Document:

Exhibit 10.1

 

Execution Copy

 

	
 
    
	
 
    
	
TERMINATION AND TRANSFER AGREEMENT
    
	
 
    
	
dated as of May 12, 2011
    
	
 
    
	
among
    
	
 
    
	
Sempra Energy Trading LLC,
    
	
 
    
	
MXenergy Inc.
    
	
 
    
	
MXenergy Electric Inc.
    
	
 
    
	
MXenergy Holdings Inc.
    
	
 
    
	
and
    
	
 
    
	
Constellation Energy Commodities Group, Inc.
    
	
 
    
	
 
    

 

 

Table of Contents

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I REDEMPTION,   TERMINATION, TRANSFER AND RELEASE
    	
2
    
	
 
    	
 
    
	
Section 1.01 Redemption   and Termination of Sempra Interests
    	
2
    
	
Section 1.02   Termination of Supply Arrangements
    	
3
    
	
Section 1.03   Termination of SET Collateral Arrangements
    	
3
    
	
Section 1.04 Payment;   Allocation of Payment
    	
3
    
	
Section 1.05 Termination   of Third Party Credit Support
    	
4
    
	
Section 1.06   Performance, Transfer and Termination of Transactions
    	
4
    
	
Section 1.07 Gas Adder   and Energy Adder
    	
7
    
	
Section 1.08 Transfer   and Release of Gas Assets and Electricity Assets; Purchase of Stored Gas
    	
7
    
	
Section 1.09   Termination of Scheduling Obligations
    	
8
    
	
Section 1.10 Mutual   Release
    	
8
    
	
 
    	
 
    
	
ARTICLE II REPLACEMENT CREDIT   SUPPORT
    	
8
    
	
 
    	
 
    
	
Section 2.01   Replacement Credit Support
    	
8
    
	
Section 2.02 Letter of   Credit
    	
8
    
	
 
    	
 
    
	
ARTICLE III REGULATORY   APPROVALS AND FEES
    	
9
    
	
 
    	
 
    
	
Section 3.01 Regulatory   Approvals and Filings
    	
9
    
	
Section 3.02 Monthly   Transition Fee
    	
10
    
	
 
    	
 
    
	
ARTICLE IV EVENTS OF DEFAULT;   REMEDIES
    	
10
    
	
 
    	
 
    
	
Section 4.01 Events of   Default
    	
10
    
	
Section 4.02 Remedies
    	
11
    
	
Section 4.03 Indemnity
    	
12
    
	
 
    	
 
    
	
ARTICLE V DEFINITIONS
    	
12
    
	
 
    	
 
    
	
Section 5.01   Definitions
    	
12
    
	
 
    	
 
    
	
ARTICLE VI CLOSING; CONDITIONS   PRECEDENT
    	
18
    
	
 
    	
 
    
	
Section 6.01 Conditions   Precedent to Obligations of SET
    	
18
    
	
Section 6.02 Closing
    	
18
    
	
Section 6.03 Consent to   Merger
    	
19
    
	
Section 6.04 Release or   Assignment of Liens
    	
19
    
	
 
    	
 
    
	
ARTICLE VII CONSENTS,   COOPERATION AND REPORTING; FURTHER ASSURANCES; ETC.
    	
20
    

 

i

 

	
Section 7.01 Consent
    	
20
    
	
Section 7.02 No Third   Party Consents
    	
21
    
	
Section 7.03   Cooperation; Transaction Progress Reporting
    	
21
    
	
Section 7.04 Further   Assurances
    	
21
    
	
Section 7.05 No Merger   Before Closing Date
    	
21
    
	
Section 7.06 Amendment   to Original ISDAs
    	
21
    
	
Section 7.07 No   Amendment
    	
21
    
	
 
    	
 
    
	
ARTICLE VIII MISCELLANEOUS
    	
21
    
	
 
    	
 
    
	
Section 8.01   Interpretation
    	
21
    
	
Section 8.02   Representations and Warranties of the Parties
    	
22
    
	
Section 8.03   Representations and Warranties of MX Holdings and the MX Companies
    	
23
    
	
Section 8.04   Representation and Warranty of CECG
    	
23
    
	
Section 8.05   Representations and Warranties of SET
    	
23
    
	
Section 8.06 Notices
    	
23
    
	
Section 8.07 No Joint   Venture or Joint Liability
    	
24
    
	
Section 8.08 Headings
    	
24
    
	
Section 8.09   Severability
    	
24
    
	
Section 8.10 Entire   Agreement
    	
24
    
	
Section 8.11 Successors   and Assigns
    	
25
    
	
Section 8.12 No   Third-Party Beneficiaries
    	
25
    
	
Section 8.13 Amendment   and Modification; Waiver
    	
25
    
	
Section 8.14 Governing   Law; Submission to Jurisdiction
    	
25
    
	
Section 8.15 Waiver of   Jury Trial
    	
25
    
	
Section 8.16   Counterparts
    	
26
    

 

EXHIBITS AND SCHEDULES

 

	
Exhibit A
    	
Merger Agreement
    
	
Exhibit B
    	
Transferee Certificate
    
	
 
    	
 
    
	
Schedule 1.02(A)
    	
Form of Amended and Restated Electric ISDA
    
	
Schedule 1.02(B)
    	
Form of Amended and Restated Gas ISDA
    
	
Schedule 1.04
    	
Allocation of Consideration
    
	
Schedule   1.06(k)
    	
SET   Hedges; MX Load Forecasts
    
	
Schedule   1.06(k)(2)
    	
Process   for Entering Into and Confirming all New SET Hedges
    
	
Schedule   2.02
    	
Form of   Letter of Credit
    

 

ii

 

Execution Copy

 

TERMINATION AND TRANSFER AGREEMENT

 

Termination and Transfer Agreement, dated as of May 12, 2011 (this “Agreement”), among Sempra Energy Trading LLC, a Delaware limited liability company (“SET”), MXenergy Inc., a Delaware corporation (“MX”), MXenergy Electric Inc., a Delaware corporation (“MX Electric”), MXenergy Holdings Inc., a Delaware corporation (“MX Holdings”), and Constellation Energy Commodities Group, Inc., a Delaware corporation (“CECG”).

 

RECITALS:

 

WHEREAS, MX Holdings is entering into a transaction (the “Merger”) pursuant to which all of the issued and outstanding shares of MX Holdings will be acquired in the manner described in the Merger Agreement (as defined below);

 

WHEREAS, SET owns the Class B Shares, the Class C Shares and certain restricted share units (“RSUs”) issued by MX Holdings pursuant to its equity compensation plan;

 

WHEREAS, SET and MX (an Affiliate of MX Holdings) have entered into that certain ISDA Master Agreement, dated as of September 22, 2009, (as amended, restated or otherwise modified from time to time and together with all schedules, annexes and amendments thereto, the “Original Gas ISDA”);

 

WHEREAS, SET and MX Electric (an Affiliate of MX Holdings) have entered into that certain ISDA Master Agreement, dated as of September 22, 2009, as amended, restated or otherwise modified from time to time and together with all schedules, annexes and amendments thereto, the “Original Electric ISDA”, and together with the Gas ISDA, the “Original ISDAs”);

 

WHEREAS, the parties have determined that the services provided by SET to the MX Companies pursuant to the Original ISDAs will no longer be necessary;

 

WHEREAS, in connection with SET’s termination of services to the MX Companies, CECG will enter into hedging arrangements with SET and agrees to accept the novation of certain transactions executed by SET on behalf of the MX Companies;

 

WHEREAS, the parties desire to provide in this Agreement for, among other things: (i) the termination of certain commercial arrangements related to, and the amendment and restatement of, the Original ISDAs; (ii) the termination or transfer of certain transactions entered into under the Original ISDAs and certain corresponding hedge transactions; (iii) the termination of MX’s and MX Electric’s obligation to provide credit support to SET with respect to the obligations of the MX Companies under the Original ISDAs; (iv) the redemption of all Shares and the termination of all RSUs held by SET; and (v) certain other obligations of the MX Companies related to the transactions contemplated by this Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereby agree as follows:

 

 

ARTICLE I
 REDEMPTION, TERMINATION, TRANSFER AND RELEASE

 

Section 1.01         Redemption and Termination of Sempra Interests.

 

(a)           At the Closing, SET shall: (i) sell, transfer, assign and deliver to MX Holdings and MX Holdings shall purchase and redeem all of the Shares; (ii) deliver to MX Holdings all of the certificates representing the Shares, free and clear of any Liens, duly endorsed in blank or accompanied by a stock proxy or other instrument of transfer acceptable to MX Holdings; and (iii) acknowledge (by documentation reasonably acceptable to MX Holdings) that the RSUs have been terminated.

 

(b)           SET hereby acknowledges and agrees that:

 

(i)            MX Holdings is simultaneously entering into the Merger Agreement pursuant to which all of the issued and outstanding shares of MX Holdings will be acquired;

 

(ii)           SET is fully aware of the consideration to be paid to the stockholders of MX Holdings as specified in the Merger Agreement;

 

(iii)          the amount payable to SET upon the redemption of the Shares and the termination of the RSUs pursuant to this Agreement may be less than the amount that would be payable to SET upon the consummation of the Merger if SET were a stockholder of MX Holdings at the closing of the Merger;

 

(iv)          as a result of the redemption of the Shares and the termination of the RSUs pursuant to this Agreement, SET will not be a “Securityholder” under the Merger Agreement and will not have any right to receive any portion of the consideration payable to the stockholders of MX Holdings pursuant to the terms of the Merger Agreement, and the Shares shall irrevocably be deemed to be redeemed and cancelled in full for all purposes and all of SET’s right title and interest in and to the RSUs shall be deemed to be terminated and cancelled in full for all purposes.

 

(c)           At the Closing, SET shall deliver to MX Holdings and CECG a written release stating that it irrevocably releases, acquits and forever discharges MX Holdings, CECG, their respective Affiliates and their respective officers, directors, stockholders, trustees, employees, principals, agents, personal or legal representatives, insurers and attorneys from any and all Claims, past, present or future, whether known or unknown, contingent or otherwise, relating to or arising out of: (i) the ownership of the Sempra Interests or any other interests in MX Holdings (including any right to receive any portion of the amount payable to the stockholders of MX Holdings upon the consummation of the Merger) or the governance or operation of the business and affairs of MX Holdings and its subsidiaries; and (ii) subject to compliance by MX Holdings and CECG with Section 7.05 and Section 7.07, the execution and delivery by MX Holdings and any Affiliate of CECG of the Merger Agreement or the consummation of the Merger.

 

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Section 1.02         Termination of Supply Arrangements.  Effective as of the Closing, but subject to compliance by the MX Companies with Section 1.04, the Original Electric ISDA and the Original Gas ISDA shall each be amended and restated in the forms attached hereto as Schedule 1.02(A) and Schedule 1.02(B), respectively (the Original Electric ISDA and the Original Gas ISDA, as so amended, the “A&R Electric ISDA” and the “A&R Gas ISDA,” respectively), and, except as set forth in the A&R ISDAs, the obligations of SET to supply Gas and Products to MX or MX Electric shall be terminated and of no further force and effect.  In the event the Closing Date occurs on or before July 1, 2011, the MX Companies shall be entitled to a credit in the amount of one hundred seventy-five thousand dollars ($175,000) toward any payment obligations under the A&R ISDAs.

 

Section 1.03         Termination of SET Collateral Arrangements.  Effective upon the Closing and SET’s receipt of the Replacement Credit Support:

 

(a)           all ISDA  Security Documents (as defined in the Original ISDAs) shall be terminated and shall be of no further force and effect;

 

(b)           immediately upon payment pursuant to Section 1.04, SET shall release its liens and security interest in the personal property of MX, MX Electric and each Specified Entity (with UCC-3 Financing Statements to be filed by MX or MX Electric);

 

(c)           immediately upon issuance of directions pursuant to Section 6.03(f)(v), SET shall terminate its control over the Collateral Accounts (as defined in the Original ISDAs) pursuant to a termination letter that is in form and substance acceptable to the MX Companies; and

 

(d)           SET shall deliver to MX and MX Electric, upon request, executed instructions to MX’s and MX Electric’s payors, in form and substance satisfactory to SET, MX and MX Electric, terminating SET’s irrevocable payment instructions previously delivered to such payors and permitting MX and MX Electric or their respective designees to provide such payors with new payment instructions.

 

Section 1.04         Payment; Allocation of Payment.  At the Closing, the MX Companies shall:

 

(a)           pay to SET in immediately available funds $16,050,000;

 

(b)           pay to SET all principal and accrued and unpaid interest and fees on all Loans (as defined in the Original ISDAs) outstanding, if any, but excluding any “SG Exposure Fees” (as defined in the Original ISDAs), which are reflected in the payment amount set forth in clause (a)); and

 

(c)           pay to SET other amounts, if any (other than for the purchase of Gas in storage), the Settlement Dates (as defined in the applicable Original ISDA) of which have occurred on or before the Closing Date, including any accrued Financing Fees (as defined in the Original ISDAs) owed with respect thereto;

 

provided, however, that the MX Companies agree that, at the Closing, SET shall apply any cash margin in SET’s possession pursuant to the Original ISDAs to satisfy the obligations of the MX

 

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Companies pursuant to clauses (a), (b) and (c) above, and that the MX Companies shall be responsible for the payment of any remaining balance with respect to such amount.  The parties hereto agree that the payment made pursuant to Section 1.04(a) shall be allocated between the redemption price for the Sempra Interests and other consideration as set forth on Schedule 1.04.

 

Section 1.05         Termination of Third Party Credit Support.

