Document:

este-ex101_7.htm

 

Exhibit 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) entered into on May 18, 2016, is among EARTHSTONE ENERGY, INC., a Delaware corporation (“Borrower”), EARTHSTONE OPERATING, LLC, a Texas limited liability company (“EO”), EF NON-OP, LLC, a Texas limited liability company (“EF”), SABINE RIVER ENERGY, LLC, a Texas limited liability company (“Sabine”), BASIC PETROLEUM SERVICES, INC., a Texas corporation (“Basic”), LYNDEN ENERGY CORP., a company existing under the laws of British Columbia (“LE”), and LYNDEN USA, INC., a Utah corporation (“LUSA”), as guarantors (EO, EF, Sabine, Basic, LE and LUSA, each a “Guarantor” and collectively, the “Guarantors”); each Lender (defined below) who is a signatory hereto and BOKF, NA dba BANK OF TEXAS, a national banking association, as administrative agent (“Agent”) for the Lenders.  The party or parties are sometimes individually referred to herein as a “Party” or collectively referred to as “Parties.”

R E C I T A L S

WHEREAS, Borrower, Agent and the lenders from time to time party thereto (each a “Lender” and collectively, the “Lenders”) are parties to that certain Credit Agreement dated as of December 19, 2014, as amended by that certain First Amendment to Credit Agreement dated as of December 1, 2015 (as may be further amended, modified or restated from time to time, the “Credit Agreement”), whereby the Lenders agreed to make available to Borrower a credit facility upon the terms and conditions set forth therein; and

WHEREAS, Borrower has requested that Agent and the Lenders amend the Credit Agreement as provided herein; and

WHEREAS, subject to the terms hereof, the Agent and the Lenders are willing to agree to the amendment to the Credit Agreement as set forth herein.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the Parties to this Amendment hereby agree as follows:

SECTION 1. Defined Terms. Except as may otherwise be provided herein, all capitalized terms which are defined in the Credit Agreement shall have the same meaning herein as therein, all of such terms and their definitions being incorporated herein by reference.  

SECTION 2. Amendment to Credit Agreement. Subject to the conditions precedent set forth in Section 4 hereof:

(a) The definition of “Applicable Margin” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 “Applicable Margin” means the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Borrowing Base Utilization as in effect from time to time:

 

	
Borrowing Base Utilization
	
Applicable Margin

	
LIBOR Loans
	
Base Rate Loans

	
Less than 25%
	
2.25%
	
1.25%

	
Greater than or equal to 25%, but less than 50%
	
2.50%
	
1.50%

	
Greater than or equal to 50%, but less than 75%
	
2.75%
	
1.75%

	
Greater than or equal to 75%, but less than 90%
	
3.00%
	
2.00%

	
Greater than or equal to 90%
	
3.25%
	
2.25%

 

Each change in the Applicable Margin resulting from a change in the Borrowing Base Utilization shall take effect on the day such change in the Borrowing Base Utilization occurs.

(b) The definition of “Consolidated Net Income” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

“Consolidated Net Income” means with respect to Borrower and its Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of Borrower and its Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (i) the net income of any Person in which Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of Borrower and its Consolidated Subsidiaries in accordance with GAAP) or the net income of any Unrestricted Subsidiary, except to the extent of the amount of dividends or distributions actually paid in such period by such other Person or such Unrestricted Subsidiary to Borrower or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but not loss) of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or prohibited in each case determined in accordance with GAAP; (iii) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (iv) any extraordinary gains or losses, including gains or losses attributable to Property sales not in the ordinary course of business; and (v) the cumulative effect of a change in accounting principles and any gains or losses attributable to write ups or write downs of assets.

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(c) The definition of “EBITDAX” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

“EBITDAX” means, for any period, the sum of Consolidated Net Income for such period plus (a) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) taxes, (iii) depreciation, (iv) depletion, (v) amortization, (vi) non-cash losses under FASB ASC 815 as a result of changes in the fair market value of derivatives, (vii) exploration expenses, (viii) impairment expenses and (ix) Eligible Rig Contract Cancellation Expenses and minus (b) to the extent included in Consolidated Net Income in such period, non-cash gains under FASB ASC 815 as a result of changes in the fair market value of derivatives.

(d) Section 1.02 of the Credit Agreement is hereby amended by inserting the following as a new definition:

“Eligible Rig Contract Cancellation Expenses” means expenses or charges in connection with the cancellation or termination of oil and gas drilling rig contracts incurred by a Loan Party during fiscal year 2016 that do not, when aggregated with all such expenses or charged incurred in prior periods of the fiscal year 2016, exceed $5,200,000.

(e) Section 1.02 of the Credit Agreement is hereby amended by inserting the following as a new definition:

“Recourse Debt” means Debt of an Unrestricted Subsidiary which is a liability, in whole or in part, of any Loan Party or which is secured by any Lien upon any property or assets of any Loan Party.

(f) The definition of “Subsidiary” in Section 1.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

“Subsidiary” means (i) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by another Person or one or more of such Person’s Subsidiaries or by such Person and one or more of its Subsidiaries and (ii) any joint venture, limited liability company or partnership, trust company, general or limited partnership or any other type of partnership or entity other than a corporation in which a Person or one or more of its other Subsidiaries is a member, owner, partner or joint venturer and owns, directly or indirectly, at least a majority of the equity of such entity or controls such entity, but excluding any tax partnerships that are not classified as partnerships under state law; provided, however, that such term shall not include an Unrestricted Subsidiary. For purposes of this definition, any Person which owns directly or indirectly an equity investment in another Person which allows the first Person to manage or elect managers who manage the normal activities of such second Person will be deemed to “control” such second Person (e.g. a sole general partner controls a limited partnership). Unless otherwise indicated herein, each reference to the term “Subsidiary” means a Subsidiary of Borrower.

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(g) Section 1.02 of the Credit Agreement is hereby amended by inserting the following as a new definition:

“Unrestricted Subsidiary” means any subsidiary of Borrower or a Guarantor (a) in which Borrower notifies the Agent at such subsidiary’s creation or acquisition that such subsidiary will be an “Unrestricted Subsidiary” and (b) that meets the requirements of an Unrestricted Subsidiary set forth in Section 9.16.

(h) Section 8.01(k) of the Credit Agreement is hereby amended by adding the following sentence to the end thereof: 

“Borrower will notify Administrative Agent of any amendment to the charter, by-laws, or other constituent documents in any manner of any Unrestricted Subsidiary.” 

(i) Section 8.09(d) is amended by adding the following sentence to the end thereof:

“If, at any time, a new Unrestricted Subsidiary is acquired or created, Borrower shall, and, as applicable, shall cause such new Unrestricted Subsidiary to, contemporaneously with such acquisition or creation, (x) pledge all of the Capital Securities of such new Unrestricted Subsidiary (including, without limitation, delivery of original certificates evidencing the Capital Securities of such new Unrestricted Subsidiary, together with an appropriate undated transfer power for each certificate duly executed in blank by the registered owner thereof, if applicable) and (y) execute and deliver such other Loan Documents (including Security Instruments granting to Agent a valid, first priority (subject only to Excepted Liens) perfected Lien in the Capital Securities of such new Unrestricted Subsidiary), certificates and legal opinions as Agent shall reasonably request.”

(j) Section 9.03 of the Credit Agreement is hereby amended by adding the following as a new subsection (i): 

“(i) investments in Unrestricted Subsidiaries engaged exclusively in oil and gas exploration, development, production, processing and related activities in an aggregate amount not to exceed $5,000,000.”

(k) Section 9.08 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

“Section 9.08 Mergers, Etc.. Neither Borrower nor any Subsidiary will merge into or with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property or assets to any other Person, except (a) Borrower may merge into or consolidate with any other Person provided that Borrower is the surviving entity and no Default exists or would result therefrom, (b) Borrower and any Subsidiary may merge or consolidate, or sell, lease or otherwise dispose of all or substantially all of its property with Borrower or any other Subsidiary and (c) 1058286 B.C. Ltd., a company existing under the laws of British Columbia, may merge with Lynden Energy Corp., a company existing under the laws of British Columbia, pursuant to the terms of that certain Arrangement Agreement, dated as of December 16, 2015, among Borrower, 1058286 B.C. Ltd. and Lynden Energy Corp.”

