Document:

hlf-ex1040_188.htm

Exhibit 10.40

 

UNITED STATES OF AMERICA 
Before the

SECURITIES AND EXCHANGE COMMISSION

 

SECURITIES EXCHANGE ACT OF 1934 
Release No. 89704 / August 28, 2020 

ACCOUNTING AND AUDITING ENFORCEMENT  
Release No. 4165 / August 28, 2020 

ADMINISTRATIVE PROCEEDING 
File No. 3-19948 

 

	
 
	
 

	
In the Matter of
	
ORDER INSTITUTING CEASE-AND-

	
 
	
DESIST PROCEEDINGS PURSUANT TO

	
HERBALIFE NUTRITION
	
SECTION 21C OF THE SECURITIES

	
LTD.,
	
EXCHANGE ACT OF 1934, MAKING

	
 
	
FINDINGS, AND IMPOSING A CEASE-

	
 
	
AND-DESIST ORDER

	
 
	
 

	
Respondent.
	
 

	
 
	
 

	
 
	
 

 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”), against Herbalife Nutrition, Ltd. (“Herbalife” or “Respondent”).   

 

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Respondent admits the Commission’s jurisdiction over it and the subject matter of these proceedings, and consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary

1. This matter concerns violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by Herbalife, a direct selling company incorporated in the Cayman Islands with headquarters in the United States. 

2. From 2006 to 2016, Herbalife’s Chinese subsidiaries (“Herbalife China”) engaged in a scheme to offer corrupt payments and other improper benefits to Chinese government officials.  Between 2012 and 2016, Herbalife China employees, including Herbalife China’s then-Managing Director (“Managing Director”) and Herbalife China’s then-Director of External Affairs (“EA Director”), provided improper benefits of cash, gifts, travel, alcohol, meals, and entertainment to Chinese government officials.  Certain Herbalife executives received reports of high travel and entertainment spending in China and violations of Herbalife’s internal FCPA policies, but failed to detect and prevent improper payments and benefits and falsifications of expense reports.  By 2016, Herbalife China was responsible for approximately twenty percent of Herbalife’s worldwide net sales.  The improper benefits provided by Herbalife China were not accurately reflected in Herbalife’s books and records, and Herbalife failed to devise and maintain a sufficient system of internal accounting controls.   

3. As a result, Herbalife violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. 

 

Respondent

4. Herbalife is a direct selling company incorporated in the Cayman Islands with headquarters in the United States.  Herbalife’s common stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act.  At all relevant times, its stock has been listed on the New York Stock Exchange (Ticker:  HLF), and it has been an “issuer” within the meaning of the FCPA.       

 

Relevant Entity and Persons

5. Herbalife China is a group of wholly-owned, China-based subsidiaries of Herbalife. Throughout the relevant period, Herbalife China’s financial statements were consolidated with those of Herbalife.  

 

	
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The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.   

 

6. Managing Director is a Chinese national residing in China and was Herbalife China’s Managing Director from December 2007 to May 2017.  Prior to becoming Managing Director, he was the Director of Sales for Herbalife China in 2006 and 2007.   

7. EA Director is a Chinese national who resides in China.  From 2006 to May 2017, she served as the head of the External Affairs department (“External Affairs”) for Herbalife China.   

 

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Facts

Herbalife China Provided Improper Benefits to Chinese Government Officials in Connection with Licenses   

8. From at least 2006, External Affairs, headed by EA Director, was responsible for obtaining direct selling licenses from the Chinese government – a prerequisite for Herbalife China to conduct its direct selling business in China.  External Affairs was also responsible for promoting Herbalife China’s interests to the Chinese government, responding to inquiries and investigative requests from the Chinese government, and marketing Herbalife China through the Chinese media.   

9. In late 2006, Herbalife China submitted an application to the Chinese government for its first direct selling license, which was ultimately granted for two cities in one province (the “Province”).  To facilitate approval of its license application, Herbalife China provided improper benefits, including payments, to government officials including those employed by Chinese Government Agency 1, the agency responsible for awarding direct selling licenses in China.  For example, in a January 10, 2007 telephone call, Managing Director (serving then as the Director of Sales for Herbalife China) asked EA Director whether Herbalife China had “taken care of” an official at Chinese Government Agency 1 (“Official 1”).  Managing Director then asked, “We have given the money to [Official 1], haven’t we?” to which EA Director replied, “Of course we have.”  Managing Director then stated, “The money works well on him.”2  

 

10. In March 2007, Chinese government officials informed Herbalife China that it would receive its first direct selling license for the two cities in the Province.  During a March 22, 2007 telephone call, Herbalife China’s Managing Director at the time (“Former MD”) congratulated EA Director on acquiring the license.  EA Director told Former MD, “I will take care of those people.  I will still have to invite them out for dinner next time I come anyway.”  Former MD responded, “Right, good idea.  We will talk later about how you are going to take care of them.”  Later that day, during a call, EA Director spoke with a senior manager of External Affairs (“Senior Manager”).  EA Director told Senior Manager to “grab a pen and write down the gift list.”  After listing the names of 17 individuals, including Chinese Government Agency 1 officials who were involved in application process for  Herbalife China’s pending direct selling license application, EA Director told Senior Manager to “go and get 260,000 yuan (approximately $33,700) and then divide the money among them, with a total of approximately 60,000 yuan (approximately $7,800) distributed to 16 Chinese Government Agency 1 officials”   

 

	
2
	
The telephone discussions between Herbalife China employees described in this Order were in Chinese, and the quoted excerpts are English translations of those discussions. 

 

11. During a telephone call later that same day, Former MD told Managing Director (serving then as the Director of Sales for Herbalife China) that Former MD wanted to talk “about what I spent to take care of things for our license.”  Managing Director told Former MD that Managing Director had withdrawn over 200,000 yuan, and Former MD responded that EA Director “is pressing me about that.  I already took [100,000 yuan] out of the bank and gave it to [EA Director].” 

