Document:

RL-2013.06.29-10Q EX10.1

EXHIBIT 10.1
RALPH LAUREN CORPORATION 
AMENDED AND RESTATED 2010 LONG-TERM STOCK INCENTIVE PLAN 
As amended through August 8, 2013 
SECTION 1.    PURPOSE AND HISTORY.  The purposes of this Amended and Restated Ralph Lauren Corporation 2010 Long-Term Stock Incentive Plan are to promote the interests of the Ralph Lauren Corporation and its stockholders by (i) attracting and retaining exceptional directors, officers and other employees and third party service providers of the Company and its Subsidiaries, as defined below; (ii) motivating such individuals by means of performance-related incentives to achieve longer-range performance goals; and (iii) enabling such individuals to participate in the long-term growth and financial success of the Company. The Plan was originally adopted by the Company's Board of Directors on June 17, 2010 and originally approved by the Company's stockholders on August 5, 2010. 
SECTION 2.    DEFINITIONS.  As used in the Plan, the following terms shall have the meanings set forth below: 
“Affiliate” shall mean (i) any Person that, directly or indirectly, is controlled by, or controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee. 
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award, Other Stock-Based Award or Performance Compensation Award. 
“Award Agreement” shall mean any agreement, contract, or other instrument or document, in any form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter), evidencing any Award or the terms and conditions thereof, which may, but need not, be executed or acknowledged by a Participant. 
“Board” shall mean the Board of Directors of the Company. 
“Cause” shall mean in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) the Company or an Affiliate having “cause” to terminate a Participant's employment or service, as defined in any employment or consulting agreement between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein): (A) failure by the Participant to perform the duties of the Participant to the Company or an Affiliate (other than due to his or her Disability), provided that such conduct shall not constitute Cause unless and until such failure by Participant to perform his or her duties has not been cured to the satisfaction of the Company, in its sole discretion, within fifteen (15) days after notice of such failure has been given by the Company to Participant; (B) an act of fraud, embezzlement, theft, breach of fiduciary duty, dishonesty, or any other misconduct or any violation of law (other than a traffic violation) committed by the Participant; (C) any action by the Participant causing damage to or misappropriation of the Company's assets; (D) the Participant's wrongful disclosure of confidential information of the Company or any of its Affiliates; (E) the Participant's breach of (x) any non-competition, non-solicitation, non-disparagement or other restrictive covenants to which he or she is subject under any employment or consulting agreement or otherwise, and/or (y) the Participant's duty of loyalty; (F) the Participant's breach of any employment policy of the Company, including, but not limited to, conduct relating to falsification of business records, violation of the Company's code of business conduct & ethics, harassment, creation of a hostile work environment, excessive absenteeism, insubordination, violation of the Company's policy on drug & alcohol use, or violent acts or threats of violence; (G) performance by the Participant of his or her employment duties in a manner deemed by the Committee, in its sole discretion, to be grossly negligent; or (H) the commission of any act by the Participant, whether or not performed in the workplace, which subjects or, if publicly known, would be likely to subject the Company to public ridicule or embarrassment, or would likely be detrimental or damaging to the Company's reputation, goodwill, or relationships with its customers, suppliers, vendors, licensees or employees. Any determination of whether Cause exists shall be made by the Committee in its sole discretion. 
“Change of Control” shall mean the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act other than Permitted Holders; (ii) any 

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person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have “beneficial ownership” of all Shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50 percent of the total voting power of the voting stock of the Company, including by way of merger, consolidation or otherwise; provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate, (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate, (III) any acquisition by one or more of the Permitted Holders, or (IV) any acquisition which complies with clauses (A), (B) and (C) of subsection (v) below; (iii) during any period of twelve (12) consecutive months, Present and/or New Directors cease for any reason to constitute a majority of the Board; (iv) the Permitted Holders' beneficial ownership of the total voting power of the voting stock of the Company falls below 30 percent and either Ralph Lauren is not nominated for a position on the Board, or he stands for election to the Board and is not elected; (v) the consummation of a reorganization, recapitalization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company's stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), if immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Company”), or (y) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Shares that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the shares of voting stock of the Company were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power was among the holders of the Shares that were outstanding immediately prior to the Business Combination, (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company, or one or more Permitted Holders), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company) and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination; or (vi) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company. 
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. 
“Committee” shall mean either (i) the Board or (ii) a committee of the Board designated by the Board to administer the Plan and composed of not less two directors, each of whom is required to be a “Non-Employee Director” (within the meaning of Rule 16b-3) and an “outside director” (within the meaning of Section 162(m) of the Code) to the extent Rule 16b-3 and Section 162(m) of the Code, respectively, are applicable to the Company and the Plan. If at any time such a committee has not been so designated, the Board shall constitute the Committee. 
“Company” shall mean the Ralph Lauren Corporation, together with any successor thereto. 
“Disability” shall mean that as a result of a Participant's incapacity due to physical or mental illness, the Participant shall have been (or the Committee reasonably determines that the Participant is reasonably likely to be) absent and unable to perform the duties of the Participant's position on a full-time basis for an entire period of six consecutive months. 
“Effective Date” shall mean the date on which this Plan is approved by the Stockholders of the Company at the Company's 2010 annual meeting of Stockholders. 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
“Fair Market Value” shall mean, (A) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee and (B) with respect to the Shares, as of any date, (i) the mean between the high and low sales prices of the Shares (provided that the Committee may in its discretion use the closing sales price) as reported on the New York Stock Exchange for such date (or if not then trading on the New York Stock Exchange, the mean between the high and low sales price of the Shares (provided that the Committee may in its discretion use the closing sales price) on the stock exchange or over-the-counter market on which the Shares are principally trading on such date), or if, there were no sales on such date, on the closest preceding date on which there were sales of Shares or (ii) in the event there shall be no public market for the Shares on such date, the fair market value of the Shares as determined in good faith by the Committee. 

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 “Full Value Award” shall mean an Award which is other than in the form of an Option or Stock Appreciation Right, and that is settled by the issuance of Shares. 
“Good Reason” shall mean in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) the Participant having “good reason” to terminate his or her employment or service, as defined in any employment or consulting agreement between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “good reason” contained therein), Good Reason shall not apply to such Participant. 
“Incentive Stock Option” shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. 
“Negative Discretion” shall mean the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award; PROVIDED that the exercise of such discretion would not cause the Performance Compensation Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code. By way of example and not by way of limitation, in no event shall any discretionary authority granted to the Committee by the Plan including, but not limited to, Negative Discretion, be used to (a) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (b) increase a Performance Compensation Award above the maximum amount payable under Sections 4(a) or 11(d)(vi) of the Plan. Notwithstanding anything herein to the contrary, in no event shall Negative Discretion be exercised by the Committee with respect to any Option or Stock Appreciation Right (other than an Option or Stock Appreciation Right that is intended to be a Performance Compensation Award under Section 11 of the Plan). 
“New Directors” shall mean any directors whose election by the Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company who, at the time of such vote, were either Present Directors or New Directors but excluding any such individual whose initial assumption of office occurs solely as a result of an actual or threatened proxy contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board. 
“Non-Qualified Stock Option” shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is not intended to be an Incentive Stock Option. 
“Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option. 
“Other Stock-Based Award” shall mean any right granted under Section 10 of the Plan. 
“Participant” shall mean any Person eligible to receive an Award under Section 5 of the Plan and selected by the Committee to receive an Award under the Plan. 
 “Performance Award” shall mean any right granted under Section 9 of the Plan. 
“Performance Compensation Award” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan. 
“Performance Criteria” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company (and/or one or more Subsidiaries, Affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments or any combination of the foregoing) and shall be limited to the following: (a) net earnings or net income (before or after taxes); (b) basic or diluted earnings per share (before or after taxes); (c) net revenue or net revenue growth; (d) gross revenue or gross revenue growth, or gross profit or gross profit growth; (e) net operating profit (before or after taxes); (f) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (g) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital), which may but are not required to be measured on a per share basis; (h) earnings before or after taxes, interest, depreciation and/or amortization; (i) gross or net operating margins; (j) productivity ratios; (k) share price (including, but not limited to, growth measures and total stockholder return); (l) expense targets or cost reduction goals; (m) general and administrative expense savings; (n) operating efficiency; (o) objective measures of customer satisfaction; 

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(p) working capital targets; (q) measures of economic value added or other “value creation” metrics; (r) inventory control; (s) enterprise value; (t) customer retention; (u) competitive market metrics; (v) employee retention; (w) timely completion of new product rollouts; (x) timely launch of new facilities; (y) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (z) royalty income; (aa) same store sales (comparable sales), comparisons of continuing operations to other operations; (bb) market share; (cc) new store openings (gross or net), store remodelings; (dd) cost of capital, debt leverage year-end cash position or book value; (ee) strategic objectives, development of new product lines and related revenue, sales and margin targets, franchisee growth and retention, menu design and growth, co-branding or international operations; or (ii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criterion, or used on an absolute or relative basis to measure the performance of the Company, Subsidiary and/or Affiliate as a whole or any divisions or operational and/or business units, product lines, brands, business segments, or administrative departments of the Company, Subsidiary and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period. In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. 
“Performance Formula” shall mean, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period. 
“Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. The Committee is authorized at any time during the first 90 days of a Performance Period, or at any time thereafter (but only to the extent the exercise of such authority after the first 90 days of a Performance Period would not cause the Performance Compensation Awards granted to any Participant for the Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code), in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code in order to prevent the dilution or enlargement of the rights of Participants based on the following events: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in the Financial Accounting Standards Board Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year, (f) acquisitions or divestitures, (g) any other specific, unusual or nonrecurring events, or objectively determinable category thereof, (h) foreign exchange gains and losses, and (i) a change in the Company's fiscal year. To the extent such inclusions or exclusions affect Awards to Participants, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility. 
“Performance Period” shall mean the one or more periods of time of at least one year in duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to and the payment of a Performance Compensation Award. 
“Permitted Holders” shall mean, as of the date of determination, (i) any and all of Ralph Lauren, his spouse, his siblings and their spouses, and descendants of any of them (whether natural or adopted) (collectively, the “Lauren Group”) and (ii) any trust established and maintained primarily for the benefit of any member of the Lauren Group and any entity controlled by any member of the Lauren Group. 
“Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. 
 “Plan” shall mean this Amended and Restated Ralph Lauren Corporation 2010 Long-Term Stock Incentive Plan. 

