Document:

exv4w2

Exhibit 4.2

 

V.F. CORPORATION

 

First Supplemental Indenture

Dated as of October 15, 2007

 

(First Supplemental to the Indenture Dated as of October 15, 2007)

 

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Trustee

 

 

 

     FIRST SUPPLEMENTAL INDENTURE, dated as of October 15, 2007, between V.F. Corporation, a
corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (herein
called the “Company”), and The Bank of New York Trust Company, N.A., a National Banking
Association, as Trustee (herein called “Trustee”);

RECITALS:

     WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated
as of October 15, 2007 (the “Base Indenture”), providing for the issuance from time to time of the
Company’s unsecured notes, notes or other evidences of indebtedness (herein and therein called the
“Securities”), to be issued in one or more series as provided in the Base Indenture;

     WHEREAS, Section 9.01 of the Base Indenture permits the Company and the Trustee to enter into
an indenture supplemental to the Base Indenture to establish the form and terms of any series of
Securities;

     WHEREAS, Section 2.01 of the Base Indenture permits the form of Securities of any series to be
established in an indenture supplemental to the Base Indenture;

     WHEREAS, Section 3.01 of the Base Indenture permits certain terms of any series of Securities
to be established pursuant to an indenture supplemental to the Base Indenture;

     WHEREAS, pursuant to Sections 2.01 and 3.01 of the Base Indenture, the Company desires to
provide for the establishment of two new series of Securities under the Base Indenture, the form
and substance of such Securities and the terms, provisions and conditions thereof to be set forth
as provided in the Base Indenture and this First Supplemental Indenture;

     WHEREAS, all things necessary to make this First Supplemental Indenture a valid agreement of
the Company, in accordance with its terns, have been done;

     NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Securities of both series
established by this First Supplemental Indenture by the holders thereof (the “Noteholders”), it is
mutually agreed, for the equal and proportionate benefit of all such Noteholders, as follows:

ARTICLE 1

Definitions and Other Provisions of General Application 

     Section 1.01. Relation to Base Indenture. This First Supplemental Indenture constitutes a
part of the Base Indenture (the provisions of which, as modified by this First Supplemental
Indenture, shall apply to the Notes) in respect of the Notes but shall not

 

 

modify, amend or otherwise affect the Base Indenture insofar as it relates to any other series
of Securities or modify, amend or otherwise affect in any manner the terms and conditions of the
Securities of any other series.

     Section 1.02. Definitions. For all purposes of this First Supplemental Indenture, the
capitalized terms used herein (i) which are defined in this Section 1.02 have the respective
meanings assigned hereto in this Section 1.02 and (ii) which are defined in the Base Indenture (and
which are not defined in this Section 1.02) have the respective meanings assigned thereto in the
Base Indenture. For all purposes of this First Supplemental Indenture:

     (a) Unless the context otherwise requires, any reference to an Article or Section refers to an
Article or Section, as the case may be, of this First Supplemental Indenture;

     (b) The words “herein,” “hereof” and “hereunder” and words of similar import refer to this
First Supplemental Indenture as a whole and not to any particular Article, Section or other
subdivision; and

     (c) The terms defined in this Section 1.02(c) have the meanings assigned to them in this
Section and include the plural as well as the singular:

     “Below Investment Grade Rating Event” means the Notes are rated below Investment Grade by each
of the Rating Agencies on any date from the date of the public notice of an arrangement that could
result in a Change of Control until the end of the 60-day period following public notice of the
occurrence of a Change of Control (which period shall be extended so long as the rating of the 2017
Notes or the 2037 Notes is under publicly announced consideration for possible downgrade by any of
the Rating Agencies); provided, that a Below Investment Grade Rating Event otherwise arising by
virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a
particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event
for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating
Agencies making the reduction in rating to which this definition would otherwise apply do not
announce or publicly confirm or inform the Trustee in writing at its request that the reduction was
the result, in whole or in part, of any event or circumstance composed of or arising as a result
of, or in respect of, the applicable Change of Control (whether or not the applicable Change of
Control shall have occurred at the time of the Below Investment Grade Rating Event).

     “Business Day” is any day, other than (i) a Saturday, Sunday or other day on which banking
institutions in The City of New York are authorized or required by law or executive order to remain
closed.

     “Change of Control” means the occurrence of any of the following: (1) the direct or indirect
sale, 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 properties or assets of
the Company and its subsidiaries taken as a whole to any “person” (as that term is used in Section
13(d)(3) of the Exchange Act), other than the Company or one of its subsidiaries; (2) the
consummation of any transaction (including, without limitation, any merger or consolidation) the
result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act)
becomes the beneficial

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owner, directly or indirectly, of more than 50% of the then outstanding number of shares of
the Company’s Voting Stock; or (3) the first day on which a majority of the members of the
Company’s Board of Directors are not Continuing Directors.

     “Change of Control Repurchase Event” means the occurrence of both a Change of Control and a
Below Investment Grade Rating Event.

     “Comparable Treasury Price” means, with respect to any Redemption Date, the average of the
Reference Treasury Dealer Quotations for such Redemption Date.

     “Continuing Directors” means, as of any date of determination, any member of the Board of
Directors of the Company who (1) was a member of such Board of Directors on the date of the
issuance of the Notes; or (2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of such Board of Directors
at the time of such nomination or election (either by a specific vote or by approval of the
Company’s proxy statement in which such member was named as a nominee for election as a director).

     “Interest Payment Date” has the meaning set forth in Section 2.01(d).

     “Interest Period” has the meaning set forth in Section 2.01(d).

     “Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any
successor rating categories of Moody’s); a rating of BBB- or better by S&P (or its equivalent under
any successor rating categories of S&P); and a rating of BBB- or better by Fitch (or its equivalent
under any successor rating categories of Fitch); or the equivalent investment grade credit rating
from any additional Rating Agency or Rating Agencies selected by the Company.

     “Maturity Date” has the meaning set forth in 2.01(c).

     “Moody’s” means Moody’s Investors Service Inc. and any successor thereto.

     “Notes” has the meaning set forth in Section 2.01(a).

     “Rating Agency” means (1) each of Fitch, Moody’s and S&P; and (2) if any of Fitch, Moody’s or
S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons
outside of the Company’s control, a “nationally recognized statistical rating organization” within
the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company as a
replacement agency for Fitch, Moody’s or S&P, as the case may be.

     “S&P” means Standard & Poor’s Ratings Services, a division of McGraw-Hill, Inc., and any
successor thereto.

     “Voting Stock” means the Company’s capital stock of any class or kind the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.

