Document:

Exhibit 10.6

 

Continuing Agreement

For

Standby

Letters of Credit

 

This Agreement is between

 

Cubic Corporation

Cubic Defence New Zealand, Ltd.

Cubic Transportation Systems,

Australia PTY Ltd.,

Cubic Transportation Systems, Inc.,

Cubic Defense Applications, Inc.,

Cubic Simulation Systems, Inc.,

Cubic Applications, Inc.,

Cubic Transportation Systems, (India) Private Limited, and

 

JPMorgan Chase Bank, N.A.

and its subsidiaries and affiliates

 

 

CONTINUING AGREEMENT FOR

STANDBY LETTERS OF CREDIT

 

To induce JPMorgan Chase Bank, N.A. and/or any of its domestic or foreign subsidiaries or affiliates (individually and collectively, “Bank”),  in its sole discretion, to issue for the account of the Applicant or for the account of the Account Party named in the Application, one or more standby letters of credit, or other independent undertakings from time to time at the request of the undersigned (individually and collectively, “Applicant”; jointly and severally, if more than one), Applicant agrees as to each letter of credit or undertaking (together with any replacements, extensions or modifications, a “Credit”, collectively, “Credits” ) as follows.

 

1.  Applications/Instructions.  Each  request to issue a Credit (an “Application”) shall be irrevocable and in such form as Bank shall from time to time require or agree to accept (including any type of electronic form or means of communication). Inquiries, communications and instructions (whether oral, telephonic, written, telegraphic, facsimile, electronic or other) regarding a Credit, each Application and this Agreement are each referred to herein as “Instructions” (and the term “Application” is subsumed within the term “Instruction”). Bank’s records of the content of any Instruction shall be conclusive. Applicant shall be responsible for the final text of a Credit notwithstanding Bank’s recommendation, assistance or drafting or Bank’s use, non-use or refusal to use text submitted by Applicant. Bank may transmit a Credit and any amendment thereto by S.W.I.F.T. message and thereby bind Applicant directly and as indemnitor to the S.W.I.F.T. rules, including rules obligating Applicant or Bank to pay charges.

 

2.  Payment Terms; Obligations Absolute.  (a) For each Credit, Applicant shall pay Bank: (i) the amount of each drawing paid by Bank under the Credit on demand, if under a sight draft and at least one Business Day prior to the date when payment is to be made under a time draft (or acceptance relating thereto) or deferred payment obligation; (ii) commissions, fees and charges in respect of the Credit (including, commissions and fees for issuance, transfer, assignment of proceeds, amendments and drawings and of any adviser, confirming institution or entity or other nominated person), at such rates, amounts and times as Bank and Applicant shall mutually agree (or if no agreement, the rate then customarily charged by Bank); (iii) interest on each amount  under this Agreement for each day from and including the date such payment is due through the date of payment, on demand, at a rate per annum (calculated on the basis of a 360 day year for the actual number of days elapsed) equal to the lesser of (A) Prime plus 4% and (B) the highest rate permitted by applicable law; (iv) Bank’s charges, costs and expenses (including reasonable internal and outside counsel fees, expenses and charges) incurred in connection with the protection or enforcement of Bank’s rights under this Agreement and any correspondent’s charges, with interest from the date paid or incurred by Bank through the date of payment by Applicant, on demand, at a rate per annum equal to Prime plus 4%; and (v) if as a result of any Regulatory Change, the Bank determines that the cost to the Bank of issuing or maintaining any Credit is increased, or any amount received or receivable by the Bank hereunder is reduced, or the Bank is required to make any payment in connection with any transaction contemplated hereby, then the Applicant shall pay to the Bank on demand such additional amount or amounts as the Bank determines will compensate the Bank for such increased cost, reduction or payment. “Regulatory Change” means any change after the date hereof in United States federal, state or foreign laws or regulations (including Regulation D of the Board of Governors of the Federal Reserve System as amended or supplemented from time to time) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including the Bank or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. “Business Day” means any day on which commercial banks in New York City, New York are not authorized or required to be closed for business. “Prime” shall mean the rate of interest per annum announced by the Bank from time to time as its Prime Rate; each change in the Prime Rate shall be effective from and including the date such change is announced as being effective.

 

(b) If the amount drawn under any Credit is in non-United States currency (“foreign currency”), Applicant shall pay under paragraph 2(a)(i) above the United States dollar equivalent of the amount computed at Bank’s selling rate, as of the date of Applicant’s payment, for cable transfers of such foreign currency to the place of payment; provided, further, that if, for any reason, Bank has no selling rate for cable transfers of that currency to such place on the payment date, Applicant shall pay Bank an amount in United States currency equivalent to Bank’s actual cost of settlement of its obligation.

 

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(c) All payments shall be made in immediately available funds, free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges, withholdings, set-off or other liabilities.  Applicant shall pay all withholding, stamp and other taxes or duties imposed by any taxing authority on payment under any Credit and this Agreement and shall indemnify Bank against all liabilities, costs, claims, and expenses resulting from Bank having to pay or from any omission to pay or delay in paying any duty or tax.

 

(d) Bank may (but shall not be required to), without demand for payment or notice to the Applicant, and in addition to any other right of set-off which Bank may have, (i) debit any account or accounts maintained by Applicant with any office of Bank  (now or in the future) and set-off and apply (X) any balance or deposits (general, special, time, demand, provisional, final, matured, unmatured, contingent or absolute) in the account(s) and (Y) any sums due or payable from Bank, to the payment of any and all amounts owed by Applicant to Bank and/or (ii) advance funds to Applicant under any line of credit (committed or uncommitted) made available to Applicant by Bank and apply such funds to said payment obligations.

 

(e) Applicant’s payment obligations under this paragraph 2 are absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever, including, without limitation: (i) any lack of validity, enforceability or legal effect of any Credit or this Agreement, or any term or provision therein or herein; (ii) payment against presentation of any draft, demand or claim for payment under any Credit or other document presented for purposes of drawing under any Credit (“Drawing Document”) that does not comply in whole or in part with the terms of the applicable Credit or which proves to be fraudulent, forged or invalid in any respect or any statement therein being untrue or inaccurate in any respect, or which is signed, issued or presented by a Person (or a transferee of such Person) purporting to be a successor or transferee of the beneficiary of such Credit; (iii) Bank or any of its branches or affiliates being the beneficiary of any Credit; (iv) Bank or any correspondent honoring a drawing against a Drawing Document up to the amount available under any Credit even if such Drawing Document claims an amount in excess of the amount available under the Credit; (v) the existence of any claim, set-off, defense or other right that Applicant or any other Person may have at any time against any beneficiary, any assignee of proceeds, Bank or any other Person; (vi) Bank or any correspondent having previously paid against fraudulently signed or presented Drawing Documents (whether or not Applicant reimbursed Bank for such drawing); and (vii) any other event, circumstance or conduct whatsoever, whether or not similar to any of the foregoing, that might, but for this paragraph, constitute a legal or equitable defense to or discharge of, or provide a right of set-off against, Applicant’s obligations hereunder (whether against Bank, the beneficiary or any other Person); provided, however, that subject to paragraph 4 hereof, the foregoing shall not exculpate Bank from such liability to Applicant as may, be finally, judicially determined in an independent action or proceeding brought by Applicant against Bank following payment of Applicant’s obligations under this Agreement. “Person” means any natural Person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

 

3.  Amendment; Waiver.  Bank shall not be deemed to have amended or modified any term hereof, or waived any of its rights unless Bank consents in writing to such amendment, modification or waiver. No such waiver, unless expressly stated therein, shall be effective as to any transaction which occurs subsequent to such waiver, nor as to any continuance of a breach after such waiver.  Bank’s consent to any amendment, waiver, or modification does not mean that Bank shall consent or has consented to any other or subsequent Instruction to amend, modify, or waive a term of this Agreement or any Credit.

 

4.  Indemnification; Limitation of Liability.  (a) Applicant shall indemnify and hold harmless Bank, its parent, and correspondents and each of their respective directors, officers, employees and agents (each, including Bank, an “Indemnified Person”) from and against any and all claims, suits, judgments, costs, losses, fines, penalties, damages, liabilities, and expenses, including expert witness fees and legal fees, charges and disbursements of any counsel (including in-house counsel fees and allocated costs) for any Indemnified Person (“Costs”), arising out of, in connection with, or as a result of: (i) any Credit or any pre-advice of its issuance; (ii) any transfer, sale, delivery, surrender, or endorsement of any Drawing Document at any time(s) held by any Indemnified Person in connection with any Credit; (iii) any action or proceeding arising out of or in connection with any Credit or this Agreement (whether administrative, judicial or in connection with arbitration), including any action or proceeding to compel or restrain any presentation or payment under any Credit, or for the wrongful dishonor of or honoring a presentation under any Credit; (iv) any independent undertakings issued by the beneficiary of any Credit; (v) any unauthorized Instruction or error in computer transmission; (vi) an adviser, confirmer or other nominated person seeking to be

 

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reimbursed, indemnified or compensated; (vii) any third party seeking to enforce the rights of an applicant, beneficiary, nominated person, transferee, assignee of letter of credit proceeds or holder of an instrument or document; (viii) the fraud, forgery or illegal action of parties other than the Indemnified Person; (ix) the enforcement of this Agreement or any rights or remedies under or in connection with this Agreement or any Credit; (x) the Bank’s performance of the obligations of a confirming institution or entity that wrongfully dishonors a confirmation; (xi) Bank dishonoring any presentation upon or during the continuance of any Event of Default or for which Applicant is unable or unwilling to make any payment to Bank required under paragraph 2 above; and (xii) the acts or omissions, whether rightful or wrongful, of any present or future de jure or de facto governmental or regulatory authority or cause or event beyond the control of such Indemnified Person; in each case, including that resulting from Bank’s own negligence, provided, however, that such indemnity shall not be available to any Person claiming indemnification under (i) through (xii) above to the extent that such Costs are found in a final, non-appealable judgement by a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of the Indemnified Person claiming indemnity. If and to the extent that the obligations of Applicant under this paragraph are unenforceable for any reason, Applicant shall make the maximum contribution to the Costs permissible under applicable law.  The Indemnified Person shall give Applicant reasonably prompt written notice of any written claim or demand for payment in connection with which such Indemnified Person is seeking indemnity from Applicant (each, a “Claim”).  Upon the written request of Applicant, the Indemnified Person shall consult with Applicant with respect to the defense and settlement of any Claim.

