Document:

OptionAgreementFeb2014

Exhibit 10.4

KINDRED BIOSCIENCES, INC. 
2012 EQUITY INCENTIVE PLAN 
NOTICE OF STOCK OPTION GRANT
Kindred Biosciences, Inc. (the “Company”) hereby grants you the following Option to purchase shares of its common stock (“Shares”).  The terms and conditions of this Option are set forth in the Stock Option Agreement and the Kindred Biosciences, Inc. 2012 Equity Incentive Plan (the “Plan”), both of which are attached to and made a part of this document.
	
		
	Date of Grant:
	[Day] [Month] 201___.

	Name of Optionee:
	 

	Number of Option Shares:
	 

	Type of Option:
	 

	Exercise Price per Share:
	$____ (The Exercise Price per Share of an Option shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant.  If Optionee is a Ten-Percent Stockholder, the Exercise Price per Share of an ISO must be at least one hundred ten percent (110%) of Fair Market Value.)

	Vesting Start Date:
	[Day] [Month] 201___.

	Vesting Schedule:
	

By signing this document, you acknowledge receipt of a copy of the related Stock Option Agreement and the Plan, and agree that: (a) you have carefully read, fully understand and agree to all of the terms and conditions described in the attached Stock Option Agreement and the Plan; (b) you understand and agree that the Stock Option Agreement, including its cover sheet any attachment, constitutes the entire understanding between you and the Company regarding this Option, and replaces and supersedes any prior or contemporaneous agreements, commitments or negotiations concerning this Option; and (c) you have been given an opportunity to consult your own legal and tax counsel with respect to all matters relating to this Option prior to signing this document and that you have either consulted such counsel or voluntarily declined to consult such counsel.
	
		
	 
	 

	Optionee:
	Kindred Biosciences, Inc.:

	 
	 

	 
	                  

	            
	By:   

	 
	Its:   

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Exhibit 10.4

KINDRED BIOSCIENCES, INC.
2012 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
SECTION 1.KIND OF OPTION.
This Option is intended to be either an incentive stock option intended to meet the requirements of Section 422 of the Internal Revenue Code (an “ISO”) or a non-statutory option (an “NSO”), which is not intended to meet the requirements of an ISO, as indicated in the Notice of Stock Option Grant.  Even if this Option is designated as an ISO, it shall be deemed to be an NSO to the extent required by the $100,000 annual limitation under Section 422(d) of the Code.
SECTION 2.VESTING.
Subject to the terms and conditions of the Plan and this Stock Option Agreement (the “Agreement”), your Option and the Shares shall vest in accordance with the schedule set forth in the Notice of Stock Option Grant. If your Option is granted in consideration of your Service to the Company as an Employee, a Consultant, an Advisor, or a Director, and if all of your Service terminates for any reason, vesting of your Shares subject to your Option immediately stops and your Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Employee, a Consultant, an Advisor, or a Director terminates, unless otherwise specified in the Notice of Stock Option Grant.  Notwithstanding the foregoing, in the event of a Corporate Transaction, your Option shall be deemed fully vested and exercisable immediately prior to the consummation of the Corporate Transaction (provided that your Option has not expired by its terms and that you take all steps necessary to exercise your Option prior to the Corporate Transaction as provided in this Agreement)
SECTION 3.TERM.
Your Option will expire in any event at the close of business at Company headquarters on the date that is ten (10) years after the Date of Grant; provided, however, that if your Option is an ISO it will expire five (5) years after the Date of Grant if you are a Ten-Percent Stockholder of the Company (the “Expiration Date”).  Also, your Option will expire earlier if your Service terminates, as described below.
SECTION 4.REGULAR TERMINATION.
		
	(a)
	If your Service terminates for any reason except death or Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date three (3) months after your termination of Service.  During that three (3) month period, you may exercise the portion of your Option that was vested on your termination date.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

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Exhibit 10.4

		
	(b)
	If your Option is an ISO and you exercise it more than three (3) months after termination of your Service as an Employee for any reason other than death or Disability expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will cease to be eligible for ISO tax treatment.

		
	(c)
	Your Option will cease to be eligible for ISO tax treatment if you exercise it more than three (3) months after the ninetieth (90th) day of a bona fide leave of absence approved by the Company, unless you return to employment immediately upon termination of such leave or your right to reemployment after your leave was guaranteed by statute or contract.

SECTION 5.DEATH.
If you die while in Service with the Company, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of your death.  During that twelve (12) month period, your estate, legatees or heirs may exercise that portion of your Option that was vested on the date of your death.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.
SECTION 6.DISABILITY.
		
	(a)
	If your Service terminates because of a Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.  During that twelve (12) month period, you may exercise that portion of your Option that was vested on the date of your Disability.  “Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.  Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.

		
	(b)
	If your Option is an ISO and your Disability is not expected to result in death or to last for a continuous period of at least twelve (12) months, your Option will be eligible for ISO tax treatment only if it is exercised within three (3) months following the termination of your Service as an Employee.