(l) Section 9.16 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows: 

“Section 9.16 Subsidiaries. Borrower shall not and shall not permit any Subsidiary to sell or to issue any Capital Securities of any Subsidiary, except to Borrower or any Guarantor and except in 

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compliance with Section 9.03. Borrower shall not, and shall not permit any Subsidiary to, create any additional Subsidiaries, unless (a) the creation of such Subsidiary is in preparation for the acquisition of Oil and Gas Properties and (b) Borrower shall have notified Agent in writing fifteen (15) days prior to the creation of such Subsidiary and provided Agent with any information reasonably requested by Agent and the Lenders (through the Agent) concerning such Subsidiary or acquisition.  Any Subsidiary so created shall be a U.S. Person and immediately upon its being created or acquired shall enter into the requisite agreements as provided in Section 8.09(d). Borrower shall not and shall cause its Subsidiaries to not permit any Unrestricted Subsidiary to sell or to issue any Capital Securities of such Unrestricted Subsidiary, except to Borrower or any Guarantor and except in compliance with Section 9.03. Borrower shall not, and shall not permit any Subsidiary to, create any additional Unrestricted Subsidiaries, unless Borrower shall have notified Agent in writing fifteen (15) days prior to the creation of such Unrestricted Subsidiary and provided Agent with any information reasonably requested by Agent and the Lenders (through the Agent) concerning such Unrestricted Subsidiary.  Any Unrestricted Subsidiary so created shall be a U.S. Person.  Borrower shall not and shall not permit any Subsidiary to create any Unrestricted Subsidiary, except to the extent (i) the ownership interest of Borrower or its Subsidiary in such Unrestricted Subsidiary is pledged as provided in Section 8.09(d), (ii) such Unrestricted Subsidiary does not incur, create, assume, or permit to exist any Recourse Debt, (iii) neither Borrower nor any of its Subsidiaries provides any credit support for any obligation (contingent or otherwise) of such Unrestricted Subsidiary, (iv) neither Borrower nor any of its Subsidiaries have any direct or indirect obligation to maintain or preserve the financial condition of such Unrestricted Subsidiary or cause such Unrestricted Subsidiary to achieve any specified level of operating results, and (v) such Unrestricted Subsidiary does not own any equity interest in Borrower or any of its Subsidiaries or hold any obligation of, or Lien on the property of, Borrower or any of its Subsidiaries.  Borrower shall not re-designate any Subsidiary as an Unrestricted Subsidiary.” 

(m) Article IX of the Credit Agreement is hereby amended by adding the following as a new Section 9.20: 

“Section 9.20 No Recourse Debt. Neither Borrower nor any Subsidiary will permit any Unrestricted Subsidiary to incur, create, assume, or permit to exist any Recourse Debt.”

(n) Section 12.06(b)(v) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

“(v) No Assignments to Certain Persons.  No such assignment shall be made to (1) Borrower or any of Borrower’s Affiliates, Subsidiaries or Unrestricted Subsidiaries or (2) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (2).”

(o) Exhibit B – Form of Borrowing, Continuing, and Conversion Request of the Credit Agreement is hereby amended by (i) deleting the “and” at the end of the last clause (b), (ii) replacing the period at the end of the last clause (c) with “; and” and (iii) adding the following as a new clause (d): “(d) after giving effect to the funding of the Loans requested hereunder Borrower will be in pro forma compliance with Section 9.12(b) of the Credit Agreement.”

SECTION 3. Borrowing Base Redetermination.  The Lenders have agreed that the amount of the Borrowing Base shall be reduced to $75,000,000 and the Monthly Reduction Amount shall be reaffirmed at $0, until the Borrowing Base and Monthly Reduction Amount are further redetermined pursuant to the terms of Section 2.08 of the Agreement.

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SECTION 4. Conditions of Effectiveness.  The obligations of Agent and the Lenders to amend the Credit Agreement as provided herein are subject to the fulfillment of the following conditions precedent: 

(a) Agent shall have received counterparts of this Amendment, which shall have been executed by the Lenders, Borrower and the Guarantors.  

(b) Borrower shall have made payment of all fees and expenses due and owing under the Credit Agreement including such fees and expenses specified in Section 8.  

(c) Agent shall have received the following documents (each of which shall be satisfactory to Agent in form and substance and in sufficient original counterparts) and the other conditions provided in this Section 4(c) shall have been satisfied:

(i) Supplements to the Guaranty Agreement executed by LE and LUSA.

(ii) Supplements to the Pledge and Security Agreement executed by Borrower, LE and LUSA.

(iii) The certificates representing Capital Securities of LE and LUSA pledged pursuant to the Pledge and Security Agreement, together with an undated transfer power for each such certificate executed in blank by the pledgor thereof.

(iv) A Mortgage executed by LUSA in sufficient counterparts for recording.

(v) Letters-in-Lieu executed by LUSA, in blank.

(vi) A favorable opinion of Parr Brown Gee & Loveless, special Utah counsel to LUSA, as to such matters incident to the transactions herein contemplated as Agent may reasonably request.

(vii) A certificate of the Secretary or an Assistant Secretary of each of LE and LUSA setting forth (A) resolutions of its board of directors, members, managers or other governing body, as applicable, with respect to the authorization of such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (B) the officers of such Guarantor (y) who are authorized to sign the Loan Documents to which such Guarantor is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (C) specimen signatures of the authorized officers, (D) the Charter Documents of such Guarantor, certified as being true and complete, and (E) certificates of the appropriate state agencies with respect to the existence, qualification and good standing of such Guarantors.  Agent and the Lenders may conclusively rely on such certificate until they receive notice in writing from such Guarantor to the contrary.

(viii) A Borrowing, Continuation and Conversion Request, the form of which gives effect to the amendment provided for by Section 2(o) of this Amendment.

(ix) A customary payoff letter with respect to LE’s credit facility, evidence that all amounts due and owing thereunder shall have been repaid and all commitments of the lenders thereunder shall have been terminated, releases of all liens and security interests pursuant to such credit facility, and evidence that all hedges and derivative contracts of LE and its Subsidiaries have been terminated.

(x) Such other agreements, documents, certificates, and evidence as Agent may request. 

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(xi) Agent shall be satisfied that all conditions precedent to the Arrangement Agreement shall have been, or shall contemporaneously with the effectiveness of this Amendment be, consummated pursuant to the terms and conditions thereof, and no condition precedent to the Arrangement Agreement shall have been waived without the consent of Agent.

(d) Agent shall be satisfied that Lynden Exploration Ltd., a company existing under the laws of Alberta (“LEXP”) has been dissolved.

(e) All representations and warranties set forth in each of the Loan Documents shall be true and correct.

(f) No Material Adverse Effect shall have occurred. 

(g) No Default or Event of Default shall have occurred. 

SECTION 5. Post-Closing Conditions. 

(a) Within sixty (60) days after the date of this Amendment, Borrower will deliver title information in form and substance reasonably acceptable to Agent covering enough of the Mortgaged Properties evaluated by the most recent Reserve Report that includes LUSA’s Oil and Gas Properties, so that Agent shall have received together with title information previously delivered to Agent, satisfactory title information on at least (80%) of the value of the Oil and Gas Properties evaluated in such Reserve Report that are Proven Reserves.

(b) Within sixty (60) Business Days after the date of this Amendment, Agent shall be satisfied that Borrower has entered into Hedging Agreements for (i) sixty percent (60%) of its anticipated monthly production from its PDP Reserves for the months of January 2017 through December 2017 with a strike price of not less than $46.36 per barrel and (ii) fifty percent (50%) of its anticipated monthly production from its PDP Reserves for the months of January 2018 through December 2018 with a strike price of not less than $47.97 per barrel.

(c) Within one (1) Business Day after LE has been provided a post-amalgamation number and an amalgamation certificate, Agent shall have received a favorable opinion of Gowling WLG, special Canadian counsel to LE, in the form attached to this Amendment as Exhibit A.

SECTION 6. Representations and Warranties. Borrower and each Guarantor represents and warrants to Agent and the Lenders, with full knowledge that Agent and the Lenders are relying on the following representations and warranties in executing this Amendment, as follows:

(a) It has the power and authority to execute, deliver and perform this Amendment, and all organizational action on the part of itself, as applicable, requisite for the due execution, delivery and performance of this Amendment has been duly and effectively taken.

(b) This Amendment and each other document executed and delivered in connection herewith constitute its legal, valid and binding obligation, to the extent it is a party thereto, enforceable against it in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

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(c) This Amendment does not and will not violate any provisions of (i) its Charter Documents; (ii) any contract, agreement, or instrument to which it is a party; or (iii) any requirement of any governmental authority to which it is subject. Its execution of this Amendment will not result in the creation or imposition of any lien upon its properties other than those permitted by the Credit Agreement and this Amendment.

(d) Its execution, delivery and performance of this Amendment does not require the consent or approval of any other Person, including, without limitation, any regulatory authority or governmental body of the United States of America or any state thereof or any political subdivision of the United States of America or any state thereof.

(e) As of the date of this Amendment, it is solvent and has taken no action such as may invoke applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

(f) Upon giving effect to this Amendment, no Default or Event of Default exists, and all of the representations and warranties made by it contained in the Credit Agreement are true and correct in all material respects on and as of this date other than those which have been disclosed to Lenders in writing (except to the extent such representations and warranties expressly refer to an earlier or other date, in which case they shall be true and correct as of such earlier or other date).

Except to the extent expressly set forth herein to the contrary, nothing in this Section 6 is intended to amend any of the representations or warranties contained in the Agreement.

SECTION 7. Reference to and Effect on the Credit Agreement.

(a) Upon and after the execution of this Amendment by each of the parties hereto, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby.  This Amendment shall constitute a Loan Document.

(b) Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed.

SECTION 8. Fees, Cost, Expenses and Taxes. Borrower agrees to pay all reasonable legal fees and expenses to be incurred in connection with the preparation, reproduction, execution and delivery of this Amendment and the other instruments and documents to be delivered in connection with the transactions associated herewith, including reasonable attorneys’ fees and out-of-pocket expenses of Agent and the Lenders, and agrees to save Agent and the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such fees.

