Document:

exhibit10_1.htm

    Exhibit 10.1

      

       

      THIRD AMENDMENT TO CREDIT
AGREEMENT

       

      THIRD
AMENDMENT TO CREDIT AGREEMENT (the “Third Amendment”)
dated as of November 19, 2009 by and among GERBER SCIENTIFIC, INC., GERBER
SCIENTIFIC INTERNATIONAL INC., as Borrowers, GERBER COBURN OPTICAL
INTERNATIONAL, INC., GERBER SCIENTIFIC UK, LTD., SPANDEX LTD., GERBER SCIENTIFIC
INTERNATIONAL LTD., VIRTEK VISION INTERNATIONAL INC., VIRTEK LASER SYSTEMS NORTH
AMERICA, INC. and VIRTEK EUROPEAN HOLDINGS INC. (the “Guarantors”), the
several banks and other financial institutions and lenders from time to time
party hereto (the “Lenders”), and RBS
CITIZENS, N.A., in its capacity as administrative agent for the Lenders (the
“Agent”).

       

      Recitals

       

      The
Borrowers, the Guarantors, the Lenders and the Agent are each party to that
certain Credit Agreement dated as of January 31, 2008 as amended by that certain
First Amendment to Credit Agreement dated November 21, 2008 and that certain
Second Amendment to Credit Agreement dated March 4, 2009 (the “Credit Agreement”)
pursuant to which the Lenders have established a revolving credit facility for
the benefit of the Borrowers.  The Borrowers and the Majority Lenders
have agreed to certain changes to the terms of the Credit
Agreement.

       

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

       

      Section
1. Defined
Terms.  Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.

       

      Section
2. Amendment of Section 1.1 of
Credit Agreement.  Section 1.1 of the Credit Agreement is
hereby amended by (i) adding in alphabetical order new definitions of “Virtek
Guarantors”, “Yunique”, “Yunique Acquisition” “Yunique Earnout” and “Third
Amendment” set forth below and (ii) deleting the definitions of “Consolidated
Asset Coverage Ratio”, “Consolidated EBIT” “Consolidated EBITDA”, “Maximum
Revolving Credit Amount” and “Total Funded Debt” in their entirety and
substituting therefor the corresponding definitions thereof set forth
below:

       

       “Consolidated Asset Coverage
Ratio” shall mean the ratio of (a) the sum of (i) 55% of Eligible
Accounts, plus
(ii) 25% of Eligible Inventory, plus (iii)
$12,500,000 with respect to each month ending October 31, 2009, November 30,
2009 and December 31, 2009, plus (iv) $10,000,000
with respect to each month ending January 31, 2010, February 28, 2010, March 31,
2010, April 30, 2010, May 31, 2010 and June 30, 2010, plus (v) $7,500,000
with respect to each month ending July 31, 2010, August 31,

       

      
        
           

        

        
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      2010 and
September 30, 2010 plus (vi) cash of the
Loan Parties on deposit with the Lenders or in accounts in Canada subject to
blocked account agreements in favor of the Agent to (b) the amount of Total
Funded Debt, each determined as of the date of calculation thereof.

       

      “Consolidated EBIT”
shall mean for any period ending on or after January 31, 2009 an amount equal to
(a) Consolidated Net Income plus (b) all amounts
deducted in computing Consolidated Net Income in respect of (i) Consolidated
Interest Expense, (ii) taxes based on or measured by income, (iii) non-cash
charges and other non-cash expenses arising (A) from the grant of or issuance or
repricing of stock, stock options, or other equity-based awards to the officers,
directors and employees of the Loan Parties incurred during such period, (B) in
respect of investments in connection with the Supplemental Executive Retirement
Plan of Gerber incurred during such period and (C) in accordance with GAAP under
Statement of Accounting Standards 142 during such period; provided that the
total amount added under this clause (iii)(C) during the term of this Agreement
shall not exceed $10,000,000, (iv) non-cash losses (i.e. the difference between
book value and sale proceeds net of any legal fees and advisory fees) arising
from asset sales, disposals or abandonments occurring after the date of the
Second Amendment incurred during such period (including Designated Asset Sales
during such period) and (v) non-recurring fees and expenses incurred in
connection with the Second Amendment and Third Amendment (including any mortgage
of the Tolland Property pursuant to Section 10 of the Third Amendment), in each
case for the period under review; provided, however, that (w) for
each of the four quarter periods ending January 31, 2009, April 30, 2009, July
31, 2009 and October 31, 2009, Consolidated EBIT shall be increased by, without
duplication, (i) the non-cash “inventory step up” for such period associated
with the inventory of the Virtek Guarantors and their Subsidiaries purchased by
the Borrowers on the date of the Virtek Acquisition and the inventory of Gamma
and its Subsidiaries purchased by the Borrowers on the date of the Gamma
Acquisition, (ii) the non-cash expense required to be taken by the Parent in the
amount of the difference between the ceiling and the spot rate on its hedging
agreement in connection with the Virtek Acquisition relating to Canadian Dollar
fluctuations not to exceed $750,000 U.S. Dollars in the aggregate and (iii) the
consolidated net income of the Virtek Guarantors and Gamma plus all amounts
deducted in computing consolidated net income in respect of consolidated
interest expense and taxes based on or measured by income for the portion of
such four quarter periods prior to the Virtek Acquisition and the acquisition of
Gamma, respectively and (x) after the date of the Third Amendment, Consolidated
EBIT shall be increased by the amount of cash restructuring charges to the
extent deducted in computing Consolidated Net Income for such period up to an
aggregate amount of $3,000,000 for all such periods, (y) following the
consummation of the Yunique Acquisition, Consolidated EBIT shall include pro
forma Consolidated EBIT of Yunique consistent with the

