Document:

Exhibit

Exhibit 10.6
EXECUTION COPY    

  

FOURTH AMENDMENT TO 
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 16, 2017
among
PLAINS MARKETING, L.P.

and

PLAINS MIDSTREAM CANADA ULC,

as Borrowers,
PLAINS ALL AMERICAN PIPELINE, L.P.,
as Guarantor
BANK OF AMERICA, N.A., 
as Administrative Agent and Swing Line Lender,
BANK OF AMERICA, N.A. and WELLS FARGO BANK, NATIONAL ASSOCIATION, 
as L/C Issuers
and
The Other Lenders Party Hereto
CITIBANK, N.A. and SOCIÉTÉ GÉNÉRALE, 
as Co-Syndication Agents,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
CITIGROUP GLOBAL MARKETS INC. and SOCIÉTÉ GÉNÉRALE,
as
Joint Lead Arrangers and Joint Bookrunners

Senior Secured
Hedged Inventory Facility

FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of the 16th day of August, 2017, is by and among PLAINS MARKETING, L.P., a Texas limited partnership (the “Company”), PLAINS MIDSTREAM CANADA ULC, a British Columbia unlimited liability company (“PMCULC”; and together with the Company, the “Borrowers” and each individually, a “Borrower”), PLAINS ALL AMERICAN PIPELINE, L.P., as guarantor, BANK OF AMERICA, N.A., as Administrative Agent and an L/C Issuer, WELLS FARGO BANK, NATIONAL ASSOCIATION, as an L/C Issuer, and the Lenders party hereto.
W I T N E S S E T H:
WHEREAS, Borrowers, Administrative Agent, certain of the L/C Issuers and certain of the Lenders entered into that certain Third Amended and Restated Credit Agreement dated as of August 19, 2011, as amended by that certain First Amendment to Third Amended and Restated Credit Agreement dated as of June 27, 2012, that certain Second Amendment to Third Amended and Restated Credit Agreement dated as of August 16, 2013 and that certain Third Amendment to Third Amended and Restated Credit Agreement dated as of August 11, 2016 (as heretofore amended, the “Original Agreement”) for the purposes and consideration therein expressed; and
WHEREAS, Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPFS”) and the other joint lead arrangers and joint bookrunners, have, at the Company’s request, syndicated and arranged for an extension of the maturity date set forth in, and other amendments to, the Original Agreement, and pursuant thereto, the Borrowers, Administrative Agent, L/C Issuers and the Lenders party hereto desire to amend the Original Agreement for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. — Definitions and References
§ 1.1.    Terms Defined in the Original Agreement.  Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Credit Agreement shall have the same meanings whenever used in this Amendment.
§ 1.2.    Other Defined Terms.  Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this § 1.2.
“Amendment” means this Fourth Amendment to Third Amended and Restated Credit Agreement.
“Amendment Effective Date” has the meaning specified in § 3.1 of this Amendment.
“Credit Agreement” means the Original Agreement as amended hereby.

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ARTICLE II. — Amendments
§ 2.1.    Definitions.  
(a)Collateral.  The definition of “Collateral” in Section 1.01 of the Original Agreement is hereby amended by adding the following new sentence at the end thereof:
In no event shall Collateral include any Subject Inventory, corresponding Swap Contracts with respect thereto, and Subject Receivables that are the subject of Collateral Intermediary Transactions permitted pursuant to Section 7.08.
(b)Collateral Value.  The definition of “Collateral Value” in Section 1.01 of the Original Agreement is hereby amended by adding the following new sentence at the end thereof:
In no event shall any Subject Inventory, any corresponding Swap Contracts with respect thereto or Subject Receivables be included in the calculation of Collateral Value.
(c)New Defined Terms.  Section 1.01 of the Original Agreement is hereby amended by adding the following new defined terms in appropriate alphabetical order, to read as follows:
“Commodity Intermediary” means (i) any Lender, any Affiliate of any Lender that engages in Commodity Intermediary Transactions, or other nationally recognized institution engaged in transactions of such type, or (ii) any other institution that engages in Commodity Intermediary Transactions that is reasonably acceptable to the Administrative Agent.
“Commodity Intermediary Transaction” means a transaction or series of transactions (whether reflected in a single agreement or a set of related agreements) under which a Commodity Intermediary buys from Borrower and/or sells to Borrower or third parties Subject Inventory, and in addition, may enter into Swap Contracts with respect to such Subject Inventory (including for hedging and/or risk mitigation purposes) and/or provide additional financial accommodations based on Subject Receivables, and in connection therewith (i) the Administrative Agent releases any Liens securing the Obligations on Subject Inventory, such Swap Contracts and Subject Receivables, and (ii) Borrower grants a Lien on Subject Inventory, corresponding Swap Contracts with respect thereto, and Subject Receivables (if any) in favor of such Commodity Intermediary to secure the obligations of Borrower to such Commodity Intermediary arising under such Commodity Intermediary Transaction.
“Subject Inventory” means any portion of Borrower’s Petroleum Product inventory identified by Borrower as subject to a Commodity Intermediary Transaction.
“Subject Receivables” means Receivables arising from the sale of Subject Inventory.
§ 2.2.    Liens.  The reference to “Liens, other than Liens permitted by Section 7.01” in Section 5.07 of the Original Agreement is hereby amended to refer instead to “Liens, other than Liens permitted by Section 7.01 and Liens granted in connection with Commodity Intermediary Transactions permitted pursuant to Section 7.08”.