SECTION 9. Extent of Amendment. Except as otherwise expressly provided herein, neither the Credit Agreement nor the other Loan Documents are amended, modified or affected by this Amendment. Borrower and each Guarantor hereby ratifies and confirms that (i) except as expressly amended or waived hereby, all of the terms, conditions, covenants, representations, warranties and all other provisions of the Credit Agreement, as applicable, remain in full force and effect, (ii) each of the other Loan Documents to which it is a party are and remain in full force and effect in accordance with their respective terms, and (iii) the Collateral granted by it is unimpaired by this Amendment.

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Nothing contained in this Amendment nor any past indulgence by Agent and/or the Lenders, nor any other action or inaction on behalf of Agent and/or the Lenders (i) shall constitute or be deemed to constitute a waiver of any unknown or future Defaults or Events of Default which may now or in the future exist under the Credit Agreement or the other Loan Documents, or (ii) shall constitute or be deemed to constitute an election of remedies by Agent and/or the Lenders or a waiver of any of the rights or remedies of Agent and/or the Lenders provided in the Credit Agreement or the other Loan Documents or otherwise afforded at law or in equity. 

SECTION 10. Grant and Affirmation of Security Interest. Borrower and each Guarantor hereby confirms and agrees that (i) any and all liens, security interests and other security or Collateral granted by it and now or hereafter held by Lenders as security for payment and performance of the Obligations are hereby renewed and carried forth to secure payment and performance of all of the Obligations, and (ii) the Loan Documents, as such may be amended in accordance herewith, are and remain legal, valid and binding obligations, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.  

SECTION 11. Claims; Release. As additional consideration to the execution, delivery, and performance of this Amendment by the parties hereto and to induce Agent and the Lenders to enter into this Amendment, Borrower and each Guarantor hereby represents and warrants that it does not know of any defenses, counterclaims or rights of setoff to the payment of any Obligations of Borrower or any Guarantor to Agent and/or the Lenders.  In consideration of the amendments contained herein, Borrower and each Guarantor hereby waives and releases each of the Lenders and Agent from any and all claims and defenses, known or unknown, with respect to the Credit Agreement and the other Loan Documents and the transactions contemplated thereby.

SECTION 12. Execution and Counterparts. This Amendment may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile or other electronic transmission (such as Portable Document Format) and other Loan Documents shall be equally as effective as delivery of a manually executed counterpart of this Amendment and such other Loan Documents.

SECTION 13. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

SECTION 14. Headings. Section headings in this Amendment are included herein for convenience and reference only and shall not constitute a part of this Amendment for any other purpose.

SECTION 15. NO ORAL AGREEMENTS. The rights and obligations of each of the parties to the loan documents shall be determined solely from written agreements, documents, and instruments, and any prior oral agreements between such parties are superseded by and merged into such writings. This Amendment and the other written loan documents executed by Borrower, Guarantor, Agent and/or the Lenders (together with any fee letters as they relate to the payment of fees after the closing date) represent the final agreement between such parties, and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements by such parties. There are no unwritten oral agreements between such parties. 

[signature pages to follow]

 

 

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the Effective Date.

 

	
BORROWER:

	
 
	
 
	
 

	
EARTHSTONE ENERGY, INC.

	
a Delaware corporation

	
 
	
 
	
 

	
By:
	
 
	
/s/ Christopher E. Cottrell

	
 
	
 
	
Christopher E. Cottrell

Executive Vice President, Land and Marketing, 

and Corporate Secretary

 

	
GUARANTORS:

	
 

	
EARTHSTONE OPERATING, LLC, 

	
a Texas limited liability company

	
EF NON-OP, LLC, 

	
a Texas limited liability company 

	
SABINE RIVER ENERGY, LLC, 

	
a Texas limited liability company 

	
BASIC PETROLEUM SERVICES, INC.,

	
a Texas corporation

	
LYNDEN ENERGY CORP.,

	
a company existing under the laws of British Columbia

	
LYNDEN USA, INC.,

	
a Utah corporation

 

	
Each by:
	
 
	
/s/ Christopher E. Cottrell

	
 
	
 
	
Christopher E. Cottrell

Executive Vice President, Land and Marketing, 

and Corporate Secretary

 

 

 

Signature Page to Second Amendment to Credit Agreement (Earthstone Energy, Inc.)

 

	
LENDER AND AGENT:

	
 
	
 
	
 

	
BOKF, NA dba BANK OF TEXAS, 

	
as Agent and Lender

	
 
	
 
	
 

	
By:
	
 
	
/s/ Martin W. Wilson

	
 
	
 
	
Martin W. Wilson

	
 
	
 
	
Senior Vice President

 

	
LENDER:

	
 
	
 
	
 

	
WELLS FARGO BANK, NATIONAL ASSOCIATION, 

	
as Lender

	
 
	
 
	
 

	
By:
	
 
	
/s/ Matthew Denkler

	
Name:
	
 
	
Matthew Denkler

	
Title:
	
 
	
Vice President

 

 

 

Signature Page to Second Amendment to Credit Agreement (Earthstone Energy, Inc.)

 

Exhibit A

May 18, 2016

BOKF, NA dba Bank of Texas, as Agent (the “Agent”)

for the Lenders pursuant to the Credit Agreement

(as defined below)

1401 McKinney, Suite 1650

Houston, Texas 77010

Re:     Second Amendment to Credit Agreement dated as of May 18, 2016 (the “Credit Agreement”) among Earthstone Energy, Inc., a Delaware corporation, as borrower (“Borrower”), Earthstone Operating, LLC, a Texas limited liability company (“EO”), EF NON-OP, LLC, a Texas limited liability company (“EF”), Sabine River Energy, LLC, a Texas limited liability company (“Sabine”), Basic Petroleum Services, Inc., a Texas corporation (“Basic”), Lynden Energy Corp., a company existing under the laws of British Columbia (“LE”), and Lynden USA, Inc., a Utah corporation (“LUSA”), as guarantors, and BOKF, NA dba Bank of Texas, a national banking association, as administrative agent (“Agent”) for the Lenders. 

Ladies and Gentlemen:

At the request of the Borrower we have acted as special British Columbia counsel in reviewing the documents set out in 0 (the “Opinion Documents”) in connection with LE in its capacity as a Guarantor.  We did not act in connection with the preparation, execution or delivery of any of the Opinion Documents.  Unless otherwise defined herein or the context hereof otherwise requires, each term used herein with its initial letter capitalized has the meaning given to such term in the Credit Agreement.  Other such terms that are defined in the Uniform Commercial Code as in effect on the date hereof in the State of Texas (the “Texas UCC”) have the same meaning therein when used herein unless otherwise indicated by the context in which such terms are so used.

This opinion is furnished to you at the request of the Borrower.

In reaching the conclusions expressed in this opinion, we have examined the Opinion Documents.  We have also examined originals or copies of: (i) LE’s constitutive documents listed in Section A of 0 hereto (the “Organizational Documents”); (ii) certain resolutions of the Board of Directors of LE dated May 18, 2016, authorizing the transactions contemplated by the Opinion Documents to which LE is a party; (iii) executed copy of the Pledge and Security Agreement dated December 19, 2014; and (iv) such other documents and records as we have deemed necessary and relevant for purposes hereof.

We are qualified to practice law only in the Province of British Columbia and, accordingly, we express no opinion as to any laws other than the laws of the Province of British Columbia and the federal laws of Canada applicable therein as of the date of this opinion.  Without limitation, the Opinion Documents are governed in accordance with the laws of the State of Texas and we provide no opinion with respect to the laws of the State of Texas. 

In our examination of documents, certificates and records, we have assumed the genuineness of all signatures, the legal capacity to contract of all natural persons, the authenticity of all documents and records submitted to us as originals, the conformity to original documents and records of all documents and records submitted to us as copies, and the correctness and accuracy of all statements of fact contained therein. 

 

 

Based upon the foregoing, we are of the opinion that:

	
 
	
1.
	
LE is a company validly existing and in good standing under the laws of the Province of British Columbia.

	
 
	
2.
	
LE has the corporate power and authority under the laws of the Province of British Columbia and its Organizational Documents to execute, deliver, and perform its obligations under the Opinion Documents to which it is a party.

	
 
	
3.
	
The execution and delivery by LE of each Opinion Document to which it is a party do not, and the performance by LE of its obligations thereunder will not, violate LE’s Organizational Documents or any laws, statutes or regulations of the Province of British Columbia or of Canada to which LE is subject.

	
 
	
4.
	
No authorization, consent, permit, exemption or approval of, or filing with or notice to, any governmental agency or authority, or any regulatory body, court, or tribunal having legal jurisdiction in British Columbia, is required at this time in connection with the execution and delivery by LE of the Opinion Documents or to which it is a party the consummation by it of the transactions contemplated by those Opinion Documents.

	
 
	
5.
	
A financing statement has been registered on behalf of the Agent under the British Columbia Personal Property Security Act (the “PPSA”) (the “Financing Statement”) with respect to the Supplement No. 1 to Pledge and security agreement (the “Security Agreements”) on May 18, 2016 under base registration number 296072J. 

	
 
	
6.
	
The registration of the Financing Statement is effective for the period May 18, 2016 to May 18, 2020, unless renewed or extended prior to that date.  Attending to renewal is the sole responsibility of the Agent. 

	
 
	
7.
	
Registration of the Financing Statement applies to all assets of the Debtor whether now owned or hereafter acquired, wherever located (collectively, the “Collateral”).