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ARTICLE 2

General Terms and Conditions of the Notes

     Section 2.01. Terms of Notes. Pursuant to Sections 2.01 and 3.01 of the Base Indenture,
there is hereby established two series of Securities, the terms of which shall be as follows:

     (a) Designation. The Securities of these series shall be known and designated as the “5.950%
Notes due 2017” (the “2017 Notes”) and “6.450% Notes due 2037” (the “2037 Notes” and together with
the 2017 Notes, the “Notes”) of the Company. The CUSIP number of the 2017 Notes is 918204 AS7 and
the CUSIP number of the 2037 Notes is 918204 AT5.

     (b) Form and Denominations. The 2017 Notes and the 2037 Notes will be issued only in fully
registered form, and the authorized denominations of the Notes shall be $2,000 principal amount and
any integral multiple of $1,000 in excess thereof. The Notes will initially be issued in the form
of one or more Global Securities substantially in the form of Annex A attached hereto, with such
modifications thereto as may be approved by the authorized officer executing the same. The Notes
will be denominated in U.S. dollars and payments of principal and interest will be made in U.S.
dollars.

     (c) Maturity Date. The principal amount of, and all accrued and unpaid interest on, the Notes
shall be payable in full on November 1, 2017 for the 2017 Notes and November 1, 2037 for the 2037
Notes, or if such days are not Business Days, the following Business Day (each, the “Maturity
Date”).

     (d) Interest. Interest payable on any Interest Payment Date (as defined below), the Maturity
Date, or if applicable, the Redemption Date (as defined in the Base Indenture) shall be the amount
accrued from, and including, the immediately preceding Interest Payment Date in respect of which
interest has been paid or duly provided for (or from and including the original issue date of
October 15, 2007, if no interest has been paid or duly provided for with respect to the Notes) to
but excluding such Interest Payment Date, Maturity Date or, if applicable, Redemption Date, as the
case may be (each, an “Interest Period”). The Notes will bear interest at the rate of 5.950% for
the 2017 Notes and 6.450% for the 2037 Notes per year from the original issue date thereof to the
respective Maturity Date. Interest on the Notes shall be payable semi-annually in arrears on May 1
and November 1 of each year, beginning on May 1, 2008 (each such date, an “Interest Payment Date”).
The amount of interest payable for any semi-annual Interest Period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest payable for any
period shorter than a full semi-annual Interest Period for which interest is computed will be
computed on the basis of the actual number of days elapsed per 30-day month. In the event any
Interest Payment Date on or before the Maturity Date falls on a day that is not a Business Day, the
interest payment due on that date will be postponed to the next day that is a Business Day and no
interest shall accrue as a result of such postponement.

     In the event the Maturity Date or a Redemption Date for any Note falls on a day that is not a
Business Day, then the related payments of principal, premium, if any, and interest may be made on
the next succeeding date that is a Business Day (and no additional interest will accumulate on the
amount payable for the period from and after the Maturity Date for such Note). Interest due on the
Maturity Date or a Redemption

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Date (in each case, whether or not an Interest Payment Date) will be paid to the Person to
whom principal of such Notes is payable.

     (e) To Whom Interest is Payable. Interest shall be payable to the Person in whose name the
Notes are registered at the close of business on the Business Day next preceding the Interest
Payment Date, or in the event the Notes cease to be held in the form of one or more Global
Securities, at the close of business on the date 15 days prior to that Interest Payment Date,
whether or not a Business Day.

     (f) Sinking Fund; Noteholder Repurchase Right. The Notes shall not be subject to any sinking
fund or analogous provision or be redeemable at the option of the Noteholders.

     (g) Forms. The Notes shall be substantially in the form of Annex A attached hereto, with such
modifications thereto as may be approved by the authorized officer executing the same.

     (h) Registrar, Paying Agent, Authenticating Agent and Place of Payment. The Company hereby
appoints U.S. Bank Trust National Association as Security Registrar, Authenticating Agent and
Paying Agent with respect to the Notes. The Notes may be surrendered for registration of transfer
and for exchange at the office or agency of the Company maintained for such purpose in the City of
New York, New York and at any other office or agency maintained by the Company for such purpose.
The Place of Payment for the Notes shall be the Paying Agent’s office in New York, New York.

     (i) Defeasance. Until the Maturity Date, the Notes will be subject to Sections 13.02 and
13.03 of the Base Indenture.

ARTICLE 3

Change of Control Repurchase Event

     Section 3.01. Change of Control Repurchase Events. If a Change of Control Repurchase Event
with respect to the 2017 Notes or the 2037 Notes occurs, unless the Company has exercised its right
to redeem all the 2017 Notes or the 2037 Notes, the Company shall make an offer to each Noteholder
of the 2017 Notes or the 2037 Notes to repurchase all or any part (in integral multiples of $1,000)
of that Noteholder’s Notes at a repurchase price in cash equal to 101% of the aggregate principal
amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to the
date of repurchase. Within 30 days following any such Change of Control Repurchase Event or, at
the Company’s option, prior to any Change of Control, but after the public announcement of an
impending Change of Control, the Company shall mail a notice (a “Change of Control Notice”) to each
Noteholder of the 2017 Notes or the 2037 Notes, with a copy to the Trustee, describing the
transaction or transactions that constitute or may constitute the Change of Control Repurchase
Event and offering to repurchase the 2017 Notes or the 2037 Notes on the payment date specified in
the Change of Control Notice, which date will be no earlier than 30 days and no later than 60 days
from the date such Change of Control Notice is mailed. The Change of Control Notice shall, if
mailed prior to the date of consummation of the Change of Control, state that the offer to
repurchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the
payment date specified in the Change of Control Notice.

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     The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, to the extent those laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a Change of Control
Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict
with the Change of Control Repurchase Event provisions of the Notes, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 3.01 by virtue of such conflict.

     On the Change of Control Repurchase Event payment date, the Company shall, to the extent
lawful, with respect to the 2017 Notes or the 2037 Notes:

	 	•	 	accept for payment all Notes properly tendered pursuant to the Company’s offer
(“Tendered Notes”);
	 
	 	•	 	deposit with the Trustee a cash amount in immediately available funds equal to the
aggregate repurchase price in respect of all Tendered Notes; and
	 
	 	•	 	deliver or cause to be delivered to the Trustee the Tendered Notes, together with
an officers’ certificate stating that such Tendered Notes have been properly accepted
by the Company and stating the aggregate principal amount of Tendered Notes being
purchased by the Company.

