Document:

EXHIBIT 10.20

 

AUDIOEYE, INC.

 

2014 INCENTIVE COMPENSATION PLAN

 

 

	
AUDIOEYE, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
2014 INCENTIVE   COMPENSATION PLAN
    	
 
    
	
 
    	
 
    	
 
    
	
1.
    	
Purpose
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
3.
    	
Administration
    	
6
    
	
 
    	
 
    	
 
    
	
4.
    	
Shares Subject to Plan
    	
7
    
	
 
    	
 
    	
 
    
	
5.
    	
Eligibility; Per-Person Award Limitations
    	
8
    
	
 
    	
 
    	
 
    
	
6.
    	
Specific Terms of Awards
    	
8
    
	
 
    	
 
    	
 
    
	
7.
    	
Certain Provisions Applicable to Awards
    	
14
    
	
 
    	
 
    	
 
    
	
8.
    	
Code Section 162(m) Provisions
    	
16
    
	
 
    	
 
    	
 
    
	
9.
    	
Change in Control
    	
18
    
	
 
    	
 
    	
 
    
	
10.
    	
General Provisions
    	
19
    
				

 

 

AUDIOEYE, INC.

 

2014 INCENTIVE COMPENSATION PLAN

 

1.             Purpose.  The purpose of this AUDIOEYE, INC. 2014 INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist AudioEye, Inc., a Delaware corporation (the “Company”) and its Related Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing such persons with annual and long term performance incentives to expend their maximum efforts in the creation of stockholder value.

 

2.             Definitions.  For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof and elsewhere herein.

 

(a)           “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award, Share granted as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with any other right or interest, granted to a Participant under the Plan.

 

(b)           “Award Agreement” means any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder.

 

(c)           “Beneficiary” means the person, persons, trust or trusts that have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant’s death or to which Awards or other rights are transferred if and to the extent permitted under Section 10(b) hereof.  If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

 

(d)           “Beneficial Owner” and “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

 

(e)           “Board” means the Company’s Board of Directors.

 

(f)            “Cause” shall, with respect to any Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable manner, his or her duties as assigned by the Company or a Related Entity, (ii) any violation or breach by the Participant of his or her employment, consulting or other similar agreement with the Company or a Related Entity, if any, (iii) any violation or

 

 

breach by the Participant of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company or a Related Entity, (iv) any act by the Participant of dishonesty or bad faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the Participant’s work performance, or (vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the Company or any Related Entity.  The good faith determination by the Committee of whether the Participant’s Continuous Service was terminated by the Company for “Cause” shall be final and binding for all purposes hereunder.

 

(g)           “Change in Control” means a Change in Control as defined in Section 9(b) of the Plan.

 

(h)           “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

 

(i)            “Committee” means a committee designated by the Board to administer the Plan; provided, however, that if the Board fails to designate a committee or if there are no longer any members on the committee so designated by the Board, or for any other reason determined by the Board, then the Board shall serve as the Committee.  While it is intended that the Committee shall consist of at least two directors, each of whom shall be (i) a “non-employee director” within the meaning of  Rule 16b-3 (or any successor rule) under the Exchange Act, unless administration of the Plan by “non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) “Independent,” the failure of the Committee to be so comprised shall not invalidate any Award that otherwise satisfies the terms of the Plan.

 

(j)            “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as a director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(k)           “Continuous Service” means the uninterrupted provision of services to the Company or any Related Entity in any capacity of Employee, Director, Consultant or other service provider.  Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of Employee, Director, Consultant or other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director, Consultant or other service provider (except as otherwise provided in the Award Agreement).  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

 

(l)            “Covered Employee” means the Person who, as of the end of the taxable year, either is the principal executive officer of the Company or is serving as the acting principal executive officer of the Company, and each other Person whose compensation is required to be disclosed in the Company’s filings with the Securities and Exchange Commission by reason of that person being among the three highest compensated officers of the Company as of the end of

 

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a taxable year, or such other person as shall be considered a “covered employee” for purposes of Section 162(m) of the Code.

 

(m)          “Deferred Stock” means a right to receive Shares, including Restricted Stock, cash measured based upon the value of Shares or a combination thereof, at the end of a specified deferral period.

 

(n)           “Deferred Stock Award” means an Award of Deferred Stock granted to a Participant under Section 6(e) hereof.

 

(o)           “Director” means a member of the Board or the board of directors of any Related Entity.

 

(p)           “Disability” means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee.

 

(q)           “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof, to receive cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.

 

(r)            “Effective Date” means the effective date of the Plan, which shall be January 27, 2014.

 

(s)            “Eligible Person” means each officer, Director, Employee, Consultant and other person who provides services to the Company or any Related Entity.  The foregoing notwithstanding, only Employees of the Company, or any parent corporation or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive Stock Options.  An Employee on leave of absence may, in the discretion of the Committee, be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation in the Plan.

 

(t)            “Employee” means any person, including an officer or Director, who is an employee of the Company or any Related Entity.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(u)           “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

 

(v)           “Fair Market Value” means the fair market value of Shares, Awards or other property as determined by the Committee, or under procedures established by the Committee.  Unless otherwise determined by the Committee, the Fair Market Value of a Share as of any given date shall be the closing sale price per Share reported on a consolidated basis for stock listed on the principal stock exchange or market on which Shares are traded on the date immediately preceding the date as of which such value is being determined (or as of such later measurement date as determined by the Committee on the date the Award is authorized by the Committee), or, if there is no sale on that date, then on the last previous day on which a sale was reported.

 

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(w)          “Good Reason” shall, with respect to any Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any employment, consulting or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or a Related Entity, or any other action by the Company or a Related Entity which results in a material diminution in such duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; (ii) any material failure by the Company or a Related Entity to comply with its obligations to the Participant as agreed upon, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; or (iii) the Company’s or Related Entity’s requiring the Participant to be based at any office or location outside of fifty (50) miles from the location of employment or service as of the date of Award, except for travel reasonably required in the performance of the Participant’s responsibilities.

 

(x)           “Incentive Stock Option” means any Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code or any successor provision thereto.

 

(y)           “Independent,” when referring to either the Board or members of the Committee, shall have the same meaning as used in the rules of the Listing Market.

 

(z)           “Incumbent Board” means the Incumbent Board as defined in Section 9(b)(ii) hereof.

 

(aa)         “Listing Market” means the OTC Bulletin Board or any other national securities exchange on which any securities of the Company are listed for trading, and if not listed for trading, by the rules of the Nasdaq Market.

 

(bb)         “Non-Qualified Stock Option” means any option that is not an Incentive Stock Option.

 

(cc)         “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards at a specified price during specified time periods.

 

(dd)         “Optionee” means a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such person under this Plan.

 

(ee)         “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(i) hereof.

 

(ff)          “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

 

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(gg)         “Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 6(h) hereof.

 

(hh)         “Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

 

(ii)           “Performance Share” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

 

(jj)           “Performance Unit” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

 

(kk)         “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

 

(ll)           “Related Entity” means any Subsidiary, and any business, corporation, partnership, limited liability company or other entity designated by the Board, in which the Company or a Subsidiary holds a  substantial ownership interest, directly or indirectly.

 

(mm)      “Restriction Period” means the period of time specified by the Committee that Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose.

 

(nn)         “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such risks of forfeiture and other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

(oo)         “Restricted Stock Award” means an Award granted to a Participant under Section 6(d) hereof.

 

(pp)         “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

 

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(qq)         “Shares” means the shares of common stock of the Company, par value $.00001 per share, and such other securities as may be substituted (or resubstituted) for Shares pursuant to Section 10(c) hereof.

 

(rr)           “Stock Appreciation Right” means a right granted to a Participant under Section 6(c) hereof.

 

(ss)          “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.

 

(tt)           “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, Awards previously granted, or the right or obligation to make future Awards, by a company (i) acquired by the Company or any Related Entity, (ii) which becomes a Related Entity after the date hereof, or (iii) with which the Company or any Related Entity combines.

 

3.             Administration.

 

(a)           Authority of the Committee.  The Plan shall be administered by the Committee except to the extent (and subject to the limitations imposed by Section 3(b) hereof) the Board elects to administer the Plan, in which case the Plan shall be administered by only those members of the Board who are Independent members of the Board, in which case references herein to the “Committee” shall be deemed to include references to the Independent members of the Board.  The Committee shall have full and final authority, subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.  In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of any other Eligible Persons or Participants.

 

(b)           Manner of Exercise of Committee Authority.  The Committee, and not the Board, shall exercise sole and exclusive discretion (i) on any matter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act, (ii) with respect to any Award that is intended to qualify as “performance-based compensation” under Section 162(m), to the extent necessary in order for such Award to so qualify; and (iii) with respect to any Award to an Independent Director.  Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, its

 

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Related Entities, Eligible Persons, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and stockholders.  The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee.  The Committee may delegate to officers or managers of the Company or any Related Entity, or committees thereof, the authority, subject to such terms and limitations as the Committee shall determine, to perform such functions, including administrative functions as the Committee may determine to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify.  The Committee may appoint agents to assist it in administering the Plan.

(c)           Limitation of Liability.  The Committee and the Board, and each member thereof, shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or Employee, the Company’s independent auditors, Consultants or any other agents assisting in the administration of the Plan.  Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalf of the Committee or the Board, shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

 

4.             Shares Subject to Plan.

 

(a)           Limitation on Overall Number of Shares Available for Delivery Under Plan.  Subject to adjustment as provided in Section 10(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be five million (5,000,000).  Any Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.

 

(b)           Application of Limitation to Grants of Awards.  No Award may be granted if the number of Shares to be delivered in connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares deliverable in settlement of or relating to then outstanding Awards.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.

 

(c)           Availability of Shares Not Delivered under Awards and Adjustments to Limits.

 

(i)            If any Awards are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash

 

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settlement or non-issuance, again be available for delivery with respect to Awards under the Plan, subject to Section 4(c)(iv) below.

 

(ii)           In the event that any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or withholding tax liabilities arising from such option or other award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for grant under the Plan.

 

(iii)          Substitute Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participant in any period.  Additionally, in the event that a company acquired by the Company or any Related Entity or with which the Company or any Related Entity combines has shares available under a pre-existing plan approved by its stockholders, the shares available for delivery pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan; if and to the extent that the use of such Shares would not require approval of the Company’s stockholders under the rules of the Listing Market.

 

(iv)          Any Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.

 

(v)           Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, the maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be five million (5,000,000) Shares.