       

      
        
           

        

        
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      Consolidated
EBIT figures previously presented to the Lenders for the portion of such period
preceding the date of consummation of the Yunique Acquisition and (z)
Consolidated EBIT shall be increased by the amount of non-recurring fees and
expenses incurred in connection with preparation for or closing of the Yunique
Acquisition to the extent deducted in computing Consolidated Net Income minus
(c) all amounts included in computing Consolidated Net Income in respect of
non-cash gains (i.e. the excess of sale proceeds (net of any legal fees and
advisory fees) over book value) arising from asset sales, disposals or
abandonments occurring after the date of the Second Amendment and arising during
such period (including Designated Asset Sales during such period).

       

      “Consolidated EBITDA”
shall mean for any period ending on or after January 31, 2009 an amount equal to
(a) Consolidated EBIT plus (b) all amounts
deducted in computing Consolidated EBIT in respect of consolidated depreciation
and amortization expense; provided, however, that (w) for
each of the four quarter periods ending January 31, 2009, April 30, 2009, July
31, 2009 and October 31, 2009, Consolidated EBITDA shall be increased by,
without duplication, all amounts deducted in computing consolidated net income
of the Virtek Guarantors and Gamma in respect of consolidated depreciation and
amortization expense for the portion of such four quarter periods prior to the
Virtek Acquisition and the acquisition of Gamma, respectively and (x) following
the consummation of the Yunique Acquisition, Consolidated EBITDA shall include,
without duplication, pro forma Consolidated EBITDA of Yunique consistent with
the Consolidated EBITDA figures previously presented to the Lenders for the
portion of such period preceding the date of consummation of the Yunique
Acquisition.

       

       “Maximum Revolving Credit
Amount” shall mean, subject to Section 2.18, as of any date of
determination, the lesser of (a) $75,000,000 and (b) the amount to which the
Maximum Revolving Credit Amount may have been reduced pursuant to Section 2.14
hereof; provided that if the
obligation of the Lenders to make further Revolving Credit Advances is
terminated upon the occurrence of an Event of Default, the Maximum Revolving
Credit Amount as of any date of determination thereafter shall be deemed to be
$0.  For the purposes of determining the Maximum Revolving Credit
Amount Revolving Credit Advances denominated in an Alternative Currency shall be
converted into the U.S. Dollar equivalent as of the date of such
determination.

       

      “Third Amendment”
shall mean that certain Third Amendment to Credit Agreement by and among the
Loan Parties, the Majority Lenders and the Agent dated as of November 19,
2009.”

       

      “Total Funded Debt” of
any Person means, without duplication, Indebtedness under this Agreement
(including the stated amount of all

       

      
        
           

        

        
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      Letters
of Credit), in the case of the Borrowers, and all other Indebtedness for
borrowed money of any such Person (including the Borrowers) (including the
stated amount of all letters of credit), other than Indebtedness in respect of
the Yunique Earnout.

       

       “Virtek Guarantors”
shall mean Virtek Vision International Inc., Virtek Laser Systems North America,
Inc. and Virtek European  Holdings Inc.

       

      “Yunique” shall mean
Yunique Solutions Inc, a New Jersey corporation.

       

      “Yunique Acquisition”
shall mean the acquisition by Gerber International of all of the capital stock
of Yunique.

       

      “Yunique Earnout”
shall mean the obligations of Gerber International to make the earnout payments
under the definitive purchase agreement in respect of the Yunique
Acquisition.

