Document:

Exhibit 10.1

 

	
 
    
	
INTREPID POTASH, INC.
    
	
 
    
	
$150,000,000 Senior Notes
    
	
 
    
	
$60,000,000 3.23% Senior Notes, Series A, due April 16,   2020
    
	
$45,000,000 4.13% Senior Notes, Series B, due April 14,   2023
    
	
$45,000,000 4.28% Senior Notes, Series C, due April 16,   2025
    
	
 
    
	    

    
	
 
    
	
NOTE PURCHASE AGREEMENT
    
	
 
    
	    

    
	
 
    
	
Dated as of August 28, 2012
    
	
 
    
	
 
    
	
 
    
	
 
    	
SERIES A PPN: 46121Y A*3
    	
 
    
	
 
    	
SERIES B PPN: 46121Y A@1
    	
 
    
	
 
    	
SERIES C PPN: 46121Y A#9
    	
 
    

 

 

TABLE OF CONTENTS

 

	
Section
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
AUTHORIZATION OF NOTES
    	
1
    
	
 
    	
1.1.
    	
Authorization of Notes
    	
1
    
	
 
    	
1.2.
    	
Subsidiary Guaranty
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
SALE AND PURCHASE OF NOTES
    	
2
    
	
 
    	
 
    	
 
    
	
3.
    	
CLOSING
    	
2
    
	
 
    	
 
    	
 
    
	
4.
    	
CONDITIONS TO CLOSING
    	
2
    
	
 
    	
4.1.
    	
Representations and Warranties
    	
2
    
	
 
    	
4.2.
    	
Performance; No Default
    	
2
    
	
 
    	
4.3.
    	
Compliance Certificates
    	
3
    
	
 
    	
4.4.
    	
Opinions of Counsel
    	
3
    
	
 
    	
4.5.
    	
Purchase Permitted By Applicable Law, etc.
    	
3
    
	
 
    	
4.6.
    	
Sale of Other Notes
    	
3
    
	
 
    	
4.7.
    	
Payment of Special Counsel Fees
    	
4
    
	
 
    	
4.8.
    	
Private Placement Numbers
    	
4
    
	
 
    	
4.9.
    	
Changes in Corporate Structure
    	
4
    
	
 
    	
4.10.
    	
Funding Instructions
    	
4
    
	
 
    	
4.11.
    	
Proceedings and Documents
    	
4
    
	
 
    	
4.12.
    	
Subsidiary Guaranty
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    	
4
    
	
 
    	
5.1.
    	
Organization; Power and Authority
    	
5
    
	
 
    	
5.2.
    	
Authorization, etc.
    	
5
    
	
 
    	
5.3.
    	
Disclosure
    	
5
    
	
 
    	
5.4.
    	
Organization and Ownership of Shares of Subsidiaries
    	
6
    
	
 
    	
5.5.
    	
Financial Statements
    	
6
    
	
 
    	
5.6.
    	
Compliance with Laws, Other Instruments, etc.
    	
7
    
	
 
    	
5.7.
    	
Governmental Authorizations, etc.
    	
7
    
	
 
    	
5.8.
    	
Litigation; Observance of Agreements, Statutes and Orders
    	
7
    
	
 
    	
5.9.
    	
Taxes
    	
7
    
	
 
    	
5.10.
    	
Title to property; Leases
    	
8
    
	
 
    	
5.11.
    	
Licenses, Permits, etc.
    	
8
    
	
 
    	
5.12.
    	
Compliance with ERISA
    	
8
    
	
 
    	
5.13.
    	
Private Offering by the Company
    	
9
    
	
 
    	
5.14.
    	
Use of Proceeds; Margin Regulations
    	
10
    
	
 
    	
5.15.
    	
Existing Indebtedness; Future Liens
    	
10
    
	
 
    	
5.16.
    	
Foreign Assets Control Regulations, etc.
    	
10
    
	
 
    	
5.17.
    	
Status under Certain Statutes
    	
11
    
					

 

ii

 

	
 
    	
5.18.
    	
Environmental Matters
    	
11
    
	
 
    	
5.19.
    	
Ranking of Obligations
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
REPRESENTATIONS OF THE PURCHASERS
    	
12
    
	
 
    	
6.1.
    	
Purchase for Investment
    	
12
    
	
 
    	
6.2.
    	
Source of Funds
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
INFORMATION AS TO COMPANY
    	
14
    
	
 
    	
7.1.
    	
Financial and Business Information
    	
14
    
	
 
    	
7.2.
    	
Officer’s Certificate
    	
16
    
	
 
    	
7.3.
    	
Electronic Delivery
    	
17
    
	
 
    	
7.4.
    	
Inspection
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
PREPAYMENT OF THE NOTES
    	
18
    
	
 
    	
8.1.
    	
No Scheduled Prepayments
    	
18
    
	
 
    	
8.2.
    	
Optional Prepayments
    	
18
    
	
 
    	
8.3.
    	
Mandatory Offer to Prepay Upon Change of Control
    	
18
    
	
 
    	
8.4.
    	
Allocation of Partial Prepayments
    	
19
    
	
 
    	
8.5.
    	
Maturity; Surrender, etc.
    	
20
    
	
 
    	
8.6.
    	
Purchase of Notes
    	
20
    
	
 
    	
8.7.
    	
Make-Whole Amount
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
AFFIRMATIVE COVENANTS
    	
22
    
	
 
    	
9.1.
    	
Compliance with Law
    	
22
    
	
 
    	
9.2.
    	
Insurance
    	
22
    
	
 
    	
9.3.
    	
Maintenance of Properties
    	
22
    
	
 
    	
9.4.
    	
Payment of Taxes and Claims
    	
23
    
	
 
    	
9.5.
    	
Corporate Existence, etc.
    	
23
    
	
 
    	
9.6.
    	
Subsidiary Guaranty
    	
23
    
	
 
    	
9.7.
    	
Books and Records
    	
24
    
	
 
    	
9.8.
    	
Priority of Obligations
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
NEGATIVE COVENANTS
    	
24
    
	
 
    	
10.1.
    	
Fixed Charge Coverage Ratio
    	
24
    
	
 
    	
10.2.
    	
Leverage Ratio
    	
25
    
	
 
    	
10.3.
    	
Priority Debt
    	
25
    
	
 
    	
10.4.
    	
Liens
    	
25
    
	
 
    	
10.5.
    	
Mergers, Consolidations, etc.
    	
27
    
	
 
    	
10.6.
    	
Sale of Assets
    	
29
    
	
 
    	
10.7.
    	
Transactions with Affiliates
    	
30
    
	
 
    	
10.8.
    	
Terrorism Sanctions Regulations
    	
30
    
	
 
    	
10.9.
    	
Line of Business
    	
30
    
	
 
    	
10.10.
    	
Financial Covenant Parity
    	
31
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
EVENTS OF DEFAULT
    	
32
    
	
 
    	
 
    	
 
    
	
12.
    	
REMEDIES ON DEFAULT, ETC.
    	
34
    

 

iii

 

	
 
    	
12.1.
    	
Acceleration
    	
34
    
	
 
    	
12.2.
    	
Other Remedies
    	
35
    
	
 
    	
12.3.
    	
Rescission
    	
35
    
	
 
    	
12.4.
    	
No Waivers or Election of Remedies, Expenses, etc.
    	
36
    
	
 
    	
12.5.
    	
Default Rate
    	
36
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
    	
36
    
	
 
    	
13.1.
    	
Registration of Notes
    	
36
    
	
 
    	
13.2.
    	
Transfer and Exchange of Notes
    	
36
    
	
 
    	
13.3.
    	
Replacement of Notes
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
PAYMENTS ON NOTES
    	
37
    
	
 
    	
14.1.
    	
Place of Payment
    	
37
    
	
 
    	
14.2.
    	
Home Office Payment
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
EXPENSES, ETC.
    	
38
    
	
 
    	
15.1.
    	
Transaction Expenses
    	
38
    
	
 
    	
15.2.
    	
Survival
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE   AGREEMENT
    	
39
    
	
 
    	
 
    	
 
    
	
17.
    	
AMENDMENT AND WAIVER
    	
39
    
	
 
    	
17.1.
    	
Requirements
    	
39
    
	
 
    	
17.2.
    	
Solicitation of Holders of Notes
    	
39
    
	
 
    	
17.3.
    	
Binding Effect, etc.
    	
40
    
	
 
    	
17.4.
    	
Notes held by the Company, etc.
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
18.
    	
NOTICES
    	
41
    
	
 
    	
 
    	
 
    
	
19.
    	
REPRODUCTION OF DOCUMENTS
    	
41
    
	
 
    	
 
    	
 
    
	
20.
    	
CONFIDENTIAL INFORMATION
    	
41
    
	
 
    	
 
    	
 
    
	
21.
    	
SUBSTITUTION OF PURCHASER
    	
43
    
	
 
    	
 
    	
 
    
	
22.
    	
MISCELLANEOUS
    	
43
    
	
 
    	
22.1.
    	
Successors and Assigns
    	
43
    
	
 
    	
22.2.
    	
Payments Due on Non-Business Days
    	
43
    
	
 
    	
22.3.
    	
Accounting Terms
    	
43
    
	
 
    	
22.4.
    	
Severability
    	
44
    
	
 
    	
22.5.
    	
Construction
    	
44
    
	
 
    	
22.6.
    	
Counterparts
    	
44
    
	
 
    	
22.7.
    	
Governing Law
    	
45
    
	
 
    	
22.8.
    	
Jurisdiction and Process; Waiver of Jury Trial
    	
45
    

 

iv

 

	
SCHEDULE   A
    	
—
    	
Information   Relating to Purchasers
    
	
SCHEDULE   B
    	
—
    	
Defined   Terms
    
	
SCHEDULE   5.3
    	
—
    	
Disclosure   Materials
    
	
SCHEDULE   5.4
    	
—
    	
Subsidiaries
    
	
SCHEDULE   5.5
    	
—
    	
Financial   Statements
    
	
SCHEDULE   5.15
    	
—
    	
Existing   Indebtedness
    
	
SCHEDULE   10.4
    	
—
    	
Liens
    
	
SCHEDULE   10.7
    	
—
    	
Affiliate   Transactions
    
	
EXHIBIT 1.1(a)
    	
—
    	
Form of   Series A Senior Note
    
	
EXHIBIT 1.1(b)
    	
—
    	
Form of   Series B Senior Note
    
	
EXHIBIT 1.1(c)
    	
—
    	
Form of   Series C Senior Note
    
	
EXHIBIT 1.2
    	
—
    	
Form of   Subsidiary Guaranty
    
	
EXHIBIT 4.4(a)
    	
—
    	
Form of   Opinion of Counsel for the Company
    
	
EXHIBIT 4.4(b)
    	
—
    	
Form of   Opinion of Special Counsel for the Purchasers
    

 

v

 

Intrepid Potash, Inc.

707 17th Street, Suite 4200

Denver, CO  80202

(303) 296-3006

 

$150,000,000 Senior Notes

 

$60,000,000 3.23% Senior Notes, Series A, due April 16, 2020

$45,000,000 4.13% Senior Notes, Series B, due April 14, 2023

$45,000,000 4.28% Senior Notes, Series C, due April 16, 2025

 

Dated as of August 28, 2012

 

TO EACH OF THE PURCHASERS LISTED IN

THE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

INTREPID POTASH, INC., a Delaware corporation (the “Company”), agrees with you as follows:

 

1.                                      AUTHORIZATION OF NOTES.

 

1.1.                            Authorization of Notes

 

The Company has authorized the issue and sale of $150,000,000 aggregate principal amount of its Senior Notes consisting of (i) $60,000,000 aggregate principal amount of its 3.23% Senior Notes, Series A, due April 16, 2020 (the “Series A Notes”); (ii) $45,000,000 aggregate principal amount of its 4.13% Senior Notes, Series B, due April 14, 2023 (the “Series B Notes”); and (iii) $45,000,000 aggregate principal amount of its 4.28% Senior Notes, Series C, due April 16, 2025 (the “Series C Notes” and, collectively with the Series A Notes and the Series B Notes, the “Notes,” such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement).  The Notes shall be substantially in the forms set out in Exhibits 1.1(a) through 1.1(c).  Certain capitalized and other terms used in this Agreement are defined in Schedule B; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

 

1.2.                            Subsidiary Guaranty.

 

The payment by the Company of all amounts due with respect to the Notes and the performance by the Company of its obligations under this Agreement will be guaranteed equally and ratably by each Subsidiary that is now, or in the future becomes, a guarantor of, or otherwise is or becomes obligated in respect of, any Indebtedness to banks under the Credit Agreement (individually, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”), pursuant to the Subsidiary Guaranty in substantially the form of the attached

 

 

Exhibit 1.2, as it hereafter may be amended or supplemented from time to time with the consent of the Subsidiary Guarantors (the “Subsidiary Guaranty”).

 

2.                                      SALE AND PURCHASE OF NOTES.

 

Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and each of the other purchasers named in Schedule A (the “Other Purchasers”), and you and the Other Purchasers will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and series specified opposite your names in Schedule A at the purchase price of 100% of the principal amount thereof.  Your obligation hereunder and the obligations of the Other Purchasers are several and not joint obligations and you shall have no liability to any Person for the performance or non-performance by any Other Purchaser hereunder.

 

3.                                      CLOSING.

 

The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Foley & Lardner LLP, 321 North Clark Street, Suite 2800, Chicago, Illinois 60654-5313, at 9:00 a.m., Chicago time, at a closing (the “Closing”) on April 16, 2013 or on such other Business Day thereafter on or prior to April 30, 2013 as may be agreed upon by the Company and you and the Other Purchasers.  At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 412-341-9277 at Wells Fargo Bank, N.A., 1700 Lincoln Street, 8th Floor, Denver, CO 80203, ABA No. 121000248.  If at the Closing the Company fails to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment.

 

4.                                      CONDITIONS TO CLOSING.

 

Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions:

 

4.1.                            Representations and Warranties.

 

The representations and warranties of the Company in this Agreement shall be correct on the date hereof and correct in all material respects at the time of the Closing.

 

4.2.                            Performance; No Default.

 

The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to

 

2

 

or at the Closing and from the date of this Agreement to the Closing assuming that Sections 9 and 10 are applicable from the date of this Agreement.  From the date of this Agreement until the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14), no Default or Event of Default shall have occurred and be continuing.  Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10 had such Section applied since such date.

 

4.3.                            Compliance Certificates.

 

(a)                                 Officer’s Certificate.  The Company shall have delivered to you an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

 

(b)                                 Secretary’s Certificate.  Each of the Company and each Subsidiary Guarantor shall have delivered to you a certificate of its Secretary or Assistant Secretary, dated the date of the Closing, certifying as to (i) the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and the Subsidiary Guaranty, as applicable and (ii) its organizational documents as then in effect.

 

4.4.                            Opinions of Counsel.

 

You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Bryan Cave LLP, counsel for the Company and the Subsidiary Guarantors, covering the matters set forth in Exhibit 4.4(a) (and the Company instructs its counsel to deliver such opinion to you) and (b) from Foley & Lardner LLP, special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b).

 

4.5.                            Purchase Permitted By Applicable Law, etc.

 

On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof.  If requested by you, you shall have received an Officer’s Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted.

 

4.6.                            Sale of Other Notes.

 

Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A.

 

3

 

4.7.                            Payment of Special Counsel Fees.

 

Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of your special counsel referred to in Section 4.4, to the extent reflected in a statement of such counsel rendered to the Company at least three Business Days prior to the Closing.

 

4.8.                            Private Placement Numbers.

 

A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained by Foley & Lardner LLP for each series of the Notes (and you hereby instruct your counsel to obtain the Private Placement Numbers).

 

4.9.                            Changes in Corporate Structure.

 

The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5, in each case except as to the extent not prohibited under Section  10.

 

4.10.                     Funding Instructions.

 

At least three Business Days prior to the date of the Closing, you shall have received written instructions signed by a Responsible Officer on letterhead of the Company confirming the information specified in Section 3 including (i) the name and address of the transferee bank, (ii) such transferee bank’s ABA number and (iii) the account name and number into which the purchase price for the Notes is to be deposited.

 

4.11.                     Proceedings and Documents.

 

All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments reasonably related to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

 

4.12.                     Subsidiary Guaranty.

 

You shall have received a copy of the Subsidiary Guaranty, duly executed and delivered by each Subsidiary Guarantor and the Subsidiary Guaranty shall be in full force and effect.

 

5.                                      REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to you, as of the date hereof and as of the Closing, that:

 

4

 

5.1.                            Organization; Power and Authority.

 

The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.

 

5.2.                            Authorization, etc.

 

This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

5.3.                            Disclosure.

 

The Company, through its agent, U.S. Bancorp Investments, Inc., has delivered to each Purchaser a copy of a Confidential Offering Memorandum, dated August 2012 (the “Memorandum”), relating to the transactions contemplated hereby.  The Memorandum fairly described, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries as of the date hereof.  As of the date of this Agreement, this Agreement, the Memorandum and the documents, certificates or other writings delivered to or made available to the Purchasers by or on behalf of the Company in connection with the transactions contemplated hereby and identified in Schedule 5.3 (this Agreement, the Memorandum and such documents, certificates or other writings delivered to or made available to each Purchaser being referred to, collectively, as the “Disclosure Documents”), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made.  Except as disclosed in the Disclosure Documents, since December 31, 2011, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary, except changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect.  There is no fact known to the Company that would reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Disclosure Documents.  Notwithstanding the foregoing, with respect to projected financial information (if any), the Company represents only that such information was prepared in good faith based upon assumptions believed by the Company to have been

 

5

 

reasonable at the time of the preparation thereof (it being understood that any projections as to future events are not to be viewed as facts and that the actual results during the period covered by such projections may differ from the projected results and that the differences may be material).

 

5.4.                            Organization and Ownership of Shares of Subsidiaries.

 

(a)                                 Schedule 5.4 contains (except as noted therein) complete and correct lists as of the date hereof of:  (i) the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, and (ii) the Company’s directors and Responsible Officers.

 

(b)                                 All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).

 

(c)                                  Each Subsidiary is a corporation or other legal entity duly organized, validly existing and, where applicable, in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and, where applicable, is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

 

(d)                                 No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

 

5.5.                            Financial Statements.

 

The Company has delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5.  All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial condition of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments and absence of footnotes).  The Company and its Subsidiaries do not have any Material liabilities

 

6

 

that are not disclosed on such financial statements or otherwise disclosed in the Disclosure Documents.

 

5.6.                            Compliance with Laws, Other Instruments, etc.

 

The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, corporate charter or by-laws, or any other Material agreement, lease, or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.

 

5.7.                            Governmental Authorizations, etc.

 

No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes.

 

5.8.                            Litigation; Observance of Agreements, Statutes and Orders.

 

(a)                                 There are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Neither the Company nor any Subsidiary is (i) in default under any term of any agreement or instrument to which it is a party or by which it is bound, (ii) in violation of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or (iii) in violation of any applicable law, ordinance, rule or regulation of any Governmental Authority (including Environmental Laws, the USA PATRIOT Act or any of the other laws and regulations that are referred to in Section 5.16), in each case which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

5.9.                            Taxes.

 

The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which

 

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is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP.  The Company knows of no basis for any other tax or assessment that would reasonably be expected to have a Material Adverse Effect.  The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate.

