Agreements granted hereunder; to
prescribe, amend and rescind rules and regulations pertaining to the Plan; and to make all other
determinations necessary or deemed advisable in the administration of the Plan. The
determinations, interpretations and constructions made by the Committee shall be final and
conclusive.

     (b) Members of the Committee shall be specified by the Board of Directors, and shall
consist solely of Non-Employee Directors. On the date Non-Employee
Directors are elected to the Board
of Directors and on each subsequent anniversary of such date that a Non-Employee Director serves
as a member of the Board of Directors, such Non-Employee Director shall automatically be granted
nonqualified options to purchase 3,125 shares of Common Stock.

	5.	 	Eligibility

     Incentive stock options to purchase Common Stock may be granted under Section 4(a) of
the Plan to such key employees of the Company or its Subsidiaries (including any director who is
also a key employee of the Company or one of its Subsidiaries) as shall be determined by the
Committee. Nonqualified stock options to purchase Common Stock may be granted under Section 4(a)
of the Plan to

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such key employees or directors of, or consultants to, the Company or its Subsidiaries as
shall be determined by the Committee. Which persons are to be granted options under Section 4(a)
of the Plan, the number of options, the number of shares subject to each option, the exercise
price or prices of each option, the vesting and exercise period of each option, whether an option
may be exercised as to less than all of the Common Stock subject thereto, and such other terms
and conditions of each option, if any, as are not inconsistent with the provisions of this Plan
shall be determined on the Date of Grant in accordance with Section 4(a) of this Plan.
Notwithstanding any provision of this Plan to the contrary, unless the stockholders of the
Company approve the Plan at the first annual stockholders’ meeting held in 1997: (a) no incentive
stock option or nonqualified stock option may be granted to a “covered employee” (within the
meaning of Section 162(m)(3) of the Code) on or after the date of such meeting, and (b) no
incentive stock option or nonqualified stock option granted on or after the date of such meeting
may be exercised during any year in which the Optionee is a “covered employee.” In connection
with the granting of incentive stock options, the aggregate Fair Market Value (determined at the
Date of Grant of an incentive stock option) of the shares with respect to which incentive stock
options are exercisable for the first time by an Optionee during any calendar year (under all
such plans of the Optionee’s employer corporation and its parent and subsidiary corporations as
defined in Section 424 of the Code) shall not exceed $100,000 or such other amount as from time
to time provided in §422(d) of the Code or any successor
provision.

6. Exercise Price

     The purchase price or prices for Common Stock subject to an option (the “Exercise Price”)
granted pursuant to Section 4(a) of the Plan shall be determined at the Date of Grant; provided,
however, that (a) the Exercise Price for any option shall not be less than 100% of the Fair Market
Value of the Common Stock at the Date of Grant, and (b) if the Optionee owns more than 10 percent
of the total combined voting power of all classes of stock of the Company or its parent or any of
its subsidiaries, as more fully described in §422(b)(6) of the Code or any successor provision
(such stockholder is referred to herein as a “10-Percent Stockholder”), the Exercise Price for any
incentive stock option granted to such Optionee shall not be less than 110% of the Fair Market
Value of the Common Stock at the Date of Grant. Notwithstanding the foregoing, nothing contained
herein shall prohibit the Board of Directors or the Committee, in the sound exercise of business
judgment, from canceling outstanding options that were previously issued pursuant to Section 4(a)
of the Plan and reissuing new options at a lower Exercise Price in the event that the Fair Market
Value per share of Common Stock at any time prior to the date of exercise falls below the Exercise
Price of options granted pursuant to the Plan; provided, however, that such actions shall
only be permitted when approved by a majority of the Committee or a majority of the disinterested
directors of the Company.

7.
Term of Stock Options and Limitations on Right to Exercise

     No incentive stock option granted pursuant to Section 4(a) of this Plan shall be exercisable
(a) more than five years after the Date of Grant with respect to a 10-Percent Stockholder, and
(b) more than ten years after the Date of Grant with respect to all persons other than 10-Percent
Stockholders. No nonqualified stock option granted pursuant to Section 4(a) of this Plan shall be
exercisable more than ten years after the Date of Grant. Nonqualified stock options granted to
members of the Committee pursuant to Section 4(b) of this Plan shall be exercisable for ten
years, except that in the event of death, termination or resignation of such member as a director
of the Company or a Subsidiary, such nonqualified stock options shall only be exercisable for one
year following the date of such member’s death, termination or resignation (or if shorter, the
remaining term of the option). The Company shall not be required to issue any fractional shares
upon the exercise of any options granted under this Plan.

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No Optionee nor his legal representatives, legatees, distributees or transferees, as the
case may be, will be, or will be deemed to be, a holder of any shares subject to an option unless
and until said option has been exercised and the purchase price of the shares in respect of which
the option has been exercised has been paid. An option shall not be exercisable except (i) by the
Optionee, (ii) by a person who has obtained the Optionee’s rights under the option by will or
under the laws of descent and distribution, (iii) by a permitted transferee as contemplated by
Section 11(b) hereof or (iv) by a spouse incident to divorce within the meaning of Section 1041
of the Code or any successor provision.