     The Trustee shall promptly mail to each Noteholder holding Tendered Notes the repurchase price
for the Tendered Notes, and the Trustee shall, to the extent necessary, promptly authenticate and
mail (or cause to be transferred by book-entry) to each such Noteholder a new security equal in
principal amount to any unpurchased portion of any Tendered Notes; provided, that each new security
will be in a principal amount of $2,000 or any integral multiple of $1,000 in excess thereof.

     The Company shall not be required to make an offer to repurchase the Notes upon a Change of
Control Repurchase Event if a third party makes such an offer in the manner, at the times and
otherwise in compliance with the requirements for an offer made by the Company and such third party
purchases all Notes properly tendered and not withdrawn under its offer.

ARTICLE 4

Supplemental Indentures

     Section 4.01. Supplemental Indentures with Consent of Noteholders. As set forth in Section
9.01 of the Base Indenture, with the consent of the holders of a majority in the aggregate
principal amount of Notes of each series affected by such supplemental indenture at the time
outstanding, the Company and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental to the Base Indenture for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the Base Indenture or this
First Supplemental Indenture or of modifying in any manner the rights of the Noteholders.

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ARTICLE 5

Miscellaneous

     Section 5.01.
 Relationship to Existing Base Indenture. The First Supplemental Indenture is
a supplemental indenture within the meaning of the Base Indenture. The Base Indenture, as
supplemented and amended by this First Supplemental Indenture, is in all respects ratified,
confirmed and approved and, with respect to the Notes, the Base Indenture, as supplemented and
amended by this First Supplemental Indenture, shall be read, taken and construed as one and the
same instrument.

     Section 5.02. Modification of The Existing Base Indenture. Except as expressly modified by
this First Supplemental Indenture, the provisions of the Base Indenture shall govern the terms and
conditions of the Notes.

     Section 5.03. Governing Law. This instrument shall be governed by and construed in
accordance with the laws of the State of New York.

     Section 5.04. Counterparts. This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

     Section 5.05. Trustee Makes No Representation. The recitals contained herein are made by
the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or sufficiency of this First
Supplemental Indenture (except for its execution thereof and its certificates of authentication of
the Notes).

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     IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed and attested all as of the day and year first above written.

Dated: October 15, 2007

	 	 	 	 	 
	 	V.F. Corporation

 	 
	 	By:  	/s/ Mackey J. McDonald
 	 
	 	 	Mackey J. McDonald 	 
	 	 	Chairman and Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	/s/ Candace S. Cummings
 	 
	 	 	Candace S. Cummings 	 
	 	 	Vice President – Administration,

General Counsel and Secretary 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Frank C. Pickard III
 	 
	 	 	Frank C. Pickard III 	 
	 	 	Vice President – Treasurer 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	/s/ Candace S. Cummings
 	 
	 	 	Candace S. Cummings 	 
	 	 	Vice President – Administration,

General Counsel and Secretary 	 
	 

	 	 	 	 	 
	 	THE BANK OF NEW YORK TRUST COMPANY, N.A., as
Trustee

 	 
	 	By:  	/s/ Christie Leppert
 	 
	 	 	Name:  	Christie Leppert 	 
	 	 	Title:  	Assistant Vice President 	 
	 

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ANNEX A

     THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE
OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OR TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

A-1 

 

V.F. CORPORATION

			
	No.
	 	CUSIP No.:

$

     V.F. CORPORATION, a corporation duly incorporated and subsisting under the laws of the
Commonwealth of Pennsylvania (herein called the “Company,” which term includes any successor
corporation under the Indenture hereinafter referred to), for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of $Ÿ on November [ ], 20[ ]
and to pay interest thereon from October 15, 2007, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on May 1 and November 1 in each
year, commencing May 1, 2008, at the rate of Ÿ% per annum, until the principal hereof is paid
or made available for payment. Interest on this security shall be computed on the basis of a
360-day year of twelve 30-day months.

     The interest so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or
more Predecessor Securities) is registered at the close of business on the Business Day next
preceding the relevant Interest Payment Date, or in the event the Notes cease to be held in the
form of one or more Global Notes, at the close of business on the date 15 days prior to that
Interest Payment Date, whether or not a Business Day. Any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Noteholder on such Regular Record Date
and may either be paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Noteholders of
Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes of this series may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.

     Payment of the principal of (and premium, if any) and interest on this Note will be made at
the office or agency of the Company maintained for that purpose in New York, New York in such coin
or currency of the United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.

     Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.

     Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

A-2 

 

     In Witness Whereof, the Company has caused this instrument to be duly executed under
its corporate seal.

Dated:

	 	 	 	 	 
	 	V.F. Corporation

 	 
	 	By:  	 	 
	 	 	Mackey J. McDonald 	 
	 	 	Chairman and Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	 	 
	 	 	Candace S. Cummings 	 
	 	 	Vice President – Administration,
 General Counsel and Secretary 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	

 	 
	 	 	Frank C. Pickard III 	 
	 	 	Vice President – Treasurer 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	 	 
	 	 	Candace S. Cummings 	 
	 	 	Vice President – Administration, 
General Counsel and Secretary 	 
	 

       This is one of the Notes of the series designated therein referred to in the within-mentioned
Indenture.

	 	 	 	 	 
	 	U.S. BANK TRUST NATIONAL ASSOCIATION

 	 
	 	By:  	 	 
	 	 	Authorized Signature 	 
	 	 	 	 
	 

(Signature Page for Series Ÿ Security)

A-3 

 

[Reverse of Note]

     This Note is one of a duly authorized issue of notes of the Company (herein called the
“Notes”), issued and to be issued in one or more series under an Indenture, dated as of October
15, 2007 (herein called the “Base Indenture”, which term shall have the meaning assigned to it in
such instrument), as supplemented by a First Supplemental Indenture, dated as of October 15, 2007
(herein called the “First Supplemental Indenture” and together with the Base Indenture, the
“Indenture”), between the Company and The Bank of New York Trust Company, N.A., as Trustee under
the Indenture (the “Trustee”), and reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Noteholders and of the terms upon which the Notes are, and are to be, authenticated
and delivered. This Note is one of the series designated on the face hereof, initially limited in
aggregate principal amount to $Ÿ. The Company may at any time issue additional notes under
the Indenture in unlimited amounts having the same terms as the Notes.

     The Notes of this series are subject to redemption, as a whole or from time to time in part,
upon not less than 30 nor more than 60 days’ notice mailed to each Noteholder of Notes to be
redeemed at his address as it appears in the Securities Register, on any date prior to their Stated
Maturity at a Redemption Price equal to the greater of (i) 100% of the principal amount of such
Notes to be redeemed, plus accrued and unpaid interest thereon to the Redemption Date or (ii) as
determined by a Quotation Agent (as defined below), the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion of such payments of
interest accrued as of the Redemption Date) discounted to the Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined below), plus Ÿ basis points, plus accrued and unpaid interest thereon to the
Redemption Date; provided that unless the Company defaults in payment of the Redemption Price, on
or after the Redemption Date, interest will cease to accrue on the Notes or portions thereof called
for redemption.