       

      Section
3. Amendment of Article 7 of
the Credit Agreement.  Article 7 of the Credit Agreement is
hereby amended by deleting Sections 7.1 and 7.2 in their entirety and
substituting therefor the following:

       

      “Section
7.1                      Ratio of Consolidated EBIT
to Consolidated Interest Expense.  For each of the trailing
four-quarter periods ending on the dates set forth below Gerber and it
Subsidiaries shall not permit the ratio of (a) Consolidated EBIT to (b)
Consolidated Interest Expense to be less than the ratio set forth beside such
date in the table below:

       

      
        	
                April
      30, 2009

              	
                2.75-to-1

              
	
                July
      31, 2009

              	
                2.25-to-1

              
	
                October
      31, 2009

              	
                1.50-to-1

              
	
                January
      31, 2010

              	
                1.50-to-1

              
	
                April
      30, 2010

              	
                2.25-to-1

              
	
                July
      31, 2010

              	
                2.50-to-1

              
	
                October
      31, 2010 and each trailing

                four-quarter
      period thereafter

              	
                3.00-to-1

              

      

      

      “Section
7.2                      Ratio of Total Funded Debt
to Consolidated EBITDA.  For each of the trailing four-quarter
periods ending on the dates set forth below Gerber and it Subsidiaries shall not
permit the ratio of (a) Total Funded Debt of Gerber and its Subsidiaries to (b)
Consolidated

       

      
        
           

        

        
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      EBITDA to
exceed the ratio set forth beside such date in the table below:

       

      
        	
                April
      30, 2009

              	
                3.75-to-1

              
	
                July
      31, 2009

              	
                3.75-to-1

              
	
                October
      31, 2009

              	
                3.50-to-1

              
	
                January
      31, 2010 and each trailing four-quarter period thereafter

              	
                3.00-to-1

              

      

      

      Section
4. Amendment of Article 7 of
the Credit Agreement.  Article 7 of the Credit Agreement is
hereby further amended by deleting Section 7.4 in its entirety and substituting
therefor the following:

       

      “Section
7.4                      Consolidated Asset Coverage
Ratio.  For each (i) month during the period commencing
February 28, 2009 and ending October 31, 2010 and (ii) quarterly period
commencing with the quarterly period ending January 31, 2011, Gerber and its
Subsidiaries shall not permit the Consolidated Asset Coverage Ratio, in each
case measured on the last day of each such period, to be less than
1-to-1.”

       

      Section
5. Amendment of Section 9.1 of
the Credit Agreement.  Section 9.1 of the Credit Agreement is
hereby amended by re-lettering subparagraph (h) thereof as subparagraph (i) and
inserting the following new subparagraph (h):

       

      “(h)           Indebtedness
in respect of the Yunique Earnout.”

       

      Section
6. Amendment of Schedule 1 to
the Credit Agreement.   Schedule 1 to the Credit Agreement
is hereby amended by deleting Schedule 1 in its entirety and substituting
therefor Schedule 1 attached hereto as Exhibit 1.

       

      Section
7. Yunique
Acquisition.  Subject to the conditions set forth in Section 8
below and provided that (a) the Agent receives and approves final acquisition
documents with respect to the Yunique Acquisition which are consistent with the
terms of the Yunique Acquisition previously presented to the Lenders, (b) the
cash purchase price paid to the holders of the capital stock of Yunique shall
not exceed $2,000,000 plus any amounts paid pursuant to earnout provisions and
(c) all other requirements of the definition of Permitted Acquisition have been
satisfied with respect to the Yunique Acquisition, the Agent and the Lenders
herby waive the requirement contained in clause (iv) of the definition of
Permitted Acquisition as it applies to the Yunique Acquisition.

       

      Section
8. Conditions
Precedent.  The effectiveness of this Third Amendment is
subject to the truth and accuracy of the representations and warranties set
forth in Section 9 below and shall become effective upon receipt by the Agent on
the date hereof of:

       

      
        
           

        

        
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      (a)  Counterparts
of this Amendment duly executed by each of the Loan Parties, the Agent and the
Majority Lenders.

       

      (b) The
opinion of William Grickis, General Counsel of Gerber, in form and substance
acceptable to the Agent.

       

      (c) Copies of
the resolutions of the Board of Directors or equivalent body of each of the Loan
Parties authorizing the execution, delivery and performance of this Amendment
and the other Loan Documents to which such Loan Party is a party, certified by
the Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of such
Loan Party (which certificate shall state that such resolutions are in full
force and effect).

       

      (d) Certificates
of legal existence and corporate good standing for the Loan Parties of recent
date issued by the appropriate Connecticut and
Massachusetts  governmental authorities.

       

      (e) Payment
to the Agent for the account of the Lenders who have executed this Third
Amendment on or before the date hereof of the Third Amendment Fee (as defined on
Exhibit 2
hereto).

       

      (f) Such
other documents, certificates and opinions as the Agent or the Lenders may
reasonably request which have been notified to the Borrowers in writing prior to
the date hereof.

       

      Section
9. Representations and
Warranties.  The Loan Parties, jointly and severally, represent
and warrant, on and as of the date of this Amendment, that:

       

      (a) No
Default or Event of Default is outstanding both before and after giving effect
to this Third Amendment.

       

      (b) The
representations and warranties of the Loan Parties contained in the Credit
Agreement are true and accurate on and as of the date of this Amendment, except
(i) that the references in Article 5 to the 2007 Financial Statements (except in
Section 5.12) shall be deemed to refer to the most recent audited consolidated
financial statements of Gerber and its Subsidiaries furnished to the Agent and
(ii) to the extent that such representations and warranties relate solely to an
earlier date (in which case such representations and warranties were true and
accurate as of such earlier date).