 

(a)           The MX Companies and SET shall each use commercially reasonable efforts and cooperate to terminate and extinguish, as soon as practicable following the Closing Date: (i) SET’s obligations pursuant to Third Party Credit Support; and (ii) SET’s potential liability to any ISOs, EDCs, LDCs, Transmission Providers and Transporters arising in connection with (A) the service of load by SET for the MX Companies or any of their Affiliates, or (B) SET’s acting as a Qualified Scheduling Entity for MX Electric.

 

(b)           Without limiting Section 1.05(a), the MX Companies and SET shall: (i) execute all documents as may be reasonably necessary to evidence the replacement of SET as a provider of services on behalf of the MX Companies to ISOs, EDCs, LDCs, Transmission Providers and Transporters; (ii) exercise commercially reasonable efforts (without the obligation of any party to make any additional payment to any third party) to cause each holder of Third Party Credit Support and each third party to whom a potential liability may be owed by SET (as described in Section 1.05(a)) to acknowledge in writing to SET that SET’s obligations under any Third Party Credit Support held by such third party and/or any such liabilities have been terminated and extinguished and that SET has no liability with respect to such Third Party Credit Support and/or liabilities for any period on, before or after the Closing Date (such acknowledgement, a “Termination Acknowledgement”).

 

Section 1.06         Performance, Transfer and Termination of Transactions.

 

(a)           Exchange Traded Transactions.  Promptly following the Closing Date (and in no event later than the settlement date for any Exchange Traded Transactions for delivery after the First Month), all SET Hedges that that are cleared or traded on or through an exchange (the “Exchange Traded Transactions”) shall be transferred via one or more ex-pit transactions by SET to CECG.  Such ex-pit transactions shall be on such terms and conditions as may be agreed between SET and CECG.  SET shall have no obligation to post any margin and each party to such transfer shall be responsible for payment of any transactions costs imposed on it in connection with such transfer.  Upon the transfer of each Exchange Traded Transaction to CECG pursuant to this Section 1.06(a): (i) any corresponding MX Transactions that have not been novated as of such time shall simultaneously be novated by SET to CECG; and (ii) CECG shall settle with SET, and SET shall settle with CECG, for any change between the original (nominal) price paid by SET and the ex-pit transfer price.  Such settlement may require payment by either SET or CECG, depending on the direction of the change in price.

 

(b)           Continuing Performance.  All Outstanding Transactions that are outstanding as of the Closing Date shall be performed and settled in accordance with their terms by SET, MX and/or MX Electric, in each case as applicable, until such time as they are novated, terminated or liquidated in accordance with the terms of this Agreement.

 

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(c)           Novation of Financially-Settled Transactions.  On the Closing Date, SET shall novate to CECG SET’s positions under all of the financially-settled MX Gas Transactions and all of the financially-settled MX Electric Transactions (excluding any portion of such transactions that hedge MX’s or MX Electric’s delivery obligations during the First Month).  Such novations shall be at no cost to any party other than that provided in Section 1.06(f).

 

(d)           Novation of Transactions for Physical Delivery.  SET, CECG and the MX Companies shall use their commercially reasonable efforts to novate to CECG as soon as reasonably practicable after the Closing Date, SET’s positions under all of the MX Gas Transactions and all of the MX Electric Transactions that involve the physical delivery of Gas or Products in any month following the First Month; provided that this Section 1.06(d) shall not apply to transactions for the delivery of Gas from inventory.  Such novations shall be at no cost to any party other than that provided in Section 1.06(f).

 

(e)           Novation of SET Hedges.  SET and CECG shall use their commercially reasonable efforts to novate to CECG as soon as reasonably practicable after the Closing Date, SET’s positions under the SET Hedges.

 

(f)            Novation Payments.  With respect to each MX Electric Transaction and MX Gas Transaction novated to CECG pursuant to Sections 1.06(c) and 1.06(d), the MX Companies shall pay to SET an amount equal to the buy/sell spread between the contract price in such transaction (less any price adjustment for the elimination of Gas Adders and Energy Adders as described in Section 1.07 and, in the case of MX Gas Transactions, any component of such price associated with storage withdrawal or transportation to the applicable city-gate) and the contract price in the corresponding SET Hedge discounted to present value as of the effective date of the novation at a rate equal to the LIBOR Rate plus 2.25%.  The parties acknowledge and agree that any Outstanding Transaction that is to be novated shall be novated pursuant to a novation agreement that is in form and substance acceptable to SET.

 

(g)           SET Counter-Hedges.  If, as a result of SET’s novation of any MX Gas Transaction or any MX Electric Transaction pursuant to Section 1.06(c) or 1.06(d), SET would hold any Unmatched SET Hedges, CECG shall, simultaneously with such novation, execute transactions (each, an “SET Counter-Hedge”) with SET pursuant to the CECG ISDA Agreement.  Each such SET Counter-Hedge shall: (i) be at the same prices and shall include all of the same economic terms as set forth in the corresponding Unmatched SET Hedge; and (ii) terminate upon the novation or termination of such corresponding Unmatched SET Hedge.

 

(h)           Transfer Deadline and Liquidation.  If on or before the date that is forty-five (45) days after the Closing Date CECG or SET reasonably expect that one or more of the Outstanding Transactions will not be novated to CECG prior to the date that is the earlier of ninety-one (91) days after the Closing Date and October 31, 2011 (such date, the “Trigger Date”), SET and CECG shall negotiate in good faith the terms and conditions that would govern CECG’s appointment as SET’s agent to service such Outstanding Transactions (including any corresponding SET Counter-Hedges) from the Trigger Date forward at no cost to SET.  If CECG and SET have not agreed on the terms and conditions that would govern such agency arrangement by the Trigger Date, then, with respect to any Outstanding Transaction that has not been novated to CECG as of such date, for any reason other than the failure of SET to act in

 

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good faith and use its commercially reasonable efforts to accomplish such novation (without the obligation for SET to make any additional payment to any third party), SET, at its option, may:  (i) novate its position under such Outstanding Transaction (and in the case of SET Hedges, any corresponding SET Counter-Hedge, if applicable) to The Royal Bank of Scotland plc or such other Creditworthy Third Party as may be reasonably acceptable to CECG (such acceptance not to be unreasonably withheld, conditioned or delayed), in which case the MX Companies or CECG, as applicable, will provide credit support to the assignee that is materially the same as that provided to SET pursuant to the A&R ISDAs or the CECG ISDA Agreement, as applicable, with respect to such transactions or otherwise reasonably acceptable to the MX Companies and/or CECG, as applicable; (ii) continue to perform such Outstanding Transaction and, if applicable, any corresponding SET Counter-Hedge for a monthly fee of $200,000 as set forth in Section 3.02; or (iii) terminate and liquidate such Outstanding Transaction and, if applicable, any corresponding SET Counter-Hedge in accordance with Section 1.06(i).

 

(i)            Termination and Liquidation.  With respect to the termination and liquidation of any MX Gas Transaction or any MX Electric Transaction pursuant to clause (iv) of Section 1.06(h), the MX Companies shall pay to SET an amount equal to the buy/sell spread between the contract price in such transaction (less any price adjustment for the elimination of Gas Adders and Energy Adders as described in Section 1.07 and, in the case of MX Gas Transactions, any component of such price associated with storage withdrawal or transportation to the applicable city-gate) and the contract price in the corresponding SET Hedge discounted to present value as of the effective date of the novation at a rate equal to the LIBOR Rate plus 2.25%.  With respect to the termination and liquidation of any SET Hedges pursuant to clause (iv) of Section 1.06(h), SET shall negotiate the terms of such termination and liquidation in good faith (and without any consideration, stated or unstated, pertaining to any other transaction) and in the event SET incurs any out-of-pocket costs or losses on the liquidation of such SET Hedge, MX or MX Electric, as the case may be, shall pay SET 50% of such costs and losses, if any.

 

(j)            Minimum Quantities; Extension.  In consideration of a portion of the amount being paid to SET pursuant to Section 1.04(a) (as described in Schedule 1.04), SET agrees that, effective as of the occurrence of the Closing, the “Minimum Gas Quantity” (as defined in Part 7(a)(ii) of the Schedule to the Original Gas ISDA) and the “Minimum Energy Quantity” (as defined in Part 7(a)(v) of the Schedule to the Original Electric ISDA) shall cease to be applicable for any reason, including in connection with determining payments to be made with respect to any terminated or novated transaction.  Effective as of the date hereof, SET agrees that it will not exercise its right to extend the “Termination Date” (as defined in and as contemplated by Part 5(h) of the Schedules to the Original ISDAs) on or prior to the Drop-Dead Date; provided, however, that if the Closing Date does not occur on or prior to the Drop-Dead Date, SET shall be permitted to exercise its right to extend such “Termination Date” as contemplated by Part 5(h) of the Schedule to the Original Gas ISDA and Part 5(h) of the Schedule to the Original Electric ISDA.

 

(k)           New SET Hedges.  Part I of Schedule 1.06(k) sets forth all of the SET Hedges in place as of May 11, 2011.  On and after the effective date of this Agreement until the earlier of the Closing Date or the Drop-Dead Date:  (i) SET shall execute all new SET Hedges with CECG in the manner specified in Schedule 1.06(k)(2); and (ii) so long as the purchases of MX and MX Electric do not exceed their respective load forecasts as shown in Part II of Schedule 1.06(k),

 

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SET shall execute corresponding MX Gas Transactions with MX and corresponding MX Electric Transactions with MX Electric on the same prices as those set forth in such SET Hedges.

 

(l)            Effective Date of Novations.  All novations executed by the parties pursuant to Section 1.06 shall be effective as of the first day of the calendar month following execution thereof.

 

Section 1.07         Gas Adder and Energy Adder.  The parties acknowledge and agree that from the date hereof through the Closing Date, all financially settled MX Gas Transactions and MX Electric Transactions shall not include any Gas Adder or Energy Adder; provided, however, that if the Closing Date does not occur on or before the Drop-Dead Date, SET shall be permitted to include the Gas Adder and Energy Adder in any financially settled MX Gas Transactions and MX Electric Transactions executed after such date.  The parties further acknowledge and agree that, to the extent any MX Transactions executed after the date hereof provide for physical delivery after the Closing Date, the MX Companies shall be entitled to a price credit for the full amount of all Gas Adders and Energy Adders applicable to such deliveries after the Closing Date; provided, however, that such credit shall not apply to MX Transactions for the purchase of Gas in inventory as described in Section 1.08(b).

 

Section 1.08         Transfer and Release of Gas Assets and Electricity Assets; Purchase of Stored Gas.

 

(a)           Transfer and Release of Gas Assets and Electricity Assets.  SET and the MX Companies will work together with CECG and all applicable ISOs, EDCs, LDCs, Transporters, Transmission Providers and regulatory bodies in a timely, cooperative and efficient manner, and will each execute all necessary documents required to: (i) effect the transfer to CECG of all of the Electricity Assets; (ii) effect the transfer, release to CECG of all of the Gas Assets (or the termination of control over such Gas Assets by SET, in form and substance acceptable to MX); and (iii) transfer the load associated with MX Electric’s retail customers from SET’s account(s) to the account(s) of CECG, in each case effective as soon as reasonably practicable after the Closing Date (but, in any event, no later than October 31, 2011).  SET shall cease to be the financially responsible party or Qualified Scheduling Entity with respect to MX Electric’s customer load in an ISO upon the release of the Electricity Assets with respect to such ISO.  Promptly after all of the Gas Assets have been transferred or released by SET, SET and MX shall terminate the Asset Management Agreement and SET hereby consents to such termination.

 

(b)           Purchase of Stored Gas.  Effective as of the transfer of any Gas Asset to CECG (or the termination of control over such Gas Asset by SET, in form and substance reasonably acceptable to MX), SET shall sell to MX, MX Holdings and/or CECG and MX, MX Holdings and/or CECG, as applicable, shall purchase from SET all of the Gas in inventory that is owned by SET for the purposes of satisfying any outstanding MX Gas Transactions and held in storage in or on such Gas Asset.  With respect to any Gas in inventory sold pursuant to this Section 1.08(b), the MX Companies shall pay to SET an amount equal to the purchase price for such Gas, as reflected in the applicable MX Gas Transaction (less any component of such price associated with storage withdrawal or transportation to the applicable city-gate), plus any accrued “Finance Fees” owed pursuant to the A&R Gas ISDA.  Upon the purchase and sale of

 

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any Gas pursuant to this Section 1.08(b), SET shall novate the corresponding MX Gas Transaction to CECG at no cost to CECG.

 

Section 1.09         Termination of Scheduling Obligations.  Following the Closing Date and until such time as the applicable Electricity Assets or Gas Assets are transferred to CECG, SET shall be responsible for the scheduling, nominating and other operational obligations with respect to the delivery of Gas and Products as set forth in the A&R ISDAs.  As the Electricity Assets and Gas Assets are transferred to CECG, SET shall be relieved of such responsibility with respect to the transferred Electricity Assets and/or Gas Assets.

 

Section 1.10         Mutual Release.  At the Closing, each of the MX Companies and MX Holdings shall execute and deliver to SET, and SET shall execute and deliver to each of the MX Companies and MX Holdings a written acknowledgement, in form and substance reasonably acceptable to the recipient, irrevocably releasing, acquitting and forever discharging the recipient party(ies), its or their Affiliates and their respective officers, directors, stockholders, trustees, employees, principals, agents, personal or legal representatives, insurers and attorneys from any and all Claims past, present or future, whether known or unknown, contingent or otherwise, sounding in tort that relate to or arise out of the Original ISDAs or the business relationship between SET and the MX Companies and MX Holdings with respect to such Original ISDAs; provided, however, that such release shall not affect in any way any contract Claim that a party to either of the A&R ISDAs may have pursuant to the terms of such agreements, regardless of whether such Claim arose prior to the Closing Date.