     “Adjusted Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal
to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price
for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date. The semi-annual equivalent yield to maturity
will be computed as of the third business day immediately preceding the Redemption Date.
“Comparable Treasury Issue” (expressed as a percentage of its principal amount) means the United
States Treasury security selected by the Quotation Agent as having a maturity comparable to the
remaining term of the Notes to be redeemed that would be utilized in accordance with customary
financial practice in pricing new issues of corporate notes of comparable maturity to the remaining
term of the Notes. “Comparable Treasury Price” means, with respect to any Redemption Date, (i) the
average of the Reference Treasury Dealer Quotations for such Redemption Date, provided that if
three or more Reference Treasury Dealer Quotations are obtained, the highest and lowest of such
quotations shall be excluded from the calculation. “Quotation Agent” means the Reference Treasury
Dealer appointed by the Company. “Reference Treasury Dealer” means (i) Citigroup Global Markets
Inc. and its respective successors; provided, however, that, if the foregoing shall cease to be a
primary U.S. Government securities dealer (a “Primary

A-4 

 

Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer; and
(ii) any other Primary Treasury Dealer selected by the Company. “Reference Treasury Dealer
Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the
average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such
Redemption Date.

     The Notes do not have the benefit of any sinking fund obligations.

     In the event of redemption of this Note in part only, a new Note or Notes of this series and
of like tenor for the unredeemed portion hereof will be issued in the name of the Noteholder hereof
upon the cancellation hereof.

     If a Change of Control Repurchase Event with respect to the 2017 Notes or 2037 Notes occurs,
unless the Company has exercised its right to redeem all the 2017 Notes or 2037 Notes, the Company
shall make an offer to each Noteholder of the 2017 Notes or 2037 Notes to repurchase all or any
part (in integral multiples of $1,000) of that Noteholder’s Notes at a repurchase price in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid
interest on the Notes repurchased to the date of repurchase. Within 30 days following any such
Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but
after the public announcement of an impending Change of Control, the Company shall mail a notice (a
“Change of Control Notice”) to each Noteholder of the 2017 Notes or 2037 Notes, with a copy to the
Trustee, describing the transaction or transactions that constitute or may constitute the Change of
Control Repurchase Event and offering to repurchase the 2017 Notes or 2037 Notes on the payment
date specified in the Change of Control Notice, which date will be no earlier than 30 days and no
later than 60 days from the date such Change of Control Notice is mailed. The Change of Control
Notice shall, if mailed prior to the date of consummation of the Change of Control, state that the
offer to repurchase is conditioned on the Change of Control Repurchase Event occurring on or prior
to the payment date specified in the Change of Control Notice.

     The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, to the extent those laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a Change of Control
Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict
with the Change of Control Repurchase Event provisions of the Notes, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have breached its
obligations under the Indenture by virtue of such conflict.

     On the Change of Control Repurchase Event payment date, the Company shall, to the extent
lawful, with respect to the 2017 Notes or 2037 Notes:

     • accept for payment all Notes properly tendered pursuant to the Company’s offer (“Tendered
Notes”);

     • deposit with the Trustee a cash amount in immediately available funds equal to the aggregate
repurchase price in respect of all Tendered Notes; and

A-5 

 

     • deliver or cause to be delivered to the Trustee the Tendered Notes, together with an
officers’ certificate stating that such Tendered Notes have been properly accepted by the Company
and stating the aggregate principal amount of Tendered Notes being purchased by the Company.

     The Trustee shall promptly mail to each Noteholder of Tendered Notes the repurchase price for
the Tendered Notes, and the Trustee shall, to the extent necessary, promptly authenticate and mail
(or cause to be transferred by book-entry) to each such Noteholder a new note equal in principal
amount to any unpurchased portion of any Tendered Notes; provided, that each new note will be in a
principal amount of $2,000 or any integral multiple of $1,000 in excess thereof.

     The Company shall not be required to make an offer to repurchase the Notes upon a Change of
Control Repurchase Event if a third party makes such an offer in the manner, at the times and
otherwise in compliance with the requirements for an offer made by the Company and such third party
purchases all Notes properly tendered and not withdrawn under its offer.

     The Indenture contains provisions for defeasance at any time of the entire indebtedness of
this Note or certain restrictive covenants and Events of Default with respect to this Note, in each
case upon compliance with certain conditions set forth in the Indenture.

     If an Event of Default with respect to Notes of this series shall occur and be continuing, the
principal of the Notes of this series may be declared due and payable in the manner and with the
effect provided in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Noteholders of
the Notes of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Noteholders of not less than 50% in principal amount of the Notes
at the time Outstanding of each series to be affected. The Indenture also contains provisions
permitting the Noteholders of specified percentages in principal amount of the Notes of each series
at the time Outstanding, on behalf of the Noteholders of all Notes of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Noteholder of this Note
shall be conclusive and binding upon such Noteholder and upon all future Noteholders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this Note.

     As provided in and subject to the provisions of the Indenture, the Noteholder of this Note
shall not have the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless such Noteholder
shall have previously given the Trustee written notice of a continuing Event of Default with
respect to the Notes of this series, the Noteholders of not less than 25% in principal amount of
the Notes of this series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered the Trustee
reasonable indemnity, and the Trustee shall not have received from the Noteholders of a majority in
principal

A-6 

 

amount of Notes of this series at the time Outstanding a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the
Noteholder of this Note for the enforcement of any payment of principal hereof or any premium or
interest hereon on or after the respective due dates expressed herein.

     No reference herein to the Indenture and no provision of this Note or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Note at the times, place and rate, and in the
coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Note is registrable in the Security Register, upon surrender of this Note for
registration of transfer at the office or agency of the Company in any place where the principal of
and any premium and interest on this Note are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Noteholder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or transferees.

     The Notes of this series are issuable only in registered form without coupons in denominations
of $2,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Notes of this series are exchangeable for a like
aggregate principal amount of Notes of this series and of like tenor of a different authorized
denomination, as requested by the Noteholder surrendering the same.

     No service charge shall be made to a Noteholder for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

     All terms used in this Note which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

A-7exhibit10-1.htm

  

  

 

	 FINAL EXECUTION VERSION  	 Exhibit 10.1 

 

AMENDED AND RESTATED

 

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), made and effective as of the 15th day of July, 2011 (the “Effective Date”), is entered into by Applied Natural Gas Fuels, Inc., having an address at 31111 Agoura Road, Suite 208, Westlake Village, CA 91361 (the “Company”), and Cem Hacioglu (the “Executive”).

