Document:

Exhibit

Exhibit 10.1

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
SOUTHCROSS ENERGY PARTNERS, L.P.
SENIOR UNSECURED PIK NOTE
January 7, 2016                                  Original Principal Amount:
$[__________]

Southcross Energy Partners, L.P., a Delaware limited partnership, and each of the other signatories hereto (each, an “Obligor” and, collectively, the “Company”), hereby jointly and severally promise to pay to [____________], a [____________] (together with any transferee permitted under the terms hereof, the “Holder”), in no event later than the Maturity Date, the principal amount of $[__________] or such lesser principal amount then outstanding, together with interest thereon calculated in accordance with the provisions of this Senior Unsecured Note (this “Note”).
This Note and any Notes subsequently issued by the Company to the Holder or one of its Affiliates and having substantially similar terms are collectively referred to herein as the “Notes.”
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Senior Revolver.
1.Payment of Interest.  Interest shall accrue on a daily basis from the Issuance Date (as defined below) until this Note is repaid in full in cash at the rate (the “Interest Rate”) of 7% per annum, payable on each three-month anniversary of the Issuance Date, which interest shall be paid-in-kind by adding such interest to the principal amount outstanding under this Note, or, at the option of the Company (other than with respect to interest payable on or after the Maturity Date (as defined below) which shall be payable in cash) may be paid in cash, in each case on the unpaid principal amount of this Note then outstanding (excluding any accrued and unpaid interest and, solely prior to the acceleration of the obligations hereunder following an Event of Default (as defined below), any interest that has been paid-in-kind and added to the principal amount of this Note, but including any interest that has been paid-in-kind and added to the principal amount of this Note on or after the acceleration thereof).  For the avoidance of doubt, unless the Company elects to pay interest in cash, interest (including interest payable at the default rate pursuant to Section 4(b)(i)) shall be deemed paid-in-kind; provided, however, interest payable on or after the Maturity Date or upon acceleration of the Note shall be paid in cash.  
2.    Payment of Principal and Interest. 
(a)    Scheduled Payment.  The Company shall pay the outstanding principal amount of this Note on January 7, 2017 (the “Maturity Date”), together with all accrued and unpaid interest thereon and any other remaining obligations under this Note.
(b)    Optional Prepayments.  The Company may, at any time and from time to time without premium or penalty, prepay all or any portion of the outstanding principal amount of, or 

Exhibit 10.1

interest on, this Note.  In connection with each prepayment of principal hereunder, the Company shall also pay all accrued and unpaid interest hereunder.  Partial prepayments of this Note shall be shall be in an integral multiple of $100,000.  Amounts prepaid or repaid under this Note may not be reborrowed.
(c)    Application of Payments.  Payments under this Note shall be applied as follows: (i) first to any accrued and unpaid obligations under Section 15, (ii) second to any accrued but unpaid interest  hereunder (including interest payable at the default rate pursuant to Section 4(b)(i)) until all such interest is paid, (iii) third to the payment of accrued interest that has been paid in-kind hereunder (including interest payable at the default rate pursuant to Section 4(b)(i)) until all such interest is paid, (iv) fourth to the repayment of the principal outstanding hereunder, and (v) fifth to the repayment of all other accrued and unpaid obligations outstanding hereunder. 
(d)    Allocation of Payments. All payments of principal, interest and other obligations under the 2016 Unsecured Notes by the Company shall be applied to all outstanding 2016 Unsecured Notes ratably in accordance with the unpaid principal amount thereof.
3.    Covenants.  Each Obligor agrees that:
(a)    Use of Proceeds.  The proceeds of this Note shall be used solely for (i) payments pursuant to Section 15, (ii) the general working capital of the Company in the ordinary course of business, or (iii) the payment of obligations under the Senior Loan Agreements (as defined below).
(b)    Compliance with Senior Loan Agreements.  Each Obligor shall comply in all respects with each of the covenants set forth in Articles VIII and IX of each of the Senior Loan Agreements, in each case, as in effect on the Issuance Date, the failure with which to comply shall cause, or following the passage of time or notice of default in respect thereof or both has caused, an Event of Default under any Senior Loan Agreement (as in effect on the Issuance Date).
(c)    Books and Records.  Each Obligor shall (i) treat the outstanding principal balance of the Note as indebtedness for borrowed money on its books and records and in all applicable regulatory filings and (ii) shall give appropriate notices of the Note and the related borrowing to the extent such Obligor is required to give notice of the incurrence of indebtedness pursuant to applicable law or its contractual obligations. 
4.    Events of Default.
(a)    Definition.  For purposes of this Note, an Event of Default shall be deemed to have occurred if: 
(i)    The Company fails to pay when due and payable (whether at maturity, by acceleration or otherwise) (A) the full amount of interest then accrued on this Note, (B) the full amount of any principal payment on this Note, or (C) any other amount due and owing under this Note.
(ii)    Any Obligor or any Subsidiary of any Obligor makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating any Obligor or any Subsidiary of any Obligor bankrupt or insolvent; or any order for relief with respect to any Obligor or any Subsidiary of any Obligor is entered under the Bankruptcy Code; or any Obligor or any 

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Exhibit 10.1

Subsidiary of any Obligor petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of any Obligor or any Subsidiary of any Obligor, or of any substantial part of the assets of any Obligor or any Subsidiary of any Obligor, or commences any proceeding relating to any Obligor or any Subsidiary of any Obligor under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against any Obligor or any Subsidiary of any Obligor and either (A) such Obligor or any such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein or (B) such petition, application or proceeding is not dismissed within 60 days. 
(iii)    Any Obligor or any Subsidiary of an Obligor shall fail to make any payment of principal of or interest on any Material Indebtedness, when and as the same shall become due and payable, and such failure to pay shall extend beyond any applicable period of grace.
(iv)    A Change in Control shall occur.
(v)    Any Obligor (i) fails to comply with its obligations under Section 3(a) or (b) or (ii) fails to comply with its obligations under Section 3(c) and such failure to comply shall continue unremedied or shall not be waived for a period of three (3) Business Days.
(b)    Consequences of Events of Default. 
(i)    If any Event of Default has occurred and is continuing, the Interest Rate on all obligations under this Note, including, for the avoidance of doubt, on overdue amounts owed pursuant to Section 15, shall automatically increase by an increment of two percentage points (2.00%) per annum to the extent permitted by law.  Any increase of the Interest Rate resulting from the operation of this subparagraph shall terminate as of the close of business on the date on which no Events of Default exist (subject to subsequent increases pursuant to this subparagraph).
(ii)    If an Event of Default of the type described in Section 4(a)(ii) has occurred, the aggregate principal amount of this Note (together with all accrued interest thereon and all other amounts due and payable with respect thereto) shall become immediately due and payable without any requirement of a notice, presentment or other action on the part of the Holder, and the Company shall immediately pay to the Holder all amounts due and payable with respect to this Note.
(iii)    If an Event of Default other than of the type described in Section 4(a)(ii) has occurred, the aggregate principal amount of this Note (together with all accrued interest thereon and all other amounts due and payable with respect thereto) may, at the option of the Holder upon written notice to the Company, become immediately due and payable, and the Company shall immediately pay to the Holder all amounts due and payable with respect to this Note.
5.    Definitions.  For purposes of this Note, the following capitalized terms have the following meaning:
“2016 Unsecured Notes” means the Notes and the Tailwater Note. 