12. The following day, on March 23, 2007, Former MD spoke with a (now former) senior Herbalife executive in the U.S. (“Senior Executive”).  During that call, Former MD complained about Herbalife’s internal policy of limiting dinners with any Chinese government official to six dinners per year.  Former MD said that he was concerned about this limitation “because the people that does [sic] your license are those people, okay.  You have far more than just six dinners.”  Former MD told Senior Executive that this policy will put the onus on U.S. executives to approve any dinners in excess of six times per year, “I can always write back to you folks and ask for approvals but then it’s like putting the onus back on you folks to answer future questions.”  Former MD stated that he “disagree[d] that having dinners with officials, that you will influence them but it’s just part 

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of the way of doing business.”  Senior Executive told Former MD that “I am sure there are a lot of government officials, you can put different names down...but I didn’t tell you that.”  After Former MD explained that “with the license process, you know, it is tough for me to use all the names,” Senior Executive responded, “How would anybody ever know?”  Former MD said he understood, and Senior Executive told Former MD, “All an auditor is going to do is pick up your receipts, your expense report, oh he did Mr. X, Mr. A, Mr. B, Mr. C, Mr. D., and if he did a few of these guys a couple times but that was it.”         

13. Thereafter, Herbalife China provided improper benefits to a Chinese government official in connection with a license.  On September 8, 2009, Managing Director spoke with an official from a government agency responsible, at least in part, for enforcing compliance with Chinese laws applicable to direct selling licenses (“Official 2”).  Managing Director thanked Official 2 for helping Herbalife China in connection with a license:  “You have certainly helped us to get this done.”  Official 2 asked to be a “consultant” for Herbalife to help pay for his “son’s house purchasing fund,” but Official 2 also said that he did not “want to discuss too much [ ] over the phone.”  

14. Herbalife China employees continued to influence government officials through lavish meals and gifts.  Consistent with the lack of commitment to compliance and accurate record keeping demonstrated by Senior Executive, Herbalife China employees funded those meals and gifts through falsified expense reimbursements until 2016.  

Herbalife China Provided Chinese Government Officials with Improper Benefits including Cash, Gifts, Meals, and Entertainment 

15. Herbalife China provided improper benefits of cash, gifts, meals, and entertainment to Chinese government officials.  For example, during a call on March 15, 2007, Managing Director (serving then as the Director of Sales for Herbalife China) and EA Director discussed paying certain provincial officials.  Managing Director told EA Director that he had been told to pay 35,000 yuan (approximately $4,500) to the officials.  Managing Director then asked, “Do you think we should give more?”  EA Director responded that, “Okay.  But he has to guarantee this...to be effective.”  Managing Director explained that “we need to build the connection...I was thinking it is better to spend money beforehand than spending money afterwards.  This money is a small sum after all, and if we were to be penalized, the figure will be much greater.” 

16. Herbalife China continued to influence Chinese government officials with improper gifts of meals and entertainment.  An Herbalife China External Affairs manager (“EA Manager”) developed a relationship with a municipal government official (“Official 3”).  During telephone conversations, EA Manager and Official 3 discussed treating Chinese government officials to expensive meals, alcohol, karaoke, and luxury gifts.  For example, on January 11, 2012, EA Manager told Official 3 that EA Manager had entertained several government officials with dinners, karaoke, and alcohol.  EA Manager said that one government official who coordinated a dinner had been direct about his expectations:  “He was straight forward to me, because I’m not going to go invite people for dinner empty-handed...He said, ‘you be prepared.’  I said I understood.  I can’t leave him empty-handed.”  EA Manager also said that he had “taken care” of other Chinese government officials. 

17. On March 31, 2012, EA Manager told Official 3 that EA Manager treated Chinese government officials to expensive meals with alcohol.  EA Manager said that one evening was “so expensive, my hands were shaky.”  Later, EA Manager asked Official 3 for names of government officials that EA Manager could write on his expense reports because he spent so much money that he needed to add names to get under the company’s per head spending limitation.  

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18. Other Herbalife China External Affairs employees also falsified expense reports to collect reimbursement for purported gifts and meals to Chinese government officials.  For example, on January 11, 2012, an External Affairs employee spoke with the External Affairs assistant manager responsible for processing expense reimbursement requests (“EA Assistant Manager”).  EA Assistant Manager asked the employee to submit falsified reimbursement requests supported by false meal and gift invoices totaling 577,000 yuan (approximately $91,000).       

19. Herbalife China also provided improper benefits, including payments, to Chinese government officials, to curtail government investigations of Herbalife China and to prevent or reduce fines issued to Herbalife China by the Chinese government.  For example, on August 8, 2012, Managing Director and EA Director discussed an investigation in Nanjing.  EA Director told Managing Director that a Chinese government official had helped stop an investigation involving Herbalife China, and that EA Director was going to obtain the interview records and police report for the investigation.  Managing Director told EA Director to thank the government official, and she responded that she had already done so when he came to Beijing.  Managing Director told EA Director to give the government official the money that the company otherwise would have paid as a penalty, “Let’s give the fine to him.”  EA Director responded that they should not discuss this over the phone. 

20. The above-described conduct by External Affairs employees continued until 2016.  According to internal audit reports, Herbalife China employees continued excessive spending on gifts, meals, and entertainment for Chinese government officials.       

 

Herbalife China Provided Improper Benefits to Chinese State-Owned Media to Remove Negative Media Coverage of Herbalife China 

21. Herbalife China also provided improper benefits to government officials at state-owned media outlets in China to delete negative media coverage of Herbalife China.  For example, in January 2013, a state-owned media outlet (“Media Outlet 1”) published a negative article about Herbalife China.  In an April 22, 2013 telephone call, EA Director told Managing Director that she had met with an official of Media Outlet 1 (“Media Official 1”) and asked him to remove the negative article.  EA Director told Managing Director:  “He already took what he should take, ate what he should eat, drank what he should drink, and used what he should use.  It’s up to him.”  Managing Director responded:  “It is time for him to get to work, right?”  EA Director told Managing Director that she told Media Official 1 that “if you destroyed us, where could you get money?” to which Media Official 1 laughed and agreed to remove the negative articles.  Managing Director praised EA Director:  “You have done a great job!” 