	
 
	
8.
	
Registration has been made in all public offices provided for under the laws of, or the federal laws of Canada applicable in, British Columbia where registration is necessary to perfect in British Columbia the security interests created by the Security Agreement in the Collateral in favour of the Agent.

	
 
	
9.
	
The security interests which the Security Agreement purport to create in any “serial numbered goods” specifically prescribed by the PPSA have not been perfected by registration in the Personal Property Registry against the “serial numbers” prescribed by the PPSA. 

	
 
	
10.
	
We have not filed notices on behalf of the Agent of the security interests in goods which the Security Agreement purport to create against title to any land to which the goods may be affixed so as to constitute such personal property fixtures.  If any of the goods are to be affixed to land, the Agent must file notice of the security interest claimed against title to the land before the goods are affixed in order to protect the Agent’s position. 

	
 
	
11.
	
Any transfer by LE of any or all of the Collateral and any change of name of LE will require the filing of financing change statements under the PPSA:

	
 
	
(a)
	
within 15 days of the transfer of Collateral where the Agent consents to the transfer; or

 

 

	
 
	
(b)
	
within 15 days of the Lender learning of the transfer of Collateral where the Agent has not consented to the transfer, or of the change of name, as applicable, and of the information necessary to register the financing change statements. 

We assume no responsibility for making these types of registrations or for notifying you if circumstances arise which necessitate these types of registrations

	
 
	
12.
	
Because the PPSA is not a title registry, we are unable to express any opinion as to the priority or ranking of the Agent’s security interest in the Collateral. 

The foregoing opinion is subject to and qualified in all respects by the following:

	
(A)
	
We have made no examinations of title and we express no opinion as to whether LE has title to any Collateral.

The opinion expressed herein is solely for the benefit of and may be relied upon only by the Agent and the Lenders and any permitted assignees or successors of the Lenders in accordance with the Credit Agreement.  This opinion is rendered as of the date hereof and we undertake no, and hereby disclaim any, obligation to advise you of any changes in or new developments which might affect any matters or opinions set forth herein.

Yours truly,

 

 

 

 

 

Exhibit A

OPINION DOCUMENTS

	
1.
	
Credit Agreement dated as of December 19, 2014;

	
2.
	
First Amendment to Credit Agreement dated as of December 1, 2015;

	
3.
	
Second Amendment to Credit Agreement dated May 18, 2016;

	
4.
	
Supplement No. 1 to Guarantee dated as of May 18, 2016 by and between LE and Agent;

	
5.
	
Supplement No. 1 to Pledge and Security Agreement dated as of May 18, 2016 by and between LE and Agent;

The Credit Agreement, the First Amendment to Credit Agreement, the Second Amendment to Credit Agreement, Supplement No. 1 to Guarantee and Supplement No. 1 to Pledge and Security Agreement, referred to as the “Opinion Documents.”

 

 

 

 

 

Exhibit B

ORGANIZATIONAL DOCUMENTS

Section A. ORGANIZATIONAL DOCUMENTS

a)Certificate of Amalgamation for Lynden Energy Corp. dated May 18, 2016

b)Articlesrely-ex101_6.htm

Exhibit 10.1

REAL INDUSTRY, INC.

MANAGEMENT CONTINUITY PLAN FOR SENIOR OFFICERS

SECTION 1.GENERAL

1.1Plan Name and Effective Date. The name of the Plan is the Real Industry, Inc. Management Continuity Plan for Senior Officers. The Plan shall be effective as of May 19, 2016 (the “Effective Date”).

1.2Purpose. The purpose of the Plan is to provide for severance benefits to certain specified senior officers whose employment with the Company Group is involuntarily terminated. This Plan is intended to be the exclusive means by which the Company Group provides eligible employees with severance benefits except to the extent different benefits are provided in written agreements signed by authorized representatives of the Company Group.

SECTION 2.DEFINITIONS

Terms not otherwise defined throughout the Plan shall be defined as follows:

2.1“Affiliate” means any corporation or other entity controlled by the Company and designated by the Committee as such.

2.2“Beneficiary” shall mean the beneficiary or beneficiaries designated in accordance with Section 7 to receive the amount, if any, payable under the Plan upon the death of an Executive.

2.3“Board” means the Board of Directors of the Company.

2.4A “Change in Control” shall mean the occurrence of any of the following events, each of which shall be determined independently of the others: (i) any “Person” (as hereinafter defined) becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of a majority of the stock of the Company entitled to vote in the election of directors of the Company; (ii) individuals who are Continuing Directors of the Company (as hereinafter defined) cease to constitute a majority of the members of the Board; (iii) stockholders of the Company adopt and consummate (x) a plan of liquidation for all or substantially all of the assets of the Company or (y) an agreement providing for the distribution of all or substantially all of the assets of the Company; (iv) consummation of a merger, consolidation, other form of business combination or a sale of all or substantially all of its assets, with an unaffiliated third party, unless the business of the Company following consummation of such merger, consolidation or other business combination is continued following any such transaction by a resulting entity (which may be, but need not be, the Company) and the stockholders of the Company immediately prior to such transaction hold, directly or indirectly, at least a majority of the voting power of the resulting entity; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) shall not constitute a Change in Control; (v) there is a Change in Control of the Company of a nature that is reported in response to Item 5.01 of Current Report on Form 8-K or any similar item, schedule 

 

or form under the Exchange Act, as in effect at the time of the change, whether or not the Company is then subject to such reporting requirements; or (vi) the Company consummates a transaction which constitutes a “Rule 13e-3 transaction” (as such term is defined in Rule 13e-3 of the Exchange Act). 

2.5“Code” means the Internal Revenue Code of 1986, as amended, and any applicable notices, rulings and regulations promulgated thereunder.

2.6“Committee” means the Compensation Committee of the Board or another committee appointed by the Board to administer the Plan in accordance with Section 6.1, which such committee may be one or more persons.

2.7“Company” means Real Industry, Inc., a Delaware corporation.

2.8“Company Group” shall mean, collectively or individually, as the context requires, the Company and each of its Subsidiaries and Affiliates. When referring to the employment of an Executive with the Company Group (or the termination of such employment), references to Company Group shall be deemed to refer to the member thereof that employs such Executive, as appropriate in the context.

2.9“Continuing Directors” shall mean the members of the Board on the Effective Date, provided that any person becoming a member of the Board subsequent to such date whose election or nomination for election was supported by at least a majority of the directors who then comprised the Continuing Directors shall be considered to be a Continuing Director; provided, however, that no individual initially elected or nominated as a Director as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be a Continuing Director.

2.10“Director” means a director serving on the Board who is not also an Employee; and who has been duly elected to the Board by the stockholders of the Company or by the Board under applicable corporate law. Neither service as a Director nor payment of a director’s fee by the Company shall, without more, constitute “employment” by the Company.

2.11“Disability” means:

(a)in the case where the Executive has a written employment agreement with the Company Group, the definition for such term set forth in such employment agreement as in effect; and

(b)in all other cases, an Executive’s inability, due to physical or mental incapacity, to substantially perform his or her duties and responsibilities for a period of ninety (90) days during any twelve-month period as determined by the Company.

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2.12“Discharge or Discharged for Cause” shall mean, with respect to an Executive, unless otherwise specifically defined in an employment agreement between the Executive and the Company Group, a Discharge from Employment by reason of any one or more of the following:  

(i)the willful failure by the Executive to attempt in good faith to substantially perform his obligations to the Company and/or under any award or other agreements with the Company (other than any such failure resulting from the Executive’s incapacity due to a Disability); provided, however, that the Company shall have provided the Executive with written Notice of Termination that such actions are occurring and the Executive has been afforded at least ten (10) days to cure same;

(ii)Executive’s willfully engaging in fraud or other financial dishonesty, including, without limitation, theft or misappropriation of funds or property of the Company, insider trading or any attempt by Executive to secure any personal profit related to the business or business opportunities of the Company without the informed, written consent of the Board;

(iii)any other material breach or violation by the Executive of this Plan, any restrictive covenants under any agreement with the Company, the Company’s written code of conduct, written code of ethics or other written policy; provided, however, that the Company shall have provided the Executive with written Notice of Termination that such actions are occurring and the Executive has been afforded at least ten (10) days to cure, provided, further, that (A) this cure provision shall not apply to violations of the Company’s code of conduct, written code of ethics or prohibition against unlawful harassment, and (B) such cure period shall only apply to breaches or violations that in the Board’s sole judgment are capable of or amenable to such cure;

(iv)the Executive’s conviction of or plea of guilty or nolo contendere to, a felony or any other crime involving moral turpitude or dishonesty; or

(v)the Executive’s other willful misconduct, gross negligence or knowing violation of securities laws that, in the good faith judgment of the Board, may have or has had a material adverse impact on the Company (either economically or on its reputation).

2.13“Discharge from Employment” shall mean the termination by the Company Group of the Executive’s employment which results in the Executive no longer being employed by any member of the Company Group.

2.14“Discharge or Discharged without Cause” shall mean, with respect to an Executive, a Discharge from Employment other than a Discharge for Cause.

2.15“Effective Date” shall have the meaning set forth in Section 1.1.

2.16“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and any applicable notices, rulings and regulations promulgated thereunder.