 

W I T N E S S E T H:

WHEREAS, PNG Ventures, Inc. (“PNG”), the predecessor entity to the Company, and the Executive entered into that certain Employment Agreement dated February 1, 2009 (the “Original Employment Agreement”); and

 

WHEREAS, as of February 16, 2010, the Company and the Executive entered into an amendment to the Original Employment Agreement to reflect, among others, certain modifications to the Original Employment Agreement that the parties believed were necessary and appropriate in recognition of the Company’s emergence from bankruptcy proceedings under the terms of a Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code (the “Plan”); and

 

WHEREAS, to reflect the significant contributions of the Executive to the Company, particularly noting the Company’s recent performance following its emergence from bankruptcy proceedings, effective as of the Effective Date, the Board of Directors of the Company (the “Board”) desires to extend the term of the Executive’s employment with the Company, as reflected by the terms of this Agreement; and

 

WHEREAS, intending this Agreement to completely and fully amend and restate the terms of Executive’s employment with the Company, the Company desires to employ the Executive and the Executive desires to be employed by the Company, on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:

 

1.           Term of Employment.  The Company hereby agrees to employ the Executive because of the unique and extraordinary services the Executive can render to the Company, and the Executive hereby accepts employment with the Company, on the terms set forth in this Agreement, for the period (the “Employment Period”) commencing on the Effective Date (the “Commencement Date”) and terminating on February 16, 2017, subject to earlier termination in accordance with the provisions of Section 5.

 

2.           Title; Capacity; Duties.

 

(a)         The Executive shall serve, on a full-time basis, as the President and Chief Executive Officer of the Company (and its subsidiaries).  In performing his duties hereunder, the Executive shall report to the Board and, in addition to the responsibilities and authority

 

  

1

  

provided to the President and/or the Chief Executive Officer of the Company under the Company’s By-Laws, or as expressly provided by Nevada law, shall have such the responsibilities and authority as shall be delegated to him by the Board, commensurate with those of presidents and chief executive officers of companies of similar size and revenues.

 

(b)         The Executive hereby accepts such employment and agrees, using diligent efforts, to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities as the Board shall from time to time reasonably assign to him, provided that such duties and responsibilities are substantially similar to those expected of the president and chief executive officer of a corporation of similar size and in a like or similar business to that of the Company.  The Executive agrees to devote all of his business time, attention and energies to discharging his duties hereunder.  The Executive agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the Company.

 

3.           Compensation.

 

(a)         The Company shall pay the Executive, in regular bi-weekly installments consistent with the Company’s regular payroll practices, a base salary at the annual rate of $326,700, commencing on the Commencement Date, which shall be increased, on each December 31st following the Commencement Date and any annual anniversary thereof occurring during the Employment Period, by the greater of (x) 10%, or (y) the percentage increase in the cost of living for the metropolitan area in which the principal headquarters of the Company is located over the prior year (but in no event less than the prior year’s percentage increase) (the “Base Salary”).

 

(b)         The executive shall receive an annual performance-based bonus.  For performance years (as defined in Section 3(e) hereof) beginning with or within the Employment Period, the annual performance-based bonus shall be awarded provided the Company exceeds its annual EBITDA target for the year (to the extent EBITDA is defined and used by the Company in its annual financial statements), with EBITDA targets being set by the Board in its annual budget meetings taking into account the Company’s projected results for the year covered by the budget.  Subject to clause (i) below, the Board will discuss the applicable performance year’s budget numbers with the management in the last Board meeting of the immediately preceding performance year and agree on an EBITDA target that will trigger an award for a lump sum cash bonus of 5% of the Company’s EBITDA and an "equity" bonus in the form of an option to purchase that number of shares of the Company's common stock equal to 7% of the Company’s EBITDA (each, a "Bonus Stock Option," and together with the cash bonus, the “EBITDA Bonus”); provided, however that, the Executive shall abstain from any determination or vote affecting his own compensation if he then is a member of the Board.  The cash portion of an applicable EBITDA Bonus shall be paid to the Executive in a single lump sum within 2 1⁄2 months following the end of the performance year to which such cash portion relates.  The Bonus Stock Option portion of an applicable EBITDA Bonus shall be deemed granted to the Executive as of the date on which the Company completes all corporate action necessary to effectuate the grant (the “Grant Date”); provided, however, that the Grant Date shall be the date on which the Board approves such Bonus Stock Option

 

  

2

  

portion, provided that the applicable grant agreement between the Company and the Executive is executed reasonably soon thereafter.

 

(c)         Each Bonus Stock Option will vest fully on its Grant Date, will be exercisable at a price per share equal to the “Fair Market Value” (as defined in the Company’s 2010 Stock Incentive Plan) of a share of the Company’s common stock, will expire 10 years from its Grant Date and will be subject to such other terms and conditions as are set forth in the applicable grant agreement.  Further, notwithstanding any provision of this Agreement to the contrary, except in the case of adjustments covered by Section 11 of the Company’s 2010 Stock Incentive Plan, in no event may (i) the exercise price per share underlying a Bonus Stock Option ever be reduced after the Grant Date to less than the Fair Market Value per share as of the Grant Date or (ii) the number of share underlying a Bonus Stock Option ever be changed.  In the event of any conflict between the terms of this Agreement and the terms of the applicable grant agreement for a Bonus Stock Option, the terms of this Agreement shall prevail.

 

(d)         The Board may, in its discretion, grant an annual additional discretionary cash bonus or option (to purchase shares of the Company’s common stock) award to the Executive above and beyond any other bonus awards as set forth herein above.  Any such cash bonus award shall be paid to the Executive in a single lump sum within 2 1⁄2 months following the performance year in which such award vests.  Any such option bonus award shall be granted at such times as the Board shall determine in its sole and absolute discretion, and shall satisfy the Fair Market Value and exercise price and share adjustment requirements of Section 3(c) hereof.

 

(e)         For purposes of this Agreement, the “performance year” is the calendar year beginning with or within each 12-consecutive-month period comprising the Employment Period.

 

4.           Benefits.

 

(a)         The Executive shall be entitled to participate in the Company’s life and disability insurance, health benefit insurance (with coverage extended to the Executive’s family) and retirement plans for its executive employees, in each case to the extent that the Executive’s tenure, age, health and other qualifications make him eligible to participate.