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§ 2.3.    Collateral Documents.  The reference to “(excluding tank bottoms and pipeline linefill of such Borrower)” in Section 5.13 of the Original Agreement is hereby amended to refer instead to “(excluding tank bottoms, pipeline linefill and Subject Inventory of such Borrower)”.
§ 2.4.    Covenant to Give Security.  The reference to “(excluding tank bottoms, pipeline linefill and other Petroleum Products inventory of such Borrower)” in Section 6.12 of the Original Agreement is hereby amended to refer instead to “(excluding tank bottoms, pipeline linefill, other Petroleum Products inventory and Subject Inventory of such Borrower)”.
§ 2.5.    Dispositions.  The reference to “except in the ordinary course of business on ordinary trade terms” in Section 7.03 of the Original Agreement is hereby amended to refer instead to “except (i) in the ordinary course of business on ordinary trade terms and (ii) in connection with Commodity Intermediary Transactions permitted pursuant to Section 7.08”.
§ 2.6.    Commodity Intermediary Transactions.  Article VII of the Original Agreement is hereby amended by adding a new Section 7.08 at the end thereof, to read as follows:
7.08    Commodity Intermediary Transactions.  Enter into any Commodity Intermediary Transaction, unless:
(a)    The aggregate value of the maximum volume of Subject Inventory and Subject Receivables shall not exceed an amount equal to the lesser of (i) $500 million and (ii) 20% of the value of all of Borrower’s Petroleum Product inventory and all of Borrower’s Receivables therefrom at such time; provided that, in the case of a Commodity Intermediary Transaction that is documented under a master or framework agreement and contemplates an ongoing series of transactions, such calculation shall be made only at the commencement of a Commodity Intermediary Transaction and each time thereafter that the maximum volume of Subject Inventory is increased by Borrower and the applicable Commodity Intermediary;
(b)    Borrower shall (i) notify the Administrative Agent of the specific locations of Subject Inventory, certifying that no Petroleum Product inventory constituting Collateral is stored or located at any such location, and any corresponding Swap Contracts with respect thereto; provided that in the case of a Commodity Intermediary Transaction that is documented under a master or framework agreement and contemplates an ongoing series of transactions, the foregoing requirement shall be satisfied by Borrower providing such notice to the Administrative Agent at the inception of such Commodity Intermediary Transaction and upon (A) the addition of any new locations at which Subject Inventory is stored or located or (B) any such location at which Subject Inventory ceases to be stored or located, and (ii) expressly identify any Subject Receivables as such in Borrower’s records;
(c)    In connection with any requested release of Collateral with respect to Subject Inventory, any corresponding Swap Contracts with respect thereto and any Subject Receivables, Borrower shall certify that after giving effect to such release, the Collateral Value shall exceed Total Outstandings;
(d)    With respect to any release of Petroleum Product inventory constituting Collateral in connection with a Commodity Intermediary Transaction, such release shall be 