 

ARTICLE II
 REPLACEMENT CREDIT SUPPORT

 

Section 2.01         Replacement Credit Support.  On the Closing Date, CECG shall provide to SET: (i) a Letter of Credit satisfying the conditions of Section 2.02 that will be available to reimburse SET for any draws under any Third Party Credit Support and as credit support for the payment obligations specified in Section 3.02; and (ii) any additional credit support required pursuant to the A&R ISDAs.

 

Section 2.02         Letter of Credit.

 

(a)           The Letter of Credit shall be: (i) substantially in the form of Schedule 2.02 with such changes to the terms in that form as the Issuer of the Letter of Credit may require and as may be acceptable to SET or such other form as may be reasonably acceptable to SET; and (ii) in an amount equal to the sum of (A) the aggregate amount of SET’s Third Party Credit Support obligations as of the Closing Date, plus (B) $525,000 to secure the fees payable pursuant to Section 3.02 (the total of such amounts described in clauses (A) and (B), the “Letter of Credit Amount”).

 

(b)           The Letter of Credit shall be delivered by the Issuer to such address as SET shall specify and shall be maintained for the benefit of SET.  CECG shall: (i) cause the renewal of the Letter of Credit on a timely basis as provided in the Letter of Credit; (ii) if the Issuer has indicated its intent not to renew such Letter of Credit, provide a substitute Letter of Credit at least twenty (20) Business Days prior to the expiration of the outstanding Letter of Credit; (iii) if

 

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the Issuer fails to honor SET’s properly documented request to draw on the Letter of Credit, provide for the benefit of SET a substitute Letter of Credit that is issued by an Eligible Bank within one (1) Business Day after such refusal; and (iv) within one (1) Business Day of any draw made by SET against the Letter of Credit, amend, or cause the Issuer of the Letter of Credit to amend, the Letter of Credit to increase the amount available to be drawn to an amount equal to the Letter of Credit Amount.

 

(c)           Upon the occurrence of a Letter of Credit Default, CECG shall cause another Issuer to deliver to SET a substitute Letter of Credit on or before the second Business Day after the occurrence thereof (or on or before the third Business Day after the occurrence thereof if only clause (i) under the definition of Letter of Credit Default applies).

 

(d)           In the event that twenty (20) or fewer Business Days remain prior to the expiration of the Letter of Credit and the Issuer has failed to either extend such Letter of Credit or issue a replacement Letter of Credit, SET may draw the entire undrawn portion of such outstanding Letter of Credit upon presentation to the Issuer of one or more certificates in accordance with the specific requirements of any such Letter of Credit.  In such event, SET shall retain such proceeds as cash collateral securing the obligations of the MX Companies pursuant to this Agreement and the MX Companies and CECG each hereby grant to SET first priority continuing security interest in, lien on such cash collateral.

 

(e)           Within two (2) Business Days of a written request from CECG, SET shall calculate the Letter of Credit Amount as of the date of such calculation (such date, the “Valuation Date”).  To the extent that the face amount of the Letter of Credit exceeds the Letter of Credit Amount on the Valuation Date by $5,000,000 or more, CECG shall have the right to provide a replacement Letter of Credit in the amount of the Letter of Credit Amount rounded down to the nearest integral multiple of $500,000.  CECG may make a written request pursuant to this Section 2.02(e) no more frequently than twice every thirty (30) days.  SET shall return the Letter of Credit (and any cash held by SET pursuant to Section 2.02(d)) to CECG promptly after (i) the aggregate amount of SET’s Third Party Credit Support obligations equals zero, and (ii) the MX Companies have made all payments required by Section 3.02.

 

ARTICLE III
 REGULATORY APPROVALS AND FEES

 

Section 3.01         Regulatory Approvals and Filings.  Each of the parties shall use commercially reasonable efforts to: (i) make or cause to be made all filings and to obtain all approvals or authorizations required by it or any of its Affiliates with the FERC, any other governmental body having jurisdiction with respect to the transactions contemplated herein and any other relevant third parties; (ii) comply at the earliest practicable date with any request for any additional information, documents or other materials received by it or any of its Affiliates with respect to the transactions contemplated herein; (iii) cooperate with the other parties in connection with any such filing as may be required in order to consummate the transactions contemplated herein; and (iv) comply with any applicable requirements or restrictions as may be imposed on it from time to time by the FERC or any other governmental body having jurisdiction with respect to the transactions contemplated therein.  Notwithstanding anything herein to the contrary, no party shall have any obligation to enter into any of the transactions

 

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described herein, to provide any of the services or to enter into any Transactions described in the Original ISDAs, the A&R ISDAs or the CECG ISDA to the extent that the consummation of such transactions or the provision of such services would result in a violation of, or cause any party to be unable to comply with, any applicable law or any rule or regulation issued by any ISO, LDC, EDC, transmission provider, transporter or governmental authority, in each case as determined by such party in its reasonable judgment.

 

Section 3.02         Monthly Transition Fee.  The MX Companies shall pay SET a monthly fee equal to sixty-two thousand five hundred dollars ($62,500) per month commencing as of the Closing Date (unless the Closing Date occurs on a date other than the first day of a calendar month, in which case, such fee shall be payable commencing on the first day of the month in which the Closing Date occurs) and continuing through and including the earlier to occur of:  (i) the date as of which all of the Outstanding Transactions have been novated, terminated or have expired; or (ii) October 31, 2011; provided, however, that (x) in the event the Closing Date occurs after September 1, 2011 the monthly fee shall be two hundred thousand dollars ($200,000), and (y) to the extent SET continues to perform any Outstanding Transactions and, if applicable, any corresponding SET Counter-Hedge pursuant to Section 1.06(h)(ii), the MX Companies shall, notwithstanding anything to the contrary in this Section 3.02, continue to pay SET a monthly fee of two hundred thousand dollars ($200,000) until such transaction(s) is ultimately novated to CECG, terminated, or expires.  Such monthly fee shall be payable in arrears on or before the tenth (10th) day of the month following the month to which the fee applies.

 

ARTICLE IV
 EVENTS OF DEFAULT; REMEDIES

 

Section 4.01         Events of Default.  Notwithstanding any other provision of this Agreement, an event of default (each, an “Event of Default”) shall be deemed to occur with respect to a party if:

 

(a)           such party shall fail to make any payment when due of any amount owed by it under this Agreement within three (3) Business Days following written demand therefor;

 

(b)           such party fails to perform or observe any covenant or obligation applicable to such party under this Agreement (excluding the covenants set forth in Section 6.04, Section 7.05 and Section 7.07) and such failure is not cured within ten (10) Business Days following written notice thereof;

 

(c)           such party breaches any representation or warranty made, repeated or deemed to have been made or repeated by such party, or any representation or warranty proves to have been incorrect in any material respect when made, repeated or deemed to have been made or repeated under this Agreement;

 

(d)           such party: (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) institutes or has instituted

 

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against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding up or liquidation, unless such proceeding or petition is withdrawn, dismissed, discharged, stayed or restrained within (A) thirty (30) days, if as of and during the pendency of such proceeding or petition, the party has a long term unsecured debt Rating of at least BBB+ by S&P or Baa1 by Moody’s or (B) in all cases other than as set forth in clause (A) of this Section 4.01(b)(i)(iv), fifteen (15) days; (v) has a resolution passed for its winding up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (vii) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets; (viii) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (vii) inclusive; or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts;

 

(e)           an “Event of Default” (as defined in the Original ISDAs, the A&R ISDAs or the CECG ISDA Agreement, as applicable) occurs with respect to such party (in which case such event shall constitute an Event of Default hereunder only with respect to the party(ies) to such ISDA agreement(s) that has/have committed such “Event of Default;”

 

(f)            a party fails to perform its covenants set forth in Section 6.04;

 

(g)           with respect to MX, MX Electric, MX Holdings or CECG, a Letter of Credit Default shall have occurred and not been cured within the time frame specified in Section 2.02; or

 

(h)           with respect to MX Holdings or CECG, such party fails to perform its covenants set forth in Section 7.05 or Section 7.07.

 

Section 4.02         Remedies.  Notwithstanding any other provision of this Agreement, upon the occurrence of an Event of Default with respect to a party, in addition to any rights and remedies set forth in this Agreement, each other party hereto shall be entitled to its rights and remedies at law or in equity.  Upon the occurrence of an Event of Default pursuant to Section 4.01(h) and in addition to and not in limitation of any rights or remedies that SET may have as set forth in this Section 4.02, SET shall have the right to suspend performance of its obligations under Parts 7 and 8 of the Original ISDAs or the A&R ISDAs, as applicable, including any obligations to supply Gas or Products to the MX Companies, to provide or maintain Third Party Credit Support or to provide scheduling, nomination or other operational services to the MX Companies.  The parties acknowledge and agree that the occurrence of an Event of Default with respect to MX, MX Electric or MX Holdings hereunder will be deemed an Event of Default with respect each of MX, MX Electric and MX Holdings.

 

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Section 4.03         Indemnity.

 

(a)           The MX Companies and MX Holdings shall indemnify, defend and hold harmless SET and CECG, their Affiliates and their respective officers, directors, employees and agents, from and against any and all third-party losses resulting from Claims based on the breach by the MX Companies or MX Holdings of their respective obligations under this Agreement.

 

(b)           SET shall indemnify, defend and hold harmless the MX Companies, MX Holdings and CECG, their Affiliates and their respective officers, directors, employees and agents, from and against any and all third-party losses resulting from Claims based on the breach by SET of its obligations under this Agreement.

 

(c)           CECG shall indemnify, defend and hold harmless the MX Companies, MX Holdings and SET, their Affiliates and their respective officers, directors, employees and agents, from and against any and all third-party losses resulting from Claims based on the breach by CECG of its obligations under this Agreement.

 

(d)           The indemnities provided in this Section 4.03 shall survive until the date that is one year after the Closing Date; provided, however, that a party’s indemnification obligation shall survive beyond such date with respect to any Claims asserted against it for which it has sought indemnification pursuant hereto.

 

ARTICLE V
 DEFINITIONS

 

Section 5.01         Definitions.  The following terms have the meanings set forth below:

 

(a)           “Affiliate” means, with respect to any Person, another Person that directly or indirectly controls, is under common control with, or is controlled by, such Person or any successor thereto; provided, however, that for purposes of this definition: (i) control of a Person shall mean the power, direct or indirect, to (A) vote fifty percent (50%) or more of the securities having ordinary voting power for the election of the governing body of such Person, or (B) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; and (ii) neither SET nor any of direct or indirect parent or subsidiaries shall be an Affiliate of any of the MX Companies or any of their direct or indirect parents or subsidiaries; and provided further, that for purposes of this Agreement, none of CECG nor any of the entities that are its Affiliates prior to the Closing Date shall be deemed to be an Affiliate of MX Holdings or any of the entities that are its Affiliates prior to the Closing Date.

 

(b)           “A&R Electric ISDA” has the meaning set forth in Section 1.02.

 

(c)           “A&R Gas ISDA” has the meaning set forth in Section 1.02.

 

(d)           “A&R ISDAs” means the A&R Electric ISDA and the A&R Gas ISDA.

 

(e)           “Agreement” has the meaning set forth in the preamble to this Agreement.

 

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(f)            “Asset Management Agreement” means the Asset Management Agreement entered into as of October 13, 2009 between SET and MX.

 

(g)           “Business Day” means any day, other than a Saturday, Sunday or a day on which commercial banks in New York are authorized or obligated by applicable law or executive order to close.

 

(h)           “CECG” has the meaning set forth in the preamble to this Agreement.

 

(i)            “CECG ISDA Agreement” means that certain ISDA Master Agreement, dated as of June 26, 2001, by and between CECG and SET, including the schedules and annexes thereto.

 

(j)            “Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of MX Holdings.

 

(k)           “Claims” means, collectively, claims, controversies, actions, causes of action, cross-claims, counter-claims, rights, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, costs, expenses (including attorneys’ fees and disbursements) or liabilities of any nature whatsoever.

 

(l)            “Class B Shares” means all of the Class B Common Stock of MX Holdings owned by SET.

 

(m)          “Class C Shares” means all of the Class C Common Stock of MX Holdings owned by SET.

 

(n)           “Closing” means the consummation of the transactions described in Section 6.02.

 

(o)           “Closing Date” means the date on which the Closing occurs.

 

(p)           “Creditworthy Third Party” means any entity having, or an entity with a guarantor having, a long term unsecured debt Rating equal to at least BBB- by S&P or Baa3 by Moody’s.

 

(q)           “Drop-Dead Date” means September 15, 2011 or such later date as may be agreed to in writing by SET in its sole discretion.

 

(r)            “EDC” means the local distribution company responsible for delivering electric energy or Products to MX Electric’s customers in a particular geographic area.

 

(s)           “Electricity Assets” means all transmission capacity, congestion revenues rights, auction revenue rights, ISO load IDs and tags associated with MX Electric’s customer load that are held in the name of SET on or prior to the Closing Date.

 

(t)            “Eligible Bank”  means a major U.S. commercial bank or a U.S. branch of a foreign bank which:

 

	
 (i)
    	
satisfies all regulatory capital   requirements applicable to it (including any individual regulatory capital   requirements);
    

 

 

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 (ii)
    	
is “well capitalized” within the meaning of   Section 38 of the Federal Deposit Insurance Act, as amended, or any   successor statute, and any applicable regulations thereunder;
    
	
 
    	
 
    
	
 (iii)
    	
is not an affiliate of MX or MX Electric;
    
	
 
    	
 
    
	
 (iv)
    	
is a Qualified Institution; and
    
	
 
    	
 
    
	
 (v)
    	
meets the applicable criteria of SET (as   consistently applied) for letter of credit issuers as in effect at such time,   including credit, legal and risk management criteria.
    

