Document:

Exhibit 4.2

 

EXECUTION VERSION

 

THIRD SUPPLEMENTAL INDENTURE

 

Dated as of January 22, 2014

 

to

 

INDENTURE

 

Dated as of October 11, 2012

 

among

 

AIR LEASE CORPORATION,

 

as Issuer,

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

 

as Trustee

 

and

 

ZIONS FIRST NATIONAL BANK,

 

as Authenticating and Paying Agent

 

eNOTES

 

INTERNET AUCTION PROGRAM

 

MEDIUM-TERM NOTES

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I. DEFINITIONS
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.1
    	
Definitions
    	
2
    
	
Section 1.2
    	
Other Defined Terms
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE II. TERMS AND   DESCRIPTION OF NOTES
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
Indenture
    	
6
    
	
Section 2.2
    	
Designation and Amount
    	
6
    
	
Section 2.3
    	
Form of Notes
    	
7
    
	
Section 2.4
    	
Notes issuable in any Number of Tranches
    	
7
    
	
Section 2.5
    	
Additional Notes
    	
7
    
	
Section 2.6
    	
Notes form a Single Series
    	
7
    
	
Section 2.7
    	
Sinking Fund
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE III. APPOINTMENT AND   ACKNOWLEDGEMENT
    	
7
    
	
 
    	
 
    	
 
    
	
Section 3.1
    	
Appointment of the Authenticating Agent in respect of the   Notes
    	
7
    
	
Section 3.2
    	
Appointment of Paying Agent in respect of the Notes
    	
7
    
	
Section 3.3
    	
Appointment of Security Registrar in respect of the Notes
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE IV. SATISFACTION AND   DISCHARGE
    	
8
    
	
 
    	
 
    	
 
    
	
Section 4.1
    	
Satisfaction and Discharge of Indenture
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE V. AMENDMENTS AND   WAIVERS
    	
9
    
	
 
    	
 
    	
 
    
	
Section 5.1
    	
Supplemental Indentures without Consent of Holders
    	
9
    
	
Section 5.2
    	
Supplemental Indentures with Consent of Holders
    	
9
    
	
 
    	
 
    
	
ARTICLE VI. CERTAIN   COVENANTS OF THE COMPANY
    	
9
    
	
 
    	
 
    	
 
    
	
Section 6.1
    	
Limitation on Liens
    	
9
    
	
Section 6.2
    	
Release of Liens
    	
10
    
	
Section 6.3
    	
Merger, Consolidation or Sale of All or Substantially All   Assets
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE VII. DEFAULTS AND   REMEDIES
    	
11
    
	
 
    	
 
    	
 
    
	
Section 7.1
    	
Events of Default
    	
11
    
	
Section 7.2
    	
Acceleration
    	
12
    
	
Section 7.3
    	
Control by Holders
    	
13
    
	
Section 7.4
    	
Waivers
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII. DEFEASANCE
    	
13
    
	
 
    	
 
    	
 
    
	
Section 8.1
    	
Covenant Defeasance
    	
13
    

 

i

 

	
ARTICLE IX. REDEMPTION OF   NOTES
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.1
    	
Notice of Redemption of Notes
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE X. REPURCHASE OF   NOTES AT OPTION OF HOLDERS
    	
13
    
	
 
    	
 
    	
 
    
	
Section 10.1
    	
Offer to Repurchase Upon Change of Control Repurchase Event
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE XI. MISCELLANEOUS   PROVISIONS
    	
16
    
	
 
    	
 
    	
 
    
	
Section 11.1
    	
Effect of Supplemental Indenture
    	
16
    
	
Section 11.2
    	
Governing Law
    	
16
    
	
Section 11.3
    	
Effect of Headings
    	
16
    
	
Section 11.4
    	
Severability
    	
16
    
	
Section 11.5
    	
Ratification of Indenture
    	
16
    
	
Section 11.6
    	
Trustee Not Responsible for Recitals
    	
16
    
	
Section 11.7
    	
Waiver of Jury Trial
    	
16
    
	
Section 11.8
    	
Counterparts
    	
16
    
	
Section 11.9
    	
Concerning The Trustee and the Authenticating and Paying   Agent
    	
16
    
	
Section 11.10
    	
Documents to be Given to the   Trustee
    	
16
    
	
 
    	
 
    	
 
    
	
EXHIBIT A — Form of Note
    	
 
    

 

ii

 

THIRD SUPPLEMENTAL INDENTURE, dated as of January 22, 2014 (this “Supplemental Indenture”), by and among Air Lease Corporation, a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), Deutsche Bank Trust Company Americas, a New York banking corporation, as Trustee (the “Trustee”), and Zions First National Bank, a national banking association organized under the laws of the United States with its principal place of business in the State of Utah, as Authenticating and Paying Agent (the “Authenticating and Paying Agent”).