 

(b) The liability of Bank (or any other Indemnified Person) under, in connection with and/or arising out of this Agreement or any Credit (or any pre-advice), regardless of the form or legal grounds of the action or proceeding, shall be limited to any direct damages suffered by Applicant that are caused directly by Bank’s gross negligence or willful misconduct in (i) honoring a presentation that does not at least substantially comply with a Credit, (ii) failing to honor a presentation that strictly complies with a Credit or (iii) retaining Drawing Documents presented under a Credit.  In no event shall Bank be deemed to have failed to act with due diligence or reasonable care if Bank’s conduct is in accordance with Standard Letter of Credit Practice or in accordance with this Agreement, including paragraph 4(c) below. Applicant’s aggregate remedies against Bank and any Indemnified Person for wrongfully honoring a presentation under any Credit or wrongfully retaining honored Drawing Documents shall in no event exceed the aggregate amount paid by Applicant to Bank in respect of the honored presentation in respect of such Credit under paragraph 2 above, plus interest. Notwithstanding anything to the contrary herein, Bank and the other Indemnified Persons shall not, under any circumstances whatsoever, be liable for any punitive, consequential, indirect or special damages or losses regardless of whether Bank or any Indemnified Person shall have been advised of the possibility thereof or of the form of action in which such damages or losses may be claimed. Applicant shall take reasonable action to avoid and mitigate the amount of any damages claimed against Bank or any Indemnified Person, including by enforcing its rights in the underlying transaction.  Any claim by Applicant for damages under or in connection with this Agreement or any Credit shall be reduced by an amount equal to the sum of (i) the amount saved by Applicant as a result of the breach or alleged wrongful conduct and (ii) the amount of the loss that would have been avoided had Applicant mitigated damages. If a Credit is to be governed by a law other than that of the State of New York, Bank shall not be liable for any Costs resulting from any act or omission by Bank in accord with the UCP or the ISP, as applicable, and Applicant shall indemnify Bank for all such Costs. “Standard Letter of Credit Practice” means, for Bank, any domestic or foreign law or letter of credit practices applicable in the city in which Bank issued the applicable Credit or for its branch or correspondent, such laws and practices applicable in the city in which it has advised, confirmed or negotiated such Credit, as the case may be. Such practices shall be (i) of banks that regularly issue Credits in the particular city and (ii) required or permitted under the UCP or the ISP, as chosen in the applicable Credit. “ISP” means, International Standby Practices 1998 (International Chamber of Commerce Publication No. 590) and any subsequent revision thereof adhered to by Bank on the date such Credit is issued.  “UCP” means, Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 500 or No. 600, as applicable to any Credit and any subsequent revision thereof adhered to by Bank on the date such Credit is issued.  If a Credit subject to UCP does not specify which revision is applicable, the Credit shall be subject to Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600.

 

(c) Without limiting any other provision of this Agreement, Bank and each other Indemnified Person (if applicable), shall not be responsible to Applicant for, and Bank’s rights and remedies against Applicant and Applicant’s obligation to reimburse the Bank shall not be impaired by: (i) honor of a presentation under any Credit which on its face substantially complies with the terms of such Credit; (ii) honor of a presentation of any Drawing Documents

 

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which appear on their face to have been signed, presented or issued (X) by any purported successor or transferee of any beneficiary or other party required to sign, present or issue the Drawing Documents or (Y) under a new name of the beneficiary; (iii) acceptance as a draft of any written or electronic demand or request for payment under a Credit, even if nonnegotiable or not in the form of a draft, and may disregard any requirement that such draft, demand or request bear any or adequate reference to the Credit; (iv) the identity or authority of any presenter or signer of any Drawing Document or the form, accuracy, genuineness, or legal effect of any presentation under any Credit or of any Drawing Documents; (v) disregard of any non-documentary conditions stated in any Credit; (vi) acting upon any Instruction which it, in Good Faith, believes to have been given by a Person or entity authorized to give such Instruction; (vii) any errors, omissions, interruptions or delays in transmission or delivery of any message, advice or document (regardless of how sent or transmitted) or for errors in interpretation of technical terms or in translation; (viii) any delay in giving or failing to give any notice; (ix) any acts, omissions or fraud by, or the solvency of, any beneficiary, any nominated Person or any other Person; (x) any breach of contract between the beneficiary and Applicant or any of the parties to the underlying transaction;  (xi) assertion or waiver of any provision of the UCP or ISP which primarily benefits an issuer of a letter of credit, including, any requirement that any Drawing Document be presented to it at a particular hour or place; (xii) payment to any paying or negotiating bank (designated or permitted by the terms of the applicable Credit) claiming that it rightfully honored or is entitled to reimbursement or indemnity under the Standard Letter of Credit Practice applicable to it; (xiii) dishonor of any presentation upon or during any Event of Default or for which Applicant is unable or unwilling to reimburse or indemnify Bank (provided that Applicant acknowledges that if Bank shall later be required to honor the presentation, Applicant shall be liable therefor in accordance with paragraph 2 hereof); and (xiv) acting or failing to act as required or permitted under Standard Letter of Credit Practice (or in the case of other independent undertakings or guarantees, the UN Convention)  applicable to where it has issued, confirmed, advised or negotiated such Credit, as the case may be. “Good Faith” means honesty in fact in the conduct of the transaction concerned. “UN  Convention” means the United Nations Convention on Independent Guarantees and Standby Letters of Credit.

 

(d) Applicant shall notify Bank of (i) any noncompliance with any Instruction, any other irregularity with respect to the text of any Credit or any amendment thereto or any claim of an unauthorized, fraudulent or otherwise improper Instruction, within three (3) Business Days of Applicant’s receipt of a copy of such Credit or amendment and (ii) any objection Applicant may have to Bank’s honor or dishonor of any presentation under any Credit or any other action or inaction taken or proposed to be taken by Bank under or in connection with this Agreement or any Credit, within five (5) Business Days after Applicant receives notice of the objectionable action or inaction.  The failure to so notify the Bank within said times shall discharge Bank from any loss or liability that Bank could have avoided or mitigated had it received such notice, to the extent that Bank could be held liable for damages hereunder; provided, that, if Applicant shall not provide such notice to Bank within five (5) Business Days of the date of receipt in the case of clause (i) or ten (10) Business Days from the date of receipt in the case of clause (ii), Bank shall have no liability whatsoever for such noncompliance, irregularity, action or inaction and Applicant shall be precluded from raising such noncompliance, irregularity or objection as a defense or claim against Bank. Applicant’s acceptance or retention of a Drawing Document presented under or in connection with any Credit (whether or not the document is genuine) or of any Released Merchandise shall ratify Bank’s honor of the presentation and preclude Applicant from raising a defense, set-off or claim with respect to Bank’s honor of such Credit.  Bank shall not be required to seek any waiver of discrepancies from Applicant or to grant any waiver of discrepancies which Applicant approves or requests. “Released Merchandise” means all Property referred to in or relating to the applicable Credit, released (including pursuant to a forwarders cargo receipt or by any other means whatsoever) or consigned to Applicant or any Person designated by Applicant in connection with such Credit. “Property” means all property of any kind whatsoever (now existing or hereafter acquired) including, without limitation, any and all right, title and interest of Applicant in any goods, equipment, inventory, money, documents, letters of credit, warehouse receipts, instruments, securities, security entitlements, financial assets, investment property, precious and base metals, chattel paper, electronic chattel paper, accounts, commercial tort claims, deposit accounts, general intangibles (including any claims for breach of contract, breach of warranty claims and any insurance policies and proceeds), letter of credit rights, choses in action and the proceeds of any and all thereof (including any and all of the aforesaid referred to in any Credit or the Drawing Documents relating thereto).

 

(e) Applicant will (i) comply with all foreign and domestic laws, rules and regulations (including the USA Patriot Act, foreign exchange control regulations, foreign asset control regulations and other trade-related regulations) now or hereafter applicable to each Credit, the transactions underlying such Credit or Applicant’s execution, delivery and performance of this Agreement, (ii) cause all Released Merchandise to be insured against theft, fire and such other

 

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risks usually insured against in connection with the underlying transaction; (iii) permit Bank (or its representatives) to inspect and audit any Property with respect thereto upon reasonable notice; and (iv) to the extent not provided to Bank under other agreements, upon request, furnish Bank with Applicant’s most recent year-end, quarterly and monthly (if any), financial statements (as audited) and such other information as Bank shall reasonably request regarding the financial condition, business or operations of Applicant.  Further, the undersigned acknowledges and agrees to provide the Bank additional information, records, and documentation as requested by Bank, pursuant to the Bank’s programs enacted to comply with Section 326 of the USA Patriot Act, the applicable regulations promulgated thereunder, and the Bank’s Customer Identification Program and authorizes Bank to verify information as per the USA Patriot Act Regulation.