SECTION 7.EXERCISING YOUR OPTION.
To exercise your Option, you must execute the Notice of Exercise (the “Exercise Notice”), attached as Exhibit A.  You must submit this form, together with full payment as provided in Section 8, below, to the Company.  Your exercise will be effective when it is received by the Company.  If someone else wants to exercise your Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

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Exhibit 10.4

SECTION 8.PAYMENT FORMS.
When you exercise your Option, you must include payment of the Exercise Price for the Shares you are purchasing in cash or cash equivalents.  Alternatively, you may pay all or part of the Exercise Price by surrendering, or attesting to ownership of, Shares already owned by you, unless such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes.  Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date of Option exercise.  To the extent that a public market for the Shares exists and to the extent permitted by applicable law, in each case as determined by the Company, you also may exercise your Option by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and, if requested, applicable withholding taxes.  The Company will provide the forms necessary to make such a cashless exercise.  The Board may permit such other payment forms as it deems appropriate, subject to applicable laws, regulations and rules. 
SECTION 9.TAX WITHHOLDING AND REPORTING.
		
	(a)
	You will not be allowed to exercise this Option unless you pay, or make acceptable arrangements to pay, any taxes required to be withheld as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option.  You hereby authorize withholding from payroll or any other payment due you from the Company or your employer to satisfy any such withholding tax obligation.

		
	(b)
	If you sell or otherwise dispose of any of the Shares acquired pursuant to an ISO on or before the later of (i) two (2) years after the grant date, or (ii) one year after the exercise date, you shall immediately notify the Company in writing of such disposition.

SECTION 10.TRANSFER OF OPTION.
Prior to your death, only you may exercise this Option.  This Option and the rights and privileges conferred hereby cannot be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.  For instance, you may not sell this Option or use it as security for a loan.  If you attempt to do any of these things, this Option will immediately become invalid.  You may, however, dispose of this Option in your will.  Regardless of any marital property settlement agreement, the Company is not obligated to honor an Exercise Notice from your spouse or former spouse, nor is the Company obligated to recognize such individual’s interest in your Option in any other way. Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by you to a revocable trust or to one or more family members or to a trust established for your benefit and/or one or more of your family members to the extent permitted by the Plan. 

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Exhibit 10.4

SECTION 11.RETENTION RIGHTS.
This Agreement does not give you the right to be retained by the Company in any capacity.  The Company reserves the right to terminate your Service at any time and for any reason without thereby incurring any liability to you.
SECTION 12.STOCKHOLDER RIGHTS.
Neither you nor your estate or heirs have any rights as a stockholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued.  No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
SECTION 13.ADJUSTMENTS.
In the event of a stock split, a stock dividend or a similar change in the Company’s Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan.  Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity as set forth in the Plan.

SECTION 14.LEGENDS.
All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the following legend:
If the Option is an ISO, then the following legend will be included:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED.  THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.
SECTION 15.TAX DISCLAIMER.
You agree that you are responsible for consulting your own tax advisor as to the tax consequences associated with your Option.  The tax rules governing options are complex, change frequently and depend on the individual taxpayer’s situation.  Although the Company will make available to you general tax information about stock options, you agree that the Company shall 

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Exhibit 10.4

not be held liable or responsible for making such information available to you or for any tax or financial consequences that you may incur in connection with your Option.
By accepting this Option, you acknowledge that any tax liability or other adverse tax consequences to you resulting from the grant of the Option will be the responsibility of, and will be borne entirely by, you.  YOU ARE THEREFORE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR BEFORE ACCEPTING THE GRANT OF THIS OPTION.
SECTION 16.THE PLAN AND OTHER AGREEMENTS.
The text of the Plan is incorporated in this Agreement by reference.  Certain capitalized terms used in this Agreement are defined in the Plan.  The Notice of Stock Option Grant, this Agreement, including its attachments, and the Plan constitute the entire understanding between you and the Company regarding this Option.  Any prior agreements, commitments or negotiations concerning this Option are superseded.
SECTION 17.MISCELLANEOUS PROVISIONS.
		
	(a)
	You understand and acknowledge that: (i) the Plan is entirely discretionary; (ii) the Company and your employer have reserved the right to amend, suspend or terminate the Plan at any time; (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount; and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

		
	(b)
	The value of this Option shall be an extraordinary item of compensation outside the scope of your employment contract, if any, and shall not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

		
	(c)
	You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

		
	(d)
	You hereby authorize and direct your employer to disclose to the Company or any Subsidiary any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your employer deems necessary or appropriate to facilitate the administration of the Plan.

		
	(e)
	You consent to the collection, use and transfer of personal data as described in this Subsection.  You understand and acknowledge that the Company, your employer 

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Exhibit 10.4

and the Company’s other Subsidiaries hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the your favor (the “Data”).  You further understand and acknowledge that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan.  You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere.  You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf.  You may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection by contacting the Human Resources Department of the Company in writing.
SECTION 18.APPLICABLE LAW.
This Agreement will be interpreted and enforced under the laws of the State of California (without regard to their choice of law provisions).