 

5.             Eligibility; Per-Person Award Limitations.  Awards may be granted under the Plan only to Eligible Persons.  Subject to adjustment as provided in Section 10(c), in any fiscal year of the Company during any part of which the Plan is in effect, no Participant may be granted (i) Options or Stock Appreciation Rights with respect to more than 500,000 Shares or (ii) Restricted Stock, Deferred Stock, Performance Shares and/or Other Stock-Based Awards with respect to more than 500,000 Shares.  In addition, the maximum dollar value payable to any one Participant with respect to Performance Units is (x) $250,000 with respect to any 12 month Performance Period and (y) with respect to any Performance Period that is more than 12 months, $500,000.

 

6.             Specific Terms of Awards.

 

(a)           General.  Awards may be granted on the terms and conditions set forth in this Section 6.  In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including

 

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terms requiring forfeiture of Awards in the event of termination of the Participant’s Continuous Service and terms permitting a Participant to make elections relating to his or her Award.  Except as otherwise expressly provided herein, the Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan.  Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of Delaware law, no consideration other than services may be required for the grant (as opposed to the exercise) of any Award.

 

(b)           Options.  The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions:

 

(i)            Exercise Price.  Other than in connection with Substitute Awards, the exercise price per Share purchasable under an Option shall be determined by the Committee, provided that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option.  If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted.

 

(ii)           Time and Method of Exercise.  The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Options shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including in the discretion of the Committee a cashless exercise procedure), the form of such payment, including, without limitation, cash, Shares (including without limitation the withholding of Shares otherwise deliverable pursuant to the Award), other Awards or awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law), and the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants.

 

(iii)          Incentive Stock Options.  The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code.  Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options (including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that will

 

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result in such disqualification.  Thus, if and to the extent required to comply with Section 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and conditions:

 

(A)          the Option shall not be exercisable for more than ten years after the date such Incentive Stock Option is granted; provided, however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant; and

 

(B)          The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000.

 

(c)           Stock Appreciation Rights.  The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or without regard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions of the Plan, including the following:

 

(i)            Right to Payment.  A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right as determined by the Committee.  The grant price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right.

 

(ii)           Other Terms.  The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions of any Stock Appreciation Right.

 

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(iii)          Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or, for Options that are Non-Qualified Stock Options, at any time thereafter before exercise or expiration of such Option.  Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the exercise price at which Shares can be acquired pursuant to the Option.  In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the related Option has been exercised.

 

(d)           Restricted Stock Awards.  The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on the following terms and conditions:

 

(i)            Grant and Restrictions.  Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan during the Restriction Period.  The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan.  The restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter.  Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee).  During the period that the Restriction Stock Award is subject to a risk of forfeiture, subject to Section 10(b) below and except as otherwise provided in the Award Agreement, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

 

(ii)           Forfeiture.  Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited and reacquired by the Company; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 

(iii)          Certificates for Stock.  Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine.  If certificates representing

 

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Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

 

(iv)          Dividends and Splits.  As a condition to the grant of a Restricted Stock Award, the Committee may require or permit a Participant to elect that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock or applied to the purchase of additional Awards under the Plan.  Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property have been distributed.

 

(e)           Deferred Stock Award.  The Committee is authorized to grant Deferred Stock Awards to any Eligible Person on the following terms and conditions:

 

(i)            Award and Restrictions.  Satisfaction of a Deferred Stock Award shall occur upon expiration of the deferral period specified for such Deferred Stock Award by the Committee (or, if permitted by the Committee, as elected by the Participant).  In addition, a Deferred Stock Award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine.  A Deferred Stock Award may be satisfied by delivery of Shares, cash equal to the Fair Market Value of the specified number of Shares covered by the Deferred Stock, or a combination thereof, as determined by the Committee at the date of grant or thereafter.  Prior to satisfaction of a Deferred Stock Award, a Deferred Stock Award carries no voting or dividend or other rights associated with Share ownership.

 

(ii)           Forfeiture.  Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Deferred Stock Award), the Participant’s Deferred Stock Award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Deferred Stock Award shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of any Deferred Stock Award.

 

(iii)          Dividend Equivalents.  Unless otherwise determined by the Committee at the date of grant, any Dividend Equivalents that are granted with respect to any Deferred Stock Award shall be either (A) paid with respect to such Deferred Stock Award at the dividend payment date in cash or in Shares of unrestricted stock having a Fair Market Value

 

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equal to the amount of such dividends, or (B) deferred with respect to such Deferred Stock Award and the amount or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect.  The applicable Award Agreement shall specify whether any Dividend Equivalents shall be paid at the dividend payment date, deferred or deferred at the election of the Participant.  If the Participant may elect to defer the Dividend Equivalents, such election shall be made within 30 days after the grant date of the Deferred Stock Award, but in no event later than 12 months before the first date on which any portion of such Deferred Stock Award vests.

 

(f)            Bonus Stock and Awards in Lieu of Obligations.  The Committee is authorized to grant Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act.  Shares or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.

 

(g)           Dividend Equivalents.  The Committee is authorized to grant Dividend Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or other periodic payments.  Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award.  The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify.  Any such determination by the Committee shall be made at the grant date of the applicable Award.

 

(h)           Performance Awards.  The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by the Committee, subject to the provisions of Section 8 if and to the extent that the Committee shall, in its sole discretion, determine that an Award shall be subject to those provisions.  The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award; provided, however, that a Performance Period shall not be shorter than twelve (12) months nor longer than five (5) years.  Except as provided in Section 9 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period.  The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 8(b), or in the case of an Award that the Committee determines shall not be subject to Section 8 hereof, any other criteria that the Committee, in its sole discretion, shall determine should be used for that purpose.  The amount of the Award to be distributed shall be conclusively determined by the Committee.  Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis.

 

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(i)            Other Stock-Based Awards.  The Committee is authorized, subject to limitations under applicable law, to grant to any Eligible Person such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan.  Other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan.  The Committee shall determine the terms and conditions of such Awards.  Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(i) shall be purchased for such consideration, (including without limitation loans from the Company or a Related Entity provided that such loans are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards or other property, as the Committee shall determine.

 

7.             Certain Provisions Applicable to Awards.

 

(a)           Stand-Alone, Additional, Tandem, and Substitute Awards.  Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a Related Entity, or any other right of a Participant to receive payment from the Company or any Related Entity.  Such additional, tandem, and substitute or exchange Awards may be granted at any time.  If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award.  In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cash compensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Shares minus the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted with an exercise price or grant price “discounted” by the amount of the cash compensation surrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made in compliance with Section 409A of the Code.

 

(b)           Term of Awards.  The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years (or in the case of an Incentive Stock Option such shorter term as may be required under Section 422 of the Code).

 

(c)           Form and Timing of Payment Under Awards; Deferrals.  Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis, provided that any determination to pay in installments or

 

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on a deferred basis shall be made by the Committee at the date of grant.  Any installment or deferral provided for in the preceding sentence shall, however, be subject to the Company’s compliance with applicable law and all applicable rules of the Listing Market, and in a manner intended to be exempt from or otherwise satisfy the requirements of Section 409A of the Code.  Subject to Section 7(e) hereof, the settlement of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in the sole discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control).  Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without limitation, may in the case of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the exercise or grant price.  Installment or deferred payments may be required by the Committee (subject to Section 7(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee.  The Committee may, without limitation, make provision for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares.

 

(d)           Exemptions from Section 16(b) Liability.  It is the intent of the Company that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant).  Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

 

(e)           Code Section 409A.

 

(i)            The Award Agreement for any Award that the Committee reasonably determines to constitute a Section 409A Plan, and the provisions of the Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A of the Code.

 

(ii)           If any Award constitutes a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”), then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code:

 

(A)          Payments under the Section 409A Plan may not be made earlier than the first to occur of (u) the Participant’s “separation from service,” (v) the date the Participant becomes “disabled,” (w) the Participant’s death, (x) a “specified time (or pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such

 

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compensation, (y) a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets” of the Company, or (z) the occurrence of an “unforeseeble emergency;”

 

(B)          The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;

 

(C)          Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Section 409A(a)(4) of the Code; and

 

(D)          In the case of any Participant who is “specified employee,” a distribution on account of a “separation from service” may not be made before the date which is six months after the date of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death).

 

For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.  The Company does not make any representation to the Participant that any Awards awarded under this Plan will be exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless any Participant or Beneficiary for any tax, additional tax, interest or penalties that any Participant or Beneficiary may incur in the event that any provision of this Plan, any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.

 

(iii)          Notwithstanding the foregoing, the Company does not make any representation to any Participant or Beneficiary that any Awards made pursuant to this Plan are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest or penalties that the Participant or any Beneficiary may incur in the event that any provision of this Plan, or any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.

 

8.             Code Section 162(m) Provisions.

 

(a)           Covered Employees.  Unless otherwise specified by the Committee, the provisions of this Section 8 shall be applicable to any Performance Award granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee.

 

(b)           Performance Criteria.  If a Performance Award is subject to this Section 8, then the payment or distribution thereof or the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be contingent

 

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upon achievement of one or more objective performance goals.  Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.”  One or more of the following business criteria for the Company, on a consolidated basis, and/or for Related Entities, or for business or geographical units of the Company and/or a Related Entity (except with respect to the total stockholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total stockholder return; (13) debt reduction; (14) market share; (15) entry into new markets, either geographically or by business unit; (16) customer retention and satisfaction; (17) strategic plan development and implementation, including turnaround plans; and/or (18) the Fair Market Value of a Share.  Any of the above goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of companies that are comparable to the Company.  In determining the achievement of the performance goals, the Committee shall exclude the impact of any (i) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (iii) change in accounting standards required by generally accepted accounting principles.

 

(c)           Performance Period; Timing For Establishing Performance Goals.  Achievement of performance goals in respect of Performance Awards shall be measured over a Performance Period no shorter than twelve (12) months and no longer than five (5) years, as specified by the Committee.  Performance goals shall be established not later than 90 days after the beginning of any Performance Period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code.

 

(d)           Adjustments.  The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with Awards subject to this Section 8, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of an Award subject to this Section 8.  The Committee shall specify the circumstances in which such Awards shall be paid or forfeited in the event of termination of Continuous Service by the Participant prior to the end of a Performance Period or settlement of Awards.

 

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(e)           Committee Certification.  No Participant shall receive any payment under the Plan that is subject to this Section 8 unless the Committee has certified, by resolution or other appropriate action in writing, that the performance criteria and any other material terms previously established by the Committee or set forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based compensation” under Section 162(m) of the Code.