8. Termination of Employment

     The conditions that shall apply to the exercise of an option granted under Section 4(a) in
the event an Optionee shall cease to be employed by the Company or a Subsidiary for any reason
shall be determined at the Date of Grant. In the event of the death of an Optionee while in the
employ or while serving as a director of or consultant to the Company or a Subsidiary, the option
theretofore granted to him shall be exercisable by the executor or administrator of the Optionee’s
estate, or if the Optionee’s estate is not in administration, by the person or persons to whom the
Optionee’s right shall have passed under the Optionee’s will or under the laws of descent and
distribution, within the year next succeeding the date of death or such other period as may be
specified in the Option Agreement, but in no case later than the expiration date of such option,
and then only to the extent that the Optionee was entitled to exercise such option at the date of
his death. Neither this Plan nor any option granted hereunder is intended to confer upon any
Optionee any rights with respect to continuance of employment or other utilization of his services
by the Company or by a Subsidiary, nor to interfere in any way with his right or that of his
employer to terminate his employment or other services at any time (subject to the terms of any
applicable written contract).

9. Dilution or Other Adjustments

     In the event that there is any change in the Common Stock subject to this Plan or subject to
options granted hereunder as the result of any stock dividend on, dividend of or stock split or
stock combination of, or any like change in, stock of the same class or in the event of any change
in the capital structure of the Company, the Board of Directors or the Committee shall make such
adjustments with respect to options, or any provisions of the Plan, as it deems appropriate to
prevent dilution or enlargement of option rights.

10. Expiration and Termination of the Plan

     Options may be granted at any time under Section 4(a) of the Plan and as specified under
Section 4(b) of the Plan prior to December 31, 2000, as long as the total number of shares which
may be issued pursuant to options under this Plan does not (except as provided in Section 9 above) exceed the
limitations of Section 3 above. This Plan may be abandoned, suspended or terminated at any time
by the Board of Directors of the Company except with respect to any options then outstanding
under the Plan.

11. Restrictions on Issuance of Shares

     (a) The Company shall not be obligated to sell or issue any shares upon the exercise of any
option granted under this Plan unless:

     (i) the shares with respect to which such option is being exercised have been
registered under applicable federal securities laws or are exempt from such registration;

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     (ii) the prior approval of such sale or issuance has been obtained from
any state regulatory body having jurisdiction; and

     (iii) in the event the Common Stock has been listed on any exchange, the shares with respect to which such option is being exercised have been duly listed on such exchange in accordance with the procedure specified therefor.

If the shares to be issued upon the exercise of any option granted under the Plan are
intended to be issued by the Company in reliance upon the exemptions from the registration
requirements of applicable federal securities laws, the Optionee, if so requested by the
Company, shall furnish to the Company such evidence and representations, including an
opinion of counsel, satisfactory to the Company, as the Company may reasonably request.

     (b) All or a portion of the nonqualified options to be granted to an Optionee may, in the
sole
discretion of the Committee (or the Board of Directors, as the case may be), be on terms
that permit
transfer by such Optionee to (i) the spouse, children or grandchildren of the Optionee
(“Immediate
Family Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members,
(iii) a partnership or other entity in which such Immediate Family Members are the only
partners or
(iv) to other persons or entities deemed appropriate by the Committee, provided that (x)
the stock option
agreement pursuant to which such nonqualified options are granted must be approved by the
Committee
(or the Board of Directors, as the case may be), and must expressly provide for
transferability in a
manner consistent with this Section, and (y) subsequent transfers of transferred options
shall be
prohibited except by will or the laws of descent and distribution. Following transfer,
any such options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of each Option Agreement and
Sections 7, 11(a) and (c) and 14(b) hereof the term “Optionee” shall be deemed to refer
to the transferee. The events of termination of employment of Section 8 hereof shall
continue to be applied with respect to the original optionee, following which the options
shall be exercisable by the transferee only to the extent, and for the periods specified
herein and in the Stock Option Agreement.

     (c) Except
as set forth in Section 11(b) above, no option granted pursuant to the Plan
shall
be transferable by the Optionee other than by will or the laws of descent and
distribution or by a spouse
incident to divorce within the meaning of Section 1041 of the Code or any successor
provision.

     (d) The Board of Directors or Committee may impose such other restrictions on the
ownership and transfer of shares issued pursuant to this Plan as it deems desirable; any
such restrictions
shall be set forth in any Option Agreement entered into hereunder.

12. Proceeds

     The proceeds to be received by the Company upon exercise of any option granted under
this Plan may be used for any proper purposes.

13. Amendment of the Plan

     The Board of Directors may amend the Plan from time to time in such respects as it may
deem advisable in its sole discretion or in order that the options granted hereunder shall
conform to any change in applicable laws, including tax laws, or in regulations or rulings
of administrative agencies or in order

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that options granted or stock acquired upon exercise of such options may qualify for
simplified registration under applicable securities or other laws;
provided, however, that no amendment that requires stockholder approval in order for the Plan to
continue to comply with Section 162(m) of the Code or under any other applicable law, rule
or regulation (including, without limitation, the Code, the Exchange Act or any
self-regulatory organization such as a national securities exchange), will be made unless
such amendment has received the requisite approval of stockholders. In addition, no
amendment may be made that adversely affects any of the rights of an Optionee under any
option theretofore granted, without such Optionee’s consent.