       

      (c) Since
April 30, 2009, there have been no events, acts, conditions or occurrences of
whatever nature, singly or in the aggregate, which have had, or could reasonably
be expected to have, a Material Adverse Effect.

       

      Section
10. Tolland
Mortgage.  The Loan Parties, jointly and severally, hereby
covenant and agree that if, at any time, the Industrial Revenue Bonds secured by
a mortgage on the real property owned by Gerber Scientific, Inc. and located in
Tolland Connecticut (the “Tolland Property”) are paid in full, the Loan Parties
shall, within 45 days of such payment of the Industrial Revenue Bonds, cause
Gerber Scientific, Inc. to execute a mortgage with respect to the Tolland
Property in a form provided by the Agent and reasonably acceptable to the
Loan

       

      
        
           

        

        
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      (a) Parties
and to deliver title insurance, property and flood insurance (to the extent
reasonably deemed necessary by the Agent) naming the Agent as loss payee and
each other survey, certificate or document that the Agent may reasonably
request, to create, register, perfect, maintain, evidence the existence,
substance, form or validity of or enforce a valid lien on the Tolland Property
in favor of the Agent for the benefit of the Lenders, subject only to such Liens
as the Agent may approve.  Notwithstanding the foregoing, the Loan
Parties shall use best efforts to deliver each of the items referenced in this
Section 10 within 30 days of payment in full of the Industrial Revenue
Bonds.

       

      Section
11. Survival.  Each
of the foregoing representations and warranties shall be made at and as of the
date of this Third Amendment.  Each of the foregoing representations
and warranties shall constitute a representation and warranty of the Loan
Parties under the Credit Agreement, and it shall be an Event of Default if any
such representation and warranty shall prove to have been incorrect or false in
any material respect at the time when made or deemed to have been
made.  Each of the foregoing representations and warranties shall
survive and not be waived by the execution and delivery of this Third Amendment
or any investigation by the Agent or any Lender.

       

      Section
12. Ratification of Credit
Agreement and Loan Documents

       

      .  Except
as expressly amended herein, all terms, covenants and conditions of the Credit
Agreement and the other Loan Documents shall remain in full force and effect,
and the parties hereto do expressly ratify and confirm the Credit Agreement and
the other Loan Documents.  All future references to the Credit
Agreement shall be deemed to refer to the Credit Agreement as modified
hereby.

       

      Section
13. Loan
Document.  This Third Amendment shall be deemed to be a Loan
Document and a breach of any covenant contained herein shall constitute an Event
of Default under the Credit Agreement.

       

      Section
14. Miscellaneous
Provisions.

       

      (a) Counterparts and
Expenses.  This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, and all
counterparts, taken together, shall constitute but one and the same
document.  The Loan Parties, jointly and severally, agree to pay on
demand all the Agent’s reasonable expenses in preparing, executing and
delivering this Third Amendment, and all related instruments and documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
Agent’s special counsel, Goodwin Procter LLP.

       

      (b) Governing
Law.  THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS.

       

      [Signatures
on Following Page]

       

      
        
           

        

        
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      IN
WITNESS WHEREOF, the Borrowers, the Guarantors, the Agent and the Lenders have
caused this Third Amendment to be executed by their duly authorized officers as
of the date set forth above.

       

       

                                     THE
BORROWERS:

       

       

      

       

       

      

       

       

                                     GERBER SCIENTIFIC,
INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Senior
Vice President, General Counsel

       

                                     and
Secretary

       

       

                                     GERBER SCIENTIFIC
INTERNATIONAL, INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director
and Secretary

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                     GUARANTORS:

       

       

      

       

       

                                     GERBER COBURN OPTICAL
INTERNATIONAL, INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Secretary

       

       

                                     GERBER SCIENTIFIC UK,
LTD.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director

       

       

                                     SPANDEX
LIMITED

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director

       

       

                                     GERBER SCIENTIFIC
INTERNATIONAL LTD.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  President
and Director

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                     VIRTEK VISION
INTERNATIONAL INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director
and Secretary

       

       

                                     VIRTEK EUROPEAN
HOLDINGS INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director
and Secretary

       

       

                                     VIRTEK LASER SYSTEMS
NORTH AMERICA, INC.

       

                                     By:  /s/ William V.
Grickis,
Jr.                                                                

       

                                     Name:  William
V. Grickis, Jr.

       

                                     Title:  Director
and Secretary

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                       THE AGENT:

       

       

      

       

       

                                        RBS CITIZENS, N.A.,
as Agent

       

                                        By:  /s/ Thomas F.
McNamara

       

                                        Name:  Thomas
F. McNamara

       

                                        Title:  SVP

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                     THE
LENDERS:

       

       

      

       

       

                                     RBS CITIZENS,
N.A.