22. In 2013, another state-owned media outlet (“Media Outlet 2”) published several negative articles about Herbalife China.  In an August 28, 2013 telephone call, EA Manager told Managing Director that he had met with a senior editor of Media Outlet 2 (“Media Outlet 2 Editor”), who “had agreed that they would stop after publishing two articles and we would start to negotiate collaboration.”  EA Manager told Managing Director that when Media Outlet 2 Editor escorted him out, EA Manager “put our ‘goodwill’ on the desk.  He pretended he did not see it.  This should not be a problem.”   

Herbalife China Employees Submitted and Approved False Expenses  

23. External Affairs employees submitted fake invoices and false expense reports to get reimbursed for improper benefits they provided to government officials.  For example, on January 31, 2012, EA Manager asked Official 3 for names of government officials that EA Manager could list on a falsified expense report.  EA manager told Official 3 that a local government official had called EA Manager to ask EA Manager to pay for a meal for the official and his family during a family road trip.  EA Manager explained that the official “knows that [EA Manager] can arrange for any place all over the country.”  EA Manager said that the official “has 

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helped [EA Manager] a lot before.”  EA Manager asked for names of officials that he could list on the expense report because “it’s not appropriate for [EA Manager] to write down [the official’s] name too many times.”        

24. During a telephone call on April 6, 2012, EA Manager told Official 3 that he went to buy fake receipts “to cover the gifts” for government officials, bags that were “very expensive by Prada.”  During a call on August 1, 2013, EA Manager and EA Director discussed whether to purchase fake meal invoices or fake gift invoices to best avoid internal audit oversight.  They also discussed how EA Manager’s usual fake invoice supplier was no longer available and his other sources could not provide enough fake invoices. 

25. During a telephone call on March 21, 2014, two External Affairs employees discussed how to submit falsified expense reports for 20,000 yuan for claimed expenses regarding gifts to government officials.  The two employees discussed splitting the gift expenses into two applications and revising the list of purported participants because the original list of 20 supposed deputy directors was not realistic.   

26. In 2015 and 2016, Managing Director approved several expense applications submitted by an External Affairs employee for a reimbursement of approximately $150,000 claimed to have been paid to a farm, purportedly for shipping fruit and vegetable gifts to Chinese government officials and media, including state-owned media officials.  The amount of produce purportedly purchased at the farm would have weighed approximately 34.5 metric tons, or 135 pounds per purported gift recipient, and, thus, could not have been the actual purpose of the $150,000 reimbursed.  The expense applications and attached invoices were false, and the expenditures was improperly recorded in Herbalife’s financial records.   

27. Between 2012 and 2016, Herbalife China failed to accurately record gifts, meals, entertainment, and other expenditures provided for government officials on its books, records and accounts. 

28. Herbalife China’s financial statements were consolidated into Herbalife’s reported financial statements, which were filed in the United States.  Therefore, these falsified and/or fake expenses recorded by Herbalife China were incorporated into Herbalife’s financial statements.  

Herbalife Executives Received Internal Audit Reports Showing High Spending in China and Violations of Internal Policies 

29. At all relevant times, Herbalife’s Internal Audit department (“IA”) was headed by Herbalife’s Senior Vice President, Internal Audit (“IA Director”), who reported directly to Herbalife’s Audit Committee.  The IA in China (“China IA”), which reported directly to IA Director, audited External Affairs’ expenses approximately twice a year.  At the conclusion of each audit, China IA reported its results to IA, which then circulated a revised version of this report to Managing Director and Herbalife’s management (“EA Audit Report”).  The EA Audit Reports showed large expenses and identified violations of Herbalife China’s internal policies regarding compliance with FCPA, including fake receipts and verbal approval of expenses when prior, written approval had been required. 

30. For example, in 2014, an EA Audit Report covering expenses for the last six months of 2012 found that, during this six-month period, EA Director had been reimbursed over $1 million on claimed meals and gifts for Chinese government officials and media, including state-owned media officials.  According to the report, EA Director submitted expenses claiming to have attended 239 such meals, with a total of 4,312 participants, averaging $3,232 per meal.  These numbers were extraordinarily high, as there were only 184 days (including weekends) during those six months.  According to the EA Audit Report, during those six months, External Affairs, as a whole, submitted expenses claiming to have treated 30,076 Chinese government officials and media members to meals, and was reimbursed, as a whole, a total of approximately $3.7 million for claimed meals, gifts, and entertainment of government officials and media, including state-owned media officials. 

 

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31. In March 2016, another EA Audit Report covering expenses for the first six months of 2015 stated that EA Director submitted expenses claiming to have attended 115 restaurant meals with Chinese government officials and media, including state-owned media officials, during that six-month period.  The average cost per meal was $1,472.  During that same period, according to the EA Audit Report, EA Director submitted expenses claiming to have provided gifts to 828 government officials and media, including state-owned media officials, totaling $146,485.  The report stated that “vendor receipts were replaced when problems were found,” highlighting Herbalife China’s practice of allowing External Affairs to replace problematic receipts, and failing to highlight those problems on the final reports.  Despite this practice of replacing problematic receipts, the report still found violations, such as restaurant receipts submitted by different employees with very close transaction times in the same restaurant.  The report also found that External Affairs had expended a total of $811,465 without the corporate approvals required for those particular expenses, and that seven External Affairs employees (including EA Director) had relied solely upon verbal approvals for more than 50% of their expense applications, despite Herbalife China’s internal policy that such verbal approval could be used only for emergency expenditures. 