14. Payment Upon Exercise; Withholding

     (a) Shares of Common Stock shall be issued to the Optionee upon payment in full
either in cash or by an exchange of shares of Common Stock of the Company previously
owned by the
Optionee, or a combination of both, in an amount or having a combined value equal to the
aggregate
Exercise Price for the shares subject to the option or portion thereof being exercised.
The value of the
previously owned shares of Common Stock exchanged in full or partial payment for the shares purchased
upon the exercise of an option shall be equal to the Fair Market Value of such shares on
the date of the
exercise of such Option. The Optionee shall be entitled to elect to pay all or a portion
of the aggregate
purchase price by having shares of Common Stock having a Fair Market Value on the date
of exercise
equal to the aggregate Exercise Price withheld by the Company or sold by a broker-dealer
under
circumstances meeting the requirements of 12 C.F.R. Part 220. In addition, upon the
exercise of any
option granted under the Plan, the Company may make financing available to the Optionee
for the
purchase of the Common Stock that may be acquired pursuant to the exercise of such
option on such
terms as the Committee shall specify.

     (b) The Company may defer making payment or delivery of any benefits under the
Plan until satisfactory arrangements have been made for the payment of any tax
attributable to any
amounts payable on shares deliverable under the Plan. The Optionee shall be entitled to
elect to pay all
or a portion of all taxes arising in connection with the exercise of any option by
paying cash or electing
to (1) have the Company withhold shares of Common Stock that were to be issued to the
Optionee upon
such exercise, or (2) deliver other shares of Common Stock previously owned by the
Optionee having a
Fair Market Value equal to the amount to be withheld; provided, however, that the amount
to be withheld
shall not exceed the Optionee’s estimated total federal (including FICA), state and
local tax obligations associated with the transaction. The Fair Market Value of
fractional shares remaining after payment of the withholding taxes shall be paid to the
Optionee in cash.

15. Stockholders’ Approval

     The Plan was originally adopted by the Board of Directors and approved by the sole
stockholder of the Company on February 25, 1991. Amendment
No. 1 to the Plan was adopted by
the Board of Directors on March 27, 1992 and approved by the stockholders of the Company on
May 22, 1992. Amendment No. 2 to the Plan was adopted and approved by the Board of Directors
of the Company on November 30, 1993. Amendment No. 3 to the Plan was adopted by the Board of
Directors on February 23, 1994 and approved by the stockholders
of the Company on May 5, 1994.
The Amended and Restated Plan was adopted by the Board of Directors
on January 13, 1997 and
approved by the stockholders of the Company on March 21, 1997.

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16. Liability of the Company

     Neither the Company, its directors, officers or employees, nor any of the Company’s
Subsidiaries which are in existence or hereafter come into existence, shall be liable to any
Optionee or other person if it is determined for any reason by the Internal Revenue Service or any
court having jurisdiction that any incentive stock options granted hereunder do not qualify for tax
treatment as incentive stock options under Section 422 of the
Code.

	 	 	 	 	 
	 	SPORT SUPPLY GROUP, INC. 

 	 
	 	/s/ Geoffrey P. Jurick
 	 
	 	Geoffrey P. Jurick 	 
	 	Chairman of the Board 	 
	 

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AMENDMENT NO. 1

TO THE

SPORT SUPPLY GROUP, INC.

AMENDED AND RESTATED STOCK OPTION PLAN

AMENDMENT to the Sport Supply Group, Inc. Amended and Restated Stock Option Plan (the “Plan”) dated
as of this 28th day of August, 2003. The Plan was last amended by action of the Board of Directors
of Sport Supply Group, Inc. (the “Company”) amending and
restating the Plan on January 13, 1997,
subject to shareholder approval, which approval was obtained on
March 21, 1997.

Absent action by the Board, the Plan would be considered to have expired on December 31, 2000. By
resolution approved unanimously by the Board, the term of the Plan was extended by virtue of the
approval of this Amendment. Accordingly, Section 10 of the Plan is hereby amended to read in its
entirety as follows:

10. EXPIRATION AND TERMINATION OF THE PLAN

This Plan will continue in effect until the earlier of its termination by the Board or the
date on which all of the shares available for issuance under the Plan have been issued and
all restrictions on such shares under the terms of the Plan and the agreements evidencing
options granted under the Plan have lapsed; provided, however, that incentive stock
options may only be granted on or prior to December 31, 2000. This Plan may be abandoned,
suspended or terminated at any time by the Board of Directors of the Company except with
respect to any options then outstanding under the Plan.

The amendments set forth herein shall become effective when this Amendment is signed below.

Except as herein modified and amended, all the terms and conditions of the Plan shall remain in
full force and effect, and this Amendment shall in no event be deemed to adversely affect any right
or claim of any party under, or by virtue of, the Plan or any options issued thereunder.

	 	 	 	 	 
	SPORT SUPPLY GROUP, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Geoffrey P. Jurick	 	 
	 	 	 	 	 
	Geoffrey P. Jurick	 	 
	Chairman of the Board<PAGE>
                                                                    Exhibit 10.1

                                                                [EXECUTION COPY]

                       FOURTH AMENDMENT TO SECOND AMENDED
                          AND RESTATED CREDIT AGREEMENT

     This Fourth Amendment to Second Amended and Restated Credit Agreement (this
"Fourth Amendment") dated as of November 15, 2005, is by and among PARALLEL
PETROLEUM CORPORATION, a Delaware corporation, and PARALLEL, L.P., a Texas
limited partnership (collectively, the "Borrowers"), and PARALLEL, L.L.C., a
Delaware limited liability company ("Guarantor"), and CITIBANK TEXAS, N.A.
(formerly known as First American Bank, SSB), BNP PARIBAS, WESTERN NATIONAL BANK
and CITIBANK, F.S.B. (collectively, "Lenders"), and CITIBANK TEXAS, N.A., as
Joint Lead Arranger and as Administrative Agent ("Agent") and BNP PARIBAS, as
Joint Lead Arranger and as Syndication Agent.