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Exhibit 10.1

“Affiliates” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Bankruptcy Code” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.
“Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.
“Change in Control” means: 
(a)    the Sponsors and their Affiliates, collectively, shall cease to beneficially own and control, directly or indirectly, Equity Interests in the General Partner representing a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in the General Partner;
(b)    the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) other than the Sponsors and their respective Affiliates of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in the General Partner;
(c)    the General Partner shall cease to be the sole general partner of the Company, with substantially the same (or more expansive) powers to manage the Company as are granted to the General Partner under the organizational documents of the Company as of the date of this Note;
(d)    except for transactions permitted by Section 9.10 or Section 9.11 of the Senior Loan Agreements, the Company shall cease to beneficially own and control, directly or indirectly, all of the Equity Interests in each of its Subsidiaries (other than Subsidiaries that the Company has designated in writing to the Holder to be an “Excluded Subsidiary”); or
(e)    within any period of twelve (12) consecutive calendar months, individuals who were neither (i) members of the board of managers, or similar governing body, of the General Partner on the first day of such period, (ii) persons who were appointed or nominated by such persons, nor (iii) persons who were appointed or nominated by a Sponsor (or an Affiliate of a Sponsor) shall constitute a majority of the members of the board of managers, or similar governing body, of the General Partner.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. 1, et seq.), as amended from time to time, any successor statute, and any rule, regulation, or order of the Commodities Futures Trading Commission (or the application or official interpretation of any thereof).
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Indebtedness or redeemable for any consideration other than other Equity Interests (which 

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Exhibit 10.1

would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the earlier of (a) the Maturity Date and (b) the date on which there are no obligations hereunder outstanding.
“Equity Interest” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interests.
“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied and as in effect from time to time.
“General Partner” means Southcross Energy Partners GP, LLC, a Delaware limited liability company and the sole general partner of the Company.

“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions (including any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act); provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees, or consultants of the Company or the Subsidiaries shall be a Hedging Agreement.

“Hedging Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreements, as determined by the counterparties to such Hedging Agreements.

“Indebtedness” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of property or services, except (i) trade accounts payable of such Person arising in the ordinary course of business if and to the extent that such trade accounts payable are not past due by more than ninety (90) days or that are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established or are subject to an offset in favor of such Person as a result of accounts receivable owed to such Person and (ii) non-cash purchase price adjustments or non-cash earnouts and the portion of any cash purchase price adjustments or cash earnouts that is not determinable; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Indebtedness (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a lien on any property of such Person, whether or not such Indebtedness is assumed by such Person, provided, however, that the amount of such Indebtedness of any Person described in this clause (f) shall, for purposes of this Agreement, be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness or (ii) the fair market value of the property encumbered; (g) all Indebtedness (as defined in the other clauses of this definition) of others guaranteed by such Person or in 

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Exhibit 10.1

which such Person otherwise assures a creditor against loss of the Indebtedness (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Indebtedness and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Indebtedness or property of others; (i) obligations to pay for electricity, natural gas, other hydrocarbons and other commodities under contracts having an initial term in excess of one (1) year even if such electricity, natural gas, other Hydrocarbons, and other commodities are not actually taken, received or utilized by such Person; (j) any Indebtedness of a partnership for which such Person is liable either by agreement, by operation of law or by an applicable requirement of law but only to the extent of such liability; and (k) Disqualified Capital Stock.

“Issuance Date” means January 7, 2016.

“Material Indebtedness” means Indebtedness (other than any principal amount outstanding under this Agreement and any accrued interest thereon), or obligations in respect of one or more Hedging Agreements, of any one or more of the Company and its Subsidiaries (i) in an aggregate principal amount exceeding $7,500,000 or (ii) represented by any 2016 Unsecured Note.  For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Company or any Subsidiary in respect of any Hedging Agreement at any time shall be the Hedging Termination Value.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust (including any beneficiary thereof), a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. 
“Related Parties” with respect to any Person, means such Person's Affiliates and the directors, officers, employees, partners, agents, trustees, administrators, managers, advisors and representatives of it and its Affiliates.
“Senior Loan Agreements” means, collectively, (a) that certain Third Amended and Restated Revolving Credit Agreement, dated as of August 4, 2014, by and among the Company, Wells Fargo Bank, N.A., as Administrative Agent, and the lenders from time to time party thereto, as amended by that certain First Amendment to Third Amended and Restated Revolving Credit Agreement, dated as of May 7, 2015 (as amended, modified or supplemented from time to time, the “Senior Revolver”) and (b) that certain Term Loan Credit Agreement, dated as of August 4, 2014, by and among the Company, Wells Fargo Bank, N.A., as Administrative Agent, and the lenders from time to time party thereto, in each case, as amended, restated, amended and restated, supplemented or otherwise modified in accordance with the terms thereof.
“Sponsors” means, collectively or individually as the context requires, each of (a) Tailwater Capital LLC, (b) EIG Management Company, LLC and (c) Charlesbank Equity Fund VI, Limited Partnership, a Massachusetts limited partnership.
“Subsidiary” means: (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, manager or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by (i) another Person, (ii) one or more of such other Person’s Subsidiaries, or (iii) collectively, such other Person and one or more of such other Person’s Subsidiaries, and (b) any partnership of which such other Person or any of such other Person’s Subsidiaries is a general partner.  Unless otherwise indicated herein, each reference to the term “Subsidiary” means a Subsidiary of the Company.  Notwithstanding anything to the contrary set forth herein, the term “Subsidiary” does not include Subsidiaries that the Company has designated in writing to the Holder to be an “Excluded Subsidiary”.