 

 

(u)           “Energy Adder” has the meaning specified in the Original Electric ISDA or the Original Gas ISDA, as applicable.

 

(v)           “ERCOT” means the Electric Reliability Council of Texas.

 

(w)          “Event of Default” has the meaning set forth in Section 4.01.

 

(x)            “Exchange Traded Transactions” has the meaning set forth in Section 1.06(a).

 

(y)           “FERC” means the United States Federal Energy Regulatory Commission.

 

(z)            “First Month” means the first full calendar month immediately following the Closing Date; provided, however, that if the Closing Date occurs on the first day of a calendar month, the First Month shall be the calendar month in which the Closing Date occurs.

 

(aa)         “Gas” means any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane.

 

(bb)         “Gas Adder” has the meaning specified in the Original Electric ISDA or the Original Gas ISDA, as applicable.

 

(cc)         “Gas Assets” means, for any date of determination, all Gas transportation and storage capacity held by SET as of such date that MX: (i) directed or caused to be released to SET by any LDCs; or (ii) released or re-released to SET.

 

(dd)         “Intercreditor Agreement”  means the Intercreditor and Subordination Agreement, dated as of September 22, 2009, by and among MX Holdings, the pledgors from time to time party thereto, SET, in its capacity as facility agent, and Law Debenture Trust Company of New York, in its capacity as indenture trustee, as it may be amended from time to time.

 

(ee)         “ISDA Cash Collateral” means any cash held by SET as collateral pursuant to the terms of the Original ISDAs.

 

(ff)           “ISO” means any independent electric system operator, regional transmission operator or similar entity including the NY-ISO, ERCOT, PJM and ISO-New England.

 

(gg)         “ISO New England” means ISO New England Inc.

 

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(hh)         “Issuer” means any bank issuing a Letter of Credit.

 

(ii)           “LDC” means the local distribution company responsible for delivering Gas to MX’s customers in a particular geographic area.

 

(jj)           “Letter of Credit” means an irrevocable, standby letter of credit, issued by an Eligible Bank in accordance with Section 2.02.

 

(kk)         “Letter of Credit Amount” has the meaning set forth in Section 2.02(a).

 

(ll)           “Letter of Credit Default” means, with respect to an outstanding Letter of Credit, the occurrence of any of the following events: (i) the Issuer shall cease to be an Eligible Bank; (ii) the Issuer shall fail to comply with or perform its obligations under such Letter of Credit if such failure shall be continuing after the lapse of any applicable grace period; (iii) the Issuer shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; or (iv) such Letter of Credit shall expire or terminate, or shall fail or cease to be in full force and effect, at any time during the term of this Agreement; provided, however, that no Letter of Credit Default shall be deemed to occur during any period after the time such Letter of Credit is required to be canceled or returned in accordance with the terms of this Agreement.

 

(mm)       “LIBOR Rate” means the rate of interest per annum (rounded upwards if necessary to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page or http://www.bba.org.uk/bba/ (or any successor page) as the British Bankers Association London Interbank offered rate deposits in U.S. Dollars for the relevant tenor at approximately 11 a.m. London time two Business Days prior to the date of determination.

 

(nn)         “Lien” means any charge, claim, “adverse claim” (as defined in Section 8-102(a)(1) of the New York Uniform Commercial Code), community property interest, equitable interest, easement, encumbrance, option, lien, pledge, hypothecation, assignment, deposit arrangement, security interest (including a preference, priority or other security agreement or preferential arrangement of any kind), mortgage, deed of trust, retention of title agreement, right of first refusal, right of first offer, preemptive right or other restriction or granting of any rights of any kind (including any restriction on, or right granted with respect to, the use, voting, transfer, receipt of income or exercise of any other attribute of ownership).

 

(oo)         “Merger” has the meaning set forth in the recitals to this Agreement.

 

(pp)         “Merger Agreement” means the Agreement and Plan of Merger, dated May 12, 2011, together with all exhibits, schedules and annexes thereto, among Constellation Energy Resources, LLC, a Maryland limited liability company, Nutmeg Merger Sub, Inc., a Delaware corporation, and MX Holdings Inc.

 

(qq)         “Moody’s” means Moody’s Investor Service, Inc. or its successor.

 

(rr)           “MX” has the meaning set forth in the preamble to this Agreement.

 

(ss)            “MX Companies” means MX and MX Electric.

 

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(tt)           “MX Electric” has the meaning set forth in the preamble to this Agreement.

 

(uu)         “MX Electric Transactions” means all Transactions between MX Electric and SET under (and as defined in) the Original Electric ISDA or the A&R Electric ISDA, as applicable.

 

(vv)         “MX Gas Transactions” means all Transactions between MX and SET under (and as defined in) the Original Gas ISDA or the A&R Gas ISDA, as applicable.

 

(ww)       “MX Holdings” has the meaning set forth in the preamble to this Agreement.

 

(xx)          “MX Transaction” means an MX Gas Transaction or an MX Electric Transaction.

 

(yy)         “New Secured Party” has the meaning set forth in Section 6.04(b).

 

(zz)          “NY-ISO” means the New York independent system operator.

 

(aaa)       “Original Electric ISDA” has the meaning set forth in the recitals to this Agreement.

 

(bbb)      “Original Gas ISDA” has the meaning set forth in the recitals to this Agreement.

 

(ccc)       “Original ISDAs” has the meaning set forth in the recitals to this Agreement.

 

(ddd)      “Outstanding Transactions” means all MX Gas Transactions, MX Electric Transactions and SET Hedges that are outstanding as of a specified date.

 

(eee)       “Person” means an individual, partnership, corporation, association, business, trust, limited liability company, government agency or authority or other legal entity.

 

(fff)         “PJM” means PJM Interconnection, L.L.C.

 

(ggg)      “Product” has the meaning set forth in the Original ISDAs and the A&R ISDAs.

 

(hhh)      “Qualified Institution” means a Bank (as defined in the Federal Deposit Insurance Act) whose rating with respect to its long term unsecured, unsubordinated indebtedness is at least A- by S&P and A3 by Moody’s.

 

(iii)          “Qualified Scheduling Entity” means an ERCOT market participant that is qualified by ERCOT in accordance with Section 16 of the ERCOT Protocols (Registration and Qualification of Market Participants).

 

(jjj)          “Rating” means, with respect to any entity, the ratings assigned to such entity by each of the Rating Agencies.

 

(kkk)       “Rating Agencies” means Moody’s and/or S&P.

 

(lll)          “Replacement Credit Support” means a Letter of Credit in the amount of the Letter of Credit Amount calculated as of the Closing Date.

 

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(mmm)    “RSUs” has the meaning set forth in the recitals to this Agreement.

 

(nnn)      “S&P” means Standard and Poor’s Ratings Group (a division of The McGraw Hill Companies, Inc.) or its successor.

 

(ooo)      “Sempra Interests” means the Shares and the RSUs.

 

(ppp)      “SET” has the meaning set forth in the preamble to this Agreement.

 

(qqq)      “SET Counter-Hedge” has the meaning set forth in Section 1.06(g).

 

(rrr)         “SET Hedges” means and all transactions between SET and its hedging counterparts that hedge the MX Gas Transactions or MX Electric Transactions.

 

(sss)       “SET Liens” has the meaning set forth in Section 6.04(a).

 

(ttt)         “Shares” means the Class B Shares and the Class C Shares.

 

(uuu)      “Specified Entity” means each signatory to this Agreement other than MX, MX Electric, MX Holdings, SET and CECG.

 

(vvv)      “Specified Transaction” means any transaction contemplating the acquisition by a third party, whether by purchase, merger, consolidation, reorganization or otherwise, of equity interests in, or all or a substantial portion of the assets (not in the ordinary course of business) of, MX Holdings or any Subsidiary of MX Holdings.

 

(www)    “Stockholders Agreement” means the Stockholders Agreement, dated September 22, 2009, among MX Holdings and the stockholders party thereto, as such agreement is in effect on the date hereof.

 

(xxx)        “Termination Acknowledgement” has the meaning set forth in Section 1.05(b).

 

(yyy)      “Third Party Credit Support” means any letter of credit posted by or on behalf of SET to a third party in support of obligations (other than any SET Hedge) incurred by MX or MX Electric to such third parties.

 

(zzz)        “Transaction” means, as the context requires, a transaction entered into under the Original ISDAs or the A&R ISDAs.

 

(aaaa)     “Trigger Date” has the meaning specified in Section 1.06(h).

 

(bbbb)    “Unmatched SET Hedge” means any SET Hedge held by SET after SET novates the MX Gas Transaction or MX Electric Transaction that corresponds to such SET Hedge.

 

(cccc)     “Valuation Date” has the meaning set forth in Section 2.02(e).

 

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ARTICLE VI
 CLOSING; CONDITIONS PRECEDENT

 

Section 6.01         Conditions Precedent to Obligations of SET.  The obligation of SET to consummate the Closing is subject to satisfaction (or waiver by SET in writing in its sole discretion) of the following condition:

 

(a)           SET shall have received confirmation from each of CECG and MX Holdings that all conditions precedent to the Merger (other than the satisfaction of the conditions precedent to this Agreement and any other conditions dependent upon the execution and delivery of this Agreement) have been satisfied and that the Merger shall occur immediately following the Closing.  SET shall not be obligated to consummate the Closing on any Closing Date after the Drop-Dead Date.

 

Section 6.02         Closing.

 

(a)           The MX Companies shall:

 

(i)            notify SET and CECG when and where the Closing will take place at least three (3) days prior to the Closing Date;

 

(ii)           at Closing, authorize SET to apply any ISDA Cash Collateral against the payment obligations set forth in Section 1.04 and, to the extent such ISDA Cash Collateral is insufficient to satisfy such payment obligations, pay to SET the remaining balance of such obligations; and

 

(iii)          at least five Business Days prior to the Closing Date, provide SET with the identities of up to three payees (including their respective wire instructions) to which SET shall distribute the remaining balance of the ISDA Cash Collateral as set forth in 6.02(e)(iv).

 

(b)           At the Closing, MX Electric shall:

 

(i)            deliver to SET duly executed counterparts of the A&R Electric ISDA; and

 

(ii)           deliver to SET the release in accordance with Section 1.10.

 

(c)           At the Closing, MX shall:

 

(i)            deliver to SET duly executed counterparts of the A&R Gas ISDA; and

 

(ii)           deliver to SET the release in accordance with Section 1.10.

 

(d)           At the Closing, CECG shall:

 

(i)            deliver to SET the Replacement Credit Support.

 

(e)           At the Closing, SET shall:

 

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(i)            deliver to MX Holdings all of the certificates representing the Shares, duly endorsed in blank or accompanied by a stock proxy or other instrument of transfer reasonably acceptable to MX Holdings;

 

(ii)           deliver to MX duly executed counterparts of the A&R Gas ISDA;

 

(iii)          deliver to MX Electric duly executed counterparts of the A&R Electric ISDA.

 

(iv)          apply any ISDA Cash Collateral against the payment obligations set forth in Section 1.04 and distribute the remaining balance of such ISDA Cash Collateral, by wire transfer, to one or more payees specified by the MX Companies pursuant to Section 6.02(a)(iii) pursuant to, and in the amounts specified in, a written notice jointly delivered by the MX Companies to SET no later than three (3) Business Days prior to the Closing Date;

 

(v)           immediately following the disbursement of funds pursuant to Section 6.02(e)(iv), execute a written termination of the Account Control Agreements (as defined in the Original ISDAs) in form and substance reasonably acceptable to the MX Companies and CECG;

 

(vi)          deliver to the MX Companies the termination letter in accordance with Section 1.03(c);

 

(vii)         deliver to the MX Companies a written termination of payment instructions in accordance with Section 1.03(d);

 

(viii)        deliver to MX Holdings written resignations of any individual (in form and substance reasonably acceptable to MX Holdings and CECG) appointed to the MX Holdings board of directors by SET;

 

(ix)           deliver to MX Holdings and CECG the release in accordance with Section 1.01(c);

 

(x)            deliver to the MX Companies and MX Holdings the release in accordance with Section 1.10.

 

Section 6.03         Consent to Merger.  No later than three (3) Business Days after the date of the execution of this Agreement and the Merger Agreement, SET shall deliver to MX Holdings a written consent to the Merger in accordance with the procedures set forth in the Merger Agreement.

 

Section 6.04         Release or Assignment of Liens.

 

(a)           Unless the MX Companies deliver a notice pursuant to Section 6.04(b), effective as of the Closing, all the security interests, Liens and pledges in favor of SET securing any of the debts, liabilities or other obligations owed by the MX Companies, the Specified Entities or any

 

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of their Affiliates under the Original ISDAs (collectively, the “SET Liens”) shall be automatically released with no further action on SET’s part.

 

(b)           No later than three (3) Business Days prior to the Closing Date, the MX Companies may deliver written notice to SET, requesting SET to authorize the filing by MX, MX Electric or their designee of: (i) UCC-3 financing statement amendments with respect to the UCC-1 financing statements or other financing statements evidencing the SET Liens; or (ii) amendments with respect to any other collateral filings evidencing the SET Liens, which amendments shall change the “Secured Party” designated therein from SET to a Person or Persons designated by CECG (the “New Secured Party”).  SET hereby agrees to take such action as may be reasonably requested by CECG to facilitate and evidence such amendment and the assignment of the SET Liens contemplated thereby.  The MX Companies shall be responsible for any out-of-pocket costs and expenses reasonably incurred by SET pursuant to this Section 6.04(b) to amend the financing statements and effect the assignment of the SET Liens contemplated thereby, and SET shall not be obligated to make any representations or warranties, or incur any liability to the MX Companies or CECG, in connection with such amendment(s).