 

9.             Change in Control.

 

(a)           Effect of “Change in Control.”  If and only to the extent provided in any employment or other agreement between the Participant and the Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined by the Committee in its sole discretion and without any requirement that each Participant be treated consistently, upon the occurrence of a “Change in Control,” as defined in Section 9(b):

 

(i)            Any Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control, shall become immediately vested and exercisable, subject to applicable restrictions set forth in Section 10(a) hereof.

 

(ii)           Any restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Deferred Stock Award or an Other Stock-Based Award subject only to future service requirements granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof.

 

(iii)          With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, the Committee may, in its discretion, deem such performance goals and conditions as having been met as of the date of the Change in Control.

 

(b)           Definition of “Change in Control.”  Unless otherwise specified in any employment agreement between the Participant and the Company or any Related Entity, or in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following:

 

(i)            The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the value of then outstanding equity securities of the Company (the “Outstanding Company Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this Section 9(b), the following acquisitions shall not constitute or result in a Change in Control:  (v) any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below; or

 

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(ii)           During any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(iii)          Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its Related Entities, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company or any of its Related Entities (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the Board of Directors or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

 

(iv)          Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

10.          General Provisions.

 

(a)           Compliance With Legal and Other Requirements.  The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or

 

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qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to the Listing Market, or compliance with any other obligation of the Company, as the Committee, may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.

 

(b)           Limits on Transferability; Beneficiaries.  No Award or other right or interest granted under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and conditions which the Committee may impose thereon).  A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

 

(c)           Adjustments.

 

(i)            Adjustments to Awards.  In the event that any extraordinary dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuer such that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee shall, in such manner as it may deem equitable, substitute, exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awards granted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) the number and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate.

 

(ii)           Adjustments in Case of Certain Transactions.  In the event of any merger, consolidation or other reorganization in which the Company does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of the following approaches, without the requirement of obtaining any consent or agreement of a Participant as such, as determined by the agreement effectuating the transaction or, if and to

 

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the extent not so determined, as determined by the Committee: (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (b) the assumption or substitution for, as those terms are defined in Section 9(a)(iv) hereof, the outstanding Awards by the surviving entity or its parent or subsidiary, (c) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (d) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction).  The Committee shall give written notice of any proposed transaction referred to in this Section 10(c)(ii) at a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction).  A Participant may condition his exercise of any Awards upon the consummation of the transaction.

 

(iii)          Other Adjustments.  The Committee (and the Board if and only to the extent such authority is not required to be exercised by the Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards, or performance goals and conditions relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit, or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Options, Stock Appreciation Rights, Performance Awards granted pursuant to Section 8(b) hereof to Participants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder.  Adjustments permitted hereby may include, without limitation, increasing the exercise price of Options and Stock Appreciation Rights, increasing performance goals, or other adjustments that may be adverse to the Participant.

 

(d)           Taxes.  The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company or any Related Entity and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect

 

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thereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

 

(e)           Changes to the Plan and Awards.  The Board may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the consent of stockholders or Participants, except that any amendment or alteration to the Plan shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of the Listing Market, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under the terms of any previously granted and outstanding Award.  The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award Agreement relating thereto, except as otherwise provided in the Plan; provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Committee or the Board action may materially and adversely affect the rights of such Participant under terms of such Award.  Notwithstanding anything to the contrary, the Committee shall be authorized to amend any outstanding Option and/or Stock Appreciation Right to reduce the exercise price or grant price without the prior approval of the stockholders of the Company.  In addition, the Committee shall be authorized to cancel outstanding Options and/or Stock Appreciation Rights replaced with Awards having a lower exercise price without the prior approval of the stockholders of the Company.

 

(f)            Limitation on Rights Conferred Under Plan.  Neither the Plan nor any action taken hereunder or under any Award shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a Related Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and Employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company including, without limitation, any right to receive dividends or distributions, any right to vote or act by written consent, any right to attend meetings of stockholders or any right to receive any information concerning the Company’s business, financial condition, results of operation or prospects, unless and until such time as the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award.  None of the Company, its officers or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant is duly issued Shares pursuant to the Award on the stock books of the Company in accordance with the terms of an Award.  Neither the Company nor any of the Company’s officers, directors, representatives or agents is granting any rights under the Plan to the Participant whatsoever, oral or written, express or implied, other than those rights expressly set forth in this Plan or the Award Agreement.

 

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(g)           Unfunded Status of Awards; Creation of Trusts.  The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation.  With respect to any payments not yet made to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Shares, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan.  Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.  The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law.

 

(h)           Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable including incentive arrangements and awards which do not qualify under Section 162(m) of the Code.

 

(i)            Payments in the Event of Forfeitures; Fractional Shares.  Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other consideration.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award.  The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

(j)            Governing Law.  The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflict of laws, and applicable federal law.

 

(k)           Non-U.S. Laws.  The Committee shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.

 

(l)            Plan Effective Date and Stockholder Approval; Termination of Plan.  The Plan shall become effective on the Effective Date, subject to subsequent approval, within 12 months of its adoption by the Board, by stockholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable  requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan.  Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained.  The Plan shall terminate

 

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at the earliest of (a) such time as no Shares remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of the Effective Date.  Awards outstanding upon expiration of the Plan shall remain in effect until they have been exercised or terminated, or have expired.

 

24Exhibit 10.1

 

[Execution Version]

 

LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT

 

Dated as of January 29, 2014

 

THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this “Agreement”) is issued by the undersigned applicant (the “Applicant”) in favor of Union Bank, N.A. (together with its successors and assigns, the “Bank”).

 

RECITALS

 

The Applicant has requested that the Bank issue from time to time one or more standby letters of credit in an aggregate stated amount not to exceed $25,000,000 (the “Facility Amount”) at any one time outstanding for the account of the Applicant to support performance obligations of the Applicant and other general corporate activities of the Applicant.  The Applicant agrees that each such letter of credit shall be subject to the terms and provisions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Applicant agrees with and for the benefit of the Bank as follows:

 

SECTION 1.                            CERTAIN DEFINITIONS.  When used herein the following terms shall have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms):

 

“Account” has the meaning assigned to such term in the Cash Collateral Agreement.

 

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person.  A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.

 

“Application” means an application (which shall be in writing, including by facsimile, or made by electronic transmission), in the form attached hereto as Exhibit A or on the Bank’s customary standby letter of credit application form provided by the Bank to the Applicant from time to time after the date hereof, delivered by the Applicant to the Bank requesting that the Bank issue a Letter of Credit and specifying (a) the requested issuance date, the amount, the beneficiary and the expiration date of such Letter of Credit, (b) the documentary requirements for drawing thereunder and (c) such other information as the Bank may reasonably request.

 

“BTMU” means The Bank of Tokyo-Mitsubishi UFJ, Ltd., together with its successors and assigns.

 

“Business Day” means any day on which (i) the Bank is open for commercial banking business at its principal office in Los Angeles, California, and (ii) BTMU is open for commercial banking business at its principal office in New York, New York.

 

 

“Cash Collateral Agreement” means the Cash Collateral Agreement, dated as of the date hereof, by the Applicant in favor of the Bank.

 

“Closing Date” means the date on which this Agreement becomes effective pursuant to Section 2.5.

 

“Commitment Fee” has the meaning assigned to such term in Section 6(b).

 

“Event of Default” means any of the events described in Section 10.1.

 

“Facility Amount” has the meaning assigned to such term in the recitals hereto.

 

“Financing Documents” means this Agreement, each Application, the Cash Collateral Agreement and the Special Deposit Account Control Agreement.

 

“Item” means any draft, order, instrument, demand or other document drawn or presented, or to be drawn or presented, under a Letter of Credit.

 

“ISP” means at any time the most recent International Standby Practices issued by the Institute for International Banking Law & Practice, Inc.

 

“L/C Fee Rate” means 0.25% per annum.

 

“Letter of Credit” means any standby letter of credit issued by the Bank for the account of the Applicant (including any standby letter of credit issued jointly for the account of the Applicant and any other Person) to support the performance obligations of the Applicant, in each case as amended, extended or otherwise modified from time to time, but excluding any letter of credit that is issued pursuant to an Application which expressly provides that such letter of credit is not issued pursuant to this Agreement.  A letter of credit issued by the Bank pursuant to an Application from the Applicant (either individually or together with any other Person) shall be a Letter of Credit hereunder even if another Person is named as the “Applicant” or “Account Party” in such letter of credit.

 

“Letter of Credit Fee” has the meaning assigned to such term in Section 6(a).

 

“Liabilities” means all obligations of the Applicant to the Bank and BTMU, however created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, arising out of or in connection with this Agreement, the Cash Collateral Agreement, the Special Deposit Account Control Agreement, a Letter of Credit, an Application or any instrument or document delivered in connection herewith or therewith.

 

“Parent” means Illinois Power Resources, LLC, a Delaware limited liability company and the direct parent company of the Applicant.

 

“Patriot Act” has the meaning assigned to such term in Section 4(k).

 

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“Person” means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

 

“Reference Rate” means the variable rate of interest per annum established by the Bank from time to time as its “reference rate”.  Such “reference rate” is set by the Bank as a general reference rate of interest, taking into account such factors as the Bank may deem appropriate, it being understood that many of the Bank’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Bank may make various commercial or other loans at rates of interest having no relationship to such rate.  For purposes of this Agreement, each change in the Reference Rate shall be effective as of the opening of business on the date announced as the effective date of any change in such “reference rate”.

 

“Solvent” means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“Special Deposit Account Control Agreement” means the Special Deposit Account Control Agreement, dated the date hereof, among the Applicant, the Bank and BTMU.

 

“Termination Date” means January 27, 2017.

 

“UCC” means at any time the Uniform Commercial Code as then in effect in the State of New York.

 

“UCP” means at any time the most recent Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce.

 

“Unmatured Event of Default” means any event which, if it continues uncured will, with lapse of time or notice or both, constitute an Event of Default.

 

“Unused Commitment” means, on any date of determination, the Facility Amount less the aggregate stated amount of all Letters of Credit outstanding at such time.

 

SECTION 2.                            LETTER OF CREDIT PROCEDURES.