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Exhibit 10.1

“Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the property subject to such operating lease upon expiration or early termination of such lease.
“Tailwater Note” means the Senior Unsecured PIK Note, dated as of the Issuance Date, issued by the Company to [Tailwater].
6.    Amendment and Waiver.  The provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only upon the written consent of the Holder.
7.    Cancellation.  After all principal, accrued interest and any other obligations at any time owed on this Note have been paid in full in cash, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 
8.    Payments.  All payments in cash to be made to the Holder shall be made in the lawful money of the United States of America in immediately available funds.
9.    Place of Payment.  Payments of principal and interest shall be delivered to the Holder at such address as is specified by prior written notice by the Holder. 
10.    Governing Law.  All questions concerning the construction, validity and interpretation of this Note will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule.  Any litigation arising hereunder or related thereto shall be tried by the United States District Court for the Southern District of New York, provided that if such litigation shall not be permitted to be tried by such court then such litigation shall be held in the state courts of New York sitting in New York City.  The Company and the Holder, irrevocably consent to and confer personal jurisdiction on the United States District Court for the Southern District of New York, or, if (but only if) the litigation in question shall not be permitted to be tried by such court, on the state courts of New York sitting in New York City, and expressly waives any objection to the venue of such court, as the case may be.
11.    Waiver of Presentment, Demand and Dishonor.  The Company hereby waives presentment for payment, protest, demand, notice of protest, notice of nonpayment and diligence with respect to this Note, and waives and renounces all rights to the benefits of any statute of limitations or any moratorium, appraisement, exemption, or homestead now provided or that hereafter may be provided by any federal or applicable state statute, including but not limited to exemptions provided by or allowed under the Bankruptcy Code, both as to itself and as to all of its property, whether real or personal, against the enforcement and collection of the obligations evidenced by this Note and any and all extensions, renewals, and modifications hereof.
12.    Business Days.  If any cash payment is due, or any time period for giving notice or taking action expires, on a day which is a Saturday, Sunday or legal holiday in the State of New York, the payment shall be due and payable on, and the time period shall automatically be extended to, the next business day immediately following such Saturday, Sunday or legal holiday, and interest shall continue to accrue at the required rate hereunder until any such payment is made.

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Exhibit 10.1

13.    Usury Laws.  It is the intention of the Company and the Holder to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters.  If the maturity of this Note is accelerated by reason of an election by the Holder resulting from an Event of Default, optional prepayment by the Company or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of the Holder either be rebated to the Company or credited on the principal amount of this Note, or if this Note has been paid, then the excess shall be rebated to the Company.  The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time.  If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Company or credited on the principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated to the Company.
14.    Taxes.  The Company shall make all payments, whether on account of principal, interest, fees or otherwise, free of and without deduction or withholding for any present or future taxes, duties or other charges (“Taxes”), except as required by law. If the Company is compelled by law to deduct or withhold any Taxes, it shall (i) be entitled to make such deduction or withholding and (ii) shall promptly pay to the Holder such additional amount as is necessary to ensure that the net amount received by the Holder is equal to the amount payable by the Company had there been no deduction or withholding, unless such Tax is (A) a Tax imposed on or measured by net income (however denominated),  a franchise Tax, or a branch profits Tax, in each case, imposed as a result of the Holder having a present or former connection with the jurisdiction imposing such Tax (other than a connection directly relating to this Note), including by way of being organized under the laws of, or having its principal office or lending office located in, such jurisdiction (or any political subdivision thereof) or (B) a U.S. federal withholding tax, including such a Tax imposed by reason of Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended (the “Code”), any regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any intergovernmental agreement with respect thereto and applicable official implementing guidance thereunder.
15.    Expenses and Indemnity.
(a)    Costs and Expenses.  The Company shall pay (i) all reasonable out-of-pocket expenses incurred by the Holder and its Affiliates (including the reasonable fees, charges and disbursements of counsel) in connection with the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof) of this Note and any amendments, modifications or waivers of or consents related to the provisions hereof and (ii) all out-of-pocket expenses incurred by the Holder (including the fees, charges and disbursements of any counsel for the Holder) in connection with the enforcement or protection of its rights in connection with this Note, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the obligations under this Note.  Without limiting the foregoing, on the Issuance Date, the Company shall pay, in immediately available funds, the reasonable fees, charges and disbursements of [____________], incurred in connection with the preparation of this Note.
(b)    Indemnity.  The Company agrees to indemnify and hold harmless the Holder and the Holder’s Related Parties (each, an “Indemnified Party”) from and against, any and all claims, damages, losses, liabilities and related expenses (including the reasonable fees, charges and 

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Exhibit 10.1

disbursements of any counsel for any Indemnified Party), incurred by any Indemnified Party or asserted against any Indemnified Party by any Person (including any Obligor) other than such Indemnified Party and its Related Parties arising out of, in connection with, or by reason of (i) the execution or delivery of this Note or the performance by the parties hereto of their respective obligations hereunder, (ii) the actual or proposed use of the proceeds of this Note, or (iii) any actual or prospective claim, investigation, litigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by an Obligor, and regardless of whether any Indemnified Party is a party thereto; provided that such indemnity shall not be available to any Indemnified Party to the extent that such claims, damages, losses, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Party. 
16.    Assignments of this Note.  The provisions of this Note shall be binding on any successors and assigns or other transferees of this Note; provided, however, that the Company may not assign this Note or any rights or duties hereunder without the Holder’s prior written consent and any prohibited assignment shall be absolutely void ab initio. 
17.    Severability. In the event that any provision of this Note is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Note shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Note.
18.    NON-RECOURSE TO THE GENERAL PARTNER.  THIS NOTE DOES NOT AND WILL NOT IN ANY WAY CONSTITUTE A DIRECT OR INDIRECT GUARANTY BY THE GENERAL PARTNER OF THE OBLIGATIONS OF THE COMPANY OR ANY SUBSIDIARY HEREUNDER. IF ANY PROVISION OF THIS NOTE IS HELD BY ANY AUTHORITY TO CONSTITUTE A DIRECT OR INDIRECT GUARANTY BY THE GENERAL PARTNER OF THE OBLIGATIONS OF THE COMPANY OR ANY SUBSIDIARY, SUCH PROVISION SHALL BE DEEMED INEFFECTIVE TO THE EXTENT SUCH PROVISION CONSTITUTES A DIRECT OR INDIRECT GUARANTY BY THE GENERAL PARTNER OF THE OBLIGATIONS OF THE COMPANY OR ANY SUBSIDIARY. THIS NOTE IS NOT INTENDED TO CREATE ANY LIABILITY OF THE GENERAL PARTNER FOR THE PERFORMANCE OF ANY OBLIGATION OF THE COMPANY OR ANY SUBSIDIARY HEREUNDER. THE HOLDER SHALL NOT HAVE ANY RECOURSE AGAINST THE GENERAL PARTNER; PROVIDED, THAT, NOTWITHSTANDING THE FOREGOING TO THE CONTRARY, IN NO EVENT SHALL THIS SECTION 18 RELIEVE THE GENERAL PARTNER FROM ANY LIABILITY IT MAY HAVE AS A RESULT OF ITS FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, OR THAT OF ANY OF ITS OFFICERS, IN CONNECTION WITH THE EXECUTION, DELIVERY OR PERFORMANCE OF THIS NOTE OR ANY CERTIFICATES OR DOCUMENTS DELIVERED IN CONNECTION HEREWITH BY THE GENERAL PARTNER ON BEHALF OF THE COMPANY IN ITS CAPACITY AS THE COMPANY’S GENERAL PARTNER.
19.    Notices.  Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by facsimile or United States of America mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of facsimile in complete and legible form, or three business days after depositing it in the United States of America mail with postage prepaid and properly addressed; provided that notices to the Holder shall not be effective until received. For the purposes hereof, the address 

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Exhibit 10.1

of the Company and the Holder shall be (a) as set forth below or (b) such other address as shall be designated by such Person in a written notice delivered to the other parties hereto.
COMPANY
Southcross Energy Partners, L.P.
1717 Main Street, Suite 5200
Dallas, Texas 75201
Attention: Chief Financial Officer
Phone 214.979.9830
Fax: 214.979.3710
with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
333 South Hope Street
Los Angeles, CA 90071
Attention:  David M. Nemecek, P.C.
Direct Dial: 213.680.8111
Telecopier: 213.680.8500

HOLDER
[_____________]
[_____________]
[_____________]
Attention:  [_____________]
Direct Dial: [_____________]
Telecopier: [_____________] 

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Exhibit 10.1

IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first written above.
SOUTHCROSS ENERGY PARTNERS, L.P.