 

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Exhibit 10.4

EXHIBIT A

NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK

	
		
	 
	Name:   

	 
	Address:   
   

	 
	SSN:   

	 
	Date:   

Kindred Biosciences, Inc.
Attention: Corporate Secretary
1499 Bayshore Highway, Suite 226
Burlingame, California 94010

Re:    Exercise of Stock Option

Ladies and Gentlemen:

I elect to purchase ______________ shares of Common Stock of Kindred Biosciences, Inc. (the “Company”) pursuant to the Stock Option Agreement, dated ___________, between the Company and me and the Kindred Biosciences, Inc. 2012 Equity Incentive Plan.  The purchase will take place on the Exercise Date, which will be (i) as soon as practicable following the date this notice and all other necessary forms and payments are received by the Company, unless I specify a later date (not to exceed 30 days following the date of this notice) or (ii) in the case of a Broker-assisted cashless exercise (as indicated below), the date of this notice.
On or before the Exercise Date, I will pay the full exercise price in the form specified below (check one):
[ ]    Cash: by delivering cash to the Company for $___________.
[ ]    Check: by delivering a check made payable to the Company for $___________.
I will pay the full exercise price in the following form, as expressly authorized in writing by the Company:
[ ]    Other Company Shares: by delivering for surrender other shares of the Company’s Common Stock having a fair market value at the time of receipt by the Company equal to not less than the Exercise Price.

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Exhibit 10.4

[ ]    Deferred Payment Arrangement: on such terms as have been approved by the Board.
[ ]    Net Exercise Arrangement: pursuant to the Plan and on such terms as have been approved by the Board.
[ ]    Cash From Broker: by delivering the purchase price from ________________, a broker, dealer or other “creditor” as defined by Regulation T issued by the Board of Governors of the Federal Reserve System (the “Broker”).  I authorize the Company to issue a stock certificate in the number of shares indicated above in the name of the Broker in accordance with instructions received by the Company from the Broker and to deliver such stock certificate directly to the Broker (or to any other party specified in the instructions from the Broker) upon receiving the exercise price from the Broker.
On or before the Exercise Date, I will pay any applicable tax withholding obligations, as provided in the Option Agreement and the Plan, for the full tax withholding amount.
Please deliver the stock certificate to me (unless I have chosen to pay the purchase price through a broker).
	
		
	 
	Very truly yours,

	 
	 

	 
	 

	 
	                                          

	 
	 

	AGREED TO AND ACCEPTED:
	 

	 
	 

	KINDRED BIOSCIENCES, INC.
	 

	 
	 

	 
	 

	By:                                            
	 

	 
	 

	Title:                                         
	 

	 
	 

	Number of Option Shares
	 

	Exercised:                                 
	 

	 
	 

	Number of Option Shares
	 

	Remaining:                                
	 

	 
	 

	Date:                                          
	 

 8FourthAmendmentto2ndARCA

Execution Version
Exhibit 10.1

FOURTH AMENDMENT TO 
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered into effective as of the 13th day of March, 2014, among SOUTHCROSS ENERGY PARTNERS, L.P., a Delaware limited partnership (the “Borrower”), WELLS FARGO BANK, N.A., a national banking association, as the Administrative Agent (the “Administrative Agent”), and each of the Lenders (as defined below).
W I T N E S S E T H:
WHEREAS, the Borrower, the Administrative Agent and the financial institutions party thereto as lenders (the “Lenders”) are parties to that certain Second Amended and Restated Credit Agreement dated as of November 7, 2012 (as amended prior to the Fourth Amendment Effective Date (as defined in Section 2 of this Amendment), the “Credit Agreement”) (unless otherwise defined herein, all terms used herein which are defined in the Credit Agreement shall have the meanings given such terms in the Credit Agreement, as amended hereby); 
WHEREAS, pursuant to the Credit Agreement, the Lenders have made Loans to the Borrower and provided certain other credit accommodations to the Borrower; 
WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders (a) amend certain terms and provisions of the Credit Agreement, including the elimination of the existing requirement that the Subsequent Equity Contribution be made, and (b) provide for the release of the GP Collateral and the termination of the GP Cash Collateral Control Agreement, the GP Cash Collateral Pledge Agreement and the Equity Holder Agreement, in each case as provided in this Amendment; and
WHEREAS, subject to the terms and conditions set forth herein, the Lenders have agreed to the Borrower’s requests.
NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Administrative Agent and the Lenders hereby agree as follows:
Section 1Amendments.  In reliance on the representations, warranties, covenants and agreements contained in this Amendment, and subject to the satisfaction of each condition precedent set forth in Section 2 hereof, the Credit Agreement shall be amended effective as of the Fourth Amendment Effective Date in the manner provided in this Section 1.
1.1    Deleted Definitions.  Section 1.02 of the Credit Agreement shall be amended by deleting therefrom each of the following defined terms and their corresponding definitions: “Subsequent Equity Amount”, “Subsequent Equity Contribution”, “Subsequent Equity Contribution Date”, “Subsequent Equity Contribution Test” and “Subsequent Equity Proceeds”.