                                    RECITALS:

     WHERAS, Borrowers, Guarantor and Lenders in the capacities stated above,
entered into that Second Amended and Restated Credit Agreement dated as of
September 27, 2004, as amended by First Amendment to Second Amended and Restated
Credit Agreement dated as of December 27, 2004, by Second Amendment to Second
Amended and Restated Credit Agreement dated as of April 1, 2005, and by Third
Amendment to Second Amended and Restated Credit Agreement dated as of October
13, 2005 (as amended, the "Credit Agreement"); and

     WHEREAS, Borrowers, Guarantor and Lenders desire to amend the Credit
Agreement in certain respects.

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

                                    Agreement

     Section 1. Definitions. Except as otherwise expressly provided herein, all
terms defined in the Credit Agreement shall have the same meanings herein.

     Section 2. New Definitions. Section 1 of the Credit Agreement is hereby
amended to include the following additional defined terms in their appropriate
alphabetical order:

          (a) Intercreditor Agreement means that certain Intercreditor and
     Subordination Agreement dated November 15, 2005, executed by Borrowers,
     Guarantor, Agent, and BNP Paribas, as Subordinated Administrative Agent, as
     the same may be amended, modified or restated from time to time.

          (b) Subordinated Debt means all obligations owed by either Borrower or
     Guarantor pursuant to the Subordinated Loan Agreement, the Subordinated
     Notes or any related document or instrument, as the same may be amended,
     modified or restated from time to time.

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<PAGE>

          (c) Subordinated Loan Agreement means that certain Second Lien Term
     Loan Agreement dated November 15, 2005, executed by Borrowers, BNP Paribas,
     as Administrative Agent, and the other lenders parties thereto, as the same
     may be amended, modified or restated from time to time.

          (d) Subordinated Notes means the subordinated promissory notes issued
     pursuant to the Subordinated Loan Agreement, as the same may be renewed,
     extended, modified or amended from time to time.

     Section 3. Amendment to Definition of Change of Control. The definition of
"Change of Control" in Section 1 of the Credit Agreement is hereby amended in
its entirety to read as follows:

          Change of Control shall occur (i) if a majority of the individuals
     comprising the Board of Directors of PPC as of the Effective Date shall
     either resign, be declared incompetent or otherwise be removed (voluntarily
     or involuntarily) or cease to serve as members of the Board of Directors of
     PPC, (ii) upon the acquisition of beneficial ownership (within the meaning
     of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, the
     "1934 Act") of an aggregate of 35% or more of the Voting Power of PPC's
     outstanding Voting Securities by any person or group (as such term is used
     in Rule 13d-5 under the 1934 Act), and/or (iii) upon the sale, lease,
     transfer, conveyance or other disposition (other than by way of merger or
     consolidation), in one or a series of related transactions, of all or
     substantially all of the assets of PPC and its Subsidiaries taken as a
     whole to any "person" (as such term is used in Sections 13(d) and 14(d) of
     the 1934 Act). For purposes of the definition of "Change of Control,"
     Voting Securities" means all securities of a company entitling the holders
     thereof to vote in an election of directors (without consideration of the
     rights of any class of stock other than the common stock to elect directors
     by a separate class vote); and a specified percentage of the "Voting Power"
     of a company means such number of the Voting Securities as will enable the
     holders thereof to cast such percentage of all the votes which could be
     cast in an election of directors (without consideration of the rights of
     any class of stock other than the common stock to elect directors by a
     separate class vote).

     Section 4. Amendment to Definition of Consolidated Current Liabilities. The
definition of "Consolidated Current Liabilities" in Section 1 of the Credit
Agreement is hereby amended in its entirety to read as follows:

          Consolidated Current Liabilities means the total of consolidated
     current obligations as determined in accordance with GAAP, excluding
     therefrom, as of any date, current maturities due on the Loans and the
     Subordinated Notes, and excluding the after-tax net effect of any
     non-recurring non-cash charges after June 30, 2004, under Financial
     Accounting Standards Board Statement No. 133, as amended, supplemented or
     modified from time to time.

     Section 5. Amendment to Definition of Permitted Liens. The definition of
"Permitted Liens" in Section 1 of the Credit Agreement is hereby amended in its
entirety to read as follows:

          Permitted Liens shall mean (i) royalties, overriding royalties,
     reversionary interests, production payments and similar burdens to the
     extent the same do not reduce either Borrower's or Guarantor's net revenue
     interest in the Oil and Gas Properties to an interest below that
     represented to Agent and Lenders; (ii) sales contracts or other