 

5.10.                     Title to property; Leases.

 

The Company and its Subsidiaries have good and sufficient title to, or leaseholds or other rights to use, their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in a transaction not prohibited hereby), in each case free and clear of Liens prohibited by this Agreement.  All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

 

5.11.                     Licenses, Permits, etc.

 

(a)                                 The Company and its Subsidiaries own or possess rights to use all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without any conflict with the rights of others known to the Responsible Officers, except for any such conflict that would not reasonably be expected to result in a Material Adverse Effect.

 

(b)                                 To the knowledge of the Responsible Officers, no product or service of the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person, other than any infringement that would not reasonably be expected to result in a Material Adverse Effect.

 

(c)                                  To the knowledge of the Responsible Officers, there is no Material violation by any Person of any right of the Company or any Subsidiary with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Company or any Subsidiary, other than any violation that would not reasonably be expected to result in a Material Adverse Effect.

 

5.12.                     Compliance with ERISA.

 

(a)                                 The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and would not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that would reasonably be expected

 

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to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to section 430(k) of the Code or to any such penalty or excise tax provisions under the Code or Federal law or section 4068 of ERISA or by the granting of a security interest in connection with the amendment of a Plan, in each case other than such liabilities or Liens as would not be individually or in the aggregate Material.

 

(b)                                 The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $5 million in the aggregate for all Plans.  The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.

 

(c)                                  The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

 

(d)                                 The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material or has been disclosed in the most recent audited consolidated financial statements of the Company.

 

(e)                                  The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you.

 

5.13.                     Private Offering by the Company.

 

Neither the Company nor anyone acting on its behalf has offered the Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you and the Other Purchasers and not more than 72 other Institutional Investors, each of which has been offered the Notes at a private sale for investment.  Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.

 

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5.14.                     Use of Proceeds; Margin Regulations.

 

The Company will use the proceeds of the sale of the Notes for lawful corporate purposes.  No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 25% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 25% of the value of such assets.  As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

 

5.15.                     Existing Indebtedness; Future Liens.

 

(a)                                 Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of June 30, 2012 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranty thereof, if any) since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries.  Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Material Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Material Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

 

(b)                                 Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.4.

 

(c)                                  Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as specifically indicated in Schedule 5.15.

 

5.16.                     Foreign Assets Control Regulations, etc.

 

(a)                                 Neither the Company nor any Controlled Entity is (i) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons

 

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published by the Office of Foreign Assets Control, U.S. Department of Treasury (“OFAC”) (an “OFAC Listed Person”) or (ii) a department, agency or instrumentality of, or is otherwise controlled by or acting on behalf of, directly or indirectly, (x) any OFAC Listed Person or (y) any Person, entity, organization, foreign country or regime that is subject to any OFAC Sanctions Program (each OFAC Listed Person and each other Person, entity, organization and government of a country described in clause (ii), a “Blocked Person”).

 

(b)                                 No part of the proceeds from the sale of the Notes hereunder constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used, directly by the Company or indirectly through any Controlled Entity, in connection with any investment in, or any transactions or dealings with, any Blocked Person.

 

(c)                                  To the Company’s actual knowledge after making due inquiry, neither the Company nor any Controlled Entity (i) is under investigation by any Governmental Authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes under any applicable law (collectively, “Anti-Money Laundering Laws”), (ii) has been assessed civil penalties under any Anti-Money Laundering Laws or (iii) has had any of its funds seized or forfeited in an action under any Anti-Money Laundering Laws. The Company has taken measures as required by applicable law to ensure that the Company and each Controlled Entity is and will continue to be in compliance with all applicable current and future Anti-Money Laundering Laws.

 

(d)                                 No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any illegal payments to any governmental official or employee, political party, official of a political party, candidate for political office, official of any public international organization or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage.  The Company has taken measures as required by applicable law to ensure that the Company  and each Controlled Entity is and will continue to be in compliance with all applicable current and future anti-corruption laws and regulations.

 

5.17.                     Status under Certain Statutes.

 

Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, or the Federal Power Act, as amended.

 

5.18.                     Environmental Matters.

 

Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any Subsidiary or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as would not reasonably be expected to result in a Material Adverse Effect.

 

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(a)                                 Neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as would not reasonably be expected to result in a Material Adverse Effect.

 

(b)                                 Neither the Company nor any Subsidiary has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that would reasonably be expected to result in a Material Adverse Effect.

 

(c)                                  All buildings on all real properties now owned, leased or operated by the Company or any Subsidiary are in compliance with applicable Environmental Laws, except where failure to comply would not reasonably be expected to result in a Material Adverse Effect.

 

5.19.                     Ranking of Obligations.

 

The Company’s payment obligations under this Agreement and the Notes and each Subsidiary Guarantor’s payment obligations under the Subsidiary Guaranty will, upon issuance of the Notes and the Subsidiary Guaranty, rank at least pari passu, without preference or priority, with all other unsecured and unsubordinated Indebtedness of such Loan Party.

 

6.                                      REPRESENTATIONS OF THE PURCHASERS.

 

6.1.                            Purchase for Investment.

 

You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control.  You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

 

6.2.                            Source of Funds.

 

You represent that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by you to pay the purchase price of the Notes to be purchased by you hereunder:

 

(a)                                 the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the NAIC (the “NAIC Annual

 

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Statement”) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

 

(b)                                 the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

 

(c)                                  the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1, or (ii) a bank collective investment fund, within the meaning of PTE 91-38 and, except as you have disclosed to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

 

(d)                                 the Source constitutes assets of an “investment fund” (within the meaning of Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM Exemption), no employee benefit plan’s assets that are managed by the QPAM in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, represent more than 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM maintains an ownership interest in the Company that would cause the QPAM and the Company to be “related” within the meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM and (ii) the names of any employee benefit plans whose assets in the investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization, represent 10% or more of the assets of such investment fund, have been disclosed to the Company in writing pursuant to this clause (d); or

 

(e)                                  the Source constitutes assets of a “plan(s)” (within the meaning of section IV of PTE 96-23 (the “INHAM Exemption”) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company

 

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and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

 

(f)                                   the Source is a governmental plan; or

 

(g)                                  the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

 

(h)                                 the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

 

As used in this Section 6.2, the terms “employee benefit plan”, “governmental plan” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

 

7.                                      INFORMATION AS TO COMPANY.

 

7.1.                            Financial and Business Information

 

The Company will deliver to each Purchaser and each holder of Notes that is an Institutional Investor:

 

(a)                                 Quarterly Statements — within 45 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,

 

(i)                                     a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter,

 

(ii)                                  consolidated statements of operations or income of the Company and its consolidated Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and

 

(iii)                               consolidated statements of cash flows of the Company and its consolidated Subsidiaries for such quarter or (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,

 

setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial condition of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments and absence of footnotes, provided that delivery within the time period specified above of copies of the Company’s Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); provided, further, that the Company

 

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shall be deemed to have made such delivery of such Form 10-Q if it shall have timely made such Form 10-Q available on “EDGAR” and on its home page on the worldwide web (at the date of this Agreement located at:  http//www.intrepidpotash.com); provided, however, the Company shall use commercially reasonable efforts to ensure that each holder that (A) is an Institutional Investor and (B) has provided the Company with a valid e-mail address receives automatically generated electronic mail from the Company’s website providing notice of the filing of such Form 10-Q (such availability and electronic notice thereof being referred to as “Electronic Delivery”);

 

(b)                                 Annual Statements — within 90 days after the end of each fiscal year of the Company, duplicate copies of,

 

(i)                                     a consolidated balance sheet of the Company and its consolidated Subsidiaries, as at the end of such year, and

 

(ii)                                  consolidated statements of operations or income, changes in stockholders’ equity and cash flows of the Company and its consolidated Subsidiaries, for such year,

 

setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial condition of the Company and its consolidated Subsidiaries being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company’s Annual Report on Form 10-K for such fiscal year prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b); provided, further, that the Company shall be deemed to have made such delivery of such Form 10-K if it shall have timely made Electronic Delivery thereof;

 

(c)                                  SEC and Other Reports — within a reasonable time after they become available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission; provided, that the Company shall be deemed to have complied with this Section 7.1(c) if it shall have timely made Electronic Delivery of any such required financial statement, report, notice, proxy statement, report, registration statement, prospectus or amendment;

 

(d)                                 Notice of Default or Event of Default — promptly, and in any event within five Business Days after a Responsible Officer obtaining actual knowledge of the

 

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existence of any Default or Event of Default, a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

 

(e)           ERISA Matters — promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

 

(i)            with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof if such reportable event would reasonably be expected to have a Material Adverse Effect; or

 

(ii)           the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan, in each case if such steps, threat, proceeding, appointment or action would reasonably be expected to have a Material Adverse Effect; or

 

(iii)          any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, would reasonably be expected to have a Material Adverse Effect;

 

(f)            Notices from Governmental Authority — promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that would reasonably be expected to have a Material Adverse Effect; and

 

(g)           Requested Information — with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any Subsidiary as from time to time may be reasonably requested by any such holder of Notes.

 

7.2.         Officer’s Certificate.

 

Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or (b) shall be accompanied by a certificate of a Senior Financial Officer:

 

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(a)           Covenant Compliance — (i) stating whether it is in compliance with all of the covenants in Section 10.1 through 10.10 and (ii) setting forth the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.3 during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and

 

(b)           Event of Default — certifying that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

 

7.3.         Electronic Delivery.

 

Without limiting the right to deliver information by Electronic Delivery in accordance with Section 7.1, any information required to be delivered by the Company pursuant to Sections 7.1 or 7.2 shall be deemed to have been delivered if the information is (1) delivered to each holder of Notes that is an Institutional Investor by e-mail or (2) is timely posted by or on behalf of the Company on IntraLinks or on any other similar website to which each holder of Notes that is an Institutional Investor has free access; provided however, that upon reasonable request of any holder that is an Institutional Investor, the Company will thereafter deliver written copies of such information to such holder.

 

7.4.         Inspection.

 

The Company will permit the representatives of each holder of Notes that is an Institutional Investor:

 

(a)           No Default — if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, all at such reasonable times as may be reasonably requested in writing; provided that each holder shall not be entitled to more than one visitation during any fiscal year; and

 

(b)           Default — if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any 

 

17

 

Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances, and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

 

8.             PREPAYMENT OF THE NOTES.

 

8.1.         No Scheduled Prepayments.

 

No regularly scheduled prepayments are due on the Notes prior to their stated maturity.

 

8.2.         Optional Prepayments.

 

(a)           The Notes.  The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, one or more series of the Notes in an amount not less than $1,000,000 in the aggregate in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount.  The Company will give each holder of each series of the Notes to be prepaid written notice of each optional prepayment under this Section 8.2(a) not less than 30 days and not more than 60 days prior to the date fixed for such prepayment.  Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of each series of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.4), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation.  Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

 

(b)           Prepayments During Defaults or Events of Defaults.  Anything in Section 8.2(a) to the contrary notwithstanding, during the continuance of a Default or Event of Default the Company may prepay less than all of the outstanding Notes pursuant to Section 8.2(a) only if such prepayment is allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

 

8.3.         Mandatory Offer to Prepay Upon Change of Control.

 

(a)           Notice of Change of Control or Control Event — The Company will, within five Business Days after any Responsible Officer has knowledge of the occurrence of any Change of Control or Control Event, give notice of such Change of Control or Control Event to each holder of Notes; provided that, notwithstanding anything to the 

 

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contrary in this Section 8.3, the Company shall not be required to give any notice of any Control Event unless and until it provides notice of such Control Event to the public (and public notice of such Control Event by filing of a Current Report on Form 8-K shall be deemed to constitute notice of such Control Event hereunder).  If a Change of Control has occurred, such notice shall contain and constitute an offer to prepay Notes as described in paragraph (c) of this Section 8.3 and shall be accompanied by the certificate described in paragraph (g) of this Section 8.3.

 

(b)           Offer to Prepay Notes — The offer to prepay Notes contemplated by paragraph (a) of this Section 8.3 shall be an offer to prepay, in accordance with and subject to this Section 8.3, all, but not less than all, of the Notes held by each holder (in this case only, “holder” in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the “Proposed Prepayment Date”).  Such Proposed Prepayment Date shall be not less than 30 days and not more than 60 days after the date of such offer.

 

(c)           Acceptance; Rejection — A holder of Notes may accept the offer to prepay made pursuant to this Section 8.3 by causing a notice of such acceptance to be delivered to the Company on or before the date specified in the certificate described in paragraph (f) of this Section 8.3.  A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.3, or to accept an offer as to all of the Notes held by the holder, within such time period shall be deemed to constitute rejection of such offer by such holder.

 

(d)           Prepayment — Prepayment of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of the outstanding principal amount of such Notes, together with interest on such Notes accrued and unpaid to the date of prepayment and shall not require the payment of any Make-Whole Amount or prepayment premium.  The prepayment shall be made on the Proposed Prepayment Date.

 

(e)           Officer’s Certificate — Each offer to prepay the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Proposed Prepayment Date, (ii) that such offer is made pursuant to this Section 8.3, (iii) the principal amount of each Note offered to be prepaid, (iv) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date, (v) that the conditions of this Section 8.3 have been fulfilled, (vi) in reasonable detail, the nature and date or proposed date of the Change of Control and (vii) the date by which any holder of a Note that wishes to accept such offer must deliver notice thereof to the Company, which date shall not be earlier than seven Business Days prior to the Proposed Prepayment Date.

 

8.4.         Allocation of Partial Prepayments.

 

In the case of each partial prepayment of Notes of a series pursuant to Section 8.2(a), the principal amount of the Notes of the series to be prepaid shall be allocated among all of the Notes of such series at the time outstanding in proportion, as nearly as 

 

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practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

 

8.5.         Maturity; Surrender, etc.

 

In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any.  From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue.  Any Note paid or prepaid in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

 

8.6.         Purchase of Notes.

 

The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate pro rata to the holders of all Notes at the time outstanding upon the same terms and conditions.  Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 10 Business Days.  If the holders of more than 10% of the principal amount of the Notes then outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 10 Business Days from its receipt of such notice to accept such offer.  The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

 

8.7.         Make-Whole Amount.

 

“Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero.  For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

 

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a 

 

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discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

 

“Reinvestment Yield” means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by the yield(s) reported as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on-the-run U.S. Treasury securities (“Reported”) having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  If there are no such U.S. Treasury securities Reported having a maturity equal to such Remaining Average Life, then such implied yield to maturity will be determined by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between the yields Reported for the applicable most recently issued actively traded on-the-run U.S. Treasury securities with the maturities (1) closest to and greater than such Remaining Average Life and (2) closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

 

If such yields are not Reported or the yields Reported as of such time are not ascertainable (including by way of interpolation), then “Reinvestment Yield” means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by the U.S. Treasury constant maturity yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for the U.S. Treasury constant maturity having a term equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  If there is no such U.S. Treasury constant maturity having a term equal to such Remaining Average Life, such implied yield to maturity will be determined by interpolating linearly between (1) the U.S. Treasury constant maturity so reported with the term closest to and greater than such Remaining Average Life and (2) the U.S. Treasury constant maturity so reported with the term closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

 

“Remaining Average Life” means, with respect to any Called Principal, the number of years obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years, computed on the basis of a 360-day year composed of twelve 30-day months, that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

 

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such 

 

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Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1.

 

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

 

9.             AFFIRMATIVE COVENANTS.

 

From the date of this Agreement until the Closing and thereafter so long as any of the Notes are outstanding, the Company covenants that:

 

9.1.         Compliance with Law.

 

Without limiting Section 10.8, the Company will, and will cause each Subsidiary to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, ERISA, Environmental Laws, the USA PATRIOT Act and the other laws and regulations that are referred to in Section 5.16, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

9.2.         Insurance.

 

The Company will, and will cause each Subsidiary to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

 

9.3.         Maintenance of Properties.

 

The Company will, and will cause each Subsidiary to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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9.4.         Payment of Taxes and Claims.

 

The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims in the aggregate would not reasonably be expected to have a Material Adverse Effect.

 

9.5.         Corporate Existence, etc.

 

Subject to Sections 10.5 and 10.6, the Company will at all times preserve and keep its corporate existence in full force and effect.  Subject to Sections 10.5 and 10.6, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect.

 

9.6.         Subsidiary Guaranty.

 

(a)           Subsidiary Guarantors.  The Company will cause each Subsidiary that, on or after the date of the Closing, is a guarantor of, or otherwise is or becomes obligated in respect of, any Indebtedness to banks under the Credit Agreement on the date of the Closing or within 30 days of its thereafter becoming a guarantor of, or otherwise becoming obligated in respect of, Indebtedness under the Credit Agreement to become a party to the Subsidiary Guaranty (with the effect that such Subsidiary shall guaranty the Notes equally and ratably with the Credit Agreement), and shall deliver to each holder:

 

(i)            an executed counterpart of the Subsidiary Guaranty, or, if the Subsidiary Guaranty has been previously executed and delivered, an executed counterpart of a Joinder thereto;

 

(ii)           copies of such directors’ or other authorizing resolutions, charter, bylaws and other constitutive documents of such Subsidiary as the Required Holders may reasonably request; and

 

(iii)          an opinion of independent counsel reasonably satisfactory to the Required Holders covering the authorization, execution, delivery, no conflict with laws or other documents, no consents and enforceability of the Subsidiary 

 

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Guaranty against such Subsidiary in form and substance reasonably satisfactory to the Required Holders.

 

(b)           Release of Subsidiary Guarantor.  Each holder of a Note fully releases and discharges from the Subsidiary Guaranty a Subsidiary Guarantor, immediately and without any further act, upon such Subsidiary Guarantor being released and discharged as a guarantor under and in respect of the Credit Agreement; provided that (i) no Default or Event of Default exists or will exist immediately following such release and discharge; (ii) if any fee or other consideration is paid or given to any holder of Indebtedness under the Credit Agreement in connection with such release, other than the repayment of all or a portion of such Indebtedness under such Credit Agreement, each holder of a Note receives equivalent consideration on a pro rata basis; and (iii) at the time of such release and discharge, the Company delivers to each holder of Notes a certificate of a Responsible Officer certifying (x) that such Subsidiary Guarantor has been or is being released and discharged as a guarantor under and in respect of the Credit Agreement and (y) as to the matters set forth in clauses (i) and (ii).  Any outstanding Indebtedness of a Subsidiary Guarantor shall be deemed to have been incurred by such Subsidiary Guarantor as of the date it is released and discharged from the Subsidiary Guaranty.

 

9.7.         Books and Records.

 

The Company will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Company or such Subsidiary, as the case may be.

 

9.8.         Priority of Obligations.

 

The Company will ensure that its payment obligations under this Agreement and the Notes will at all times rank at least pari passu, without preference or priority, with all other unsecured and unsubordinated Indebtedness of the Company.