By:  Southcross Energy Partners GP, LLC, 
        its general partner

By:  _______________________________
         Name:  
         Title:

SOUTHCROSS ENERGY OPERATING, LLC
SOUTHCROSS ENERGY LP LLC
SOUTHCROSS ENERGY GP LLC
SOUTHCROSS DELTA PIPELINE LLC
SOUTHCROSS PROCESSING LLC
SOUTHCROSS ALABAMA PIPELINE LLC
SOUTHCROSS NUECES PIPELINES LLC
SOUTHCROSS ENERGY FINANCE CORP.
FL RICH GAS SERVICES GP, LLC

By:  _______________________________
        Name:  
         Title:

Signature Page to Senior Unsecured Note

Exhibit 10.1

SOUTHCROSS CCNG GATHERING LTD.
SOUTHCROSS CCNG TRANSMISSION LTD.
SOUTHCROSS GULF COAST TRANSMISSION LTD.
SOUTHCROSS MISSISSIPPI PIPELINE, L.P.
SOUTHCROSS MISSISSIPPI GATHERING, L.P.
SOUTHCROSS ALABAMA GATHERING SYSTEM, L.P.
SOUTHCROSS MIDSTREAM SERVICES, L.P.
SOUTHCROSS MARKETING COMPANY LTD.
SOUTHCROSS NGL PIPELINE LTD.
SOUTHCROSS GATHERING LTD.
SOUTHCROSS MISSISSIPPI INDUSTRIAL GAS SALES, L.P.

		
	By:
	Southcross Energy GP LLC,

as general partner

By:  _______________________________
        Name:  
         Title:

FL RICH GAS SERVICES, LP

		
	By:
	FL Rich Gas Services GP, LLC,

its general partner

By:  _______________________________
        Name:  
         Title:

Signature Page to Senior Unsecured Note

Exhibit 10.1

FL RICH GAS UTILITY GP, LLC

By:  _______________________________
        Name:  
         Title:

FL RICH GAS UTILITY, LP
TEXSTAR TRANSMISSION, LP

		
	By:
	FL Rich Gas Utility GP, LLC,

its general partner

By:  _______________________________
        Name:  
         Title:

Signature Page to Senior Unsecured NoteExhibit 10.1

 

EXECUTIVE SEVERANCE AGREEMENT

 

This Executive Severance Agreement (this “Agreement”), made this      day of               ,         (the “Effective Date”), is by and between Fossil Partners, L.P., a Texas limited partnership (the “Company”), and          , a resident of         (“Executive”) (the signatories to this Agreement will be referred to jointly as the “Parties”).

 

WHEREAS, the Company desires that Executive receive certain severance benefits in connection with certain terminations of service in exchange for entering into this Agreement; and

 

[WHEREAS, the Company and Executive have previously entered into that certain Executive Retirement Agreement, dated as of                 , 20   (the “Retirement Agreement”); and]

 

[WHEREAS, the Company and Executive desire to terminate the Retirement Agreement and for this Agreement to supersede the Retirement Agreement in all respects; and]

 

WHEREAS, both the Company and Executive have read and understood the terms and provisions set forth in this Agreement, and have been afforded a reasonable opportunity to review this Agreement with their respective advisors.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, Executive and the Company agree as follows:

 

1.                                      DEFINITIONS.

 

a.                                      “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.

 

b.                                      “Base Salary” means Executive’s then current annual base salary in effect.

 

c.                                       “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

 

d.                                      “Cause” shall mean Executive’s Termination of Service by the Company upon the occurrence of any of the following events, as determined by the Company, in its sole discretion: (i) an act or acts of theft, embezzlement, fraud, or dishonesty by Executive, regardless of whether it relates to the Company or its Affiliates; (ii) a willful or material misrepresentation by Executive that relates to the Company or its Affiliates or has an impact on the Company or its Affiliates; (iii) any gross or willful misconduct by Executive with regard to the Company or its Affiliates; (iv) any violation by Executive of any fiduciary duties owed by Executive to the Company or its Affiliates; (v) Executive’s conviction of, or pleading nolo contendere or guilty to, a felony (other than a traffic infraction) or misdemeanor; (vi) a material violation of the Company’s written policies,

 

 

standards or guidelines, which Executive failed to cure within thirty (30) days after receiving written notice from the Company specifying the alleged violation; (vii) Executive’s failure or refusal to satisfactorily perform the duties and responsibilities required to be performed by Executive or necessary to carry out Executive’s job duties, which Executive failed to cure within thirty (30) days after receiving written notice from the Company specifying the alleged willful failure or refusal; (viii) the failure or refusal of Executive to follow the lawful directives of the Company; (ix) Executive’s illegal use of drugs, use of alcohol or illegal drugs in the workplace, or Executive is under the influence of alcohol or illegal drugs in the workplace or Executive possesses illegal drugs in the workplace  (x) a material breach by Executive of any agreement to which Executive and the Company are parties that is not cured by Executive within thirty (30) days after receipt by Executive of a written notice from the Company specifying the details of such breach; or (xi) Employee’s unauthorized use or disclosure of any Proprietary Information of the Company

 

e.                                       “Change in Control” shall mean a “Change in Control” as defined in the Incentive Plan.

 

f.                                        “Code” means the Internal Revenue Code of 1986, as amended.

 

g.                                       “Date of Grant” means, with respect to an equity or equity-based award previously granted to Executive, the applicable date of grant of such award as set forth in the award agreement for such award.

 

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

 

i.                                          “Fossil” means Fossil Group, Inc., a Delaware corporation.

 

j.                                         “Good Reason” means Executive’s resignation in accordance with the following sentence after the occurrence of one or more of the following without Executive’s express written consent: (i) a material diminution by the Company in Executive’s Base Salary; provided, however, that, a reduction of Base Salary that (combined with all prior reductions) totals ten percent (10%) or less and also applies to substantially all other similarly situated employees of the Company will not be grounds for “Good Reason”; (ii) a material reduction of Executive’s authority, duties, or responsibilities relative to Executive’s authority, duties, or responsibilities in effect immediately prior to such reduction, provided, however, that continued employment following a Change in Control with substantially the same responsibility with respect to the Company’s business and operations will not constitute “Good Reason” (for example, “Good Reason” does not exist if Executive is employed by the Company with substantially the same responsibilities with respect to the Company’s business that Executive had immediately prior to the Change in Control regardless of whether Executive’s title is revised to reflect Executive’s placement within the overall corporate hierarchy or whether Executive provides services to a subsidiary, affiliate, business unit or otherwise); (iii) the relocation of Executive’s principal work location(s) to a facility or a location more than fifty (50) miles from Executive’s prior work location; or (iv) the

 

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Company’s material breach of its employment agreement with Executive.  In order for Executive’s resignation to be for Good Reason, Executive must not terminate employment with the Company without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within sixty (60) days of Executive’s awareness of the initial existence of the grounds for “Good Reason” and a cure period of thirty (30) days following the date of written notice (the “Cure Period”), such grounds must not have been cured during such time, and Executive must resign within thirty (30) days following the end of the Cure Period.