 

2.1                               Issuance of Letters of Credit.  Subject to the terms and conditions of this Agreement, the Bank will issue Letters of Credit for the account of the Applicant from time to

 

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time from the date hereof until the date that occurs ten (10) Business Days prior to the Termination Date; provided that (i) each Letter of Credit and the Application therefor shall be satisfactory to the Bank in its reasonable discretion, (ii) each Letter of Credit shall by its terms expire no later than one year after its date of issuance (or, in the case of any extension of a Letter of Credit, one year from the date of effectiveness of such extension) (but may include customary automatic annual renewal provisions, it being understood and agreed that (A) the Bank shall be under no obligation to allow the automatic renewal of any Letter of Credit and (B) the Bank may with at least sixty (60) days’ prior written notice, in its sole and absolute discretion, send a notice of non-renewal to the beneficiary of any Letter of Credit pursuant to the terms thereof), and in any event no later than the Termination Date, (iii) no Letter of Credit shall be issued unless (A) after giving effect to such issuance, the aggregate stated amount of all Letters of Credit then outstanding is equal to or less than the Facility Amount, and (B) the aggregate amount of cash collateral held by the Bank in the Account pursuant to the Cash Collateral Agreement is equal to, or in excess of, the greater of (1) 101% of the aggregate stated amount of all Letters of Credit then outstanding (after giving effect to the issuance of such Letter of Credit) and (2) $10,000,000, and (iv) each Letter of Credit shall be in a face amount of not less than $10,000 (unless otherwise agreed by the Bank).

 

2.2                               Applications.  Not later than two (2) Business Days prior to the date of the proposed issuance of any Letter of Credit (or such later date as the Bank shall agree in its sole discretion), the Applicant shall deliver an Application for such Letter of Credit to the Bank.  An Application may be sent by facsimile, by United States mail, by overnight courier, by electronic transmission using the system provided by the Bank, by personal delivery or by any other means acceptable to the Bank.

 

2.3                               Form of Letters of Credit.  (a) The Applicant authorizes the Bank to set forth the terms of each Application in the Letter of Credit corresponding to such Application (and in any amendment thereto) in such language as the Bank deems appropriate, with such variations from such terms as the Bank may in its discretion determine to be necessary (which determination shall be conclusive) and not materially inconsistent with such Application.  The Bank may, but shall not be obligated to, request the Applicant to review and sign the form of a Letter of Credit prior to issuance thereof, in which case the Applicant shall be deemed to have approved the form of such Letter of Credit.  With respect to any other Letter of Credit, the Applicant agrees that such Letter of Credit shall be conclusively presumed to be in proper form unless the Applicant notifies the Bank in writing of any discrepancy in such Letter of Credit within three (3) Business Days of its issuance.  Upon receipt of timely notice of any discrepancy in any Letter of Credit, the Bank will endeavor to obtain the consent of the beneficiary and any confirming bank for an appropriate modification to such Letter of Credit; provided that the Bank shall have no liability or responsibility for its failure to obtain such consent.

 

(b)                                 The Applicant accepts the risk that a Letter of Credit will be interpreted or applied other than as intended by the Applicant to the extent such Letter of Credit (i) permits presentation at a place other than the place of issuance, (ii) permits application of laws other than the governing law of this Agreement as set forth in Section 12.5 of this Agreement, (iii) requires termination or reduction against a presentation made by the Applicant rather than the beneficiary or (iv) fails to incorporate, or permits the application of rules and practices other than, established letter of credit practices and rules.

 

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2.4                               Representations and Warranties.  The delivery of each Application shall automatically constitute a representation and warranty by the Applicant to the Bank to the effect that on the requested date of issuance of a Letter of Credit (a) the representations and warranties of the Applicant set forth in Section 4 of this Agreement and in Section 6 of the Cash Collateral Agreement shall be true and correct as of such requested date as though made on such requested date of issuance, both before and after giving effect to such issuance, and (b) no Event of Default or Unmatured Event of Default shall have then occurred and be continuing or will result from such issuance.

 

2.5                               Conditions to Effectiveness of this Agreement.  The effectiveness of this Agreement is subject to the satisfaction of the conditions precedent set forth in Schedule 1 hereto.

 

2.6                               Conditions to Issuance of a Letter of Credit.  In addition to the conditions precedent set forth in Section 2.5 hereof, the obligation of the Bank to issue each Letter of Credit pursuant to this Agreement is subject to the satisfaction of the conditions precedent set forth in Schedule 2 hereto.

 

SECTION 3.                            REIMBURSEMENT OBLIGATIONS; RESPONSIBILITIES, ETC.

 

3.1                               Reimbursement of Obligations.  The Applicant hereby agrees to reimburse the Bank forthwith upon demand in an amount equal to any payment or disbursement made by the Bank under a Letter of Credit or any time draft issued pursuant thereto, together with interest on the amount so paid or disbursed by the Bank from and including the date of payment or disbursement to but not including the date the Bank is reimbursed by the Applicant at a rate equal to the Reference Rate from time to time in effect plus 2% per annum (or, if less, the maximum rate permitted by applicable law).  The obligation of the Applicant to reimburse the Bank under this Section 3 for payments and disbursements made by the Bank under a Letter of Credit or any time draft issued pursuant thereto shall be absolute and unconditional under any and all circumstances, including, without limitation, the following:

 

(a)                                 any failure of any Item presented under such Letter of Credit to comply strictly with the terms of such Letter of Credit;

 

(b)                                 the legality, validity, regularity or enforceability of such Letter of Credit or of any Item presented thereunder;

 

(c)                                  any defense based on the identity of the transferee of such Letter of Credit or the sufficiency of the transfer if such Letter of Credit is transferable;

 

(d)                                 the existence of any claim, set-off, defense or other right that the Applicant may have at any time against any beneficiary or transferee of such Letter of Credit, the Bank, BTMU or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or any unrelated transaction;

 

(e)                                  any Item presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

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(f)                                   honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;

 

(g)                                  waiver by the Bank of any requirement that exists for the Bank’s protection and not the protection of the Applicant or any waiver by the Bank which does not in fact materially prejudice the Applicant;

 

(h)                                 any payment made by the Bank in respect of an Item presented after the date specified as the expiration date of, or the date by which documents must be received under, such Letter of Credit if payment after such date is authorized by the ISP, the UCC or the UCP, as applicable; or

 

(i)                                     any other act or omission to act or delay of any kind of or by the Bank or any other Person or any other event, circumstance or happening whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 3.1, constitute a legal or equitable discharge of the Applicant’s obligations hereunder;

 

provided, that, notwithstanding the foregoing or any other provision of this Agreement, the Applicant shall not be obligated to reimburse the Bank for any wrongful payment or disbursement made by the Bank under a Letter of Credit as a result of any act or omission constituting gross negligence, bad faith or willful misconduct on the part of the Bank, as determined by the final non-appealable judgment of a court of competent jurisdiction.

 

3.2                               Discrepancies.  (a) The Applicant agrees that it will promptly examine any and all instruments and documents delivered to it from time to time in connection with a Letter of Credit, and if the Applicant has any claim of non-compliance with its instructions or of discrepancies or other irregularity, the Applicant will immediately (and, in any event, within three (3) Business Days) notify the Bank thereof in writing, and the Applicant shall be deemed to have waived any claim against the Bank unless such notice is given within such time period.  Without limiting the foregoing, if the Bank makes any payment or disbursement under a Letter of Credit and the Applicant does not send a notice to the Bank within three (3) Business Days of receipt of notice of such payment or disbursement objecting to such payment or disbursement and specifying in reasonable detail the discrepancy or irregularity which is the basis for such objection, then the Applicant shall be precluded from making any objection to the Bank’s honor of the presentation with respect to which such payment or disbursement was made (but shall not be precluded from asserting any objection to any different presentation under the same or a different Letter of Credit).

 

(b)  The Applicant’s acceptance or retention of any documents presented under or in connection with a Letter of Credit (including originals or copies of documents sent directly to the Applicant) or of any property for which payment is supported by a Letter of Credit shall ratify the Bank’s honor of the documents and absolutely preclude the Applicant from raising a defense or claim with respect to the Bank’s honor of the relevant presentation.

 

3.3                               Documents.  Unless specified to the contrary in the relevant Application, the Applicant agrees that the Bank and its correspondents:  (a) may accept as complying with the applicable Letter of Credit any Item drawn, issued or presented under such Letter of Credit

 

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which is issued or purportedly issued by an agent, executor, trustee in bankruptcy, receiver or other representative of the party identified in such Letter of Credit as the party permitted to draw, issue or present such Item; and (b) may in its or their reasonable discretion, but shall not be obligated to, accept or honor (i) any item which substantially complies with the terms of the applicable Letter of Credit; (ii) any Item which substantially complies under the laws, rules, regulations and general banking or trade customs and usages of the place of presentation, negotiation or payment; (iii) drafts which fail to bear any or adequate reference to the applicable Letter of Credit; (iv) any Item presented to the Bank after the stated expiration date of a Letter of Credit but within any applicable time period during which such Letter of Credit may be honored in accordance with the UCP, the UCC and/or the ISP, as applicable (and, in any event, any Item presented to the Bank on the Business Day immediately following the stated expiration date of a Letter of Credit, if such stated expiration date falls on a day which is not a Business Day); or (v) any Item which substantially complies with the requirements of the UCP, the UCC and/or the ISP, as applicable.  In determining whether to pay under a Letter of Credit, the Bank shall have no obligation to the Applicant or any other Person except to confirm that the Items required to be delivered under such Letter of Credit appear to have been delivered and appear on their face to substantially comply with the requirements of such Letter of Credit.  For purposes of the foregoing, an Item “substantially complies” unless there are discrepancies in the presentation which appear to be substantial and which reflect corresponding defects in the beneficiary’s performance in the underlying transaction.   A discrepancy is not substantial if it is unrelated or immaterial to the nature or amount of the Applicant’s loss.  For example, documents required by the Bank that do not comply with the timing requirements of the Letter of Credit for presenting or dating any required beneficiary statement nonetheless substantially comply if those timing requirements are not material in determining whether the underlying agreement has been substantially performed or violated.

 

3.4                               Exculpation.  In addition to the exculpatory provisions contained in the UCP, the UCC and/or the ISP, as applicable, the Bank and its correspondents shall not be responsible for, and the Applicant’s obligation to reimburse the Bank shall not be affected by (a) compliance with any law, custom or regulation in effect in the country of issuance, presentation, negotiation or payment of a Letter of Credit, (b) any refusal by the Bank to honor any Item because of an applicable law, regulation or ruling of any governmental authority or agency, whether now or hereafter in effect, (c) any action or inaction required or permitted under the UCC, the UCP, the ISP or the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, in each case as applicable, or (d) any act or the failure to act of any agent or correspondent of the Bank, including, without limitation, failure of any such agent or correspondent to pay any Item because of any law, decree, regulation, ruling or interpretation of any governmental authority or agency.