32. After receiving the March 2016 IA report, a member of Herbalife’s Board of Directors emailed the Audit Committee and IA Director asking whether the high spending by China EA was reasonable.  Another Board member responded:  “Please note I have questioned this every year I have been on the board, and the company has defended its position that these are reasonable within FCPA guidelines.”  IA Director responded that “the findings are the typical issues in these audits” and are within “tolerance.”  

33. Between 2012 and 2016, Herbalife reimbursed External Affairs employees for over $7.2 million in questionable External Affairs meal and gift expenditures in connection with Chinese officials and media, including state-owned media officials.  Herbalife obtained approximately $58.7 million in benefit based on the conduct described above.    

Legal Standards and Violations

34. Under Section 21C of the Exchange Act, the Commission may impose a cease-and-desist order upon any person who is violating, has violated, or is about to violate any provision of the Exchange Act or any rule or regulation thereunder, and upon any other person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation. 

35. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(A) of the Exchange Act, which requires issuers that have a class of securities registered pursuant to Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of the Exchange Act to make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect their transactions and disposition of their assets.  [15 U.S.C. § 78m(b)(2)(A)]. 

36. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(B) of the Exchange Act, which requires issuers that have a class of securities registered pursuant to Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of the Exchange Act to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  [15 U.S.C. § 78m(b)(2)(B)]. 

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Herbalife’s Cooperation and Remedial Efforts

37. In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff.  Herbalife’s remediation included terminating employees involved in the violative conduct, hiring a dedicated Chief Compliance Officer, enhancing internal accounting controls and compliance functions, and adopting a new compliance structure.  Herbalife’s cooperation included timely sharing of facts developed during the course of an internal investigation and voluntarily producing documents. 

Undertakings

38. Respondent has undertaken to: 

(1) Report to the Commission staff periodically during a three-year term, the status of its remediation and implementation of compliance measures, particularly as to the areas of due diligence on prospective and existing third-party consultants and vendors, FCPA training, and the testing of relevant controls including the collection and analysis of compliance data. 

(2) During this period, should Herbalife discover credible evidence, not already reported to the Commission staff, that questionable or corrupt payments or questionable or corrupt transfers of value may have been offered, promised, paid, or authorized by Herbalife, or any entity or person acting on behalf of Herbalife, or that related false books and records have been maintained, Herbalife shall promptly report such conduct to the Commission staff.   

(3) During this three-year period, Herbalife shall:  (1) conduct an initial review and submit an initial report and (2) conduct and prepare two follow-up reviews and reports, as described below: 

a. Herbalife shall submit to the Commission staff a written report within 365 calendar days of the entry of this Order setting forth a complete description of its FCPA and anti-corruption related remediation efforts to date, its proposals reasonably designed to improve Herbalife’s policies and procedures for the purpose of compliance with FCPA and other applicable anticorruption laws, and the parameters of the subsequent review (the “Initial Report”).  The Initial Report shall be transmitted to Gerald A. Gross, Assistant Regional Director, United States Securities and Exchange Commission, New York Regional Office, 200 Vesey Street, Suite 400, New York, New York 10128.  Herbalife may extend the time period for issuance of the Initial Report with prior written approval of the Commission staff. 

b. Herbalife shall undertake two follow-up reviews, incorporating any comments provided by the Commission staff on the previous report, to further monitor and assess whether Herbalife’s policies and procedures are reasonably designed to detect and prevent violations of the FCPA and other applicable anti-corruption laws (the “Follow-Up Reports”). 

c. The first Follow-up Report shall be completed by no later than 365 days after the Initial Report. The second Follow-up Report shall be completed by no later than 700 days after the completion of the Initial Report. Herbalife may extend the time period for issuance of the Follow-up Reports with prior written approval of the Commission staff. 

d. The periodic reviews and reports submitted by Herbalife will likely include confidential financial, proprietary, competitive business or commercial information.  Public disclosure of the reports could discourage cooperation, impede pending or potential government investigations or undermine the objectives of the reporting requirement.  For these reasons, among others, the reports and the contents thereof are intended to remain and shall remain non-

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public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, (3) to the extent that the Commission determines in its sole discretion that disclosure would be in furtherance of the Commission’s discharge of its duties and responsibilities, or (4) is otherwise required by law. 

e. During this three-year period of review, Herbalife shall provide its external auditors with its annual internal audit plan and reports of the results of internal audit procedures and, subject to attorney-client privilege and attorney work product protections, its assessment of its FCPA compliance policies and procedures. 

f. During the three-year period of review, Herbalife shall provide Commission staff with any written reports or recommendations provided by Herbalife’s external auditors in response to Herbalife’s annual internal audit plan, reports of the results of internal audit procedures, and its assessments of its FCPA compliance policies and procedures.   

(4) Certify, in writing, compliance with the undertakings set forth above.  The certification shall identify the undertakings, provide written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  The Commission staff may make reasonable requests for further evidence of compliance, and Respondent agrees to provide such evidence.  The certification and supporting material shall be submitted to Gerald A. Gross, Assistant Regional Director, United States Securities and Exchange Commission, New York Regional Office, 200 Vesey Street, Suite 400, New York, New York 10128, with a copy to the Office of Chief Counsel of the Enforcement Division, no later than sixty (60) days from the date of the completion of the undertakings. 

39. Respondent undertakes to do the following:  in connection with this action and any related judicial or administrative proceeding or investigation commenced by the Commission or to which the Commission is a party, Respondent (i) agrees to appear and be interviewed by Commission staff at such times and places as the staff requests upon reasonable notice; (ii) will accept service by mail or facsimile transmission of notices or subpoenas issued by the Commission for documents or testimony at depositions, hearings, or trials, or in connection with any related investigation by Commission staff; (iii) appoints Respondent's undersigned attorney as agent to receive service of such notices and subpoenas; (iv) with respect to such notices and subpoenas, waives the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure and any applicable local rules, provided that the party requesting the testimony reimburses Respondent's travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per diem rates; and (v) consents to personal jurisdiction over Respondent in any United States District Court for purposes of enforcing any such subpoena. 