 

(f) Applicant acknowledges that this Agreement and each Credit is entered into (or will be entered into) for commercial purposes. To the extent that Applicant may now or hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement or any Credit, to claim for itself or its revenues or properties any immunity from the jurisdiction of any court or from legal process (whether from service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and to the extent that in any such jurisdiction there may be attributed to the Applicant any such immunity (whether or not claimed), Applicant hereby irrevocably agrees not to claim, and hereby waives, such immunity in respect of its obligations under this Agreement or any Credit.

 

5.  Representations and Warranties.  Applicant hereby represents and warrants as of the date of this Agreement (and with each Instruction for the issuance of a Credit represents and warrants as of the date of the Instruction) that: (a) it has all necessary power and authority to enter into and perform this Agreement; (b) it has obtained all authorizations, consents and approvals required for it to enter into and perform this Agreement in accordance with its terms; (c) this Agreement constitutes the legal, valid and binding obligation of Applicant, enforceable against it in accordance with its terms; (d) the execution, delivery and performance of this Agreement by Applicant does not and will not contravene (i) its charter, by-laws or other organizational documents, (ii) any order or writ binding on or affecting Applicant or its properties, or (iii) any agreement or arrangement to which Applicant is a party or by which it or its properties may otherwise be bound, the contravention of which agreement or arrangement would have a material adverse effect on Applicant; (e) the financial statements most recently furnished to Bank by Applicant fairly present the financial condition of Applicant in accordance with generally accepted accounting principles, and there has been no material adverse change in Applicant’s business, condition (financial or otherwise) or results of operation since the date of Applicant’s most recent annual financial statements; (f) no information now or hereafter furnished by Applicant to Bank in connection with this Agreement or any Credit is or shall be materially false or misleading when furnished; (g) there is no pending or threatened action which may materially adversely affect its financial condition or business or which purports to affect the validity or enforceability of this Agreement, any Credit or any transaction related to any Credit; and (h) Applicant is acting for itself and for no other Person or entity in requesting issuance of each Credit.

 

6.  Pledge and Assignment of Security.  (a) As security for the payment and performance of all obligations and liabilities of Applicant to Bank in respect of any and all Credits issued hereunder (if any) and under this Agreement, whether matured or unmatured, absolute or contingent, now existing or hereafter incurred (“Obligations”), Applicant hereby grants to Bank a continuing lien and security interest in, and pledges and assigns to Bank all of Applicant’s present and future right, title and interest in, to and under the “Charged Property” (as defined in that certain Charge over Cash Deposit dated as of the date hereof among Cubic Transportation Systems Ltd. and JPMorgan Chase Bank, N.A., as amended, restated, supplemented or otherwise modified from time to time (the “Charge over Cash Deposit”)) (the “Collateral”).

 

(b) Applicant shall hold all payments of the Obligations and all proceeds of Collateral in trust for Bank. Bank shall be deemed to have possession, custody or control of all Collateral actually in transit to or set apart for it (or any of its agents, correspondents or others acting in its behalf), it being understood that the receipt at any time by Applicant (or any of its agents, correspondents, or others acting in its behalf), of Collateral of whatever nature, including cash, shall not be deemed a waiver of any of Bank’s rights or powers.

 

(c) If at any time there shall occur and be continuing (i) any Event of Default, (ii) any material adverse change in the condition (financial or otherwise), business, operations or prospects of Applicant or any Person that has guaranteed or provided credit support for all or part of the Obligations (“Guarantor”), (iii) any action for a temporary

 

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restraining order, preliminary or permanent injunction, beneficiary wrongful dishonor action or the issuance or commencement of any similar order, action or event in connection with any Credit or any Drawing Document or this Agreement, which order, action or event may apply, directly or indirectly, to Bank or which otherwise threatens to extend or increase Bank’s contingent liability beyond the time, amount or other limit provided in such Credit or this Agreement; or (iv) any other event or condition which provides a basis for Bank in good faith to deem itself insecure, then, Applicant shall, upon Bank’s demand, deliver to Bank, as additional security for the Obligations, cash in an amount required by Bank.

 

(d) Bank is authorized to file financing statements, naming Applicant as debtor and Bank as secured party, with respect to any or all of the Collateral hereunder. Bank is authorized to take any action necessary to protect its rights in the Collateral.  Applicant will, at its own expense upon request by Bank from time to time, sign any other instrument or document (including any security agreement, or control agreement) and take any other action Bank may reasonably deem necessary or desirable to preserve, perfect, protect or maintain the Collateral and the priority of Bank’s security interest therein and to realize upon Bank’s rights and remedies as a secured party

 

(e) To the extent Bank honors a presentation for which Bank remains unpaid, Bank may assert rights of Applicant and Applicant shall cooperate with Bank in its assertion of Applicant’s rights against the beneficiary, the beneficiary’s rights against Applicant and any other rights that Bank may have by subordination, subrogation, reimbursement, indemnity or assignment.

 

(f) If Bank shall agree to honor (accept) Drawing Documents under a Credit on a time draft or deferred payment basis, Applicant shall not take possession of the Drawing Documents or the underlying Property except for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with such Property in a manner preliminary to its sale or exchange. An Instruction to release any such Drawing Document or Property shall be deemed a representation by Applicant to Bank that Applicant seeks such release for one of said purposes.  In each such case, Applicant immediately shall apply the sale proceeds of such Property to the Obligations relating to the applicable Credit.

 

7.  Events of Default; Obligations Due; Remedies.  (a) Each of the following shall be an “Event of Default” under this Agreement: (i) Applicant shall fail to pay any sum payable upon or in respect of any of the Obligations when due; (ii) Applicant shall fail to perform any agreement contained herein; (iii) Applicant or any Guarantor shall fail to pay any taxes when due and such taxes shall not be contested in good faith or the amount thereof reserved for in accordance with GAAP; (iv) there shall be commenced against Applicant or any Guarantor any proceeding for enforcement of a money judgment in excess of $10 million in aggregate, which proceeding shall not have been stayed within 60 days; (v) any statement made, or any information, report or Instruction furnished by or for Applicant to Bank contains any misstatement of a material fact or omits to state a material fact or any fact necessary to make any statement contained therein not materially misleading; (vi) the dissolution, termination or, if an individual, death of Applicant or a Guarantor; (vii) any indebtedness, obligation and/or liability of Applicant or a Guarantor to any Person, including but not limited to Bank, shall not be paid or performed when due or any event or condition shall occur that shall result in any indebtedness, obligation or liability becoming due prior to its scheduled maturity or settlement date or that permits (with or without the giving of notice, the lapse of time or both) the holder of such indebtedness or obligee to cause such indebtedness, obligation or liability to become due, or to require the prepayment, repurchase, redemption or defeasance thereof prior to its scheduled maturity or settlement date; (viii) Applicant or any Guarantor shall contest the validity or enforceability of any guaranty supporting the Obligations; (ix) Applicant or any Guarantor shall become insolvent (however such insolvency may be evidenced or defined) or generally not be able to pay its debts as they become due, shall make a general assignment for the benefit of creditors, or shall suspend the transaction of its usual business or be expelled or suspended from any exchange, or if an application is made by any judgment creditor of Applicant or a Guarantor for any order directing Bank to pay over money or to deliver other property, or a petition in bankruptcy shall be filed by or against Applicant or a Guarantor or any proceeding shall be instituted by or against Applicant or a Guarantor which is not dismissed within 60 days thereafter for any relief under any bankruptcy or insolvency laws or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, composition or extensions or if any governmental authority or any court at the instance of any governmental authority shall take possession of any substantial part of the property of Applicant or any Guarantor or shall assume control over the affairs or operations of Applicant or any Guarantor, or if a receiver or custodian shall be appointed for, or a writ or order of attachment or garnishment shall be issued or made against, any of the property or assets of Applicant or a Guarantor or Applicant or a Guarantor shall indicate

 

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that any of the foregoing has occurred or will occur; or (x) there shall occur in one or a series of transactions (A) the sale or transfer of, or the creation or assertion of a lien over, a substantial portion of the assets of Applicant or of any Guarantor, (B) any transaction or event which results in the reduction in shareholder’s equity (or partnership capital, net worth or similar equivalent term) of the Applicant or any Guarantor of 50% or more (measured against such equity as of the date hereof; (C) an acquisition, directly or indirectly, of the power to direct or cause the direction of the management or policies of Applicant (or any Guarantor), whether by means of contract, voting power or otherwise (it being understood and agreed that neither the ownership nor acquisition of shares of the capital stock of Cubic Corporation by, nor the transfer of shares of the capital stock of Cubic Corporation between, Walter J. Zable, his spouse, his children, his grandchildren and/or any trust of which Walter J. Zable is the settlor, shall constitute an Event of Default), or (D) the merger or consolidation of Applicant or any Guarantor pursuant to which Applicant or such Guarantor is not the surviving company.