    

1.2    Additional Definitions.  Section 1.02 of the Credit Agreement shall be amended to add thereto in alphabetical order each of the following defined terms:
“Fourth Amendment” means that certain Fourth Amendment to this Agreement dated March 13, 2014, entered into by and among the Borrower, the Administrative Agent and the Lenders party thereto.
“Fourth Amendment Effective Date” has the meaning assigned to such term in the Fourth Amendment.  
“Nueces Pipelines” means Southcross Nueces Pipelines LLC, a Delaware limited liability company.
“Topaz Agreements” means (a) that certain Pipeline Services Agreement dated March 6, 2014, between Nueces Pipelines and Barney M. Davis, LP, and (b) that certain Pipeline Services Agreement dated March 6, 2014 between Nueces Pipelines and Nueces Bay WLE, LP.  
1.3    Restated Definitions.  Section 1.02 of the Credit Agreement shall be amended by amending and restating each of the following definitions in its entirety as follows:
“Required Equity Amount” means the Initial Equity Amount.
“Required Equity Contribution” means the Initial Equity Contribution.
“Required Equity Contribution Date” means the Initial Equity Contribution Date.
“Required Equity Proceeds” means the Initial Equity Proceeds.  
“Target Leverage Date” means the date on which each of the following conditions is satisfied:
(a)    the Target Leverage Test is satisfied as of the most recent Target Leverage Test Date; and
(b)    the Administrative Agent has received a certificate from a Financial Officer of the Borrower in accordance with Section 8.01(d), which certificate shall include calculations of the Target Leverage Ratio in form and substance satisfactory to the Administrative Agent.
1.4    Amendment to Definition of Applicable Margin.  The definition of the term “Applicable Margin” set forth in Section 1.02 of the Credit Agreement shall be amended by amending and restating the proviso contained in the last paragraph thereof in its entirety to read as follows

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provided, however, that (w) if at any time the Borrower fails to deliver any financial statements or a compliance certificate required by Sections 8.01(a), (b) or (d), as applicable, then the “Applicable Margin” means the rate per annum set forth on the grid when the Consolidated Total Leverage Ratio is at its highest level, (x) for the period from the Effective Date until March 31, 2013, the Consolidated Total Leverage Ratio shall, for purposes of this definition, be deemed to be greater than or equal to 4.50 to 1.00, (y) for the period from April 1, 2013 until the day immediately preceding the Fourth Amendment Effective Date, “Applicable Margin” means, for any day, (i) 4.50% per annum with respect to Eurodollar Loans, (ii) 3.50% per annum with respect to ABR Loans and (iii) 0.500% per annum with respect to the Commitment Fee Rate, and (z) for the period from the Fourth Amendment Effective Date until the date on which the financial statements and compliance certificate required pursuant to Sections 8.01(a), (b) or (d), as applicable, are delivered to the Administrative Agent for the period ending on the last day of the fiscal quarter ending March 31, 2014, “Applicable Margin” means the rate per annum set forth on the grid when the Consolidated Total Leverage Ratio is equal to the pro forma Consolidated Total Leverage Ratio on the Fourth Amendment Effective Date, as calculated in accordance with and certified to the Administrative Agent pursuant to Section 2 of the Fourth Amendment.  
1.5    Amendment to Definition of Consolidated Net Income.  The definition of the term “Consolidated Net Income” set forth in Section 1.02 of the Credit Agreement shall be amended by inserting the following proviso immediately before the period at the end of such definition:
provided, further, that, (i) solely with respect to amounts constituting revenue actually received in cash by the Borrower and its Consolidated Subsidiaries in respect of the operation of the Oscar Assets pursuant to the Topaz Agreements (as in effect on the Fourth Amendment Effective Date) and which cash receipts would otherwise not be included in calculating “Consolidated Net Income” due to requirements that such revenues be recognized over the life of transportation contracts pursuant to GAAP, such amounts shall be included, without duplication, in calculating “Consolidated Net Income” at the time of receipt by the Borrower and its Consolidated Subsidiaries notwithstanding, and in lieu of when recognized as net income by, such revenue recognition requirements under GAAP, and (ii) solely with respect to the fiscal quarter ending March 31, 2014, Consolidated Net Income for such fiscal quarter shall be adjusted by adding up to $1,241,000 thereto in respect of purchase price adjustments in connection with the Oscar Acquisition resulting from certain demand fees prepaid prior to the closing thereof, solely to the extent such adjustments reduce the aggregate consideration paid by Nueces Pipelines for the Oscar Assets at such closing.
1.6    Amendment to Compliance Certificate Covenant.  Section 8.01(d)(i) of the Credit Agreement shall be amended by deleting clause “(F)” thereof in its entirety and inserting the word “and” immediately before clause “(E)” thereof.