In determining whether to accept the Offer, the Commission has considered the undertakings set forth in Paragraph 39. 

Deferred Prosecution Agreement

40. Herbalife has entered into a three-year deferred prosecution agreement with the United States Department of Justice that acknowledges responsibility for criminal conduct relating to certain findings in the Order.    

Non-Imposition of a Civil Penalty

41. Herbalife acknowledges that the Commission is not imposing a civil penalty based upon the imposition of a $55,743,093 criminal fine as part of its resolution with the Department of Justice. 

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IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Herbalife’s Offer. 

Accordingly, it is hereby ORDERED that: 

A. Pursuant to Section 21C of the Exchange Act, Respondent Herbalife cease and desist from committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.  

 

B. Respondent shall comply with the undertakings enumerated in Paragraph 38 above. 

C. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of $58,669,993.00 and prejudgment interest of $8,643,504.50 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600. 

Payment must be made in one of the following ways:   

	
 
	
(1)
	
Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;  

	
 
	
(2)
	
Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

	
 
	
(3)
	
Respondent may pay by certified check, bank cashier’s check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:  

Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying Herbalife as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Sanjay Wadhwa, Senior Associate Director, New York Regional Office, Securities and Exchange Commission, 200 Vesey Street, Suite 400, New York, NY 10281-1022.     

By the Commission. 

Vanessa A. Countryman

Secretary

10Exhibit 10.1 

 

Execution
Version 

 

THIRD
AMENDMENT To CREDIT AGREEMENT

 

THIS
THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of October 30, 2020, by and
among GOODRICH PETROLEUM CORPORATION, a Delaware corporation (“Parent”), Goodrich
Petroleum Company, L.L.C., a Louisiana limited liability company (the “Borrower”), each of the
Lenders which is signatory hereto, and TRUIST BANK, succesor by merger to SunTrust Bank, as Administrative Agent for the Lenders
(in such capacity, together with its successors in such capacity “Administrative Agent”) and as Issuing
Bank under the Credit Agreement referred to below.

 

W I T N E S S E T H:

 

WHEREAS, the Parent,
Borrower, Administrative Agent, the Lenders and the Issuing Bank are parties to that certain Second Amended and Restated Senior
Secured Revolving Credit Agreement dated as of May 14, 2019 (as amended, restated, supplemented or otherwise modified prior to
the date hereof, the “Existing Credit Agreement”, and as amended by this Amendment and as further amended,
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), whereby upon
the terms and conditions therein stated the Lenders have agreed to make certain loans to the Borrower upon the terms and conditions
set forth therein;

 

WHEREAS, the Borrower
has requested that the Lenders amend the Credit Agreement as set forth below; and

 

WHEREAS, subject to
the terms and conditions hereof, the Lenders are willing to agree to the amendments to the Credit Agreement as set forth herein.

 

NOW, THEREFORE, for
and in consideration of the mutual covenants and agreements herein contained, the parties to this Amendment hereby agree as follows:

 

SECTION
1.        Definitions.
Unless otherwise defined in this Amendment, each capitalized term used herein but not otherwise
defined herein has the meaning given such term in the Credit Agreement. The interpretive provisions set forth in Section
1.04 of the Credit Agreement shall apply to this Amendment. 

 

SECTION
2.        Amendments
to Credit Agreement. Effective on the Amendment Effective Date, the Credit Agreement is amended as follows:

 

(a)               
Section 1.02 of the Credit Agreement is amended by inserting the following definitions in proper alphabetical
order:

 

“Benchmark
Replacement” means the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected
by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate
or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention
for determining a rate of interest as a replacement to the LIBO Screen Rate for U.S. dollar-denominated syndicated credit facilities
and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero,
the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

 

“Benchmark
Replacement Adjustment” means, with respect to any replacement of the LIBO Screen Rate with an Unadjusted Benchmark
Replacement for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the
Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or
determining such spread adjustment, for the replacement of the LIBO Screen Rate with the applicable Unadjusted Benchmark
Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a
spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBO Screen
Rate with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such
time.

 

     

     

    

 

“Benchmark
Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational
changes (including changes to the definition of “Alternate Base Rate,” the definition of “Interest Period,”
timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative
Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration
thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent
decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines
that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the
Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

 

“Benchmark
Replacement Date” means the earlier to occur of the following events with respect to the LIBO Screen Rate:

 

		(1)	in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,”
the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the
administrator of the LIBO Screen Rate permanently or indefinitely ceases to provide the LIBO Screen Rate; or

 

		(2)	in the case of clause (3) of the definition of “Benchmark Transition Event,” the date
of the public statement or publication of information referenced therein.

 

“Benchmark
Transition Event” means the occurrence of one or more of the following events with respect to the LIBO Screen Rate:

 

		(1)	a public statement or publication of information by or on behalf of the administrator of the LIBO
Screen Rate announcing that such administrator has ceased or will cease to provide the LIBO Screen Rate, permanently or indefinitely,
provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide
the LIBO Screen Rate;

 

		(2)	a public statement or publication of information by the regulatory supervisor for the administrator
of the LIBO Screen Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for the
LIBO Screen Rate, a resolution authority with jurisdiction over the administrator for the LIBO Screen Rate, or a court or an entity
with similar insolvency or resolution authority over the administrator for the LIBO Screen Rate, which states that the administrator
of the LIBO Screen Rate has ceased or will cease to provide the LIBO Screen Rate permanently or indefinitely, provided that, at
the time of such statement or publication, there is no successor administrator that will continue to provide the LIBO Screen Rate;
or

 

		(3)	a public statement or publication of information by the regulatory supervisor for the administrator
of the LIBO Screen Rate announcing that the LIBO Screen Rate is no longer representative.