 

(c)           Subject to SET’s receipt of payment in accordance with Section 1.04, SET shall deliver to CECG or the MX Companies, on or prior to the Closing Date, all possessory collateral of the MX Companies or any of the Specified Entities held by SET that is the subject of the SET Liens.

 

(d)           SET hereby authorizes and consents to: (i) the filing of UCC-3 termination statements (or UCC-3 amendments, if applicable) immediately following the Closing Date; and (ii) the execution, delivery, and/or filing of any other statement, filing, notice, or agreement necessary or desirable to effect the release of Liens (or assignment of Liens to the New Secured Party) contemplated hereby immediately following the Closing Date.  SET agrees that it shall take any and all actions reasonably necessary to evidence the consummation of the Lien release (or assignment of Liens to the New Secured Party) contemplated hereby, including terminating any other agreements creating or perfecting a security interest in any collateral, including any intellectual property filings and control agreements over deposit accounts.  SET hereby authorizes either or both of the MX Companies to file the above-referenced termination statements (or amendments, if applicable) on or after the Closing Date.

 

(e)           The parties acknowledge and agree that (i) if CECG and MX Holdings have not delivered the confirmation required by Section 6.01(a), and (ii) the Merger does not occur on or before the Drop-Dead Date, then no party hereto shall have any liability under this Agreement for the failure of the Merger to so occur on or before the Drop-Dead Date.

 

ARTICLE VII
 CONSENTS, COOPERATION AND REPORTING; FURTHER ASSURANCES; ETC.

 

Section 7.01         Consent.  In the event the Closing Date shall not have occurred on or before the Drop-Dead Date, MX, MX Electric, MX Holdings and the Specified Entities hereby consent to the assignment, novation and transfer by SET at any time following the Drop-Dead Date to a Creditworthy Third Party of: (i) all (but not less than all) of the Sempra Interests, including all of the rights of SET under all shareholder related agreements, including the

 

20

 

Certificate of Incorporation, the bylaws of MX Holdings and the Stockholders Agreement (so long as such transfer constitutes a “Wholesale Transfer” pursuant to such Stockholders Agreement); (ii) SET’s rights and obligations under the Original ISDAs; and (iii) SET’s rights and obligations under the Intercreditor Agreement.  MX Holdings hereby agrees that a transferee of SET shall satisfy the requirements of Section 2.1(d) of the Stockholder Agreement by the delivery to MX Holdings of a certificate substantially in the form of Exhibit B.

 

Section 7.02         No Third Party Consents.  Each of the MX Companies and MX Holdings represents and warrants that in the event SET undertakes the transactions contemplated by Section 7.01, no additional corporate action, governmental or regulatory consents required to be obtained by MX Holdings or the MX Companies, or consents of the shareholders, bondholders or other creditors of MX Holdings or the MX Companies will be required to consummate such transactions.

 

Section 7.03         Cooperation; Transaction Progress Reporting.  Promptly following a request from SET, MX Holdings shall provide SET with the status of, and MX Holdings’ progress with respect to, its negotiations of the Merger Agreement and shall supply SET such documents and information with respect to the Merger as SET may reasonably request.

 

Section 7.04         Further Assurances.  Subject to the terms and conditions of this Agreement, each of MX, MX Energy, CECG and SET agrees to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws or otherwise to consummate and make effective the transactions contemplated by this Agreement.

 

Section 7.05         No Merger Before Closing Date.  CECG agrees that it shall not, and it shall cause its Affiliates to not, consummate the Merger prior to the Closing.  MX Holdings agrees that it shall not consummate the Merger prior to the Closing.

 

Section 7.06         Amendment to Original ISDAs.  Part 1 (i)(vii)(I) of the Schedule of each of the Original ISDAs is amended by deleting the text “[Intentionally Omitted]” and inserting in lieu thereof the following:

 

“The occurrence of any Event of Default under the Termination and Transfer Agreement, dated as of May 12, 2011 among Party A, MXenergy Inc., MXenergy Electric Inc., MXenergy Holdings Inc. and Constellation Energy Commodities Group, Inc.”

 

Section 7.07         No Amendment.  Each of CECG and MX Holdings agrees that, prior to the Closing, it shall not amend any terms of the Merger Agreement that materially affect the Sempra Interests or the economic terms of the Merger without the consent of the holders of the Shares.

 

ARTICLE VIII
 MISCELLANEOUS

 

Section 8.01         Interpretation.  The following rules of construction shall apply when interpreting this Agreement.

 

21

 

(a)           all references in this Agreement to Articles, Sections and Schedules refer to Articles, Sections and Schedules of this Agreement unless expressly provided otherwise;

 

(b)           the headings appearing in this Agreement are for convenience only, do not constitute any part of this Agreement and shall be disregarded in construing the language contained herein;

 

(c)           the terms “herein,” “hereby,” “hereto,” “hereunder,” “hereof” and terms of similar import in this Agreement refer to the Agreement as a whole and not to any particular subdivision unless expressly so limited and the term “this Section” refers only to the Section hereof in which such words occur;

 

(d)           the word “including” (in its various forms) means “including without limitations”;

 

(e)           each Schedule to this Agreement shall be deemed to be incorporated herein by reference as if such Schedule were set forth in its entirety herein; and

 

(f)            no term of this Agreement shall be construed in favor of, or against, a party as a consequence of one party having had a greater role in the preparation or drafting of this Agreement, but shall be construed as if the language were mutually drafted by both parties with full assistance of counsel.

 

Section 8.02         Representations and Warranties of the Parties.  Each of SET, CECG, MX, MX Electric, MX Holdings and the Specified Entities represents and warrants as of the date hereof and as of the Closing Date, except to the extent that a representation and warranty expressly relates to a specified date in which case such representation and warranty shall be true and correct as of such date, as follows:

 

(a)           it is duly organized, validly existing and in good standing under the laws of its respective jurisdiction and it has the full power and legal authority to execute and deliver this Agreement and to perform its obligations (if any) hereunder;

 

(b)           the execution, delivery and performance of this Agreement by it have been and remain duly authorized by all necessary corporate action and do not contravene: (i) any provision of its organizational documents; or (ii) any law or regulation;

 

(c)           all governmental or regulatory consents, authorizations, approvals, registrations and declarations required for the due execution, delivery and performance of this Agreement by it has been obtained from or, as they case may be, filed with the relevant governmental authorities having jurisdiction over it and remains in full force and effect, and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance of this Agreement by it;

 

(d)           this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms hereof, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally or by general equity principles;

 

22

 

(e)           there are no proceedings at law or in equity, or before or by any court or other government authority that are pending or, to its knowledge threatened against or affecting its or any of its property and that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on it; and

 

(f)            it is not: (i) in violation of any applicable laws that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on its ability to perform hereunder; or (ii) subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other government authority that, individually or in the aggregate, could reasonably be expected to result in a material adverse effect on its ability to perform hereunder.

 

Section 8.03         Representations and Warranties of MX Holdings and the MX Companies.  Each of MX Holdings, the MX Companies represents and warrants to SET as of the date hereof and of the Closing Date as follows:

 

(a)           except for the Merger Agreement, neither MX Holdings nor any Affiliate of MX Holdings has entered into a letter of intent, memorandum of understanding, agreement or other document regarding a Specified Transaction;

 

(b)           the document attached hereto as Exhibit A is a true, complete and correct copy of the Merger Agreement.

 

Section 8.04         Representation and Warranty of CECG.  CECG represents and warrants to SET as of the date hereof and of the Closing Date as follows:

 

(a)           the document attached hereto as Exhibit A is a true, complete and correct copy of the Merger Agreement.

 

Section 8.05         Representations and Warranties of SET.  SET represents and warrants to the MX Companies, MX Holdings and CECG as of the date hereof and as of the Closing Date as follows:

 

(a)           it is the owner of the Sempra Interests, free and clear of any and all Liens;

 

(b)           the Sempra Interests represent all of SET’s equity interests in MX Holdings or any of its Affiliates.

 

Section 8.06         Notices.  Except as otherwise specified in this Agreement, any notice required or authorized by this Agreement to be given to a party shall be given in writing and shall be sufficiently given if delivered by overnight mail, overnight courier or hand delivery against written receipt, in each case to the address set forth below or to such other address as such party may designate for itself by prior notice given in accordance with this Section 8.06.  Any such notice shall be effective only upon receipt thereof (or upon refusal to accept delivery), provided that such notice is received during the normal business hours of the addressee, and if not received during such normal business hours, then on the first Business Day following such receipt.  The address for the delivery of notices and bills to each party and the respective telephone numbers are as follows:

 

23

 

	
Notices to SET:
    
	
Sempra Energy Trading LLC
    
	
58 Commerce Road
    
	
Stamford, Connecticut   06902
    
	
Attn:
    	
Legal Dept.
    
	
Facsimile No.:   203-355-5410
    
	
Telephone No.:   203-355-5403
    

 

	
Notices to MX Holdings, MX   or MX Electric:
    
	
c/o MXenergy Holdings Inc.
    
	
595 Summer Street,   Suite 300
    
	
Stamford, CT 06901-1407
    
	
Attn:
    	
Chief Financial Officer
    
	
 
    	
Chief Legal Officer
    
	
Facsimile No.:   203-425-9562
    
	
Telephone No.:   203-356-1318
    

 

	
Notices to CECG:
    
	
Constellation Energy   Commodities Group, Inc.
    
	
100 Constellation Way,   Suite 500C
    
	
Baltimore, MD 21202
    
	
Attn:
    	
General Counsel
    
	
Facsimile No.:   410-470-2600
    
	
Telephone No.:   410-470-3121
    

 

Section 8.07         No Joint Venture or Joint Liability.  Neither this Agreement, nor the Merger, shall create or be construed to create any partnership or joint venture or operation among any of the parties hereto and each party hereto acknowledges and agrees that each other party shall be solely responsible for the performance of any obligations of such other party.

 

Section 8.08         Headings.  The headings in this Agreement are for reference only and  shall not affect the interpretation of this Agreement.

 

Section 8.09         Severability.  If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.  Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 8.10         Entire Agreement.  This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein

 

24

 

and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

 

Section 8.11         Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  No party to this Agreement may assign its rights or obligations hereunder without the prior written consent of each other party, which consent shall not be unreasonably withheld or delayed.

 

Section 8.12         No Third-Party Beneficiaries.  This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

 

Section 8.13         Amendment and Modification; Waiver.  This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each of parties hereto.  No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving.  No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 8.14         Governing Law; Submission to Jurisdiction.  All questions concerning the construction, validity and interpretation of this Agreement and any and all disputes or controversies arising out of the subject matter hereof (whether by contract, tort or otherwise) shall be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.  THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL PROPERLY (AND EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN NEW YORK COUNTY, NEW YORK.  BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH ACTION.  THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.  THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.

 

Section 8.15         Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE 

 

25

 

TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.15.

 

Section 8.16         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement.  A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

26

 

IN WITNESS WHEREOF, the parties hereto have caused this Termination and Transfer Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

	
 
    	
SEMPRA ENERGY TRADING LLC  
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Wendy Lewis
    
	
 
    	
 
    	
Name: Wendy Lewis
    
	
 
    	
 
    	
Title: Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MXENERGY INC.  
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chaitu Parikh
    
	
 
    	
 
    	
Name: Chaitu Parikh
    
	
 
    	
 
    	
Title: Executive V.P and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
MXENERGY ELECTRIC INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chaitu Parikh
    
	
 
    	
 
    	
Name: Chaitu Parikh
    
	
 
    	
 
    	
Title: Executive V.P. and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MXENERGY HOLDINGS INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chaitu Parikh
    
	
 
    	
 
    	
Name: Chaitu Parikh
    
	
 
    	
 
    	
Title: Executive V.P. and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CONSTELLATION ENERGY COMMODITIES GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Bryan P. Wright
    
	
 
    	
 
    	
Name: Bryan P. Wright
    
	
 
    	
 
    	
Title: Controller
    

 

[Signature Page to the Termination and Transfer Agreement]

 

 

	
Acknowledged   and Agreed:
    	
 
    
	
 
    	
 
    	
 
    
	
MXENERGY   (CANADA) LTD.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
ONLINECHOICE, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
MXENERGY   GAS CAPITAL HOLDINGS CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
MXENERGY   ELECTRIC CAPITAL HOLDINGS CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
MXENERGY   GAS CAPITAL CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P and Chief Financial   Officer
    	
 
    

 

[Signature Page to the Termination and Transfer Agreement]

 

 

	
MXENERGY   ELECTRIC CAPITAL CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P. and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
MXENERGY   CAPITAL HOLDINGS CORP.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P. and Chief Financial   Officer
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
INFOMETER.COM   INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Chaitu Parikh
    	
 
    
	
 
    	
Name: Chaitu Parikh
    	
 
    
	
 
    	
Title: Executive V.P. and Chief Financial   Officer
    	
 
    

 

[Signature Page to the Termination and Transfer Agreement]

 

 

Exhibit A

 

Form of Merger Agreement

 

[Filed with the SEC as Exhibit 2.1 to Holdings’ Current Report on Form 8-K, filed on May 18, 2011 and incorporated by reference herein]

 

E-1

 

Exhibit B

 

Form of Transferee Certificate

 

Transferee’s Representations and Warranties Certificate
 Pursuant to Section 2.1(d) of the Stockholders Agreement

 

[Date]

 

1              Definitions.

 

(a)           The following terms have the indicated meanings when used herein.