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effective with respect to such Petroleum Product inventory provided that, subject to clause (a) of this Section 7.08, such Petroleum Product inventory is stored or located at a specified location where either (A) only Subject Inventory is stored or located or (B) only such Petroleum Product inventory (and no other Petroleum Product inventory constituting Collateral) is stored or located.  Immediately upon the termination of (A) the Commodity Intermediary Transaction regarding such Subject Inventory or (B) the Borrower’s relationship with the applicable Commodity Intermediary, all Petroleum Product inventory stored or located at such location shall thereafter constitute Collateral;
(e)    Subject Inventory shall not be commingled with any Collateral at any time;
(f)    No corresponding Swap Contract with respect to Subject Inventory shall be (i) pursuant to or governed by any ISDA Master Agreement governing any Swap Contracts with respect to any Collateral, (ii) subject to netting with respect to any Swap Contract with respect to any Collateral, or (iii) secured by any Collateral;
(g)    Upon the sale to any third party (other than a Commodity Intermediary) of any Subject Inventory (or corresponding Subject Receivable (if any)), Borrower shall promptly pay to the applicable Commodity Intermediary the corresponding account payable with respect thereto;
(h)    Following the occurrence and during the continuance of any Event of Default, all proceeds of the sale of Subject Inventory or any Subject Receivables shall be segregated by Borrower from its other funds, held in a segregated deposit account and not commingled with any other funds of Borrower; and
(i)    Borrower shall enter into an intercreditor agreement in form and substance satisfactory to the Administrative Agent in all respects with any Commodity Intermediary party to any Commodity Intermediary Transaction.
Each Lender hereby authorizes the Administrative Agent to enter into amendments to the Security Documents, in form and substance satisfactory to the Administrative Agent, to evidence the foregoing and consents to each such amendment.
ARTICLE IIA. — Extension of Maturity Date
§ 2A.1.      Extension of Maturity Date.  With respect to the Company’s request pursuant to Section 2.14 of the Credit Agreement to extend the Maturity Date applicable to each Lender for one additional year from the Existing Maturity Date (the “Extension”), Administrative Agent has notified the Company of the Extending Lenders and Non-Extending Lenders with respect thereto as set forth on Schedule A attached hereto.  Subject to the satisfaction of the conditions precedent set forth in Article III:
(a)    Effective as of August 16, 2017, the Maturity Date with respect to each such Extending Lender is August 16, 2020;
(b)    the Existing Maturity Date of August 16, 2019 shall remain in effect with respect to each such Non-Extending Lender; and

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(c)    the parties hereto agree that with respect to the Extension, the certification by the Company required by Section 2.14(f) of the Credit Agreement is hereby satisfied by the Company’s execution and delivery of this Amendment.
ARTICLE III. — Conditions of Effectiveness
§ 3.1.    Amendment Effective Date.  This Amendment shall become effective as of the date first written above (the “Amendment Effective Date”), upon the satisfaction of the following conditions precedent:
(a)The Administrative Agent’s receipt of the following, each of which shall be originals, telecopies or other electronic copies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, if applicable, each dated the Amendment Effective Date (or, in the case of certificates of governmental officials, a recent date before the Amendment Effective Date and in the case of financial statements, the date or period of such financial statements) and each in form and substance reasonably satisfactory to the Administrative Agent:
(i)executed counterparts of this Amendment, sufficient in number for distribution to the Administrative Agent, each Lender, each Borrower and PAA;
(ii)    such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Amendment and the other Loan Documents delivered pursuant to this § 3.1 to which such Loan Party is a party;
(iii)    such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party and General Partner is duly organized or formed, and that each Borrower is validly existing and in good standing in its jurisdiction of organization, issued by the appropriate authorities of such jurisdiction;
(iv)    favorable opinions of (A) Richard McGee, Esq., General Counsel for Borrowers and PAA, (B) Baker Botts L.L.P., special Texas and New York counsel to Borrowers and PAA, and (C) Patterson Adams LLP, special Canadian counsel to PMCULC, addressed to the Administrative Agent and each Lender; 
(v)    a certificate signed by a Responsible Officer of the Company certifying (A) that the conditions specified in Section 4.02(a), (b) and (d) of the Credit Agreement have been satisfied (and in the case of said Section 4.02(d), if no Request for Credit Extension is made on the Amendment Effective Date, then determined in respect to then Outstanding Amount of Obligations, if any, of each Borrower), (B) that there has been no event or circumstance since December 31, 2016 that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, and (C) the current PAA Debt Ratings; and