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<PAGE>

     arrangements for the sale of production of oil, gas or associated liquid or
     gaseous hydrocarbons which would not (when considered cumulatively with the
     matters discussed in clause (i) above) deprive either Borrower or Guarantor
     of any material right in respect of its assets or properties (except for
     rights customarily granted with respect to such contracts and
     arrangements); (iii) statutory Liens for taxes or other assessments that
     are not yet delinquent (or that, if delinquent, are being contested in good
     faith by appropriate proceedings, levy and execution thereon having been
     stayed and continue to be stayed and for which either Borrower or Guarantor
     has set aside on its books adequate reserves in accordance with GAAP); (iv)
     easements, rights of way, servitudes, permits, surface leases and other
     rights in respect to surface operations, pipelines, grazing, logging,
     canals, ditches, reservoirs or the like, conditions, covenants and other
     restrictions, and easements of streets, alleys, highways, pipelines,
     telephone lines, power lines, railways and other easements and rights of
     way on, over or in respect of either Borrower's or Guarantor's assets or
     properties and that do not individually or in the aggregate cause a
     Material Adverse Effect; (v) materialmen's, mechanic's, repairman's,
     employee's, vendor's, laborer's warehousemen's, landlord's, carrier's,
     pipeline's, contractor's, sub-contractor's, operator's, non-operator's
     (arising under operating or joint operating agreements), and other Liens
     (including any financing statements filed in respect thereof) incidental to
     obligations incurred by either Borrower or Guarantor in connection with the
     construction, maintenance, development, transportation, processing, storage
     or operation of either Borrower's or Guarantor's assets or properties to
     the extent not delinquent (or which, if delinquent, are being contested in
     good faith by appropriate proceedings and for which either Borrower or
     Guarantor, as applicable, has set aside on its books adequate reserves in
     accordance with GAAP); (vi) all contracts, agreements and instruments, and
     all defects and irregularities and other matters affecting either
     Borrower's or Guarantor's assets and properties which were in existence at
     the time either Borrower's or Guarantor's assets and properties were
     originally acquired by it and all routine operational agreements entered
     into in the ordinary course of business, which contracts, agreements,
     instruments, defects, irregularities and other matters and routine
     operational agreements are not such as to, individually or in the
     aggregate, interfere materially with the operation, value or use of either
     Borrower's or Guarantor's assets and properties, considered in the
     aggregate; (vii) liens in connection with workmen's compensation,
     unemployment insurance or other social security, old age pension or public
     liability obligations; (viii) legal or equitable encumbrances deemed to
     exist by reason of the existence of any litigation or other legal
     proceeding or arising out of a judgment or award with respect to which an
     appeal is being prosecuted in good faith and levy and execution thereon
     have been stayed and continue to be stayed; (ix) rights reserved to or
     vested in any municipality, governmental, statutory or other public
     authority to control or regulate either Borrower's or Guarantor's assets
     and properties in any manner, and all applicable laws, rules and orders
     from any governmental authority; (x) landlord's liens; (xi) Liens incurred
     pursuant to the Security Instruments; and (xii) Liens securing the
     Subordinated Debt. Provided, however, that the definition of the term
     "Permitted Liens" does not include Liens of any kind or character which are
     prior by perfection to Liens on the Collateral held by Agent, or which may,
     by operation of law, become prior to such Liens held by Agent.

     Section 6. Amendment to Letter of Credit Provisions. Section 2(d) and
Section 2(e) of the Credit Agreement are hereby amended in their entirety to
read as follows, respectively:

          (d) Letters of Credit. On the terms and conditions hereinafter set
     forth, the Agent, or an Affiliate of Agent, shall from time to time during
     the period beginning on

                                        3

<PAGE>

     the Effective Date and ending on the Maturity Date upon request of either
     Borrower issue standby Letters of Credit for the account of either Borrower
     (the "Letters of Credit") in such face amounts as either Borrower may
     request, but not to exceed in the aggregate face amount at any time
     outstanding the sum of One Million and No/100 Dollars ($1,000,000.00). The
     face amount of all Letters of Credit issued and outstanding hereunder shall
     be considered as Advances on the Commitment for Borrowing Base purposes and
     all payments made by the Agent, or any issuing Affiliate of Agent, on such
     Letters of Credit shall be considered as Advances under the Notes. Each
     Letter of Credit used for the account of either Borrower hereunder shall
     (i) be in favor of such beneficiaries as are specifically requested by such
     Borrower for purposes of securing such Borrower's obligations associated
     with its oil and gas operations and activities, or securing such Borrower's
     obligations in connection with Rate Management Transactions permitted under
     this Agreement, (ii) have an expiration date not exceeding the earlier of
     (a) one year or (b) the Maturity Date, and (iii) contain such other terms
     and provisions as may be required by Agent. Each Lender (other than Agent,
     except in cases where an Affiliate of Agent is the issuer) agrees that,
     upon issuance of any Letter of Credit hereunder, it shall automatically
     acquire a participation in the Agent's, or its issuing Affiliate's,
     liability under such Letter of Credit in an amount equal to such Lender's
     Commitment Percentage of such liability, and each Lender (other than Agent,
     except in cases where an Affiliate of Agent is the issuer) thereby shall
     absolutely, unconditionally and irrevocably assume, as primary obligor and
     not as surety, and shall be unconditionally obligated to Agent, or its
     issuing Affiliate, to pay and discharge when due, its Commitment Percentage
     of Agent's, or its issuing Affiliate's, liability under such Letter of
     Credit. The Borrowers hereby, jointly and severally, unconditionally agree
     to pay and reimburse the Agent, or its issuing Affiliate, for the amount of
     each demand for payment under any Letter of Credit that is in compliance
     with the provisions of any such Letter of Credit at or prior to the date on
     which payment is to be made by the Agent, or its issuing Affiliate, to the
     beneficiary thereunder, without presentment, demand, protest or other
     formalities of any kind. Upon receipt from any beneficiary of any Letter of
     Credit of any demand for payment under such Letter of Credit, the Agent
     shall promptly notify the Borrowers of the demand and the date upon which
     such payment is to be made by the Agent, or its issuing Affiliate, to such
     beneficiary in respect of such demand. Forthwith upon receipt of such
     notice from the Agent, Borrowers shall advise the Agent whether or not
     Borrowers intend to borrow hereunder to finance their obligations to
     reimburse the Agent, or its issuing Affiliate, and if so, submit a Notice
     of Borrowing as provided in Section 2(c) hereof. If Borrowers fail to so
     advise Agent and thereafter fail to reimburse Agent, or its issuing
     Affiliate, the Agent shall notify each Lender of the demand and the failure
     of the Borrowers to reimburse the Agent, or its issuing Affiliate, and each
     Lender shall reimburse the Agent, or its issuing Affiliate, for its
     Commitment Percentage of each such draw paid by the Agent, or its issuing
     Affiliate, and unreimbursed by the Borrowers. All such amounts paid by
     Agent, or its issuing Affiliate, and/or reimbursed by the Lenders shall be
     treated as an Advance or Advances under the Commitment, which Advances
     shall be immediately due and payable and shall bear interest at the Maximum
     Rate.