 

3.5                               Risks.  The Applicant assumes all risks of the acts or omissions of any beneficiary or transferee of a Letter of Credit (it being understood that such assumption is not intended to, and shall not, preclude the Applicant from pursuing any right or remedy it may have against any such beneficiary or transferee).  The Applicant further agrees that any action or omission by the Bank under or in connection with a Letter of Credit or any related Item, document or property shall, unless such action or omission constitutes the gross negligence, bad faith or willful misconduct of the Bank (as determined by the final non-appealable judgment of a court of competent jurisdiction), be binding on the Applicant and shall not put the Bank under any

 

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resulting liability to the Applicant.  Without limiting the foregoing, the Applicant agrees that in no event shall the Bank be liable for incidental, consequential, punitive, exemplary or special damages.

 

3.6                               Limitation on Bank’s Obligations.  Without limiting any other provision herein, the Bank is expressly authorized and directed to honor any request for payment which is made under and in compliance with the terms of a Letter of Credit without regard to, and without any duty on the part of the Bank to inquire into, the existence of any dispute or controversy between any of the Applicant, the beneficiary of any Letter of Credit or any other Person, or the respective rights, duties or liabilities of any of them, or whether any facts represented in an Item presented under a Letter of Credit are true or correct.  Furthermore, the Applicant agrees that the Bank’s obligation to the Applicant shall be limited to honoring requests for payment made under and in compliance with the terms of any Letter of Credit, and the Bank’s obligation remains so limited even if the Bank has prepared or assisted in the preparation of the wording of any Letter of Credit or any Item required to be presented thereunder and even if the Bank is otherwise aware of the underlying transaction giving rise to any Letter of Credit.

 

3.7                               Automatic Renewal of Letters of Credit.  IF A LETTER OF CREDIT CONTAINS ANY PROVISION FOR AUTOMATIC RENEWAL, THE APPLICANT ACKNOWLEDGES AND AGREES THAT THE BANK IS UNDER NO OBLIGATION TO ALLOW SUCH RENEWAL TO OCCUR AND ANY SUCH RENEWAL SHALL REMAIN WITHIN THE SOLE AND ABSOLUTE DISCRETION OF THE BANK.  THE APPLICANT IRREVOCABLY CONSENTS TO THE AUTOMATIC RENEWAL OF EACH LETTER OF CREDIT IN ACCORDANCE WITH ITS TERMS IF THE BANK ALLOWS SUCH RENEWAL TO OCCUR; PROVIDED THAT THE APPLICANT SHALL HAVE THE RIGHT TO REQUEST THE BANK TO DISALLOW ANY SUCH RENEWAL ON THE CONDITION THAT THE APPLICANT SHALL GIVE THE BANK PRIOR WRITTEN NOTICE OF SUCH REQUEST NOT LESS THAN 30 DAYS PRIOR TO THE DEADLINE IMPOSED UPON THE BANK FOR NOTIFICATION TO THE BENEFICIARY OF NON-RENEWAL OF SUCH LETTER OF CREDIT.

 

SECTION 4.                            REPRESENTATIONS AND WARRANTIES.  The Applicant represents and warrant to the Bank that:

 

(a)                                 Organization, etc.  The Applicant is duly incorporated, validly existing in good standing under the laws of the State of Illinois, and the Applicant is duly qualified and in good standing as a foreign entity authorized to do business in each other jurisdiction where, because of the nature of its activities or properties, such qualification is required.

 

(b)                                 Authorization; No Conflict.  The Applicant’s execution and delivery of this Agreement and each Application, the Applicant’s procurement of the issuance of any Letters of Credit for its account hereunder and the Applicant’s performance of its obligations under this Agreement and each Application are within the organizational powers of the Applicant, have been (or, in the case of any Application, upon the execution and delivery by the Applicant of such Application will have been) duly authorized by all necessary organizational action, have received all necessary governmental approvals (if any shall be required), and do not and will not contravene or conflict with, or result in or require the imposition of any lien or security interest

 

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under, any provision of law or of the articles of incorporation or by-laws of the Applicant or of any indenture, loan agreement or other contract, or any judgment, order or decree that is binding upon the Applicant.

 

(c)                                  Validity and Binding Nature.  This Agreement is, and upon delivery to the Bank each Application will be, the legal, valid and binding obligation of the Applicant, enforceable against the Applicant in accordance with its terms, subject to bankruptcy, insolvency and similar laws of general application affecting the rights of creditors generally, and to general principles of equity.

 

(d)                                 Approvals.  No authorization, approval or consent of, or notice to or filing with, any governmental or regulatory authority is required to be made in connection with the execution, delivery and performance by the Applicant of this Agreement or the issuance of any Letters of Credit for the account of the Applicant pursuant hereto.

 

(e)                                  Solvency.  The Applicant is, individually, and together with its subsidiaries, taken as a whole, Solvent.

 

(f)                                   Investment Company.  The Applicant is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(g)                                  Margin Stock.  The Applicant is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System of the United States), or extending credit for the purpose of purchasing or carrying margin stock.

 

(h)                                 Material Contracts and Orders.  Except as set forth in Schedule 4(h), neither the Applicant nor any of its property is subject to, or otherwise bound by, (i) any lease, indenture, instrument, contract or other agreement (other than the Financing Documents) or (ii) any order, judgment or decree of any governmental or regulatory authority, in each case, the termination or loss of which could reasonably be expected to have a material adverse effect on (A) the business, operations, results of operations, assets or financial condition of the Applicant, (B) the ability of the Applicant to perform its obligations under any Financing Document, or (C) the legality, validity, binding effect or enforceability against the Applicant of any Financing Document.

 

(i)                                     Separateness.  The properties and assets, and the separate liabilities, of the Applicant are readily distinguishable from the properties and assets, and the liabilities, of each Affiliate of the Applicant.  The Applicant conducts its business solely in its own name in a manner not misleading to other Persons as to its identity.  The Applicant maintains separate bank accounts and separate books of account from each Affiliate of the Applicant and all other Persons.

 

(j)                                    Liens.  All cash deposited by the Applicant in the Account is owned by the Applicant free and clear of any lien, security interest, adverse claim or other restriction (other than any liens and security interests in favor of the Bank granted pursuant to the Cash Collateral Agreement).

 

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(k)                                 Foreign Asset Control Regulations.  The transactions covered by this Agreement or the Letters of Credit are not and will not be prohibited under the Foreign Assets Control Regulations of the United States Treasury Department, the Internal Revenue Code, the Export Administration Act of 1977 or related laws and regulations thereunder.

 

(l)                                     Anti-Terrorism Laws.  Neither the Applicant nor, to the knowledge of the Applicant, any of its Affiliates is in violation of any laws, rules or regulations relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Public Law 107-56, signed into law October 26, 2001) (the “Patriot Act”).  Neither the Applicant nor, to the knowledge of the Applicant, any of its Affiliates is any of the following:

 

(i)                                     a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

 

(ii)                                  a Person owned or controlled by, or acting for or on behalf of, any Person that is listed on the Annex to, or is otherwise subject to the provisions of, the Executive Order;

 

(iii)                               a Person with whom the Applicant is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)                              a Person who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

 

(v)                                 a Person that is named as a “specially designated national or blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

 

Neither the Applicant nor, to the knowledge of the Applicant, any of its Affiliates (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (i), (ii), (iii) or (v) above or, to the knowledge of the Applicant, clause (iv) above; (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order; or (C) engages in or conspires to engage in any transaction that evades or avoids, or has the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

SECTION 5.                            COVENANTS.

 

(a)                                 Separateness.  The Applicant covenants and agrees that it shall not:

 

(i)                                     fail to pay its debts and liabilities from its own funds;

 

(ii)                                  fail to use reasonable efforts to correct any known misunderstanding of any other Person actually known to it regarding its separate legal identity;

 

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(iii)                               fail to maintain its records, books of accounts, bank accounts and financial statements separate and apart from those of any other Person, and use stationery, invoices and checks bearing its own name;

 

(iv)                              commingle its funds or assets with those of any other Person;

 

(v)                                 fail to hold its assets in its own name;

 

(vi)                              fail to observe at all time faithfully and fully all corporate formalities;

 

(vii)                           fail to allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, including, but not limited to, paying for shared office space and services performed by any officer or employee of such Affiliate;

 

(viii)                        fail to hold itself out as being separate and apart from any of its Affiliates and any other Person, and conduct its business in its own name;

 

(ix)                              fail to observe at all times faithfully and fully its formal legal requirements as a separate legal entity;

 

(x)                                 hold itself out to be responsible for the debts of another Person or assume or guaranty or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person, except as contemplated by or not otherwise prohibited by this Agreement; or

 

(xi)                              fail to hold itself out to the public as a legal entity separate and distinct from any other Person, or to conduct its business in order not to (i) mislead others as to the identity with which such other party is transacting business, or (ii) suggest that the Applicant is responsible for the debts of any other Person.

 

(b)                                 Substitute Collateral.  If the Applicant, the Bank or BTMU is prevented from applying the funds on deposit in the Account to the satisfaction of the Liabilities as a result of any bankruptcy or insolvency proceeding involving the Applicant or for any other reason, then the Applicant shall provide the Bank and BTMU, as applicable, with other collateral of a type and value reasonably satisfactory to the Bank and BTMU, as applicable, as security for the Liabilities.

 

(c)                                  Amendments to Organizational Documents.  The Applicant shall not, without the prior written consent of the Bank, amend, supplement or otherwise modify (i) Article V of its Amended and Restated By-Laws, adopted as of December 2, 2013, as amended pursuant to the First Amendment thereto, dated as of January 16, 2014, and the Second Amendment thereto, dated as of January     , 2014 (as so amended, and as further amended, supplemented or otherwise modified in accordance with the terms hereof and thereof, the “By-Laws”), or (ii) any other provision of its By-Laws or any provision of its articles of incorporation in any respect that is adverse to the rights or interests of the Bank.