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(vi)    such other assurances, certificates, documents, consents or opinions as the Administrative Agent may reasonably require.
(b)All consents, licenses and approvals required in connection with the execution, delivery and performance by each Loan Party and the validity against each Loan Party of this Amendment and each of the other Loan Documents to which it is a party shall have been obtained and shall be in full force and effect.
(c)There shall not have occurred during the period from December 31, 2016 through and including the Amendment Effective Date (i) any event or condition that has had or could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, or (ii) any action, suit, investigation, proceeding, claim or dispute pending or, to the knowledge of PAA, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against PAA or any of its Subsidiaries or against any of their properties or revenues that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(d)Any fees due MLPFS, Administrative Agent or any Lender, including any arrangement fees, agency fees and upfront fees, and any expenses incurred by MLPFS and Administrative Agent, in each case, as agreed in writing by the Company, required to be paid on or before the Amendment Effective Date shall have been paid.
(e)The Company shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to the Amendment Effective Date.
For purposes of determining compliance with the conditions specified in this § 3.1, each Lender that has signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Amendment Effective Date specifying its objection thereto and the Administrative Agent hereby agrees to promptly provide the Company with a copy of any such notice received by the Administrative Agent.
ARTICLE IV. — Representations and Warranties
§ 4.1.    Representations and Warranties of the Company.  In order to induce Administrative Agent, L/C Issuers and Lenders to enter into this Amendment, the Company represents and warrants to Administrative Agent, L/C Issuers and each Lender that:
(a)The representations and warranties of (i) the Company (and PMCULC, solely as to itself) contained in Article V of the Credit Agreement and (ii) each Loan Party in any other Loan Document are true and correct in all material respects on and as of the Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement.
(b)No Default has occurred and is continuing as of the Amendment Effective Date.

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ARTICLE V. — Miscellaneous
§ 5.1.    Ratification of Agreements.  The Original Agreement, as hereby amended, is hereby ratified and confirmed in all respects.  The Loan Documents, as they may be amended or affected by this Amendment, are hereby ratified and confirmed in all respects by each Borrower and PAA.  Any reference to the Original Agreement in any Loan Document shall be deemed to refer to the Credit Agreement.   Upon and after the effectiveness hereof, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Administrative Agent, any L/C Issuer or any Lender under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document.
§ 5.2.    Ratification of PAA Guaranty and Collateral Documents.  PAA, by its signature hereto, represents and warrants that PAA has no defense to the enforcement of the PAA Guaranty, and that according to its terms the PAA Guaranty will continue in full force and effect to guaranty each Borrower’s Obligations and the other amounts described in the PAA Guaranty following execution of this Amendment.  Each Borrower, Administrative Agent, L/C Issuers and Lenders each acknowledges and agrees that any and all Obligations of such Borrower are secured indebtedness under, and are secured by, each and every Collateral Document with respect to the Collateral pledged thereunder by such Borrower.  The Company hereby re-pledges, re-grants and re-assigns a security interest in and lien on every asset of such Borrower described as Collateral in any Collateral Document.
§ 5.3.    Loan Documents.  This Amendment is a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto.
§ 5.4.    GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
§ 5.5.    Counterparts.  This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Amendment.
§ 5.6.    ENTIRE AGREEMENT.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
		
	BORROWERS:
	PLAINS MARKETING, L.P.,

as the Company and a Borrower
By:    PLAINS GP LLC,
its general partner

By:    /s/ Sharon S. Spurlin    
Name: Sharon S. Spurlin
Title: Vice President and Treasurer

PLAINS MIDSTREAM CANADA ULC,
as PMCULC and  a Borrower

By:    /s/ Sharon S. Spurlin    
Name: Sharon S. Spurlin
Title: Vice President and Treasurer

		
	PAA:
	 PLAINS ALL AMERICAN PIPELINE, L.P.

By:    PAA GP LLC, its general partner
By:    PLAINS AAP, L.P., its sole member
By:    PLAINS ALL AMERICAN GP LLC,
its general partner

By:    /s/ Sharon S. Spurlin    
Name: Sharon S. Spurlin
Title: Vice President and Treasurer
    