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1.7    Amendment to Monthly Financial Reporting Covenant.  Section 8.01(n) of the Credit Agreement shall be amended and restated in its entirety to read as follows:
(n)    [Intentionally Omitted.]
1.8    Amendment to Required Equity Issuances Covenant.  Section 8.20(b) of the Credit Agreement shall be amended and restated in its entirety to read as follows:
(b)    [Intentionally Omitted.]
1.9    Amendment to Consolidated Total Leverage Ratio Covenant.  The second proviso at the end of Section 9.01(a)(i) of the Credit Agreement shall be amended and restated in its entirety to read as follows:
provided, further, that (x) as elected by the Borrower on the Fourth Amendment Effective Date with respect to the Oscar Acquisition and (y) thereafter at the election of Borrower upon closing a Material Acquisition (by delivering written notice of such election to the Administrative Agent on the closing date of such Material Acquisition), in each case for the Rolling Period ending on the last day of the fiscal quarter in which such acquisition occurs and for the immediately following two Rolling Periods the maximum Consolidated Total Leverage Ratio that is permitted shall be increased to 5.00 to 1.00;
1.10    Amendment to Equity Cure Provision.  Section 9.01(e)(vi) shall be amended by amending and restating the last sentence thereof in its entirety to read as follows:
For the avoidance of doubt, no Equity Cure Amount deposited to the GP Cash Collateral Account shall be netted or credited against Consolidated Total Funded Indebtedness in the calculation of the Consolidated Total Leverage Ratio, Adjusted Consolidated Total Leverage Ratio, or Consolidated Senior Secured Leverage Ratio, as applicable, for the purpose of determining the Borrower’s compliance with clauses (a), and (b) of this Section 9.01 for the Rolling Period ending on the Equity Cure Test Date for which such Equity Cure Amount is received.
1.11    Amendments to Investments, Loans, and Advances Covenant.  Section 9.05(n)(iv) of the Credit Agreement shall be amended and restated in its entirety as follows:
(iv)    the Borrower shall have expressly designated, in one or more written notices delivered to the Administrative Agent concurrently with any issuance of Equity Interests in the Borrower consummated after the Third Amendment Effective Date, net cash proceeds (other than Webb Equity Proceeds) received by the Borrower from such issuances in a minimum aggregate amount equal to the greater of (A) $40,000,000 and (B) the Oscar Purchase Price, for the sole purpose of funding the Oscar Acquisition (any proceeds so designated, “Oscar Equity Proceeds”), which Oscar Equity Proceeds shall not be designated by the Borrower for any other purpose, 

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including, without limitation, for funding Webb Project Growth Capital Expenditures in accordance with Section 9.23(c)(i)(B) or (c)(ii);
1.12    Amendments to Capital Expenditures Covenant.  Section 9.23 of the Credit Agreement shall be amended as follows:
(a)    Clause (b) of Section 9.23 shall be amended by deleting the phrase “and, in any case, on or prior to the final Subsequent Equity Contribution Date” therefrom in its entirety.
(b)    Clause (c)(i)(B) of Section 9.23 shall be amended by deleting the phrases (i) “and Subsequent Equity Proceeds” and (ii) “and (B) shall not satisfy, in whole or in part, Borrower’s obligation to consummate the Subsequent Equity Contribution pursuant to Section 8.20(b)” therefrom in their respective entireties.
(c)    Clause (c)(ii) of Section 9.23 shall be amended by (i) deleting the phrases (A) “and Subsequent Equity Proceeds” and (B) “and (B) shall not satisfy, in whole or in part, Borrower’s obligation to consummate the Subsequent Equity Contribution pursuant to Section 8.20(b)” therefrom in their respective entireties, and (ii) amending and restating each reference to “the final Subsequent Equity Contribution Date” contained therein in its entirety to read as “the Fourth Amendment Effective Date”.
1.13    Amendment to Release of GP Collateral Provision.  Section 12.20(b) of the Credit Agreement shall be amended and restated in its entirety to read as follows:
(b)    Final Release of GP Collateral.  From and after the Fourth Amendment Effective Date, the Administrative Agent shall take any and all actions necessary (including any actions necessary to terminate the GP Cash Collateral Account Control Agreement, the GP Cash Collateral Pledge Agreement and the Equity Holder Agreement) to cause its Lien on and security interest in the GP Collateral, including, without limitation, the GP Cash Collateral Account, to be released as contemplated by Section 4 of the Fourth Amendment.
1.14    Replacement of Borrowing Request Exhibit.  Exhibit B to the Credit Agreement is hereby amended and restated in its entirety in the form of Exhibit B to this Amendment, and Exhibit B to this Amendment shall be deemed to be attached as Exhibit B to the Credit Agreement.
1.15    Replacement of Ongoing Compliance Certificate Exhibit.  Exhibit D-2 to the Credit Agreement shall be amended and restated in its entirety in the form of Exhibit D-2 to this Amendment, and Exhibit D-2 to this Amendment shall be deemed to be attached as Exhibit D-2 to the Credit Agreement.
SECTION 2    Conditions Precedent.  This Amendment will be effective as of the date that each of the following conditions precedent has been satisfied (such date, the “Fourth Amendment Effective Date”):