 

    2

     

    

 

“Benchmark
Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark
Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective
event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the
expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or
publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Majority Lenders,
as applicable, by notice to the Borrower, the Administrative Agent (in the case of such notice by the Majority Lenders) and the
Lenders.

 

“Benchmark
Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred
with respect to the LIBO Screen Rate and solely to the extent that the LIBO Screen Rate has not been replaced with a Benchmark
Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark
Replacement has replaced the LIBO Screen Rate for all purposes hereunder in accordance with Section 3.03(b)-(e) and
(y) ending at the time that a Benchmark Replacement has replaced the LIBO Screen Rate for all purposes hereunder pursuant to Section
3.03(b)-(e).

 

“Consolidated
Cash Balance” shall mean, at any time, (a) the aggregate amount of cash and Cash Equivalents of the Loan Parties (determined
in accordance with GAAP), minus (b) the amount of cash for which any Loan Party has issued checks or initiated wires or
ACH transfers in order to utilize such cash (or will, within five (5) Business Days issue checks or initiate wires or ACH transfers
in order to utilize such cash) on account of transactions not prohibited by this Agreement; provided that Consolidated Cash Balance
shall exclude: (i) any cash and Cash Equivalents set aside for payroll or employee benefits, the payment of withholding or other
taxes of any Loan Party, or the payment of royalty and working interest payments, in each case, accrued as of such measurement
date and payable to third parties in the ordinary course of business, (ii) any cash and Cash Equivalents of any Loan Party constituting
purchase price deposits held in escrow pursuant to a binding and enforceable purchase and sale agreement with a third party containing
customary provisions regarding the payment and refunding of such deposits, (iii) any cash and Cash Equivalents of any Loan Party
constituting purchase price holdback amounts held in escrow pursuant to a binding and enforceable purchase and sale agreement with
a third party containing customary provisions regarding the disbursement of such holdback amounts and (iv) any cash and Cash Equivalents
received by Parent from (x) equity contributions made to it or (y) issuances of Equity Interests of Parent, so long as such cash
and/or Cash Equivalents are deposited into a segregated Controlled Account.

 

“Consolidated
Cash Balance Limit” shall mean $10,000,000.

 

“Early
Opt-in Election” means the occurrence of:

 

		(1)	(i) a determination by the Administrative Agent or (ii) a notification by the Majority Lenders
to the Administrative Agent (with a copy to the Borrower) that the Majority Lenders have determined, in each case, that U.S. dollar-denominated
syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 3.03(b)-(e)
are being executed or amended, as applicable,
to incorporate or adopt a new benchmark interest rate to replace the LIBO Screen Rate, and

 

		(2)	(i) the election by the Administrative Agent or (ii) the election by the Majority Lenders, in each
case, to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written
notice of such election to the Borrower and the Lenders or by the Majority Lenders of written notice of such election to the Administrative
Agent.

 

    3

     

    

 

“Excess
Cash” shall have the meaning set forth in Section 3.04(g).

 

“Excess
Cash Payment” shall mean any payment contemplated by Section 3.04(g).

 

“Federal
Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org,
or any successor source.

 

“Relevant
Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially
endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

 

“SOFR”
with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York
(or a successor administrator), as the administrator of the benchmark, on the Federal Reserve Bank of New York’s Website.

 

“Term
SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental
Body.

 

“Unadjusted
Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

 

(b)               
Section 3.03(a)(i) of the Credit Agreement is amended by inserting the following at the end thereof
after the words “for such Interest Period”: “, provided that no Benchmark Transition Event or Early Opt-In Election
shall have occurred at such time or for such Interest Period;”.

 

(c)               
Section 3.03(b) of the Credit Agreement is amended and restated in its entirety as follows:

 

“(b)Notwithstanding
anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early
Opt-in Election, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the LIBO Screen Rate
with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m.
on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all Lenders and the Borrower
so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders
comprising the Majority Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date
that Lenders comprising the Majority Lenders have delivered to the Administrative Agent written notice that such Majority Lenders
accept such amendment. No replacement of the LIBO Screen Rate with a Benchmark Replacement pursuant to these provisions will occur
prior to the applicable Benchmark Transition Start Date.”

 

    4

     

    

 

(d)               
 Section 3.03 of the Credit Agreement is amended by inserting the following as new clauses (c),
(d) and (e):

 

“(c)     In
connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement
Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments
implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other
party to this Agreement.

 

(d)       The
Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or
an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the
implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the
commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by
the Administrative Agent or Lenders pursuant to this Section 3.03(b)-(e), including any determination with respect
to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take
or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion
and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 3.03(b)-(e).

 

(e)       Upon
the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request
for a Eurodollar Borrowing of, conversion to or continuation of Eurodollar Loans to be made, converted or continued during any
Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request
for a Borrowing of or conversion to ABR Loans. During any Benchmark Unavailability Period, the component of Alternate Base Rate
based upon the Adjusted LIBO Rate will not be used in any determination of Alternate Base Rate.”

 

(e)               
Section 3.04 of the Credit Agreement is amended by inserting the following as a new clause (g):

 

“(g)     Special Prepayment
Provision for Excess Cash. If the Consolidated Cash Balance exceeds the Consolidated Cash Balance Limit for five (5) consecutive
Business Days (the amount of such excess on such fifth (5th) Business Day being “Excess Cash”) and if there
are outstanding Borrowings on such fifth (5th) Business Day, then the Borrower shall, on the Business Day immediately following
such fifth (5th) Business Day, prepay the Loans in an aggregate amount equal to such Excess Cash. The prepayment of Borrowings
pursuant to this Section 3.04(g) shall be applied as provided in Section 3.04(c)(v) and (vi).

 

(f)                
Section 9.01(a) of the Credit Agreement is amended by replacing “4.00” with “3.50”.