 

(b)         The Company shall reimburse the Executive for all reasonable travel (coach class air and business class hotel accommodations, where possible and solely as actually used), entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Executive of documentation, expense statements, vouchers and/or such other supporting information and compliance with such other procedures as are in effect from time to time for reimbursement of business expenses for all senior executive employees.  Such reimbursements shall be reported to the Company quarterly or more frequently, at the Executive’s election.  For flights in excess of 3 hours, business class air will be reimbursed.  Additionally, the Company shall reimburse the Executive or pay directly the Executive’s reasonable attorney’s fees in connection with this Agreement up to a maximum

 

  

3

  

of $5,000.  Any reimbursement under this Section 4(b) shall satisfy the following requirements: (i) comply with any and all Company rules and regulations relating to the same; (ii) apply only to expenses incurred during the Employment Period (or, in the case of attorney’s fees, expenses incurred during the year in which this Agreement is executed); (iii) not be made unless the amount of expenses eligible for reimbursement in one taxable year of the Executive will not affect the expenses eligible for reimbursement in any subsequent taxable year of the Executive; (iv) must be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred; and (v) not be subject to liquidation or exchange for another benefit.

 

(c)         The Executive shall be entitled to the number of vacation days customarily accorded senior executive employees of the Company, but in no event less than four (4) weeks per year.

 

5.           Employment Termination.

 

(a)         The employment of the Executive by the Company pursuant to this Agreement shall terminate upon the occurrence of any of the following:

 

	
  

	
(i)

	
at the election of the Board without “cause” (as defined herein below), immediately upon written notice by the Board to the Executive; or at the election of the Executive, with “good reason” (hereinafter defined); or

 

	
  

	
(ii)

	
at the election of the Board for “cause,” immediately upon -written -notice by the Company to the Executive; or

 

	
  

	
(iii)

	
upon the Executive’s death or “disability” (as defined herein below), immediately, in the case of disability, upon written notice by the Board to the Executive.

 

(b)         For the purposes of this Agreement, “cause” for termination shall be deemed to exist upon (i) a reasonable and good faith finding by the Board as determined by it in its sole discretion, of a material and repeated failure of the Executive to provide his full business time and attention to his reasonably assigned duties for the Company (including, without limitation, unexcused failure to report for work) for reasons other than the Executive’s death or disability, or the Executive’s gross negligence or willful misconduct; which failure or deficiency remains uncured (if curable) for a period of thirty (30) days following written notice by the Board to the Executive which specifies the reasons for the potential cause determination; (ii) the material breach by the Executive of any of the provisions of this Agreement for reasons other than the Executive’s death or disability, which breach remains uncured (if curable) for a period of thirty (30) days following written notice by the Board to the Executive which specifies the reasons for the potential cause determination; (iii) the conviction of the Executive of, or the entry of a pleading of guilty or nolo contendere by the Executive to, any felony; (iv) the Executive having committed any theft, embezzlement, fraud or other intentional act of dishonesty involving the business of the Company; or (v) any adjudication in any civil suit, or written acknowledgment by the Executive in any agreement or stipulation of

 

  

4

  

the commission of any theft, embezzlement, fraud or other intentional act of dishonesty involving any other person.

 

For purposes of this Agreement, “good reason” means, without the written consent of the Executive, (i) a material reduction by the Board in the Executive’s duties or position, (ii) a reduction of the Executive’s compensation or benefits as set forth in this Agreement, (iii) the relocation of the Executive’s principal place of employment, except as set forth herein or (iv) any other material breach by the Board of this Agreement.  Prior to a termination with good reason, the Board shall have thirty (30) days to cure the deficiency or deficiencies related to the potential good reason determination.

 

(c)         For purposes of this Agreement, the term “disability” shall mean (x) a disability (by reason of accident, illness, mental or physical cause) which in fact incapacitates the Executive from performing substantially the services contemplated herein for a period of three (3) consecutive months or for an aggregate of four (4) months during any twelve (12) month period during the term of this Agreement, or (y) a disability, the nature of which is such that in the opinion of a physician selected by the Board (and the Executive hereby agrees to submit to an examination by such physician), the Executive shall be incapacitated from performing the services contemplated herein for a period of three (3) consecutive months or for an aggregate of four (4) months during any twelve (12) month period during the term of this Agreement.  A termination by the Company pursuant to the provisions of paragraph 5(a)(iii) above, shall be treated as a termination without “cause” pursuant to the provisions of paragraph 5(a) (i) above.

 

6.           Effect of Early Termination.

 

(a)         In the event the Executive’s employment is terminated pursuant to Section 5(a)(i), the Company shall pay to the Executive, in addition to the “Standard Entitlements” (as hereinafter defined), (i) in a lump sum on the termination date, the Base Salary otherwise scheduled to be paid to the Executive for the lesser of: (x) the remainder of the Employment Period (subject to the percentage increases provided in paragraph 3(a)(x) hereof) and (y) three years; however, in no event less than one year; plus (ii) upon termination, the EBITDA Bonus (the cash portion payable in the form of a single lump sum and the Bonus Stock Option payable in the form of an option grant agreement) paid for the performance year (as defined in Section 3(e) hereof) immediately preceding the performance year in which the termination of employment occurs (the “Termination EBITDA Bonus”), for the lesser of (z) each performance year remaining in the Employment Period, beginning with the performance year immediately following the year in which the termination date occurs, and (aa) three years; however, in no event less than one year, with payment of the cash portion of each year’s Termination EBITDA Bonus being made in the form of a single lump sum between January 1st and March 15th of year immediately following the applicable one-year anniversary of the termination date and payment of the Bonus Stock Option portion of each year’s Termination EBITDA Bonus being made on a Grant Date as soon as reasonably practicable after the termination date; plus (iii) accelerated vesting of all other unvested options granted to the Executive.

 

  

5

  

For purposes of this Agreement, “Standard Entitlements” means accrued but unpaid (as of the termination date) Base Salary, accrued but unused (as of the termination date) vacation pay, approved but unreimbursed (as of the termination date) expenses, employee benefits that by their terms continue after the termination of employment, payable in accordance with the Company’s normal payroll practices, but in no event later than required under applicable law (the “Standard Entitlements Payment Schedule”); provided, however, that, employee benefits, if any, provided after the termination date shall be so provided only in accordance with the terms thereof, which shall for all purposes hereunder be deemed to be part of the Standard Entitlements Payment Schedule.  The exercisability of any Bonus Stock Option shall be governed by the terms of Section 3(c) hereof and the applicable grant agreement.