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2.1    Pro Forma Consolidated Total Leverage Ratio Test.  The pro forma Consolidated Total Leverage Ratio for the Rolling Period ending December 31, 2013 (calculated (a) without adding any Equity Cure Amounts or Equity Cure Rollover Amounts in the calculation of Annualized Consolidated EBITDA, (b) adjusting Annualized Consolidated EBITDA for such Rolling Period by adding $6,300,000 thereto, and (c) using Consolidated Total Funded Indebtedness as of the Fourth Amendment Effective Date after giving affect to all Borrowings made or to be made on such date) shall be less than 4.50 to 1.00.  
2.2    Exercise of the Target Leverage Option.  The Borrower shall have exercised the Target Leverage Option in accordance with the terms and conditions of the Credit Agreement (as amended hereby), including, without limitation, the requirement that the Borrower deliver (a) irrevocable written notice to the Administrative Agent of the election of the application of the covenants set forth in Section 9.01(a)(i)(A) of the Credit Agreement and (b) the certificate described in Section 2.3(b) of this Amendment.
2.3    Closing Deliveries.  Administrative Agent shall have received each of the following documents, instruments, and agreements, each of which shall be in form and substance and executed in such counterparts (if applicable) as shall be acceptable to Administrative Agent and each of which shall, unless otherwise indicated, be dated as of the Fourth Amendment Effective Date:
(a)    counterparts hereof duly executed by the Borrower and each of the Lenders and consent and agreement counterparts hereof duly executed by the other Loan Parties; 
(b)    a certificate of a Financial Officer of the Borrower in substantially the form of Exhibit D-2 to the Credit Agreement (i) certifying that no Default has occurred, (ii) setting forth reasonably detailed calculations demonstrating pro forma compliance with the Consolidated Total Interest Coverage Ratio for the Rolling Period ended December 31, 2013 (without adding any Equity Cure Amounts or Equity Cure Rollover Amounts in the calculation of Annualized Consolidated EBITDA) and the Consolidated Total Leverage Ratio (calculated in accordance with Section 2.1), including, without limitation, reasonably detailed calculations of the Specified Projects EBITDA Adjustment for each Specified Project (including a reasonably detailed summary of the terms of the applicable customer contracts relating to such calculation), each Specified Project’s Scheduled Completion Date, and each Specified Project’s Projected Capacity (and, if applicable, any changes to such Projected Capacity and supporting information as required), (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the financial statements referred to in Section 7.04 of the Credit Agreement and, if any such change has occurred, specifying the effect of such change on such calculations, (iv) attaching reports setting forth the processing volumes for the Rolling Period ended December 31, 2013, and (v) certifying as to the satisfaction of each of the conditions precedent set forth in this Section 2 (other than with respect to the Administrative Agent’s acceptance of the form and substance of the closing deliveries required under this Section 2.3); and
(c)    such other documents, instruments and certificates as the Administrative Agent or its counsel may reasonably request relating to the foregoing, the organization, existence and good standing of the General Partner and each of the Loan Parties, the authorization of this 

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Amendment and the transactions contemplated hereby, and any other legal matters relating to the General Partner, the Loan Parties and this Amendment.  
2.4    Fees and Expenses.  The Borrower shall have paid to the Administrative Agent all fees due and owing to the Administrative Agent or the Lenders in connection with this Amendment including, without limitation, all reasonable fees and expenses incurred by the Administrative Agent (including, without limitation, fees and expenses of counsel to the Administrative Agent) in the preparation, execution, review and negotiation of this Amendment and any other related documents for which the Borrower shall have been invoiced by the Administrative Agent on or before the Fourth Amendment Effective Date.  
2.5    Absence of Defaults.  No Default or Event of Default shall have occurred which is continuing.
2.6    Representations and Warranties.  Each representation and warranty contained in Section 3 hereof shall be true and correct in all material respects.
2.7    Other Documents.  The Administrative Agent shall have been provided with such documents, instruments, and agreements, and the Borrower and the other Loan Parties shall have taken such actions, in each case as the Administrative Agent may reasonably require in connection with this Amendment and the transactions contemplated hereby.
SECTION 3    Representations and Warranties.  In order to induce the Administrative Agent and the Lenders to enter into this Amendment, Borrower hereby represents and warrants to the Administrative Agent and each Lender that:
3.1    Accuracy of Representations and Warranties.  Each representation and warranty of each Loan Party contained in the Loan Documents is true and correct in all material respects as of the date hereof (except that (i) to the extent that any such representation and warranty is expressly limited to an earlier date, in which case, on the date hereof, such representation and warranty shall continue to be true and correct in all material respects as of such specified earlier date and (ii) to the extent that any such representations and warranties are qualified by materiality, such representations and warranties shall continue to be true and correct in all respects).
3.2    Due Authorization, No Conflicts.  The execution, delivery and performance by the Borrower of this Amendment are within the Borrower’s limited partnership powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than filings with the SEC required under applicable law) and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon the Borrower or any of its Subsidiaries, or result in the creation or imposition of any Lien upon any of the assets of the Borrower or any of its Subsidiaries.
3.3    Validity and Binding Effect.  This Amendment constitutes the valid and binding obligations of the Borrower enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws 