 

10.          NEGATIVE COVENANTS.

 

From the date of this Agreement until the Closing and thereafter so long as any of the Notes are outstanding, the Company covenants that:

 

10.1.       Fixed Charge Coverage Ratio.

 

The Company will not permit the ratio, as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBITDA minus Consolidated Maintenance Capital Expenditures minus cash income taxes to (ii) interest paid or payable in cash on account of Consolidated Funded Indebtedness, plus scheduled principal amortization of long term Consolidated Funded Indebtedness, all calculated for the Company and its Subsidiaries on a consolidated basis (the “Fixed Charge Coverage Ratio”), to be less than 1.30 to 1.00; as such Fixed Charge Coverage Ratio may be adjusted pursuant to Section 10.10 below; provided, however, that notwithstanding any such adjustment, the Company will not 

 

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permit the Fixed Charge Ratio as of the end of any fiscal quarter to be less than 1.20 to 1.00 (the “Minimum Fixed Charge Coverage Ratio”).

 

10.2.       Leverage Ratio.

 

The Company will not permit the Leverage Ratio, as of the end of each of its fiscal quarters, to be greater than 3.00 to 1.00; as such Leverage Ratio may be adjusted pursuant to Section 10.10 below; provided, however, that notwithstanding any such adjustment, the Company will not permit the Leverage Ratio as of the end of any fiscal quarter to be greater than 3.50 to 1.00 (the “Maximum Leverage Ratio”).

 

10.3.       Priority Debt.

 

The Company will not at any time permit Priority Debt to exceed 15% of Consolidated Total Assets (determined as of the end of the Company’s most recently completed fiscal quarter).

 

10.4.       Liens.

 

The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except:

 

(a)           Liens for taxes, assessments or governmental charges or levies on its property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

 

(b)           Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books;

 

(c)           Liens arising out of pledges or deposits under worker’s compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation.

 

(d)           Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Company or its Subsidiaries;

 

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(e)                                  Liens arising solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of set-off or similar rights and remedies as to deposit accounts, securities accounts or other funds maintained with a creditor depository institution; provided that (i) such account is not a dedicated cash collateral account and is not subject to restriction against access by the Company or a Subsidiary in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve, and (ii) such account is not intended by the Company or any Subsidiary to provide collateral to the depository institution;

 

(f)                                   Liens existing on the date hereof and described in Schedule 10.4 and Liens resulting from extensions, renewals or replacements of Liens permitted by this paragraph (f), provided that (i) there is no increase in the principal amount or decrease in maturity of the Indebtedness secured thereby at the time of such extension, renewal or replacement, (ii) any new Lien attaches only to the same property theretofore subject to such earlier Lien and (iii) immediately after such extension, renewal or replacement no Default or Event of Default would exist;

 

(g)                                  Liens securing Indebtedness arising out of any IRB, solely with respect to all qualifying real or personal property of any kind subject to such IRB;

 

(h)                                 Liens on treasury stock;

 

(i)                                     Cash collateralization of Rate Management Transactions (i) as required by the relevant counterparty pursuant to the applicable ISDA documentation, provided that the aggregate amount of such cash collateralization does not exceed $5,000,000 at any time outstanding, or (ii) to the extent and in the amounts required by the Dodd-Frank Wall Street Reform and Consumer Protection Act;

 

(j)                                    Any deposit required to secure the performance of bids, trade contracts, or leases (other than Indebtedness), statutory or reclamation bonds, statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature, in each case incurred in the ordinary course of business;

 

(k)                                 Liens securing any interest or title of a lessor or sublessor under an operating lease;

 

(l)                                     Liens securing a judgment for the payment of money not constituting an Event of Default under Section 11(i) or securing an appeal or other surety bond related to any such judgment;

 

(m)                             Any right of a licensee under any license agreement for the use of intellectual property or other intangible assets of Company or any Subsidiary thereof as to which Company or Subsidiary is the licensor;

 

(n)                                 Any leases granted to others permitted under Section 10.6;

 

(o)                                 Real estate security deposits with respect to leaseholds in the ordinary course of business;

 

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(p)                                 Liens associated with project financing the sole recourse for nonpayment of which is limited to the assets that are being financed or constructed with such project financing;

 

(q)                                 Royalties payable in connection with leasehold interests;

 

(r)                                    Any Lien created to secure all or any part of the purchase price, or to secure Indebtedness incurred or assumed to pay all or any part of the purchase price or cost of construction, of fixed or capital assets (or any improvement thereon) acquired or constructed by the Company or a Subsidiary after the date of this Agreement, provided that:

 

(i)                                     any such Lien shall extend solely to the item or items of such fixed or capital assets (or improvement thereon) so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed fixed or capital assets (or improvement thereon) or which is real property being improved by such acquired or constructed fixed or capital assets (or improvement thereon),

 

(ii)                                  the principal amount of the Indebtedness secured by any such Lien shall at no time exceed an amount equal to 100% of the fair market value (as determined in good faith by the board of directors of the Company) of such fixed or capital assets (or improvement thereon) at the time of such acquisition or construction, and

 

(iii)                               any such Lien shall be created contemporaneously with or within the period ending 180 days after, the acquisition or construction of such fixed or capital assets; and

 

(s)                                   other Liens securing Indebtedness of the Company or any Subsidiary not otherwise permitted by clauses (a) through (r) provided that Priority Debt does not exceed 15% of Consolidated Total Assets; provided, further, that notwithstanding the foregoing, the Company shall not, and shall not permit any of its Subsidiaries to, secure any Indebtedness outstanding under or pursuant to the Credit Agreement pursuant to this Section 10.4(s) unless and until the Notes (and any guaranty delivered in connection therewith) shall be concurrently secured equally and ratably with such Indebtedness pursuant to documentation reasonably acceptable to the Required Holders in substance and in form, including, without limitation, an intercreditor agreement and opinions of counsel to the Company from attorneys that are reasonably acceptable to the Required Holders.

 

10.5.                     Mergers, Consolidations, etc.

 

The Company will not, nor will it permit any Subsidiary to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person unless:

 

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(a)                                 in the case of any such transaction involving the Company, the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of the Company as an entirety, as the case may be, shall be a solvent corporation or limited liability company organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if the Company is not such corporation or limited liability company, (i) such corporation or limited liability company shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes and (ii) such corporation or limited liability company shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof;

 

(b)                                 in the case of any such transaction involving a Subsidiary Guarantor, the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of such Subsidiary Guarantor as an entirety, as the case may be, shall be (1) a solvent corporation or limited liability company organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if such Subsidiary Guarantor is not such corporation or limited liability company, (i) such corporation or limited liability company shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of the Subsidiary Guaranty and (ii) such corporation or limited liability company shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof, (2) the Company or another Subsidiary Guarantor or (3) any other Person so long as the transaction is treated as a Disposition of all or substantially all of the assets of such Subsidiary Guarantor for purposes of Section 10.6 and, based on such characterization, would be permitted pursuant to Section 10.6;

 

(c)                                  in the case of any such transaction involving a Subsidiary (other than the Company or any Subsidiary Guarantor), the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of such Subsidiary as an entirety, as the case may be, shall be (i) such Subsidiary, the Company, any Subsidiary Guarantor or any other Wholly-Owned Subsidiary or (ii) any other Person so long as the transaction is treated as a Disposition of all or substantially all of the assets of such Subsidiary for purposes of Section 10.6 and, based on such characterization, would be permitted pursuant to Section 10.6; and

 

(d)                                 immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.

 

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Notwithstanding the foregoing, (i) any Subsidiary may merge into the Company or a Wholly-Owned Subsidiary and (ii) any Subsidiary may liquidate or dissolve if the Company determines in good faith that such liquidation or dissolution is in the best interests of the Company and is not materially disadvantageous to the holders of Notes; provided, that to the extent a Loan Party is dissolved or liquidated, its assets must be transferred to another Loan Party upon such dissolution or liquidation.

 

No such conveyance, transfer or lease of substantially all of the assets of the Company or any Subsidiary Guarantor shall have the effect of releasing the Company, such Subsidiary Guarantor or any successor corporation or limited liability company that shall theretofore have become such in the manner prescribed in this Section 10.5 from its liability under this Agreement or the Notes (in the case of the Company or any such successor corporation or limited liability company thereto) or the Subsidiary Guaranty (in the case of any Subsidiary Guarantor or any successor corporation or limited liability company thereto).

 

10.6.                     Sale of Assets.

 

The Company will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its property to any other Person (collectively a “Disposition”), except:

 

(a)                                 Dispositions in the ordinary course of business;

 

(b)                                 Dispositions by the Company to a Subsidiary Guarantor or by a Subsidiary Guarantor to the Company or another Subsidiary Guarantor; or

 

(c)                                  Dispositions permitted by Section 10.5;

 

(d)                                 Licenses for the use of intellectual property or other intangible assets;

 

(e)                                  Dispositions of accounts receivable in connection with the compromise, settlement or collection thereof;

 

(f)                                   Dispositions of cash and Cash Equivalent Investments;

 

(g)                                  Sales, issuances or other dispositions of treasury stock;

 

(h)                                 Dispositions of property as required by law, regulation or ordinance;

 

(i)                                     Dispositions of property that is the subject of any IRB, in accordance with the terms thereof;

 

(j)                                    Dispositions not otherwise permitted by clauses (a) through (i) of this Section 10.6, provided that:

 

(i)                                     each such Disposition is made in an arm’s-length transaction that in the good faith opinion of the Company is for a consideration at least equal to the fair market value of the property subject thereto and is in the best interest of the Company or such Subsidiary;

 

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(ii)                                  the aggregate net book value of all assets disposed of in any period of 365 consecutive days pursuant to this Section 10.6(j) does not exceed 15% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; and

 

(iii)                               at the time of such Disposition and after giving effect thereto no Default or Event of Default shall have occurred and be continuing.

 

Notwithstanding the foregoing, the Company may, or may permit any Subsidiary to, make a Disposition and the assets subject to such Disposition shall not be subject to or included in the foregoing limitation and computation contained in clause (ii) of the preceding sentence to the extent that the net cash proceeds from such Disposition are within 365 days of such Disposition, at the Company’s sole option (A) reinvested in productive assets to be used in the business of the Company or a Subsidiary, or (B) applied or offered to be applied to the payment or prepayment of the Notes or any other outstanding Indebtedness of the Company or any Subsidiary ranking pari passu with or senior to the Notes.  For purposes of clause (B), the Company shall offer to prepay (on a date not less than 30 or more than 60 days following such offer) the Notes on a pro rata basis with such other Indebtedness at a price of 100% of the principal amount of the Notes to be prepaid (without any Make-Whole Amount) together with interest accrued on such principal amount to the date of prepayment; provided that if any holder of the Notes declines such offer, the proceeds that would have been paid to such holder shall be offered pro rata to the other holders of the Notes that have accepted the offer.  A failure by a holder of Notes to respond in writing not later than 10 days prior to the proposed prepayment date to an offer to prepay made pursuant to this Section 10.6 shall be deemed to constitute a rejection of such offer by such holder.

 

10.7.                     Transactions with Affiliates.

 

The Company will not and will not permit any Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the Material purchase, lease, sale or exchange of properties of any kind or the rendering of any Material service) with any Affiliate (other than the Company or another Subsidiary), except (i)  upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate (as determined by the Company in good faith), (ii) any IRB entered into after the date hereof, (iii) dividends permitted under applicable law, or (iv) as set forth in Schedule 10.7.

 

10.8.                     Terrorism Sanctions Regulations.

 

The Company will not and will not permit any Controlled Entity to (a) become a Blocked Person or (b) have any investments in or engage in any dealings or transactions with any Blocked Person if such investments, dealings or transactions would cause any holder of a Note to be in violation of any laws or regulations that are applicable to such holder.

 

10.9.                     Line of Business.

 

The Company will not and will not permit any Subsidiary to engage in any business if, as a result, the general nature of the business in which the Company and its 

 

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Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum (and other business that are reasonably related, complementary or incidental to such businesses); provided, this Section 10.9 shall not be deemed to prohibit acquisitions by the Company or any Subsidiary as long as the acquired companies or assets are operating in or relating or complementary to a business that is similar to or reasonably related to the current and future businesses conducted by the Company or any Subsidiary, as well as suppliers to or distributors of products similar to products purchased, produced, consumed or sold by the Company or any Subsidiary.

 

10.10.                    Financial Covenant Parity.

 

(a)                                 Subject to Section 10.10(b) below, if the Company shall at any time permanently (and not by temporary waiver of rights thereunder) amend or modify any provision of the Credit Agreement (whether through an amendment to the existing Credit Agreement or by entering into a new Credit Agreement in replacement thereof) that requires the Company to comply with any financial covenant, undertaking, restriction or other provision that limits or conditions the Company’s leverage vis-à-vis any other financial metric of the Company (other than a debt incurrence covenant) or fixed charges (however expressed and whether stated as a ratio, as a fixed threshold, as an event of default, as a right to be prepaid or offered to be prepared or otherwise)  (each a “Financial Covenant”) or any definition related to such Financial Covenant that is not at such time included or, after such amendment or modification, is different than what is then included in this Agreement, then the Company shall within 3 Business Days provide a Financial Covenant Notice to each holder of the Notes.  If Required Holders provide a notice (the “Required Holders’ Notice”) to the Company within 30 days of receipt of the Financial Covenant Notice (the “Objection Period”), that, in the Required Holders’ reasonable opinion, as a result of a change in the structure of either Financial Covenant or any definition related to such Financial Covenant, either Financial Covenant has effectively been amended beyond the Minimum Fixed Charge Coverage Ratio or the Maximum Leverage Ratio, as applicable, then the Company and the Required Holders shall negotiate in good faith to make any necessary adjustments to the applicable covenant level, covenant structure or definition, as necessary so that the applicable Financial Covenant does not exceed the applicable cap.  Until such agreement is reached, the Company will comply with the Financial Covenants as in effect prior to such structure or definitional change.  Unless the Required Holders timely provide the Required Holders’ Notice, each such Financial Covenant and each event of default, definition and other provision relating to such Financial Covenant in the Credit Agreement (as amended or modified from time to time thereafter) shall be deemed to be incorporated by reference in this Agreement, mutatis mutandis, as if then set forth herein in full, and shall automatically (without any further action being taken by the Company or any holder of a Note) take effect as of the time of effectiveness of such Financial Covenant under the Credit Agreement; provided, however, that if any fee or other consideration is paid or given to any bank party to the Credit Agreement in connection with such amendment or modification, each holder of a Note receives equivalent consideration on a pro rata basis and such amendment or modification shall not be effective until such consideration is received by each such holder.  Subject to Section 10.10(b), the incorporation of any

 

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Financial Covenant pursuant to this Section 10.10(a) shall continue in effect regardless of any subsequent termination of the Credit Agreement.

 

(b)                                 Notwithstanding the foregoing, in no event shall the Company permit (i) the Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Company to be less than the Minimum Fixed Charge Ratio or (ii) the Leverage Ratio as of the end of any fiscal quarter of the Company to be greater than the Maximum Leverage Ratio.

 

11.                               EVENTS OF DEFAULT.

 

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

 

(a)                                 the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

 

(b)                                 the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or

 

(c)                                  the Company defaults in the performance of or compliance with any term contained in Section 7.1(d) or in Sections 10.1 through 10.10; or

 

(d)                                 the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in Sections 11(a), (b) and (c)) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(d)); or

 

(e)                                  any representation or warranty made in writing by or on behalf of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been, with respect to any representations or warranties that contain a materiality qualifier, false or incorrect, and with respect to any representations or warranties that do not contain a materiality qualifier, false or incorrect in any material respect, in each case on the date as of which made or confirmed; or

 

(f)                                   (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $25,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $25,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before

 

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its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $25,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; provided that no Event of Default shall occur under this Section 11(f) as a result of a failure of the Company or any Subsidiary to pay any Indebtedness associated with project financing the sole recourse for nonpayment of which is limited to the assets that are being financed or constructed with such project financing; or

 

(g)                                  the Company or any Material Subsidiary (i) is not paying, or admits in writing its inability to pay, its debts generally as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

 

(h)                                 a court or other Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Material Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Material Subsidiaries, or any such petition shall be filed against the Company or any of its Material Subsidiaries and such petition shall not be dismissed within 60 days; or

 

(i)                                     the Company or any Material Subsidiary shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of the lesser of (A) $25,000,000 (or the equivalent thereof in currencies other than Dollars) in the aggregate and (B) such other event of default judgment threshold set forth in the Credit Agreement from time to time; provided, however, that such judgment shall not be an Event of Default under this Section 11(i) if and for so long as (1) the amount of such judgment is covered by a valid and binding policy of insurance between the Company or the applicable Material Subsidiary and the insurer covering payment thereof, (2) the out-of-pocket amount payable (including any deductibles) by the Company, any Material Subsidiary or any combination thereof in connection with any such judgment is in an aggregate amount of no more than $15,000,000 and (3) such insurer has been notified of, and has not disputed, in writing, the claim made for payment of, the amount of such judgment; or (ii) nonmonetary judgments or orders which, individually or in the aggregate, would reasonably be expected to have a Material

 

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Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith; or

 

(j)                                    if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under all Plans determined in accordance with Title IV of ERISA, shall exceed $25,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, would reasonably be expected to have a Material Adverse Effect; or

 

(k)                                 any Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Subsidiary Guaranty or the Subsidiary Guaranty ceases to be in full force and effect as a result of acts taken by the Company or any Subsidiary Guarantor (other than in connection with Section 9.6(b)), or is declared to be null and void in whole or in material part by a court or other governmental or regulatory authority having jurisdiction or the validity or enforceability thereof shall be contested by any of the Company or any Subsidiary Guarantor or any of them renounces any of the same or denies that it has any or further liability thereunder.

 

As used in Section 11(j), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in section 3 of ERISA.

 

12.                               REMEDIES ON DEFAULT, ETC.

 

12.1.                     Acceleration.

 

(a)                                 If an Event of Default with respect to the Company described in Section 11(g) or (h) (other than an Event of Default described in clause (i) of Section 11(g) or described in clause (vi) of Section 11(g) by virtue of the fact that such clause encompasses clause (i) of Section 11(g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

 

(b)                                 If any other Event of Default has occurred and is continuing, any holder or holders of more than 51% in principal amount of the Notes at the time outstanding

 

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(exclusive of Notes then owned by the Company or any of its Affiliates) may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

 

(c)                                  If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

 

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including, but not limited to, interest accrued thereon at the Default Rate) and (y) any applicable Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.  The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

 

12.2.                     Other Remedies.

 

If any Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

 

12.3.                     Rescission.

 

At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the holders of not less than 51% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or 

decree has been entered for the payment of any monies due pursuant hereto or to the Notes.  No

 

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rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

 

12.4.                     No Waivers or Election of Remedies, Expenses, etc.

 

No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies.  No right, power or remedy conferred by this Agreement or by any Note or the Subsidiary Guaranty upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.  Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys’ fees, expenses and disbursements.

 

12.5.                     Default Rate.

 

During the continuance of an Event of Default, the Required Holders may, at their option, by notice to the Company (which notice may be revoked at the option of the Required Holders notwithstanding any provision of Section 17.1 requiring unanimous consent of the holders to changes in interest rates), declare that the Notes shall bear interest at the Default Rate.  After an Event of Default has been cured or waived, the interest rate applicable to the Notes shall revert to the rates applicable prior to the occurrence of an Event of Default.