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“Present Directors” shall mean individuals who at the beginning of any one year period were members of the Board. 
“Prior Plan” shall mean the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan, as amended. 
“Restricted Stock” shall mean any Share granted under Section 8 of the Plan. 
“Restricted Stock Unit” shall mean any unit granted under Section 8 of the Plan. 
“Rule 16b-3” shall mean Rule 16b-3 as promulgated and interpreted by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time. 
“SEC” shall mean the Securities and Exchange Commission or any successor thereto and shall include the Staff thereof. 
“Shares” shall mean the shares of Class A Common Stock of the Company, $.01 par value, or such other securities of the Company (i) into which such common shares shall be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar transaction or (ii) as may be determined by the Committee pursuant to Section 4(b). 
“Stock Appreciation Right” shall mean any right granted under Section 7 of the Plan. 
“Subsidiary” shall mean (i) any entity that, directly or indirectly, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee. 
“Substitute Awards” shall have the meaning specified in Section 4(c). 
“Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who is a natural person and who renders services to the Company, a Subsidiary, or an Affiliate, that (a) are not in connection with the offer and sale of the Company's securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company's securities. 
SECTION 3.    EFFECTIVE DATE AND ADMINISTRATION. 
(a)         The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards. 
(b)         The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant and designate those Awards which shall constitute Performance Compensation Awards; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award (subject to Section 162(m) of the Code with respect to Performance Compensation Awards) shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret, administer reconcile any inconsistency, correct any default and/or supply any omission in the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (ix) establish and administer Performance Goals and certify whether, and to what extent, they have been attained; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. 
(c)        Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder. 

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(d)         The mere fact that a Committee member shall fail to qualify as a “Non-Employee Director” or “outside director” within the meaning of Rule 16b-3 and Code Section 162(m), respectively, shall not invalidate any award made by the Committee which award is otherwise validly made under the Plan. 
(e)        No member of the Board, the Committee or any employee or agent of the Company (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys' fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award Agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company's approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company's choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person's fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company's Certificate of Incorporation or By Laws. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company's Amended and Restated Certificate of Incorporation or By Laws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless. 
(f)         With respect to any Performance Compensation Award granted under the Plan, the Plan shall be interpreted and construed in accordance with Section 162(m) of the Code. 
(g)         Notwithstanding the foregoing, the Committee may delegate, in a manner consistent with Section 157(c) of the Delaware General Corporation Law (or other applicable law), to one or more officers of the Company (i) the authority to grant awards to Participants who are not officers or directors of the Company subject to Section 16 of the Exchange Act or “covered employees” within the meaning of Section 162(m) of the Code or (ii) the authority to make certain determinations permitted or required to be made by the Committee under the Plan (including, without limitation, determinations relating to the existence of Cause or Disability). 
(h)         Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the New York Stock Exchange or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan. 
SECTION 4.         SHARES AVAILABLE FOR AWARDS. 
(a)        SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b), the aggregate number of Shares with respect to which Awards may be granted under the Plan shall be the sum (such sum, the “Absolute Share Limit”) of (a) the original amount reserved under the Plan (i.e., the sum of (i) the number of Shares remaining available for issuance as of August 5, 2010 under the Prior Plan that were not subject to outstanding awards under the Prior Plan plus (ii) 3,000,000), plus (b) 1,700,000; the maximum number of Shares with respect to which Awards may be granted to any Participant who is a director of the Company but not an employee of the Company in any fiscal year may not exceed 25,000; the maximum number of Shares with respect to which Options and Stock Appreciation Rights may be granted to any Participant in any fiscal year shall be 1,000,000 and the maximum number of Shares which may be paid to a Participant in the Plan in connection with the settlement of any Award(s) designated as “Performance Compensation Awards” in respect of a single Performance Period shall be 1,000,000 or, in the event such Performance Compensation Award is paid in cash, the equivalent cash value thereof. In addition, of the Shares reserved for issuance under the Plan pursuant to this Section 4(a), no more than the Absolute Share Limit may be issued pursuant to Incentive Stock Options. If, after the Effective Date of the Plan, any Shares covered by an Award granted under the Plan or an award granted 

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under the Prior Plan, or to which such an Award relates, are forfeited, or if an Award granted under the Plan (or an award granted under the Prior Plan) has expired, terminated or been canceled for any reason whatsoever (other than by reason of exercise or vesting), then the Shares covered by such Award (or award granted under the Prior Plan) shall again be, or shall become, Shares with respect to which Awards may be granted hereunder. In addition, Shares delivered (either directly or by means of attestation or withholding) in full or partial payment of any tax withholding obligation, shall be deducted from the number of Shares delivered to the Participant pursuant to such Award (or award granted under the Prior Plan) for purposes of determining the number of Shares acquired pursuant to the Plan; provided, that notwithstanding the foregoing, in no event shall any of the following Shares again be made available for issuance in respect of Awards under the Plan: (i) Shares not issued or delivered as a result of the net settlement of an outstanding Stock Appreciation Right or Option; (ii) Shares used to pay the exercise price, strike price or withholding taxes in respect of an outstanding Stock Appreciation Right or Option; or (iii) Shares repurchased on the open market with the proceeds of the exercise price of an Option. 
(b)         ADJUSTMENTS. Notwithstanding any provisions of the Plan to the contrary, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee in its discretion to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, (ii) the number of Shares or other securities of the Company (or number and kind of other securities or property) which may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including without limitation adjusting any or all of the limitations in Section 4(a) of the Plan), (iii) the terms of any outstanding Award, including, without limitation, (1) the number of Shares or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate (2) the grant or exercise price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals), (iv) if deemed appropriate, make provision for a payment in cash, Shares, other securities or other property, or any combination thereof, to the holder of an outstanding Award in consideration for the cancellation of such Award which, in the case of Options and Stock Appreciation Rights shall equal the excess if any, of the Fair Market Value of the Shares (which if applicable may be based upon the price per Share received or to be received by other stockholders of the Company in such event) subject to such Options or Stock Appreciation Rights over the aggregate exercise price or strike price of such Options or Stock Appreciation Rights (it being understood that, in such event, any Option or SAR having a per Share exercise price or strike price equal to, or in excess of, the Fair Market Value of a Share subject thereto may be canceled and terminated without any payment or consideration therefor), and (v) accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); 
PROVIDED, however, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 4(b) (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 4(b) shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes. 
(c)         SUBSTITUTE AWARDS. Subject to Section 12(b), Awards may, in the discretion of the Committee, be made under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its Affiliates or a company acquired by the Company or with which the Company combines (“Substitute Awards”). The number of Shares underlying any Substitute Awards shall be counted against the aggregate number of Shares available for Awards under the Plan. 
(d)        SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury Shares, Shares purchased on the open market, or by private purchase, or a combination of the foregoing. Following the Effective Date, no further awards shall be granted under any Prior Plan. 
(e)        FULL VALUE AWARDS. Except with respect to a maximum of five percent (5%) of the Shares authorized under the Plan, any Full Value Awards that vest solely on the basis of the Participant's continued employment with or provision of service 

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to the Company shall not provide for vesting that is any more rapid than annual pro rata vesting over a three (3) year period, and any Full Value Awards that vest upon the attainment of performance goals shall provide for a performance period of at least twelve (12) months. The vesting of Full Value Awards may only be accelerated upon (i) death, Disability, retirement or other termination of employment or service of the Participant or (ii) a Change of Control. 
SECTION 5.        ELIGIBILITY. Any director, officer or employee of, or Third Party Service Provider to, the Company or any of its Subsidiaries (including any prospective director, officer, employee or Third Party Service Provider) shall be eligible to be designated a Participant. 
SECTION 6.         STOCK OPTIONS. 
(a)        GRANT. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, the exercise price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant both types of Options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code, as from time to time amended, and any regulations implementing such statute. All Options when granted under the Plan are intended to be Non-Qualified Stock Options, unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. If an Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan's requirements relating to Non-Qualified Stock Options. 
 (b)         EXERCISE PRICE. The Committee shall establish the exercise price at the time each Option is granted, which exercise price shall be set forth in the applicable Award Agreement, but shall be no less than the Fair Market Value of a Share at the date of grant. 
(c)        EXERCISE. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable after the tenth anniversary of the grant date. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable. Options with an exercise price equal to or greater than the Fair Market Value per Share as of the date of grant are intended to qualify as “performance-based compensation” under Section 162(m) of the Code. 
(d)        PAYMENT. 
(i)         No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the aggregate exercise price therefor is received by the Company. Such payment may be made (x) in cash, or its equivalent or (y) by tendering to the Company Shares valued at Fair Market Value at the time the Option is exercised, which are not the subject of any pledge or other security interest or which have such other characteristics, if any, as may be determined by the Committee, or (z) subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such aggregate exercise price. 
(ii)        Wherever in this Plan or any Award Agreement a Participant is permitted to pay the exercise price of an Option or taxes relating to the exercise of an Option by delivering Shares, the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised without further payment and shall withhold such number of Shares from the Shares acquired by the exercise of the Option. 
(e)        NOTIFICATION UPON DISQUALIFYING DISPOSITION OF AN INCENTIVE STOCK OPTION. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Shares acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of any Shares acquired pursuant to any Incentive 