       

                                     By:  /s/ Thomas F.
McNamara

       

                                     Name:  Thomas
F. McNamara

       

                                     Title:  SVP

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                     SOVEREIGN
BANK

         

                                     By:  /s/ Jay L.
Massiro                                                                

       

                                     Name:  Jay
L. Massiro

       

                                     Title:  Senior
Vice President

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                        BANK OF AMERICA,
N.A.

       

                                        By:  /s/
Matthew E.
Hummel                                                               

       

                                        Name:  Matthew
E. Hummel

       

                                        Title:  Senior
Vice President

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                        HSBC BANK USA,
NATIONAL ASSOCIATION

       

                                        By:  /s/ Kenneth V.
McGraime

       

                                        Name:  Kenneth
V. McGraime

       

                                        Title:  SVP
Commercial Executive

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                        JPMORGAN CHASE BANK,
N.A.

       

                                        By:  /s/ Kenneth
Coons

       

                                        Name:  Kenneth
Coons

       

                                        Title:  Underwriter

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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                                     MERRILL LYNCH CAPITAL
CORPORATION

       

                                     By:  /s/ Matthew E.
Hummel                                                                

       

                                     Name:  Matthew
E. Hummel

       

                                     Title:  Senior
Vice President

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Signature
Page to Third Amendment to Credit Agreement

       

      
        
           

        

        
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      Exhibit
1

       

      

       

      SCHEDULE
1

       

      Commitment
Percentages

       

      
        	
                Lender

              	 	
                Commitment
      Percentage

              	 	 	
                Maximum
      Amount

                of Revolving Loans

              	 
	
                RBS
      Citizens, NA

              	 	 	24	%	 	$	18,000,000.00	 
	
                Sovereign
      Bank

              	 	 	20	%	 	$	15,000,000.00	 
	
                Bank
      of America, N.A.

              	 	 	14	%	 	$	10,500,000.00	 
	
                HSBC
      Bank USA, National Association

              	 	 	14	%	 	$	10,500,000.00	 
	
                JP
      Morgan Chase Bank N.A.

              	 	 	14	%	 	$	10,500,000.00	 
	
                Merrill
      Lynch Capital Corporation

              	 	 	14	%	 	$	10,500,000.00	 
	
                TOTALS

              	 	 	100.00	%	 	$	75,000,000.00	 

      

      

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      Exhibit
2

      

       

      Third Amendment
Fee

       

      Amendment
Fee

       

      .  In
consideration of, and in order to induce the Lenders to enter into, this Third
Amendment the Loan Parties hereby agree to pay to the Agent, for the account of
each Lender which becomes a signatory hereto on or prior to the date hereof, an
amendment fee (the “Third Amendment Fee”)
equal to 0.50% of each such Lender’s Commitment Percentage of the Maximum
Revolving Credit Amount as set forth on Schedule 1 to the
Credit Agreement after giving effect to the Third Amendment.

       

      

      

      
        
           

        

        
          19kmiex10_1.htm

    Exhibit
10.1

    ANNUAL
INCENTIVE PLAN

    OF

    KINDER
MORGAN, INC.

    

    

    ARTICLE
1.

    GENERAL

    

    1.1           Purpose

    

    The
Annual Incentive Plan (the "Plan") of Kinder Morgan, Inc. (the "Company") is
intended to advance the best interests of the Company and its subsidiaries by
providing certain employees with additional incentives through the discretionary
payment of bonuses based on the performance of the Company and/or the employees
relating to specified objective financial and business criteria, thereby
increasing the personal stake of such employees in the continued success and
growth of the Company and encouraging them to remain in the employ of the
Company.  The Plan shall provide for Awards (as defined below) to
executives (the "Executive Plan") and non-executives (the "Non-Executive
Plan").

    

    1.2           Administration
Of The Plan

    

    Except
as otherwise provided herein, the Plan shall be administered by the Chief
Manager (as defined in the Amended and Restated Limited Liability Company
Agreement of Kinder Morgan Holdco LLC (“Holdco”), dated as of May 30, 2007, as
amended (the "LLC Agreement")) of Holdco; provided, however that if there is no
Chief Manager as a result of the occurrence of a “Management Rights Termination
Event” (as defined in the LLC Agreement), the Board of Managers (as defined in the LLC
Agreement) of Holdco (or the Compensation Committee thereof, if the Compensation
Committee has been given such authority by the Board of Managers) shall
administer the Plan and the matters contemplated under it.  As
applicable, the Chief Manager, the Board of Managers or the Compensation
Committee, as
administrator, shall be referred to herein as the "Committee."  The
Committee shall have authority, subject to the provisions of the Plan, in its
discretion, to grant awards ("Awards") under the Plan, to interpret conclusively
the provisions of the Plan, to adopt such rules and regulations for carrying out
the Plan as it may deem advisable, to decide conclusively all questions of fact
arising in the application of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan.  All
decisions and acts of the Committee shall be final and binding upon all Eligible
Employees, Plan Participants and beneficiaries.  No member of the
Committee shall be liable for any action taken, or determination made, in good
faith.