 

k.                                      “Incentive Plan” means the Fossil, Inc. 2008 Long-Term Incentive Plan, or any successor plan thereto.

 

l.                                          “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) Fossil or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Fossil or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the stockholders of Fossil in substantially the same proportions as their ownership of stock of Fossil.

 

m.                                  “Restricted Area” means the geographical area within which Executive performed services for the Company or its Affiliates or for which Executive had any responsibility or about which Executive received Proprietary Information during the term of Executive’s employment with the Company.

 

n.                                      “Target” means the Company’s or its Affiliates’ desired performance metric achievement determined for each fiscal year to calculate Executive pay for benchmarking purposes.  For fiscal 2015, the Target achievement level was an “exceeds” rating.

 

o.                                      “Target Bonus” means the annual cash bonus compensation, if any, that may be paid to Executive if Executive and the Company and its Affiliates achieved the Target level performance goals established by the Company and its Affiliates for the applicable performance period under any cash bonus plan.

 

p.                                      “Termination Date” means the effective date of Executive’s Termination of Service.

 

q.                                      “Termination of Service” means a “separation from service” within the meaning of Section 409A of the Code and the final treasury regulations issued thereunder.

 

2.                                      DUTIES.  The Company has agreed to employ Executive and Executive is currently employed as [job title].  The specific position and duties assigned to Executive may be changed or modified at any time by the Company, in its sole discretion. Executive will work diligently to perform his or her assigned duties in a reasonable, timely, and professional manner, and will comply with all applicable policies and rules of the Company.

 

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3.                                      AT WILL EMPLOYMENT.  At all times during his or her employment with the Company, Executive’s employment will be considered at-will.  Nothing in this Agreement shall be construed as a guarantee of present or future employment with the Company.

 

4.                                      COMPENSATION.  During the term of this Agreement, the Company will provide Executive with compensation and benefits, subject to adjustment at any time at the Company’s discretion. Compensation will be paid in accordance with the Company’s payroll policies and practices, which may be adjusted at any time at the Company’s discretion.

 

5.                                      SEVERANCE BENEFITS.

 

a.                                      TERMINATION OF SERVICE WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON PRIOR TO A CHANGE IN CONTROL.  Subject to the terms and conditions of Section 5(d) below and provided Executive has not otherwise forfeited his or her rights under this Agreement, upon Executive’s Termination of Service by the Company without Cause or Executive’s resignation for Good Reason prior to a Change in Control, Executive shall become entitled to the following:

 

(i)                                     payment of an amount equal to eighteen (18) months of Executive’s Base Salary as of the Termination Date (or if such termination of employment is a result of Section 1(j)(i), then Executive’s Base Salary immediately prior to such reduction of Base Salary), less all applicable withholdings and taxes, payable in thirty-nine (39) equal installments over an eighteen (18) month period in accordance with the Company’s normal payroll practices, with the first payment commencing on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date;

 

(ii)                                  payment of a cash bonus under any cash bonus plan for which Executive was eligible on the Termination Date as follows:

 

A.                                    a pro-rata bonus amount for the fiscal year in which the Termination Date occurs based on the actual performance by Fossil and its Affiliates under the applicable cash bonus plan, payable in a lump sum to Executive at the ordinary time of payout to other active employees (generally in March of the following year), less all applicable withholdings and taxes.  The amount to be paid to Executive hereunder shall be the bonus payment amount Executive would have received under the cash bonus plan using Executive’s Target performance review rating (or any subsequent target measurement used under a cash bonus plan for Executive) had Executive not incurred a Termination of Service times (1) the number of actual days Executive was employed during the fiscal year through the Termination Date, divided by (2) three hundred sixty-five (365); and

 

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B.                                    an amount equal to the full Target Bonus for which Executive was eligible for during the fiscal year in which the Termination Date occurs times one point five (1.5), less all applicable withholdings and taxes, divided and payable in thirty-nine (39) equal installments over an eighteen (18) month period in accordance with the Company’s normal payroll practices, with the first payment commencing on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date.

 

(iii)                               with respect to any outstanding non-performance based restricted stock unit and stock appreciation right awards granted pursuant to the Incentive Plan (collectively, “Time-Based Awards”), unless more favorable vesting is provided under the terms of the applicable award agreement, the outstanding Time-Based Awards shall continue to vest for an additional eighteen (18) months, to the same extent such awards would have otherwise vested had Executive remained employed during such period; plus

 

(iv)                              with respect to any outstanding performance based restricted stock unit awards granted pursuant to the Incentive Plan (“PSU Awards”), unless more favorable vesting is provided under the terms of the applicable award agreement, pro-rata vesting on the date such award would vest on its terms, in an amount equal to (1) the ratio derived by dividing the sum of eighteen (18) months plus the number of whole calendar months from the respective Date of Grant through the Termination Date, by the total number of months from the Date of Grant through the date such award would vest on its terms, provided the ratio is no greater than one, multiplied by (2) the number of performance based restricted stock unit awards that would have vested based on the actual performance of Fossil and its Affiliates at the end of the applicable performance period; and

 

(v)                                 notwithstanding anything in an award agreement to the contrary, all vested stock appreciation rights, whether vested pursuant to this Section 5(a) or the terms of such award, shall be exercisable until the earlier of (1) the expiration date of such stock appreciation right award, and (2) the date that is twenty-four (24) months from the Termination Date.

 

b.                                      TERMINATION OF SERVICE WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON IN CONNECTION WITH OR FOLLOWING A CHANGE IN CONTROL.  Subject to the terms and conditions of Section 5(d) below and provided Executive has not otherwise forfeited his or her rights under this Agreement, upon Executive’s Termination of Service by the Company without Cause or resignation for Good Cause in connection with or within the twenty-four (24) months following a Change in Control, Executive shall become entitled to the following:

 

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(i)                                     payment of an amount equal to twenty-four (24) months of Executive’s Base Salary as of the Termination Date (or if such termination of employment is a result of Section 1(j)(i), then Executive’s Base Salary immediately prior to such reduction of Base Salary), less all applicable withholdings and taxes, payable in fifty-two (52) equal installments over a twenty-four (24) month period in accordance with the Company’s normal payroll practices, with the first payment commencing on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date;

 

(ii)                                  payment of a cash bonus under any cash bonus plan for which Executive was eligible on the Termination Date as follows:

 

A.                                    an amount equal to the full Target Bonus Executive would have received under the cash bonus plan had Executive not incurred a Termination of Service, payable in a lump sum, less all applicable withholdings and taxes, on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date; and

 

B.                                    an amount equal to the full Target Bonus for which Executive was eligible for the fiscal year in which the Termination Date occurs times two (2), less all applicable withholdings and taxes, divided and payable in fifty-two (52) equal installments over a twenty-four (24) month period in accordance with the Company’s normal payroll practices, with the first payment commencing on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date.