 

(g)               
Section 12.02(b) of the Credit Agreement is amended by deleting “Subject to Section 3.03(b)
and Section 12.02(c) below,” and replacing it with “Subject to Section 3.03(b)-(e) with respect to the
implementation of a Benchmark Replacement or Benchmark Replacmeent Conforming Changes (as set forth therein) and Section 12.02(c)
below,”.

 

(h)               
Article XII of the Credit Agreement is amended by inserting the following as a new Section 12.24:

 

“Section
12.24Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a
guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit
Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with
respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder,
the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and
QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in
fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United
States): 

 

    5

     

    

 

(a)       In
the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding
under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any
interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported
QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective
under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and
rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party
or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights
under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against
such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S.
Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state
of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties
with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or
any QFC Credit Support.

 

(b)       As
used in this Section 12.24, the following terms have the following meanings:

 

“BHC
Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance
with, 12 U.S.C. 1841(k)) of such party.

 

“Covered
Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in
accordance with, 12 C.F.R. §252.82(b); (ii)a “covered bank” as that term is defined in, and interpreted in accordance
with, 12 C.F.R. §47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with,
12 C.F.R. §382.2(b).

 

“Default
Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§252.81,
47.2 or 382.1, as applicable.

 

“QFC”
has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with,
12 U.S.C. 5390(c)(8)(D).”

 

SECTION
3.        Limited
Waiver. Effective as of the Amendment Effective Date, Parent, the Borrower,
the Administrative Agent and the Lenders party hereto hereby agree that, subject to the terms and conditions of this
Amendment, any Default or Event of Default that has occurred or may occur under Section 10.01(d) of the Credit
Agreement solely in connection with a breach of Section 9.01(b) of the Credit Agreement as a result of the
failure of Parent and the Borrower to not permit, as of the last day of the Fiscal Quarter ending September 30, 2020, the
Current Ratio of Parent and its Consolidated Subsidiaries as of such day to be less than 1.00 to 1.00 (the
“Specified Default”) is hereby waived by the Administrative Agent and the Lenders party hereto.
This Section 3 is limited precisely as written and shall not be deemed to (a) be a waiver of or a consent to
the modification of or deviation from any term or condition of the Credit Agreement or the other Loan Documents or any of the
other instruments or agreements referred to therein other than as expressly set forth in this Section 3 or (b)
prejudice any right or rights which any of the Lenders or the Administrative Agent now have or may have in the future under
or in connection with the Credit Agreement, the Loan Documents or any of the other instruments or agreements referred to
therein.

 

    6

     

    

 

SECTION
4.        Borrowing
Base. Effective on the Amendment Effective Date, the Borrowing Base is reaffirmed
at $120,000,000 until the next redetermination or adjustment thereof pursuant to the Credit Agreement. The Borrowing Base redetermination
provided for by this Amendment is the September 1, 2020 Scheduled Redetermination under the Credit Agreement. This Amendment shall
serve as a New Borrowing Base Notice under the Credit Agreement.

 

SECTION
5.        Conditions
of Effectiveness.

 

(a)               
This Amendment shall become effective as of the date (the “Amendment Effective Date”) that
each of the following conditions precedent shall have been satisfied (or waived in accordance with Section 12.02
of the Credit Agreement):

 

(1)              
The Administrative Agent shall have received (which may be by electronic transmission), in form and substance satisfactory
to the Administrative Agent, a counterpart of this Amendment which shall have been executed by the Administrative Agent, the Issuing
Bank, the Lenders, the Borrower and the Parent (which may be by PDF transmission);

 

(2)               
Each of the representations and warranties set forth in Section 6 of this Amendment shall be true and
correct;

 

(3)               
Since December 31, 2019, there has been no event, development or circumstance that has had or would reasonably be
expected to have a Material Adverse Effect; and

 

(4)               
Borrower shall have paid all fees and expenses due to the Lenders, the Administrative Agent, the Issuing Bank and
the Arranger (including, but not limited to, reasonable attorneys’ fees of counsel to the Administrative Agent).

 

(b)               
Without limiting the generality of the provisions of Sections 6.01 and 6.02 of the Credit
Agreement, for purposes of determining compliance with the conditions specified in Section 5(a), each Lender that
has signed this Amendment (and its permitted successors and assigns) shall be deemed to have consented to, approved or accepted,
or to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory
to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed Amendment
Effective Date specifying its objection thereto.

 

SECTION
6.        Representations
and Warranties. Each of the Parent and the Borrower represents and warrants to Administrative Agent and the Lenders, with
full knowledge that such Persons are relying on the following representations and warranties in executing this Amendment, as follows:

 

(a)               
It has the organizational power and authority to execute, deliver and perform this Amendment, and all organizational
action on the part of it requisite for the due execution, delivery and performance of this Amendment has been duly and effectively
taken.

 

    7

     

    

 

(b)               
 The Credit Agreement, the Loan Documents and each and every other document executed and delivered to the Administrative
Agent and the Lenders in connection with this Amendment to which such Loan Party is a party constitute the legal, valid and binding
obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

 

(c)               
This Amendment does not and will not violate any provisions of any of limited liability company agreement, bylaws
and other organizational and governing documents of such Loan Party.

 

(d)               
No consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except
those as have been obtained or made and are in full force and effect, is required in connection with the execution, delivery or
performance by, or enforcement against, such Loan Party of this Amendment.

 

(e)               
Before (except with respect to the Specified Default) and after giving effect to this Amendment, the representations
and warranties of such Loan Party contained in Article VII of the Credit Agreement or in any other Loan Document
are true and correct in all material respects (unless already qualified by materiality in which case such applicable representation
and warranty shall be true and correct), except that any representation and warranty which by its terms is made as of a an earlier
date shall be required to be so true and correct in all material respects only as of such earlier date.