 

(i)            “Act” shall have the meaning set forth in Section 2(f).

 

(ii)           “Company” means MX Holdings Inc., a Delaware corporation.

 

(iii)          “Joinder Agreement” means the joinder agreement, in the form attached as Annex A to the Stockholders Agreement, executed by the Transferee.

 

(iv)          “Regulation S” shall have the meaning set forth in Section 2(f).

 

(v)           “SET” means Sempra Energy Trading LLC, a Delaware limited liability company.

 

(vi)          “Share Acquisition” means the acquisition by the Transferee of shares of Class B Common Stock and Class C Common Stock, in each case, held by SET in a transaction to which the provisions of Article II of the Stockholders Agreement apply.

 

(vii)         “Shares” means the shares of Class B Common Stock and Class C Common Stock to be acquired by the Transferee in the Share Acquisition.

 

(viii)        “Stockholders Agreement” means that certain stockholders agreement, dated as of September 22, 2009, among the Company, the Stockholders listed on Schedules I, II, III and IV thereto and any other Stockholder that becomes a party thereto after the date thereof pursuant to the terms thereof.

 

(ix)           “Transferee” means the undersigned Transferee.

 

(b)           Capitalized terms defined in the Stockholders Agreement and used herein but not defined herein shall have the meanings assigned to such terms in the Stockholders Agreement.

 

2              Transferee’s Representations and Warranties.  The Transferee hereby certifies that the following representations and warranties are true and correct as of the date first set forth above.

 

E-2

 

(a)           The Transferee is duly organized and validly existing under the laws of the State of                      and is in good standing under such laws.

 

(b)           The Transferee has the requisite limited liability company power and authority to enter into the Joinder Agreement and to carry out the transactions contemplated hereby; and the Joinder Agreement has been duly executed and delivered by the Transferee and constitutes the Transferee’s valid and binding obligation enforceable against the Transferee in accordance with its terms, except as the enforceability thereof may be subject to or limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting rights of creditors and (B) general equitable principles, regardless of whether enforcement is sought in a proceeding at law or in equity.

 

(c)           The execution, delivery and performance of the Joinder Agreement by the Transferee and the consummation of the transactions contemplated thereby will not (i) violate any provision of applicable law, (ii) violate any provision of the Transferee’s governing documents, effective as of the date hereof, or (iii) violate any order, judgment, injunction, determination, award or decree of any court or other governmental agency.

 

(d)           The purchase of the Shares by the Transferee will not require any consent, approval or authorization of, any notice to, or filing, registration or qualification with any court or administrative or governmental body other than with respect to applicable state securities or blue sky laws and the filing of a Form D with the Securities and Exchange Commission.

 

(e)           The Transferee has all necessary power and authority to execute, deliver and perform the Joinder Agreement.  All action on the Transferee’s part required for the lawful execution and delivery of the Joinder Agreement has been taken.  Upon execution and delivery by the Transferee, the Joinder Agreement will be a valid and binding obligation of the Transferee, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.

 

(f)            The Transferee understands that the Shares have not been and will not be registered under the Securities Act of 1933, as amended (the “Act”).  The Transferee also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Act based in part upon the Transferee’s representations contained in this Agreement.  The Transferee further acknowledges and understands that the Shares may not be offered or sold within the United States or to, or for the account or benefit of a U.S.  Person (as defined in Regulation S promulgated under the Act (the “Regulation S”)) within the meaning of Regulation S, except in accordance with Regulation S or pursuant to a duly available exemption from the registration requirements of the Act, unless the Shares are subsequently registered under the Act.  The Transferee acknowledges 

 

E-3

 

and agrees that the Company has no obligation or intention to register the Shares under the Act.  The Transferee acknowledges and agrees that it is solely responsible for obtaining such legal, including tax, advice as it considers necessary and appropriate in connection with the execution, delivery and performance of the Joinder Agreement and the purchase by it of the Shares.

 

(g)           The Transferee hereby represents, warrants and undertakes as follows:

 

(i)            The Transferee is a highly sophisticated investor and has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating, and has independently evaluated, the merits and risks of its investment in the Company and has the capacity to protect its own interests.  The Transferee may be required to bear the economic risk of this investment indefinitely and has independently concluded that it is financially able to bear those risks indefinitely.  The Transferee understands that the Company has no obligation or present intention of registering the Shares in the United States pursuant to the Act.

 

(ii)           The Transferee is purchasing the Shares for the Transferee’s own account for investment only, and not with a view towards their distribution or resale.  The Transferee has not purchased the Shares for the purpose of selling or transferring them, or granting, issuing or transferring interests in, or options over, them.

 

(iii)          The Transferee represents that by reason of its, or of its management’s, business or financial experience, the Transferee has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement.  Further, the Transferee is not aware of any general solicitation or publication of any advertisement, as such teens are defined in Regulation D under the Act, in connection with the transactions contemplated in the Joinder Agreement.

 

(iv)          The Transferee is an accredited investor, within the meaning of Regulation D under the Act.

 

(v)           The Transferee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company, including publicly available information concerning the Company, to reach an informed and knowledgeable decision to purchase the Shares.  The Transferee has had an opportunity to discuss the Company’s business, management and financial affairs with directors, officers and management of the Company.  The Transferee has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of the purchase.  The Transferee has not been provided with, nor has it requested, an offering memorandum or

 

E-4

 

similar document in connection with its decision to enter into this Agreement and purchase the Shares.

 

(vi)                              The Transferee acknowledges and agrees that the Shares are “restricted securities” as defined in Rule 144 promulgated under the Act as in effect from time to time and understands that neither the Company, nor any of its affiliates, or any person acting on its behalf makes any representation as to the availability of Rule 144 or any other exemption under the Act for the reoffer, resale, pledge or transfer of the Shares.

 

(vii)                           The Transferee acknowledges and agrees that the Shares are subject to restrictions on transfer contained in the Stockholders Agreement, dated as of the date hereof, among the Company and the stockholders of the Company party thereto, including the Transferee, and the Transferee agrees to comply with such restrictions and not transfer any of the Shares in violation thereof.

 

[Remainder of Page Intentionally Left Blank]

 

E-5

 

IN WITNESS WHEREOF, the undersigned Transferee has executed this certificate or caused this certificate to be executed on its behalf as of the date first set forth above.

 

TRANSFEREE

 

[Name of Transferee]
 [Entity signature block]

 

 

	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

E-6Exhibit 10.1

 

GEORGIA GULF CORPORATION

 

2011 EQUITY AND PERFORMANCE INCENTIVE PLAN

 

1.             Purpose.  The purpose of this Georgia Gulf Corporation 2011 Equity and Performance Incentive Plan is to attract and retain Directors, consultants, officers and other employees of Georgia Gulf Corporation, a Delaware corporation, and its Subsidiaries and to provide to such persons incentives and rewards for performance.

 

2.             Definitions.  As used in this Plan,

 

(a)           “Appreciation Right” means a right granted pursuant to Section 5 or Section 9 of this Plan, and will include both Free-Standing Appreciation Rights and Tandem Appreciation Rights.

 

(b)           “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Free-Standing Appreciation Right or a Tandem Appreciation Right.

 

(c)           “Board” means the Board of Directors of the Company.

 

(d)           “Committee” means a committee of the Board designated by the Board to administer this Plan pursuant to Section 11 of this Plan consisting solely of not less than two Non-Employee Directors.

 

(e)           “Business Combination” means a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company.

 

(f)            “Change in Control” has the meaning set forth in Section 13 of this Plan.

 

(g)           “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

(h)           “Common Stock” means the common stock of the Company, $0.01 par value, or any security into which such common stock may be changed by reason of any transaction or event of the type referred to in Section 12 of this Plan.

 

(i)            “Company” means Georgia Gulf Corporation, a Delaware corporation.

 

(j)            “Covered Employee” means a Participant who is, or is determined by the Committee to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any successor provision).

 

(k)           “Date of Grant” means the date specified by the Committee on which a grant of Option Rights, Appreciation Rights, Performance Shares, Performance Units or other awards contemplated by Section 10 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock Units, or other awards contemplated by Section 10 of this Plan will become effective 

 

 

(which date will not be earlier than the date on which the Committee takes action with respect thereto).

 

(l)            “Detrimental Activity” means:

 

(i)            Engaging in any activity as an employee, principal, agent, or consultant for another entity that competes, directly or indirectly, with the Company in any actual, researched, or prospective product, service, system, or business activity for which the Participant has had any direct or indirect responsibility during the last five years of his or her employment with, or having acted as a consultant to, the Company or a Subsidiary (or such other period specified in an Evidence of Award), in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity (or any portion of such territory or such other territory specified in the Evidence of Award).

 

(ii)           Soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary.

 

(iii)          The disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company’s or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company or its Subsidiaries, acquired by the Participant during his or her employment with the Company or its Subsidiaries or while acting as a consultant for the Company or its Subsidiaries.

 

(iv)          The failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by, or while consulting with, the Company or any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries.

 

(v)           Activity that results in Termination for Cause. For the purposes of this Section, “Termination for Cause” will mean a termination:

 

(A)          due to the Participant’s willful and continuous gross neglect of his or her duties for which he or she is employed; or 

 

(B)           due to an act of dishonesty on the part of the Participant constituting a felony resulting or intended to result, directly or indirectly, in his or her gain for personal enrichment at the expense of the Company or a Subsidiary.

 

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(vi)          Any other conduct or act determined to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary unless the Participant acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.

 

(m)          “Director” means a member of the Board.

 

(n)           “Effective Date” means the date this Plan is approved by the stockholders of the Company.

 

(o)           “Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the awards granted under the Plan.  An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant.

 

(p)           “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

 

(q)           “Existing Plan” means the Georgia Gulf Corporation 2009 Equity and Performance Incentive Plan.

 

(r)            “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant to Section 5 or Section 9 of this Plan that is not granted in tandem with an Option Right.

 

(s)           “Incentive Stock Options” means Option Rights that are intended to qualify as “incentive stock options” under Section 422 of the Code or any successor provision.

 

(t)            “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, dividend credits and other awards pursuant to this Plan.  Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region, function or other organizational unit within the Company or Subsidiary in which the Participant is employed.  The Management Objectives may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance criteria themselves.  The Committee may grant awards subject to Management Objectives that are either Qualified Performance-Based Awards or are not Qualified Performance-Based Awards.  The Management Objectives applicable to any Qualified Performance-Based Award to a Covered Employee will be based on one or more, or a combination, of the following metrics:

 

(i)            price of Common Stock;

 

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(ii)           market share;

 

(iii)          sales;

 

(iv)          return on equity, assets, capital or sales;

 

(v)           economic profit;

 

(vi)          total shareholder return;

 

(vii)         costs;

 

(viii)        margins;

 

(ix)           earnings or earnings per share;

 

(x)            cash flow;

 

(xi)           customer satisfaction;

 

(xii)          pre-tax profit;

 

(xiii)         earnings before interest and taxes;

 

(xiv)        earnings before interest, taxes, depreciation and amortization;

 

(xv)         debt/capital ratio;

 

(xvi)        compliance with covenants under the Company’s principal debt agreements; and

 

(xvii)       any combination of the foregoing.

 

If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Qualified Performance-Based Award (other than in connection with a Change in Control) where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. In such case, the Committee will not make any modification of the Management Objectives or minimum acceptable level of achievement with respect to such Covered Employee.

 

(u)           “Market Value per Share” means, as of any particular date, the closing price of a share of Common Stock as reported for that date on the New York Stock Exchange or, if the Common Stock is not then listed on the New York Stock Exchange, on any other national securities exchange on which the Common Stock is listed, or if there are no sales on such date, on the next preceding trading day during which a sale occurred.  If there is no regular public 

 

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trading market for the Common Stock, then the Market Value per Share shall be the fair market value as determined in good faith by the Committee.  The Committee is authorized to adopt another fair market value pricing method provided such method is stated in the Evidence of Award and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.

 

(v)           “Non-Employee Director” means a person who is a “Non-Employee Director” of the Company within the meaning of Rule 16b-3 promulgated under the Exchange Act and an “outside director” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder by the U.S. Department of the Treasury.

 

(w)          “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding Option Right.

 

(x)            “Option Price” means the purchase price payable on exercise of an Option Right.

 

(y)           “Option Right” means the right to purchase shares of Common Stock upon exercise of an option granted pursuant to Section 4 or Section 9 of this Plan.

 

(z)            “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at the time a consultant, an officer, or other employee of the Company or any Subsidiary or who has agreed to commence serving in any of such capacities within 90 days of the Date of Grant, and will also include each non-employee Director who receives an award under this Plan.  The term “Participant” will also include any person who provides services to the Company or a Subsidiary that are equivalent to those typically provided by an employee.

 

(aa)         “Performance Period” means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved.

 

(bb)         “Performance Share” means a bookkeeping entry that records the equivalent of one share of Common Stock awarded pursuant to Section 8 of this Plan.

 

(cc)         “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee.

 

(dd)         “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

 

(ee)         “Plan” means the Georgia Gulf Corporation 2011 Equity and Performance Incentive Plan, as may be amended from time to time.

 

(ff)           “Qualified Performance-Based Award” means any award of Performance Shares, Performance Units, Restricted Stock, Restricted Stock Units or other awards 

 

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contemplated under Section 10 of this Plan, or portion of such award, to a Covered Employee that is intended to satisfy the requirements for “qualified performance-based compensation” under Section 162(m) of the Code.