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Stock Option before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Shares acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares. 
 SECTION 7.        STOCK APPRECIATION RIGHTS. 
(a)        GRANT. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Stock Appreciation Right Award, the strike price thereof (which shall be no less than the Fair Market Value of a Share at the date of grant) and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights with a strike price equal to or greater than the Fair Market Value per Share as of the date of grant are intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to another Award. Stock Appreciation Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time. 
(b)        EXERCISE AND PAYMENT. A Stock Appreciation Right shall entitle the Participant to receive an amount equal to the excess of the Fair Market Value of a Share on the date of exercise of the Stock Appreciation Right over the strike price thereof. The Committee shall determine whether a Stock Appreciation Right shall be settled in cash, Shares or a combination of cash and Shares. 
(c)        OTHER TERMS AND CONDITIONS. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine, at or after the grant of a Stock Appreciation Right, the term, methods of exercise, methods and form of settlement, and any other terms and conditions of any Stock Appreciation Right; PROVIDED, HOWEVER, that no Stock Appreciation rights shall be exercisable after the tenth anniversary of the date of its grant. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted or exercised prior to such determination as well as Stock Appreciation Rights granted or exercised thereafter. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate. 
SECTION 8.        RESTRICTED STOCK AND RESTRICTED STOCK UNITS. 
(a)        GRANT. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Shares of Restricted Stock and Restricted Stock Units shall be granted, the number of Shares of Restricted Stock and/or the number of Restricted Stock Units to be granted to each Participant, the duration of the period during which, and the conditions, if any, under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company, and the other terms and conditions of such Awards. 
(b)        TRANSFER RESTRICTIONS. Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except, in the case of Restricted Stock, as provided in the Plan or the applicable Award Agreements. Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause Shares to be registered in the name of the Participant and held in book-entry form subject to the Company's directions. The Committee may also require that certificates issued in respect of Shares of Restricted Stock be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company. Upon the lapse of the restrictions applicable to such Shares of Restricted Stock, the Company shall deliver such certificates to the Participant or the Participant's legal representative. Subject to the restrictions set forth in this Section 8 and the applicable Award Agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock. To the extent Shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such Shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. 
(c)         PAYMENT. Each Restricted Stock Unit shall have a value equal to the Fair Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares, other securities or other property, as determined in the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. Dividends paid on any Shares of Restricted Stock may be paid directly to the Participant, withheld by the Company subject to vesting of the 

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Restricted Shares pursuant to the terms of the applicable Award Agreement, or may be reinvested in additional Shares of Restricted Stock or in additional Restricted Stock Units, as determined by the Committee in its sole discretion. 
(d)        MINIMUM VESTING REQUIREMENTS. Notwithstanding the foregoing, (i) except as provided in Section 4(e), any Awards of Shares of Restricted Stock and/or Restricted Stock Units that are Full Value Awards and vest solely on the basis of the Participant's continued employment with or provision of service to the Company shall not provide for vesting that is any more rapid than annual pro rata vesting over a three (3) year period, and any Awards of Shares of Restricted Stock and/or Restricted Stock Units that are Full Value Awards and vest upon the attainment of performance goals (whether or not combined with other conditions) shall provide for a performance period of at least twelve (12) months; and (ii) the vesting of Awards of Shares of Restricted Stock and/or Restricted Stock Units that are Full Value Awards may only be accelerated upon (A) death, Disability, retirement or other termination of employment or service of the Participant or (B) a Change of Control. 
SECTION 9.        PERFORMANCE AWARDS. 
(a)        GRANT. The Committee shall have sole and complete authority to determine the Participants who shall receive a “Performance Award”, which shall consist of a right which is (i) denominated in cash or Shares, (ii) valued, as determined by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine. 
(b)        TERMS AND CONDITIONS. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award. 
(c)        PAYMENT OF PERFORMANCE AWARDS. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the Committee, on a deferred basis. 
(d)        MINIMUM VESTING REQUIREMENTS. Notwithstanding the foregoing, (i) except as provided in Section 4(e), any Performance Awards that are Full Value Awards and vest upon the attainment of performance goals shall provide for a performance period of at least twelve (12) months; and (ii) the vesting of Performance Awards that are Full Value Awards may only be accelerated upon (A) death, Disability, retirement or other termination of employment or service of the Participant or (B) a Change of Control. 
SECTION 10.        OTHER STOCK-BASED AWARDS. 
(a)        GENERAL. The Committee shall have authority to grant to Participants an “Other Stock-Based Award”, which shall consist of any right which is (i) not an Award described in Sections 6 through 9 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan; provided that any such rights must comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award, including the price, if any, at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan. 
(b)        DIVIDEND EQUIVALENTS. In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis; provided, that no dividend equivalents shall be payable in respect of outstanding (i) Options or Stock Appreciation Rights or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than or in addition to the passage of time) (although dividend equivalents may be accumulated in respect of unearned Awards and paid after such Awards are earned and become payable or distributable). 
(c)        MINIMUM VESTING REQUIREMENTS. Notwithstanding the foregoing, (i) except as provided in Section 4(e), any “Other Stock-Based Awards” that are Full Value Awards and vest solely on the basis of the Participant's continued employment with or provision of service to the Company shall not provide for vesting that is any more rapid than annual pro rata vesting over a three (3) year period, and any “Other Stock-Based Awards” that are Full Value Awards and vest upon the attainment of performance goals shall provide for a performance period of at least twelve (12) months; and (ii) the vesting of “Other Stock-

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Based Awards” that are Full Value Awards may only be accelerated for (A) death, Disability, retirement or other termination of employment or service of the Participant or (B) a Change of Control. 
SECTION 11.        PERFORMANCE COMPENSATION AWARDS. 
(a)        GENERAL. The Committee shall have the authority, at the time of grant of any Award described in Sections 6 through 10 (other than Options and Stock Appreciation Rights granted with an exercise price or strike price, as the case may be, equal to or greater than the Fair Market Value per Share on the date of grant), to designate such Award as a Performance Compensation Award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code. 
(b)        ELIGIBILITY. The Committee will, in its sole discretion, designate within the first 90 days of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 11. Moreover, designation of a Participant eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period and designation of one Person as a Participant eligible to receive an Award hereunder shall not require designation of any other Person as a Participant eligible to receive an Award hereunder in such period or in any other period. 
(c)         DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE COMPENSATION AWARDS. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) is(are) to apply to the Company and the Performance Formula. Within the first 90 days of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 11(c) and record the same in writing. 
(d)        PAYMENT OF PERFORMANCE COMPENSATION AWARDS 
(i)         CONDITION TO RECEIPT OF PAYMENT. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period. 
(ii)         LIMITATION. A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (1) the Performance Goals for such period are achieved; and (2) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant's Performance Award has been earned for the Performance Period. 
(iii)         CERTIFICATION. Following the completion of a Performance Period, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant's Performance Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion, if and when it deems appropriate. 
(iv)         NEGATIVE DISCRETION. In determining the actual size of an individual Performance Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. 
(v)         TIMING OF AWARD PAYMENTS. The Awards granted for a Performance Period shall be paid to Participants as soon as administratively possible following completion of the certifications required by this Section 11. 
 
(vi)         MAXIMUM AWARD PAYABLE. Notwithstanding any provision contained in this Plan to the contrary, the maximum Performance Compensation Award payable to any one Participant under the Plan for a Performance Period is 

11

1,000,000 Shares or, in the event the Performance Compensation Award is paid in cash, the equivalent cash value thereof on the last day of the Performance Period to which such Award relates. Furthermore, any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (A) with respect to Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (B) with respect to a Performance Compensation Award that is payable in Shares, by an amount greater than the appreciation of a Share from the date such Award is deferred to the payment date. 
(e)        MINIMUM VESTING REQUIREMENTS. Notwithstanding the foregoing, (i) except as provided in Section 4(e), any Performance Compensation Awards that are Full Value Awards and vest upon the attainment of performance goals shall provide for a performance period of at least twelve (12) months; and (ii) the vesting of Performance Compensation Awards that are Full Value Awards may only be accelerated upon (A) death, Disability, retirement or other termination of employment or service of the Participant or (B) a Change of Control. 
SECTION 12.        AMENDMENT AND TERMINATION. 
(a)        AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided that (a) no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan; and provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would impair the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary, and (b) no material revision to the Plan shall be made without stockholder approval. A “material revision” shall include, without limitation: (i) a material increase in the number of Shares available under the Plan (other than an increase solely to reflect a reorganization, stock split, merger, spin-off or similar transaction); (ii) an expansion of the types of Awards available under the Plan; (iii) a material expansion of the class of employees, directors or other service providers eligible to participate in the Plan; (iv) a material extension of the term of the Plan; (v) a material change to the method of determining the exercise price of Options or strike price of Stock Appreciation Rights granted under the Plan; and (vi) the deletion or limitation of any provision prohibiting repricing of Options or Stock Appreciation Rights. 
(b)        AMENDMENTS TO AWARDS. The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would impair the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary; and provided, further, that, without stockholder approval, except as otherwise permitted under Section 4(b), (i) no amendment or modification may reduce the exercise price of any Option or the strike price of any Stock Appreciation Right, (ii) the Committee may not cancel any outstanding Option or Stock Appreciation Right and replace it with a new Option or Stock Appreciation Right (with a lower exercise price or strike price, as the case may be) or other Award or cash in a manner which would either (A) be reportable on the Company's proxy statement as Options or Stock Appreciation Rights which have been “repriced” (as such term is used in Item 402 of Regulation S-K promulgated under the Exchange Act), or (B) cause any Option or Stock Appreciation Right to fail to qualify for equity accounting treatment and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any applicable stock exchange on which the securities of the Company are listed. 
(c)         ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including, without limitation, the actions described in Section 4(b) hereof) in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(b) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, rules, rulings, regulations, or other requirements of any governmental body or securities exchange or inter-deal quotation system, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 
(d)        FORFEITURE EVENTS. For purposes of this Section 12(d), a “named executive officer” means a Participant who is a named executive officer of the Company (as defined for purposes of the executive compensation disclosure rules of the Exchange Act). The Committee may specify in an Award that a named executive officer's rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment, in the reasonable discretion of the Committee, upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance 