S-1    PMLP 4th Amendment

		
	LENDER PARTIES:
	 BANK OF AMERICA, N.A.,

Administrative Agent

By:    /s/ Anthea Del Biaco    
Name: Anthea Del Bianco
Title:   Vice President

BANK OF AMERICA, N.A.,
a Lender, Swing Line Lender and an L/C Issuer

By:    /s/ Christopher Dibiase    
Name: Christopher Dibiase
Title:   Director

CITIBANK, N.A., Lender

By:    /s/ Gabriel Juarez    
Name: Gabriel Juarez
Title:   Vice President

SOCIÉTÉ GÉNÉRALE, Lender

By:    /s/ Michiel V. M. Van Der Voort    
Name: Michiel V. M. Van Der Voort
Title:   Managing Director

BNP PARIBAS, Lender

By:    /s/ Joe Onischuk    
Name: Joe Onischuk
Title:   Managing Director

By:    /s/ Reginal Crichlow    
Name: Reginal Crichlow
Title:   Vice President

S-2    PMLP 4th Amendment

DNB CAPITAL LLC,
Lender

By:    /s/ Jamie Grubb    
Name: Jamie Grubb
Title:   Vice President

By:    /s/ Kelton Glasscock    
Name: Kelton Glasscock
Title:   Senior Vice President

JPMORGAN CHASE BANK, N.A., Lender

By:    /s/ Stephanie Balette    
Name: Stephanie Balette
Title:   Authorized Officer

MIZUHO BANK, LTD., Lender

By:    /s/ Leon Mo    
Name: Leon Mo
Title:   Authorized Signatory

WELLS FARGO BANK, NATIONAL ASSOCIATION, Lender and an L/C Issuer

By:    /s/ Douglas McDowell    
Name: Douglas McDowell
Title:   Managing Director

BANK OF MONTREAL, Lender

By:    /s/ Matthew Davis    
Name: Matthew Davis
Title:   Vice President

S-3    PMLP 4th Amendment

BARCLAYS BANK PLC, Lender

By:    /s/ Christopher Aitkin    
Name: Christopher Aitkin
Title:   Assistant Vice President

 
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, Lender

By:    /s/ Trudy Nelson    
Name: Trudy Nelson
Title:   Authorized Signatory

By:    /s/ Richard Antl    
Name: Richard Antl
Title:   Authorized Signatory

COMPASS BANK, Lender

By:    /s/ Mark H. Wolf    
Name: Mark H. Wolf
Title:   Senior Vice President

MORGAN STANLEY BANK, N.A., Lender

By:    /s/ Michael King    
Name: Michael King
Title:   Authorized Signatory

ROYAL BANK OF CANADA, Lender, 
and further agrees, pursuant to Section 2.14 of the 
Credit Agreement, to extend its Maturity Date from 
August 16, 2018 to August 16, 2020

By:    /s/ Kristan Spivey    
Name:  Kristan Spivey
Title:   Authorized Signatory

S-4    PMLP 4th Amendment

SUMITOMO MITSUI BANKING CORPORATION, Lender

By:    /s/ James D. Weinstein    
Name: James D. Weinstein
Title:   Managing Director

SUNTRUST BANK, Lender

By:    /s/ Chulley Bogle    
Name: Chulley Bogle
Title:   Vice President

THE BANK OF NOVA SCOTIA, Lender

By:    /s/ Mark Sparrow    
Name: Mark Sparrow
Title:   Director

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Lender

By:    /s/ Stephen W. Warfel    
Name: Stephen W. Warfel
Title:   Managing Director

UBS AG, STAMFORD BRANCH, Lender

By:        
Name:
Title:

By:        
Name:
Title:

S-5    PMLP 4th Amendment

DEUTSCHE BANK AG NEW YORK BRANCH, Lender

By:    /s/ Ming K Chu    
Name: Ming K Chu
Title:   Director

By:    /s/ Virginia Cosenza    
Name: Virginia Cosenza
Title:   Vice President

FIFTH THIRD BANK, Lender

By:    /s/ Larry Hayes    
Name: Larry Hayes
Title:   Director

By:    /s/ Charles Ritchie    
Name: Charles Ritchie
Title:   Vice President

ING CAPITAL LLC, Lender

By:    /s/ Cheryl LaBelle    
Name: Cheryl LaBelle
Title:   Managing Director

By:    /s/ Hans Beekmans    
Name: Hans Beekmans
Title:   Director

PNC BANK, NATIONAL ASSOCIATION, Lender

By:    /s/ Stephen Monto    
Name: Stephen Monto
Title:   SVP

S-6    PMLP 4th Amendment

REGIONS BANK, Lender

By:    /s/ David Valentine    
Name: David Valentine
Title:   Managing Director

U.S. BANK NATIONAL ASSOCIATION, Lender

By:    /s/ Patrick Jeffrey    
Name: Patrick Jeffrey
Title:   Vice President

S-7    PMLP 4th Amendment

SCHEDULE A
PMLP EXTENDING AND NON-EXTENDING LENDERS
EXTENDING LENDERS:
Bank of America, N.A.
Citibank, N.A.
Société Generalé
BNP Paribas
DNB Capital LLC
JPMorgan Chase Bank, N.A.
Mizuho Bank, Ltd.
Wells Fargo Bank, National Association
Bank of Montreal
Barclays Bank PLC
Canadian Imperial Bank of Commerce, New York Agency
Compass Bank
Morgan Stanley Bank, N.A.
Royal Bank of Canada
Sumitomo Mitsui Banking Corporation
SunTrust Bank
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Deutsche Bank AG New York Branch
Fifth Third Bank
ING Capital LLC
PNC Bank, National Association
Regions Bank
U.S. Bank National Association

NON-EXTENDING LENDERS:
UBS AG, Stamford Branch

PMLP 4th  Amendmentex_98910.htm

Exhibit 10.3

 

November 6, 2017

 

Scott K. Murcray, CPA

 

Re: Amended and Restated Offer Letter

 

Dear Scott:

 

As you know, you are currently employed by AirXpanders, Inc. (the “Company”) pursuant to the terms of the offer letter you entered into with the Company on May 2, 2016 (the “Offer Letter”). As discussed, you and the Company hereby agree to amend and restate the Offer Letter. The terms and conditions set forth in this offer letter (the “Amended Offer Letter”) shall become effective as of October 25, 2017 (the “Effective Date”), and shall supersede and replace the terms and conditions set forth in the Offer Letter. 

 

You shall remain employed in the position of Chief Financial Officer and Chief Operating Officer (CFO/COO), reporting to me, the President and CEO. As a CFO/COO, you will continue to perform the duties typical for such a position, as assigned by your supervisor. In addition, you will continue to devote your full energies, abilities and productive business time to the performance of your job for the Company and will not engage in any activity that would in any way interfere or conflict with the full performance of any of your duties for the Company. 

 

Salary and Benefits.

 

You will receive a salary paid at the annual rate of $273,000, less payroll deductions and withholdings, which will be paid semi-monthly in accordance with the Company’s normal payroll procedures. Your salary will be reviewed annually in accordance with the Company’s normal review process.

 

In addition, you will continue to be eligible to participate in the executive cash bonus plan adopted by the Board, at the discretion of the Board subject to the terms and conditions of such plan and any written notice to you.

 

As an employee, you will continue to be eligible to receive health care benefits (95% employee/ 80% dependents) for medical, dental and vision. Other Company benefits include Life Insurance and a 401k plan for employee-based contributions. As an Executive of the Company, you may take a reasonable amount of time off with pay, in accordance with the Company’s Non-Accrual Paid Time Off Policy. You should note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary. 

 

Equity Compensation / Accelerated Vesting in Connection with Change in Control.

 

In connection with the commencement of your employment, on August 15, 2016, the Company’s Board of Directors (the “Board”) granted you an option to purchase 240,000 shares of the Company’s Common Stock (the “Option”) under the terms of the Company’s 2015 Equity Incentive Plan (the “Plan”) and as documented in the Option grant notice and Option agreement executed by you and the Company (the “Option Documents”). Except as set forth in this paragraph, the Option shall remain subject to the terms and conditions of the Plan and the Option Documents. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continued vesting or employment.

 

As an additional benefit to you, in the event of a Change in Control (as defined below) that occurs during your employment with the Company, the vesting of the then-unvested shares subject to the Option shall be accelerated such that fifty percent (50%) of such shares shall be deemed immediately vested and exercisable as of immediately prior to the effective closing date of such Change in Control (the “Accelerated Vesting”), and the remaining shares subject to the Option shall vest equally each month over the following twelve (12) months, provided that you make yourself reasonably available, if requested by the Company (or its successor), to provide services to the Company (or its successor). This Accelerated Vesting shall also be conditioned upon your signing and delivering to the Company (or its successor) an effective release of claims agreement in the form and under the terms provided at that time by the Company (or its successor) and your continued compliance with the terms of this Amended Offer Letter and the Agreement (as defined below). 