 

13.                               REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

 

13.1.                     Registration of Notes.

 

The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes.  The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register.  If any holder of one or more Notes is a nominee, then the name and address of the beneficial owner of such Note or Notes shall also be registered in such register as an owner and holder thereof.  Prior to due presentment for registration of transfer, the Person(s) in whose name any Note(s) shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary.  The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

 

13.2.                     Transfer and Exchange of Notes.

 

Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in writing and accompanied by the relevant name, address and other information for

 

36

 

notices of each transferee of such Note or part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more new Notes (as requested by the holder thereof) of the same series in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note.  Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1.1(a), (b) or (c) as appropriate.  Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon.  The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000.  Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

 

13.3.                     Replacement of Notes.

 

Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

 

(a)                                 in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another Institutional Investor holder of a Note with a minimum net worth of at least $50,000,000, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

 

(b)                                 in the case of mutilation, upon surrender and cancellation thereof,

 

within ten Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

 

14.                               PAYMENTS ON NOTES.

 

14.1.                     Place of Payment.

 

Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York City at the principal office of U.S. Bank National Association in such jurisdiction.  The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

 

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14.2.                     Home Office Payment.

 

So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, interest and all other amounts becoming due hereunder by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1.  Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2.  The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2.

 

15.                               EXPENSES, ETC.

 

15.1.                     Transaction Expenses.

 

Whether or not the transactions contemplated hereby are consummated, the Company will pay all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees of a special counsel for the holders and, if reasonably required by the Required Holders, local or other special subject matter counsel for all holders collectively) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including:  (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes, or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, (b) the costs and expenses, including financial advisors’ fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes, and (c) the costs and expenses not in excess of $3,000 incurred in connection with the initial filing of this Agreement and all related documents and financial information, with the SVO.  The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders retained by the Company or any Subsidiary.

 

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15.2.                     Survival.

 

The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.

 

16.                               SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

 

All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note.  All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement.  Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

 

17.                               AMENDMENT AND WAIVER.

 

17.1.                     Requirements.

 

This Agreement, the Notes and the Subsidiary Guaranty may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of each Purchaser and the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver or the principal amount of the Notes that the Purchasers are to purchase pursuant to Section 2 upon the satisfaction of the conditions to Closing that appear in Section 4, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

 

17.2.                     Solicitation of Holders of Notes.

 

(a)                                 Solicitation.  The Company will provide each Purchaser and each holder of the Notes with sufficient information, sufficiently far in advance of the date a decision is required, to enable such Purchaser and such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in

 

39

 

respect of any of the provisions hereof or of the Notes.  The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each Purchaser and each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite Purchasers or holders of Notes.

 

(b)                                 Payment.  The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any Purchaser or holder of a Note as consideration for or as an inducement to the entering into by such Purchaser or holder of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, or other credit support is concurrently provided, on the same terms, ratably to each Purchaser and holder of a Note even if such Purchaser or holder did not consent to such waiver or amendment.

 

(c)                                  Consent in Contemplation of Transfer.  Any consent made pursuant to this Section 17 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate of the Company and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such holder.

 

17.3.                     Binding Effect, etc.

 

Any amendment or waiver consented to as provided in this Section 17 applies equally to all Purchasers and holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon.  No course of dealing between the Company and any Purchaser or holder of a Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any Purchaser or holder of such Note.

 

17.4.                     Notes held by the Company, etc.

 

Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

 

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18.                               NOTICES.

 

Except as provided in Section 7, all notices and communications provided for hereunder shall be in writing and sent (a) by registered or certified mail with return receipt requested (postage prepaid), or (b) by an internationally recognized overnight delivery service (with charges prepaid).  Any such notice must be sent:

 

(i)                                     if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,

 

(ii)                                  if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

 

(iii)                               if to the Company or any Subsidiary Guarantor, to the Company at its address set forth at the beginning hereof to the attention of President, General Counsel and Treasurer, or at such other address as the Company shall have specified to the holder of each Note in writing.

 

Notices under this Section 18 will be deemed given only when actually received.

 

19.                               REPRODUCTION OF DOCUMENTS.

 

This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, electronic, digital, or other similar process and you may destroy any original document so reproduced.  The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.  This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

 

20.                               CONFIDENTIAL INFORMATION.

 

For the purposes of this Section 20, “Confidential Information” means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial

 

41

 

statements delivered to you under Section 7.1 that are otherwise publicly available.  You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential or shall otherwise have a duty to keep such information confidential), (ii) your auditors, financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which it offers to purchase any Security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement.  In the event that any Purchaser or holder of a Note is required to disclose information pursuant to clause (viii)(x) or (y) above, such Purchaser or holder agrees, to the extent reasonably practicable and not in violation of applicable law, to provide the Company with prior notice of such required disclosures.  Except for the sale and purchase of the Notes as contemplated by this Agreement, you agree not to use any Confidential Information in connection with purchases or sales of, or trading in, the Company’s Securities. Each Purchaser will be liable for each breach of this Section 20 by any of their respective affiliates.  Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20.

 

In the event that as a condition to receiving access to information relating to the Company or its Subsidiaries in connection with the transactions contemplated by or otherwise pursuant to this Agreement, you are required to agree to a confidentiality undertaking (whether through Intralinks or otherwise) which is different from the terms of this Section 20, the terms of this Section 20 shall, as between you and the Company, supersede the terms of any such other confidentiality undertaking.

 

42

 

21.                               SUBSTITUTION OF PURCHASER.

 

Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Affiliate, shall contain such Affiliate’s agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6.  Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 21), shall be deemed to refer to such Affiliate in lieu of such original Purchaser.  In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this Agreement (other than in this Section 21), shall no longer be deemed to refer to such Affiliate, but shall refer to such original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.

 

22.                               MISCELLANEOUS.

 

22.1.                     Successors and Assigns.

 

All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.

 

22.2.                     Payments Due on Non-Business Days.

 

Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.

 

22.3.                     Accounting Terms.

 

(a)                                 All accounting terms used herein that are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP.  Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP and (ii) all financial statements shall be prepared in accordance with GAAP.  For purposes of determining compliance with the financial covenants contained in this Agreement, any election by the Company to measure any financial liability using fair value (as permitted by Accounting Standard Codification Topic No. 825-10-25 — Fair Value Option or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.

 

43

 

(b)                                 Notwithstanding the foregoing (but subject to clause (b) of the definition of Indebtedness), if the Company notifies the holders of Notes that, in the Company’s reasonable opinion, or if the Required Holders notify the Company that, in the Required Holders’ reasonable opinion, as a result of a change in GAAP after the date of this Agreement, any covenant contained in Section 10.1 through 10.6, or any of the defined terms used therein no longer apply as intended such that such covenants are materially more or less restrictive to the Company than as at the date of this Agreement, the Company shall negotiate in good faith with the holders of Notes to make any necessary adjustments to such covenant or defined term to provide the holders of the Notes with substantially the same protection as such covenant provided prior to the relevant change in GAAP.  Until the Company and the Required Holders so agree to reset, amend or establish alternative covenants or defined terms, (i) the covenants contained in Section 10.1 through 10.6, together with the relevant defined terms, shall continue to apply and compliance therewith shall be determined on the basis of GAAP in effect at the date of this Agreement and (ii) each set of financial statements delivered to holders of Notes pursuant to Section 7.1(a) or (b) during such time shall include detailed reconciliations reasonably satisfactory to the Required Holders as to the effect of such change in GAAP.

 

22.4.                     Severability.

 

Any provision of this Agreement that is 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 (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

 

22.5.                     Construction.

 

Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.  Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

 

For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.

 

22.6.                     Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

 

44

 

22.7.                     Governing Law.

 

This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

 

22.8.                     Jurisdiction and Process; Waiver of Jury Trial.

 

(a)                                 The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes.  To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

(b)                                 Nothing in this Section 22.8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

 

(c)                                  THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.

 

Remainder of page intentionally left blank.

 

45

 

If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company.

 

	
 
    	
Very   truly yours,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
INTREPID   POTASH, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David W. Honeyfield
    
	
 
    	
Name:
    	
David   W. Honeyfield
    
	
 
    	
Title:   
    	
President   and Chief Financial Officer
    
				

 

S-1

 

This Agreement is hereby accepted and agreed to as of the date thereof.

 

 

	
TEACHERS INSURANCE AND
    	
 
    
	
ANNUITY ASSOCIATION OF AMERICA
    	
 
    
	
 
    	
 
    	
 
    
	
By:   
    	
/s/   Joseph R. Cantey
    	
 
    
	
Name:
    	
Joseph   R. Cantey
    	
 
    
	
Title:
    	
Director
    	
 
    

 

S-2

 

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

 

 

	
By:
    	
/s/   Brian Keating
    	
 
    
	
Name:
    	
Brian   Keating
    	
 
    
	
Title:
    	
Managing   Director
    	
 
    

 

S-3

 

COBANK, ACB

 

 

	
By:
    	
/s/   Alan V. Schuler
    	
 
    
	
Name:
    	
Alan   V. Schuler
    	
 
    
	
Title:
    	
Vice   President
    	
 
    

 

S-4

 

AGFIRST FARM CREDIT BANK

 

 

	
By:
    	
/s/   John W. Burnside, Jr.
    	
 
    
	
Name:
    	
John   W. Burnside, Jr.
    	
 
    
	
Title:
    	
Vice   President
    	
 
    

 

S-5

 

FARM CREDIT BANK OF TEXAS

 

 

	
By:
    	
/s/   Luis M.H. Requejo
    	
 
    
	
Name:
    	
Luis   M.H. Requejo
    	
 
    
	
Title:
    	
Director   of Capital Markets
    	
 
    

 

S-6

 

GREENSTONE FARM CREDIT SERVICES, ACA/FLCA

 

 

	
By:
    	
/s/   Curtis Flammini
    	
 
    
	
Name:
    	
Curtis   Flammini
    	
 
    
	
Title:
    	
Vice   President
    	
 
    

 

S-7

 

1ST FARM CREDIT SERVICES, PCA

 

 

	
By:
    	
/s/   Corey Waldinger
    	
 
    
	
Name:
    	
Corey   Waldinger
    	
 
    
	
Title:
    	
Vice   President, Capital Markets
    	
 
    

 

S-8

 

FARM CREDIT SERVICES OF AMERICA, PCA

 

 

	
By:
    	
/s/   Steven L. Moore
    	
 
    
	
Name:
    	
Steven   L. Moore
    	
 
    
	
Title:
    	
Vice   President
    	
 
    

 

S-9

 

SCHEDULE B

 

DEFINED TERMS

 

As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

 

“Affiliate” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, provided, that in no event shall (i) any institutional investor be deemed an Affiliate of the Company unless such institutional investor has placed at least one of its representatives on the Company’s board of directors and (ii) any trustee under, or any committee with responsibility for administering, any Plan be deemed an Affiliate of the Company.  As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

 

“Agreement” means this Note Purchase Agreement dated as of August 28, 2012,  as it may be amended or supplemented from time to time.

 

“Anti-Money Laundering Laws” is defined in Section 5.16(c).

 

“Blocked Person” is defined in Section 5.16(a).

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

 

“Capital Expenditures” means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP; provided, that “Capital Expenditures” shall not include (w) expenditures funded with net cash proceeds received by a Loan Party with respect to (i) any sale, transfer or disposition of property or series of related sales, transfers, or dispositions of property that yields gross proceeds to any Loan Party, (ii) any insurance or condemnation proceeds for assets being replaced, in each case, received or paid to the account of any Loan Party, or (iii) an equity issuance by the Company; (x) expenditures funded directly with proceeds of contractual reimbursement obligations owing by landlords of the Loan Parties to the extent actually reimbursed in cash by landlords that are not Affiliates of any Loan Party; (y) any like-kind or non-monetary exchange of assets; and (z) for the avoidance of doubt, Permitted Acquisitions.

 

“Capitalized Lease” of a Person means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

 

 

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.

 

“Cash Equivalent Investments” means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $500,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest, (v) shares of money market mutual funds that are rated at least “AAAm” or “AAAG” by S&P or “P-1” or better by Moody’s, and (vi) any Investment permitted by that certain Short-Term Investment Policy of Intrepid Potash, Inc., issued in July 2008, as the same may be amended or supplemented from time to time, and as approved by the Company’s audit committee.

 

“Change of Control” means (i) the acquisition by any Person, or two or more Persons acting in concert, in each case, other than the Permitted Holders, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act) of 30% or more of the outstanding shares of voting stock of the Company; or (ii) within any twelve-month period, occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (x) nominated by the board of directors of the Company nor (y) appointed by directors so nominated.

 

“Closing” is defined in Section 3.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

 

“Company” means Intrepid Potash, Inc., a Delaware corporation.

 

“Confidential Information” is defined in Section 20.

 

“Consolidated EBITDA” means, for any period, Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income and without duplication, (i) Consolidated Interest Expense, (ii) expense for income, franchise or similar taxes paid in cash or accrued, (iii) depreciation expense, (iv) amortization expense, (v) impairment expense, (vi) extraordinary expenses, charges or losses incurred other than in the ordinary course of business, (vii) all non-cash expenses (including related to stock based compensation), (viii) non-recurring or unusual cash expenses, (ix) depletion expense, and (x) accretion expense, minus, to the extent included in Consolidated Net Income, (1) extraordinary income or gains realized other than in the ordinary course of business, (2) all non-cash income or gains, (3) non-recurring or unusual cash income or gains, (4) income tax credits and refunds (to the extent not netted from tax expense), and (5) any cash payments made during such period in respect of non-cash items described in clauses (vi) or (vii) above subsequent to the fiscal quarter in which the relevant non-cash expenses, charges or losses were incurred, all calculated for the Company and

 

B-2

 

its Subsidiaries on a consolidated basis for such period.  For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”), (i) if at any time during such Reference Period the Company or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, and (ii) if during such Reference Period the Company or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period.  Any determination of Consolidated EBITDA shall exclude (i) unrealized gains or losses in respect of Rate Management Transactions and (ii) gains or losses resulting from any disposition of assets that is not a Material Disposition.

 

“Consolidated Funded Indebtedness” means at any time the aggregate amount of Consolidated Indebtedness, excluding (A) Indebtedness of a type described in clauses (ii), (iii), (v), (vii) (but only with respect to (a) commercial Letters of Credit or (b) Letters of Credit supporting reclamation obligations or other obligations that are of the type that are, or are permitted to be, supported by performance guarantees, surety bonds or reclamation bonds), (viii) (as it pertains to clauses (ii), (iii), (v), (vii) (but only with respect to (a) commercial Letters of Credit or (b) Letters of Credit supporting reclamation obligations or other obligations that are of the type that are, or are permitted to be, supported by performance guarantees, surety bonds or reclamation bonds) or (ix) in the definition of Indebtedness or any Indebtedness arising out of any IRB) and (ix) in the definition of Indebtedness and (B) any Indebtedness arising out of any IRB.

 

“Consolidated Indebtedness” means at any time the Indebtedness of the Company and its Subsidiaries calculated on a consolidated basis as of such time.

 

“Consolidated Interest Expense” means, with reference to any period, the interest expense of the Company and its Subsidiaries calculated in accordance with GAAP on a consolidated basis for such period.  For the purposes of calculating Consolidated Interest Expense for any Reference Period, (i) if at any time during such Reference Period the Company or any Subsidiary shall have made any Material Disposition, the Consolidated Interest Expense for such Reference Period shall be reduced by an amount equal to the Consolidated Interest Expense (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated Interest Expense (if negative) attributable thereto for such Reference Period, and (ii) if during such Reference Period the Company or any Subsidiary shall have made a Material Acquisition, Consolidated Interest Expense for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period.

 

“Consolidated Maintenance Capital Expenditures” means, with reference to any period, the maintenance Capital Expenditures of the Company and its Subsidiaries calculated on a consolidated basis for such period, which, for purposes of any calculation under Section 10.1, shall equal $40,000,000 per any four fiscal quarter period.

 

B-3

 

“Consolidated Net Income” means, with reference to any period, the net income (or loss) of the Company and its Subsidiaries calculated in accordance with GAAP on a consolidated basis for such period.

 

“Consolidated Total Assets” means, as of the date of any determination thereof, total assets of the Company and its Subsidiaries calculated in accordance with GAAP on a consolidated basis as of such date.

 

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss relating to the obligation or liability of any other Person, including, without limitation, any comfort letter tantamount to a guaranty, any operating agreement tantamount to a guaranty, any take-or-pay contract, or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership (other than such obligations of such partnership (or portion thereof) that are made non-recourse to such general partner); provided, that “Contingent Obligation” shall not include warranties or indemnities for goods or services sold in the ordinary course of business or endorsements of instruments for deposit or collection in the ordinary course of business, and unless otherwise expressly limited by the terms of a guarantee, the amount of any guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith; provided, further, that “Contingent Obligation” shall not include any obligation of Company or any of its Subsidiaries under any IRB.

 

“Control Event” means the execution of any definitive and legally binding written agreement that, when fully performed by the parties thereto, will result in a Change of Control.

 

“Controlled Entity” means any of the Subsidiaries of the Company and any of their or the Company’s respective Controlled Affiliates. As used in this definition, “Control” means the possession by the Company or any Subsidiary of the Company, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Credit Agreement” means the Credit Agreement dated as of August 3, 2011 among the Company, the lenders from time to time party thereto, and U.S. Bank National Association, as administrative agent, as such agreement may be amended, restated, supplemented, refinanced, increased or reduced from time to time, and any successor or replacement credit agreement or similar facility.

 

“Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

 

B-4

 

“Default Rate” means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by U.S. Bank National Association in New York City is as its “base” or “prime” rate.

 

“Disclosure Documents” is defined in Section 5.3.

 

“Dollar” and “$” means the lawful currency of the United States of America.

 

“Electronic Delivery” is defined in Section 7.1.

 

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to Hazardous Materials.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

 

“Event of Default” is defined in Section 11.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Financial Covenant” is defined in Section 10.10(a).

 

“Financial Covenant Notice” means a written notice from the Company to each holder of the Notes delivered promptly, and in any event within 3 Business Days after the inclusion of any Financial Covenant or any event of default, definition or other provision relating to such Financial Covenant in the Credit Agreement (including by way of amendment or other modification of any exiting provision thereof), pursuant to Section 10.10, by a Responsible Officer of the Company in reasonable detail, including reference to Section 10.10, a verbatim statement of such Financial Covenant,  event of default, definition or other provision relating to such Financial Covenant and related explanatory calculations, as applicable.

 

“Fixed Charge Coverage Ratio” is defined in Section 10.1.

 

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America.

 

“Governmental Authority” means

 

(a)                                 the government of

 

B-5

 

(i)                                     the United States of America or any State or other political subdivision thereof, or

 

(ii)                                  any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or

 

(b)                                 any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

 

“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

 

(a)                                 to purchase such indebtedness or any property constituting security therefor;

 

(b)                                 to advance or supply funds (i) for the purchase or payment of such Indebtedness, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness;

 

(c)                                  to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness of the ability of any other Person to make payment of the Indebtedness; or

 

(d)                                 otherwise to assure the owner of such Indebtedness against loss in respect thereof.

 

In any computation of the Indebtedness of the obligor under any Guaranty, the Indebtedness that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.

 

“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any applicable law including, but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.

 

“holder” means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.