 

(iii)                               with respect to any outstanding Time-Based Awards, full acceleration of vesting of such awards, as of the Termination Date;

 

(iv)                              with respect to any outstanding PSU Awards, unless more favorable vesting is provided under the terms of the applicable award agreement, (A) if the Termination of Service occurs within the first half of the applicable performance period, then full acceleration of vesting at Target performance, and (B) if the Termination of Service occurs within the second half of the applicable performance period, then accelerated vesting of the award, based on actual performance of Fossil and its Affiliates if measurable, or at Target performance if the performance of Fossil and its Affiliates is not measurable; and

 

(v)                                 notwithstanding anything in an award agreement to the contrary, all vested stock appreciation rights, whether vested pursuant to this Section 5(b) or the terms of such award, shall be exercisable until the earlier of (1) the expiration date of such stock appreciation right award, and (2) the date that is twenty-four (24) months from the Termination Date.

 

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c.                                       HEALTH BENEFITS.  Executive shall receive information about continuation health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) under separate cover.  Subject to the terms and conditions of Section 5(d) below and provided Executive has not otherwise forfeited his or her rights under this Agreement, the Company shall pay Executive on a monthly basis, an amount equal to the Company paid portion of the health insurance premiums that were paid by the Company on behalf of Executive immediately prior to the Termination Date, less all applicable taxes and withholdings required and/or authorized by law (the “Healthcare Allowance”), to be used by Executive to purchase health coverage after the Termination Date, such as COBRA coverage or coverage on the Health Insurance Marketplace (Exchange).  Such Healthcare Allowance will be made available to Executive for a period of eighteen (18) months from the Termination of Service or until Executive becomes eligible to participate in another employer’s health care plan, whichever date is earlier.  The amount of the Healthcare Allowance will be calculated by the Company’s benefits department.  However, Executive is not required to use any portion of the Healthcare Allowance for this purpose or provide evidence of such health coverage.  It is solely Executive’s responsibility to elect or apply for post-termination health coverage and to pay the full amount of any required premium or contribution for such post-termination health coverage.  The Company agrees to pay the Healthcare Allowance to Executive in accordance with the Company’s normal payroll practices, with the first payment commencing on the first payroll date coinciding with or immediately following the sixtieth (60th) day following the Termination Date; provided, that, the first payment shall include any payment that would have otherwise been paid during the preceding sixty (60) day period.

 

d.                                      ELIGIBILITY; RELEASE.  The right to the payments and benefits described in this Section 5 is conditioned upon: (i) Executive’s continued compliance with any restrictive covenants in any written agreement between Executive and the Company, including, without limitation, Sections 6, and 7; and (ii) within fifty (50) days following the Termination Date, the execution and delivery to the General Counsel of the Company by Executive of a release prepared by the Company and providing for Executive’s release of any and all claims against the Company and its Affiliates (and those acting on behalf of them) that may have arisen on or before the date of the release, which release shall contain such other reasonable and customary terms as are specified by and acceptable to the Company (the “Release”).  Notwithstanding any provisions to the contrary, the payments and benefits described in this Section 5 shall not be paid unless and until such binding release is effective.  If such executed release is not delivered within fifty (50) days of the Termination Date, then all rights to the payments and benefits described in this Section 5 shall be forfeited.

 

6.                                      NON-DISCLOSURE AND CONFIDENTIALITY.

 

a.                                      Executive acknowledges that, by the nature of his or her duties and in order for Executive to perform his or her duties, the Company and its Affiliates shall disclose to Executive, and Executive shall have otherwise prohibited access to, trade secrets and confidential, proprietary, and highly sensitive information of and/or relating

 

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to the Company and its Affiliates, which is a competitive asset of the Company and its Affiliates and which Executive did not have prior knowledge of, including, without limitation, information pertaining to: (i) the identities of existing and prospective customers or clients, including names, addresses, contact persons, and pricing information; (ii) current, pending, and prospective contracts and business relationships; (iii) business information pertaining to existing and prospective customers or clients, including customer or client preferences and non-public personal information; (iv) product and systems specifications, concepts for new or improved products, and other product or systems data; (v) the identities of and special skills possessed by the Company, its Affiliates and/or the Company’s or its Affiliates’ executives; (vi) customer or client lists and profiles developed and/or purchased by the Company or its Affiliates; (vii) training programs developed by the Company or its Affiliates; (viii) pricing studies, information, and analyses; (ix) current and prospective products, product designs, inventions, services, and or systems; (x) financial models, business projections and market studies; (xi) the Company’s and its Affiliates’ financial results and business conditions, including, without limitation, marketing and business plans and strategies; (xii) special processes, procedures, and services of the Company and its Affiliates; (xiii) computer programs, technology, and software developed by the Company, its Affiliates and/or their consultants; (xiv) any and all information regarding the salary, pay scale, capabilities, experiences and desires of the Company’s and its Affiliates’ employees and independent contractors; (xv) vendor or supplier lists, profiles, preferences and non-public personal information; and (xvi) and other business information disclosed to Executive by the Company or its Affiliates, either directly or indirectly, in writing, orally, or by drawings or observation.  The confidential, proprietary, and highly sensitive information described in this Section 6(a) is hereinafter referred to as “Proprietary Information.”

 

b.                                      Executive acknowledges and agrees that Proprietary Information is proprietary to and a trade secret of the Company and its Affiliates and, as such, is a special and unique asset of the Company and its Affiliates.  Executive recognizes and agrees that the unauthorized disclosure and/or use of Proprietary Information will place the Company and its Affiliates at a competitive disadvantage and cause irreparable harm and loss to the Company and its Affiliates.  Executive understands and acknowledges that each and every component of the Proprietary Information (i) has been developed by the Company and its Affiliates at significant effort and expense and is sufficiently secret to derive economic value from not being generally known to other parties, and (ii) constitutes a protectable business interest of the Company and its Affiliates.  Executive agrees to preserve and protect the confidentiality of all Proprietary Information.  Consequently, during Executive’s employment with the Company and after Executive’s Termination of Service for any reason, Executive agrees not to: (A) use, directly or indirectly, at any time, any Proprietary Information for his or her own benefit or for the benefit of another; or (B) disclose, directly or indirectly, any Proprietary Information to any person  or entity, except as permitted in the proper performance of the duties assigned to Executive in this Agreement or as otherwise permitted by law.  Executive acknowledges and agrees that the Company and its Affiliates own the Proprietary Information.  Executive agrees not to dispute, contest, or deny any such ownership rights

 

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either during or after the Executive’s employment with the Company.  Executive further acknowledges and agrees not to make copies of any Proprietary Information, except in the performance of the duties assigned to him or her in this Agreement.