 

Protection of Third Party Information / Compliance with Confidentiality Agreement and Company Policies.

 

You agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. 

 

In your work for the Company, you are expected not to make any unauthorized use or disclosure of any confidential or proprietary information, including trade secrets, of any former employer or other third party to whom you have contractual obligations to protect such information. Rather, you are expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is provided or developed by the Company. You represent and agree that you are not in unauthorized possession of, and will not to bring onto Company premises, any former employer or third party confidential information or property. 

 

You are expected to continue to abide by the Company’s rules, policies and standards (including, but not limited to, the Company’s Employee Handbook), as adopted or modified by the Company from time to time. You remain subject to the terms of the Company’s Employee Confidential Information and Invention Assignment Agreement that you signed on May 4, 2016 (the “Agreement”), which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information. 

 

At-Will Employment; Severance.

 

At-Will Employment. Your employment with the Company remains at-will and is for no specified period. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to terminate its employment relationship with you at any time, with or without Cause (as defined below), and with or without advance notice. We request that, in the event of your employment resignation, you give the Company at least two weeks’ notice. Your employment at-will status can only be modified in a written agreement signed by you and the Chief Executive Officer of the Company. 

 

Termination without Cause. If, at any time, the Company terminates your employment without Cause (and other than as a result of your death or disability), and provided such termination constitutes a Separation from Service (as defined below) (such termination, a “Qualifying Termination”), then subject to your signing and delivering to the Company an effective Release and your continued compliance with the terms of the Agreement, the Company will provide you with the following severance benefits: 

 

(a)     Cash Severance. The Company will pay you, as cash severance, six (6) months of your base salary in effect as of your Separation from Service date, less standard payroll deductions and tax withholdings (the “Cash Severance”). The Cash Severance will be paid in installments in the form of continuation of your base salary payments, paid on the Company’s ordinary payroll dates, commencing on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date, and shall be for any accrued base salary for the sixty (60)-day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable, and all salary continuation payments thereafter, if any, shall be made on the Company’s regular payroll dates.

 

(b)     COBRA Severance. The Company will continue to pay the cost of your health care coverage in effect at the time of your Separation from Service for a maximum of six (6) months, either under the Company’s regular health plan (if permitted), or by paying your COBRA premiums (the “COBRA Severance”). The Company's obligation to pay the COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law. You must notify the Company within two (2) weeks if you obtain coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (each payment, a “Special Payment”) (which amount shall be based on the premium for the first month of COBRA coverage), which Special Payments shall be made on the last day of each month regardless of whether you elect COBRA continuation coverage and shall end on the earlier of (x) the date upon which you obtain other coverage or (y) the last day of the sixth (6th) calendar month following your Separation from Service date. The first installment of any Special Payment, including any installments that you would have otherwise received earlier, will be made in the month that the Release becomes effective, but, if the Release Period spans two (2) calendar years, you will not be paid any Special Payments until the second calendar year.

 

Resignation; Termination for Cause; Death or Disability. If, at any time, you resign your employment for any reason, or the Company terminates your employment for Cause, or if either party terminates your employment as a result of your death or disability, you will receive your base salary accrued through your last day of employment, as well as any unused vacation (if applicable) accrued through your last day of employment. Under these circumstances, you will not be entitled to any other form of compensation from the Company, including any Cash Severance, COBRA Severance or Accelerated Vesting, other than your rights to the vested portion of your Option and any other rights to which you are entitled under the Company’s benefit programs.

 

Conditions to Receipt of Cash Severance and COBRA Severance. Prior to and as a condition to your receipt of the Cash Severance and COBRA Severance described above, you shall execute and deliver to the Company an effective release of claims in favor of and in a form acceptable to the Company (the “Release”) within the timeframe set forth therein, but not later than forty-five (45) days following your Separation from Service date and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within any applicable time period set forth therein (such latest permitted effective date, the “Release Deadline”).

 

Definitions. 

 

For purposes of this Amended Offer Letter, the following terms shall have the following meanings:

 

“Cause” for termination will mean your: (a) commission or conviction (including a guilty plea or plea of nolo contendere) of any felony or any other crime involving fraud, dishonesty or moral turpitude; (b) your commission or attempted commission of or participation in a fraud or act of dishonesty or misrepresentation against the Company; (c) material breach of your duties to the Company; (d) intentional damage to any property of the Company; (e) misconduct, or other violation of Company policy that causes harm; (f) your material violation of any written and fully executed contract or agreement between you and the Company, including without limitation, material breach of the Agreement, or of any Company policy, or of any statutory duty you owe to the Company; or (g) conduct by you which in the good faith and reasonable determination of the Company demonstrates gross unfitness to serve. The determination that a termination is for Cause shall be made by the Company in its sole discretion.