 

(b) Upon the occurrence and continuance of an Event of Default, all of the Obligations shall be immediately due and payable without notice or demand (whether or not a drawing or claim had in fact been made or paid) and Bank may, in addition to all other rights and remedies it may have at law or in equity, (i) exercise any remedies of a secured party under applicable law, including under the Code, (ii) charge, debit and/or set-off against any general or special account of Applicant maintained at any office of Bank (whether matured or unmatured) for the amount of the Obligations, (iii) amend or terminate, or transfer drawing rights or cure one or more discrepancies under, any Credit, and/or (iv) make payment in satisfaction of the Obligations or hold all amounts, proceeds and Collateral as security for each Credit.  Upon the occurrence and continuance of an Event of Default, Applicant shall assemble all Collateral and make it available to Bank at a place designated by Bank which is reasonably convenient to Bank and Applicant, and Bank shall be authorized to liquidate or sell immediately, without demand for payment, advertisement or notice to Applicant, all of which are hereby expressly waived (except such notice as is required by applicable law and cannot be waived, in which event such notice shall be deemed proper if mailed at least five Business Days before disposition or other action) any and all Collateral (whether received pursuant to paragraph 6(c) hereof or otherwise) at private sale or at public auction or at brokers’ board or upon any exchange or otherwise, at Bank’s option, in such parcels and at such time and at such place and at such price and upon such terms and conditions as Bank may deem proper, and to apply the net proceeds of such sale or sales, together with any balance of deposits and any sums credited by or due from Bank to Applicant in general account or otherwise, to the payment of any and all of the Obligations, all without prejudice to the rights of Bank against Applicant with respect to any and all amounts which may be or remain unpaid and if any such sale be at broker’s board or public auction or upon any exchange Bank may itself be a purchaser at such sale, free from any right of redemption, which Applicant hereby expressly waives and releases.

 

8.  Continuing Rights and Obligations.  Bank’s rights and liens hereunder shall continue unimpaired, and Applicant shall be and remain obligated in accordance with the terms and provisions hereof, notwithstanding the release and/or substitution of any Property which may be held as security hereunder at any time, or of any rights or interest therein. Applicant waives any defense whatsoever which might constitute a defense available to, or discharge of, a surety or a guarantor.  If more than one Person signs this Agreement or an Application hereunder, each of them shall be jointly and severally liable hereunder and thereunder and all the terms and provisions regarding liabilities, obligations and Property of such Persons shall apply to any liabilities, obligations and Property of any and all of them.

 

9.  Electronic Transmissions.  Bank is authorized to accept and process any Application and any amendments, transfers, assignments of proceeds, Instructions, consents, waivers and all documents relating to the Credit or the Application which are sent to Bank by electronic transmission, including SWIFT, electronic mail, telex, telecopy, telefax, courier, mail or other computer generated telecommunications and such electronic communication shall have the same legal effect as if written and shall be binding upon and enforceable against the Applicant.  Bank may, but shall not be obligated to, require authentication of such electronic transmission or that Bank receives original documents prior to acting on such electronic transmission.  If it is a condition of the Credit that payment may be made upon receipt by Bank of an electronic transmission advising negotiation, Applicant hereby agrees to reimburse Bank on demand for the amount indicated in such electronic transmission advice, and further agrees to hold Bank harmless if the documents fail to arrive, or if, upon the arrival of the documents, Bank should determine that the documents do not comply with the terms and conditions of the Credit.

 

8

 

10.  Jurisdiction; Waiver of Jury Trial.  (a) Applicant submits to the nonexclusive jurisdiction of any state or federal court located in the Borough of Manhattan, City of New York, State of New York, for itself and its Property and agrees that any such court shall be a proper forum for any action or suit brought by Bank.  Service of process in any legal action or proceeding arising out of or in connection with this Agreement, any Instruction or any Credit may be made upon Applicant by mailing a copy of the summons to Applicant either at the address set forth in the applicable Application or at Applicant’s last address appearing in Bank’s records. In addition, if Applicant is organized or incorporated in a jurisdiction outside the United States of America, Applicant designates the CT Corporation located at 111 8th Avenue, New York, New York 10011 as the true and lawful agent and attorney-in-fact of Applicant for receipt of the summons, writs and notices in connection with any such action or suit.

 

(b) No legal action or proceeding arising out of or in connection with this Agreement, any Instruction or any Credit may be brought by Applicant against Bank (i) except in a state or federal court located in the Borough of Manhattan, City of New York, State of New York and (ii) unless commenced within one (1) year after (X) the expiration date of the applicable Credit or (Y) the alleged breach shall have purportedly occurred, whichever is earlier.

 

(c) APPLICANT WAIVES (I) THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION OR PROCEEDING IN WHICH BANK AND APPLICANT ARE PARTIES (WHETHER OR NOT THE ONLY PARTIES) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY INSTRUCTION OR ANY CREDIT AND (II) THE RIGHT TO INTERPOSE ANY CLAIM, SETOFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION.

 

11.  Applicable Law; Severability. This Agreement  shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflict of laws.  The UCP and the ISP, as in effect on the date of this Agreement,  are incorporated by reference into this Agreement and are evidence of Standard Letter of Credit Practice with respect to matters covered therein provided, however, that to the extent permitted by applicable law, this Agreement shall prevail in case of a conflict between this Agreement, the Uniform Commercial Code (the “Code”), and/or Standard Letter of Credit Practice and the UCP shall prevail in case of conflict between the UCP and the Code or other Standard Letter of Credit Practice, if the Credit is governed by the UCP and the ISP shall prevail in case of a conflict between the ISP and the Code and other Standard Letter of Credit Practice if the Credit is a standby Credit governed by the ISP. Any provisions of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, Applicant hereby waives any provision of law, which prohibits or renders unenforceable any provision of this Agreement.

 

12.  No Third Party Benefits; Successor; Assignment; Integration; Delivery by Facsimile; Notices.  This Agreement shall be binding upon and inure to the benefit of Bank and Applicant and their respective successors and permitted assigns. This Agreement shall not confer any right or benefit upon any Person other than the parties to this Agreement, the Indemnified Persons and their respective successors and permitted assigns.  Bank may, in compliance with applicable laws, assign or sell participations in all or any part of any Credit or this Agreement to another entity and Bank may disseminate credit information relating to the Applicant in connection with any proposed participation.  Applicant agrees to amend this Agreement and/or the Charge over Cash Deposit (as defined in paragraph 6(b)) in a manner that Bank deems reasonably necessary or desirable (under New York law, English law, or otherwise) in connection with any assignment or participation of all or any portion of Bank’s interest under this Agreement.  Applicant may not assign this Agreement without the prior written consent of Bank.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Delivery of an executed counterpart of a signature page of this Agreement by any electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. Notices to Bank shall be sent to the address of Bank as set forth on the Credit and shall be delivered by hand, overnight courier or certified mail, return receipt requested. Notices to Applicant shall be sent to the address set forth below the signature line hereto.  THIS AGREEMENT CONSTITUTES THE ENTIRE CONTRACT AND FINAL AGREEMENT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  Notwithstanding anything to the contrary contained herein, in the event that any term or provision of this Agreement conflicts with or is inconsistent with the Charge over Cash Deposit as it relates to the Charged Property

 

9

 

(as defined in the Charge over Cash Deposit), then the terms and provisions of the Charge over Cash Deposit shall prevail and govern with respect thereto.

 

13.  Continuing Agreement. This Agreement is a continuing agreement and may not be terminated by Applicant except upon (i) thirty (30) days’ prior written notice of such termination by Applicant to Bank at the address of Bank set forth on the most recent Credit issued hereunder, (ii) payment of all Obligations and (iii) the expiration or cancellation of all Credits issued hereunder.  Notwithstanding the foregoing sentence, if a Credit is issued in favor of a sovereign or commercial entity, which is to issue a guarantee or undertaking on Applicant’s behalf in connection therewith, or is issued as support for such a guarantee, the Applicant shall remain liable with respect to such Credit until Bank is fully released in writing by such entity.

 

14.   Survival.  The provisions of Sections 2, 4, 6, 10, 11 and 13 shall survive and remain in full force and effect regardless of the consummation of any transactions contemplated hereby, the reimbursement or repayment of any drawings or Obligations, the expiration or termination of the Credits or the termination of this Agreement or any provision hereof.

 

15.  Limitation of Interest and Other Charges.  Applicant and Bank intend to conform strictly to the applicable usury laws, if any, now or hereafter in force with respect to this Agreement.  To such end: the aggregate of all interest and other charges constituting interest under such applicable usury laws and contracted for, chargeable or receivable under this Agreement shall never exceed the maximum amount of interest, nor produce a rate in excess of the maximum contract rate of interest, that Bank is authorized to charge Applicant under such applicable usury laws.

 

16.  [Reserved]

 

17.  IN THE EVENT STANDBY CREDIT(S) ARE ISSUED UNDER THIS AGREEMENT, THE FOLLOWING TERMS AND PROVISIONS SHALL APPLY:

 

Installments.  If the Credit is issued subject to UCP 500 or 600, unless otherwise agreed, in the event that any installment of the Credit is not drawn within the period allowed for that installment, the Credit may continue to be available for any subsequent installments in the sole discretion of the Bank, notwithstanding Article 41 of UCP 500 or Article 32 of UCP 600.

 

Auto Extend Notice.  If the Credit provides for automatic extension without amendment, Applicant agrees that it will notify Bank in writing at least sixty (60) days prior to the last day specified in the Credit by which Bank must give notice of nonextension as to whether or not it wishes the Credit to be extended. Any decision to extend or not extend the Credit shall be in Bank’s sole discretion and judgment. Applicant hereby acknowledges that in the event Bank notifies the beneficiary of the Credit that it has elected not to extend the Credit and the beneficiary draws on the Credit after receiving the notice of non-extension, Applicant acknowledges and agrees that Applicant shall have no claim or cause of action against Bank or defense against payment under the agreement for Bank’s discretionary decision to extend or not extend the Credit.

 

Pending Expiry Notice.  If a Credit’s terms and conditions provide that Bank give beneficiary  a  notice of pending expiration, Applicant agrees that it will notify Bank in writing at least sixty (60) days prior to the last day specified in the Credit by which Bank must give such notice of the pending expiration date. In the event Applicant fails to so notify Bank  and the Credit is extended, Applicant’s Obligations under this Agreement shall continue  in effect  and be binding on Applicant with regard to the Credit as so extended.