 

(f)                
Before (except with respect to the Specified Default) and after giving effect to this Amendment, no Default, Event
of Default or Borrowing Base Deficiency will exist and be continuing.

 

(g)               
Since December 31, 2019, there has been no event, development or circumstance that has had or would reasonably be
expected to have a Material Adverse Effect.

 

SECTION
7.        Miscellaneous.

 

(a)               
Reference to the Credit Agreement. Upon the effectiveness hereof, on and after the date hereof, each
reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,”
or words of like import, shall mean and be a reference to the Credit Agreement as amended hereby.

 

(b)               
Effect on the Credit Agreement; Ratification. Except as specifically amended by this Amendment, the
Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. By its acceptance hereof, each of
the Parent and the Borrower hereby ratifies and confirms each Loan Document to which it is a party in all respects, after giving
effect to the amendments set forth herein.

 

(c)               
Extent of Amendments. Except as otherwise expressly provided herein, the Credit Agreement and the other
Loan Documents are not amended, modified or affected by this Amendment. Each of the Parent and the Borrower hereby ratifies and
confirms that (i) except as expressly amended hereby, all of the terms, conditions, covenants, representations, warranties and
all other provisions of the Credit Agreement remain in full force and effect, (ii) each of the other Loan Documents are and remain
in full force and effect in accordance with their respective terms, and (iii) the Collateral and the Liens on the Collateral securing
the Secured Obligations are unimpaired by this Amendment and remain in full force and effect.

 

(d)                Loan
Documents. The Loan Documents, as such may be amended in accordance herewith, are and remain legal, valid and binding
obligations of the parties thereto, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law. This Amendment is a Loan Document.

 

    8

     

    

 

(e)               
Claims. As additional consideration to the execution, delivery, and performance of this Amendment by
the parties hereto and to induce Administrative Agent and Lenders to enter into this Amendment, the Borrower represents and warrants
that, as of the date hereof, it does not know of any defenses, counterclaims or rights of setoff to the payment of any Secured
Obligations of the Borrower to Administrative Agent, Issuing Bank or any Lender.

 

(f)                
Execution and Counterparts. 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
of which taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of this Amendment
by facsimile or pdf shall be equally as effective as delivery of a manually executed counterpart.

 

(g)               
Governing Law. This Amendment and any claims, controversy, dispute or cause of action (whether in contract
or tort or otherwise) based upon, arising out of or relating to this Amendment and the transactions contemplated hereby and thereby
shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof)
of the State of New York.

 

(h)               
Headings. Section headings in this Amendment are included herein for convenience and reference only
and shall not constitute a part of this Amendment for any other purpose.

 

SECTION
8.        NO
ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF EACH OF THE PARTIES TO THE LOAN DOCUMENTS SHALL BE DETERMINED SOLELY FROM WRITTEN
AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND
ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AMENDMENT AND THE OTHER WRITTEN
LOAN DOCUMENTS EXECUTED BY THE BORROWER, the Parent, ADMINISTRATIVE AGENT, ISSUING BANK AND/OR LENDERS REPRESENT THE FINAL AGREEMENT
BETWEEN SUCH PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY
SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.

 

SECTION
9.        No
Waiver. The Borrower hereby agrees that, except with respect to the Specified Default, no Event of Default and no Default
has been waived or remedied by the execution of this Amendment by the Administrative Agent or any Lender. Nothing contained in
this Amendment (a) shall constitute or be deemed to constitute a waiver of any Defaults or Events of Default which may exist under
the Credit Agreement or the other Loan Documents (except with respect to the Specified Default), or (b) shall constitute or be
deemed to constitute an election of remedies by the Administrative Agent, Issuing Bank or any Lender, or a waiver of any of the
rights or remedies of the Administrative Agent, Issuing Bank or any Lender provided in the Credit Agreement, the other Loan Documents,
or otherwise afforded at law or in equity.

 

Signatures Pages Follow

 

    9

     

    

 

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

 

	PARENT:	 
        GOODRICH PETROLEUM CORPORATION

	 	 
	 	By:	/s/ Michael J. Killelea
	 	Name:	Michael J. Killelea
	 	Title:	Executive Vice President, General Counsel and Corporate Secretary 

 

	BORROWER:	GOODRICH PETROLEUM COMPANY, L.L.C.
	 	 
	 	By:	/s/ Michael J. Killelea
	 	Name:	Michael J. Killelea
	 	Title:	Executive Vice President, General Counsel and Corporate Secretary

 

Signature Page to Third Amendment to Credit Agreement

 

     

     

    

 

	 	TRUIST BANK, SUCCESSOR BY MERGER TO SUNTRUST BANK,
	 	as Administrative Agent, as Issuing Bank and as a Lender
	 	 
	 	By:	/s/ Benjamin L. Brown
	 	 	Name:	Benjamin L. Brown
	 	 	Title:	Director
	 	 

Signature Page to Third Amendment to Credit Agreement

 

     

     

    

 

	 	ROYAL BANK OF CANADA
	 	 
	 	By:	/s/ Katy Berkemeyer
	 	Name:	Katy Berkemeyer
	 	Title:	Authorized Signatory

 

Signature Page to Third Amendment to Credit Agreement

 

     

     

    

 

	 	Citizens Bank, N.A.
	 	 
	 	By:	/s/ Kelly Graham
	 	Name:	Kelly Graham
	 	Title:	Vice President

 

Signature Page to Third Amendment to Credit Agreement

 

     

     

    

 

	 	CIT BANK, N.A.
	 	 
	 	By:	/s/ John Feeley
	 	Name:	John Feeley
	 	Title:	Director

 

Signature Page to Third Amendment to Credit Agreement

 

     

     

    

 

	 	CATHAY BANK
	 	 
	 	By:	/s/ Dale T Wilson 
	 	Name:	Dale T Wilson
	 	Title:	Senior Vice President 

 

Signature Page to Third Amendment to Credit Agreement

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