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

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2.18“Executive” means an individual directly employed by the Company on a regular, full-time basis and who is the Chief Executive Officer, the Chief Financial Officer, an Executive Vice President or a Senior Vice President and certain individual(s) who are (a) employed as an executive officer by a member of the Company Group and (b) specifically designated by the Committee to be eligible for participation in the Plan.

2.19“Good Reason” shall mean, with respect to an Executive, unless otherwise specifically defined in an employment agreement between the Executive and the Company Group, the occurrence of any of the following without the Executive’s prior written consent: (i) a material diminution in the Executive’s base compensation; (ii) a material diminution in the Executive’s authority, duties, or responsibilities; (iii) a change of at least 50 miles in the geographic location at which the Executive provider must perform the services; (iv) any other action or inaction that is a material breach by the Company Group of the Executive’s employment agreement (including, but not limited to, requiring the Chief Executive Officer to report to anyone other than the full Board of Directors); provided, however, (x) that the Executive must provide notice to the Plan Administrator of the existence of the condition constituting Good Reason within ninety (90) days of its initial existence, and the Company Group must have at least thirty (30) days to remedy the condition to the extent capable of being cured and the Executive must terminate employment within sixty (60) days after the end of the Company’s cure period; and (y) if the Board determines in its reasonable discretion that the separation of the titles of Chairman of the Board and Chief Executive Officer and the naming of another individual to be the non-executive Chairman of the Board, is necessary or desirable to consummate a third-party transaction, such separation in connection with the consummation of such transaction shall not be considered to be a material diminution of an Executive’s authority, duties or responsibilities for purposes of a Good Reason.

2.20“Person” means any partnership, corporation, limited liability company, group, trust or other legal entity.

2.21“Plan” shall mean this Real Industry, Inc. Severance Plan for Senior Officers, as it may be amended from time to time.

2.22“Plan Administrator” shall be set forth in Section 6.1 of the Plan.

2.23“Resignation” shall mean, with respect to any Executive, the termination by the Executive of such Executive’s employment with the Company Group, including due to the Executive’s death or Disability.

2.24“Resignation for Good Reason” shall mean, with respect to any Executive, a Resignation due to “Good Reason.” 

2.25“Resignation without Good Reason” shall mean, with respect to any Executive, any Resignation other than a Resignation for Good Reason.

2.26“Severance Period” shall mean the period during which an Executive is receiving payment of severance benefits pursuant to Section 3.2 hereof.

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2.27“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Code Section 424(f).

SECTION 3.SEVERANCE BENEFITS

3.1Eligibility for Severance Benefits. Except as otherwise set forth in Section 5.2, an Executive shall be eligible for severance benefits set forth in Section 3.2, if:

(a)The Executive is Discharged without Cause or the Executive submits a Resignation for Good Reason which is not cured by the Company within thirty (30) days of delivery of notice specifying the circumstances providing the basis for such Resignation for Good Reason to the extent capable of being cured; 

(b)The Executive signs a general release, subject to the condition that severance benefits under the Plan be made and provided to the Executive, waiving any employment related claims against the Company Group in a form provided by the Plan Administrator that is substantially similar to the form provided in Schedule A to the Plan, and the Executive does not revoke such general release during the time permitted; and

(c)The Executive continues to comply with all restrictive covenants and continuing obligations to the Company Group to which he or she is bound, including but not limited to the restrictive covenants set forth in the general release described in Section 3(b) above.

An Executive shall be ineligible for payments and benefits under the Plan pursuant to Section 3.2 or otherwise if the Executive submits a Resignation without Good Reason, or is Discharged for Cause, or if the Executive’s employment is terminated due to death or disability.

3.2Payment of Severance Benefits. If an Executive meets all of the eligibility requirements set forth in Section 3.1, then subject to Section 5.2, the Company shall provide the Executive with the following severance benefits:

(a)payment of a number of months of severance compensation in accordance with the following:

(i)for the Chief Executive Officer of the Company – the sum of (x) twenty four (24) months of the Executive’s annual base salary and (y) the Executive’s target annual cash bonus, each as in effect on the date of the Executive’s Discharge without Cause or Resignation for Good Reason; and

(ii)for all Executives other than the Chief Executive Officer of the Company – twelve (12) months of annual base salary in effect at the time of the Executive’s Discharge without Cause or Resignation for Good Reason;

(b)payment of an amount equal to the annual bonus earned by the Executive in the year of Discharge without Cause or Resignation for Good Reason based on full-

5

year performance, as prorated to reflect the partial year of employment and payable at the time the Company pays bonuses to other senior executives; and

(c)continuation of health and welfare benefits and payment of the employer portion of the applicable premiums to the extent permitted by each such applicable plan for the applicable Severance Period provided in Section 3.2(a) hereof.

Subject to Section 4.2, the vesting of the Executive’s outstanding unvested equity awards will only be accelerated, if at all, upon the Executive’s Discharge without Cause or Resignation for Good Reason to the extent provided in an applicable employment agreement or award agreement.  

3.3Timing of Payment of Severance Benefits.  Except as provided in Section 4.2 hereof and subject to Section 10, any amounts payable pursuant to Sections 3.2(a) and (b) above shall be made in monthly installments payable over the applicable Severance Period following the effective date of the Executive’s Discharge without Cause or Resignation for Good Reason in accordance with the Company’s normal payroll practices; provided, however, that the first payment will not be paid until the first payroll date following the sixtieth (60th) day after the effective date of such Discharge without Cause or Resignation for Good Reason and the first payment will include all payments that otherwise would have been made within that period.

SECTION 4.CHANGE IN CONTROL BENEFITS

4.1Eligibility for Change in Control Benefits. An Executive shall be eligible for the benefits set forth in Section 4.2 (in addition to the benefits set forth in Section 3.2(c)), if:

(a)The Executive was actively at work, or on an approved temporary leave of absence, with the Company Group immediately prior to a Change in Control; 

(b)The Executive is Discharged without Cause or the Executive submits a Resignation for Good Reason, within the 24-month period following the Change in Control; 

(c)The Executive signs a general release, subject to the condition that severance benefits under the Plan be made and provided to the Executive, waiving any employment related claims against the Company Group in a form provided by the Plan Administrator that is substantially similar to the form provided in Schedule A to the Plan and the Executive does not revoke such general release during the time permitted; and

(d)The Executive continues to comply with all restrictive covenants and continuing obligations to the Company Group to which he or she is bound, including but not limited to the restrictive covenants set forth in the general release described in Section 4(c) above.

An Executive shall be ineligible for the accelerated vesting of the Executive’s outstanding unvested equity awards pursuant to Section 4.2 if the Executive submits a Resignation without Good Reason, or is Discharged for Cause, or if the Executive’s employment is terminated due to death or Disability.

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4.2Payment of Change in Control Benefits. If an Executive meets all of the eligibility requirements set forth in Section 4.1, then subject to Section 5.2, the Company shall pay to the Executive, in one lump sum payment within 30 days following the Executive’s termination of employment: 

(a)the amount equal to the product of (x) the monthly rate of the Executive’s base annual salary compensation in effect at the time of the Executive’s Discharge without Cause or Resignation for Good Reason and (y) the applicable number of months in accordance with the following:  

(i)for the Chief Executive Officer of the Company – 24 months; and

(ii)for all Executives other than the Chief Executive Officer of the Company – eighteen (18) months; plus

(b)an amount equal to the product of (x) the Executive’s target annual bonus on the date of  the Executive’s Discharge without Cause or Resignation for Good Reason, and (y) the number of years for which the Executive is entitled to severance benefits pursuant to Section 4.2(a) above (such that, by way of example for the avoidance of doubt, 24 months equals 2.0 years); and 

(c)unless otherwise specified in any equity award agreement to the contrary, provide the Executive with accelerated vesting of the Executive’s outstanding unvested equity or other long-term incentive awards so that as of the date of the Executive’s Discharge without Cause or Resignation for Good Reason within 24 months following a Change in Control, such awards shall be 100% vested.

4.3Limitations on Change in Control Payments.

(a) If the aggregate of all amounts and benefits due to the Executive (or his or her Beneficiaries), under this Plan or any other agreement, plan, program, policy or arrangement (a “Company Arrangement”) (or any payments, benefits or entitlements by or on behalf of any person that effectuates a related transaction) (collectively, “Change in Control Benefits”), would cause the Executive to have “parachute payments” as such term is defined in and under Code Section 280G(b)(2) and would result in the imposition of excise taxes pursuant to Code Section 4999 (“Excise Tax”), the Company will reduce (or cause to be reduced) any such payments and benefits so that the Value of all Change in Control Benefits (as hereinafter defined), in the aggregate, equals the Safe Harbor Amount (as hereinafter defined) minus $1,000.00, but only if, by reason of such reduction, the Net After-Tax Benefit shall exceed the Net After-Tax Benefit (as hereinafter defined) if such reduction were not made (a “Required Reduction”). The determinations with respect to this paragraph (a) shall be made by an independent auditor (the “Auditor”) paid by the Company. The Auditor shall be a nationally-recognized United States public accounting firm chosen, and paid for, by the Company. Notwithstanding any provision to the contrary in this Plan or in any other applicable Company Arrangement, any Required Reduction shall be implemented as follows: first, by reducing any bonus payments to be made to the Executive under this Plan; second, by 

7

reducing any salary continuation payments to be made to the Executive under this Plan; third, by cancelling any outstanding equity-based compensation awards that would otherwise constitute parachute payments and that are subject to performance vesting (“Performance-Based Equity”), the performance goals for which have not been met prior to the occurrence of the event giving rise to the Change in Control Benefits; and fourth, cancelling any other payments due to the Executive. In the case of the reductions to be made pursuant to each of the above-mentioned clauses, the payment and/or benefit amounts to be reduced, and the acceleration of vesting to be cancelled, shall be reduced or cancelled in the inverse order of their originally scheduled dates of payment or vesting, as applicable, and shall be so reduced (x) only to the extent that the payment and/or benefit otherwise to be paid, or the vesting of the award that otherwise would be accelerated, would be treated as a “parachute payment” within the meaning of Code Section 280G(b)(2)(A), and (y) only to the extent necessary to achieve the Required Reduction. 