 

c.                                       Executive’s obligations under this section shall survive Executive’s employment with the Company.  Executive’s obligations under this section are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which he or she may have to the Company or its Affiliates under general legal or equitable principles or under other policies of the Company or its Affiliates.

 

7.                                      NON-COMPETITION AND NON-SOLICITATION.

 

a.                                      Executive acknowledges that the Company and its Affiliates have, over a period of time, developed, and will continue, over a period of time, to develop, significant relationships and goodwill between themselves and their current and prospective clients, customers, vendors, and suppliers by providing superior products and services to their current and prospective clients, customers, vendors, and suppliers. Executive further acknowledges that these relationships and goodwill are a valuable asset belonging solely to the Company and its Affiliates.  The Company and its Affiliates promise to share their business relationships and goodwill with Executive.

 

b.                                      Executive agrees that, as part of his or her employment with the Company, he or she will become familiar the Proprietary Information of the Company and its Affiliates, including, without limitation, information regarding the salary, pay scale, capabilities, experiences and desires of the Company’s and its Affiliates’ employees and independent contractors.  Executive agrees to maintain the confidentiality of such information.

 

c.                                       Executive acknowledges that, in exchange for the execution of the non-competition and non-solicitation restrictions set forth below in this section, he or she has received substantial, valuable consideration, including the consideration set forth in Sections 4, 5 and 6 above.  Executive acknowledges and agrees that this consideration constitutes fair and adequate consideration for the execution of the non-competition and non-solicitation restrictions set forth in this section.

 

d.                                      In consideration for (i) the Company’s promise to provide Proprietary Information to Executive, (ii) the substantial economic investment made by the Company and its Affiliates in the Proprietary Information and goodwill of the Company and its Affiliates, and/or the business opportunities disclosed or entrusted to Executive, (iii) access to the Company’s and its Affiliates’ customers, clients, vendors and suppliers, and (iv) the Company’s employment of Executive pursuant to this Agreement and the compensation and other benefits provided by the Company to Executive, to protect the Proprietary Information and business goodwill of the Company and its Affiliates, Executive agrees to the following restrictive covenants.  Executive agrees that while he or she is employed by the Company and for a period of eighteen (18) months following Executive’s Termination of Service, he or she shall not, without the Company’s prior

 

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written consent, directly or indirectly, alone or for his or her own account, or as a principal, owner, partner, member, manager, executive, advisor, agent, trustee, officer, director, employee, shareholder, or consultant of any corporation, trust, partnership, joint venture or other business organization or entity, or in any other manner or capacity whatsoever:

 

(i)                                     be employed by, work for, perform consulting services for, have business dealings with, control, manage, have an ownership interest in, establish, take steps to establish, engage in or otherwise become involved with, directly or indirectly, any business, operation, corporation, partnership, association, agency, or other person or entity that is in the business of producing, marketing, servicing, and/or retailing, directly or at wholesale, watches, leather goods or connected devices (works with an app), in the Restricted Area; or

 

(ii)                                  call upon, solicit, divert, interfere with, induce, or attempt to call upon, solicit, divert, interfere with, or induce any of the Company’s or its Affiliates’ clients or customers with whom the Company or its Affiliates did business or were in the process of conducting business during the previous twenty-four (24) months of Executive’s employment with the Company, and who or which: (A) Executive contacted, called on, serviced or did business with during Executive’s employment with the Company; (B) Executive learned of as a result of Executive’s employment with the Company; or (C) about whom Executive received Proprietary information.  This restriction applies only to business which is in the scope of services or products provided by the Company or its Affiliates;

 

(iii)                               cause, induce, solicit or attempt to cause, induce or solicit clients, manufacturers, suppliers, or others doing business with the Company or its Affiliates to terminate, reduce, or alter such business with the Company or its Affiliates; or

 

(iv)                              recruit, hire, or attempt to recruit or hire, directly, indirectly or by assisting others, any other employees or independent contractors of the Company or its Affiliates, nor shall he or she contact or communicate with any other employees or independent contractors of the Company or its Affiliates for the purpose of inducing other employees or independent contractors to terminate their employment or association with the Company or its Affiliates.  For purposes of this covenant, “other employees or independent contractors” shall refer to permanent employees, temporary employees, or independent contractors who were employed by, doing business with, or associated with the Company or its Affiliates within six (6) months of the time of the attempted recruiting or hiring.  Executive’s obligations under this section shall survive Executive’s employment with the Company.

 

e.                                       Executive understands that the non-competition and non-solicitation restrictions shall apply whether he or she acts as an individual or for his or her own account, or as a principal, partner, owner, member, manager, executive, officer, director,

 

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employee, advisor, agent, trustee, shareholder, salesman, distributor, consultant, representative or in any other capacity whatsoever, of any person, firm, corporation or other entity.

 

f.                                        Executive agrees that the non-competition and non-solicitation restrictions set forth above are ancillary to an otherwise enforceable agreement and supported by independent valuable consideration.  Executive further agrees that the limitations as to time, geographical area, and scope of activity to be restrained by this section are reasonable and acceptable to him or her, and do not impose any greater restraint than is reasonably necessary to protect the goodwill and other business interests of the Company and Affiliates.  Executive agrees that if, at some later date, a court of competent jurisdiction determines that the non-competition and/or non-solicitation restrictions set forth in this section are unreasonable or unenforceable as written, this section may be reformed by the court and enforced to the maximum extent permitted by law.

 

g.                                       If Executive is found to have violated any of the provisions of this section, Executive agrees that the restrictive period of each covenant so violated shall be extended by a period of time equal to the period of such violation by him or her.  It is the intent of this section that the running of the restrictive period of any covenant shall be tolled during any period of violation of such covenant so that the Company may obtain the full and reasonable protection for which it contracted and so that Executive may not profit by his or her breach.

 

h.                                      Executive understands that his or her obligations under this section shall survive his or her employment with the Company and shall not be assignable by him or her.

 

8.                                      REMEDIES FOR BREACH OF SECTIONS 6 and 7.  In the event that Executive violates any of the provisions set forth in Sections 6 or 7 of this Agreement, he or she acknowledges that the Company will suffer immediate and irreparable harm which cannot be accurately calculated in monetary damages and/or for which money damages would not be a sufficient remedy to the Company .  Consequently, Executive acknowledges and agrees that the Company shall be entitled to a temporary restraining order and injunctive relief, to prevent such a violation or threatened violation, and to recover from Executive the Company’s attorneys’ fees, costs and expenses related to any violation or threatened violation of this Agreement and enforcement of this Agreement.  Executive further acknowledges and agrees that this injunctive relief shall be in addition to any other legal or equitable relief to which the Company would be entitled.  The existence of any claim or cause of action by Executive against the Company or its Affiliates, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of Sections 6 or 7 of this Agreement or preclude injunctive relief.  Executive also acknowledges that violations of the provisions set forth in Sections 6 or 7 will result in the immediate cessation of the payments and benefits described in Section 5 above.