 

Upon receipt by Executive of such sums payable by the Company as provided in this Section 6(a), Executive (or his estate, as the case may be) will provide the Company with a confirmation of receipt of payment and, with respect to payments other than the Standard Entitlements, a general mutual release of claims, provided, however, that if the release of claims by the Company would diminish its rights under any insurance policy covering any related loss by the Company, then the Company may elect to waive the requirement that the parties deliver such releases.

 

(b)         In the event the Executive’s employment is terminated, at the election of the Company pursuant to Section 5(a)(ii), or for any other reason except as set forth in this Section 6, the Company shall pay to the Executive only the Standard Entitlements, in accordance with the Standard Entitlements Payment Schedule.  In such event, the Executive shall forfeit the right to receive any then ungranted Bonus Stock Options or other options (whether or not vested); provided, however, that the exercisability of any granted Bonus Stock Option shall be governed by the terms of Section 3(c) hereof and the applicable grant agreement.  Upon receipt by Executive of such sums payable by the Company as provided in this paragraph, Executive will provide the Company with a confirmation of receipt of payment and, with respect to payments other than the Standard Entitlements, a general mutual release of claims, provided, however, that if the release of claims by the Company would diminish its rights under any insurance policy covering any related loss by the Company, then the Company may elect to waive the requirement that the parties deliver such releases.

 

(c)         In the event the Executive’s employment is terminated pursuant to Section 5(a)(iii), the Company shall pay to the estate of the Executive, or to the Executive, as the case may be, the amounts payable in the case of a termination pursuant to the provisions of paragraph 6(a) above, with the Standard Entitlements being paid in accordance with the Standard Entitlements Payment Schedule.  The exercisability of any Bonus Stock Option shall be governed by the terms of Section 3(c) hereof and the applicable grant agreement.  Upon receipt by Executive (or his estate, as the case may be) of such sums payable by the Company as provided in this paragraph, Executive (or his estate, as the case may be) will provide the Company with a confirmation of receipt of payment and, with respect to payments other than the Standard Entitlements, a general mutual release of claims; provided, however, that if the release of claims by the Company would diminish its rights under any insurance policy covering any related loss by the Company, then the Company may elect to waive the requirement that the parties deliver such releases.

 

  

6

  

(d)         The Executive understands, acknowledges and agrees that he will not be entitled to receive, and will not receive, payment of any amounts described in Section 6(a)(i), (ii) or (iii) and shall forfeit any Bonus Stock Option or other option (even if vested), should he not execute and not revoke the general release described above, unless the requirement of a general release is waived by the Company.

 

(e)         Notwithstanding any provision of this Agreement to the contrary, should any payments contemplated hereunder constitute “excess parachute payments” within the meaning of Sections 280G and 409A of the “Code” (as hereinafter defined), such payments shall be reduced such that the remaining payments do not, either individually or in the aggregate, constitute excess parachute payments.  Payments of amounts exempt from Section 409A of the Code (as hereinafter defined), including, without limitation, Bonus Stock Option payments, shall be cut back first.  No cutback with respect to amounts constituting deferred compensation within the meaning of Section 409A of the Code (as hereinafter defined) shall be made if doing so would constitute an impermissible acceleration of deferred compensation under Section 409A.

 

7.           Breach of Contract by the Executive.

 

(a)         The Executive recognizes that the Company is entering into this Agreement in order to obtain the exclusive use of his personal services during the term hereof, that Executive’s services are of a special, unique, unusual, extraordinary, creative and intellectual character, and that the commercial success of the enterprise for which the Executive has been hired depends primarily upon the unique character of his services.  The Executive therefore agrees that the diversion of the Executive’s services to unrelated business endeavors during the term of this Agreement, in violation of this Agreement and without consent of the Company, shall be a material breach of this Agreement (which is deemed not curable).

 

(b)         The Executive further agrees that, in addition to any other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief, without the need to post a bond or other security, to enforce any of the rights and privileges of the Company or any of the covenants or obligations of the Executive hereunder, including, without limitation, the covenants and obligations of the Executive set forth in this Section 7.

 

8.           Non-Competition; Non-Solicitation.

 

(a)         During the term of the Executive’s employment by the Company, and until the latter of (x) one year from the date of termination of employment or (y) that period following the termination of the Executive’s employment for which Executive is provided any payments under section 6 of this Agreement (and for this purpose, all lump sum payments shall be deemed to cover the period covered by the lump sum payment) (the “Non-Compete Period”), the Executive shall not, directly or indirectly, as an individual proprietor, partner, stockholder, officer, executive, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as a holder of not more than one percent (1%) of the total

 

  

7

  

outstanding stock of a publicly held company); engage in a business that competes with the business of the Company.

 

(b)         During the term of the Executive’s employment by the Company, and during the Non-Compete Period, the Executive shall not, directly or indirectly:

 

	
  

	
(i)

	
solicit or induce, or attempt to induce, any other person or entity having any continuing or periodic contractual relationship with the Company to terminate, reduce or materially alter their relationship with, or otherwise cease negotiations and/or business activity with, the Company; or

 

	
  

	
(ii)

	
solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any persons who had a contractual relationship with the Company or with whom the Company was involved in negotiating any such relationship within six (6) months of the effective date of termination, and with whom the Executive, while employed by the Company, had significant personal contacts or relationships.

 

(c)         The restrictions contained in this Section 8 are necessary for the protection of the trade secrets, proprietary information and contractual relationships of the Company, all of which the Executive acknowledges may be disclosed to the Executive while in the Company’s employ, and are considered by the Executive to be reasonable for such purpose.  The Executive agrees that any breach of this Section 8 shall cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, the Executive agrees that he will not be entitled to receive, and will not receive, payment of any amounts described in Section 6(a)(i), (ii) or (iii) and shall forfeit any Bonus Stock Option or other option (even if vested), and in addition to any other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief, without the need to post a bond or other security.

 

(d)         If any restriction set forth in this Section 8 is found by a court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic areas as to which it may be enforceable.

 

9.           Proprietary Information and Developments.

 

(a)         The Executive acknowledges -and agrees that due to the uniqueness of his position, information is available to him which is of such a highly confidential and proprietary nature as to constitute a trade secret, and any conduct by him which makes use of such information (except as part of the performance of his duties on behalf of the Company) would be a breach of his fiduciary duty to the Company.  Accordingly, and in furtherance of the terms of Section 8, the Executive agrees that all information and knowhow, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business or financial

 

  

8

  

affairs or business methods received by him from the Company or of which he became aware during the term of his employment (collectively, “Proprietary Information”), is and shall be the exclusive property of the Company.  The Executive shall not disclose any Proprietary Information to others outside the Company (except as part of the performance of his duties on behalf of the Company), or use the same for any unauthorized purposes, without written approval by the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge without fault of the Executive.