(b)It is possible that after the determinations and selections made pursuant to the above paragraph (a), the Executive will receive Change in Control Benefits that are, in the aggregate, either more or less than the limitations provided in paragraph (a) above (hereafter referred to as an “Excess Payment” or “Underpayment”, respectively). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Executive shall refund the Excess Payment to the Company promptly on demand, together with an additional payment in an amount equal to the product obtained by multiplying the Excess Payment times the applicable annual federal rate (as determined in and under Code Section 1274(d)), or such higher rate as is necessary to ensure that the Change in Control Benefits are less than the Safe Harbor Amount, times a fraction whose numerator is the number of days elapsed from the date of the Executive’s receipt of such Excess Payment through the date of such refund and whose denominator is three hundred sixty-five (365). In the event that it is determined (x) by a court of competent jurisdiction, or (y) by the Auditor upon request by the Executive or the Company, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to the Executive within ten (10) days of such determination together with an additional payment in an amount equal to the product obtained by multiplying the Underpayment times the applicable annual federal rate (as determined in and under Code Section 1274(d)) times a fraction whose numerator is the number of days elapsed from the date of the Underpayment through the date of such payment and whose denominator is three hundred sixty-five (365). 

(c)All determinations made by the Auditor under this Section 4.3 shall be binding upon the Company and the Executive and shall be made as soon as reasonably practicable following the event giving rise to the Change in Control Benefits, or such later date on which a Change in Control Benefit has been paid or a request or demand has been made. 

(d)Definitions. The following terms shall have the following meanings for purposes of this Section 4.3. 

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(i)“Net After-Tax Benefit” means the present value (as determined in accordance with Code Section 280G(d)(4)) of the Change in Control Benefits net of all taxes imposed on the Executive with respect thereto under Code Sections 1 and 4999 and under applicable state and local laws, determined by applying the highest marginal rate under Code Section 1 and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive certifies are likely to apply to the Executive in the relevant tax year(s). 

(ii)“Value of a Change in Control Benefit” means the present value as of the date of the change in control for purposes of Code Section 280G of the portion of such Change in Control Benefit that constitutes a “parachute payment” under Code Section 280G(b)(2) and its implementing regulations, as determined by the Auditor for purposes of determining whether and to what extent the Excise Tax will apply to such Change in Control Benefit. 

(iii)“Safe Harbor Amount” means 2.99 times the Executive’s “base amount,” within the meaning of Code Section 280G(b)(3) and its implementing regulations. 

SECTION 5.ADJUSTMENTS

5.1Death Prior to Full Payment. If an Executive dies, after becoming eligible for, but before receiving, any payment due under the Plan, such payment shall be paid to the Executive’s Beneficiary.

5.2Payments Offset by Severance Payments in Employment Agreement. Any payment or benefit made under the Plan to an Executive pursuant to Section 3.2 or Section 4.2 shall be offset by any severance payments due to such Executive under any employment agreement or change in control agreement between the Executive and the Company Group and any severance payments required by Federal or state law (including pursuant to the Worker Adjustment and Retraining Notification Act). 

5.3Retirement Benefits. In addition to any amounts payable to the Executive under Section 3.2 or Section 4.2, following the Executive’s Discharge from Employment or Resignation, the Executive shall be entitled to receive all benefits payable to the Executive under any plan or agreement relating to retirement benefits.

SECTION 6.PLAN ADMINISTRATION

6.1Plan Administrator. The Committee shall be the Plan Administrator as that term is defined in ERISA. The Plan Administrator shall have the authority to administer the Plan, subject to its right to designate other organizations or persons (who also may be employed by any Company) to carry out specific duties, other than claims processing and review which duty shall be retained by the Plan Administrator, including but not limited to: administration and management duties; recordkeeping; and preparation of reports and other documents required to be distributed to Executives and Beneficiaries. The Plan Administrator shall have no 

9

responsibility or authority with regard to the filing of reports and other documents with respect to the Plan with government authorities, and all such authority shall instead remain with the Company and the employees who are designated by the officers of the Company to carry out such responsibilities and to execute such documents. The Plan Administrator shall be the named fiduciary under the Plan.

6.2Determination by Plan Administrator Binding. The Plan Administrator shall have complete discretionary authority to determine the standard of proof required in any case, to determine eligibility for Plan benefits, to apply, construe and interpret the terms of the Plan, to resolve any disputes arising from language in the Plan and to interpret any ambiguous or uncertain terms therein. No benefits shall be paid under the Plan unless the Plan Administrator has approved them. The decisions of the Plan Administrator shall be final and binding. To the extent required by law, the Plan Administrator shall administer the Plan on a reasonable and nondiscriminatory basis and shall apply uniform rules to all persons similarly situated.

6.3Information to be Furnished by Executives. Executives under the Plan must furnish the Plan Administrator or its delegate with such evidence, data or information as the Plan Administrator or its delegate considers necessary or desirable to administer the Plan. A fraudulent misstatement or fraudulent omission of fact made by an Executive in a claim for benefits or otherwise may be used to deny claims for benefits.

6.4Action by the Company. Any action required or permitted to be taken by the Company under the Plan shall be by resolution of the Committee.

6.5Indemnification. To the extent permitted by law, any director, officer or employee of the Company Group who has acted in good faith in taking any action in connection with the Plan shall be indemnified by the Company against expenses (including the amount of any liability imposed in the form of a money judgment, civil penalty or excise tax, as well as amounts paid in the settlement with approval of the Company) reasonably incurred by him or her in connection with any action, suit or proceeding to which he or she may be a party or with which he or she shall be threatened by reason of actions taken in good faith in connection with the Plan.

SECTION 7.DESIGNATION OF BENEFICIARIES

7.1Designation and Change of Designation. Each Executive shall file with the Plan Administrator a written designation of one or more persons as the Beneficiary who, subject to applicable law, shall be entitled to receive the amount, if any, payable under the Plan upon the Executive’s death. An Executive may, from time to time, revoke or change a Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Plan Administrator. The last such designation received by the Plan Administrator shall be controlling; provided, however, that no designation or change or revocation thereof, shall be effective unless it is on a form acceptable to the Plan Administrator and is received by the Plan Administrator prior to the Executive’s death, and in no event shall it be effective as of a date prior to such receipt.

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7.2Absence of Valid Designation. If no Beneficiary designation is in effect at the time of an Executive’s death, if no designated Beneficiary survives the Executive, or if a designation conflicts with law or is not on a form acceptable to the Plan Administrator, the Executive’s estate shall be deemed to have been designated as the Beneficiary and shall receive payment of the amount, if any, payable under the Plan upon the Executive’s death. If the Plan Administrator is in doubt as to the right of any person to receive such amount, the Plan Administrator may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Plan Administrator may pay such amount to any court of competent jurisdiction, and such payment shall be a complete discharge of the Plan and the Company Group.

SECTION 8.AMENDMENT OR TERMINATION

8.1Amendment. Prior to a Change in Control, the Company reserves the right to amend the Plan at any time, by action of the Board, without the consent of any Executive or any other person. All amendments shall be in writing. Prior to a Change in Control, the Company also reserves the right to add, modify or eliminate benefits provided under the Plan, without the consent of any Executive or any other person; provided, however, that any amendment within 24 months prior to a Change in Control or a Discharge without Cause or Resignation for Good Reason of that is adverse to any Executive shall not be applicable to such Executive. Following a Change in Control, until the later of the second anniversary of the Change in Control or the date on which benefits are no longer payable under the Plan, no amendment may be made to Section 3 or Section 4, and no amendment may be made that adversely affects any Executive without such Executive’s consent; provided, however, that if the Plan is a nonqualified deferred compensation plan within the meaning of Code Section 409A, the Company, without any Executive’s consent, shall make such amendments to the Plan as shall be required to avoid additional income taxes and/or penalties imposed by Code Section 409A, including without limitation, the elimination or modification of benefits which the Company in its reasonable judgment determines cannot be provided as set forth in the Plan in compliance with Code Section 409A, provided that such elimination or modification shall be made in such manner so as to preserve the benefits provided by the Plan to the maximum extent possible. Following the second anniversary of the Change in Control, the Company may amend the Plan without the consent of an Executive who is not then receiving any benefits under the Plan attributable to a termination of employment that occurred after the Change in Control or any other person.