 

[Signature page follows]

 

10

 

THE UNDERSIGNED HEREBY AGREES TO ALL THE TERMS AND CONDITIONS SET FORTH HEREIN, ALL OF WHICH HAVE BEEN READ AND UNDERSTOOD BY THE UNDERSIGNED.

 

 

	
 
    	
Cubic   Corporation
    	
 
    	
 
    
	
 
    	
(Applicant/Obligor)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
/s/   William W. Boyle
    	
 
    	
/s/   Gregory L. Tanner
    
	
 
    	
(Authorized   Signature)
    	
 
    	
 
    
	
 
    	
William   W. Boyle
    	
 
    	
Gregory   L. Tanner
    
	
 
    	
Senior   Vice President
    	
 
    	
Treasurer
    
	
 
    	
(Title)   and Chief Financial Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
858-505-2342
    	
 
    	
858-505-2891
    
	
 
    	
(Phone)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
858-505-1559
    	
 
    	
858-505-1559
    
	
 
    	
(Fax)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
January   12, 2012
    	
 
    	
January   12, 2012
    
	
 
    	
(Date)
    	
 
    	
 
    

 

 

	
AGREED AND ACCEPTED:
    	
 
    
	
 
    	
 
    
	
JPMORGAN CHASE BANK, N.A.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Ling Li
    	
 
    
	
Name:
    	
LING   LI
    	
 
    
	
Title:
    	
Vice   President
    	
 
    
	
Date:
    	
1/12/12
    	
 
    

 

11

 

THE FOLLOWING IS TO BE EXECUTED IF THE CREDIT IS TO BE ISSUED FOR THE ACCOUNT OF A PERSON OTHER THAN THE PERSON SIGNING ABOVE:

 

AUTHORIZATION AND AGREEMENT OF ADDITIONAL PARTIES NAMED AS ACCOUNT PARTIES

 

To:  THE ISSUER OF THE CREDIT

 

We join in the above Agreement, naming us as Account Party, for the issuance of any applicable Credit and, in consideration thereof, we irrevocably agree (i) that the above Applicant has sole right to give instructions and make agreements with respect to this Agreement and such Credit, and the disposition of documents, and we have no right or claim against you, any of your affiliates or subsidiaries, or any correspondent in respect of any matter arising in connection with any of the foregoing and (ii) to be bound by the Agreement and all obligations of the Applicant thereunder as if we were a party thereto.  The Applicant is authorized to assign or transfer to you all or any part of any security held by the Applicant for our obligations arising in connection with this transaction and, upon any such assignment or transfer, you shall be vested with all powers and rights in respect of the security transferred or assigned to you and you may enforce your rights under this Agreement against us or our Property in accordance with the terms hereof.

 

 

	
Cubic Defence New Zealand, Ltd.
    	
 
    	
Cubic   Transportation Systems, Australia PTY Ltd.
    
	
(Account   Party)
    	
 
    	
(Account   Party)
    
	
 
    	
 
    	
 
    
	
/s/   Gregory L. Tanner
    	
 
    	
/s/   William W. Boyle
    
	
Gregory   L. Tanner
    	
 
    	
William   W. Boyle
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Director
    
	
Treasurer
    	
 
    	
(Title)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-2981
    	
 
    	
858-505-2342
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-1559
    	
 
    	
858-505-1559
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
January   12, 2012
    	
 
    	
January   12, 2012
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Cubic   Transportation Systems, Inc.
    	
 
    	
Cubic   Defense Applications, Inc.
    
	
(Account   Party)
    	
 
    	
(Account   Party)
    
	
 
    	
 
    	
 
    
	
/s/   Gregory L. Tanner
    	
 
    	
/s/   Gregory L. Tanner
    
	
Gregory   L. Tanner
    	
 
    	
Gregory   L. Tanner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Treasurer
    	
 
    	
Treasurer   and Assistant Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-2981
    	
 
    	
858-505-2981
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-1559
    	
 
    	
858-505-1559
    
	
 
    	
 
    	
 
    
	
January   12, 2012
    	
 
    	
January   12, 2012
    

 

12

 

	
Cubic   Simulation Systems, Inc.
    	
 
    	
Cubic   Applications, Inc.
    
	
(Account   Party)
    	
 
    	
(Account   Party)
    
	
 
    	
 
    	
 
    
	
/s/   Gregory L. Tanner
    	
 
    	
/s/   Gregory L. Tanner
    
	
Gregory   L. Tanner
    	
 
    	
Gregory   L. Tanner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Treasurer   and Assistant Secretary
    	
 
    	
Treasurer   and Assistant Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-2981
    	
 
    	
858-505-2342
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-1559
    	
 
    	
858-505-1559
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
January   12, 2012
    	
 
    	
January   12, 2012
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Cubic Transportation Systems, (India) Private Limited
    	
 
    	
 
    
	
(Account Party)
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Gregory L. Tanner
    	
 
    	
 
    
	
Gregory   L. Tanner
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Director
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-2981
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
858-505-1559
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
January   12, 2012
    	
 
    	
 
    

 

13

 

Appendix A

To the Continuing Agreement for Standby Letters of Credit

(To be completed by Account Party/Applicant/Correspondent Bank)

 

This Appendix will remain in effect until further notice in writing is received by the JPMorgan Chase Bank, N.A. from the Account Party/Applicant/Correspondent Bank.  Changes to this Appendix require a new Appendix A to be executed and delivered to JPMorgan Chase Bank, N.A.

 

A) In the event JPMorgan Chase Bank, N.A. issues or amends a Standby Letter of Credit (“Credit”), any one of the following individual(s) shall be authorized to sign on the behalf of:

 

	
Cubic Corporation
    
	
(Print   Name of Account Party/Applicant/Correspondent Bank)
    
	
 
    
	
 
    
	
William W. Boyle
    	
 
    	
SVP & CFO
    	
 
    	
/s/   William W. Boyle
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
John D. Thomas
    	
 
    	
VP Finance/Corp Dev
    	
 
    	
/s/   John D. Thomas
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gregory L. Tanner
    	
 
    	
Treasurer
    	
 
    	
/s/   Gregory L. Tanner
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    

 

B) In regards to any “Credit”, JPMorgan Chase Bank, N.A. may accept and rely on instructions including without limitation, (a) waiving of discrepancies, (b) mailings/returning shipping documents, (c) changing Credit terms and conditions prior to issuance, and amendments to Credits which do not extend, increase or change the tenor of the draft(s) transmitted by the following authorized representatives of:

 

 

	
Cubic Corporation
    
	
(Print   Name of Account Party/Applicant/Correspondent Bank)
    
	
 
    
	
 
    
	
William W. Boyle
    	
 
    	
SVP & CFO
    	
 
    	
/s/   William W. Boyle
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
John D. Thomas
    	
 
    	
VP Finance/Corp Dev
    	
 
    	
/s/   John D. Thomas
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Gregory L. Tanner
    	
 
    	
Treasurer
    	
 
    	
/s/   Gregory L. Tanner
    	
 
    	
January   12, 2012
    
	
(Printed Name)
    	
 
    	
(Title)
    	
 
    	
(Authorized   Signature)
    	
 
    	
(Date)
    

 

C) Signature Verification (To be completed by “Bank”):

 

The above individual(s) is/are authorized to execute and sign applications, amendments and instructions on behalf of the Account Party/Applicant/Correspondent Bank.

 

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(Print Relationship Manager “RM” Name)
    	
 
    	
(“RM”   Title)
    	
 
    	
(“RM”   Authorized Signature)
    	
 
    	
(Date)
    

 

14Exhibit 10.1

 

SEPARATION AGREEMENT

 

This Separation Agreement (this “Agreement”) is by and between J. DARBY SERÉ (the “Executive”) and GEOMET, INC. (the “Company”).  The Executive and the Company are sometimes referred to collectively in this Agreement as the “Parties” and individually as a “Party.”

 

WHEREAS, the Executive and the Company are parties to an Employment Agreement dated December 7, 2000, as amended by the Amendment to Employment Agreement dated March 13, 2007, and the Second Amendment to Employment Agreement dated December 31, 2008 (the “Employment Agreement”);

 

WHEREAS, the Executive currently serves as the Company’s Chief Executive Officer and President pursuant to the Employment Agreement and as the Chair of the Board of Directors of the Company (the “Board”);

 

WHEREAS, the Executive’s employment and service as the Chair of the Board will end on April 30, 2012 (the “Separation Date”) under circumstances that will entitle the Executive to certain severance benefits under the Employment Agreement in exchange for a release of claims;

 

WHEREAS, in the light of the Executive’s knowledge and experience, and the necessity of a transition period to allow for the orderly transfer of information about ongoing business matters, the Company desires to engage the Executive, and the Executive has agreed to be engaged, as a consultant to the Company for a limited period after the Separation Date;

 

WHEREAS, the Parties intend that the terms and conditions of this Agreement (and all documents attached hereto or referenced herein) shall govern all issues related to the Executive’s employment, ending of employment, consulting relationship, and post-employment and post-consultancy obligations; and

 

WHEREAS, capitalized terms not defined in this Agreement shall have the meanings assigned to them in the Employment Agreement.

 

THEREFORE, in consideration of the mutual promises and undertakings provided herein, the Parties agree as follows:

 

1.             Separation from Employment; Final Pay and Benefits.

 

(a)         The Executive’s employment with the Company will permanently end on the Separation Date without the necessity of notice or further action by the Company.  As of the Separation Date, the Executive permanently resigns all offices and positions in the Company and its Affiliates.  From and after the Separation Date, the Executive shall not hold himself out as an employee or agent of the Company or any of its Affiliates.