          (e) Procedure for Obtaining Letters of Credit. The amount and date of
     issuance, renewal, extension or reissuance of a Letter of Credit pursuant
     to the Lenders' commitments above in Section 2(d) shall be designated by
     either Borrower's written request delivered to Agent at least three (3)
     Business Days prior to the date of such issuance, renewal, extension or
     reissuance. Concurrently with or promptly following the delivery of the
     request for a Letter of Credit, the Borrower making such request shall

                                        4

<PAGE>

     execute and deliver to the Agent, or its issuing Affiliate, an application
     and agreement with respect to the Letter of Credit, said application and
     agreement to be in the form used by the Agent, or its issuing Affiliate.
     Neither the Agent nor any Affiliate of Agent shall be obligated to issue,
     renew, extend or reissue such Letter of Credit if (A) the amount thereon
     when added to the face amount of the outstanding Letters of Credit plus any
     Reimbursement Obligations exceeds One Million and No/100 Dollars
     ($1,000,000.00) or (B) the amount thereof when added to the Total
     Outstandings would exceed the Commitment. Borrowers, jointly and severally,
     agree to pay the Agent, or its issuing Affiliate, for the benefit of the
     Lenders commissions for issuing the Letters of Credit (calculated
     separately for each Letter of Credit) in an amount equal to the greater of
     (i) the LIBOR Margin in effect per annum at the time of issuance times the
     maximum face amount of the Letter of Credit (calculated on the basis of
     actual days elapsed or a year consisting of 360 days) or (ii) $500.00. In
     addition, Borrowers, jointly and severally, agree to pay to the Agent, or
     its issuing Affiliate, for its own account an additional commission of
     one-quarter of one percent (.25%) times the maximum face amount of such
     Letter of Credit for issuing each such Letter of Credit. Such commissions
     shall be payable prior to the issuance of each Letter of Credit and
     thereafter on each anniversary date of such issuance while such Letter of
     Credit is outstanding.

     Section 7. New Affirmative Covenant. Section 12 of the Credit Agreement is
hereby amended to include an additional affirmative covenant reading as follows:

          (x) Subordinated Loan Agreement. Borrowers and Guarantor will (i)
     furnish to Agent copies of all documents, instruments, notices, reports,
     certificates or other items which are furnished to or received from the
     administrative agent or any lender pursuant to the terms of the
     Subordinated Loan Agreement or any Loan Documents (as defined in the
     Subordinated Loan Agreement), at the same time as the same are furnished to
     the administrative agent or any lender pursuant to the terms of
     Subordinated Loan Agreement or any such Subordinated Loan Documents (except
     to the extent a copy of any such item has previously been furnished to
     Agent), and (ii) grant to Agent for the ratable benefit of the Lenders a
     first and prior Lien on any of their assets upon which the administrative
     agent or any lender under the Subordinated Loan Agreement is granted a
     Lien, prior to granting any such Lien to the administrative agent or any
     lender under the Subordinated Loan Agreement.

     Section 8. Amendment to Debt Covenant. Section 13(f) of the Credit
Agreement is hereby amended in its entirety to read as follows:

          (f) Debts, Guaranties and Other Obligations. Neither either Borrower
     nor Guarantor will, and will not permit any Subsidiary to, incur, create,
     assume or in any manner become or be liable in respect of any indebtedness,
     or guarantee or otherwise in any manner become or be liable in respect of
     any indebtedness, liabilities or other obligations of any other Person,
     whether by agreement to purchase the indebtedness of any other Person or
     agreement for the furnishing of funds to any other Person through the
     purchase or lease of goods, supplies or services (or by way of stock
     purchase, capital contribution, advance or loan) for the purpose of paying
     or discharging the indebtedness of any other Person, or otherwise, except
     that the foregoing restrictions shall not apply to:

               (i) the Notes and any renewal or increase thereof, or other
          indebtedness heretofore disclosed to Lenders in the Borrowers' or
          Guarantor's Financial Statements or on Schedule "4" hereto; or

                                        5

<PAGE>

               (ii) taxes, assessments or other government charges which are not
          yet due or are being contested in good faith by appropriate action
          promptly initiated and diligently conducted, if such reserve as shall
          be required by GAAP shall have been made therefor and levy and
          execution thereon have been stayed and continue to be stayed; or

               (iii) indebtedness (other than in connection with a loan or
          lending transaction) incurred in the ordinary course of business which
          is not more than 60 days past due, including, but not limited to
          indebtedness for drilling, completing, leasing and reworking oil and
          gas wells; or

               (iv) obligations under Rate Management Transactions permitted
          pursuant to Section 13(l) hereof; or

               (v) the Subordinated Debt; or

               (vi) other indebtedness not exceeding $250,000 in the aggregate
          for Borrowers, Guarantor and Subsidiaries outstanding at any time; or

               (vii) any renewals or extensions of (but, other than in the case
          of the Notes, not increases in) any of the foregoing.