 

“Indebtedness” of a Person means such Person’s (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other

 

B-6

 

than accounts payable arising in the ordinary course of such Person’s business), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, bonds or other similar instruments, (v) obligations of such Person to purchase securities or other property arising out of or in connection with the sale of the same or substantially similar securities or property, but only if such obligation to purchase can be enforced prior to the stated maturity of any Note, (vi) Capitalized Lease Obligations, (vii) obligations of such Person as an account party with respect to standby and commercial Letters of Credit or banker’s acceptances, (viii) Contingent Obligations of such Person relating to Indebtedness of a type described in clauses (i) through (vii) or (ix) through (xi) of this definition, (ix) Net Mark-to-Market Exposure under Rate Management Transactions, (x) obligations under any transaction pursuant to which such Person has sold, conveyed or otherwise transferred any accounts or notes receivable and rights related thereto (other than any sale or transfer in connection with enforcement or collection thereof), and (xi) any other obligation for borrowed money which in accordance with GAAP would be shown as a liability on the consolidated balance sheet of such Person.  Notwithstanding the foregoing, for all purposes hereof, (a) no effect shall be given hereunder to any change under GAAP that results in any operating lease being treated as indebtedness or a capital lease and (b) the Indebtedness of any Person will not include accrued liabilities or obligations incurred in the ordinary course.

 

“INHAM Exemption” is defined in Section 6.2(e).

 

“Institutional Investor” means (a) any original purchaser of a Note and (b)  any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form.

 

“IRB” means any self-funded industrial revenue bond transaction set forth in Schedule 5.15, or any such transaction entered into by the Company or any of its Subsidiaries after the date hereof pursuant to the provisions of Sections 4-59-1 to 4-59-16 of the New Mexico Statutes Annotated, 1978 Compilation, as amended, or any comparable statute, regulation or program in any other state, so long as, in each case, such transaction is debt-neutral (with the relevant municipality or county issuing such bonds, the Company purchasing such bonds, and the relevant Subsidiary receiving the proceeds from the sales of such bonds) and is generally of the kind and nature entered into by the Company and its Subsidiaries prior to the date hereof.

 

“Letter of Credit” of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.

 

“Leverage Ratio” means, as of any date of calculation, the ratio of (i) Consolidated Funded Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Company’s then most-recently ended four fiscal quarters for which financial statements have been delivered pursuant to Section 7.1.

 

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security

 

B-7

 

agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

 

“Loan Party” or “Loan Parties” means, individually or collectively, the Company and the Subsidiary Guarantors.

 

“Make-Whole Amount” is defined in Section 8.7.

 

“Material” means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole.

 

“Material Acquisition” means any Permitted Acquisition that involves the payment of consideration by the Company and its Subsidiaries in excess of $25,000,000.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the ability of Subsidiary Guarantors, taken as a whole, to perform their obligations under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Notes or the Subsidiary Guaranty.

 

“Material Disposition” means any sale, transfer or disposition of property or series of related sales, transfers, or dispositions of property that yields gross proceeds to the Company or any of its Subsidiaries in excess of $25,000,000.

 

“Material Subsidiary” means each Subsidiary which, as of the end of the most recent fiscal quarter of the Company, (i) for the period of four consecutive fiscal quarters then ended for which financial statements have been delivered pursuant to Section 7.1, contributed greater than 10% of the Company’s Consolidated EBITDA for such period or (ii) contributed greater than 10% of the Company’s Consolidated Total Assets as of such date; provided that, if at any time the aggregate amount of the EBITDA or consolidated total assets of all Subsidiaries that are not Material Subsidiaries exceeds 20% of the Company’s Consolidated EBITDA for any such period or 20% of the Company’s Consolidated Total Assets as of the end of any such fiscal quarter, respectively, the Company shall designate sufficient Subsidiaries as “Material Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Subsidiaries.

 

“Maximum Leverage Ratio” is defined in Section 10.2.

 

“Memorandum” is defined in Section 5.3.

 

“Minimum Fixed Charge Coverage Ratio” is defined in Section 10.1.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

B-8

 

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

 

“NAIC” means the National Association of Insurance Commissioners or any successor thereto.

 

“NAIC Annual Statement” is defined in Section 6.2(a).

 

“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions.  “Unrealized losses” means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date).

 

“Notes” is defined in Section 1.1.

 

“OFAC” is defined in Section 5.16(a).

 

“OFAC Listed Person” is defined in Section 5.16(a).

 

“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing.  A list of OFAC Sanctions Programs may be found at http://www.ustreas.gov/offices/enforcement/ofac/programs/.

 

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

 

“Other Purchasers” is defined in Section 2.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.

 

“Permitted Acquisition” has the meaning given to such term in the Credit Agreement.

 

“Permitted Holder” means each of (i) Robert P. Jornayvaz III and Hugh E. Harvey, Jr., (ii) Intrepid Production Corporation and Harvey Operating and Production Company to the extent such entities are controlled by Robert P. Jornayvaz III and/or Hugh E. Harvey, Jr. and (iii) to the extent controlled solely by Robert P. Jornayvaz III or Hugh E. Harvey, Jr., any partnership, trust or other entity created for the benefit of any one or more of Robert P. Jornayvaz III or Hugh E. Harvey, Jr., the spouse of Robert P. Jornayvaz III or Hugh E. Harvey, Jr., or any lineal descendants of Robert P. Jornayvaz III or Hugh E. Harvey, Jr.

 

B-9

 

“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof.

 

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability.

 

“Priority Debt”  means, as of any date, the sum (without duplication) of (a) outstanding unsecured Indebtedness of Subsidiaries other than (i) Indebtedness of any Subsidiary Guarantor; (ii) Indebtedness owed to the Company, a Subsidiary Guarantor or a Wholly-Owned Subsidiary; and (iii) Indebtedness of a Subsidiary outstanding at the time of its acquisition by the Company, provided that (A) such Indebtedness was not incurred in contemplation of becoming a Subsidiary, and (B) at the time of such acquisition and after giving effect thereto, no Default or Event of Default exists or would exist and (b) Indebtedness of the Company and its Subsidiaries secured by Liens not otherwise permitted by Sections 10.4(a) through (r).

 

“property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

 

“Purchaser” means each purchaser listed in Schedule A and such Purchaser’s successors and assigns (so long as any such assignment complies with Section 13.2), provided, however, that any Purchaser of a Note that ceases to be the registered holder or a beneficial owner (through a nominee) of such Note as the result of a transfer thereof pursuant to Section 13.2 shall cease to be included within the meaning of “Purchaser” of such Note for the purposes of this Agreement upon such transfer.

 

“QPAM Exemption” is defined in Section 6.2(d).

 

“Rate Management Transaction” means any transaction (including an agreement with respect thereto) now existing or hereafter entered by the Company or any Subsidiary which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures, excluding any agreements entered into by the Company or any Subsidiary for the physical purchase of natural gas in the ordinary course of business for use in the Company’s or such Subsidiary’s operations.

 

B-10

 

“Required Holders” means, at any time (i) prior to the Closing, the Purchasers and (ii) on or after the Closing, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).

 

“Responsible Officer” means any of the Executive Chairman of the Board, President, Chief Financial Officer, Treasurer, Vice President of Finance, Controller and Chief Accounting Officer or any Executive Vice President of the Company, acting singly.

 

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

 

“Securities” or “Security” shall have the meaning specified in section 2(1) of the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

 

“Senior Financial Officer” means the chief financial officer, chief accounting officer, treasurer or controller of the Company.

 

“Series A Notes” is defined in Section 1.1.

 

“Series B Notes” is defined in Section 1.1.

 

“Series C Notes” is defined in Section 1.1.

 

“Source” is defined in Section 6.2.

 

“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries).  Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

 

“Subsidiary Guarantor” means any Subsidiary of the Company that executes and delivers, or becomes a party to, the Subsidiary Guaranty.

 

“Subsidiary Guaranty” is defined in Section 1.2.

 

“SVO” means the Securities Valuation Office of the NAIC or any successor to such Office.

 

B-11

 

“USA PATRIOT Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

 

“Wholly Owned Subsidiary” means, at any time, any Subsidiary 100% of all of the equity interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company’s other Wholly Owned Subsidiaries at such time.

 

B-12

 

EXHIBIT 1.1(a)

 

[FORM OF SERIES A SENIOR NOTE]

 

INTREPID POTASH, INC.

 

3.23% SENIOR NOTE, SERIES A
 DUE APRIL 16, 2020

 

	
No. AR-[          ]
    	
 
    	
[Date]
    
	
$[              ]
    	
 
    	
PPN: 46121Y A*3
    

 

FOR VALUE RECEIVED, the undersigned, INTREPID POTASH, INC., a Delaware corporation (the “Company”), promises to pay to [         ], or registered assigns, the principal sum of $[              ] (or so much thereof as shall not have been prepaid) on April 16, 2020 (the “Maturity Date”), with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 3.23% per annum from the date hereof, payable semiannually, on April 16 and October 16, in each year, commencing with the October 16 next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law and subject to Section 12.5 of the Note Purchase Agreement (as defined below), on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate.

 

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of U.S. Bank National Association in New York City or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

 

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement dated as of August 28, 2012 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof.  Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations set forth in Section 6.2 of the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

 

 

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement but not otherwise.

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

 

	
 
    	
INTREPID   POTASH, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

 

EXHIBIT 1.1(b)

 

[FORM OF SERIES B SENIOR NOTE]

 

INTREPID POTASH, INC.

 

4.13% SENIOR NOTE, SERIES B
 DUE APRIL 14, 2023

 

	
No. BR-[          ]
    	
 
    	
[Date]
    
	
$[              ]
    	
 
    	
PPN: 46121Y A@1
    

 

FOR VALUE RECEIVED, the undersigned, INTREPID POTASH, INC., a Delaware corporation (the “Company”), promises to pay to [         ], or registered assigns, the principal sum of $[              ] (or so much thereof as shall not have been prepaid) on April 14, 2023 (the “Maturity Date”), with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 4.13% per annum from the date hereof, payable semiannually, on April 16 and October 16, in each year, commencing with the October 16 next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law and subject to Section 12.5 of the Note Purchase Agreement (as defined below), on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate.

 

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of U.S. Bank National Association in New York City or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

 

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement dated as of August 28, 2012 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof.  Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations set forth in Section 6.2 of the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the

 

 

purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

 

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement but not otherwise.

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

 

	
 
    	
INTREPID   POTASH, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

 

EXHIBIT 1.1(c)

 

[FORM OF SERIES C SENIOR NOTE]

 

INTREPID POTASH, INC.

 

4.28% SENIOR NOTE, SERIES C
 DUE APRIL 16, 2025

 

	
No. CR-[          ]
    	
 
    	
[Date]
    
	
$[              ]
    	
 
    	
PPN: 46121Y A#9
    

 

FOR VALUE RECEIVED, the undersigned, INTREPID POTASH, INC., a Delaware corporation (the “Company”), promises to pay to [         ], or registered assigns, the principal sum of $[              ] (or so much thereof as shall not have been prepaid) on April 16, 2025 (the “Maturity Date”), with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 4.28% per annum from the date hereof, payable semiannually, on April 16 and October 16, in each year, commencing with the October next succeeding the date hereof, and on the Maturity Date, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law and subject to Section 12.5 of the Note Purchase Agreement (as defined below), on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum from time to time equal to the Default Rate.

 

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of U.S. Bank National Association in New York City or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

 

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement dated as of August 28, 2012 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof.  Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations set forth in Section 6.2 of the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the

 

 

purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

 

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement but not otherwise.

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

 

	
 
    	
INTREPID   POTASH, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

 

EXHIBIT 1.2

 

[FORM OF SUBSIDIARY GUARANTY]

 

THIS GUARANTY (this “Guaranty”) dated as of April 16, 2013 is made by the undersigned (each, a “Guarantor”), in favor of the holders from time to time of the Notes hereinafter referred to, including each purchaser named in the Note Purchase Agreement hereinafter referred to, and their respective successors and assigns (collectively, the “Holders” and each individually, a “Holder”).

 

W I T N E S S E T H:

 

WHEREAS, INTREPID POTASH, INC., a Delaware corporation (the “Company”), and the initial Holders entered into a Note Purchase Agreement dated as of August 28, 2012 (the Note Purchase Agreement as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms, the “Note Purchase Agreement”);

 

WHEREAS, the Note Purchase Agreement provides for the issuance by the Company of $150,000,000 aggregate principal amount of Notes (as defined in the Note Purchase Agreement);

 

WHEREAS, the Company owns, directly or indirectly, all of the issued and outstanding capital stock of each Guarantor;

 

WHEREAS, it is a requirement under the Note Purchase Agreement that the Guarantor shall execute and deliver this Guaranty to the Holders and the Guarantor will derive substantial benefit from the transaction requiring execution and delivery of this Guaranty; and

 

WHEREAS, each Guarantor desires to execute and deliver this Guaranty to satisfy the conditions described in the preceding paragraph;

 

NOW, THEREFORE, in consideration of the premises and other benefits to each Guarantor and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, each Guarantor makes this Guaranty as follows:

 

SECTION 1.  Definitions.  Any capitalized terms not otherwise herein defined shall have the meanings attributed to them in the Note Purchase Agreement.

 

SECTION 2.  Guaranty.  Each Guarantor, jointly and severally with each other Guarantor, unconditionally and irrevocably guarantees to the Holders the due, prompt and complete payment by the Company of the principal of, Make-Whole Amount, if any, and interest on, and each other amount due under, the Notes or the Note Purchase Agreement, when and as the same shall become due and payable (whether at stated maturity or by required or optional prepayment or by declaration or otherwise) in accordance with the terms of the Notes and the Note Purchase Agreement (the Notes and the Note Purchase Agreement being sometimes hereinafter collectively referred to as the “Note Documents” and the amounts payable by the Company under the Note Documents, and all other monetary obligations of the Company thereunder (including any attorneys’ fees and expenses required thereunder), being sometimes collectively hereinafter referred to as the “Obligations”).  This Guaranty is a guaranty of

 

 

payment and not just of collection and is in no way conditioned or contingent upon any attempt to collect from the Company or upon any other event, contingency or circumstance whatsoever.  If for any reason whatsoever the Company shall fail or be unable duly, punctually and fully to pay such amounts as and when the same shall become due and payable, each Guarantor, without demand, presentment, protest or notice of any kind, will forthwith pay or cause to be paid such amounts to the Holders under the terms of such Note Documents, in lawful money of the United States, at the place specified in the Note Purchase Agreement, or perform or comply with the same or cause the same to be performed or complied with, together with interest (to the extent provided for under such Note Documents) on any amount due and owing from the Company.  Each Guarantor, promptly after demand, will pay to the Holders the reasonable costs and expenses of collecting such amounts or otherwise enforcing this Guaranty, including, without limitation, the reasonable fees and expenses of counsel.  Notwithstanding the foregoing, the right of recovery against each Guarantor under this Guaranty is limited to the extent it is judicially determined with respect to any Guarantor that entering into this Guaranty would violate Section 548 of the United States Bankruptcy Code or any comparable provisions of any state law, in which case such Guarantor shall be liable under this Guaranty only for amounts aggregating up to the largest amount that would not render such Guarantor’s obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any state law.

 

SECTION 3.  Guarantor’s Obligations Unconditional.  The obligations of each Guarantor under this Guaranty shall be primary, absolute and unconditional obligations of each Guarantor, shall not be subject to any counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense based upon any claim each Guarantor or any other person may have against the Company or any other person, and to the full extent permitted by applicable law shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not each Guarantor or the Company shall have any knowledge or notice thereof), including:

 

(a)                                 any termination, amendment or modification of or deletion from or addition or supplement to or other change in any of the Note Documents or any other instrument or agreement applicable to any of the parties to any of the Note Documents;

 

(b)                                 any furnishing or acceptance of any security, or any release of any security, for the Obligations, or the failure of any security or the failure of any person to perfect any interest in any collateral;

 

(c)                                  any failure, omission or delay on the part of the Company to conform or comply with any term of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above, including, without limitation, failure to give notice to any Guarantor of the occurrence of a “Default” or an “Event of Default” under any Note Document;

 

(d)                                 any waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in any Note Document, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other

 

 

action or inaction under or in respect of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above or any obligation or liability of the Company, or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of any such instrument or agreement or any such obligation or liability;

 

(e)                                  any failure, omission or delay on the part of any of the Holders to enforce, assert or exercise any right, power or remedy conferred on such Holder in this Guaranty, or any such failure, omission or delay on the part of such Holder in connection with any Note Document, or any other action on the part of such Holder;

 

(f)                                   any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, conservatorship, custodianship, liquidation, marshaling of assets and liabilities or similar proceedings with respect to the Company, any Guarantor or to any other person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;

 

(g)                                  any discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of the Note Documents or any other agreement or instrument referred to in paragraph (a) above or any term hereof;

 

(h)                                 any merger or consolidation of the Company or any Guarantor into or with any other corporation, or any sale, lease or transfer of any of the assets of the Company or any Guarantor to any other person;

 

(i)                                     any change in the ownership of any shares of capital stock of the Company or any change in the corporate relationship between the Company and any Guarantor, or any termination of such relationship;

 

(j)                                    any release or discharge, by operation of law, of any Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty; or

 

(k)                                 any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which might otherwise limit recourse against any Guarantor, other than the defense of payment in full of the Obligations.

 

Notwithstanding any other provision contained in this Guaranty, each Guarantor’s liability with respect to the principal amount of the Notes shall be no greater than the liability of the Company with respect thereto.

 

 

SECTION 4.  Full Recourse Obligations.  The obligations of each Guarantor set forth herein constitute the full recourse obligations of such Guarantor enforceable against it to the full extent of all its assets and properties.

 

SECTION 5.  Waiver.  Each Guarantor unconditionally waives, to the extent permitted by applicable law, (a) notice of any of the matters referred to in Section 3, (b) notice to such Guarantor of the incurrence of any of the Obligations, notice to such Guarantor or the Company of any breach or default by the Company with respect to any of the Obligations or any other notice that may be required, by statute, rule of law or otherwise, to preserve any rights of the Holders against such Guarantor, (c) presentment to or demand of payment from the Company or the Guarantor with respect to any amount due under any Note Document or protest for nonpayment or dishonor, (d) any right to the enforcement, assertion or exercise by any of the Holders of any right, power, privilege or remedy conferred in the Note Purchase Agreement or any other Note Document or otherwise, (e) any requirement of diligence on the part of any of the Holders, (f) any requirement to exhaust any remedies or to mitigate the damages resulting from any default under any Note Document, (g) any notice of any sale, transfer or other disposition by any of the Holders of any right, title to or interest in the Note Purchase Agreement or in any other Note Document and (h) any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which might otherwise limit recourse against any Guarantor (other than the defense of payment in full of the Obligations).

 

SECTION 6.  Subrogation, Contribution, Reimbursement or Indemnity.  Until one year and one day after all Obligations have been indefeasibly paid in full, each Guarantor agrees not to take any action pursuant to any rights which may have arisen in connection with this Guaranty to be subrogated to any of the rights (whether contractual, under the United States Bankruptcy Code, as amended, including Section 509 thereof, under common law or otherwise) of any of the Holders against the Company or against any collateral security or guaranty or right of offset held by the Holders for the payment of the Obligations. Until one year and one day after all Obligations have been indefeasibly paid in full, each Guarantor agrees not to take any action pursuant to any contractual, common law, statutory or other rights of reimbursement, contribution, exoneration or indemnity (or any similar right) from or against the Company which may have arisen in connection with this Guaranty.  So long as the Obligations remain, if any amount shall be paid by or on behalf of the Company to any Guarantor on account of any of the rights waived in this paragraph, such amount shall be held by such Guarantor in trust, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Holders (duly endorsed by such Guarantor to the Holders, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Holders may determine.  The provisions of this paragraph shall survive the term of this Guaranty and the payment in full of the Obligations.