 

(b)         Whether or not the Executive signs this Agreement, the Executive will receive (i) payment of the Executive’s Base Salary through the Separation Date and vacation accrued in 2012 but unused as of the Separation Date, each less legally required and authorized withholdings and deductions; and (ii) reimbursement for authorized and reasonable business

 

 

expenses incurred by the Executive through the Separation Date, if any, in accordance with the Company’s customary practices and upon receipt of appropriate documentation.  The amount in (b)(i) will be paid to the Executive no later than the 10th day after the Separation Date or such shorter period required by law.  The amount in (b)(ii), if any, will be paid to the Executive on the 10th day after the Separation Date provided that the Executive has submitted appropriate documentation by the Separation Date.

 

(c)         The Executive’s eligibility to participate in and coverage under the Company’s group medical plan ends on the last day of the month is which the Separation Date occurs and the Executive’s participation in and eligibility for all other employee benefits ends on the Separation Date, all according to the terms of the applicable plans and in accordance with applicable law.  Nothing in this Agreement, however, affects the Executive’s accrued and vested benefits, if any, under applicable employee benefit plans, or the Executive’s right to continue or convert coverage under certain employee benefit plans, in accordance with the terms of those plans and applicable law.

 

(d)         The Executive’s participation in and eligibility for any paid leave, compensation, bonus, or equity plans or practices of the Company ends on the Separation Date.  The Executive acknowledges and agrees that he has no vested right to a bonus or other incentive or extra compensation under any plan, policy or practice of the Company.

 

(e)           The Executive acknowledges and agrees that the promises of the Company in this Section 1 satisfy all legal obligations owed to him as an employee and as a participant in the Company’s and its Affiliates’ applicable benefit and compensation plans and practices, and that, except as otherwise set out in this Agreement, no additional amounts are owed to him by the Company or any of its Affiliates by virtue of his employment.

 

2.             Termination of Employment Agreement.  The Parties agree that the Employment Agreement is terminated as of the Separation Date and that, except as specifically set out in this Agreement, neither Party shall have any further liabilities, obligations, or duties to the other pursuant to the Employment Agreement.  Notwithstanding the previous sentence, the Parties further agree, and the Executive acknowledges, that certain of Executive’s obligations under the Employment Agreement survive the termination of the Employment Agreement and the Executive’s employment, including without limitation, Paragraphs 8 (Noncompetition and Related Matters, as modified in Section 5 below); 9 (Confidentiality); 10 (Business Records); 11 (Intellectual Property); 12 (Assistance in Litigation); 15 (Arbitration); and 17 (Injunctive Relief).

 

3.             Severance Benefit.

 

(a)         In full satisfaction of the Company’s obligations under Paragraph 6(d) of the Employment Agreement and in consideration of the Executive’s promises and undertakings set out in this Agreement, the Company shall pay to the Executive the following amount (the “Severance Benefit”): (i) $499,500.00, which represents 18 months of the Executive’s Base Salary, plus (ii) an additional amount equal to $36,000, which is the cost of continued coverage under the Company’s group medical plan pursuant to the Consolidated Omnibus Budget

 

2

 

Reconciliation Act of 1985 for the Executive and any of his eligible dependents for 18 months, each less legally required withholdings.

 

(b)         The Severance Benefit described in subsection (a)(i) will be paid in the form of a lump sum (i) within 30 days after the Separation Date or, if later, (ii) on the Company’s first payroll date after the Effective Date (as defined in Section 10 below).  The Severance Benefit described in subsection (a)(ii) will be paid in 18 equal monthly payments commencing with the month following the Separation Date.  The Severance Benefit will be paid by ACH direct deposit to the Executive’s last checking account on record with the Company for which the Company has a proper authorization.

 

(c)         No contributions from the Executive or the Company will be made to any retirement, savings, or other benefit plan with respect to the Severance Benefit.

 

(d)         The obligation to pay the Severance Benefit is contingent on the Executive’s (i) timely execution and return, and non-revocation, of this Agreement and (ii) performance of all his obligations under this Release.

 

4.             Effect of Separation on Equity Awards.  In further consideration of the Executive’s promises and undertakings set out in this Agreement and subject to subsection (c), the equity awards are amended as follows:

 

(a)         Accelerated Vesting of Equity Awards.  The Executive’s equity awards identified in Exhibits A, B and C to this Agreement shall be fully vested and nonforfeitable as of the Separation Date.

 

(b)         Option Exercise Period.

 

(i)            As of the Separation Date, each Stock Option Award Agreement set out on Exhibit A to this Agreement (the “Exhibit A Options”) is hereby amended by amending and restating the first sentence of Section 4(a) thereof in its entirety to read as follows:

 

“This Option may not be exercised after the earlier of (i) the expiration of seven  years from the Grant Date or (ii) the expiration of 3 years from the “Separation Date” as defined in that certain Separation Agreement between the Company and Optionee dated April 30, 2012.”

 

In addition, as of the Separation Date, each Exhibit A Option is hereby amended by amending and restating the second sentence of Section 4(b) thereof in its entirety to read as follows:

 

“If the employment or service of an Optionee shall terminate for any reason other than Cause, each outstanding Option held by the Optionee may be exercised, to the extent then vested, until the earlier of (i) the expiration of 3 years from the date of such termination of employment or service or (ii) the expiration of the term of such Option.”

 

3

 

(ii)           As of the Separation Date, each Amended and Restated Non-Qualified Stock Option Agreement listed on Exhibit B to this Agreement (the “Exhibit B Options”)is hereby amended by amending and restating paragraph 2(ii) thereof in its entirety to read as follows:

 

“(ii)         In the event of Optionee’s termination of employment for any reason (other than the reasons set forth in subparagraph (i) of this paragraph 2), the Option may be exercised, to the extent then vested, for up to three years from the date of such termination of employment, unless the Option, by its terms, expires earlier.”

 

(c)         Issuance of Shares in Connection with Vested Restricted Stock and Restricted Stock Units.  The Company shall send a letter of instruction to its transfer agent to issue to Executive certificates representing the number of unvested units and unvested shares of common stock represented by the Restricted Stock Unit Award Agreement and the Restricted Stock Award Agreements, respectively, listed on Exhibit C to this Agreement within three (3) days following the Separation Date.

 

(d)         Effect of Failure to Accept or Revocation.  Notwithstanding subsections (a)-(c), if Executive does not timely accept this Agreement or timely revokes his acceptance, as described in Section 10, the Parties agree that (i) Executive shall return to the Company all stock received in settlement or upon vesting of the awards set out on Exhibit C (or an equivalent value in cash determined based on “Fair Market Value” (as defined in the applicable Company stock plan or award agreement) of any stock received as of the date of settlement or vesting), and an equivalent value in cash with respect to any stock withheld to satisfy applicable tax withholding, with such value to be determined based on “Fair Market Value” (as defined in the applicable Company stock plan or award agreement) as of the date of settlement or vesting; (ii) Executive shall forfeit to the Company each Exhibit A Option and each Exhibit B Option that became vested by virtue of subsection (a) or, if Executive has exercised any such options, pay to the Company an amount in cash (or transfer to the Company an equivalent value in Company common stock) equal to “Fair Market Value” (as defined in the applicable Company stock plan or award agreement), as of the date of exercise, of any Company stock covered by such exercised options less the exercise price of any such exercised options; and (iii) the exercise period for each Exhibit A Option and each Exhibit B Option that was vested before the Separation Date shall not be extended pursuant to subsection (b).

 

5.             Consulting Agreement.  In further consideration of their mutual promises and undertakings set out in this Agreement, the Parties shall execute the Consulting Agreement attached as Exhibit D to be effective on the day after the Separation Date.

 

6.             Noncompetition and Related Matters.  In further consideration of the promises and undertakings of the Company set out in this Agreement and the Consulting Agreement, and in the light of the acknowledgements in subsection (a) below, the Executive agrees as follows:

 

(a)         With respect to Paragraph 8 of the Employment Agreement, the Executive acknowledges and agrees that (i) the Company promised to provide (and in fact did provide) special training and knowledge, including confidential information identified in Paragraph 9 of

 

4

 

the Employment Agreement; (ii) the confidential information is valuable to the Company and, therefore, its protection and maintenance constitutes a legitimate interest to be protected by the Company; and (iii) he agreed in Paragraph 9 of the Employment Agreement to hold in strict confidence and not to disclose or reveal to any person, or use for his own personal benefit or for the benefit of any else, such confidential information during employment and for the three-year period after his employment ended, which obligation survives the termination of the Employment Agreement and the Executive’s employment.  The Executive further acknowledges and agrees that (w) the Company is engaged in a highly competitive business; (x) the Company has expended considerable time and resources to develop goodwill with its vendors, suppliers, customers, investors, business partners, and others with whom it has a business relationship (the “Business Partners”) and to create, protect, and exploit its confidential information; (y) the Executive’s participation in and direction of the Company’s day-to-day operations and strategic planning gave Executive unique access to confidential information that could be used by unauthorized third parties in a manner that would irreparably harm the Company’s competitive position in the marketplace and dilute its goodwill; and (z) pursuant to the Consulting Agreement, the Executive will continue to create and/or have access to confidential information of the Company that could be used by unauthorized third parties in a manner that would irreparably harm the Company’s competitive position in the marketplace and dilute its goodwill.