    

    1.3           Eligibility

    

    "Eligible
Employee" means any employee of the Company or its subsidiaries, except (i) an
employee who is included in a unit of employees covered by a collective
bargaining agreement unless such agreement expressly provides for eligibility
under this Plan, and (ii) a director who is not an employee of the Company or
its subsidiaries.  The Chairman and Chief Executive Officer of the
Company ("Chairman") and all employees identified by the Chairman who report
directly to the 

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    office
of the Chairman shall be eligible to participate in the Executive
Plan.  All other Eligible Employees shall be eligible to participate
in the Non-Executive Plan.

    

    1.4           Awards
Under The Plan

    

    The
Committee shall designate the Eligible Employees, if any, to be granted Awards
under the Plan.  Each Eligible Employee to whom an Award is granted
shall be a "Participant."  No employee shall be a Participant or be
entitled to any payment hereunder unless such employee is designated as a
Participant and granted an Award by the Committee.  All Awards granted
under the Plan shall be on the terms and subject to the conditions hereinafter
provided.

    

    1.5           Other
Compensation Programs

    

    The
existence and terms of the Plan shall not limit the authority of the Board of
Directors or the Committee in compensating employees of the Company or its
subsidiaries in such other forms and amounts, including compensation pursuant to
any other plans as may be in effect currently or adopted in the future, as the
Board of Directors or the Committee may determine from time to
time.

    

    ARTICLE
2.

    TERMS
AND CONDITIONS OF AWARDS

    

    2.1           Executive
Plan

    

    (a)           Establishment
Of Performance Goals And Bonus Opportunity

    

    Prior
to or within 90 days after the commencement of each Performance Year, the
Committee shall establish written Performance Goals and a Bonus Opportunity for
each Award granted to a Participant in the Executive Plan for such Performance
Year.  The Performance Goals shall be based on criteria established by
the Committee, including but not limited to one or more of the
following:

    

    (1)           Company
earnings per share;

    

    
      	
               
      

            	
              (2)

            	
              Company
      or subsidiary cash distributions to shareholders or common
      unitholders;

            

    

    

    
      	
               
      

            	
              (3)

            	
              Company
      or subsidiary earnings before interest and taxes or earnings before
      interest, taxes and corporate
charges;

            

    

    

    (4)           Company
or subsidiary net income;

    

    (5)           Company
or subsidiary revenues;

    

    (6)           Company
or subsidiary unit revenues minus unit variable costs;

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (7)

            	
              Company
      or subsidiary return on capital, return on equity, return on assets, or
      return on invested capital;

            

    

    

    
      	
               
      

            	
              (8)

            	
              Company
      or subsidiary cash flow, return on assets or cash flows from operating
      activities;

            

    

    

    (9)           Company
or subsidiary capital expenditures;

    

    
      	
               
      

            	
              (10)

            	
              Company
      or subsidiary operations and maintenance expense or general and
      administrative expense;

            

    

    

    (11)           Company
or subsidiary debt-equity ratios and key profitability ratios; and

    

    (12)           Company
stock price.

    

    At
the time of establishing the Performance Goals, the Committee shall specify (i)
the formula to be used in calculating the compensation payable to a Participant
if the Performance Goals are obtained, and (ii) the individual employee or class
of employees to which the formula applies.  The Bonus Opportunity
shall be expressed as an amount of cash. The Committee may also specify a
minimum acceptable level of achievement of the relevant Performance Goals, as
well as one or more additional levels of achievement, and a formula to determine
the percentage of the Bonus Opportunity deemed to have been earned by the
Participant upon attainment of each such level of achievement, which percentage
may exceed 100%.  The Performance Goals and Bonus Opportunity relating
to any particular Award need not be the same as those relating to any other
Award, whether made at the same or a different time.  Notwithstanding
the terms of any Award, the maximum payout under this Plan to any individual for
any Performance Year shall not exceed $3,000,000.

    

    (b)           Performance
Year

    

    The
Performance Year with respect to an Executive Plan Award shall be the calendar
year within which the Performance Goals relating to that Award are to be
achieved.

    

    (c)           Earning
Of Award

    

    Promptly
after the date on which the necessary information for a particular Performance
Year becomes available, the Committee shall determine the extent to which the
Bonus Opportunity for such Performance Year has been earned, through the
achievement of the relevant Performance Goals, by each Participant for such
Performance Year.

    

    2.2           Non-Executive
Plan

    

    (a)           Performance
Year

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    The
Performance Year for the Non-Executive Plan shall be the calendar year
applicable to the Executive Plan except that, for non-exempt Eligible Employees,
the Performance Year shall be the period containing all time worked and used to
determine pay beginning November 1 of the prior calendar year and ending October
31 of the calendar year applicable for the Executive Plan.