12

conditions of an Award. Such events may include, but shall not be limited to, termination of the named executive officer's employment for cause, material violation of material written policies of the Company, or breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the named executive officer, as determined by the Committee in its reasonable discretion. In addition, with respect to an Award, if, as a result of a named executive officer's intentional misconduct or gross negligence, as determined by the Committee in its reasonable discretion, the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, the Committee may, in its reasonable discretion, require the named executive officer to promptly reimburse the Company for the amount of any payment (whether in cash, Shares, other securities or other property) previously received by the named executive officer pursuant to any Award (or otherwise forfeit to the Company any outstanding Award) that was earned or accrued (or exercised or settled) during the twelve (12) month period following the earlier of the first public issuance or filing with the United States Securities and Exchange Commission of any financial document embodying such financial reporting requirement that required such accounting restatement. 
SECTION 13.        CHANGE OF CONTROL. In the event that a Participant's employment with the Company is terminated by the Company without Cause or by the Participant for Good Reason, in each case on or within 12 months following the date of a Change of Control, any outstanding Awards then held by such affected Participant which are unexercisable or otherwise unvested shall automatically be deemed exercisable or otherwise vested, as the case may be, as of immediately prior to such termination of employment; provided, that in the event the vesting or exercisability of any Award would otherwise be subject to the achievement of performance conditions, a portion of any such Award that shall become fully vested and immediately exercisable shall be based on (a) actual performance through the date of termination as determined by the Committee or (b) if the Committee determines that measurements of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee. 
SECTION 14.        GENERAL PROVISIONS. 
(a)        NONTRANSFERABILITY. 
(i)         Each Award, and each right under any Award, shall be exercisable only by the Participant during the Participant's lifetime, or, if permissible under applicable law, by the Participant's legal guardian or representative. 
(ii)         No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. 
(iii)         Notwithstanding the foregoing, the Committee may in the applicable Award Agreement evidencing an Option granted under the Plan or at any time thereafter in an amendment to an Award Agreement provide that Options granted hereunder which are not intended to qualify as Incentive Stock Options may be transferred by the Participant to whom such Option was granted (the “Grantee”) without consideration, subject to such rules as the Committee may adopt to preserve the purposes of the Plan, to: 
(A)            the Grantee's spouse, children or grandchildren (including adopted and stepchildren and grandchildren) (collectively, the “Immediate Family”); 
(B)            a trust solely for the benefit of the Grantee and his or her Immediate Family; or 
(C)             a partnership or limited liability company whose only partners or stockholders are the Grantee and his or her Immediate Family members; 
(each transferee described in clauses (A), (B) and (C) above is hereinafter referred to as a “Permitted Transferee”); PROVIDED that the Grantee gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Grantee in writing that such a transfer would comply with the requirements of the Plan and any applicable Award Agreement evidencing the option. 
The terms of any option transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan or in an Award Agreement to an optionee, Grantee or Participant shall be 

13

deemed to refer to the Permitted Transferee, except that (a) Permitted Transferees shall not be entitled to transfer any Options, other than by will or the laws of descent and distribution; (b) Permitted Transferees shall not be entitled to exercise any transferred Options unless there shall be in effect a registration statement on an appropriate form covering the shares to be acquired pursuant to the exercise of such Option if the Committee determines that such a registration statement is necessary or appropriate, (c) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Grantee under the Plan or otherwise and (d) the consequences of termination of the Grantee's employment by, or services to, the Company under the terms of the Plan and applicable Award Agreement shall continue to be applied with respect to the Grantee, following which the Options shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement. 
(b)         NO RIGHTS TO AWARDS. No Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee's determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not such Participants are similarly situated). 
(c)        SHARE CERTIFICATES. All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan (or, if applicable, a notice evidencing a book entry notation) pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates, as applicable, make appropriate reference to such restrictions. 
(d)        WITHHOLDING. 
(i)         A Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payments of any Award. 
(ii)        Without limiting the generality of clause (i) above, a Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the option a number of Shares with a Fair Market Value equal to such withholding liability. 
(iii)         Notwithstanding any provision of this Plan to the contrary, in connection with the transfer of an Option to a Permitted Transferee pursuant to Section 14(a) of the Plan, the Grantee shall remain liable for any withholding taxes required to be withheld upon the exercise of such Option by the Permitted Transferee. 
 
(e)         409A OF THE CODE. Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. Notwithstanding any provision of the Plan to the contrary and only to the extent required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, if any Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Award that are “deferred compensation” subject to Section 409A of the Code shall be made to such Participant prior to the date that is six months after the date of Participant's “separation from service” (as defined in Section 409A of the Code) or, if earlier, Participant's date of death. Following any applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest permissible payment date. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean 

14

“separation from service” within the meaning of Section 409A of the Code. Unless otherwise provided by the Committee, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (i) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code or (ii) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments. 
(f)        AWARD AGREEMENTS. Each Award hereunder shall be evidenced by an Award Agreement which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto, including but not limited to the effect on such Award of the death, Disability or termination of employment or service of a Participant and the effect, if any, of such other events as may be determined by the Committee. 
(g)        NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of Options, Restricted Stock, Shares and other types of Awards provided for hereunder (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. 
(h)        NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. 
 
(i)         NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable Award, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Stock hereunder, the applicable Award shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Stock. 
(j)        GOVERNING LAW. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of New York. 
(j)        SEVERABILITY. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 
(l)        OTHER LAWS. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary. Without limiting the generality of the foregoing, no Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the U.S. federal securities laws. 
(m)        NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. 
(n)        NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. 

15

(o)        PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee or the senior human resource officer of the Company shall find that any Person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee or the senior human resource officer of the Company so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a 
proper recipient on behalf of such Person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. 
(p)         RELATIONSHIP TO OTHER BENEFITS. No payment or benefit under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided in such other plan. 
(q)        HEADINGS. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 
SECTION 15.        TERM OF THE PLAN. 
(a)        EXPIRATION DATE. No Award shall be granted under the Plan on or after the tenth anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the tenth anniversary of the Effective Date. 
(b)        SECTION 162(M) REAPPROVAL. The provisions of the Plan regarding Performance Compensation Awards shall be disclosed and reapproved by stockholders of the Company no later than the first stockholder meeting that occurs in the fifth year following the year that stockholders previously approved such provisions, in order for Performance Compensation Awards granted after such time to be exempt from the deduction limitations of Section 162(m) of the Code. Nothing in this Section 15(b), however, shall affect the validity of Performance Compensation Awards granted after such time if such stockholder approval has not been obtained. 

16ex10111q063013.htm

AGREEMENT NO. 12/KZ/2013

For the Sale of Gas from Lisewo gas field

between

FX Energy Poland Sp. z o.o.

and

POLSKIE GÓRNICTWO NAFTOWE I GAZOWNICTWO S.A.

  

  

  

Agreement No. 12/K/2013

 

This Agreement (“Agreement”) was signed on June 18, 2013, in Warsaw between:

FX ENERGY POLAND Sp. z o.o. with its registered seat in Warsaw, at ul. Chałubinskiego 8, 00-613 Warsaw, entered into the National Court Register by the District Court in Warsaw under the KRS No. 0000052459, NIP 521-275-14-81, share capital PLN 1 895 000,

hereinafter referred to as the “Seller” or a “Party”, represented by:

1.  Mr Zbigniew Tatys – member of the Management Board

2.  Ms. Eva Sokolowska – Representative FX Energy Poland Sp. z o.o.,

and

Polskie Górnictwo Naftowe i Gazownictwo Spółka Akcyjna with its registered office in Warsaw at ul. Marcina Kasprzaka 25, entered in the Companies Register of the National Court Register by the District Court for the City of Warsaw, XIX Commercial Division of the National Court Register, under number KRS 0000059492, NIP number 525-000-80-28, REGON number 012216736-00027, with share capital of PLN 5,900,000,000, paid up in full,

hereinafter referred to as the “Purchaser” or a “Party”, represented by:

1.  Mr. Marian Lukaszewicz – Director of Gas Purchasing Department; and

2.  Mr. Bartosz Motyka-Radlowski – Deputy Director of Economical Department

§ 1

	
1.