     Section 9. New Negative Covenant. Section 13 of the Credit Agreement is
hereby amended to include an additional negative covenant reading as follows:

          (r) Subordinated Debt. Neither either Borrower nor Guarantor will (i)
     amend or enter into any agreement to amend or otherwise change the
     Subordinated Loan Agreement or any agreement or instrument executed in
     connection therewith, except as permitted by Section 2.16 of the
     Intercreditor Agreement, (ii) fail to comply in any material respect with
     the provisions of the Intercreditor Agreement, or (iii) make any prepayment
     of amounts owing under the Subordinated Notes.

     Section 10. Events of Default. Section 14 of the Credit Agreement is hereby
amended to include an additional "Event of Default" reading as follows:

          (n) an Event of Default (as defined therein) shall occur under the
     terms of the Subordinated Loan Agreement or under any document or
     instrument executed in connection therewith.

     Section 11. Representations and Warranties of Borrowers and Guarantor.
Borrowers and Guarantor hereby jointly and severally represent and warrant to
Lenders as follows:

          (a) The representations and warranties contained in Section 10 of the
Credit Agreement are true and correct on and as of the date hereof as though
made on and as of the date hereof, except for those representations and
warranties which address matters only as of a particular date (which remain true
and correct as of such date).

          (b) No Event of Default or Default has occurred and is continuing
under the Credit Agreement.

                                        6

<PAGE>

          (c) The execution, delivery and performance by Borrowers and Guarantor
of this Fourth Amendment are within the Borrowers' and Guarantor's partnership,
corporate and limited liability company powers, have been duly authorized by all
necessary action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not violate or constitute a default
under any provisions of applicable law or any material agreement binding upon
Borrowers, Guarantor or their respective Subsidiaries or result in the creation
or imposition of any Lien upon any of the assets of Borrowers, Guarantor or
their respective Subsidiaries, except Permitted Liens.

          (d) This Fourth Amendment constitutes the valid and binding obligation
of Borrowers and Guarantor enforceable in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditor's rights generally, and (ii) the availability of
equitable remedies may be limited by equitable principles of general
application.

     Section 12. Conditions Precedent. This Fourth Amendment shall be effective
as of the date upon which all of the following conditions have been satisfied:

          (a) Agent shall have received counterparts of this Fourth Amendment
duly executed by Borrowers, Guarantor and Lenders;

          (b) the Borrowers and Guarantor shall have provided to Agent (i) a
copy of resolutions, in form and substance satisfactory to Agent, of the Board
of Directors of PPC authorizing the execution, delivery and performance of this
Fourth Amendment and any other Loan Documents to be executed or delivered
pursuant hereto, certified by the secretary or an assistant secretary of PPC,
which certificate shall be in form and substance satisfactory to Agent and
Agent's counsel and shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded, (ii) a copy of the resolutions, in
form and substance satisfactory to Agent, duly adopted by the respective
partners of PLP authorizing the execution, delivery and performance of this
Fourth Amendment and any other Loan Documents to be executed or delivered by PLP
pursuant hereto, certified by PLP's general partner, which certificate shall be
in form and substance satisfactory to Agent and Agent's counsel and shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded, and (iii) resolutions, in form and substance satisfactory to
Agent, of the managers of Guarantor authorizing the execution, delivery and
performance of this Fourth Amendment and any other Loan Documents to be executed
or delivered pursuant hereto, certified by its secretary or assistant secretary,
which certificate shall be in form and substance satisfactory to Agent and
Agent's counsel and shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded;

          (c) The Borrowers and Guarantor shall have provided to Agent copies of
all documents, instruments, notices, reports, certificates and/or other items
executed and/or delivered by any of them in connection with the Subordinated
Loan Agreement;

          (d) The transactions contemplated by that certain Purchase and Sale
Agreement dated October 14, 2005, by and among Lynx Production Company, Inc., et
al., as Sellers, and Parallel, L.P., as Buyer (the "Purchase Agreement") shall
have been consummated upon terms and pursuant to instruments satisfactory to
Agent, and Borrowers and Guarantor shall have provided to Agent true and correct
copies of all documents, instruments and certificates delivered in connection
with such transaction;

          (e) PLP shall have executed and delivered to Agent a first and prior
deed of trust Lien on all properties acquired by PLP pursuant to the Purchase
Agreement, pursuant to instruments in form and substance satisfactory to Agent;

                                        7

<PAGE>

          (f) The Borrowers shall have provided to Agent a certificate of
insurance coverage of the Borrowers evidencing that the Borrowers are carrying
insurance in accordance with Section 12(h) of the Credit Agreement and
reflecting that all acquired insurance policies are endorsed in favor of and
made jointly payable to Agent as its interests may appear, naming Agent and the
Lenders as "additional insureds" and providing that the insurer will give at
least thirty (30) days prior notice of any cancellation to Agent; and

          (g) Agent shall have received any other documents, certificates and
opinions in connection with this Fourth Amendment that may be requested by
Agent, in form and substance satisfactory to Agent.