 

(d)                                 Financial Statements.  The Applicant shall deliver, or cause to be delivered, to the Bank:

 

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(i)                                     promptly after they become available (but only to the extent prepared), the audited consolidated financial statements of Parent and its subsidiaries (including, without limitation, the Applicant) as at the end of each fiscal year of the Applicant (it being understood that this clause (i) shall not be deemed to the require the preparation of any such audited financial statements); and

 

(ii)                                  within sixty (60) days after the end of each fiscal quarter of the Applicant, the unaudited consolidated balance sheet of Parent and its subsidiaries (including, without limitation, the Applicant) as at the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows for such fiscal quarter and for the elapsed portion of the fiscal year ended with the last day of such fiscal quarter, in each case setting forth comparative figures for the corresponding fiscal quarter in the prior fiscal year, which financial statements shall fairly present in all material respects, in accordance with U.S. generally accepted accounting principles consistently applied, the financial condition of Parent and its subsidiaries as of the dates indicated and the results of their operations for the periods indicated, subject to normal year-end audit adjustments.

 

SECTION 6.                            FEES.

 

(a)                                 With respect to each Letter of Credit outstanding from time to time, the Applicant shall pay to the Bank a letter of credit fee, which shall accrue for each day during the period from the date of issuance of such Letter of Credit to the date of expiration or termination of such Letter of Credit, equal to the product of (A) the aggregate stated amount available to be drawn under such Letter of Credit on such day multiplied by (B) 1/360th of the L/C Fee Rate (the “Letter of Credit Fee”).  The accrued portion of the Letter of Credit Fee in respect of each Letter of Credit shall be payable in arrears (i) quarterly on the first day of January, April, July and October of each year, (ii) on the date of expiration or termination of such Letter of Credit, (iii) on the Termination Date and (iv) following the Termination Date, on demand.

 

(b)                                 The Applicant agrees to pay to the Bank a commitment fee (the “Commitment Fee”) for the period from and including the Closing Date to and including the Termination Date, payable quarterly in arrears on the last day of March, June, September and December of each year, commencing on March 31, 2014, and on the Termination Date, computed at a rate per annum equal to 0.10% on the daily amount of the Unused Commitment during the calendar quarter ending on such payment date (or other period commencing with the Closing Date or ending on the Termination Date).

 

(c)                                  The Applicant agrees to pay to the Bank all reasonable fees of the Bank (at the rate specified by the Bank from time to time in schedules delivered by the Bank to the Applicant) with respect to each Letter of Credit (including, without limitation, all fees associated with any issuance of, amendment to, drawing under, banker’s acceptance pursuant to, delivery of, and transfer of any Letter of Credit), such fees to be payable within five (5) Business Days after demand by the Bank therefor; provided, that the fees for each issuance or amendment of a Letter of Credit and for delivery of a Letter of Credit shall be the amounts set forth on Schedule 3 hereto.

 

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(d)                                 In addition to the fees set forth in paragraphs (a), (b) and (c) above, the Applicant shall pay to BTMU the customary wire transfer fees of BTMU for any wire transfers from the Account (which fees are, as of the date hereof, $30.00 for any outgoing domestic wire).  Such fees shall be paid by the Applicant within five (5) Business Days after an invoice therefor is provided to the Applicant.

 

SECTION 7.                            COMPUTATION OF INTEREST AND FEES.  All interest and fees hereunder shall be computed for the actual number of days elapsed on the basis of a year of 360 days.  The interest rate applicable to Letter of Credit reimbursement obligations shall change simultaneously with each change in the Reference Rate.

 

SECTION 8.                            MAKING OF PAYMENTS.  (a) All payments of principal of, or interest on, letter of credit reimbursement obligations, all payments of fees and all other payments hereunder shall be made by the Applicant in immediately available funds to the Bank at its principal office in Los Angeles, California not later than 1:00 P.M. Los Angeles, California time (or, in the case of amounts payable to BTMU pursuant to Section 6(d), to BTMU at its principal office in New York, New York not later than 1:00 P.M. New York City time), in each case, on the date due, and funds received after that time shall be deemed to have been received by the Bank (or BTMU, as the case may be) on the next Business Day.  If any payment of principal, interest or fees falls on a day which is not a Business Day, then such due date shall be extended to the next Business Day, and additional interest or fees (as the case may be) shall accrue and be payable for the period of such extension.

 

(b)                                 The Applicant irrevocably agrees that the Bank may (but shall not be obligated to) debit any deposit account (including, without limitation, the Account) of the Applicant maintained with the Bank or any of its Affiliates (including, without limitation, BTMU) in an amount sufficient to pay any fee, reimbursement obligation or other amount that is due and payable hereunder.  The Bank shall promptly notify the Applicant of any such debit (but failure of the Bank to do so shall not impair the effectiveness thereof or impose any liability on the Bank).

 

I                                           The Applicant shall reimburse the Bank for each payment under a Letter of Credit in the same currency in which such payment was made, provided that, if the Bank so requests (in its discretion), the Applicant shall reimburse the Bank in United States dollars for any payment under a Letter of Credit made in a foreign currency at the rate at which the Bank could sell such foreign currency in exchange for United States dollars for transfer to the place of payment of such payment or, if there is no such rate, the United States dollar equivalent of the Bank’s actual cost of settlement.  The Applicant agrees to pay the Bank on demand in United States dollars such amounts as the Bank may be required to expend to comply with any and all governmental exchange regulations now or hereafter applicable to the purchase of foreign currency.

 

(d)                                 All payments by the Applicant hereunder shall be made free and clear of and without deduction for any present or future income, excise or stamp taxes and any other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes imposed on or measured by the Bank’s or BTMU’s net income or receipts (such non-excluded items being called “Taxes”).  If any withholding or

 

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deduction from any payment to be made to the Bank or BTMU hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Applicant will

 

(i)                                     pay directly to the relevant authority the full amount required to be so withheld or deducted;

 

(ii)                                  promptly forward to the Bank or BTMU, as the case may be, an official receipt or other documentation satisfactory to the Bank or BTMU, as the case may be, evidencing such payment to such authority; and

 

(iii)                               pay to the Bank or BTMU, as the case may be, such additional amount as is necessary to ensure that the net amount actually received by the Bank or by BTMU, as the case may be, will equal the full amount the Bank or BTMU would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes are directly asserted against the Bank or BTMU on any payment received by the Bank or BTMU hereunder, the Bank or BTMU, as the case may be, may pay such Taxes and the Applicant will promptly pay such additional amount (including any penalty, interest or expense) as is necessary in order that the net amount received by the Bank or BTMU, as the case may be, after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount the Bank or BTMU, as the case may be, would have received had no such Taxes been asserted.

 

If the Applicant fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Bank or BTMU, as the case may be, the required receipts or other required documentary evidence, the Applicant shall indemnify the Bank and BTMU for any incremental Tax, interest, penalty or expense that may become payable by the Bank or BTMU, as the case may be, as a result of such failure.

 

SECTION 9.                            INCREASED COSTS.  If, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request, guideline or directive (whether or not having the force of law) of any such authority, central bank or comparable agency,

 

(a)                                 affects or would affect the amount of capital or liquidity required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration the Bank’s or such controlling corporation’s policies with respect to capital adequacy and liquidity) the Bank determines that the amount of such capital or liquidity requirement is increased as a consequence of this Agreement or the Letters of Credit; or

 

(b)                                 imposes, modifies or deems applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by the Bank with respect to letters of credit, or imposes on the Bank any other condition affecting this Agreement or the Letters of Credit, and the Bank determines that the result of any of the foregoing is to increase the cost to, or to impose a cost on, the Bank of issuing or maintaining

 

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any Letter of Credit or of making any payment or disbursement under any Letter of Credit, or to reduce the amount of any sum received or receivable by the Bank under this Agreement,

 

then within ten (10) Business Days after demand by the Bank (which demand shall be accompanied by a statement setting forth in reasonable detail the basis of such demand and a calculation thereof in reasonable detail), the Applicant shall pay directly to the Bank such additional amount as will compensate the Bank for such increased capital or liquidity requirement, such increased cost or such reduction, as the case may be.  Determinations and statements of the Bank pursuant to this Section 9 shall be conclusive absent manifest error, and the provisions of this Section 9 shall survive termination of this Agreement.

 

Notwithstanding anything herein to the contrary, this Section 9 shall apply to (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203), as amended, and all requests, rules, regulations, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, regulations, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted, issued or implemented.

 

SECTION 10.                     EVENTS OF DEFAULT AND THEIR EFFECT.

 

10.1                        Events of Default.  Each of the following shall constitute an Event of Default under this Agreement:

 

10.1.1              Non-Payment of Liabilities, etc.  Default in the payment when due of any principal of or interest on any Liabilities; or default, and continuance thereof for five (5) days after notice thereof from the Bank, in the payment when due of any fees (including, without limitation, any Letter of Credit Fee or Commitment Fee) or other amounts payable by the Applicant hereunder or under any other Financing Document.

 

10.1.2              Bankruptcy, etc.  The Applicant or any guarantor of the Liabilities shall become insolvent or admit in writing its inability to pay debts as they mature, or the Applicant or any such guarantor shall apply for, consent to or acquiesce in the appointment of a trustee or receiver, or in the absence of such application, consent or acquiescence, a trustee or receiver is appointed for the Applicant or any such guarantor, or any proceeding under any bankruptcy or insolvency law or any dissolution or liquidation proceeding is instituted by or against the Applicant or any such guarantor and, if instituted against the Applicant or such guarantor, remains for 30 days undismissed, or any writ of attachment is issued against any substantial portion of the Applicant’s or any such guarantor’s property and is not released within 30 days of service, or the Applicant or any such guarantor takes any action to authorize, or in furtherance of, any of the foregoing.

 

10.1.3              Failure to Comply with Financing Documents.  The Applicant shall fail to perform or observe any term, covenant or agreement contained in this Agreement or any other Financing Document; or any provision of this Agreement or any other Financing Documents shall at any time for any reason cease to be valid and binding on the

 

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Applicant, or shall be declared to be null and void, or the validity or enforceability thereof shall be denied or contested by the Applicant, or a proceeding shall be commenced by any governmental authority having jurisdiction over the Applicant seeking to establish the invalidity or unenforceability thereof and the Applicant shall fail diligently or successfully to defend such proceeding; or the Bank shall for any reason cease to have a valid and enforceable first priority perfected security interest in any portion of the Collateral (as defined in the Cash Collateral Agreement).