 

9.                                      CLAWBACK.  Executive acknowledges, understands and agrees, with respect to any compensation paid to Executive pursuant to this Agreement or otherwise, that such compensation shall be subject to recovery by the Company, and Executive shall be required to

 

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repay such compensation, if either in the year such compensation is paid, or within the three (3) year period thereafter: (i) Fossil (or any successor thereto) is required to prepare an accounting restatement due to material noncompliance of the Company or an Affiliate with any financial reporting requirement under applicable securities laws and Executive is or was during such three (3) year period, either a named executive officer of Fossil or an employee of the Company who is responsible for preparation of the Company’s financial statements; or (ii) the Company or Fossil is required by applicable law to require repayment by Executive of such compensation.  The parties agree that the repayment obligations set forth in the foregoing sentence shall only apply to the extent repayment is required by applicable law.

 

10.                               SEVERABILITY.  The Parties acknowledge that each covenant and/or provision of this Agreement shall be enforceable independently of every other covenant and/or provision. Furthermore, Executive and the Company acknowledge that, in the event any covenant and/or provision of this Agreement is determined to be unenforceable for any reason, the remaining covenants and/or provisions will remain effective, binding and enforceable.

 

11.                               COMPLETE AGREEMENT; MODIFICATION.  The Parties acknowledge and agree that this Agreement constitutes the complete and entire agreement between the Parties with respect to the subject matter hereof, and fully supersedes any and all prior negotiations, discussions, agreements, understanding or representations pertaining to or concerning the subject matter of this Agreement.  The Parties further acknowledge and agree that each executed this Agreement based upon the express terms and provisions set forth herein; that, in entering into this Agreement, Executive is not relying on, has not relied on, and specifically disclaims any reliance upon any representations, promises, statements, communications, or inducements, oral or written, by the Company or its agents, which are not set forth in this Agreement; that no previous agreements or statements, either oral or written, shall have any effect on the terms or provisions of this Agreement; and that all previous agreements, either oral or written, [including, without limitation, the Retirement Agreement,] are expressly superseded and revoked by this Agreement; except that Executive agrees that he or she continues to be bound by and will comply with all non-disclosure, non-competition, and non-solicitation agreements previously made by Executive.  The provisions hereof may not be altered, amended, modified, waived, or discharged in any way whatsoever, except by written agreement executed by Executive and an authorized representative of the Company.  Executive represents that Executive relied solely and only on Executive’s own judgment in making the decision to enter into this Agreement.

 

12.                               GOVERNING LAW AND VENUE.  The validity of this Agreement and any of its terms or provisions, as well as the rights and duties of the parties hereunder, shall be governed by, construed under, and in accordance with the laws of the State of Texas. With respect to any disputes, claims and causes of action between the Parties hereto, the Company and Executive agree that the state and federal courts situated in Dallas County, Texas, shall have personal jurisdiction over the Company and Executive to hear all disputes arising under this Agreement. This Agreement is to be at least partially performed in Dallas County, Texas, and, as such, the Company and Executive agree that venue shall be proper with the state or federal courts in Dallas County, Texas, to hear such disputes.

 

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13.                               VOLUNTARY AGREEMENT.  The Parties acknowledge that each has carefully read this Agreement, that each has had an opportunity to consult with his or her or its attorney concerning the meaning, import and legal significance of this Agreement, that each understands its terms, that all understandings and agreements between Executive and the Company relating to the subjects covered in this Agreement are contained in it, and that each has entered into the Agreement voluntarily and not in reliance on any promises or representations by the other Party, other than those contained in this Agreement.

 

14.                               CODE SECTION 280G.

 

a.                                      Code Section 280G Treatment.  In the event it is determined that any payment, distribution, or benefit of any type by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with a Change in Control (the “Change in Control Payments”), constitute “parachute payments” within the meaning of Code Section 280G(b)(2), the Company will provide Executive with a computation of (i) the maximum amount of the Change in Control Payments that could be made, without the imposition of the excise tax imposed by Code Section 4999 (said maximum amount being referred to as the “Capped Amount”); (ii) the value of the Change in Control Payments that could be made pursuant to the terms of this Agreement (all said payments, distributions and benefits being referred to as the “Uncapped Amount”); (iii) the dollar amount of the excise tax (if any) including any interest or penalties with respect to such excise tax which Executive would become obligated to pay pursuant to Code Section 4999 as a result of receipt of the Uncapped Payments (the “Excise Tax Amount”); and (iv) the net value of the Uncapped Amount after reduction by the Excise Tax Amount and the estimated income taxes payable by Executive on the difference between the Uncapped Amount and the Capped Amount, assuming that Executive is paying the highest marginal tax rate for state, local and federal income taxes (the “Net Uncapped Amount”).  If the Capped Amount is greater than the Net Uncapped Amount, Executive shall be entitled to receive or commence to receive payments equal to the Capped Amount; or if the Net Uncapped Amount is greater than the Capped Amount, Executive shall be entitled to receive or commence to receive payments equal to the Uncapped Amount.  If Executive receives the Uncapped Amount, then Executive shall be solely responsible for the payment of all income and excise taxes due from Executive and attributable to such Uncapped Amount, including, without limitation, the excise tax including any interest or penalties with respect to such excise tax which Executive may become obligated to pay pursuant to Code Section 4999, with no right of additional payment from the Company as reimbursement for any taxes, interest or penalties.

 

b.                                      Determination By Accountant.  All determinations required to be made under this Section 14 shall be made in writing by the independent accounting firm agreed to by the Company and Executive on the date of the Change in Control (the “Accounting Firm”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by Section 15, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations

 

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concerning the application of Code Sections 280G and 4999.  The Company and Executive shall furnish to the Accounting Firm such information and documents as it reasonably may request in order to make determinations under this Section 14.  If the Accounting Firm determines that no Excise Tax Amount is payable by Executive, it shall furnish Executive with an opinion that he has substantial authority not to report any Code Section 4999 excise tax on his federal income tax return. The Company shall bear all costs the Accounting Firm may reasonably incur in connection with any calculations contemplated by this Section 14.

 

15.                               CODE SECTION 409A.  It is intended that this Agreement be exempt from the provisions of Code Section 409A, or, to the extent it is found to be subject to Code Section 409A, compliant with Code Section 409A.  This Agreement shall be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to be exempt from or compliant with Code Section 409A shall have no force or effect.  Notwithstanding the foregoing, nothing contained herein shall be construed as a representation or guarantee by the Company of the tax treatment of the payments and benefits described herein.  Executive acknowledges and agrees that the Company has advised him or her to consult with his or her own tax advisor regarding the tax consequences of this Agreement, including, without limitation, any possible tax consequences under Code Section 409A.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below, to be effective as of the date first above written.

 

	
COMPANY:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Fossil Partners, L.P.
    	
 
    	
 
    
	
By: Fossil Group, Inc.,   general partner
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
EXECUTIVE
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date:
    	
 
    

 

Signature Page to Executive Severance Agreement

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