 

SECTION 7.  Effect of Bankruptcy Proceedings, etc.  This Guaranty shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the sums due to any of the Holders pursuant to the terms of the Note Purchase Agreement or any other Note Document is rescinded or must otherwise be

 

 

restored or returned by such Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Company or other person or any substantial part of its property, or otherwise, all as though such payment had not been made.  If an event permitting the acceleration of the maturity of the principal amount of the Notes shall at any time have occurred and be continuing, and such acceleration shall at such time be prevented by reason of the pendency against the Company or any other person of a case or proceeding under a bankruptcy or insolvency law, each Guarantor agrees that, for purposes of this Guaranty and its obligations hereunder, the maturity of the principal amount of the Notes and all other Obligations shall be deemed to have been accelerated with the same effect as if any Holder had accelerated the same in accordance with the terms of the Note Purchase Agreement or other applicable Note Document, and such Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any, and interest thereon and any other amounts guaranteed hereunder without further notice or demand.

 

SECTION 8.  Term of Agreement.  This Guaranty and all guaranties, covenants and agreements of each Guarantor contained herein shall continue in full force and effect and shall not be discharged until such time as all of the Obligations shall be paid and performed in full and all of the agreements of such Guarantor hereunder shall be duly paid and performed in full; provided that any Guarantor shall be released from this Guaranty as provided in Section 9.6(b) of the Note Purchase Agreement.

 

SECTION 9.  Representations and Warranties.  Each Guarantor represents and warrants to each Holder that:

 

(a)                                 such Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged;

 

(b)                                 such Guarantor has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guaranty;

 

(c)                                  this Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law);

 

(d)                                 the execution, delivery and performance of this Guaranty will not violate any provision of any requirement of law or material contractual obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties, revenues or assets of the Guarantor pursuant to the provisions of any material contractual obligation of such Guarantor or any requirement of law;

 

 

(e)                                  no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty;

 

(f)                                   no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or any of its properties or revenues (i) with respect to this Guaranty or any of the transactions contemplated hereby or (ii) which would reasonably be expected to have a Material Adverse Effect;

 

(g)                                  the execution, delivery and performance of this Guaranty will not violate any provision of any order, judgment, writ, award or decree of any court, arbitrator or Governmental Authority, domestic or foreign, or of the charter or by-laws of such Guarantor or of any securities issued by such Guarantor; and

 

(h)                                 after giving effect to the transactions contemplated herein (including the last sentence of Section 2), (i) the present fair salable value of the assets of such Guarantor is in excess of the amount that will be required to pay its probable liability on its existing debts as said debts become absolute and matured, (ii)  such Guarantor has received reasonably equivalent value for executing and delivering this Guaranty, (iii) the property remaining in the hands of such Guarantor is not an unreasonably small capital, and (iv) such Guarantor is able to pay its debts as they mature.

 

SECTION 10.  Notices.  All notices under the terms and provisions hereof shall be in writing, and shall be mailed by first-class mail, postage prepaid, addressed (a) if to the Company or any Holder at the address set forth in,  the Note Purchase Agreement or (b) if to a Guarantor, in care of the Company at the Company’s address set forth in the Note Purchase Agreement, or in each case at such other address as the Company, any Holder or such Guarantor shall from time to time designate in writing to the other parties.  Any notice so addressed shall be deemed to be given when actually received.

 

SECTION 11.  Survival.  All warranties, representations and covenants made by each Guarantor herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by the Holders and shall survive the execution and delivery of this Guaranty, regardless of any investigation made by any of the Holders.  All statements in any such certificate or other instrument shall constitute warranties and representations by such Guarantor hereunder.

 

SECTION 12.  Submission to Jurisdiction.  Each Guarantor irrevocably submits to the jurisdiction of the courts of the State of New York and of the courts of the United States of America having jurisdiction in the State of New York for the purpose of any legal action or proceeding in any such court with respect to, or arising out of, this Guaranty, the Note Purchase Agreement or the Notes, the Security Agreements, the Subsidiary Guaranty or the Notes.

 

SECTION 13.  Miscellaneous.  Any provision of this Guaranty which is 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, each Guarantor hereby waives any provision of law that renders any provisions hereof prohibited or unenforceable in any respect.  The terms of this Guaranty shall be binding upon, and inure to the benefit of, each Guarantor and the Holders and their respective successors and assigns.  No term or provision of this Guaranty may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by each Guarantor and the Holders.  The section and paragraph headings in this Guaranty and the table of contents are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof, and all references herein to numbered sections, unless otherwise indicated, are to sections in this Guaranty.  This Guaranty shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, including all matters of construction, validity and performance.

 

SECTION 14.  Covenant.  Each Guarantor will ensure that its payment obligations under this Guaranty will at all times rank at least pari passu, without preference or priority, with all other unsecured and unsubordinated Indebtedness of such Guarantor.

 

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed as of the day and year first above written.

 

	
 
    	
[Name   of Guarantor]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

FORM OF JOINDER TO SUBSIDIARY GUARANTY

 

The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated as of April 16, 2013 from the Guarantors named therein in favor of the Holders, as defined therein, and agrees to be bound by all of the terms thereof and represents and warrants to the Holders that:

 

(a)                                 the Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged;

 

(b)                                 the Guarantor has the requisite power and authority and the legal right to execute and deliver this Joinder to Subsidiary Guaranty (“Joinder”) and to perform its obligations hereunder and under the Subsidiary Guaranty and has taken all necessary action to authorize its execution and delivery of this Joinder and its performance of the Subsidiary Guaranty;

 

(c)                                  the Subsidiary Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law);

 

(d)                                 the execution, delivery and performance of this Joinder will not violate any provision of any requirement of law or material contractual obligation of the Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties, revenues or assets of the Guarantor pursuant to the provisions of any material contractual obligation of such Guarantor or any requirement of law;

 

(e)                                  no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Joinder;

 

(f)                                   no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Guarantor, threatened by or against the Guarantor or any of its properties or revenues (i) with respect to this Joinder, the Subsidiary Guaranty or any of the transactions contemplated hereby or thereby or (ii) that would reasonably be expected to have a Material Adverse Effect;

 

(g)                                  the execution, delivery and performance of this Joinder will not violate any provision of any order, judgment, writ, award or decree of any court, arbitrator or Governmental Authority, domestic or foreign, or of the charter or by-laws of the Guarantor or of any securities issued by the Guarantor; and

 

 

(h)                                 after giving effect to the transactions contemplated herein (but subject to the last sentence of Section 2 of the Subsidiary Guaranty), (i) the present fair salable value of the assets of the Guarantor is in excess of the amount that will be required to pay its probable liability on its existing debts as said debts become absolute and matured, (ii)  the Guarantor has received reasonably equivalent value for executing and delivering this Guaranty, (iii) the property remaining in the hands of the Guarantor is not an unreasonably small capital, and (iv) the Guarantor is able to pay its debts as they mature.

 

Capitalized Terms used but not defined herein have the meanings ascribed in the Subsidiary Guaranty.

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary Guaranty to be duly executed as of                     ,         .

 

	
 
    	
[Name   of Guarantor]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:August 23. 2012 S8 Exhibit 10.19

Exhibit 10.19

8x8, Inc.

2012 Equity Incentive Plan

1.   Purpose

This Plan is intended to encourage ownership of Stock by employees, consultants and directors of the Company and
its Affiliates and to provide additional incentive for them to promote the success of the Company's business through the grant of Awards
of or pertaining to shares of the Company's Stock.  The Plan is intended to be an incentive stock option plan within the meaning of
Section 422 of the Code, but not all Awards are required to be Incentive Options.

2.   Definitions

As used in the Plan, the following terms shall have the respective meanings set out below, unless the context clearly
requires otherwise:

2.1.   Accelerate, Accelerated, and Acceleration, means: (a) when used with
respect to a Stock Right, that as of the time of reference the Stock Right will become exercisable with respect to some or all of the
shares of Stock for which it was not then otherwise exercisable by its terms; (b) when used with respect to Restricted Stock or
Restricted Stock Units, that the Risk of Forfeiture otherwise applicable to the Stock or Units shall expire with respect to some or all of
the shares of Restricted Stock or Units then still otherwise subject to the Risk of Forfeiture; and (c) when used with respect to
Performance Units, that the applicable Performance Goals or other business objectives shall be deemed to have been met as to some
or all of the Units.  

2.2.   Affiliate means any corporation, partnership, limited liability company, business trust, or
other entity controlling, controlled by or under common control with the Company.

2.3.   Award means any grant or sale pursuant to the Plan of Options, Stock Appreciation Rights,
Performance Units, Restricted Stock, Restricted Stock Units, or Stock Grants.

2.4.   Award Agreement means an agreement between the Company and the recipient
of an Award, or other notice of grant of an Award, setting forth the terms and conditions of the Award.

2.5.   Board means the Company's Board of Directors.

2.6.   Code means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto, and any regulations issued from time to time thereunder.

2.7.   Committee means the Compensation Committee of the Board, which in general is
responsible for the administration of the Plan, as provided in Section5 of this Plan.  For any period during which no such
committee is in existence "Committee" shall mean the Board and all authority and responsibility assigned to the Committee
under the Plan shall be exercised, if at all, by the Board.

2.8.   Company means 8x8, Inc., a corporation organized under the laws of the state of
Delaware.

2.9.   Corporate Transaction means any (1) merger or consolidation of the Company
with or into another entity as a result of which the Stock of the Company is converted into or exchanged for the right to receive cash,
securities or other property or is cancelled, (2) sale or exchange of all of the Stock of the Company for cash, securities or other
property, (3) sale, transfer, or other disposition of all or substantially all of the Company's assets to one or more other persons in a
single transaction or series of related transactions or (4) liquidation or dissolution of the Company; except, in the case of clauses (1)
and (2), for a transaction the principal purpose of which is to change the state in which the Company is incorporated.

2.10.   Effective Date means the earlier of the date the Plan is approved by the Board or the date
the Plan is approved by the stockholders of the Company.

2.11.   Grant Date means the date as of which an Option is granted, as determined
under Section7.1(a).

2.12.   Incentive Option means an Option which by its terms is to be treated as an
"incentive stock option" within the meaning of Section 422 of the Code.

2.13.   Market Value means the value of a share of Stock on a particular date determined
by such methods or procedures as may be established by the Committee.  Unless otherwise determined by the Committee, the Market
Value of Stock as of any date is: (a) the closing price for the Stock as reported on the NASDAQ Global Market (or on any other national
securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on
the next preceding date for which a closing price was reported; or (b) if the Stock is not traded on a national securities exchange but is
traded over-the-counter, the closing or last price of the Stock on the composite tape or other comparable reporting system on that date
or, if such date is not a trading day, the last market trading day prior to such date.

2.14.   Nonstatutory Option means any Option that is not an Incentive Option.

2.15.   Option means an option to purchase shares of Stock.

2.16.   Optionee means an eligible individual to whom an Option shall have been granted under
the Plan.

2.17.   Participant means any holder of an outstanding Award under the Plan.

2.18.   Performance Criteria and Performance Goals have the meanings given such
terms in Section 7.7(f).

2.19.   Performance Period means the one or more periods of time, which may be of varying and
overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals or other business
objectives will be measured for purposes of determining a Participant's right to, and the payment of, a Performance Unit.

2.20.   Performance Unit means a right granted to a Participant under Section7.5, to
receive cash, Stock or other Awards, the payment of which is contingent on achieving Performance Goals or other business objectives
established by the Committee.

2.21.   Plan means this 2012 Equity Incentive Plan of the Company, as amended from time to
time, and including any attachments or addenda hereto.

2.22.   Qualified Performance-Based Awards means Awards to persons who are or become
covered employees within the meaning of Section162(m) of the Code and which are intended to or at grant would qualify as
"performance-based compensation" under Section162(m) of the Code.

2.23.   Restricted Stock means a grant or sale of shares of Stock to a Participant subject to a Risk
of Forfeiture.

2.24.   Restricted Stock Unit means a right to receive Stock at the close of a Restriction Period,
subject to a Risk of Forfeiture.

2.25.   Restriction Period means the period of time, established by the Committee in connection
with an Award of Restricted Stock or Restricted Stock Units, during which the shares of Restricted Stock or Restricted Stock Units are
subject to a Risk of Forfeiture described in the applicable Award Agreement.

2.26.   Risk of Forfeiture means a limitation on the right of the Participant to retain Restricted
Stock or Restricted Stock Units, including a right of the Company to reacquire shares of Restricted Stock at less than its then Market
Value, arising because of the occurrence or non-occurrence of specified events or conditions.

2.27.   Stock means common stock, par value $0.001 per share, of the Company, and
such other securities as may be substituted for Stock pursuant to Section8.

2.28.   Stock Appreciation Right means a right to receive any excess in the Market Value of
shares of Stock (except as otherwise provided in Section7.2(c)) over a specified exercise price.

2.29.   Stock Grant means the grant of shares of Stock not subject to restrictions or other forfeiture
conditions.

2.30.   Stock Right means an Award in the form of an Option or a Stock Appreciation Right.

2.31.   Stockholders' Agreement means any agreement by and among the holders of at
least a majority of the outstanding voting securities of the Company and setting forth, among other provisions, restrictions upon the
transfer of shares of Stock or on the exercise of rights appurtenant thereto (including, but not limited to, voting rights).

2.32.   Ten Percent Owner means a person who owns, or is deemed within the
meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or any parent or subsidiary corporations of the Company, as defined in Sections424(e) and (f),
respectively, of the Code).  Whether a person is a Ten Percent Owner shall be determined with respect to an Option based on the facts
existing immediately prior to the Grant Date of the Option.

3.   Term of the
Plan

Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any time
in the period commencing on the date of approval of the Plan by the Board and ending immediately prior to the tenth anniversary of the
Effective Date.  Awards granted pursuant to the Plan within that period shall not expire solely by reason of the termination of the Plan.
Any Awards granted prior to stockholder approval of the Plan are hereby expressly conditioned upon such approval.

4.   Stock Subject to the Plan

At no time shall the number of shares of Stock issued pursuant to or subject to outstanding Awards granted under the
Plan, nor the number of shares of Stock issued pursuant to or subject to outstanding Incentive Options, exceed 4,100,000 shares of
Stock; subject, however, to the provisions of Section8 of the Plan.  For purposes of applying the foregoing limitation,
settlement of any Award shall not count against the foregoing limitations except to the extent settled in the form of Stock and, without
limiting the generality of the foregoing:

(a) if any Option or Stock-settled Stock Appreciation Right expires, terminates, or is cancelled for any reason without having
been exercised in full, or if any other Award is forfeited by the recipient or repurchased at less than its Market Value as a means of
effecting a forfeiture, the shares of Stock not purchased by the Optionee or which are forfeited by the recipient or repurchased shall
again be available for Awards to be granted under the Plan;

(b) if any Option is exercised by delivering previously owned shares of Stock in payment of the exercise price therefor, only the
net number of shares, that is, the number of shares of Stock issued minus the number received by the Company in payment of the
exercise price, shall be considered to have been issued pursuant to an Award granted under the Plan; and

(c) any shares of Stock either tendered or withheld in satisfaction of tax withholding obligations of the Company or an Affiliate
shall again be available for issuance under the Plan.

None of the foregoing provisions of this Section 4, including the adjustment provisions of Section 8, shall apply in determining the
maximum number of shares of Stock issued pursuant to or subject to outstanding Incentive Options unless consistent with the
provisions of Section 422 of the Code, however.  Shares of Stock issued pursuant to the Plan may be either authorized but unissued
shares or shares held by the Company in its treasury.

5.   Administration

The Plan shall be administered by the Committee; provided, however, that at any time and on any one or
more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when
so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee's exercise of its authorities hereunder;
and provided further, however, that the Committee may delegate to an executive officer or officers the authority to grant Awards
hereunder to employees who are not officers, and to consultants, in accordance with such guidelines as the Committee shall set forth at
any time or from time to time. Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to
make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan
including the employee, consultant or director to receive the Award and the form of Award.  In making such determinations, the
Committee may take into account the nature of the services rendered by the respective employees, consultants, and directors, their
present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its
discretion shall deem relevant.   Subject to the provisions of the Plan, the Committee shall also have complete authority to:  (a) interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to it; (b) approve one or more forms of Award Agreement; (c)
determine the initial terms and provisions of the respective Award Agreements (which need not be identical), including, without
limitation, as applicable, (i) the exercise price of the Award, (ii) the method of payment for shares of Stock purchased upon the exercise
of the Award, (iii) the timing, terms and conditions of the exercisability of the Award or the vesting of any shares acquired upon the
exercise thereof, (iv) the time of the expiration of the Award, (v) the effect of the Participant's termination of employment or other
association with the Company on any of the foregoing, and (vi) all other terms, conditions and restrictions applicable to the Award or
such shares not inconsistent with the terms of the Plan; (d) amend, modify, extend, cancel or renew any Award or to waive any
restrictions or conditions applicable to any Award or any shares acquired upon the exercise thereof; (e) accelerate, continue, extend or
defer the exercisability of any Award or the vesting of any shares acquired upon the exercise thereof, including with respect to the
period following a Participant's termination of employment or other association with the Company; (f) correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other
actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions
of the Plan or applicable law; and (g) to make all other determinations necessary or advisable for the administration of the Plan.  The
Committee's determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons
having or claiming any interest under the Plan or an Award made pursuant hereto.

6.   Authorization of Grants

6.1.   Eligibility.  The Committee may grant from time to time and at any time prior
to the termination of the Plan one or more Awards, either alone or in combination with any other Awards, to any employee of or
consultant to one or more of the Company and its Affiliates or to any non-employee member of the Board or of any board of directors
(or similar governing authority) of any Affiliate. However, only employees of the Company, and of any parent or subsidiary corporations
of the Company, as defined in Sections 424(e) and (f), respectively, of the Code, shall be eligible for the grant of an Incentive
Option.

6.2.   General Terms of Awards.  Each grant of an Award shall be subject to all applicable terms
and conditions of the Plan (including, but not limited to, any specific terms and conditions applicable to that type of Award set out in the
following Section), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe.
No prospective Participant shall have any rights with respect to an Award, unless and until such Participant shall have complied with the
applicable terms and conditions of such Award (including if applicable delivering a fully executed copy of any agreement evidencing an
Award to the Company).

6.3.   Effect of Termination of Employment, Disability or Death. 

(a)Termination of Employment.  Unless the Committee shall provide otherwise with respect to any Award, if the
Participant's employment or other association with the Company and its Affiliates ends for any reason other than by total disability or
death, including because of an Affiliate ceasing to be an Affiliate, (a) any outstanding Stock Right of the Participant shall cease to be
exercisable in any respect not later than 90 days following that event and, for the period it remains exercisable following that event,
shall be exercisable only to the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant shall
be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement.
Cessation of the performance of services in one capacity, for example, as an employee, shall not result in termination of an Award while
the Participant continues to perform services in another capacity, for example as a director. Military or sick leave or other bona fide
leave shall not be deemed a termination of employment or other association, provided that it does not exceed the longer of 90
days or the period during which the absent Participant's reemployment rights, if any, are guaranteed by statute or by contract. To the
extent consistent with applicable law, the Committee may provide that Awards continue to vest for some or all of the period of any such
leave, or that their vesting shall be tolled during any such leave and only recommence upon the Participant's return from leave, if
ever.