8.2Termination. While the Company expects to continue the Plan, the Company reserves the right to terminate the Plan, by action of the Board, at any time prior to a Change in Control, in whole or in part, without the consent of any Executive or any other person; provided, however, that any amendment within 24 months prior to a Change in Control that is adverse to any Executive shall not be applicable to such Executive. Following a Change in Control, the Company may not terminate the Plan until the later of the second anniversary of the Change in Control or the date on which benefits are no longer payable under the Plan.

SECTION 9.CLAIMS PROCEDURE

9.1Initial Claim for Benefits. The Plan Administrator or its delegate will generally initiate contact with an Executive who the Plan Administrator believes may be eligible for 

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benefits under the Plan. An Executive who is not so contacted, and who believes he or she is entitled to benefits under the Plan, must submit a written claim to the Plan Administrator within sixty (60) days of the date of the alleged occurrence giving rise to the claim.

9.2Information Provided if Claim is Denied. If the Plan Administrator concludes that the claim should be denied, the Executive shall be notified in writing of the denial of the claim within ninety (90) days after the Plan Administrator’s receipt of the claim, unless the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension (which shall not exceed one hundred eighty (180) days after the Plan Administrator’s receipt of the claim) shall be furnished to the Executive prior to the termination of the initial 90-day period. The notice denying the Executive’s claim shall (a) set forth the specific reason or reasons for the denial, making reference to the pertinent provisions of the Plan on which the denial is based and identifying all information and evidence relied upon in connection with the denial; (b) describe any additional material or information that should be received before the claim may be acted upon favorably and explain the reason why such material or information, if any, is needed; (c) inform the Executive of his or her right pursuant to this Section 9.2 to request review of the decision by the Plan Administrator and (d) explain the Plan’s claims review procedure and the time limits applicable to such procedures, including a statement of the Executive’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination on review.

9.3Appeal of Denied Claim. An Executive may appeal the denial of a claim to the Plan Administrator by submitting a written request for review within sixty (60) days after the date on which such denial is received. During this period, the Executive making the request for review may examine the Plan documents, records and other information relevant to the Executive’s claim for benefits. 

9.4Decision Upon Review of Denied Claim. The Plan Administrator shall decide whether or not to grant the claim within sixty (60) days after receipt of the request for review, but this period may be extended by the Plan Administrator for up to an additional sixty (60) days in special circumstances. The Plan Administrator’s decision shall be in writing, shall include specific reasons for the decision, shall refer to pertinent provisions of the Plan on which the decision is based, and shall be conclusive and binding on all persons.

SECTION 10.CODE SECTION 409A COMPLIANCE

10.1Construction. With respect to any benefits provided by this Plan that are subject to Code Section 409A, it is intended that the terms of this Plan comply with the terms and conditions of Code Section 409A and the regulations and guidance promulgated thereunder and all provisions of this Plan shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A. Notwithstanding the foregoing, the Company Group shall have any liability with regard to any failure to comply with Code Section 409A so long as it has acted in good faith with regard to compliance therewith.

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10.2Installment Payments. If under this Plan, an amount is to be paid in two (2) or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment.

10.3Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Plan providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Plan, references to a “termination,” “termination of employment” or like terms shall mean separation from service.

10.4Specified Employees. Notwithstanding the foregoing, if an Executive is a “specified employee” of a public corporation (as described in Treas. Reg. § 1.409A-1(i)), then to the extent a separate payment described in this Section 10) does not fall within the “short-term deferral” exclusion (as described in Treas. Reg. § 1.409A-1(b)(4)) or the exclusion for separation pay due to involuntary separation from service (as described in Treas. Reg. § 1.409A-1(b)(9)(iii)), and such separate payment would be paid during the first six (6) months following the Executive’s separation from service, such payment shall instead be paid on the first business day following the end of the six-month period following the Executive’s separation from service.

10.5Exemptions from Code Section 409A. Notwithstanding anything in this Plan to the contrary, the severance payments payable hereunder shall be exempt from Code Section 409A to the extent that:

(a)Such severance payments will be paid no later than 21⁄2 months following the end of the calendar year in which the Executive’s Discharge without Cause or Resignation for Good Reason occurs, so as to meet the requirements for a short-term deferral as described in Treas. Reg. §1.409A-1(b)(4) that is exempt from Code Section 409A; or

(b)With respect to severance payments that do not fall within the exemption set forth in Section 10.5(a):

(i)the severance payments are paid in full no later than December 31 of the second calendar year following the calendar year in which the Executive’s Discharge without Cause or Resignation for Good Reason occurs; and

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(ii)The amount of severance payments payable to the Executive does not exceed two times the lesser of the following:

(1)the Executive’s annual compensation for the calendar year preceding the calendar year (the “look-back year”) in which the Executive has an Discharge without Cause or Resignation for Good Reason. For this purpose, the Executive’s annual compensation means the Executive’s base pay (plus such other amounts as are permitted to be included as prescribed in Code Section 409A) for the look-back year (determined on an annualized basis if the Executive was employed for less than the full calendar year), as adjusted for any increase during the look-back year that was expected to continue indefinitely but for the Executive’s termination of employment; or

(2)the maximum amount that may be taken into account under a qualified plan pursuant to Code Section 401(a)(17) for the calendar year in which the Executive’s Discharge without Cause or Resignation for Good Reason occurs.

10.6Reimbursements. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such arrangement provides for a limit on the amount of expenses that may be reimbursed over some or all of the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expenses was incurred.

SECTION 11.MISCELLANEOUS

11.1No Guarantee of Employment. Nothing contained in the Plan shall confer upon any Executive any right with respect to the continuation of his or her employment with the Company Group or interfere in any way with the right of the Company Group, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment.

11.2Clawback of Financial Performance Awards.  As required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or of any applicable laws, rules or regulations promulgated by the Securities and Exchange Commission from time to time, to the extent permitted by applicable law, in all appropriate cases, each Executive hereby acknowledge and agree that reimbursement shall be required of any bonus or incentive compensation paid to such Executive, cause the cancellation of restricted stock awards and outstanding stock options, and seek reimbursement of any gains realized on the exercise of stock options attributable to such awards, if and to the extent that: (i) the amount of incentive 

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compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement; or (ii) the Board or an appropriate committee determines that an employee engaged in any fraud or misconduct which caused or contributed to the need for the restatement; and/or (iii) the amount of the bonus or incentive compensation that would have been awarded to any Executive had the financial results been properly reported would have been lower than the amount actually awarded.

11.3No Alienation of Benefits. Except insofar as may otherwise be required by law, no amount payable at any time under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person, and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void and of no effect whatsoever. If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge, or otherwise encumber any amount payable under the Plan, or any part thereof, or if by reason of such person’s bankruptcy or other event happening at any such time such amount would be made subject to such person’s debts or liabilities or would otherwise not inure to the benefit of such person, then, except as may be required by applicable law, the Plan Administrator, if it so elects, may direct that such amount be withheld and that such amount or any part thereof be paid or applied to or for the benefit of such person, such person’s spouse, child or other dependents, or any of them, in such manner and proportion as the Plan Administrator may deem proper.

11.4No Right, Title, or Interest in Company Assets. No Executive shall have any right, title, or interest whatsoever in or to any investments which the Company Group may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company Group and any Executive or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts. 

11.5Tax Withholding. The Plan Administrator shall have the right to deduct from all payments under the Plan an amount sufficient to satisfy all tax withholding requirements, if any.

11.6Governing Law. The Plan shall be interpreted, construed and constructed in accordance with the laws of the State of Delaware without regard to its conflicts of law provisions, except as may be superseded by applicable laws of the United States.

11.7Severability. In the event that any provision of this Plan shall be held illegal, invalid or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or unenforceable provision was not included herein.

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11.8Section Headings. The section headings contained herein are for the purpose of convenience only, and in the event of any conflict, the text of the Plan, rather than the section headings, shall control.

11.9Gender and Number. Where the context admits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural and the plural shall include the singular.

11.10Facility of Payment. When any person entitled to benefits under the Plan is under a legal disability or in the Plan Administrator’s opinion is in any way incapacitated so as to be unable to manage his or her affairs, the Plan Administrator, in its sole discretion, may cause such person’s benefits to be paid to such person’s legal representative for his or her benefit, or to be applied for the benefit of such person in any other manner that the Plan Administrator may determine. Such payment shall constitute a full discharge of liability of the Plan for such benefits.

IN WITNESS WHEREOF, the Plan is hereby adopted effective as of the date first set forth above.

	
	
REAL INDUSTRY, INC.

By:______________________________

Its:______________________________

	
 

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SCHEDULE A
FORM OF GENERAL RELEASE

 

This Agreement and General Release (the “Agreement”) is made and entered into this ____ day of _________, 20__, by and between ________________ (“Executive”) and Real Industry, Inc. (the “Company”).

1.Released Parties. The term “Released Parties”, as used in this Agreement, shall mean the Company and its subsidiaries and its affiliates (and any successors thereto) (the “Company Group”) and any of its respective past or present employees, representatives, administrators, agents, officials, officers, directors, shareholders, divisions, parents, subsidiaries, predecessors, successors, affiliates, general partners, limited partners, consultants, employee benefit plans (and their sponsors, fiduciaries, or administrators), insurers, or attorneys.