 

(b)         According, the Executive agrees that his post-employment obligations under Paragraph 8(a) and (c) of the Employment Agreement are modified as follows:  During the Restriction Period (as defined in subsection (d)(iv) below), the Executive shall not engage in any of the following activities (the “Restricted Activities”) without the written consent of the Chair of the Board:

 

(i)            Directly or indirectly, and whether or not for compensation, engage or prepare to engage in, or aid or advise another person or entity, who is engaging in or preparing to engage in, a Competing Business (as defined in subsection (d)(i) below) in the Specified Geographical Area (as defined in subsection (d)(v) below) as an employee, officer, director, agent, partner, stockholder, owner, member, representative, consultant, lender, guarantor, or in any other individual or representative capacity; provided, however, that this Section 6(b)(i) does not prohibit the Executive’s ownership of stock or other securities listed on a national securities exchange or actively traded in the over-the-counter market if he and the members of his immediate family do not, directly or indirectly, hold more than a total of 5% of all such shares of stock or other securities issued and outstanding;

 

(ii)           Directly or indirectly soliciting, inducing, persuading, or enticing, or endeavoring to solicit, induce, persuade, or entice, any person who is then employed by or otherwise engaged to perform services for the Company (including without limitation a Business Partner) to leave that employment or cease performing those services, whether on his own behalf or on behalf of any other person or entity; and

 

(iii)          Directly or indirectly soliciting, inducing, persuading, or enticing, or endeavoring to solicit, induce, persuade, or entice, any person or entity who is then a Business Partner to cease being a Business Partner or to divert all or any part of such

 

5

 

Business Partner’s business from the Company, whether on his own behalf or on behalf of any other person or entity.

 

(c)         Executive acknowledges and agrees that his obligations in Paragraph 8 of the Employment Agreement, as modified by this Section 6, (i) are ancillary to an otherwise enforceable agreement, including without limitation the mutual promises and undertakings set out in the Employment Agreement, this Agreement, and the Consulting Agreement; (ii) that the restrictions are reasonable and necessary, are valid and enforceable under applicable law, and do not impose a greater restraint than necessary to protect the Company’s goodwill, confidential information, and other legitimate business interests; (iii) that he will immediately notify the Company in writing should he believe or be advised that the restrictions are not, or likely are not, valid or enforceable under the law of any state that he contends or is advised is applicable; (iv) that he will not challenge the enforceability of such restrictions; and (v) except as otherwise modified in this Section 6, Paragraph 8 of the Employment Agreement remains in force and effect.

 

(d)         For purposes of this Section 6,

 

(i)            “Competing Business” means (i) owning, operating, leasing, acquiring, exploring, marketing, developing, producing, gathering, distributing, or disposing of Mineral Interests (as defined in subsection (d)(iii) below); or (ii) such other business activities as the Company may engage in, prepare to engage in, or investigate becoming engaged in during the term of the Consulting Agreement and about which the Executive has access to confidential information.

 

(ii)           The “Company” includes the Company and its affiliates.

 

(iii)          “Mineral Interest” means any royalty, overriding royalty, working, leasehold, or other property interest in coalbed methane, oil, or gas assets or related products, or any right to acquire such interests.

 

(iv)          “Restriction Period” means the period beginning on the Separation Date and ending 18 months after the termination of the Consulting Agreement.

 

(v)           “Specified Geographical Area” means (i) the Company’s Mineral Interests as of the Separation Date, additional Mineral Interests acquired by the Company during the term of the Consulting Agreement, and the geographical area within 25 miles of any such Mineral Interests; and (ii) the geographical locations where the Company attempted to acquire, or was investigating the acquisition of, Mineral Interests (X) within 12 months before the Separation Date or (Y) during the term of the Consulting Agreement and about which Executive had access to or created Confidential Information.

 

7.             Further Promises and Undertakings of the Executive.  In further consideration of the Company’s promises and undertakings set out in this Agreement, the Executive agrees that:

 

(a)         He will not make to any other person or entity any statement (whether oral, written, or electronic) which directly or indirectly impugns the quality or integrity of the

 

6

 

Company’s or any of the other Released Parties’ (as defined in Section 8(e) below) business or operations, or any other disparaging or derogatory remarks about the Company or any of the other Released Parties, except that he may give truthful testimony under oath in any legal proceeding;

 

(b)         Except as requested by the Company, as permitted by fair employment practices laws or other laws that may supersede the terms of this Agreement, or as compelled by valid legal process, he shall not:

 

(i)            Assist, cooperate with, or supply information of any kind to any non-governmental individual or entity or private-party litigant or their agents or attorneys (collectively a “Third Party”) concerning (A) the formation, continuation, terms and conditions, or ending of the Executive’s or any other employee’s employment with the Company or the employment practices of the Company; or (B) the business or operations of the Company or any of the other Released Parties; or

 

(ii)           Initiate or assist any Third Party in connection with any investigation, inquiry, or any other action of any kind with respect to either of the Company’s or any of the other Released Parties’ employment practices, business, or operations; and

 

(c)         If the Executive is contacted by any Third Party who is or may be adverse to, or investigating a possible claim or lawsuit against, the Company or any of the other Released Parties, he shall notify the Company in writing before providing any information to or meeting with such Third Party and, if requested, he will meet and confer with counsel for the Company or the other Released Parties before interviewing with, meeting with, providing information to, or giving a statement to any such Third Party.

 

8.             General Release.

 

(a)         In further consideration of the promises and undertakings of the Company set out in this Agreement, the Executive (for himself and for his spouse, representatives, heirs, successors and assigns) voluntarily, completely, and unconditionally releases, waives, and forever discharges to the maximum extent permitted by law the Released Parties (defined in Section 8(e) below) from any and all claims, demands, liabilities, and causes of action of whatever kind or character, whether vicarious, derivative, or direct, and whether known or unknown (individually a “Claim” and collectively the “Claims”), that the Executive now may have or ever has had against the Released Parties.

 

(b)         The Claims released and waived by this Section 8 include but are not limited to any and all Claims (including for attorneys’ fees and fraudulent inducement):

 

(i)            That the Executive is entitled to or owns any equity, phantom equity, or any other ownership or similar interest in the Company or any of the other Released Parties other than as set out on Exhibits A, B and C;

 

(ii)           For any bonus or other incentive or extra compensation;

 

7

 

(iii)          Growing out of, resulting from, or connected in any way to the Employment Agreement or termination of the Employment Agreement;

 

(iv)          Growing out of, resulting from, or connected in any way with the negotiation and execution of this Agreement;

 

(v)           Growing out of, resulting from, or connected in any way with the formation, continuation, terms and conditions, or ending of the Executive’s employment with the Company or the employment practices of the Company or any of the other Released Parties;

 

(vi)          Based on the common law or any federal, state, or local statutory or constitutional provision that applies or is asserted to apply, directly or indirectly, to the formation, continuation, terms and conditions, or ending of the employment relationship or employment practices, such as Claims based on contract or in tort, and Claims under the Civil Rights Acts of 1866, 1871, 1964, and 1991; the Age Discrimination in Employment Act, the Americans with Disabilities Act; the Fair Labor Standards Act; the Equal Pay Act; the Pregnancy Discrimination Act; the Family and Medical Leave Act; the Genetic Information Nondiscrimination Act; the Executive Retirement Income Security Act; the Fair Credit Reporting Act; the Sarbanes-Oxley Act; Chapters 21, 61, or 451 of the Texas Labor Code; and any other federal, state, or local statute, rule, order, or ordinance; and any amendments to the statutes just named or identified; and

 

(vii)         Based on any other act, conduct, or omission of any of the Released Parties.

 

(c)         The Executive acknowledges and agrees that he forever waives any right to recover, and will not request or accept, anything of value from any of the Released Parties as compensation or damages growing out of, resulting from, or connected in any way with the Executive’s employment or the ending of his employment with the Company, the employment practices of the Company, or with any other act, conduct, or omission of any of the Released Parties, other than the Severance Benefit, whether sought directly by him or by any administrative agency or other public authority, individual, or group of individuals on his behalf.

 

(d)         This Section 8 does not waive any rights that arise under this Agreement, any Claims under the Age Discrimination in Employment Act that arise after the date the Executive signs this Release, any rights under the equity awards identified on Exhibits A, B and C as amended herein, any right to indemnification or coverage under any directors and officers liability policy, or any Claims that cannot by law be released.

 

(e)         The “Released Parties” are (i) the Company; (ii) Yorktown Energy Partners IV, LP; (iii) Sherwood Energy, LLC; (iv) any parent, subsidiary, affiliate, predecessor, successor, or assign of the entities named or described in clauses (i)-(ii); and (iv) any current or former officer, director, partner, shareholder, owner, member, manager, joint venturer, trustee, fiduciary, agent, employee, associate, representative, administrator, investment advisor, employee benefit plan sponsored or maintained by, insurer, or attorney of or for the entities and persons named or described in clauses (i)-(iv).

 

8

 

9.             No Admission of Liability.  The Parties understand and agree that this Agreement does not in any manner constitute an admission of liability or wrongdoing by the Executive, the Company, or any of the Released Parties, but that any such liability or wrongdoing is expressly denied; and that, except to the extent necessary to enforce this Agreement, neither this Agreement nor any part of it may be construed as, used, or admitted into evidence in any judicial, administrative, or arbitral proceeding, as an admission of any kind by any of the Parties.