 

(gg)         “Restricted Stock” means shares of Common Stock granted or sold pursuant to Section 6 or Section 9 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.

 

(hh)         “Restriction Period” means the period of time during which Restricted Stock Units are subject to restrictions, as provided in Section 7 or Section 9 of this Plan.

 

(ii)           “Restricted Stock Unit” means an award made pursuant to Section 7 or Section 9 of this Plan of the right to receive shares of Common Stock or cash at the end of a specified period.  Certain awards of Restricted Stock Units that may be earned based on Common Stock price appreciation may be referred to as “Performance Leveraged Units”.

 

(jj)           “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised over the Option Price or Base Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively.

 

(kk)         “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which at the time the Company owns or controls, directly or indirectly, more than 50 percent of the total combined Voting Power represented by all classes of stock issued by such corporation.

 

(ll)           “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 5 or Section 9 of this Plan that is granted in tandem with an Option Right.

 

(mm)       “Voting Power” means at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of Directors in the case of the Company, or members of the board of directors or similar body in the case of another entity.

 

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3.             Shares Available Under the Plan.

 

(a)           Maximum Shares Available Under Plan.

 

(i)            Subject to adjustment as provided in Section 12 of this Plan, the number of shares of Common Stock that may be issued or transferred (A) upon the exercise of Option Rights or Appreciation Rights, (B) as Restricted Stock and released from substantial risks of forfeiture thereof, (C) in payment of Restricted Stock Units, (D) in payment of Performance Shares or Performance Units that have been earned, (E) as awards to non-employee Directors, (F) as awards contemplated by Section 10 of this Plan, or (G) in payment of dividend equivalents paid with respect to awards made under the Plan will not exceed in the aggregate 1,800,000 shares of Common Stock.  Such shares may be shares of original issuance or treasury shares or a combination of the foregoing.

 

(ii)           Shares of Common Stock covered by an award granted under this Plan will not be counted as used unless and until they are actually issued and delivered to a Participant and, therefore, the total number of shares available under this Plan as of a given date will not be reduced by any shares relating to prior awards that have expired or have been forfeited or cancelled.  Upon payment in cash of the benefit provided by any award granted under the Plan, any shares of Common Stock that were covered by that award will again be available for issue or transfer hereunder.  Notwithstanding anything to the contrary contained herein: (A) if shares of Common Stock are tendered or otherwise used in payment of the Option Price of an Option Right, the total number of shares covered by the Option Right being exercised will reduce the aggregate plan limit described above; (B) shares of Common Stock withheld by the Company to satisfy the tax withholding obligation will reduce the aggregate plan limit described above; and (C) the number of shares of Common Stock covered by an Appreciation Right, to the extent that it is exercised and settled in shares of Common Stock, and whether or not all shares of Common Stock covered by the Appreciation Right are actually issued to the Participant upon exercise of the right, will be considered issued or transferred pursuant to this Plan.  In the event that the Company repurchases shares with Option Right proceeds, those shares will not be added to the aggregate plan limit described above.  If, under this Plan, a Participant has elected to give up the right to receive compensation in exchange for shares of Common Stock based on fair market value, such shares of Common Stock will not count against the aggregate plan limit described above.

 

(b)           Limit on Incentive Stock Options. Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary and subject to adjustment as provided in Section 12 of this Plan; the aggregate number of shares of Common Stock actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not exceed 1,800,000 shares of Common Stock.

 

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(c)           Individual Participant Limits. Notwithstanding anything in this Section 3, or elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 12 of this Plan:

 

(i)                                     No Participant will be granted Option Rights or Appreciation Rights, in the aggregate, for more than 1,000,000  shares of Common Stock during any calendar year.

 

(ii)                                  No Participant will be granted Qualified Performance-Based Awards of Restricted Stock, Restricted Stock Units, Performance Shares or other awards under Section 10 of this Plan, in the aggregate, for more than 500,000 shares of Common Stock during any calendar year.

 

(iii)                               Notwithstanding any other provision of this Plan to the contrary, in no event will any Participant in any calendar year receive a Qualified Performance-Based Award of Performance Units having an aggregate maximum value as of their respective Dates of Grant in excess of $10,000,000.

 

(d)           Notwithstanding anything in this Plan to the contrary, up to 10% of the maximum number of shares of Common Stock that may be issued or transferred under this Plan as provided for in Section 3(a) of this Plan, as may be adjusted under Section 12 of this Plan, may be used for (i) awards granted under Sections 6 through 8 and Section 10 of this Plan that do not comply with the three-year or one-year vesting requirements set forth in such Sections of this Plan plus (ii) awards granted to non-employee directors under Section 9 of this Plan.

 

4.             Option Rights.  The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of Option Rights.  Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

 

(a)           Each grant will specify the number of shares of Common Stock to which it pertains subject to the limitations set forth in Section 3 of this Plan.

 

(b)           Each grant will specify an Option Price per share, which may not be less than the Market Value per Share on the Date of Grant.

 

(c)           Each grant will specify whether the Option Price will be payable (i) in cash or by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of shares of Common Stock owned by the Optionee (or other consideration authorized pursuant to Section 4(d) of this Plan) having a value at the time of exercise equal to the total Option Price, (iii) by a combination of such methods of payment, or (iv) by such other methods as may be approved by the Committee.

 

(d)           To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the shares to which such exercise relates.

 

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(e)           Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.

 

(f)            Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable.  A grant of Option Rights may provide for the earlier exercise of such Option Rights (i) in the event of the retirement, death or disability of a Participant, or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Option Rights are not assumed or converted into replacement awards in a manner described in the Evidence of Award.

 

(g)           Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.

 

(h)           Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended so to qualify, or (iii) combinations of the foregoing.  Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code.

 

(i)            The exercise of an Option Right will result in the cancellation on a share- for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan.

 

(j)            No Option Right will be exercisable more than 10 years from the Date of Grant.

 

(k)           Each grant of Option Rights will be evidenced by an Evidence of Award.  Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

 

5.             Appreciation Rights.

 

(a)           The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting (i) to any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights.  A Tandem Appreciation Right will be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.  Tandem Appreciation Rights may be granted at any time prior to the exercise or termination of the related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option.  A Free-Standing Appreciation Right will be a right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

 

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(b)           Each grant of Appreciation Rights may utilize any or all of the authorizations contained in the following provisions:

 

(i)                                     Each grant will specify that the amount payable on exercise of an Appreciation Right will be paid by the Company in cash, shares of Common Stock or in any combination thereof.

 

(ii)                                  Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Committee at the Date of Grant.

 

(iii)                               Any grant may specify waiting periods before exercise and permissible exercise dates or periods.

 

(iv)                              Each grant may specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary before the Appreciation Rights or installments thereof will become exercisable.  A grant of Appreciation Rights may provide for the earlier exercise of such Appreciation Rights in the event of the retirement, death or disability of a Participant, or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Appreciation Rights are not assumed or converted into replacement awards in a manner described in the Evidence of Award.

 

(v)                                 Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights.

 

(vi)                              Each grant of Appreciation Rights will be evidenced by an Evidence of Award, which Evidence of Award will describe such Appreciation Rights, identify the related Option Rights (if applicable), and contain such other terms and provisions, consistent with this Plan, as the Committee may approve.

 

(c)           Any grant of Tandem Appreciation Rights will provide that such Tandem Appreciation Rights may be exercised only at a time when the related Option Right is also exercisable and at a time when the Spread is positive, and by surrender of the related Option Right for cancellation.  Successive grants of Tandem Appreciation Rights may be made to the same Participant regardless of whether any Tandem Appreciation Rights previously granted to the Participant remain unexercised.

 

(d)           Regarding Free-Standing Appreciation Rights only:

 

(i)                                     Each grant will specify in respect of each Free-Standing Appreciation Right a Base Price, which may not be less than the Market Value per Share on the Date of Grant;

 

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(ii)                                  Successive grants may be made to the same Participant regardless of whether any Free-Standing Appreciation Rights previously granted to the Participant remain unexercised; and

 

(iii)                               No Free-Standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant.

 

6.             Restricted Stock.  The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the grant or sale of Restricted Stock to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

 

(a)           Each such grant or sale will constitute an immediate transfer of the ownership of shares of Common Stock to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

 

(b)           Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

 

(c)           Each such grant or sale will provide that the Restricted Stock covered by such grant or sale that vests upon the passage of time will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee at the Date of Grant or upon achievement of Management Objectives referred to in subparagraph (e) below. If the elimination of restrictions is based only on the passage of time rather than the achievement of Management Objectives, the period of time will be no shorter than three years, except that the restrictions may be removed ratably during the three-year period, on at least an annual basis, as determined by the Committee.

 

(d)           Each such grant or sale will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the hands of any transferee).

 

(e)           Any grant of Restricted Stock may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such Restricted Stock; provided, however, that notwithstanding subparagraph (c) above, restrictions relating to Restricted Stock that vests upon the achievement of Management Objectives may not terminate sooner than one year from the Date of Grant.  Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of shares of Restricted Stock on which restrictions will terminate if performance is at or above the minimum or threshold level or levels, or is at or above the target level or levels, but falls short of maximum achievement of the specified Management Objectives.  The grant of a Qualified Performance-Based Award of Restricted

 

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Stock will specify that, before the termination or early termination of restrictions applicable to such Restricted Stock, the Committee must determine that the Management Objectives have been satisfied.

 

(f)            Notwithstanding anything to the contrary contained in this Plan, any grant or sale of Restricted Stock may provide for the earlier termination of restrictions on such Restricted Stock (i) in the event of the retirement, death or disability of a Participant or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Restricted Stock is not assumed or converted into replacement awards in a manner described in the Evidence of Award.

 

(g)           Any such grant or sale of Restricted Stock may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional shares of Restricted Stock, which may be subject to the same restrictions as the underlying award; provided, however, that dividends or other distributions on Restricted Stock with restrictions that lapse as a result of the achievement of Management Objectives will be deferred until and paid contingent upon the achievement of the applicable Management Objectives.

 

(h)           Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.  Unless otherwise directed by the Committee, (i) all certificates representing shares of Restricted Stock will be held in custody by the Company until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares or (ii) all shares of Restricted Stock will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such shares of Restricted Stock.

 

7.             Restricted Stock Units.  The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Restricted Stock Units (including Performance Leveraged Units) to Participants.  Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

 

(a)           Each such grant or sale will constitute the agreement by the Company to deliver shares of Common Stock or cash to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Committee may specify.  If a grant of Restricted Stock Units specifies that the Restriction Period will terminate only upon the achievement of Management Objectives or that the Restricted Stock Units will be earned based on the achievement of Management Objectives, then, notwithstanding anything to the contrary contained in subparagraph (c) below, the applicable Restriction Period may not be a period of less than one year from the Date of Grant.  Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of Restricted Stock Units on which restrictions will terminate if performance is at or above the minimum or threshold level or levels, or is at or above the target

 

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level or levels, but falls short of maximum achievement of the specified Management Objectives.  The grant of Qualified Performance-Based Awards of Restricted Stock Units will specify that, before the termination or early termination of restrictions applicable to such Restricted Stock Units or the earning of such Restricted Stock Units, the Committee must determine that the Management Objectives have been satisfied.

 

(b)           Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

 

(c)           If the Restriction Period lapses only by the passage of time rather than the achievement of Management Objectives as provided in subparagraph (a) above, each such grant or sale will be subject to a Restriction Period of not less than three years, except that a grant or sale may provide that the Restriction Period will expire ratably during the three-year period, on at least an annual basis, as determined by the Committee.

 

(d)           Notwithstanding anything to the contrary contained in this Plan, any grant or sale of Restricted Stock Units may provide for the earlier lapse or other modification of the Restriction Period (i) in the event of the retirement, death or disability of a Participant or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Restricted Stock Units are not assumed or converted into replacement awards in a manner described in the Evidence of Award.  In such event, the Evidence of Award will specify the time and terms of delivery.

 

(e)           During the Restriction Period, the Participant will have no right to transfer any rights under his or her award and will have no rights of ownership in the shares of Common Stock deliverable upon payment of the Restricted Stock Units and will have no right to vote them, but the Committee may, at the Date of Grant, authorize the payment of dividend equivalents on such Restricted Stock Units on either a current or deferred or contingent basis, either in cash or in additional shares of Common Stock; provided, however, that dividends or other distributions on shares of Common Stock underlying Restricted Stock Units with restrictions that lapse as a result of the achievement of Management Objectives will be deferred until and paid contingent upon the achievement of the applicable Management Objectives.

 

(f)            Each grant or sale will specify the time and manner of payment of the Restricted Stock Units that have been earned.  Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in shares of Common Stock or cash, or a combination thereof.

 

(g)           Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

 

8.             Performance Shares and Performance Units.  The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Performance Shares and Performance Units.  Each such grant may utilize any or all of the

 

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authorizations, and will be subject to all of the requirements, contained in the following provisions:

 

(a)           Each grant will specify the number of Performance Shares or Performance Units to which it pertains, which number or amount may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment will be made in the case of a Qualified Performance-Based Award (other than in connection with the death or disability of the Participant or a Change in Control) where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.

 

(b)           The Performance Period with respect to each Performance Share or Performance Unit will be such period of time (not less than one year) as will be determined by the Committee at the time of grant, which may be subject to earlier lapse or other modification (i) in the event of the retirement, death or disability of a Participant or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Performance Shares and Performance Units are not assumed or converted into replacement awards in a manner described in the Evidence of Award; provided, however, that no such adjustment will be made in the case of a Qualified Performance-Based Award (other than in connection with the death or disability of the Participant or a Change in Control) where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.  In such event, the Evidence of Award will specify the time and terms of delivery.