 

10.1.4              Other Agreements with Bank.  Any default shall occur (subject to any applicable grace period) under any other agreement between the Applicant and the Bank (including, without limitation, any agreement under which the Applicant is a borrower and the Bank is a lender); or the Applicant shall fail to comply with or to perform (subject to any applicable grace period) any covenant set forth in any such other agreement as such covenant is in effect on the date hereof or is amended from time to time with the consent of the Bank (but without giving effect to the expiration or termination of any such agreement unless such agreement is replaced by another agreement to which the Bank is a party).

 

10.1.5              Representations and Warranties.  Any representation or warranty made by the Applicant herein, in any Application, in the Cash Collateral Agreement or in any writing furnished in connection with or pursuant to this Agreement shall be false or misleading in any material respect on the date made.

 

10.2                        Effect of Event of Default.  If any Event of Default described in Section 10.1.2 shall occur, all Liabilities shall immediately become due and payable, and if any other Event of Default shall occur, the Bank may declare all Liabilities to be due and payable, whereupon all Liabilities shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Applicant.  The Bank shall promptly advise the Applicant of any such declaration, but failure to do so shall not impair the effect of such declaration.

 

SECTION 11.                     SECURITY.

 

11.1                        Security.  The prompt payment and performance of all Liabilities shall be secured as provided in the Cash Collateral Agreement.  The Applicant further agrees that the Bank may set off and apply to any of the Liabilities which are then due and payable (by acceleration or otherwise) any amounts then on deposit in the Account.

 

11.2                        Rights and Remedies.  In addition to any rights or remedies provided for in the Cash Collateral Agreement, the Bank shall have all rights and remedies of a secured party under the UCC.

 

SECTION 12.                     GENERAL.

 

12.1                        Waiver, Amendments.  No delay on the part of the Bank in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy.  No amendment, modification or waiver of, or consent with respect

 

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to, any provision of this Agreement shall be effective unless the same shall be in writing and signed and delivered by the Bank, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

12.2                        Notices.  (a) Except as otherwise expressly provided herein, all notices hereunder shall be in writing (including facsimile and electronic transmission, which shall be considered original writings).  Notices given by mail shall be deemed to have been given three (3) Business Days after the date sent if sent by registered or certified mail, postage prepaid, to the applicable party at its address shown below its signature hereto or at such other address as such party may, by written notice received by the other party to this Agreement, have designated as its address for notices.  Notices given by facsimile or electronic transmission shall be deemed to have been given when sent.  Notices sent by any other means shall be deemed to have been given when received (or when delivery is refused).  Notwithstanding the foregoing, any notices to the Bank pursuant to Section 2 of this Agreement shall be deemed to have been given only when actually received by the Bank.

 

(b)                                 The Bank may rely on any writing (including any facsimile, any electronic transmission or any information on a computer disk or similar medium which may be reduced to writing), or any telephonic or other oral message or instruction (including, without limitation, any oral waiver of any discrepancy with respect to any Item), that the Bank believes in good faith to have been received from an authorized officer, employee or representative of the Applicant, and the Bank shall not be liable for any action taken in good faith with respect to any writing, message or instruction from an unauthorized person.  The Bank shall not be under any duty to verify the identity of any person submitting any Application or other writing or making any other communication hereunder.  Notwithstanding the foregoing, the Bank is not obligated to recognize the authenticity of any request to issue, amend, honor or otherwise act on a Letter of Credit that is not evidenced to the Bank’s satisfaction by a writing originally signed by a person the Applicant has certified is authorized to act for the Applicant hereunder or by a message or instruction authenticated to the Bank’s satisfaction.

 

12.3                        Costs, Expenses and Taxes; Indemnification.  (a) The Applicant agrees to pay on demand all reasonable and documented out-of-pocket costs and expenses of the Bank (including, without limitation, the reasonable and documented fees and charges of counsel for the Bank) in connection with (i) the preparation and administration of any Financing Document and any Letters of Credit, any waiver or consent thereunder or any amendment thereof or any Event of Default or Unmatured Event of Default and (ii) the enforcement of the Financing Documents and the Liabilities.  In addition, the Applicant agrees to pay, and to save the Bank harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution, delivery or enforcement of the Financing Documents, the issuance of any Letters of Credit hereunder, or the issuance of any other instrument or document provided for herein or delivered or to be delivered hereunder or in connection herewith.

 

(b)                                 The Applicant agrees to indemnify the Bank and each of its officers, directors, employees, advisors, agents and affiliates (each, an “Indemnified Party”) against, and to hold each Indemnified Party harmless from, any and all actions, causes of action, suits, losses, costs, damages, expenses (including, without limitation, reasonable attorneys’ fees and charges, expert

 

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witness fees and other dispute resolution expenses) and other liabilities (collectively, the “Indemnified Liabilities”) incurred by any Indemnified Party as a result of, or arising out of, or relating to, any Financing Document or any Letter of Credit (and without regard to whether the applicable Indemnified Party is a party to any proceeding out of which such Indemnified Liabilities arise), except to the extent that a court of competent jurisdiction determines in a final, non-appealable order that any Indemnified Liability resulted directly from the gross negligence or willful misconduct of such Indemnified Party.  Without limiting the generality of the foregoing sentence, the term “Indemnified Liabilities” includes any claim or liability in which an advising, confirming or other nominated bank, or a beneficiary requested to issue its own undertaking, seeks to be reimbursed, indemnified or compensated.  If and to the extent the foregoing undertaking may be unenforceable for any reason, the Applicant agrees to make the maximum contribution to the payment of each of the Indemnified Liabilities which is permitted under applicable law.

 

I                                           Without limiting paragraph (b) above, the Applicant agrees to indemnify the Bank, and to hold the Bank harmless from, any loss or expense incurred by the Bank as a result of any judgment or order being given or made for the payment of any amount due hereunder in a particular currency (the “Currency of Account”) and such judgment or order being expressed in a currency (the “Judgment Currency”) other than the Currency of Account and as a result of any variation having occurred in the rate of exchange between the date which such amount is converted into the Judgment Currency and the date of actual payment pursuant thereto.  The foregoing indemnity shall constitute a separate and independent obligation of the Applicant.

 

(d)                                 All obligations provided for in this Section 12.3 shall survive any termination of this Agreement.

 

12.4                        Captions.  Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.

 

12.5                        Governing Law; Severability.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT.  ALL OBLIGATIONS OF THE APPLICANT AND RIGHTS OF THE BANK EXPRESSED HEREIN SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.

 

12.6                        Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto as separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. In furtherance of the foregoing, it is understood and agreed that signatures hereto

 

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submitted by facsimile or other electronic transmission shall be deemed to be, and shall constitute, original signatures.

 

12.7                        Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Applicant may not assign or otherwise transfer any of its rights and obligations under this Agreement without the prior written consent of the Bank (and any attempted assignment or transfer by the Applicant without such consent shall be null and void).

 

12.8                        Foreign Assets Control Regulations; Patriot Act Notice.  The Applicant certifies that no transaction in foreign commodities covered by any Application will be prohibited under the foreign assets control regulations of the United States Treasury Department and that any importation related to a Letter of Credit will conform with all applicable laws, rules and regulations.  The Applicant shall (a) ensure, and cause each of its subsidiaries to ensure, that no Person who owns a controlling interest in or otherwise controls the Applicant or any subsidiary thereof is or shall be listed on the Specially Designated Nationals or Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any executive orders, and (b) not use or permit the use of the Letters of Credit or the proceeds of the Letter of Credits to violate any of the foreign asset control regulations of OFAC or any enabling statute or executive order relating thereto.  The Bank hereby notifies the Applicant that pursuant to the requirements of the Patriot Act, and the Bank’s policies and practices, the Bank is required to obtain, verify and record certain information and documentation that identifies the Applicant, which information includes the name and address of the Applicant and such other information that will allow the Bank to identify the Applicant in accordance with the Patriot Act.

 

12.9                        Mitigation; Limitation of Liability.  The Applicant agrees to take action to avoid or reduce the amount of any damages which may be claimed against the Bank.  For example, (a) in the case of wrongful honor, the Applicant agrees to enforce its rights arising out of the underlying transaction (except to the extent that enforcement is impractical due to the insolvency of the beneficiary or other Person from whom the Applicant might otherwise recover), and (b) in the case of wrongful dishonor, the Applicant agrees to act specifically and timely to authorize the Bank to effect a cure and give written assurances to the beneficiary that a cure is being arranged.  The Applicant’s aggregate remedies against the Bank for honoring a presentation or retaining honored documents in breach of the Bank’s obligations to the Applicant (whether arising under this Agreement, applicable letter of credit practice or law, or any other agreement or law) are limited to the aggregate amount paid by the Applicant to the Bank with respect to the honored presentation.

 

12.10                 Subrogation.  The Bank shall be subrogated (for purposes of defending against the Applicant’s claims and proceeding against others to the extent of any liability of the Bank to the Applicant) to the Applicant’s rights against any Person who may be liable to the Applicant on any underlying transaction, to the rights of any holder in due course or Person with similar status against the Applicant and to the rights of the beneficiary of a Letter of Credit or its assignee or any Person with similar status against the Applicant.

 

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12.11                 Reinstatement.  The Applicant agrees that if at any time all or any part of any payment theretofore applied by the Bank to any of the Liabilities is or must be rescinded or returned by the Bank for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Applicant), such Liabilities shall, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Bank, and the obligations of the Applicant with respect thereto shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Bank had not been made.

 

12.12                 Continuation of Liability.  Regardless of the expiry date of a Letter of Credit, the Applicant shall remain liable hereunder until the Bank is released from liability by every Person that is entitled to draw or demand payment under each Letter of Credit issued pursuant hereto.

 

12.13                 Jurisdiction.  THE APPLICANT HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE BANK’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  THE APPLICANT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO (OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE BANK AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  THE APPLICANT EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  A FINAL JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION IN ANY OTHER COURT.

 

12.14                 WAIVER OF JURY TRIAL.  EACH OF THE APPLICANT AND THE BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE CASH COLLATERAL AGREEMENT OR ANY APPLICATION, INSTRUMENT, DOCUMENT, AMENDMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

20

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

 

21

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

	
 
    	
ILLINOIS   POWER MARKETING COMPANY, as Applicant
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Clint C. Freeland
    
	
 
    	
 
    	
Name:
    	
Clint   C. Freeland
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
Illinois   Power Marketing Company
    
	
 
    	
 
    	
601   Travis Street, Suite 1400
    
	
 
    	
 
    	
Houston,   Texas 77002
    
	
 
    	
 
    	
Attention:   General Counsel
    
	
 
    	
 
    	
Facsimile:   (713) 507-6588
    
	
 
    	
 
    	
Telephone:   (713) 504-6400
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
UNION   BANK, N.A.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Dennis G. Blank
    
	
 
    	
 
    	
Name:
    	
Dennis   G. Blank
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
Union   Bank, N.A.
    