 

10.          Acceptance of Release; Effective Date; Right to Revoke.  The Executive may accept this Agreement at any time before the close of business on the 21st day after it was first presented to him by signing and returning this Agreement and Exhibit D without change to the attention of Stan Graves at GeoMet, Inc., 909 Fannin, Suite 1850 Houston, Texas 77010 or a signed electronic copy to graco@bellsouth.net with a copy to Mr. Graves to follow by US mail.  This Agreement will become effective and enforceable on the eighth day after it is received by Mr. Graves (the “Effective Date”).  The Executive may revoke his acceptance of this Agreement at any time before the Effective Date by so notifying Mr. Graves in writing at the above address.

 

11.          Acknowledgements.  By signing this Agreement, the Executive acknowledges that he is advised by the Company to consult with an attorney before signing this Agreement and Exhibit D, and has had sufficient time to do so; that he has been given sufficient time, and at least 21 days at his option, to consider this Agreement and Exhibit D; that he has read and understands the meaning and effect of signing this Agreement and Exhibit D; that neither the Company nor any of the other Released Parties has made any statements, representations, warranties, or promises to the Executive regarding this Agreement and Exhibit D, except for the statements, representations, warranties, or promises expressly made in this Agreement and Exhibit D; that he expressly disclaims reliance on any statements, representations, warranties, or promises made by the Company or any of the other Released Parties that are not set out in this Agreement and Exhibit D, but instead is relying on his own judgment in consultation with his attorney, if any; that his execution of this Agreement and Exhibit D thus is knowingly and voluntarily made; that pursuant to this Agreement and Exhibit D, he is receiving consideration in addition to anything of value to which he otherwise is entitled to receive; that he has not made any modifications to this Agreement or Exhibit D as they were originally presented to him by the Company or that any modifications made by him have been initialed by the Company or approved by the Company in writing (including by any Company-made revisions); and that any modifications to this Agreement or Exhibit D, whether material or immaterial, that are made or approved by the Company after they were originally presented to him do not extend the period of time for him to consider and accept this Agreement.

 

12.          Entire Agreement; Choice of Law.  This Agreement and Exhibit D represents the entire agreement of the Parties with respect to the termination of the Executive’s employment and the consulting relationship between the Parties, and shall be construed as a whole, according to its fair meaning, and not strictly for or against any of the Parties.  The Parties agree that this Agreement and the Consulting Agreement is governed by and shall be construed and enforced in accordance with Texas law, excluding its choice-of-law principles.

 

13.          Arbitration; Injunctive Relief.  The Parties agree that Paragraphs 15 (Arbitration) and 17 (Injunctive Relief) of the Employment Agreement shall apply to this

 

9

 

Agreement and Exhibit D, and nothing in Paragraph 15 of the Employment Agreement precludes the bringing of actions in court for the relief sought in Paragraph 17 of the Employment Agreement.

 

14.          Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

 

15.          Miscellaneous.

 

(a)         This Agreement and the Consulting Agreement shall be binding upon the Executive’s heirs, successors, and assigns, and shall inure to the benefit of the Executive, the Company, the other Released Parties, and his and their heirs, successors, and permitted assigns.

 

(b)         The Company may, but the Executive may not, assign or otherwise transfer this Agreement or the Consulting Agreement or any of its or his rights or obligations under this Agreement or Consulting Agreement without the written consent of the other.  The Executive shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any payments or other benefits provided under this Agreement or the Consulting Agreement; and no amounts payable under this Agreement or the Consulting Agreement shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or pursuant to the laws of descent and distribution.

 

(c)         (i) No provision of this Agreement or the Consulting Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Executive by a duly authorized officer of the Company, and such waiver is set out in writing and signed by the Party to be charged; and (ii) no waiver by a Party or failure to enforce or insist on his or its rights under this Agreement or the Consulting Agreement shall constitute a waiver or abandonment of any such rights or defense to enforcement of such rights, and a waiver on one occasion shall not be deemed to be a waiver of the same or any other type of breach on a future occasion.

 

(d)         Nothing in this Agreement or the Consulting Agreement, express or implied, is intended to or shall confer upon any person other than the Parties (and, in the case of the Company, its Affiliates), and their respective heirs, legal representatives, successors, and permitted assigns, any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement or the Consulting Agreement.

 

(e)         As used in this Agreement and the Consulting Agreement, “Affiliate” shall mean the Company and any entity that, directly or indirectly through one or more intermediaries, is controlled by or is under common control with the Company.

 

(f)          The section headings in this Agreement and the Consulting Agreement are for convenience of reference only, and they form no part of this Agreement or the Consulting Agreement and shall not affect its interpretation.

 

10

 

16.          Right to Consult a Tax Advisor.  Notwithstanding any contrary provision in this Agreement, the Executive shall be solely responsible for any risk that the tax treatment of all or part of any payments provided by this Agreement may be affected by Section 409A of the Internal Revenue Code of 1986, as amended, which may impose significant adverse tax consequences on him, including accelerated taxation, a 20% additional tax, and interest.  Because of the potential tax consequences, the Executive has the right, and is encouraged by this paragraph, to consult with a tax advisor of his choice before signing this Release.

 

17.          Withholdings.  With respect to the payment of the Severance Benefit, the Company (or its Affiliate) shall withhold and report all amounts required to be withheld and reported by applicable law.  The Company (or its Affiliate) shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

18.          Notices.  Any notice required or permitted under this Agreement or the Consulting Agreement shall be in writing and shall be deemed to have been sufficiently given or made and received upon receipt, when personally delivered, or three days after being deposited in the United States mail if sent by registered or certified mail, postage prepaid, with return receipt requested, addressed:

 

To the Company:

GeoMet, Inc.

909 Fannin, Suite 1850

Houston, Texas 77010

 

Attention:  Chair of the Board

 

To Executive, to the address reflected on the Company’s records,

 

or at any other address as either Party shall have specified by notice in writing to the other Party.

 

19.          Counterparts.  This Agreement and the Consulting Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

[Signature Page Follows]

 

11

 

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the day and year indicated below.

 

	
 
    	
EXECUTIVE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
/s/   J. Darby Seré
    
	
 
    	
Name:
    	
J.   Darby Seré
    
	
 
    	
 
    
	
 
    	
Date:
    	
April 30,   2012
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
GEOMET, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael Y. McGovern
    
	
 
    	
Name:
    	
Michael   Y. McGovern
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
Date:
    	
April 30,   2012
    

 

12

 

EXHIBIT A

 

	
Grant Date
    	
 
    	
Type
    	
 
    	
# of Shares Originally
   Covered By Award
    	
 
    	
# of Shares
   Remaining
    	
 
    	
Exercise
   Price
    	
 
    
	
March 23, 2009
    	
 
    	
Incentive   Stock Option
    	
 
    	
39,135
    	
 
    	
13,045
    	
 
    	
$
    	
0.72
    	
 
    
	
March 23, 2009
    	
 
    	
Incentive   Stock Option
    	
 
    	
69,999
    	
 
    	
23,333
    	
 
    	
$
    	
0.72
    	
 
    
	
March 23, 2009
    	
 
    	
Nonqualified   Stock Option
    	
 
    	
16,770
    	
 
    	
16,770
    	
 
    	
$
    	
0.72
    	
 
    
	
March 23, 2009
    	
 
    	
Nonqualified   Stock Option
    	
 
    	
30,000
    	
 
    	
30,000
    	
 
    	
$
    	
0.72
    	
 
    
	
September 20, 2010
    	
 
    	
Incentive   Stock Option
    	
 
    	
129,141
    	
 
    	
129,141
    	
 
    	
$
    	
0.875
    	
 
    
	
April 5, 2011
    	
 
    	
Incentive   Stock Option
    	
 
    	
68,190
    	
 
    	
68,190
    	
 
    	
$
    	
1.59
    	
 
    
	
April 5, 2011
    	
 
    	
Nonqualified   Stock Option
    	
 
    	
80,472
    	
 
    	
80,472
    	
 
    	
$
    	
1.59
    	
 
    

 

 

EXHIBIT B

 

	
 
    	
 
    	
# of Shares
    	
 
    	
Exercise Price
    	
 
    
	
Date of Original Agreement
    	
 
    	
(as provided in Paragraph 1,
   reflecting four-for-one
   common stock split)
    	
 
    	
(as provided in Paragraph 1,
   reflecting four-for-one
   common stock split)
    	
 
    
	
May 19, 2003
    	
 
    	
106,660
    	
 
    	
$
    	
2.50
    	
 
    
	
September 22, 2003
    	
 
    	
213,320
    	
 
    	
$
    	
2.50
    	
 
    
	
April 27, 2004
    	
 
    	
106,660
    	
 
    	
$
    	
2.50
    	
 
    

 

 

EXHIBIT C

 

Restricted Stock Unit Awards

 

	
Date of Agreement
    	
 
    	
# of Units Originally
   Covered By Award
    	
 
    	
# of Unvested Units
    	
 
    
	
April 5, 2011
    	
 
    	
99,108
    	
 
    	
99,108
    	
 
    

 

Restricted Stock Awards

 

	
Date of Agreement
    	
 
    	
# of Shares Originally
   Covered By Award
    	
 
    	
# of Unvested Shares
    	
 
    
	
April 18, 2006
    	
 
    	
4,614
    	
 
    	
3,076
    	
 
    
	
September 20, 2007
    	
 
    	
7,590
    	
 
    	
5,060
    	
 
    
	
March 24, 2008
    	
 
    	
32,730
    	
 
    	
32,730
    	
 
    
	
September 20, 2010
    	
 
    	
55,347
    	
 
    	
36,898
    	
 
    
	
January 5, 2011
    	
 
    	
7,449
    	
 
    	
5,587
    	
 
    
	
January 5, 2011
    	
 
    	
14,896
    	
 
    	
9,931
    	
 
    

 

 

EXHIBIT D

 

Consulting Agreement (attached)

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