 

“Change in Control” shall have the meaning set forth in the Plan, as amended from time to time. 

 

“Separation from Service” shall mean a “separation from service” as such term is defined in Treasury Regulation Section 1.409A-1(h).

 

Compliance with Section 409A. 

 

It is intended that the Cash Severance, COBRA Severance and Accelerated Vesting set forth in this Amended Offer Letter satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) (Section 409A, together with any state law of similar effect, “Section 409A”) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), your right to receive any installment payments under this Amended Offer Letter (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Amended Offer Letter, if the Company (or, if applicable, the successor entity thereto) determines that the Cash Severance, COBRA Severance or Accelerated Vesting constitute “deferred compensation” under Section 409A and you are, on the date of your Separation from Service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code (a “Specified Employee”), then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Cash Severance, COBRA Severance and Accelerated Vesting shall be delayed until the earliest of: (i) the date that is six (6) months and one (1) day after your Separation from Service date, (ii) the date of your death, or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this paragraph shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. If the Cash Severance, COBRA Severance and Accelerated Vesting benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which you have a Separation from Service, the Release will not be deemed effective any earlier than the Release Deadline. The Cash Severance, COBRA Severance and Accelerated Vesting benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.

 

Section 280G; Parachute Payments.

 

(a)     If any payment or benefit you will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Amended Offer Letter (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for you. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

(b)     Notwithstanding any provision of subsection (a) above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are "deferred compensation" within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

(c)     Unless you and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change in control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this section of the Amended Offer Letter. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen (15) calendar days after the date on which your right to a 280G Payment becomes reasonably likely to occur (if requested at that time by you or the Company) or such other time as requested by you or the Company.

 

(d)     If you receive a Payment for which the Reduced Amount was determined pursuant to clause (x) of subsection (a) of this section of this Amended Offer Letter and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of subsection (a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of subsection (a), you shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

Dispute Resolution.

 

To ensure the timely and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Amended Offer Letter, or your employment, or the termination of your employment, including but not limited to all statutory claims, shall be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration by a single arbitrator conducted in San Francisco, California, by Judicial Arbitration and Mediation Services Inc. (“JAMS”) under the then applicable JAMS rules, available upon request and also currently available at http://www.jamsadr.com/rules-employment-arbitration/). A hard copy of the rules will be provided to you upon request. By agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. To the maximum extent permitted by applicable law, all claims, disputes, or causes of action under this section, whether by you or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity. The Arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration. This paragraph shall not apply to an action or claim brought in court pursuant to the California Private Attorneys General Act of 2004, as amended. The Company acknowledges that you will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration under this agreement) shall be decided by the arbitrator. Likewise, procedural questions which grow out of the dispute and bear on the final disposition are also matters for the arbitrator. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award; and (c) be authorized to award any or all remedies that you or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of you if the dispute were decided in a court of law. Nothing in this Amended Offer Letter is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

 

Miscellaneous.

 

This Amended Offer Letter, along with the Agreement, forms the complete and exclusive agreement regarding your employment with the Company. It supersedes any prior representations or agreements, whether oral or written, including but not limited to, the Offer Letter. Except for those changes expressly reserved to the Company’s discretion, the terms in this letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by an authorized officer or member of the Board of the Company and you. If any provision of this Amended Offer Letter is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Amended Offer Letter and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.

 

To accept the Company’s Amended Offer Letter, please sign and date this letter in the space provided below and return it to the Company by the close of business on November 3, 2017. If you choose to electronically submit your signed offer of employment, please send to my confidential email at sdodson@airxpanders.com or my confidential fax 650-390-9002.

 

We look forward to your favorable reply and continuing to work with you at AirXpanders, Inc.

 

 

Sincerely,

 

/s/ Scott Dodson

 

Scott Dodson

President and CEO

AirXpanders, Inc.

 

Agreed to and accepted:

 

Signature:     /s/ Scott Murcray

 

Date: November 6, 2017

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