 

(c)           Any grant of Performance Shares or Performance Units will specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level or levels of achievement and will set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum or threshold level or levels, or is at or above the target level or levels, but falls short of maximum achievement of the specified Management Objectives.  The grant of a Qualified Performance-Based Award of Performance Shares or Performance Units will specify that, before the Performance Shares or Performance Units will be earned and paid, the Committee must determine that the Management Objectives have been satisfied.

 

(d)           Each grant will specify the time and manner of payment of Performance Shares or Performance Units that have been earned.  Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in shares of Common Stock, in Restricted Stock or Restricted Stock Units or in any combination thereof.

 

(e)           Any grant of Performance Shares or Performance Units may specify that the amount payable or the number of shares of Common Stock, shares of Restricted Stock or Restricted Stock Units with respect thereto may not exceed a maximum specified by the Committee at the Date of Grant.

 

(f)            The Committee may, at the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof either in cash or in additional

 

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shares of Common Stock, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Performance Shares with respect to which such dividend equivalents are paid.

 

(g)           Each grant of Performance Shares or Performance Units will be evidenced by an Evidence of Award and will contain such other terms and provisions, consistent with this Plan, as the Committee may approve.

 

9.             Awards to Non-Employee Directors.  Subject to the limit set forth in Section 3(d) of this Plan, the Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to non-employee Directors of Option Rights, Appreciation Rights or other awards contemplated by Section 10 of this Plan and may also authorize the grant or sale of shares of Common Stock, Restricted Stock or Restricted Stock Units to non-employee Directors.  Each grant of an award to a non-employee Director will be upon such terms and conditions as approved by the Committee, and will be evidenced by an Evidence of Award in such form as will be approved by the Committee.  Each grant will specify in the case of an Option Right an Option Price per share, and in the case of a Free-Standing Appreciation Right, a Base Price per share, which will not be less than the Market Value per Share on the Date of Grant.  Each Option Right and Free-Standing Appreciation Right granted under the Plan to a non-employee Director will expire not more than 10 years from the Date of Grant and will be subject to earlier termination as hereinafter provided.  If a non-employee Director subsequently becomes an employee of the Company or a Subsidiary while remaining a member of the Board, any award held under this Plan by such individual at the time of such commencement of employment will not be affected thereby.  Non-employee Directors, pursuant to this Section 9, may be awarded, or may be permitted to elect to receive, pursuant to procedures established by the Board, all or any portion of their annual retainer, meeting fees or other fees in shares of Common Stock, Restricted Stock, Restricted Stock Units or other awards under the Plan in lieu of cash.

 

10.           Other Awards.

 

(a)           Subject to applicable law and the limit set forth in Section 3(d) of this Plan, the Committee may grant to any Participant such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Common Stock, purchase rights for shares of Common Stock, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates or other business units thereof or any other factors designated by the Committee, and awards valued by reference to the book value of shares of Common Stock or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of the Company.  The Committee will determine the terms and conditions of such awards.  Shares of Common Stock delivered pursuant to an award in the nature of a purchase right granted under this Section 10 will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, shares of Common Stock, other awards, notes or other property, as the Committee determines.

 

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(b)           The Committee may grant shares of Common Stock as a bonus, or may grant other awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as will be determined by the Committee in a manner that complies with Section 409A of the Code.

 

(c)           If the earning or vesting of, or elimination of restrictions applicable to, an award granted under this Section 10 is based only on the passage of time rather than the achievement of Management Objectives, the period of time shall be no shorter than three years, except that the restrictions may be removed no sooner than ratably on an annual basis during the three-year period as determined by the Committee. If the earning or vesting of, or elimination of restrictions applicable to, awards granted under this Section 10 is based on the achievement of Management Objectives, the earning, vesting or restriction period may not terminate sooner than one year from the Date of Grant.

 

(d)           Notwithstanding anything to the contrary contained in this Plan, any grant of an award under this Section 10 may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award (i) in the event of the retirement, death or disability of the Participant, or (ii) in the event of a Change in Control where either (A) within a specified period the Participant is involuntarily terminated for reasons other than for cause or terminates his or her employment for good reason or (B) such Other Awards are not assumed or converted into replacement awards in a manner described in the Evidence of Award.  In such event, the Evidence of Award will specify the time and terms of delivery.

 

11.           Administration of the Plan.

 

(a)           This Plan will be administered by the Committee.  The Committee may from time to time delegate all or any part of its authority under this Plan to a subcommittee thereof.  To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee.

 

(b)           The interpretation and construction by the Committee of any provision of this Plan or of any agreement, notification or document evidencing the grant of awards under this Plan and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive.  No member of the Committee shall be liable for any such action or determination made in good faith.

 

(c)           The Committee may delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under the Plan.  The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as the Committee:  (i) designate employees to be recipients of awards under this Plan; (ii) determine the size of any such awards; provided, however, that (A) the Committee will not delegate such responsibilities to any such officer for awards granted to an employee who is an officer, Director, or more than 10%

 

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beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act, or any Covered Employee; (B) the resolution providing for such authorization sets forth the total number of shares of Common Stock such officer(s) may grant; and (C) the officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated.

 

12.           Adjustments.  The Committee will make or provide for such adjustments in the numbers of shares of Common Stock covered by outstanding Option Rights, Appreciation Rights, Restricted Stock Units, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of shares of Common Stock covered by other awards granted pursuant to Section 10 hereof, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, and in the kind of shares covered thereby, as the Committee, in its sole discretion, may determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split- off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee, in its discretion, may provide in substitution for any or all outstanding awards under this Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its sole discretion elect to cancel such Option Right or Appreciation Right without any payment to the person holding such Option Right or Appreciation Right.  The Committee will also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Committee in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 12; provided, however, that any such adjustment to the number specified in Section 3(b) will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail to so qualify.

 

13.           Change in Control.  For purposes of this Plan, except as may be otherwise prescribed by the Committee in an Evidence of Award made under this Plan, a “Change in Control” will be deemed to have occurred upon the occurrence of any of the following events:

 

(a)           The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of the Voting Power of the Company; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or any Subsidiary, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (D) any acquisition by any Person pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this Section 13.

 

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(b)           A change in a majority of the members of the Board occurs: (i) within one year following the public announcement of an actual or threatened election contest (as described in Rule 14a-12(c) promulgated under the Exchange Act) or the filing of a Schedule 13D or other public announcement indicating that a Person intends to effect a change in control of the Company, (ii) as a result of the exercise of contractual rights, or (iii) as a result of a majority of the members of the Board having been proposed, designated or nominated by a Person (other than the Company through the Board or a committee of the Board).

 

(c)           Consummation of a Business Combination unless, following such Business Combination, (i) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination or any Subsidiary of either of them) beneficially owns, directly or indirectly, 33% or more of the Voting Power of the entity resulting from such Business Combination, and (ii) at least half of the members of the board of directors of the new company resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.

 

(d)           Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

14.           Detrimental Activity and Recapture Provisions.  Any Evidence of Award may provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from time to time, if a Participant, either during employment by the Company or a Subsidiary or within a specified period after termination of such employment, shall engage in any Detrimental Activity.  In addition, notwithstanding anything in this Plan to the contrary, any Evidence of Award may also provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be required by the Committee or under Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Common Stock may be traded.

 

15.           Non U.S. Participants.  In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America or who provide services to the Company under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom.  Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan.  No such special terms, supplements, amendments or restatements, however, will include any provisions

 

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that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.

 

16.           Transferability.

 

(a)           Except as otherwise determined by the Committee, no Option Right, Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, award contemplated by Section 9 or 10 of this Plan or dividend equivalents paid with respect to awards made under this Plan will be transferable by the Participant except by will or the laws of descent and distribution, and in no event will any such award granted under the Plan be transferred for value.  Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law or court supervision.

 

(b)           The Committee may specify at the Date of Grant that part or all of the shares of Common Stock that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions on transfer.

 

(c)           Notwithstanding the provisions of Section 16(a), but subject to the prior approval of the Committee, Option Rights (other than Incentive Stock Options) and Appreciation Rights may be transferable by a Participant, without payment of consideration therefor by the transferee, to any one or more members of the Participant’s Immediate Family (or to one or more trusts established solely for the benefit of one or more members of the Participant’s Immediate Family or to one or more partnerships in which the only partners are members of the Participant’s Immediate Family); provided, however, that (i) no such transfer shall be effective unless reasonable prior notice thereof is delivered to the Company and such transfer is thereafter effected in accordance with any terms and conditions that shall have been made applicable thereto by the Company or the Committee and (ii) any such transferee shall be subject to the same terms and conditions hereunder as the Participant.   “Immediate Family” has the meaning ascribed thereto in Rule 16a-1(e) under the Exchange Act (or any successor rule to the same effect) as in effect from time to time.

 

17.           Withholding Taxes.  To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit.  If a Participant’s benefit is to be received in the form of shares of Common Stock, and such Participant fails to make arrangements for the payment of tax, the

 

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Company will withhold such shares of Common Stock having a value equal to the amount required to be withheld.  Notwithstanding the foregoing, when a Participant is required to pay the Company an amount required to be withheld under applicable income and employment tax laws, the Participant may elect to satisfy the obligation, in whole or in part, by electing to have withheld, from the shares required to be delivered to the Participant, shares of Common Stock having a value equal to the amount required to be withheld (except in the case of Restricted Stock where an election under Section 83(b) of the Code has been made), or by delivering to the Company other shares of Common Stock held by such Participant.  The shares used for tax withholding will be valued at an amount equal to the Market Value per Share of such shares of Common Stock on the date the benefit is to be included in Participant’s income.  In no event will the Market Value per Share of the shares of Common Stock to be withheld and delivered pursuant to this Section to satisfy applicable withholding taxes in connection with the benefit exceed the minimum amount of taxes required to be withheld.  Participants will also make such arrangements as the Company may require for the payment of any withholding tax obligation that may arise in connection with the disposition of shares of Common Stock acquired upon the exercise of Option Rights.

 

18.           Compliance with Section 409A of the Code.

 

(a)           To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

 

(b)           Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Subsidiaries.

 

(c)           If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the tenth business day of the seventh month after such separation from service.

 

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(d)           Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.

 

19.           Amendments.

 

(a)           The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that if an amendment to this Plan (i) would materially increase the benefits accruing to participants under this Plan, (ii) would materially increase the number of shares of Common Stock which may be issued under this Plan, (iii) would materially modify the requirements for participation in this Plan,  or (iv) must otherwise be approved by the stockholders of the Company in order to comply with applicable law or the rules of the New York Stock Exchange or, if the shares of Common Stock are not traded on the New York Stock Exchange, the principal national securities exchange upon which the shares of Common Stock are traded or quoted, then, such amendment will be subject to stockholder approval and will not be effective unless and until such approval has been obtained.

 

(b)           Except in connection with a corporate transaction or event described in Section 12 of this Plan, the terms of outstanding awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding Option Rights or Appreciation Rights in exchange for cash, other awards or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the original Option Rights or Base Price of the original Appreciation Rights, as applicable, without stockholder approval.  This Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 12 of this Plan.

 

(c)           If permitted by Section 409A of the Code and Section 162(m) of the Code, but subject to the paragraph that follows, in the case of termination of employment by reason of death, disability or retirement, or in the event of a Change in Control, to the extent a Participant holds an Option Right or Appreciation Right not immediately exercisable in full, or any shares of Restricted Stock as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or any other awards made pursuant to Section 9 or 10 subject to any vesting schedule or transfer restriction, or who holds shares of Common Stock subject to any transfer restriction imposed pursuant to Section 16(b) of this Plan, the Committee may, in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or other award may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time at which such

 

21

 

Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award, except in the case of a Qualified Performance-Based Award where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.

 

Subject to Section 19(b) hereof, the Committee may amend the terms of any award theretofore granted under this Plan prospectively or retroactively, except in the case of a Qualified Performance-Based Award (other than in connection with the Participant’s death or disability, or a Change in Control) where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.  In such case, the Committee will not make any modification of the Management Objectives or the level or levels of achievement with respect to such Qualified Performance-Based Award.  Subject to Section 12 above, no such amendment will impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any awards outstanding hereunder and not exercised in full on the date of termination.

 

20.           Governing Law.  This Plan and all grants and awards and actions taken hereunder will be governed by and construed in accordance with the internal substantive laws of the State of Delaware.

 

21.           Effective Date/Termination.  This Plan will be effective as of the Effective Date. No grants will be made on or after the Effective Date under the Existing Plan, except that outstanding awards granted under the Existing Plan will continue unaffected following the Effective Date.  No grant will be made under this Plan after May 17, 2021, but all grants made on or prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan.

 

22.           Miscellaneous Provisions.

 

(a)           The Company will not be required to issue any fractional shares of Common Stock pursuant to this Plan.  The Committee may provide for the elimination of fractions or for the settlement of fractions in cash.

 

(b)           This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.

 

(c)           To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right.  Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan.

 

(d)           No award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of stock thereunder, would be, in the opinion of counsel selected by the

 

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Company, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan.

 

(e)           Absence on leave approved by a duly constituted officer of the Company or any of its Subsidiaries will not be considered interruption or termination of service of any employee for any purposes of this Plan or awards granted hereunder.

 

(f)            No Participant will have any rights as a stockholder with respect to any shares subject to awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the stock records of the Company.

 

(g)           The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.

 

(h)           Except with respect to Option Rights and Appreciation Rights, the Committee may permit Participants to elect to defer the issuance of shares of Common Stock under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan and which are intended to comply with the requirements of Section 409A of the Code.  The Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts.

 

(i)            If any provision of this Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the Committee, such provision will be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it will be stricken and the remainder of this Plan will remain in full force and effect.

 

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