	
In this Agreement, the below terms shall have the following meanings:

	
  

	
1)

	
Business Days – days from Monday to Friday, excluding statutory holidays in the Republic of Poland;

	
  

	
2)

	
Contract Day – a period starting at 6:00 a.m. of the current calendar day and ending at 6:00 a.m. of the following calendar day;

	
  

	
3)

	
Sale Commencement Day – the Contract Day on which the sale of the Gas in Delivery Point commences;

	
  

	
4)

	
Sale Closure Day – the Contract Day on which the production from the Field is ceased, or the Seller loses its title to the Gas, or on which the Purchaser ceases to purchase Gas in connection with the end of the termination notice period pursuant to the Agreement;

	
  

	
5)

	
Gas – the 49% share in the ownership of a mix of hydrocarbons and nonflammable gaseous components including methane and nitrogen as main components, belonging to the Seller, which is not a gaseous fuel according to the Energy Law, and which conforms to the parameters specified in Appendix No. 1 (Quality Specification), produced from the Field on the basis of the Joint Operating Agreement, other than the part of the mineral used in for the purposes of operation of the mining plant;

  

  

  

Agreement No. 12/K/2013

 

	
  

	
6)

	
Contract Month – a period starting at 6:00 a.m. of the first day of the calendar month and ending at 6:00 a.m. of the first day of the following calendar month;

	
  

	
7)

	
Normal Cubic Meter (Nm3) – means the amount of gas required to fill a space of one cubic metre with an absolute pressure of 101.325 kPa (one hundred and one point three two five kilopascals) and at thermodynamic temperature of 273.15 K (two hundred and seventy three point one five Kelvin); unless expressly stated otherwise, all quantities of the Gas referred to herein shall be expressed in Nm3; upon a change of settlement unit from the Nm3 to kWh energy units the Parties shall enter into negotiations aimed at updating the definition;

	
  

	
8)

	
Sale Period – the period commencing on the Sale Commencement Day and ending on the Sale Closure Day;

	
  

	
9)

	
Planned Maintenance Work – renovation, construction, maintenance and modernization work:

	
  

	
(a)

	
conducted by the Purchaser in the Purchaser’s installations, which affects the Purchaser’s ability to take the Gas at the Delivery Point; the Purchaser’s installations include installations behind the Delivery Point that are at the disposal of the operator of the transmission grid and distribution grid;

	
  

	
(b)

	
conducted by the Seller or by the Purchaser in the Delivery System, which affects the Seller’s ability to sell the Gas at the Delivery Point, including, without limitation, any periodic tests conducted on the Field;

	
  

	
10)

	
Monthly Statement – is defined in Appendix No. 2 Technical conditions of Gas delivery;

	
  

	
11)

	
Energy Law – an act dated 10 April 1997 – Energy law (unified text: Journal of Laws of 2006 No. 89, item 625);

	
  

	
12)

	
Delivery Point – the point agreed between the Purchaser and the Seller, i.e. the valve (no. BV-0437-1 – pursuant to the detailed design of the metering system forming part of Appendix No. 2) installed at the outlet of the Metering System, linking the Delivery System with the Off-take System, constituting the Gas surrender point;

	
  

	
13)

	
Contract Year – a period starting at 6:00 a.m. of 1st October of current calendar year and ending at 6:00 a.m. of 1st October of the following calendar year, provided that:

	
  

	
(a)

	
the first Contract Year shall commence at 6:00 a.m. on the Sale Commencement Day and shall continue until 6:00 a.m. of 1st October of the following calendar year;

	
  

	
(b)

	
if this Agreement terminates on any day other than 1st October, the last Contract Year shall end at 6:00 a.m. on the last day of effectiveness of the Agreement.

	
  

	
14)

	
Quality Specification – the Gas pressure and a set of physical and chemical parameters of the Gas specified in Appendix No. 1;

  

  

  

Agreement No. 12/K/2013

 

	
  

	
15)

	
Gas Station – a set of installations used, whether jointly or separately, to reduce, process, control, measure and distribute the Gas;

	
  

	
16)

	
Delivery System – installations used for the purposes of producing, processing, compressing, testing, measuring and selling the Gas at the Delivery Point;

	
  

	
17)

	
Off-take System – a gas pipeline grid along with appertaining installations, linked with one another and working together, owned by the Purchaser and used to off-take and transport Gas from the Delivery Point;

	
  

	
18)

	
Operator – a party to this agreement appointed to perform the duties specified in the Joint Operating Agreement; at the date of execution of this Agreement the Operator is PGNiG S.A.;

	
  

	
19)

	
Tariff – the set of prices and fee rates, and conditions of their application, prepared by the Seller and introduced as binding for customers specified therein, according to the procedures set forth in the Energy Law; in particular the Tariff shall set out the prices and fee rates for the consumers of the Lw-2 class low-methane gas;

	
  

	
20)

	
Metering System – gas meters and other metering devices, as well as the systems connecting those devices, described in Appendix No. 1, used to measure the quantity of the Gas sold at the Delivery Point, owned by the Seller and the Purchaser;

	
  

	
21)

	
Joint Operating Agreement – Joint operating agreement covering the Poznań area, entered into on 1 June 2004 between the Purchaser and the Seller, on the basis of which both parties will have the ownership title to the Gas in the following proportions (shares) – the Seller – 49% and the Purchaser 51%;

	
  

	
22)

	
Field – means the gas field Lisewo located on Pyzdry concession area (concession No. 18/99/p) – the natural gas accumulation in the Rotligend sandstone, located in the area of Wielkopolskie province, Września district.

	
2.

	
All units of measurement used herein are units of the SI system in accordance with the Law on Measurements dated 11 May 2001 (consolidated text: Dz. U. of 2004, No. 243, item 2441).

§ 2

	
1.

	
This Agreement is entered into as of the date of its execution, for an indefinite period, and shall end in accordance with § 7.

	
2.

	
The Sale Commencement Day will be agreed by the Parties on the Contract Day on which the Purchaser as the Operator commences the production of Gas from the Field pursuant to the Joint Operating Agreement.

	
3.

	
The settlement of accounts between the Parties in relation to this Agreement shall take place no later than three (3) months after the end of the Sale Period.  The Parties are obliged to make final settlements within this time limit.

  

  

  

Agreement No. 12/K/2013

 

§ 3

	
1.

	
The Seller undertakes to transfer the ownership title to the Gas to the Seller during the Sale Period and to surrender all the Gas to the Purchaser at the Delivery Point, and the Purchaser undertakes to take all the Gas meeting the quality parameters specified in Appendix No. 1 (Quality Specification) and pay for it at the Gas Price specified in the Agreement.

	
2.

	
This Agreement is entered into subject to the fulfilment of a condition precedent whereby the Seller and the Purchaser are to obtain all necessary permits and administrative approvals required to commence the exploitation of the Field and to duly perform the Agreement, including in particular:

- a concession granted to PGNiG on exploration and appraisal or concession to be granted on producing natural gas from the Field;

-  a final building permit for the construction of the Lisewo Production Centre and the DN 250 pipeline, with an approximate length of 12 000 metres;

-  an operating permit for the Lisewo Production Centre, along with the fulfilment of all other conditions enabling production;

-  the legal title, to be obtained by the Seller, to 49% of Gas produced from the Field, in the form of a joint mining usufruct right or mining sub-usufruct right, or in another form granted to the Seller the ownership of produced Gas on base of primarily rule subject obtaining such detailed legal title shall be demanded according to obligatory at a given time law but Parties confirm that basing on article 3.3 (B) of the Joint Operating Agreement it falls to the Seller share the ownership of 49% of  Gas produced from the Field.

	
3.

	
The Seller and the Purchaser undertake to cooperate in obtaining the permits and approvals listed in section 2 above.

	
4.

	
The Gas pressure and quality are specified in Appendix No. 1 to the Agreement.

	
5.

	
The detailed rules for sale of the Gas to the Purchaser, including its technical and quantity parameters, the rules for the Purchaser to place orders for the Gas, the place of handover of the Gas, the rules for measuring the quality and quantity of the Gas, the rules for preparing Monthly and Annual Statements, and the rules for resolving disputes concerning the quantity and quality of the delivered Gas are defined in Appendices No. 1 and 2 hereto.

	
6.

	
The Seller represents that upon the fulfilment of the above conditions precedent it will have the exclusive right to the Gas and that Gas is not encumbered with any legal defects or third party rights that would hinder or prevent the performance of this Agreement.

§ 4

	
1.

	
The Purchaser shall pay for the Gas amounts calculated as the product of the Gas sold (expressed in cubic meters) and the Gas Price (PGU).

  

  

  

Agreement No. 12/K/2013

 

	
2.

	
As long and the Purchaser applies the Tariff, the Gas Price (PGU) shall correspond to 0.86 (zero point eighty six) parts of the price for gaseous fuel specified in the Tariff for the off-takers of low-methane gas (the “Lw-2” sub-group) taking the largest amounts gaseous fuels from the transmission network operated by Operator of Transmission Network Gaz-System S.A., in accordance with the following formula:

PGU = 0.86 *PT

where:

PGU – the Gas Price payable for the Gas sold in the Contract Month.

PT – the price for gaseous fuel specified in the Tariff for the off-takers of low-methane gas (the “Lw-2” sub-group) taking the largest amounts of gaseous fuel from the transmission network operated by Operator of Transmission Network Gaz-System S.A., being in effect on the last day of the Contract Month immediately preceding the Contract Month when the Gas is delivered;

	
3.

	
If the Tariff is changed, the Gas Price shall change as of the first day of the Contract Month immediately following the month in which the change of the Tariff becomes effective.

	
4.

	
If the Purchaser ceases to use the Tariff, the Parties shall enter into negotiations aimed at determining the new Gas Price formula within 30 (thirty) day following a notice to the Seller regarding that event.  If the Parties fail to agree upon a new Gas Price formula within 4 (four) months from the commencement of the said negotiations, each Party may terminate the Agreement subject to no less than 6 (six) month notice, effective as of the end of a Contract Year. For the avoidance of doubt, during the period between the day when the Tariff ceases to apply and the day when the Parties agree on a new Gas Price calculation formula, as well as during the period until the effective date of termination of the Agreement, as referred to in the preceding sentence, the Gas Price applicable on the last day of applicability of the Tariff shall apply.

	
5.

	
If the calorific value of the Gas sold is different from the calorific value defined in the Tariff for the prices of the “Lw-2” sub-group low-methane gas, the Gas Price shall be adjusted in accordance with the below formula:

PGU (c) = PGU * CSR/CST

where:

PGU (c) – the Gas Price payable for the Gas delivered in the Contract Month, taking into account the actual calorific value of the Gas sold, as specified in the Monthly Statement;

PGU  – the Gas Price calculated in accordance with section 2 above;

CSR – is the average monthly gross calorific value of the Gas sold in a given Contract Month in accordance with the Monthly Statement, calculated in accordance with Appendix No. 1, stated in MJ/Nm3;

CST – is the gross calorific value specified in the Tariff for the prices of the “Lw” sub-group low-methane gas sold in a given Contract Month, stated in MJ/Nm3.