	
 
    	
 
    	
445   South Figueroa Street
    
	
 
    	
 
    	
Los   Angeles, CA 90071
    
	
 
    	
 
    	
Attention:   Matthew Bly
    
	
 
    	
 
    	
Facsimile:   (213) 236-5429
    
	
 
    	
 
    	
E-mail:   matthew.bly@unionbank.com
    

 

Illinois Power Marketing Company Letter of Credit Agreement

 

S-1

 

SCHEDULE 1

 

Conditions Precedent to Effectiveness

 

(a)                                 The Bank (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Bank (which may include facsimile or other electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;

 

(b)                                 The Bank (or its counsel) shall have received from the Applicant (i) a counterpart of the Cash Collateral Agreement signed on behalf of the Applicant or (ii) written evidence satisfactory to the Bank (which may include facsimile or other electronic transmission of a signed signature page of the Cash Collateral Agreement) that the Applicant has signed a counterpart of the Cash Collateral Agreement;

 

(c)                                  The Bank (or its counsel) shall have received from the Applicant and BTMU (i) a counterpart of the Special Deposit Account Control Agreement signed on behalf of the Applicant and BTMU or (ii) written evidence satisfactory to the Bank (which may include facsimile or other electronic transmission of a signed signature page of the Special Deposit Account Control Agreement) that each of the Applicant and BTMU has signed a counterpart of the Special Deposit Account Control Agreement;

 

(d)                                 The Applicant shall have deposited, or caused to be deposited, into the Account, in immediately available funds, cash collateral in an amount equal to the greater of (i) 101% of the aggregate stated amount of any Letters of Credit to be issued on the Closing Date and (ii) $10,000,000;

 

(e)                                  The Applicant shall have paid all reasonable and documented costs and expenses of the Bank (including, without limitation, the reasonable and documented fees and expenses of counsel to the Bank) incurred in connection with the preparation, negotiation, execution and delivery of the Financing Documents and all documents delivered pursuant thereto and the transactions contemplated thereby;

 

(f)                                   The Applicant shall have paid to the Bank the structuring fee set forth in that certain fee letter agreement, dated the date hereof, between the Applicant and the Bank;

 

(g)                                  The Bank shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Applicant, in form and substance satisfactory to the Bank, covering such matters relating to the transactions contemplated hereby as the Bank may reasonably request;

 

(h)                                 The Bank shall have received copies of the resolutions of the board of directors of the Applicant authorizing the execution, delivery and performance by the Applicant of the Financing Documents to which it is a party, certified by a duly authorized officer of the

 

 

Applicant (which certificate shall state that such resolutions have not been amended, modified or rescinded and remain in full force and effect on and as of the Closing Date);

 

(i)                                     The Bank shall have received certified copies of all approvals, authorizations or consents of, or notices to or registrations with, any governmental body or agency required for the Applicant, if necessary, to enter into the Financing Documents;

 

(j)                                    The Bank shall have received a certificate of a duly authorized officer of the Applicant certifying the names and true signatures of the officers of the Applicant authorized to sign the Financing Documents to which it is a party and the other documents to be delivered by the Applicant hereunder;

 

(k)                                 The Bank shall have received a certificate signed by a duly authorized officer of the Applicant, dated the Closing Date, to the effect that: (i) the representations and warranties of the Applicant contained in the Financing Documents are true and correct on and as of the Closing Date as though made on and as of such date; and (ii) no Event of Default or Unmatured Event of Default has occurred and is continuing or would result from the issuance of the Letters of Credit or the execution, delivery and performance by the Applicant of the Financing Documents;

 

(l)                                     The Bank and BTMU shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act, with respect to the Applicant; and

 

(m)                             The Bank shall have received all documents it may reasonably request relating to the existence and good standing of the Applicant (including, without limitation, certified copies of the certificate of incorporation and by-laws of the Applicant), the corporate authority for and the validity of this Agreement and the other Financing Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Bank.

 

2

 

SCHEDULE 2

 

Conditions Precedent to the Issuance of each Letter of Credit

 

1.              On or before the date of issuance of any Letter of Credit, the Applicant shall have deposited, or caused to be deposited, into the Account, in immediately available funds, cash collateral in a sufficient amount such that, after giving effect to such deposit, the aggregate amount on deposit in the Account is equal to, or in excess of, the greater of (i) 101% of the aggregate stated amount of all Letters of Credit issued under this Agreement (after giving effect to the Letter(s) of Credit to be issued on such date), and (ii) $10,000,000.

 

2.              The statements set forth in clauses (a) and (b) of Section 2.4 of this Agreement shall be true and correct on and as of the date of such issuance.

 

 

SCHEDULE 3

 

Fees

 

	
Service
    	
 
    	
Fee
    
	
Fee for Issuance or Amendment of any Letter of Credit
    	
 
    	
$250.00
    
	
Delivery Fees
    	
 
    	
$75.00 via SWIFT

$30.00 via courier
    

 

 

SCHEDULE 4(h)

 

Contracts

 

1.                                      Amended and Restated Power Sales Agreement, dated as of July 31, 2009, by and between Electric Energy, Inc. and Ameren Energy Marketing Company.

 

2.                                      Amended and Restated Power Supply Agreement, dated as of March 28, 2008, between Ameren Energy Marketing Company and AmerenEnergy Resources Generating Company, as amended by the First Amendment to the Amended and Restated Power Supply Agreement, dated January 1, 2010.

 

3.                                      Amended and Restated Power Supply Agreement, dated as of March 28, 2008, between Ameren Energy Marketing Company and Ameren Energy Generating Company, as amended by the First Amendment to the Amended and Restated Power Supply Agreement, dated January 1, 2010.

 

Orders

 

1.                                      Certificate of Service Authority issued pursuant to Section 16-115 of the Illinois Public Utilities Act to Ameren Energy Marketing Company on November 8, 2011 in Illinois Commerce Commission (“ICC”) Docket No 11-0673 (see also that certain timely filed Application for Certificate of Service Authority under Section 16-115 of the Public Utilities Act on behalf of Illinois Power Marketing Company d/b/a Homefield Energy (f/k/a Ameren Energy Marketing Company d/b/a Homefield Energy) filed with the ICC on January 2, 2014).

 

2.                                      Madison Gas & Elec. Co. et al, 90 FERC ¶ 61,115, at 61,351 (2000).

 

3.                                      Ameren Energy Mkt’g Co., 95 FERC ¶ 61,448, at 62,627 (2001)  (see also that certain timely filed Notice of Succession for Market-Based Rate Tariff Illinois Power Marketing Company, filed December 30, 2013, in Docket No. ER14-883-000.

 

 

EXHIBIT A

 

Form of Application

 

[See Attached]

 

 

	

    	
APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF   CREDIT
    	
BANK USE ONLY

Letter   of Credit
   Number:
    

 

PLEASE CHECK AND COMPLETE APPLICABLE BOXES BELOW.

 

We (“Applicant”) request you, Union Bank, N.A. (“Bank”) to issue an irrevocable standby letter of credit (“Credit”) with the following terms and conditions for delivery to the beneficiary named below (“Beneficiary”) by:                 o Telex/SWIFT or o Courier

 

	
AMOUNT   (In words   and figures, including currency type)
    	
 
    	
EXPIRY   DATE:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
APPLICANT   (Complete   name and address)
    	
 
    	
BENEFICIARY   (Complete   name and address)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ADVISING   BANK (name and   address)—lf left blank, Bank will select at its option
    	
 
    	
ACCOUNT   PARTY (name and address)—(Complete only if Account Party is not Applicant) 

 

 

Account   Party’s name shall appear as applicant in the Credit.
    
				

 

PARTIAL DRAWINGS:

 

o  Allowed       or     o Not Allowed

 

ANY CHARGES OF ADVISING BANK ARE FOR THE ACCOUNT OF:

 

o Applicant    or     o Beneficiary

 

CREDIT AVAILABLE BY SIGHT PAYMENT: Against presentation of the documents detailed herein.

 

DOCUMENTS REQUIRED:

 

o A dated statement purportedly signed by an authorized officer or representative of Beneficiary stating:

 

	
“The undersigned   being a duly authorized officer or representative of 
    	
 
    	
hereby   represents and
    
	
 
    	
(BENEFICIARY’S   NAME)
    	
 
    
	
warrants that   the amount of the accompanying draft represents and covers: (insert text of   statement below)
    

 

 

o  See attached exhibit (please sign and date on each attached page) 

o Others (Specify):

 

	
SPECIAL   CONDITIONS:  
    	
 
    	
 
    

 

	
o Automatic Renewal Clause for 
    	
 
    	
with 
    	
days prior notification of non-renewal  
    
	
 
    	
PERIOD
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Final Expiry   Date: 
    	
 
    	
(Month/Day/Year)
    
	
 
    	
 
    	
 
    
	
o Others (Specify):
    

 

IMPORTANT NOTICE

 

(A)  Applicant understands that the risk is greater if Applicant requests a standby letter of credit which requires only a simple demand without any supporting documentation. Typically, standby letters of credit require the beneficiary to provide some written statement in order to obtain payment. However, a beneficiary that can obtain a standby letter of credit available only against presentation of a simple demand, relieves itself of any documentary requirements.

(B)  Applicant understands that the final form of Credit may be subject to such revision and changes as are deemed necessary or appropriate by Bank and Applicant hereby consents to such revisions and changes.

 

The opening of the Credit is subject to the terms and conditions appearing on the subsequent page(s) hereof to which Applicant agrees and, if Applicant has entered into a master letter of credit issuance agreement with Bank, then the Credit is subject to the terms and provisions set forth therein to the extent they are inconsistent with the terms and conditions provided herein.

 

THE UNDERSIGNED AGREES TO BE BOUND BY THE TERMS AND CONDITIONS SET FORTH ABOVE AND ON SUBSEQUENT PAGES.

 

	
NAME OF APPLICANT
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AUTHORIZED   SIGNATURE
    	
DATE
    	
ADDITIONAL   AUTHORIZED SIGNATURE
    	
DATE
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
X
    	
 
    	
 
    	
 
    	
X
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
TELEPHONE NUMBER
    	
ACCOUNT NUMBER

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