(b)Disability of Participant. If a Participant's employment or other association with the Company and its Affiliates
ends due to disability (as defined in Section 22(e)(3) of the Code), any outstanding Stock Right may be exercised at any time within six
months following the date of termination of service, but only to the extent of the accrued right to exercise at the time of termination of
service, subject to the condition that no Stock Right shall be exercised after its expiration in accordance with its terms. 

(c)Death of Participant. In the event of the death during the period during which the Stock Right may be
exercised, of a Participant who is at the time of his or her death an employee, director or consultant and whose services had not ceased
or been terminated (as determined with regard to the second sentence of Section 6.3 (a)) as such from the Grant Date until the date of
death, the Stock Right of the Participant may be exercised at any time within six months following the date of death by such
Participant's estate or by a person who acquired the right to exercise the Stock Right by bequest, inheritance or otherwise as a result of
the Participant's death, but only to the extent of the accrued right to exercise at the time of death, subject to the condition that no Stock
Right shall be exercised after its expiration in accordance with its terms.

6.4.   Non-Transferability of Awards.  Except as otherwise provided in this Section 6.4, Awards
shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.  All of a Participant's rights in any Award may be exercised
during the life of the Participant only by the Participant or the Participant's legal representative.  However, the Committee may, at or
after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the
recipient to a family member; provided, however, that any such transfer is without payment of any consideration whatsoever and
that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion.  For this purpose, "family
member" means any child, stepchild, grandchild, parent, grandparent, stepparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee's household (other than a tenant or employee), a trust in which the foregoing persons have more than 50 percent
of the beneficial interests, a foundation in which the foregoing persons (or the Participant) control the management of assets, and any
other entity in which these persons (or the Participant) own more than 50 percent of the voting interests.  The events of termination of
service of Section 6.3 hereof or in the Award Agreement shall continue to be applied with respect to the original Participant, following
which the Awards shall be exercisable by the transferee only to the extent, and for the periods specified in the Award Agreement or
Section 6.3, as applicable.

Code Limits on Grants of Qualified Performance-Based Awards.  In no event shall the
number of shares of Stock covered or referenced by either Options or Stock Appreciation Rights, or other Awards which are granted as
Qualified Performance-Based Awards, to any one person in any one calendar year exceed 750,000 shares of Stock. These limitations
shall not apply prior to the date required to apply under the regulations of the U.S. Department of Treasury promulgated under Section
162(m) of the Code, however.  Solely for purposes of applying the limitations of this Section6.5, if in effect, any shares of
Stock subject to Options or Stock Appreciation Rights which are canceled (or deemed canceled, as a result of repricing described in
applicable regulations of the U.S. Department of Treasury promulgated under Section 162(m) of the Code) shall nevertheless continue
to be counted even after such cancellation (or deemed cancellation).

7.   Specific Terms of Awards

7.1.   Options.

(a)Date of Grant.  The granting of an Option shall take place at the time specified in the Award Agreement.  Only if
expressly so provided in the applicable Award Agreement shall the Grant Date be the date on which the Award Agreement shall have
been duly executed and delivered by the Company and the Optionee.

(b)Exercise Price.  The price at which shares of Stock may be acquired under each Incentive Option shall be not less
than 100% of the Market Value of Stock on the Grant Date, or not less than 110% of the Market Value of Stock on the Grant Date if the
Optionee is a Ten Percent Owner.  The price at which shares of Stock may be acquired under each Nonstatutory Option shall the
Market Value of Stock on the Grant Date, except as provided otherwise by the Committee upon the grant of the Nonstatutory
Option.

(c)Option Period.  No Incentive Option may be exercised on or after the tenth anniversary of the Grant Date, or on or
after the fifth anniversary of the Grant Date if the Optionee is a Ten Percent Owner.  The Option period under each Nonstatutory Option
shall not be so limited solely by reason of this Section. 

(d)Exercisability.  An Option may be immediately exercisable or become exercisable in such installments,
cumulative or non-cumulative, as the Committee may determine.  In the case of an Option not otherwise immediately exercisable in full,
the Committee may Accelerate such Option in whole or in part at any time; provided, however, that in the case of an Incentive
Option, any such Acceleration of the Option would not cause the Option to fail to comply with the provisions of Section422 of
the Code or the Optionee consents to the Acceleration.

(e)Method of Exercise.  An Option may be exercised by the Optionee giving written notice, in the manner provided in
Section16, specifying the number of shares of Stock with respect to which the Option is then being exercised.  The notice
shall be accompanied by payment in the form of cash or check payable to the order of the Company in an amount equal to the exercise
price of the shares of Stock to be purchased or, subject in each instance to the Committee's approval, acting in its sole discretion, and
to such conditions, if any, as the Committee may deem necessary to avoid adverse accounting effects to the Company,

(i) by delivery to the Company of shares of Stock having a Market Value equal to the exercise price of the shares to be purchased,
or 

(ii) by surrender of the Option as to all or part of the shares of Stock for which the Option is then exercisable in exchange for shares
of Stock having an aggregate Market Value equal to the difference between (1) the aggregate Market Value of the surrendered
portion of the Option, and (2) the aggregate exercise price under the Option for the surrendered portion of the Option, or 

(iii) unless prohibited by applicable law, by delivery to the Company of the Optionee's executed promissory note in the principal
amount equal to the exercise price of the shares of Stock to be purchased and otherwise in such form as the Committee shall have
approved, or

(iv) by delivery of any other lawful means of consideration which the Committee may approve.

If the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and
conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a
brokered transaction (other than to the Company).  Receipt by the Company of such notice and payment in any authorized or
combination of authorized means shall constitute the exercise of the Option.  Within 30 days thereafter but subject to the remaining
provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates or
book-entry authorization and instruction to the Company's transfer agent and registrar for the number of shares then being purchased.
Such shares of Stock shall be fully paid and nonassessable.  In its reasonable discretion, the Committee may suspend or halt Option
exercises for such length of time as the Committee deems reasonably necessary under circumstances in which such suspension or halt
is considered to be in the best interests of the Company.

(f)Limit on Incentive Option Characterization.  An Incentive Option shall be considered to be an Incentive Option only
to the extent that the number of shares of Stock for which the Option first becomes exercisable in a calendar year do not have an
aggregate Market Value (as of the date of the grant of the Option) in excess of the "current limit".  The current limit for any
Optionee for any calendar year shall be $100,000 minus the aggregate Market Value at the date of grant of the number of
shares of Stock available for purchase for the first time in the same year under each other Incentive Option previously granted to the
Optionee under the Plan, and under each other incentive stock option previously granted to the Optionee under any other incentive
stock option plan of the Company and its Affiliates.  Any shares of Stock which would cause the foregoing limit to be violated shall be
deemed to have been granted under a separate Nonstatutory Option, otherwise identical in its terms to those of the Incentive Option.

(g)Notification of Disposition.  Each person exercising any Incentive Option granted under
the Plan shall be deemed to have covenanted with the Company to report to the Company any disposition of the shares of Stock issued
upon such exercise prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code and, if and to the extent that
the realization of income in such a disposition imposes upon the Company federal, state, local or other withholding tax requirements, or
any such withholding is required to secure for the Company an otherwise available tax deduction, to remit to the Company an amount in
cash sufficient to satisfy those requirements.

7.2.   Stock Appreciation Rights.

(a)Tandem or Stand-Alone.  Stock Appreciation Rights may be granted in tandem with an Option (at or, in the case of
a Nonstatutory Option, after, the award of the Option), or alone and unrelated to an Option.  Stock Appreciation Rights in tandem with
an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the
tandem Stock Appreciation Rights are exercised.

(b)Exercise Price.  Stock Appreciation Rights shall have an exercise price of not less than 100% of the
Market Value of the Stock on the date of award, or in the case of Stock Appreciation Rights in tandem with Options, the exercise price
of the related Option.

(c)Other Terms.  Except as the Committee may deem inappropriate or inapplicable in the circumstances,
Stock Appreciation Rights shall be subject to terms and conditions substantially similar to those applicable to a Nonstatutory Option.  In
addition, a Stock Appreciation Right related to an Option which can only be exercised during limited periods following a Corporate
Transaction may entitle the Participant to receive an amount based upon the highest price paid or offered for Stock in any transaction
relating to the Corporate Transaction or paid during the 30 day period immediately preceding the occurrence of the Corporate
Transaction in any transaction reported in the stock market in which the Stock is normally traded.

7.3.   Restricted Stock.

(a)Purchase Price.  Shares of Restricted Stock shall be issued under the Plan for such consideration, in cash, other
property or services, or any combination thereof, as is determined by the Committee.

(b)Issuance of Certificates.  Each Participant receiving a Restricted Stock Award, subject to subsection (c) below,
shall be issued a stock certificate in respect of such shares of Restricted Stock.  Such certificate shall be registered in the name of such
Participant, and, if applicable, shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such
Award substantially in the following form:
The shares evidenced by this certificate are subject to the terms and conditions of the 8x8, Inc. 2012 Equity Incentive Plan and an
Award Agreement entered into by the registered owner and 8x8, Inc., copies of which will be furnished by the Company to the
holder of the shares evidenced by this certificate upon written request and without charge.

(c)Escrow of Shares.  The Committee may require that the stock certificates evidencing shares of Restricted Stock be
held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have
lapsed, and that the Participant deliver a stock power, endorsed in blank, relating to the Stock covered by such Award.

(d)Restrictions and Restriction Period.  During the Restriction Period applicable to shares of Restricted Stock, such
shares shall be subject to limitations on transferability and a Risk of Forfeiture arising on the basis of such conditions related to the
performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement.  Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any
time by the Committee on such basis as it deems appropriate. 

(e)Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award.  Except as otherwise provided in the Plan or the
applicable Award Agreement, at all times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted
Stock, the Participant shall have all of the rights of a stockholder of the Company, including the right to vote, and the right to receive any
dividends with respect to, the shares of Restricted Stock (but any dividends or other distributions payable in shares of Stock or other
securities of the Company shall constitute additional Restricted Stock, subject to the same Risk of Forfeiture as the shares of Restricted
Stock in respect of which such shares of Stock or other securities are paid).  The Committee, as determined at the time of Award, may
permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested in additional Restricted
Stock to the extent shares of Stock are available under Section4.

(f)Lapse of Restrictions.  If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock,
the certificates for such shares shall be delivered to the Participant promptly if not theretofore so delivered.

7.4.   Restricted Stock Units.

(a)Character.  Each Restricted Stock Unit shall entitle the recipient to one or more shares of Stock at a close of such
Restriction Period as the Committee may establish and subject to a Risk of Forfeiture arising on the basis of such conditions relating to
the performance of services, Company or Affiliate performance, or otherwise as the Committee may determine and provide for in the
applicable Award Agreement.  Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any
time by the Committee on such basis as it deems appropriate.

(b)Form and Timing of Payment.  Payment of earned Restricted Stock Units shall be made in a single lump sum
following the close of the applicable Restriction Period.  At the discretion of the Committee, Participants may be entitled to receive
payments equivalent to any dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following
the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned.  Unless the Committee shall
provide otherwise, any such dividend equivalents shall be paid, if at all, without interest or other earnings.

7.5.   Performance Units.

(a)Character. Each Performance Unit shall entitle the recipient to the value of a specified number of shares of Stock,
over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified
Performance Period to the extent specified business objectives, including, but not limited to, Performance Goals, shall have been
achieved.

(b)Earning of Performance Units. The Committee shall set Performance Goals or other business objectives in its
discretion which, depending on the extent to which they are met within the applicable Performance Period, will determine the number
and value of Performance Units that will be paid out to the Participant.  After the applicable Performance Period has ended, the holder
of Performance Units shall be entitled to receive payout on the number and value of Performance Units earned by the Participant over
the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals or other business
objectives have been achieved.

(c)Form and Timing of Payment.  Payment of earned Performance Units shall be made in a single lump sum following
the close of the applicable Performance Period.  At the discretion of the Committee, Participants may be entitled to receive any
dividends declared with respect to Stock which have been earned in connection with grants of Performance Units which have been
earned, but not yet distributed to Participants.  The Committee may permit or, if it so provides at grant require, a Participant to defer
such Participant's receipt of the payment of cash or the delivery of Stock that would otherwise be due to such Participant by virtue of
the satisfaction of any requirements or goals with respect to Performance Units.  If any such deferral election is required or permitted,
the Committee shall establish rules and procedures for such payment deferrals.

7.6.   Stock Grants. Stock Grants shall be awarded solely in recognition of significant prior or
expected contributions to the success of the Company or its Affiliates, as an inducement to employment, in lieu of compensation
otherwise already due and in such other limited circumstances as the Committee deems appropriate.  Stock Grants shall be made
without forfeiture conditions of any kind.

7.7.   Qualified Performance-Based Awards.

(a)Purpose.  The purpose of this Section 7.7 is to provide the Committee the ability to qualify Awards as
"performance-based compensation" under Section 162(m) of the Code.  If the Committee, in its discretion, decides to grant
an Award as a Qualified Performance-Based Award, the provisions of this Section 7.7 will control over any contrary provision contained
in the Plan.  In the course of granting any Award, the Committee may specifically designate the Award as intended to qualify as a
Qualified Performance-Based Award.  However, no Award shall be considered to have failed to qualify as a Qualified Performance-
Based Award solely because the Award is not expressly designated as a Qualified Performance-Based Award, if the Award otherwise
satisfies the provisions of this Section 7.7 and the requirements of Section162(m) of the Code applicable to
"performance-based compensation."

(b)Authority.  All grants of Awards intended to qualify as Qualified Performance-Based Awards and the determination
of the terms applicable thereto shall be made by the Committee.  If not all of the members thereof qualify as "outside
directors" within the meaning of Section162(m) of the Code, however, all grants of Awards intended to qualify as
Qualified Performance-Based Awards and the determination of the terms applicable thereto shall be made by a subcommittee of the
Committee consisting of such of the members of the Committee as do so qualify.  Any reference in this Section 7.7 to the Committee
shall mean any such subcommittee if required under the preceding sentence, and any action by such a subcommittee shall be
considered the action of the Committee for purposes of the Plan.

(c)Discretion of Committee with Respect to Qualified Performance-Based Awards.  Any form of Award permitted
under the Plan, other than a Stock Grant, may be granted as a Qualified Performance-Based Award.  Stock Rights may be granted as
Qualified Performance-Based Awards in accordance with Section 7.1 or Section 7.2, as appropriate, except that the exercise price of
any Option or Stock Appreciation Right intended to qualify as a Qualified Performance-Based Award shall in no event be less than the
Market Value of the Stock on the date of grant, and may become exercisable based on continued service, on satisfaction of
Performance Goals, or on a combination thereof.  Each other Award intended to qualify as a Qualified Performance-Based Award, such
as Restricted Stock, Restricted Stock Units, or Performance Units, shall be subject to satisfaction of one or more Performance Goals
except as otherwise provided in this Section 7.7.  The Committee will have full discretion to select the length of any applicable
Restriction Period or Performance Period, the kind and/or level of the applicable Performance Goal, and whether the Performance Goal
is to apply to the Company, a subsidiary of the Company or any division or business unit or to the individual.  Any Performance Goal or
Goals applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than 90 days after the
beginning of any applicable Performance Period (or at such other date as may be required or permitted for "performance-based
compensation" under Section 162(m) of the Code) and shall otherwise meet the requirements of Section162(m) of the
Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined for purposes
of Section162(m) of the Code) at the time established.

(d)Payment of Qualified Performance-Based Awards.  A Participant will be eligible to receive payment under a
Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable
Performance Goal or Goals are achieved within the applicable Performance Period, as determined by the Committee, provided,
that a Qualified Performance-Based Award may be deemed earned as a result of death, becoming disabled, or in connection with a
Corporate Transaction that constitutes a change of control within the meaning of Section 162(m) of the Code, if the applicable Award
Agreement so provides, even if payment under the Award following the occurrence of such an event would not constitute
"performance-based compensation" under Section 162(m) of the Code. In determining the actual size of an individual
Qualified Performance-Based Award, the Committee may reduce or eliminate the amount of the Qualified Performance-Based Award
earned for the Performance Period, if in its sole and absolute discretion it deems such reduction or elimination is appropriate.

(e)Limitation on Adjustments for Certain Events.  Subject to paragraph (d) above, no adjustment of any Qualified
Performance-Based Award pursuant to Section 8 shall be made except on such basis, if any, as will not cause such Award to provide
other than "performance-based compensation" within the meaning of Section 162(m) of the Code.

(f)Definitions.  For purposes of the Plan
(i)Performance Criteria means the criteria that the Committee selects for purposes of establishing the Performance
Goal or Performance Goals for a Participant for a Performance Period.  The Performance Criteria used to establish Performance Goals
are limited to:  (i)cash flow (before or after dividends), (ii)earnings per share (including, without limitation, earnings
before interest, taxes, depreciation and amortization), (iii)stock price, (iv)return on equity, (v)stockholder
return or total stockholder return, (vi)return on capital (including, without limitation, return on total capital or return on invested
capital), (vii)return on investment, (viii)return on assets or net assets, (ix)market capitalization,
(x)economic value added, (xi)debt leverage (debt to capital), (xii)revenue, (xiii)sales or net sales,
(xiv)backlog, (xv)income, pre-tax income or net income, (xvi)operating income or pre-tax profit,
(xvii)operating profit, net operating profit or economic profit, (xviii)gross margin, operating margin or profit margin,
(xix)return on operating revenue or return on operating assets, (xx)cash from operations, (xxi)operating
ratio, (xxii)operating revenue, (xxiii)market share improvement, (xxiv)general and administrative expenses
and (xxv)customer service.

(ii)Performance Goals means, for a Performance Period, the written goal or goals established by the Committee for
the Performance Period based upon one or more of the Performance Criteria.  The Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit, subsidiary, or an individual, either individually,
alternatively or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually,
alternatively or in any combination, and measured either quarterly, annually or cumulatively over a period of years, on an absolute basis
or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the
Committee. The Committee will objectively define the manner of calculating the Performance Goal or Goals it selects to use for such
Performance Period for such Participant, including whether or to what extent there shall not be taken into account any of the following
events that occurs during a performance period: (i)asset write-downs, (ii)litigation, claims, judgments or settlements,
(iii)the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results,
(iv)accruals for reorganization and restructuring programs and (v)any extraordinary, unusual, non-recurring or non-
comparable items (A)as described in Accounting Standard Codification Section 225-20 (or its successor provisions),
(B)as described in management's discussion and analysis of financial condition and results of operations appearing in the

Company's annual report to stockholders for the applicable year, or (C)publicly announced by the Company in a press release
or conference call relating to the Company's results of operations or financial condition for a completed quarterly or annual fiscal
period.