  

  

  

Agreement No. 12/K/2013

 

	
6.

	
Numbers used in the calculation of the Gas Price and the resulting PGU values shall be rounded up or down to the fifth (5) decimal place inclusive.  Numbers shall be rounded down if the digit subject to rounding is in the range between 0 and 4 inclusive, and shall be rounded up if the digit subject to rounding is in the range between 5 and 9.

	
7.

	
The Gas Price and the other amounts stated herein are net of VAT, excise, and any similar tax or public charges.

§ 5

	
1.

	
The amounts due for Gas sold shall be paid monthly, on the basis of Monthly Statements.  Invoices shall be issued within seven (7) Business Days of the end of each Contract Month, and sent to the Purchaser.  A copy of the invoice will forthwith be sent to the Purchaser by e-mail, on the Contract Day on which the invoice is issued.  The amount due will be paid exclusively on the basis of the original of a correctly issued invoice.

	
2.

	
The amounts due for Gas sold shall be paid by wire transfer from the Purchaser’s bank account to the Seller’s bank account specified in the invoice, by the 30th calendar day following the end of the Contract Month in which the Gas has been surrendered to the Purchaser.

	
3.

	
If an issued invoice has to be corrected, the time limit for payment will be counted from the date of receipt of the correction invoice by the Client.  The same rule shall apply in a situation where a relevant statement is not enclosed with the invoice.

	
4.

	
The payment of amounts due under the Agreement shall be deemed to have been made on the date of crediting the Seller’s bank account.

	
5.

	
Any default in payment obligations hereunder may result in interest being charged at the statutory rate established pursuant to Article 359 of the Polish Civil Code, calculated for each day of the default.

	
6.

	
The Parties shall notify each other in writing of any changes to the descriptions or the numbers of their respective bank accounts, and such notice shall specify both the former and the modified account details.  Such changes shall not constitute amendments to this Agreement.  A Party which defaults in these obligations shall indemnify the other for all losses resulting from the default.

§ 6

	
1.

	
Any complaints regarding invoices must be made in writing within ten (10) Business Days of receipt.

	
2.

	
If the complaint refers to a manifest error (e.g. a mathematical error), then the Party receiving the invoice shall be authorized to calculate the correct amount and pay such correct amount only, within the time specified in § 5 section 2, provided that it gives the issuing Party, no later than on the date of payment, a written notice explaining its calculation.  The latter Party shall issue a correction invoice, without any delay after agreeing the correct amount with the former.

	
3.

	
Complaints disputing an invoice for reasons other than those stated in section 2 above shall not release a Party from the duty to timely pay the amount stated in the invoice constituting the basis for the complaint.

  

  

  

Agreement No. 12/K/2013

 

	
4.

	
The provisions of § 5 and this paragraph shall apply, mutatis mutandis, to payments against, and complaints concerning, accounting notes.

§ 7

	
1.

	
The Agreement shall terminate:

	
  

	
1)

	
on the Sale Closure Day;

	
  

	
2)

	
on the effective date of termination notice if the Agreement is terminated pursuant to § 8, § 4 section 4 or § 13 section 3.

	
  

	
3)

	
on the day on which the Field is depleted or geological conditions preventing the continuation of the Field exploitation occur.

§ 8

	
1.

	
Either Party’s failure to perform, or inappropriate performance of the material provisions of this Agreement specified in section 2 below shall entitle the other Party to terminate the Agreement subject to at least 30 (thirty) calendar days’ notice.

	
2.

	
Material provisions of the Agreement shall be considered nonperformed or performed inappropriately, if:

	
  

	
1)

	
a Party obliged fails to pay the other an amount due under the Agreement and the default continues for at least thirty (30) days and is not cured within an additional 14 (fourteen) day period following a written notice calling for payment and specifying the amount due; or

	
  

	
2)

	
the Seller sells any Gas to a third party without the Purchaser’s prior consent;

	
  

	
3)

	
the Purchaser reserves the right to terminate the Agreement if during three (3) consecutive months the Gas does not meet the conditions specified in Appendix No. 1 to the Agreement.

	
3.

	
The Party entitled to terminate the Agreement for the reasons specified in section 2 above shall give the other Party a reasoned and properly documented written notice specifying the reasons, and date of termination of the Agreement pursuant to section 1 of this paragraph.

	
4.

	
If the Agreement is terminated due to the reasons specified in section 2 point 1) above, the Seller shall be entitled to claim from the Purchaser statutory interest for each day of delay in payment.

	
5.

	
If the Agreement is terminated due to the reasons specified in section 2 point 2) above, the Seller shall pay the Purchaser liquidated damages constituting the equivalent of six (6) times the largest net monthly receivables on account of Gas sold in the preceding twelve (12) months.

	
6.

	
Each Party reserves the right to claim compensation for damages in excess of the liquidated damages specified above up to the value of the damage that has been actually sustained.

	
7.

	
The Parties agree that the failure to take gas of poor quality will not constitute an event of termination of the Agreement.

  

  

  

Agreement No. 12/K/2013

 

§ 9

The Parties shall be liable for any failure to perform or inappropriate performance of the Agreement pursuant to generally applicable terms.

§ 10

	
1.

	
Neither of the Parties will be liable under the Agreement for a failure to perform its obligations if it proves that:

	
  

	
a)

	
the failure has been caused by an extraordinary external events beyond its control, referred to hereinafter as Force Majeure,

	
  

	
b)

	
it could not have, at the time of execution of the Agreement and despite exercising due care, foreseen the occurrence of such an event and its effects affecting the performance of the Agreement,

	
  

	
c)

	
it could not have, despite exercising due care, avoided or overcome the event or its effects.

	
2.

	
The Parties undertake to immediately provide each other with a documented written notice on the occurrence of Force Majeure and to make all efforts aimed at ending or mitigating its effects.

§ 11

	
1.

	
The Parties shall attempt to resolve all disputes arising out of or in connection with this Agreement by direct negotiations.  If the Parties do not resolve the dispute within three (3) months of the delivery of either Party’s invitation to negotiate with the other, the dispute resulting from this Agreement or relating to it shall be resolved by a state court with jurisdiction over the Purchaser’s registered seat.

	
2.

	
The existence of any dispute shall not excuse either Party’s performance of its obligations hereunder.

§ 12

Any transfer to a third party of any rights and obligations arising hereunder without the consent of the other Party shall be null and void, except for an assignment of receivables.

§ 13

	
1.

	
The Seller undertakes, during the term of the Agreement and following its termination or expiry, not to disclose to other persons (third parties) any information (“Confidential Information“) constituting the Purchaser’s confidential business information within the meaning of the Act on Suppressing Unfair Competition (the Act of 16 April 1993 – consolidated text: Journal of Laws of 2003, No. 153, item 1503, Art. 11 section 4) and any other information received from the Purchaser with written reservation of confidentiality in oral or written form or any other physical form, and recorded on any memory carrier, including both originals and photocopies, other copies, facsimiles, notes, bills and other documents relating to the Purchaser’s or its clients’ operations, business plans and other information, unless the information has become public as a result of actions undertaken by a person unrelated to the Seller or its disclosure is required on the basis of a decision of a relevant public authority.

  

  

  

Agreement No. 12/K/2013

 

	
2.

	
At the Purchaser’s request made at any time, the Seller is obliged to forthwith:

	
  

	
a)

	
return Confidential Information along with its copies and extracts,

	
  

	
b)

	
destroy any documents that have been drafted on the basis of Confidential Information or reflect it.

	
3.

	
If the provisions of section 1 are violated, the Purchaser will be entitled to terminate the Agreement with immediate effect.

	
4.

	
The provisions of this § 13 sections 1-3 will apply as appropriate to information provided by the Seller to the Purchaser.

	
5.

	
If the confidentiality provisions of this Agreement are violated, the violating Party will pay the harmed Party a contractual penalty in the amount of the largest net monthly (1 month) receivables on account of Gas sold in the preceding twelve (12) months.

§ 14

	
1.

	
Except as otherwise specifically provided, all notices authorized or required by this Agreement between the Parties, shall be in writing, in Polish, and delivered in person or by registered mail or by courier service with confirmed delivery, or by any electronic means of transmitting written communications which provides written confirmation of completed transmission.  Any communications relating to this Agreement shall be deemed delivered only when received by the Party to whom such notice is directed, and the time for that Party to deliver any notice in response to an originating notice shall run from the date the originating notice is received.  All communications shall be delivered to the following addresses of the respective Parties:

	 	
Purchaser:

	
Polskie Gornictwo Naftowe i Gazownictwo S.A.

	 	  	
ul. Marcina Kasprzaka 25

	 	  	
01-224 Warsaw, Poland

	 	  	
Phone: +48 22 589 45 31

	 	  	
Fax: +48 22 589 46 31

	 	  	
E-mail: doz@pgnig.pl

	 	  	  
	 	
Seller:

	
FX Energy Poland Sp. z o.o.

	 	  	
ul. Chalubinskiego 8

	 	  	
00-613 Warsaw, Poland

	 	  	
Phone: +48 22 830 00 74

	 	  	
Fax: +48 22 630 66 32

	 	  	
E-mail: fxenergy@fxenergy.pl

	
2.

	
The Parties undertake to inform each other forthwith of any changes referred to in section 1 above or otherwise they will bear the costs relating to an inappropriate performance of this undertaking.  Any changes concerning the matters referred to in this clause shall not be regarded as amendments to this Agreement.

  

  

  

Agreement No. 12/K/2013

 

§ 15

	
1.