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affecting creditor’s rights generally, and subject to general principles of equity, regardless of whether considered in a proceeding in equity or law.
3.4    Absence of Defaults.  No Default or Event of Default has occurred which is continuing.
3.5    No Defense.  The Borrower has no defenses to (a) payment, counterclaims or rights of set-off with respect to the Secured Obligations on the date hereof or (b) the validity, enforceability or binding effect against the Borrower of the Credit Agreement or any of the other Loan Documents or any Liens intended to be created thereby.
3.6    Review and Construction of Documents.  The Borrower (a) has had the opportunity to consult with legal counsel of its own choice and has been afforded an opportunity to review this Amendment with its legal counsel, (b) has reviewed this Amendment and fully understands the effects thereof and all terms and provisions contained in this Amendment, and (c) has executed this Amendment of its own free will and volition.  Furthermore, the Borrower acknowledges that (i) this Amendment shall be construed as if jointly drafted by the Borrower and the Lenders, and (ii) the recitals contained in this Amendment shall be construed to be part of the operative terms and provisions of this Amendment.
SECTION 4    Release of GP Collateral.  Effective as of the Fourth Amendment Effective Date, all of the Administrative Agent’s Liens on and security interests in the GP Collateral (including, without limitation, the GP Cash Collateral Account, any sub-accounts linked thereto, any cash, monies, checks, wires, drafts, certificates, instruments, investments, or other items deposited, carried or held therein, and any books and records related to the foregoing) shall automatically be released and forever discharged, and each Lender hereby authorizes such release by the Administrative Agent and the termination by the Administrative Agent of each of the GP Cash Collateral Control Agreement, the GP Cash Collateral Pledge Agreement and the Equity Holder Agreement.  Any release pursuant to this Section 4 is only a partial release and shall not affect the Liens and security interests of the Administrative Agent in any Collateral other than the GP Collateral, nor shall such partial release affect the obligations of any Loan Party to pay the Secured Obligations.  Each Lender hereby authorizes the Administrative Agent to execute and deliver to the Borrower (or file, if appropriate), at the Borrower’s sole cost and expense, any and all additional releases of Liens, termination statements or other documents reasonably requested by the Borrower in connection with such partial release.  

8

SECTION 5    Written Notice of Elections on the Fourth Amendment Effective Date.  Each of the parties hereto acknowledges and agrees that the Borrower, by its execution and delivery of this Amendment, hereby (a) delivers written notice of its exercise of the Target Leverage Option, and (b) elects the application of the increased maximum Consolidated Total Leverage Ratio set forth in the second proviso at the end of Section 9.01(a) of the Credit Agreement.  For the avoidance of doubt the Borrower shall be deemed to have (i) delivered written notice of its exercise of the Target Leverage Option and (ii) elected the application of the increased maximum Consolidated Total Leverage Ratio set forth in the second proviso at the end of Section 9.01(a) of the Credit Agreement, in each case on the Fourth Amendment Effective Date.
SECTION 6    Miscellaneous.
6.1    Reaffirmation of Loan Documents; Extension of Liens.  Any and all of the terms and provisions of the Credit Agreement and the Loan Documents shall, except as amended and modified hereby, remain in full force and effect.  The Borrower hereby extends the Liens securing the Secured Obligations until the Secured Obligations have been paid in full, and agrees that the amendments and modifications herein contained shall in no manner affect or impair the Secured Obligations or the Liens (except as set forth in Section 4) securing payment and performance thereof.
6.2    Parties in Interest.  All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
6.3    Counterparts.  This Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this Amendment until this Amendment has been executed by the Borrower and each of the Lenders, and the consent and agreement counterparts have been executed by the other Loan Parties, at which time this Amendment shall be binding on, enforceable against and inure to the benefit of the Borrower and all Lenders.  Facsimiles or other electronic copies (e.g., .pdf) shall be effective as originals.
6.4    COMPLETE AGREEMENT.  THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6.5    Headings.  The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
6.6    No Implied Waivers.  No failure or delay on the part of the Administrative Agent or the Lenders in exercising, and no course of dealing with respect to, any right, power or privilege under this Amendment, the Credit Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Amendment, the Credit Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

9

6.7    Arms-Length/Good Faith.  This Amendment has been negotiated at arms-length and in good faith by the parties hereto.
6.8    Interpretation.  Wherever the context hereof shall so require, the singular shall include the plural, the masculine gender shall include the feminine gender and the neuter and vice versa.  The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.
6.9    Severability.  In case any one or more of the provisions contained in this Amendment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Amendment shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
6.10    Loan Documents.  The Loan Parties acknowledge and agree that this Amendment is a Loan Document.  
6.11    Further Assurances.  The Borrower agrees to execute, acknowledge, deliver, file and record such further certificates, instruments and documents, and to do all other acts and things, as may be requested by the Lenders as necessary or advisable to carry out the intents and purposes of this Amendment.
6.12    Governing Law.  THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF TEXAS.
[Signature Pages Follow]

10

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers on the date and year first above written.