    

    (b)           Determination
of Award

    

    For
each Performance Year, the Committee may grant Awards to Participants in the
Non-Executive Plan.  The Awards shall be determined by the Committee,
in its sole discretion, based on recommendations made by the Company's
management.  Such recommendations may be based on a number of factors,
or any combination of them, including, but not limited to, market data, Company
performance, and the performance of individual Participants.  The
Committee shall have the sole discretion to determine whether any Eligible
Employee will be designated a Participant and granted an Award.

    

    2.3           Discretionary
Downward Adjustments

    

    At
any time after an Award has been granted but before the Award has been paid, the
Committee, in its sole and absolute discretion, may reduce or eliminate the
Award granted to any Participant for any reason or for no reason, including, but
without limitation, the Committee's judgment that the Performance Goals have
become an inappropriate measure of achievement, a change in the employment
status, position or duties of the Participant, unsatisfactory performance of the
Participant, or the Participant's service for less than the entire Performance
Year, for example. The reduction or elimination of an Award for a Participant
may not increase the amount of an Award to another Participant.

    

    2.4           Distributions

    

    As
soon as administratively feasible after the Committee has (i) determined the
extent to which the Bonus Opportunity relating to an Award under the Executive
Plan has been earned pursuant to Section 2.1(c), or (ii) granted an Award under
the Non-Executive Plan, such Award shall be distributed in one lump sum either
in cash or in such other form of payment (for example, equity) that the
Committee, in its discretion, may determine, provided that no such other form
shall result in a deferral of compensation to which Section 409A of the Internal
Revenue Code of 1986, as amended, applies.

    

    2.5           Change
In Control

    

    Notwithstanding
any other provision of this Plan (other than in the last sentence of this
Section 2.5) or contained in any Award granted hereunder (including any
provision for deferred payment thereof), upon the occurrence of a Change in
Control (as defined in Section 3.6), the Committee, in its discretion, may
take any action with respect to outstanding Awards that it deems appropriate,
which action may vary among Awards granted to individual
Participants.  In the event that such action is to distribute an
Award, the Award shall be distributed in a lump sum no 

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    later
than 30 days after the Change in Control.  If a Change in Control
occurs and, in connection with or as a result of such Change in Control, Richard
D. Kinder no longer holds or does not continue to hold the office of Chairman of
the Company, each Participant under the (i) Executive Plan shall be deemed to
have earned 100% of the Bonus Opportunities contained in any outstanding Awards
for which the determination described in Section 2.1(c) has not been made,
or, if such determination described in Section 2.1(c) has been made, the full
amount of the portion of the Bonus Opportunity which was determined to have been
earned, (ii) Non-Executive Plan shall be deemed to have earned an Award equal to
the Award most recently paid to such Participant under the Plan (or, if no
Awards have yet been paid under the Plan, an Award equal to the award paid to
such Participant for 2009 under the prior Annual Incentive Plan), and (iii) the
amount of such Bonus Opportunities or Awards under (i) or (ii), as applicable,
shall be paid promptly (and no later than 30 days after the Change in Control)
in a cash lump sum.

    

    2.6           Termination
of Employment

    

    Except
in the case of a payment made in connection with a Change in Control under
Section 2.5, a Participant shall forfeit all rights to a distribution of an
Award if the Participant ceases to be employed by the Company or a subsidiary
for any reason prior to the date the Award is distributed.  For
greater certainty, the Participant ceases to be employed by the Company or a
subsidiary on the later of the date on which the Participant receives written
notice of termination or the last date on which the Participant provides
services to the Company or subsidiary.

    

    ARTICLE
3.

    ADDITIONAL
PROVISIONS

    

    3.1           Amendments

    

    The
Board of Directors may, in its sole discretion, amend the Plan from time to time
or terminate the Plan at any time.  Any such amendment may be made
without stockholder approval unless required to satisfy any applicable laws or
securities exchange rules. Notwithstanding this or any other provision of this
Plan to the contrary, in connection with a Change in Control (a) neither the
Committee nor the Board of Directors may adjust any Award in effect immediately
prior to such Change in Control in a manner adverse to the Participant, and (b)
the Board of Directors may not amend the provisions of this Plan relating to
such Change in Control or any such Award in a manner adverse to a Participant,
in either case without the consent of the affected Participant.

    

    3.2           Withholding

    

    Payments
under the Plan shall be net of an amount sufficient to satisfy any federal,
state, local or provincial withholding tax obligations of the
Company.

    

    3.3           Non-Assignability;
Death Of Participant

    

    No
Award under the Plan shall be assignable or transferable by the holder thereof
except by will or by the laws of descent and distribution.  In the
event of the death of a Participant, any 

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    payments
due to such Participant shall be paid to his beneficiary designated in writing
to the Committee, or, if none has been designated, to his estate.