7.8.   Awards to Participants Outside the United States.  The Committee may modify the terms of
any Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident or primarily
employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that the Award
shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that
the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result
of the Participant's residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident
or primarily employed in the United States.  The Committee may establish supplements to, or amendments, restatements, or alternative
versions of the Plan for the purpose of granting and administrating any such modified Award.  No such modification, supplement,
amendment, restatement or alternative version may increase the share limit of Section4.

8.   Adjustment Provisions

8.1.   Adjustment for Corporate Actions. All of the share numbers set forth in the
Plan reflect the capital structure of the Company as of the Effective Date.  If subsequent to the Effective Date the outstanding shares of
Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or
exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other
securities are distributed with respect to shares of Stock, as a result of a reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an appropriate and proportionate
adjustment will be made in (i)the maximum numbers and kinds of shares provided in Section 4, (ii)the numbers and
kinds of shares or other securities subject to the then outstanding Awards, (iii)the exercise price for each share or other unit of
any other securities subject to then outstanding Stock Rights (without change in the aggregate exercise price as to which such Rights
remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a
Company repurchase right.

8.2.   Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In
the event of any corporate action not specifically covered by the preceding Section, including, but not limited to, an extraordinary cash
distribution on Stock, a corporate separation or other reorganization or liquidation, the Committee may make such adjustment of
outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances.  The
Committee also may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in this Section) affecting the Company or the financial
statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to

prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

8.3.   Related Matters.  Any adjustment in Awards made pursuant to Section8.1 or 8.2
shall be determined and made, if at all, by the Committee, acting in its sole discretion, and shall include any correlative modification of
terms, including of Stock Right exercise prices, rates of vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for
Restricted Stock, and Performance Goals and other business objectives which the Committee may deem necessary or appropriate so
as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged as a result of the
adjustment and corporate action other than as expressly contemplated in this Section 8.  The Committee, in its discretion, may
determine that no fraction of a share of Stock shall be purchasable or deliverable upon exercise, and in that event if any adjustment
hereunder of the number of shares of Stock covered by an Award would cause such number to include a fraction of a share of Stock,
such number of shares of Stock shall be adjusted to the nearest smaller whole number of shares.  No adjustment of an Option exercise
price per share pursuant to Sections 8.1 or 8.2 shall result in an exercise price which is less than the par value of the Stock.  

8.4.   Corporate Transactions.

(a)Treatment of Awards in a Corporate Transaction.  In a Corporate Transaction, the Committee, in its sole and
absolute discretion, may take any one or more of the following actions as to all or any (or any portion of) outstanding
Awards.

(1)Assumption and Substitution.  Provide that such Awards shall be assumed, or substantially
equivalent rights shall be provided in substitution therefor, by the acquiring or succeeding entity (or an affiliate thereof), and that any
repurchase or other rights of the Company under each such Award shall inure to the benefit of such acquiring or succeeding entity (or
affiliate thereof).

(2)Termination, Forfeiture and Reacquisition.  Upon written notice to the holders, provide
that:

(A) any unexercised Stock Rights shall terminate immediately prior to the consummation of the Corporate Transaction
unless exercised within a specified period following the date of such notice and that any Stock Rights not then exercisable will expire
automatically upon consummation of the Corporate Transaction;

(B) any Restricted Stock Units shall terminate and be forfeited immediately prior to the consummation of the Corporate
Transaction to the extent they are then subject to a Risk of Forfeiture; and/or

(C)any shares of Restricted Stock shall automatically be reacquired by the Corporation upon consummation of the
Corporate Transaction at a price per share equal to the lesser of the Market Value of the Restricted Stock and the purchase price paid
by the Participant.

(3)Acceleration of Vesting.  Provide that:

 (A)any and all Stock Rights not already exercisable in full shall Accelerate with respect to all or a portion of the shares for
which such Stock Rights are not then exercisable prior to or upon the consummation of the Corporate Transaction; and/or

(B) any Risk of Forfeiture applicable to Restricted Stock and Restricted Stock Units which is not based on achievement of
Performance Goals or other business objectives shall lapse upon consummation of the Corporate Transaction with respect to all or a
portion of the Restricted Stock and Restricted Stock Units then subject to such Risk of Forfeiture.

(4)Achievement of Performance Goals.  Provide that all outstanding Awards of Restricted
Stock and Restricted Stock Units conditioned on the achievement of Performance Goals or other business objectives and the target
payout opportunities attainable under outstanding Performance Units shall be deemed to have been satisfied as of the effective date of
the Corporate Transaction as to (i) none of, (ii) all of or (iii) a pro rata number of shares based on the assumed achievement of all
relevant Performance Goals or other business objectives and the length of time within the Restriction Period or Performance Period
which has elapsed prior to the Corporate Transaction.  All such Awards of Performance Units and Restricted Stock Units shall be paid
to the extent earned to Participants in accordance with their terms within 30 days following the effective date of the Corporate
Transaction.

(5)Cash Payments to Holders of Stock Rights.  Provide for cash
payments, net of applicable tax withholdings, to be made to holders of Stock Rights equal to the excess, if any, of (A) the acquisition
price times the number of shares of Stock subject to a Stock Right (to the extent the exercise price does not exceed the acquisition
price) over (B) the aggregate exercise price for all such shares of Stock subject to the Stock Right, in exchange for the termination of
such Stock Right; provided, that if the acquisition price does not exceed the exercise price of any such Stock Right, the Committee may
cancel that Stock Right without the payment of any consideration therefore prior to or upon the Corporate Transaction.  For this
purpose, "acquisition price" means the amount of cash, and market value of any other consideration, received in
payment for a share of Stock surrendered in a Corporate Transaction. 

(6)Conversion of Stock Rights Upon Liquidation or Dissolution.
Provide that, in connection with a liquidation or dissolution of the Company, Stock Rights shall convert into the right to receive
liquidation proceeds net of the exercise price thereof and any applicable tax withholdings.

(7)Any combination of the foregoing.

None of the foregoing shall apply, however, (i) in the case of any Award pursuant to an Award Agreement requiring other or
additional terms upon a Corporate Transaction (or similar event), or (ii) if specifically prohibited under applicable laws, or by the rules
and regulations of any governing governmental agencies or national securities exchanges on which the Stock is listed.  Nor shall any of
the foregoing apply in the case of a Qualified Performance-Based Award except to the extent the foregoing would not interfere with the
qualification of the grant of the Award under Section 162(m) of the Code.

(b)Assumption and Substitution of Awards.  For purposes of Section
8.4(a)(1) above, an Award shall be considered assumed, or a substantially equivalent award shall be considered to have been provided
in substitution therefor, if following consummation of the Corporate Transaction the Award is assumed and/or exchanged or replaced
with another award issued by the acquiring or succeeding entity (or an affiliate thereof) that confers the right to purchase or receive the
value of, for each share of Stock subject to the Award immediately prior to the consummation of the Corporate Transaction, the
consideration (whether cash, securities or other property) received as a result of the Corporate Transaction by holders of Stock for each
share of Stock held immediately prior to the consummation of the Corporate Transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided,
however, that if the consideration received as a result of the Corporate Transaction is not solely common stock (or its equivalent) of
the acquiring or succeeding entity (or an affiliate thereof), the Committee may provide for the consideration to be received upon the
exercise of Award to consist of or be based on solely common stock (or its equivalent) of the acquiring or succeeding entity (or an
affiliate thereof) equivalent in value to the per share consideration received by holders of outstanding shares of Stock as a result of the
Corporate Transaction.

(c) Related Matters. In taking any of the actions permitted under this Section8.4, the Committee shall not be
obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically. Any determinations required to
carry out the foregoing provisions of this Section 8.4, including, but not limited to, the market value of other consideration received by
holders of Stock in a Corporate Transaction and whether substantially equivalent awards have been substituted, shall be made by the
Committee acting in its sole and absolute discretion.  In connection with any action or actions taken by the Committee in respect of
Awards and in connection with a Transaction, the Committee may require such acknowledgements of satisfaction and releases from
Participants as it may determine.

9.   Settlement of
Awards

9.1.   In General.  Awards of Restricted Stock shall be settled in accordance with
their terms.  All other Awards may be settled in cash or Stock, or a combination thereof, as determined by the Committee at or after
grant and subject to any contrary Award Agreement.  The Committee may not require settlement of any Award in Stock pursuant to the
immediately preceding sentence to the extent issuance of such Stock would be prohibited or unreasonably delayed by reason of any
other provision of the Plan.

9.2.   Violation of Law.  Notwithstanding any other provision of the Plan or the relevant Award
Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of shares of Stock covered by an Award may
constitute a violation of law, then the Company may delay such issuance and the delivery of a certificate for such shares until (i)
approval shall have been obtained from such governmental agencies, other than the Securities and Exchange Commission, as may be
required under any applicable law, rule, or regulation and (ii) in the case where such issuance would constitute a violation of a law
administered by or a regulation of the Securities and Exchange Commission, one of the following conditions shall have been
satisfied:

(a)the shares of Stock are at the time of the issue of such shares effectively registered under the Securities Act of 1933, as
amended; or

(b)the Company shall have determined, on such basis as it deems appropriate (including an opinion of counsel in form and
substance satisfactory to the Company) that the sale, transfer, assignment, pledge, encumbrance or other disposition of such shares
does not require registration under the Securities Act of 1933, as amended or any applicable State securities laws.

The Company shall make all reasonable efforts to bring about the occurrence of said events.

9.3.   Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to Awards
granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the
charter, certificate or articles, and by-laws, of the Company.  Whenever Stock is to be issued pursuant to an Award, if the Committee so
directs at or after grant, the Company shall be under no obligation to issue such shares until such time, if ever, as the recipient of the
Award (and any person who exercises any Option, in whole or in part), shall have become a party to and bound by the Stockholders'
Agreement, if any.  In the event of any conflict between the provisions of this Plan and the provisions of the Stockholders' Agreement,
the provisions of the Stockholders' Agreement shall control except as required to fulfill the intention that any Incentive Option qualify as
such, but insofar as possible the provisions of the Plan and such Agreement shall be construed so as to give full force and effect to all
such provisions.

9.4.   Investment Representations.  The Company shall be under no obligation to issue any
shares of Stock covered by any Award unless the shares to be issued pursuant to Awards granted under the Plan have been effectively
registered under the Securities Act of 1933, as amended, or the Participant shall have made such written representations to the
Company (upon which the Company believes it may reasonably rely) as the Company may deem necessary or appropriate for
purposes of confirming that the issuance of such shares will be exempt from the registration requirements of that Act and any
applicable state securities laws and otherwise in compliance with all applicable laws, rules and regulations, including, but not limited to,
that the Participant is acquiring the shares for his or her own account for the purpose of investment and not with a view to, or for sale in
connection with, the distribution of any such shares.

9.5.   Registration.  If the Company shall deem it necessary or desirable to register under the
Securities Act of 1933, as amended, or other applicable statutes any shares of Stock issued or to be issued pursuant to Awards granted
under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act of 1933, as amended or other applicable
statutes, then the Company shall take such action at its own expense.  The Company may require from each recipient of an Award, or
each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement,
prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and may require reasonable
indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and liabilities arising from
use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state
a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.  In addition, the Company may require of any such person that he or she agree that,
without the prior written consent of the Company or the managing underwriter in any public offering of shares of Stock, he or she will
not sell, make any short sale of, loan, grant any option for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any
shares of Stock during the period not to exceed 180 days commencing on the effective date of the registration statement relating to the
underwritten public offering of securities. Without limiting the generality of the foregoing provisions of this Section 9.5, if in connection
with any underwritten public offering of securities of the Company the managing underwriter of such offering requires that the
Company's directors and officers enter into a lock-up agreement containing provisions that are more restrictive than
the provisions set forth in the preceding sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of
whether such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be deemed to have
agreed to, the same lock-up terms as those to which the Company's directors and officers are required to adhere; and (b) at the request
of the Company or such managing underwriter, each such person shall execute and deliver a lock-up agreement in form and substance
equivalent to that which is required to be executed by the Company's directors and officers.

9.6.   Placement of Legends; Stop Orders; etc.  Each share of Stock to be issued pursuant to
Awards granted under the Plan may bear a reference to the investment representations made in accordance with Section9.4
in addition to any other applicable restrictions under the Plan, the terms of the Award and if applicable under the Stockholders'
Agreement and to the fact that no registration statement has been filed with the Securities and Exchange Commission in respect to
such shares of Stock.  All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of any
stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a
legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.

9.7.   Tax Withholding. Whenever shares of Stock are issued or to be issued pursuant to Awards
granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for
the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares.
The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the
recipient of an Award.  However, in such cases Participants may elect, subject to the approval of the Committee, acting in its sole
discretion, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares of Stock to
satisfy their tax obligations.  Participants may only elect to have shares of Stock withheld having a Market Value on the date the tax is
to be determined equal to the minimum statutory total tax which could be imposed on the transaction.  All elections shall be irrevocable,
made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems
appropriate.

9.8.   Company Charter and By-Laws; Other Company Policies. This Plan and all Awards
granted under the Plan (including the exercise, settlement or exchange of an Award) are subject to and must comply with the certificate
of incorporation and by-laws of the Company, as they may be amended from time to time, and all other Company policies duly adopted
by the Board, the Committee or any other committee of the Board as in effect from time to time regarding the acquisition, ownership or
sale of Stock by employees and other service providers, including, without limitation, policies intended to limit the potential for insider
trading and to avoid or recover compensation payable or paid on the basis of inaccurate financial results or statements, employee
conduct, and other similar events.

10.   Reservation of
Stock

The Company shall at all times during the term of the Plan and any outstanding Awards granted hereunder reserve
or otherwise keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect)
and the Awards and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

11.   Limitation of
Rights in Stock; No Special Service Rights

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the
shares of Stock subject to an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his
agent.  Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof
which may be now or hereafter imposed by the certificate of incorporation and the by-laws of the Company.  Nothing contained in the
Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her
employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any
Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or certificate of incorporation or

by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise
adjust, the other terms and conditions of the recipient's employment or other association with the Company and its Affiliates.

12.   Unfunded Status
of Plan

The Plan is intended to constitute an "unfunded" plan for incentive compensation, and the Plan is not
intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.  With
respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any
rights that are greater than those of a general creditor of the Company.  In its sole discretion, the Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Stock Rights
and other Awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.

13.   Nonexclusivity of
the Plan

Neither the adoption of the Plan by the Board nor any action taken in connection with the adoption or operation of the
Plan shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.

14.   No Guarantee of
Tax Consequences

Neither the Company nor any Affiliate, nor any director, officer, agent, representative or employee of either,
guarantees to the Participant or any other person any particular tax consequences as a result of the grant of, exercise of rights under,
or payment in respect of an Award, including, but not limited to, that an Option granted as an Incentive Option has or will qualify as an
"incentive stock option" within the meaning of Section 422 of the Code or that the provisions and penalties of Section 409A
of the Code, pertaining non-qualified plans of deferred compensation, will or will not apply.

15.   Termination and
Amendment of the Plan

15.1.   Termination or Amendment of the Plan. Subject to the limitations contained
in Section 15.3 below, including specifically the requirement of stockholder approval if applicable, the Board may at any time terminate
the Plan or make such modifications of the Plan as it shall deem advisable.  Unless the Board otherwise expressly provides, no
amendment of the Plan shall affect the terms of any Award outstanding on the date of such amendment.

15.2.   Termination or Amendment of Outstanding Awards; Assumptions. Subject to the limitations
contained in Section 15.3 below, including specifically the requirement of stockholder approval if applicable, the Committee may at any
time:

(a) amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as amended is
consistent with the terms of the Plan;

(b) accept the cancellation of outstanding Awards or of outstanding stock options or other equity-based compensation awards
granted by another issuer in return for the grant of new Awards for the same or a different number of shares of Stock and on the same
or different terms and conditions (including, but not limited to, the exercise price of any Option); and

(c)(i) offer to buy out for a payment in cash or cash equivalents, or in exchange for another Award, any Award previously granted or
(ii) authorize the recipient of an Award to elect to cash out an Award previously granted, in either case at such time and based upon
such terms and conditions as the Committee shall establish.

15.3.   Limitations on Amendments, Etc. 

Without the approval of the Company's stockholders, no amendment or modification of the Plan by the Board may (i) increase
the number of shares of Stock which may be issued under the Plan, (ii) change the description of the persons eligible for Awards, or (iii)
effect any other change for which stockholder approval is required by law or the rules of any relevant stock exchange.  Furthermore,
except in connection with a Corporate Transaction, the terms of outstanding Stock Rights may not be amended to reduce their exercise
price, nor may outstanding Stock Rights be cancelled in exchange for cash, Stock Rights with exercise prices that are less than the
exercise prices of the original Stock Rights, or other Awards, without stockholder approval.

No amendment or modification of the Plan by the Board, or of an outstanding Award by the Committee, shall impair the rights of the
recipient of any Award outstanding on the date of such amendment or modification or such Award, as the case may be, without the
Participant's consent; provided, however, that no such consent shall be required if (i)the Board or Committee, as the
case may be, determines in its sole discretion and prior to the date of any Corporate Transaction that such amendment or alteration
either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without
limitation the provisions of Section409A of the Code, or to meet the requirements of or avoid adverse financial accounting
consequences under any accounting standard, or (ii)the Board or Committee, as the case may be, determines in its sole
discretion and prior to the date of any Corporate Transaction that such amendment or alteration is not reasonably likely to significantly
diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.

16.   Notices and Other
Communications

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or
telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the
recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of
business, addressed to the attention of its Chief Financial Officer, or to such other address or telecopier number, as the case may be,
as the addressee may have designated by notice to the addressor.  All such notices, requests, demands and other communications
shall be deemed to have been received: (i)in the case of

personal delivery, on the date of such delivery; (ii)in the
case of mailing, when received by the addressee; and (iii)in the case of facsimile transmission, when confirmed by facsimile
machine report.

17.   Administrative Provisions

Nothing contained in the Plan shall require the issuance or delivery of certificates for any period during which the
Company has elected to maintain or caused to be maintained the evidence of ownership of its shares of Stock, either generally or in the
case of Stock acquired pursuant to Awards, by book entry, and all references herein to such actions or to certificates shall be
interpreted accordingly in light of the systems maintained for that purpose.  Furthermore, any reference herein to actions to be taken or
notices (including of grants of Awards) to be provided in writing or pursuant to specific procedures may be satisfied by means of and
pursuant to any electronic or automated voice response systems the Company may elect to establish for such purposes, either by itself
or through the services of a third party, for the period such systems are in effect.

18.   Governing
Law

It is intended that all Awards shall be granted and maintained on a basis which ensures they are exempt from, or
otherwise compliant with, the requirements of Section 409A of the Code and the Plan shall be governed, interpreted and enforced
consistent with such intent.  Neither the Committee nor the Company, nor any of its Affiliates or its or their officers, employees, agents,
or representatives, shall have any liability or responsibility for any adverse federal, state or local tax consequences and penalty taxes
which may result the grant or settlement of any Award on a basis contrary to the provisions of Section 409A of the Code or comparable
provisions of any applicable state or local income tax laws.  The Plan and all Award Agreements and actions taken thereunder
otherwise shall be governed, interpreted and enforced in accordance with the laws of the state of California, without regard to the
conflicts of laws principles thereof.

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