		
	THE BORROWER:
	SOUTHCROSS ENERGY PARTNERS, L.P.

		
	By:
	Southcross Energy Partners GP, LLC, 
its general partner

By:  /s/ J. Michael Anderson
J. Michael Anderson 
Senior Vice President, Chief Financial Officer and Secretary

The undersigned (i) consent and agree to this Amendment, and (ii) agree that the Loan Documents to which it is a party (including, without limitation, the Second Amended and Restated Guaranty and Collateral Agreement dated as of November 7, 2012, as applicable) shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of the undersigned, enforceable against it in accordance with its terms.
CONSENTED, ACKNOWLEDGED AND AGREED TO BY:

SOUTHCROSS ENERGY OPERATING, LLC
SOUTHCROSS ENERGY LP LLC
SOUTHCROSS ENERGY GP LLC
SOUTHCROSS DELTA PIPELINE LLC
SOUTHCROSS PROCESSING LLC 
SOUTHCROSS ALABAMA PIPELINE LLC 
SOUTHCROSS NUECES PIPELINES LLC

By:    /s/ J. Michael Anderson
J. Michael Anderson
Senior Vice President, Chief Financial Officer and Secretary

SOUTHCROSS CCNG GATHERING LTD.
SOUTHCROSS CCNG TRANSMISSION LTD.
SOUTHCROSS GULF COAST TRANSMISSION LTD.
SOUTHCROSS MISSISSIPPI PIPELINE, L.P.
SOUTHCROSS MISSISSIPPI GATHERING, L.P.
SOUTHCROSS ALABAMA GATHERING SYSTEM, L.P.
SOUTHCROSS MIDSTREAM SERVICES, L.P.
SOUTHCROSS MARKETING COMPANY LTD.
SOUTHCROSS NGL PIPELINE LTD.
SOUTHCROSS GATHERING LTD.
SOUTHCROSS MISSISSIPPI INDUSTRIAL GAS SALES, L.P.
    
By:    Southcross Energy GP LLC,
as general partner

By:    /s/ J. Michael Anderson
J. Michael Anderson
Senior Vice President, Chief Financial Officer and Secretary

THE ADMINISTRATIVE AGENT 
		
	AND A LENDER:
	WELLS FARGO BANK, N.A., as the Administrative Agent and a Lender 

By:      /s/ Brandon Kast
Name: Brandon Kast
Title:   Assistant Vice President

		
	LENDER:
	CITIBANK, N.A., as a Lender 

By:    /s/ Stephen Oglesby
Name: Stephen Oglesby
Title:     Managing Director

		
	LENDER:
	SUNTRUST BANK, as a Lender 

By:    /s/ Samuel M. Ballesteros
Name:     Samuel M. Ballesteros
Title:     Senior Vice President

		
	LENDER:
	BARCLAYS BANK PLC, as a Lender 

By:    /s/ Vanessa A. Kurbatskiy
Name:     Vanessa A. Kurbatskiy
Title:     Vice President

		
	LENDER:
	JPMORGAN CHASE BANK, N.A.,  
as a Lender 

By:    /s/ Kenneth J. Fatur
Name:     Kenneth J. Fatur
Title:     Managing Director

		
	LENDER:
	COMPASS BANK,  
as a Lender 

By:    /s/ Dorothy Marchand
Name:     Dorothy Marchand
Title:     EVP

		
	LENDER:
	AMEGY BANK NATIONAL ASSOCIATION, as a Lender 

By:    /s/ Jill McSorley
Name:     Jill McSorley
Title:     Senior Vice President

		
	LENDER:
	ROYAL BANK OF CANADA, as a Lender 

By:    /s/ Jay T. Sartain
Name:     Jay T. Sartain
Title:     Authorized Signatory

		
	LENDER:
	COMERICA BANK, as a Lender 

By:    /s/ Brandon M. White
Name:     Brandon M. White
Title:     Assistant Vice President

		
	LENDER:
	MIDFIRST BANK, as a Lender 

By:    /s/ W. Thomas Portman
Name:     W. Thomas Portman
Title:     Vice President

		
	LENDER:
	RAYMOND JAMES BANK, N.A., as a Lender 

By:    /s/ H. Fred Coble, Jr.
Name:     H. Fred Coble, Jr.
Title:     Senior Vice President

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