	
Any amendment to the provisions of this Agreement must be in writing or shall otherwise be null and void.

	
2.

	
The following appendices constitute an integral part of this Agreement:

	
  

	
1)

	
Appendix No. 1 – Quality Specification

	
  

	
2)

	
Appendix No. 2 – Technical conditions of Gas delivery

	
  

	
3)

	
Appendix No. 3 – Monthly protocols

	
  

	
4)

	
Current excerpts from the companies register of the National Court Register regarding both parties to the Agreement, along with Power of Attorney for the authorized signatories.

	
3.

	
This Agreement has been executed in two identical copies, one for each of the Parties.

	
SELLER

	
PURCHASER

	  	  
	
Management Board

	
Director of Gas Purchasing Department

	  	  
	
/s/ Zbigniew Tatys

	
/s/ Marian Lukaszewicz

	
Zbigniew Tatys

	
Marian Lukaszewicz

	  	  
	
Eva Sokolowska

	
Deputy Director of Economical Department

	  	  
	
/s/ Eva Sokolowska

	
/s/ Bartosz Motyka-Radlowski

	
Representative FX Energy Poland Sp. z o.o.

	
Bartosz Motyka-Radlowski

  

  

  

Appendix 1 to Agreement No. 12/K/Z/2013

Gas quality specification from the Lisewo gas field

	
1.  

	
The Gas Pressure at the Delivery Point will not be lower than 6.0 MPa and higher than 7.0 MPa.

	
2.  

	
The Gas delivered under the Agreement will be compliant with the Quality Specification set forth in the table below.

	
3.  

	 

 

	 	
Parameter

	
value

	
unit

	
tolerance

	 	
 

Wobbe index

	
Ws= 37.6           

	
MJ/ m3

	
not less than

	 	
 

Heat of combustion (gross calorific value)

	
Hs= 31.0           

	
MJ/ m3

	
not less than

	 	
 

Mercury vapour contents

	
30.0

	
μg/m3

	
not more than

	 	
 

Hydrogen sulfide contents

	
7.0

	
mg/m3

	
not more than

	 	
 

Oxygen content

	
0.2

	
%(mol/mol)

	
not more than

	 	
 

Carbon dioxide content

	
3.0

	
%(mol/mol)

	
not more than

	 	
 

Total sulphur contents

	
40.0

	
mg/m3

	
not more than

	 	
 

Total mercaptan sulphur contents

	
16.0

	
mg/m3

	
not more than

	 	
 

Contents of ash with particle diameter greater than 5μm

	
1,0

	
mg/m3

	
not more than

	 	
 

Water dew point at pressure equal to 5.5 MPa in the period from 1 IV to 30 X

	
+3.7

	
°C

	
not more than

	 	
 

Water dew point at pressure equal to 5.5 MPa in the period from 1 X  to 31 III

	
-5.0

	
°C

	
not more than

	 	
 

Dew point of hydrocarbons

	
0

	
°C

	
not more than

  

  

  

Appendix No. 2 to Agreement No. 12/K/Z/2013

Technical conditions of delivery of Gas from the Lisewo gas field

I.           GENERAL TERMS

	
1.

	
Any statements and the exchange of data under this Appendix must be made in writing to be valid.

	
2.

	
The Parties shall verify the procedures of co-operation of the dispatch services and the provisions of this Appendix no later than one year after the Sale Commencement Day.

II.           REQUIREMENTS CONCERNING CO-OPERATION OF THE SELLER’S AND PURCHASER’S SERVICES

	
1.

	
The following parties are authorised to enter into arrangements between the operation and dispatch services, concerning the on-going delivery and off-take of Gas and the settlement of its quantity and quality:

on the Purchaser’s side:

PGNiG S.A. Oddział w Zielonej Górze,

Director for Operation (Dyrektor Eksploatacji)

tel.  (068) 3291281, fax. (068) 329 14 30

Manager of the Dispatching Centre (Kierownik Dyspozycji Ruchu),

tel. 68-3291335; fax – 68-3291410,

Manager of the Gas Grid, Measurements and Settlements Department (Kierownik Działu Sieci Gazowych, Pomiarów i Rozliczeń Gazu)

tel. 61 8214280, fax 61 8214261,

on the Seller’s side:

FX Energy Poland Sp. z o.o. ul. Chałubińskiego 8, 00-613 Warszawa

Zbigniew Tatys – Regional Director (Dyrektor Regionalny)

tel. (022) 830 00 74

fax. (022) 630 66 32

Tomasz Machowski – Specialist for Production (Specjalista ds. Produkcji)

tel. (022) 830 00 74

fax. (022) 630 66 32

	
2.

	
Dispatch information from the Metering System located in the Lisewo Production Centre will be provided to the Dispatching Centre by telephone, every two (2) hours, or made available through telemetric systems.

	
3.

	
The Parties shall agree on the procedures of co-operation of the Seller’s and Purchaser’s dispatching services before the commencement of delivery and off-take of Gas.

  

  

  

III.           DELIVERY POINT

	
1.

	
The Parties agree on the following Metering System:

	
  

	
a)

	
The Metering System for measuring and settling the quantity and quality of Gas from the Lisewo field is located in the Lisewo Production Centre situated on plot number 118/2 in the municipality of Pyzdry, Września district, in the Lisewo area.  

	
2.

	
The user of the plot number 118/2 and the operator of the Delivery Point (PZO) is Polskie Górnictwo Naftowe i Gazownictwo S.A.

	
3.

	
At the Delivery Point, the following rights and risks pass from the Seller to the Purchaser:

1)           the ownership title to Gas;

2)           the benefits and burdens relating to the ownership title to Gas;

3)           the risk of loss of Gas or of the worsening of its quality;

4)           all risks relating to the physical and chemical properties of Gas.

	
4.

	
All issues relating to measuring the quantity and pressure of Gas that are not regulated in Appendix No. 2 are regulated in the Company Standards “GASEOUS FUEL MEASUREMENTS” (POMIARY PALIW GAZOWYCH), (series 4000), presented by the Purchaser to the Seller, and should these standards be changed, in the standards that will replace them.

IV.           METERING SYSTEM

1.           The Metering System shall be equipped with:

	
-   

	
operation and maintenance documentation,

	
-   

	
an operating manual,

	
-   

	
the system operation book, in which all of the following actions will be entered each time: manipulations, changes in fixed values in conversion devices, inspections, tests, repairs, replacements, adjustments and a list of seals and security devices.

	
2.

	
The Operator shall gather all the documents listed in section 1 and shall make them available for inspection to either of the Parties at its each request.

	
3.

	
Either of the Parties has the right to equip the Metering System with necessary telemetric devices at its own expense.

	
4.

	
A diagram of the Metering System in the Lisewo Production Centre is provided in section IX of Appendix No. 2.

	
5.

	
The Purchaser and the Seller have the right to be present, at their expense, at the process of installing, reading, cleaning, replacing, repairing, inspecting, testing, calibrating or adjusting the Metering System.

V.           MEASUREMENTS OF THE QUANTITY AND QUALITY OF DELIVERED GAS

1.           The quantity and quality of Gas will be measured in accordance with the following rules:

  

  

  

	
  

	
1.

	
The quantity of delivered Gas and its pressure will be measured in the Metering System in accordance with the rules defined in the PGNiG S.A. Company Standards, series ZN-G-4001÷4010: 2001.

	
  

	
2.

	
The quantity of delivered Gas and its pressure will be measured on the basis of readings of the measuring instruments specified in section X of Appendix No. 2.

	
  

	
3.

	
The chemical composition of Gas in the conversion device will be updated each time if the difference between the heat of combustion of the Gas being currently in the grid and the heat of combustion entered into the memory of the conversion device is greater than ± 0.5 %.

	
  

	
4.

	
The settlement unit for the delivered volume of Gas will be a volume unit determined in normal conditions, i.e. in conditions with the following parameters:

	
  

	
a)

	
the absolute pressure Pn = 101.325 kPa (one hundred and one and 325/1000 kilopascals),

	
  

	
b)

	
thermodynamic temperature Tn = 273.15K (two hundred and seventy-three and 15/100 degrees Kelvin).

	
  

	
5.

	
The volume of Gas will be converted from working conditions to normal conditions using an electronic conversion device.

2.           The quality of Gas will be measured in accordance with the following rules:

	
  

	
1.

	
Test measurements of Gas quality will include:

	
  

	
a)

	
dew point temperature – once (1) in a Contract Month,

	
  

	
b)

	
dew point temperature of hydrocarbons – one (1) in a year, in the winter season,

	
  

	
c)

	
an analysis of gas using the chromatographic method, in order to determine the chemical composition and heat of combustion, calorific value, Wobbe index, density and relative density –  once (1) in a Contract Month,

	
  

	
d)

	
hydrogen sulphide content – once (1) in a Contract Year for a field with a low sulphur content or once (1) in a Contract Month for a field with a high sulphur content,

	
  

	
e)

	
mercury vapours content – once (1) every two Contract Months for a field containing mercury,

	
  

	
f)

	
dust content – twice (2) in a Contract Year, once in the summer season and once in the winter season.

	
  

	
2.

	
Gas samples for taking the measurements listed in section 1 will be taken from a probe situated before the metering system.

	
  

	
3.

	
The responsibility for taking the measurements defined in section 1 will rest on the Purchaser.

  

  

  

	
  

	
4.

	
The results of Gas quality measurements will be included in reports on check-up tests, to be provided to the Seller within 14 business days after the end of the Contract Month to which the test measurement referred.

	
  

	
5.

	
If the Gas delivered by the Seller to the Delivery Point does not comply with the Quality Specification defined in Appendix No. 1, the Purchaser shall apply due care to notify the Seller of the fact as quickly as possible, providing it with as detailed information on the Gas quality as possible.