     Section 13. Ratification of Credit Agreement and Other Loan Documents.
Except as expressly amended hereby, the Credit Agreement and all of the other
Loan Documents are and shall be unchanged and all of the terms, provisions,
covenants, conditions, schedules and exhibits thereof shall remain and continue
in full force and effect and are hereby ratified and confirmed by Borrowers,
Guarantor and Lenders as of the date of this Fourth Amendment as if the Credit
Agreement and the other Loan Documents were executed by Borrowers, Guarantor and
the other parties thereto as of the date of this Fourth Amendment. The
amendments contemplated hereby shall not limit or impair any Liens securing the
Loans, each of which are hereby ratified, affirmed and extended to secure the
Loans as they may be increased pursuant hereto.

     Section 14. No Waiver. Neither the execution by Lenders of this Fourth
Amendment nor anything contained herein shall in anywise be construed or operate
as a waiver by Lenders of any Default of Event of Default (whether now existing
or that may occur hereafter) or of any of Lenders' or Agent's rights under the
Credit Agreement as amended hereby or under any of the other Loan Documents.

     Section 15. Intercreditor Agreement. By its execution of this Fourth
Amendment, each Lender hereby consents to and agrees to be bound by the terms of
the Intercreditor Agreement and authorizes Agent to execute the Intercreditor
Agreement as Agent on behalf of such Lender.

     Section 16. Miscellaneous.

          16.1 Legal Expenses. The Borrowers hereby agree to pay on demand all
     reasonable fees and expenses of counsel to the Agent incurred by the Agent
     in connection with the preparation, negotiation and execution of this
     Fourth Amendment and all related documents.

          16.2 Multiple Counterparts. This Fourth Amendment may be executed in a
     number of identical separate counterparts (including by facsimile
     transmission), each of which for all purposes is to be deemed an original
     but all of which shall constitute, collectively, one agreement. No party to
     this Fourth Amendment shall be bound hereby until a counterpart of this
     Fourth Amendment has been executed by all parties hereto.

          16.3 Reference to Agreement. Each of the Loan Documents is hereby
     amended so that any reference in the Loan Documents to the Credit Agreement
     shall mean a reference to the Credit Agreement as amended hereby.

          16.4 Governing Law. This Fourth Amendment is being executed and
     delivered, and is intended to be performed, in Midland, Midland County,
     Texas, and the substantive laws of Texas shall govern the validity,
     construction, enforcement and

                                        8

<PAGE>

     interpretation of this Fourth Amendment and all other documents and
     instruments referred to herein, unless otherwise specified therein.

          16.5 Plural and Singular Forms. The definitions given to terms defined
     hereby shall be equally applicable to both the singular and plural forms of
     such terms.

          16.6 Final Agreement. THIS FOURTH AMENDMENT, THE CREDIT AGREEMENT AND
     THE OTHER 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 UNWRITTEN ORAL
     AGREEMENTS BETWEEN THE PARTIES.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                        9

<PAGE>

     IN WITNESS THEREOF, Borrowers, Guarantor and Lenders have caused this
Fourth Amendment to be duly executed as of the day and year first above written.

BORROWERS:                              PARALLEL PETROLEUM CORPORATION,
                                        a Delaware corporation

                                        By: /s/ Steven D. Foster
                                            ------------------------------------
                                            Steven D. Foster
                                            Chief Financial Officer

                                        PARALLEL, L.P., a Texas limited
                                        partnership

                                        By: Parallel Petroleum Corporation,
                                            Its General Partner

                                        By: /s/ Steven D. Foster
                                            ------------------------------------
                                            Steven D. Foster
                                            Chief Financial Officer

GUARANTOR:                              PARALLEL, L.L.C., a Delaware limited
                                        liability company

                                        By: /s/ Steven D. Foster
                                            ------------------------------------
                                            Steven D. Foster
                                            Chief Financial Officer

                  [SIGNATURE PAGE TO FOURTH AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       10

<PAGE>

LENDERS:                                CITIBANK TEXAS, N.A. a national banking
                                        association, as Joint Lead Arranger and
                                        Administrative Agent and as a Lender

                                        By: /s/ Frank K. Stowers
                                            ------------------------------------
                                            Frank K. Stowers
                                            Senior Vice President

                 [SIGNATURE PAGE TO FOURTH AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       11

<PAGE>

                                        BNP PARIBAS, as Joint Lead Arranger and
                                        Syndication Agent and as a Lender

                                        By: /s/ Brian Malone
                                            ------------------------------------
                                        Name: Brian Malone
                                        Title: Managing Director

                                        By: /s/ Gabe Ellisor
                                            ------------------------------------
                                        Name: Gabe Ellisor
                                        Title: Vice President

                  [SIGNATURE PAGE TO FOURTH AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       12

<PAGE>

                                        WESTERN NATIONAL BANK,
                                        as a Lender

                                        By: /s/ Wesley D. Bownds
                                            ------------------------------------
                                            Wesley D. Bownds
                                            Senior Vice President

                  [SIGNATURE PAGE TO FOURTH AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       13

<PAGE>

                                        CITIBANK, F.S.B.,
                                        as a Lender

                                        By: /s/ Christopher Webb
                                            ------------------------------------
                                        Name: Christopher Webb
                                        Title: Senior Vice President

                  [SIGNATURE PAGE TO FOURTH AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       14

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