2.General Release. Executive, on behalf of [himself/herself] and [his/her] agents, representatives, attorneys, assigns, heirs, executors, and administrators, fully releases and forever discharges each of the Released Parties from any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’ fees, and remedies of any type, regarding any act or failure to act that occurred up to and including the date on which Executive signs this Agreement, including, without limitation, any claims arising or that arose or may have arisen out of or in connection with Executive’s employment, or [his/her] separation of employment from the Company Group, and including but not limited to:

all claims, actions or liability under: (1) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866 (42 U.S.C. §1981), the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act, the Fair Labor Standards Act, the National Labor Relations Act, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the California Family Rights Act, California wage laws; and (2) any other federal, state, or local statute, ordinance, or regulation regarding employment, compensation, unpaid wages, employee benefits, termination of employment, or discrimination in employment; and (3) the common law of any state relating to employment contracts, wrongful discharge, defamation, tort or any other matter.

Executive acknowledges that in exchange for this release, [he/she] has received separate consideration beyond that to which Executive is otherwise entitled under Company policy or applicable law.  Employee specifically agrees and acknowledges that [he/she] has received all wages and other compensation owed to her by the Company.

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Executive also specifically acknowledges that [he/she] is aware of and familiar with the provisions of California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THIS RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Executive, being aware of Civil Code Section 1542, hereby expressly waives and relinquishes all rights and benefits [he/she] may have thereunder, as well as under any other statutory or common law principles of similar effect.

3.Covenant Not To Sue. Except for an action arising out of a breach of the terms of this Agreement or failure to provide benefits under the Real Industry, Inc. Severance Plan for Senior Officers (the “Plan”), Executive agrees never to bring (or cause to be brought) any claim, action or proceeding against the Company Group or any of the other Released Parties regarding any act or failure to act that occurred up to and including the date on which the parties sign this Agreement, including but not limited to any claim, action or proceeding relating to Executive’s employment or [his/her] separation of employment from the Company Group.

4.Nonsolicitation; Confidential Information, etc. Executive hereby acknowledges that, during and solely as a result of Executive’s employment by the Company Group, Executive has received and will continue to receive special training and education with respect to the operations of such entity(ies) and access to confidential information and business and professional contacts, all of which is exceptionally valuable to the Company Group and vital to the success of the Company Group’s business and other related matters. In consideration of the severance benefits payable to Executive pursuant to the Plan, Executive hereby agrees to be bound by and acknowledges the reasonableness of the following covenants, which are specifically relied upon by the Company in entering into this Agreement. Executive acknowledges and agrees that each of the individual provisions of this Section 4 constitutes a separate and distinct obligation of Executive to the Company Group, individually enforceable against Executive.

(a)Covenant Not to Solicit Employees. For the period during which Executive receives salary continuation payments under the Plan (the “Restricted Period”), Executive agrees and covenants that [he/she] shall not, for any reason, directly or indirectly, employ, solicit or endeavor to entice away from the Company Group (whether for Executive’s own benefit or on behalf of another person or entity), or facilitate the solicitation, employment or enticement of, any employee of the Company Group to work for Executive, any affiliate of Executive or any competitor of the Company Group, nor shall Executive otherwise attempt to interfere (to the Company Group’s detriment) in the relationship between the Company Group and any such employees.

(b)Covenant Not to Solicit Customers. During the Restricted Period, Executive agrees and covenants that [he/she] shall not, directly or indirectly, in any form or manner, contact, solicit, or facilitate the contacting or solicitation of, any Customer of the 

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Company Group for the purpose of competing with its business. For purposes of this Agreement, the term “Customer” shall mean and refer to each person, entity, municipality or other governmental entity that has a contract with or is actively being solicited by the Company Group to engage in services within the scope of its business.

(c)Covenant of Confidentiality.  For a period of five (5) years after the termination of Executive’s employment with the Company Group, for any reason, Executive shall not, except in furtherance of the Business of the Company Group or otherwise with the prior authorization of the Company, in any form or manner, directly or indirectly, divulge, disclose or communicate to any person, entity, firm, corporation or any other third party (other than in the course of Executive’s employment or engagement), or utilize for Executive’s personal benefit or for the benefit of any competitor or customer of the Company Group any Confidential Information. For purposes of this Agreement, “Confidential Information” shall mean, but shall not be limited to, any technical or non-technical data, formulae, patterns, compilations, programs, devices, methods, techniques, drawings, designs, processes, procedures, improvements, models or manuals of any member of the Company Group or which are licensed by any member of the Company Group, any financial data or lists of actual or potential customers or suppliers (including contacts thereat) of the Company Group, and any information regarding the contracts, marketing and sales plans, which is not generally known to the public through legitimate origins of the Company Group. The parties hereto each acknowledge and agree that such Confidential Information is extremely valuable to the Company Group and shall be deemed to be a “trade secret.” In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Executive or by misappropriation), or is required to be disclosed by legal, administrative or judicial process (provided that Executive has provided to the Company reasonable prior notice of such request and the Company has had a reasonable opportunity, at its expense, to dispute, defend or limit such request for the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for purposes of this Agreement, but Executive shall continue to be bound by the terms of this Agreement as to all other Confidential Information.

(d)Return of Property.  Upon termination of Executive’s employment, Executive shall promptly deliver to the Company Group all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents or any other documents, including all copies in any form or media, concerning the Company Group’s Customers, marketing strategies, products or processes which contain any Confidential Information.

(e)Equitable Remedies.  In the event that Executive breaches any of the terms or conditions set forth in this Section 4 (collectively, the “Restrictive Covenants”), Executive stipulates that such breach will result in immediate and irreparable harm to the business and goodwill of the Company Group and that damages, if any, and remedies at law for such breach would be inadequate. The Company Group shall therefore be entitled to seek for and receive from any court of competent jurisdiction a temporary restraining order, preliminary and permanent injunctive relief and/or an order for specific performance to protect its rights and interests and to restrain any violation of this Agreement and such further relief as the court may deem just and proper, each without the necessity of posting bond. Following judgment or other 

19

final determination by such court, the non-prevailing party in such proceeding shall pay the costs and expenses (including court costs and reasonable attorneys’ fees) of the prevailing party. The Company Group may elect to seek such remedies at its sole discretion on a case by case basis. Failure to seek any or all remedies in one case shall not restrict the Company Group seeking any remedies in another situation. Such action by the Company Group shall not constitute a waiver of any of its rights.

(f)Continuing Obligation.  The obligations, duties and liabilities of Executive pursuant to Sections 4(a), 4(b), 4(c) and 4(d) of this Agreement are continuing, and for the periods set forth in such provisions hereof are absolute and unconditional, and shall survive and remain in full force and effect as provided in each such Section. Notwithstanding anything else contained in this Agreement to the contrary, the parties hereto agree that in the event, and at the moment, Executive breaches any of the terms, duties or obligations contained in Sections 4(a), 4(b) and 4(c) of this Agreement, then any payments or benefits paid to Executive pursuant to the Plan shall be returned to the Company Group and all amounts or benefits payable to Executive pursuant to the Plan shall be forfeited.

5.Non-Disparagement. Executive agrees not to make any oral or written statement to any third party that disparages, defames, or reflects adversely upon the Company Group, its products, employees or services. 

6.Governing Law. This Agreement shall be interpreted, construed and constructed in accordance with the laws of the State of Delaware without regard to its conflicts of law provisions, except as may be superseded by applicable laws of the United States.

7.Severability. In the event that any provision of this Plan shall be held illegal, invalid or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or unenforceable provision was not included herein.

8.ADEA Waiver. Executive acknowledges that [he/she] has been advised in writing to consult with an attorney prior to executing this Agreement, which contains releases and waivers. Executive understands that [he/she] may take a period of twenty-one (21) days within which to consider this Agreement. Executive understands that [he/she] may revoke this Agreement during the seven (7) days following the execution of this Agreement and that the Agreement will not become effective until that seven-day revocation period has expired. In order to revoke the Agreement, Executive must sign and send a written notice to the Company addressed to 15301 Ventura Blvd., Suite 400, Sherman Oaks, CA 91403 (attention: Chief Financial Officer), with a copy to the Secretary of the Company or to such other designee of the Company, which shall only be effective if the Company receives it no later than seven (7) days after Executive signs the Agreement. If Executive revokes the Agreement, [he/she] will not be entitled to any of the money, benefits or other consideration provided to [him/her] under the Plan.

9.Knowing and Voluntary Waiver. Executive acknowledges that: (a) [he/she] has carefully read this Agreement and fully understands its meaning and effect; (b) [he/she] had a full and adequate opportunity and reasonable time period to review this Agreement with an 

20

attorney of [his/her] choosing before [he/she] signed it; (c) [he/she] was not coerced into signing the Agreement; (d) [he/she] agrees to all the terms of the Agreement and is entering into the Agreement knowingly, voluntarily, and with full knowledge of its significance; and (e) the only consideration for [his/her] signing the Agreement are the terms stated herein, and no other promises or representations of any kind have been made by any person or entity to cause [him/her] to sign the Agreement.

10.Counterpart Execution. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute the entire document.

 

	
 
	
 
	
REAL INDUSTRY, INC.

 

	
 
	
 
	
By:
	
 
	
 

	
[Executive Name]
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
Dated:
	
 
	
 
	
Dated:
	
 
	
 

 

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