 

(b)         The Executive agrees that all tangible material containing Proprietary Information, whether created by the Executive or others, which shall come into his custody or possession during the term of his employment, shall be and is the exclusive property of the Company to be used by the Executive only in the performance of his duties for the Company, and to be returned to the Company upon the termination of his employment.

 

(c)         The Executive agrees that he shall not disclose or use information, know-how and records of the types set forth in paragraphs (a) and (b) above which constitute Proprietary Information of any third party with whom the Company has a contractual relationship which obligates the Company to maintain the confidentiality of such Proprietary Information, except to the extent such disclosure or use would be during the course of the performance by the Executive of his duties on behalf of Company and’ such disclosure or use does not constitute a breach of the contractual relationship between the Company with such third party.  Without in any way limiting the generality of the foregoing, the Executive agrees that any breach of this Section 9 shall cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, the Executive agrees that he will not be entitled to receive, and will not receive, payment of any amounts described in Section 6(a)(i), (ii) or (iii) and shall forfeit any Bonus Stock Option (even if vested), and in addition to any other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief, without the need to post a bond or other security.

 

10.           Survival.  The provisions of Sections 6, 7, 8, 9, 10, 11, 16, 17, 18, 20, 21, 22 and 23 shall survive the termination of this Agreement for any reason.

 

11.           Arbitration.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (except as otherwise set forth herein, including without limitation, as set forth in Sections 7, 8 and 9 hereof) that cannot be resolved by the Executive and the Company, including any dispute as to the calculation of the Executive’s bonuses or any payments hereunder, shall be submitted to arbitration in Los Angeles, California in accordance with California law and the procedures of the American Arbitration Association before a single arbitrator mutually acceptable to the parties.  The determination of the arbitrator(s) shall be conclusive and binding on the Company and the Executive and judgment may be entered on the arbitrator(s)’ award in any court having jurisdiction.  Notwithstanding the foregoing, this Section 11 shall not operate to preclude the Company from proceeding to adjudicate, in any court of competent jurisdiction, and not in any arbitral proceeding, any provision of Section 7, 8 or 9 hereof.

 

  

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12.           Notices.  All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon delivery personally or to its address first above written.

 

13.           Entire Agreement.  This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.

 

14.           Amendment.  This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.

 

15.           Governing Law.  Except as preempted by applicable federal law, this Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of California (without regard to any principles in respect of conflicts of laws).

 

16.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors, permitted assigns, legal representatives and heirs; provided, however, that the Company may assign this Agreement and all of its rights and obligations hereunder, but that the obligations of Executive are personal and shall not be assigned by him and if the assignee of the Company does not honor the Company’s obligations described hereunder, the Company shall remain liable.

 

17.           Waiver.  No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right.  A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

 

18.           Severability.  In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable by a tribunal of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

 

19.           Counterparts.  This Agreement may be executed in any number of counterparts, all of which, when so executed, shall be deemed an original but all of which together shall constitute one instrument.

 

20.           409A.  This Agreement shall be interpreted by all parties to comply with any applicable provisions of Section 409A of the Internal Revenue Code (the “Code”) and the Treasury Regulations promulgated thereunder.  Without in any way limiting the generality of the foregoing, it is the intent of the parties that all payments hereunder qualify, to the maximum extent possible, for exemption from the requirements of said Section 409A by reason of falling under one or more of the following exemptions from treatment as deferred compensation:  (i) the exemption for short-term deferrals set forth in Treas. Reg. Section 1.409A-1(b)(4); (ii) the exemption for certain separation pay plans set forth in Treas. Reg. Section 1.409A-1(b)(9)(iii); (iii) the exemption for bona fide vacation leave, sick leave, compensatory time or death benefits set forth in Treas. Reg. Section 1.409A-1(a)(5) (iv) the exemption for certain stock rights set forth in Treas. Reg. Section 1.409A-1(b)(5); or (v) the exemption for amounts excludible from income as described in Treas. Reg. Section 1.409A-1(b)(1).  To the extent that, notwithstanding such intent, it should be determined that said Section 409A applies to any payment under this

 

  

10

  

Agreement, such payment may not be accelerated other than as permitted by said Section 409A and the Treasury Regulations promulgated thereunder.  For purposes of this Agreement, (i) any installment payment of deferred compensation shall qualify as a separate payment for purposes of said Section 409A; (ii) if said Section 409A applies to any payment described in Section 6(a)(i), (ii) or (iii) (each, a “Severance Payment”), such Severance Payment shall not be made unless the termination of employment described therein qualifies as a “separation from service” within the meaning of said Section 409A and the Treasury Regulations promulgated thereunder (applying all of the default rules contained therein); and (iii) if said Section 409A applies to a Severance Payment, and as of the date of “separation from service,” the Executive qualifies as a “specified employee” within meaning of said Section 409A and the Treasury Regulations promulgated thereunder (applying all of the default rules contained therein), then the payment of such Severance Payment shall be delayed until the first business day after the lapse of six months after such date of separation of separation of service.

 

21.           Non-Disparagement.  Each party hereto agrees it will not during Executive’s employment with the Company or at any time thereafter, publicly disparage the other party.  Nothing in this Section 21 should be construed to preclude either party hereto from making truthful disclosures required by applicable law, regulation or order of court or governmental agency.

 

22.           Notices.  All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given on the next business day if sent by private overnight courier service; on the fourth business day after mailing if by registered or certified mail: postage prepaid (return receipt requested and received); and on the day of delivery if by facsimile accompanied by facsimile machine-generated confirmation or delivered personally, to the Company and Executive at the address set forth in the introduction to this Agreement (or to such other address as either party shall designate by notice in writing to the other in accordance herewith).

 

23.           Indemnification.  The Company shall indemnify, defend and hold harmless Executive against any liability incurred by Executive as an employee of the Company.  The Company shall be obligated to pay the claims or expenses of the Executive required under this Section 23 including defense cost, directly to the third party to whom payment is due and owing, without the necessity of the Executive making such payment and seeking reimbursement from the Company.  For the avoidance of doubt, the provisions of this Section 23 shall survive the termination or expiration of Executive’s employment under this Agreement irrespective of the reason for such termination.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.

 

APPLIED NATURAL GAS FUELS, INC.

 

	
By:

	
/s/ W. Phillip Marcum

	  	
/s/ Cem Hacioglu

	
Name:

	
W. Phillip Marcum

	  	
CEM HACIOGLU

	
Title:

	
Chairman of the Board of Directors,

	  	  
	  	
by order of the Board of Directors

	  	  

  

11

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