    

    3.4           Non-Uniform
Determinations

    

    Determinations
by the Committee under the Plan (including, without limitation, determinations
of the persons to receive Awards; the terms and provisions of such Awards; the
relevant Performance Goals; the amount of Bonus Opportunity; and the amount of
any downward adjustment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.

    

    3.5           No
Guarantee Of Employment

    

    The
grant of an Award under the Plan shall not constitute an assurance of continued
employment for any period.

    

    3.6           Change
In Control

    

    

    (a)           "Change
in Control" means:

    

    (i)           after
January 1, 2010, any natural person, entity or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and including any group acting for the purpose of
acquiring, holding, voting or disposing of securities of an issuer within the
meaning of Rule 13d-5(b)(1) under the Exchange Act (each of the foregoing, a
"Group"))(any such natural person, entity or Group being referred to herein as a
"Person"), other than a Permitted Person (hereinafter defined), becomes the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, by way of merger, amalgamation, consolidation or other
business combination, purchase, formation of a group, recapitalization,
reclassification or otherwise, of securities of the Company, Holdco or any
entity through which Holdco, directly or indirectly, owns voting securities of
the Company (an "Intermediate Entity") representing fifty percent (50%) or more
of the voting power of the Company, Holdco or such Intermediate Entity (or the
surviving or resulting entity), as the case may be, after giving effect to the
transaction;

    

    (ii)           a
sale, merger, amalgamation, consolidation or other business combination,
purchase, recapitalization, reclassification or transaction or series of related
transactions involving the Company, any Intermediate Entity or Holdco as a
result of which the voting securities of the Company, such Intermediate Entity
or Holdco, as the case may be, outstanding immediately before such transaction
or series of related transactions do not continue to represent (either by
remaining outstanding by being converted into the voting securities of the
surviving or resulting entity) at least 50% of the voting power of the Company,
such Intermediate Entity, Holdco or such surviving or resulting entity, as the
case may be, after giving effect to such transaction or series of related
transactions;

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    

    

    (iii)           the
sale or transfer of, or the approval by the relevant security holders of an
agreement for the sale or transfer of, all or substantially all of the assets of
the Company, of any Intermediate Entity or of Holdco, in a single transaction or
series of related transactions, in any case other than to an entity of which
more than 50% of the voting power is held by Permitted Persons; or

    

    (iv)           the
shareholders or relevant security holders of the Company, any Intermediate
Entity or Holdco approve a plan of complete liquidation of the Company, any
Intermediate Entity or Holdco, unless all of the assets of the affected entity
will be distributed in such liquidation to a Permitted Person.

    

    (b)           “Permitted
Person” means (i) with respect to Holdco, Richard D. Kinder or any Group
controlled by Richard D. Kinder (for purposes of this Plan, Richard D. Kinder
shall not be on the date of this Plan deemed to control Holdco or any investors
in Holdco), (ii) with respect to any particular Intermediate Entity, (x) Richard
D. Kinder or any Group controlled by Richard D. Kinder, (y) Holdco, if no Change
of Control has occurred with respect to Holdco, or (z) a second Intermediate
Entity through which Holdco owns voting securities of the particular
Intermediate Entity, if no Change of Control has occurred with respect to (A)
such second Intermediate Entity, (B) any third Intermediate Entity through which
Holdco owns voting securities of such second Intermediate Entity, or (C) Holdco,
and (iii) with respect to the Company, (x) Richard D. Kinder or any Group
controlled by Richard D. Kinder, (y) Holdco, if no Change of Control has
occurred with respect to Holdco, or (z) any Intermediate Entity, if no Change of
Control has occurred with respect to (A) such Intermediate Entity, (B) any other
Intermediate Entity through which Holdco owns voting securities of such
Intermediate Entity, or (C) Holdco.

    

    (c)           References
herein to any Section of or Rule under the Exchange Act include any successor
provision.

     
 

    

    3.7           Limitation
on Certain Payments

    

    Notwithstanding
any other provision of this Plan, the Company shall not make or be obligated to
make any payment hereunder which would require the approval of the majority of
the Board of Managers of Holdco under the Holdco LLC Agreement unless such
approval has been given.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    

    3.8           Unfunded
Status Of Awards; Creation Of Trusts

    

    The
Plan is intended to constitute an "unfunded" plan.  With respect to
any amounts payable to a Participant pursuant to an Award, nothing contained in
the Plan (or in any documents related thereto), nor the creation or adoption of
the Plan, the grant of any Award, or the taking of any other action pursuant to
the Plan, shall give any such Participant any rights that are greater than those
of a general creditor of the Company.  The Committee may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan; however, such trusts or other arrangements shall be consistent
with the "unfunded" status of the Plan.

    

    3.9           Effective
Date Of Plan

    

    The
Plan shall become effective on January 1, 2010.

    

    
      
         

      

      
        -8-

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