	
  

	
6.

	
The Purchaser will have the right to reject Gas that does not comply with the requirements set out in the Quality Specification in Appendix No. 1, and the quantity of Gas rejected by the Purchaser shall constitute undelivered quantity. The Purchaser shall inform the Seller in writing about all instances of rejection of Gas as quickly as possible.

	
  

	
7.

	
If the Purchaser does not reject Gas that does not comply with the requirements set out in the Quality Specification in Appendix No. 1, such gas will be regarded as Gas for the purposes of this Agreement and the Seller shall cover the actual costs corresponding to the fees to be paid by the Purchaser to OGP Gaz-System in connection with introducing gas that does not meet quality parameters into the gas transmission system, including the costs of treatment of gas to make it meet the quality parameters.

3.           The principal rules of operation and inspection of the Metering System.

	
  

	
a)

	
The correctness of operation of the Metering System will be supervised by the Purchaser’s relevant services.

	
  

	
b)

	
With respect to requirements and procedures concerning the measurement technique and operation and inspection of the Metering System that have not been agreed in this Appendix, the Parties shall comply with the relevant provisions of the PGNiG S.A. Company Standards, series ZN-G-4001÷4010:2001.

	
  

	
c)

	
The Parties shall adopt a time schedule of inspection of the Metering System by the end of January of a Contract Year.

	
  

	
d)

	
All alterations in the Metering System used for settlement purposes that affect the measurement and settlement of Gas deliveries and off-take must be approved by the Parties’ representatives.

	
  

	
e)

	
Each Party shall retain all results of measurements and inspections of the Metering System for at least three (3) years.

VI.           DISPUTES CONCERNING QUALITY OR QUANTITY

	
1.

	
The Purchaser shall apply due care to ensure that the Metering System is maintained in a good technical condition and that the correctness of operation and accuracy of the Metering System is inspected at least every three months, if this is required by the relevant regulations. The Purchaser shall apply due care to notify the Seller of an intended inspection of the Metering System at least three (3) days in advance.

  

  

  

	
2.

	
If any of the elements of the Metering System does not work correctly, the Purchaser shall apply due care to repair or replace such element as quickly as possible, and the Monthly Statements issued starting from the date of the previous inspection of the Metering System (and if necessary also the Annual Statement) will be modified without delay in accordance with the rules set out in the Company Standards “GASEOUS FUEL MEASUREMENTS” (series 4000).

	
3.

	
Based on modified Monthly Statements and possibly the Annual Statement, the Seller shall correct its invoices for the relevant periods, within 5  days of the modification, and any differences in amounts due arising from such modifications will be settled within 30 days after the modification.

	
4.

	
The incorrect operation of the Metering System referred to in section 2 is exclusively a situation where measurement errors exceed the permissible error values specified in the Company Standards “GASEOUS FUEL MEASUREMENTS”, (series 4000), or where the Metering System does not operate.

	
5.

	
The Seller may at any time demand that an additional inspection of the operation of the Metering System be conducted. If such an inspection does not show errors exceeding the permissible values specified in the Company Standards “GASEOUS FUEL MEASUREMENTS” (series 4000) or the incorrect operation of equipment, the costs of the inspection will be covered by the Seller; otherwise these costs will be covered by the Purchaser.

VII.           REPORTING

	
1.

	
Information concerning the quantity and quality parameters of the sold Gas is included in statements covering:

	
  

	
a)

	
each full day (Daily Report),

	
  

	
b)

	
each Contract Month (Monthly Statements);

	
2.

	
A Daily Report prepared by the Purchaser shall contain the following information obtained from readings of measuring instruments installed in the Lisewo Production Centre:

	
-   

	
gas pressure – measured once (1) on a Contract Day,

	
-   

	
gas stream in normal conditions – measured once (1) on a Contract Day,

	
-   

	
gas temperature – measured once (1) on a Contract Day,

	
-   

	
total quantity of gas for a gas day (in normal conditions) directed to the pipeline connecting the Lisewo Operation Centre with KGZ Radlin I,

	
3.

	
A Daily Report will be provided to the Seller by electronic means, forthwith after the end of each Contract Day.

	
4.

	
Monthly Statements will be prepared by the Purchaser on the basis of Daily Reports drawn up in accordance with the rules specified in this Appendix, within five (5) Business Days after the end of the Contract Month in which the delivery took place.  Annual Statements will be prepared by the Purchaser on the basis of Monthly Statements, within five (5) Business Days after the end of the Contract Year in which the delivery took place.

  

  

  

	
5.

	
Monthly Statements will contain the following information:

	
-   

	
the status of the meter in m3 recorded in the converter, as at the end of the current month and at the end of the previous month,

	
-   

	
the actual monthly quantity of gas in normal conditions, constituting the difference between the statuses of the meter at the beginning and at the end of the settlement month,

	
-   

	
the monthly quantity of gas in normal conditions, adopted for settlement purposes, stated in full m3,

	
-   

	
corrections, if any, resulting from measurement errors,

	
-   

	
the number and date of analysis of gas,

	
-   

	
the average monthly heat of combustion of gas.

	
6.

	
Monthly Statements will be provided to the Seller by electronic means, within five (5) Business Days after the end of a given Contract Month.

	
7.

	
If the Seller does not agree with the quantity or quality values supplied in a Monthly Statement or Yearly Statement, it shall notify the Purchaser of such fact within seven (7) calendar days of receiving it, specifying the details of the questioned items.  In such a case the Parties shall forthwith contact each other and shall attempt to resolve the dispute within five (5) calendar days.

	
8.

	
If the Parties fail to reach agreement within the time limit specified in section 7, the dispute concerning the quantity or quality of the delivered Gas will be resolved in accordance with section VIII of the Appendix, and other disputes will be resolved in accordance with § 9 of the Agreement.

VIII.           FINAL PROVISIONS

	
1.

	
Any disputes concerning the quality or quantity of the delivered Gas or test measurements will be resolved by a Commission to be appointed each time and to be composed of equal numbers of the Seller’s and Purchaser’s representatives, but no more than 2 representatives appointed by each of the Parties.  The Commission shall start working on the fourteenth (14) calendar day after serving the notice on the election of the first member of the Commission.

	
2.

	
If measurements taken by the Commission referred to in section 1 show incorrect values, exceeding permissible error values, the rules specified in the Company Standards “GASEOUS FUEL MEASUREMENTS” (series 4000) will be applied for settlement purposes.  If measuring instruments are disassembled in order to carry out the above tests, the costs of disassembly, inspection and reinstallation, as well as the costs of assembly of replacement measuring instruments will be borne by the Party whose doubts have not been confirmed by the result of the tests.

	
3.

	
If within one (1) month of the date of commencement of the works referred to in section 1 the Commission fails to adopt a common standpoint, an analysis for conciliation purposes will be carried out by Instytut Nafty i Gazu (Petroleum and Gas Institute) in Krakow, at ul. Lubicz 25a, or another scientific institution agreed by the Parties.  The cost of such tests will be borne by the Party whose objections have not been confirmed.

  

  

  

IX.           DIAGRAM OF THE METERING SYSTEM [graphic omitted]

X.           DESCRIPTION OF METERING FACILITIES [omitted]

XI.           VOLUME OF GAS DELIVERED FROM THE FIELDS [graphic omitted]

 

  

  

  

	  	
Appendix No. 3

	  
	
Monthly Report - Lisewo Production Centre

	  
	
Gas supplier:

	
FX Energy Poland Sp. z o.o.

	  	  
	
Gas purchaser:

	
PGNiG S.A. Warsaw Zielona Gora Branch

	
Name of point:

	
Lisewo Production Centre

	
Type of gas:

	
Lw (GZ- 41,5)

	
Report for month:

	
Day

	
Gas off-take N m3

	
Gas off-take m3 in measurment conditions

	
Average daily gas pressure MPa

	
Average daily gas temperature oC

	
1

	
0

	
0

	  	  
	
2

	
0

	
0

	
-

	  
	
3

	
0

	
0

	
-

	  
	
4

	
0

	
0

	
-

	  
	
5

	
0

	
0

	
-

	  
	
6

	
0

	
0

	
-

	  
	
7

	
0

	
0

	
-

	  
	
8

	
0

	
0

	
-

	  
	
9

	
0

	
0

	
-

	  
	
10

	
0

	
0

	
-

	  
	
11

	
0

	
0

	
-

	  
	
12

	
0

	
0

	
-

	  
	
13

	
0

	
0

	
-

	  
	
14

	
0

	
0

	
-

	  
	
15

	
0

	
0

	
-

	  
	
16

	
0

	
0

	
-

	  
	
17

	
0

	
0

	
-

	  
	
18

	
0

	
0

	
-

	  
	
19

	
0

	
0

	
-

	  
	
20

	
0

	
0

	
-

	  
	
21

	
0

	
0

	
-

	  
	
22

	
0

	
0

	
-

	  
	
23

	
0

	
0

	
-

	  
	
24

	
0

	
0

	
-

	  
	
25

	
0

	
0

	
-

	  
	
26

	
0

	
0

	
-

	  
	
27

	
0

	
0

	
-

	  
	
28

	
0

	
0

	
-

	  
	
29

	
0

	
0

	
-

	  
	
30

	
0

	
0

	
-

	  
	
31

	
0

	
0

	
-

	  
	
Total

	
0

	
0

	  	  
	
Measuring device:

	
gas meter

	
operating

	
controlling

	  	
conversion factor

	  	  
	  	
meter No.

	  	  
	
Meter level Vn on:

	  	
-

	
 -

	  	  	
-

	
 -

	  	
Difference:

	
-

	
 -

	
Total for settlement m3

	
-

	  
	
Monthly average heat of combustion MJ/m3

	
0.00

	  
	
Cumulative quantity of gas m3

	
0

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