 

RECITALS

 

WHEREAS, the Company has executed and delivered to the Trustee the Indenture, dated as of October 11, 2012 (the “Base Indenture” and together with this Supplemental Indenture, the “Indenture”), to provide for the issuance of the Company’s debt securities, to be issued in one or more series;

 

WHEREAS, pursuant to the terms of the Base Indenture, the Company desires to provide for the establishment of a new series of debt securities to be known as the “eNotes Internet Auction Program Medium-Term Notes” (the “Notes”), the form and substance and the terms, provisions and conditions thereof to be set forth as provided in the Base Indenture, as supplemented by this Supplemental Indenture and as may be further supplemented from time to time by an Officers’ Certificate with respect thereto.  The Notes may be issued from time to time in any number of tranches and any Notes issued as part of this series will constitute a single series of Securities under the Indenture and shall be included in the definition of “Securities” where the context requires;

 

WHEREAS, the Board of Directors of the Company by duly adopted resolutions has authorized certain officers of the Company to, among other things, determine the terms of the debt securities to be issued under the Indenture and execute any and all appropriate documents necessary or appropriate to effect each such issuance;

 

WHEREAS, this Supplemental Indenture is being entered into pursuant to the provisions of Sections 2.01, 3.01 and 9.01 of the Base Indenture;

 

WHEREAS, Sections 9.01(e) and 9.01(p) of the Base Indenture provide that without the consent of Holders of the Securities of any series issued under the Indenture, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Base Indenture, in form satisfactory to the Trustee, to (i) add to, change or eliminate any of the provisions of the Indenture when there is no Security Outstanding of any series created prior to the execution of a supplemental indenture that is entitled to the benefit of such provision and (ii) create and issue Add On Securities pursuant to Section 3.01 of the Base Indenture;

 

WHEREAS, Section 9.01(g) of the Base Indenture permits the Company and the Trustee to establish the form or terms of Securities of any series as permitted by Sections 2.01 and 3.01 of the Base Indenture;

 

WHEREAS, the Company desires to establish the form and terms of the Notes and to modify, alter, supplement and change certain provisions of the Base Indenture for the benefit of the Holders of the Notes (except as may be provided in a future supplemental indenture to the Indenture (“Future Supplemental Indenture”));

 

WHEREAS, the Company desires to appoint and hereby directs the Trustee pursuant to Section 6.14 of the Base Indenture by its execution and delivery hereof to appoint Zions First National Bank an Authenticating Agent in respect of one or more series of securities, and that, upon acceptance of such appointment, such Authenticating Agent shall be vested with all the rights, powers, trusts and duties of an Authenticating Agent with respect to that series of Securities;

 

WHEREAS, the Base Indenture permits the Company to appoint a Paying Agent and Security Registrar in respect of one or more series of Securities, and that, upon acceptance of such appointment, such Paying Agent shall be vested with all the rights, powers and duties of a Paying Agent and Security Registrar with respect to that series of debt securities;

 

WHEREAS, pursuant to an authenticating and paying agency agreement dated January 22, 2014 (the “Authenticating and Paying Agency Agreement”), the Company desires to appoint Zions First National Bank (the

 

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“Authenticating and Paying Agent”) to act as the Authenticating Agent and Paying Agent and Security Registrar with respect to the Notes, subject to the terms and conditions of the Authenticating and Paying Agency Agreement and the Indenture;

 

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture; and

 

WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the Company, in accordance with its terms, and to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or the Authenticating Agent, as applicable, the valid obligations of the Company, have, in each case, been performed, and the execution and delivery of this Supplemental Indenture has been duly authorized in all respects;

 

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the forms and terms of the Notes, the Company covenants and agrees, with the Trustee and the Authenticating and Paying Agent, as follows:

 

ARTICLE I.
 DEFINITIONS

 

Section 1.1                                   Definitions.  For all purposes of the Indenture, except as otherwise expressly provided or unless the context otherwise requires:

 

(a)                                 the terms defined in this Article I shall have the respective meanings assigned to them in this Article I and include the plural as well as the singular and, to the extent applicable, supersede the definitions thereof in the Base Indenture with respect to the Notes;

 

(b)                                 all words, terms and phrases defined in the Base Indenture (but not otherwise defined herein) shall have the same meanings as in the Base Indenture;

 

(c)                                  unless the context otherwise requires, (i) any reference to an “Article” or “Section” refers to an Article or Section, as the case may be, of this Supplemental Indenture; and (ii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to the Indenture as a whole as amended and/or supplemented by this Supplemental Indenture and not to any particular Article, Section or other subdivision;

 

(d)                                 unless otherwise expressly provided, the word “including” does not limit the preceding words or terms; and

 

(e)                                  unless the context otherwise requires or unless otherwise expressly provided, for purposes of this Supplemental Indenture and the Indenture, the term “series” shall mean the series of Securities designated as the “eNotes Internet Auction Program Medium-Term Notes” and shall include any tranches of Notes constituted thereunder.

 

“Aircraft Assets” means (x) aircraft, airframes, engines (including spare engines), propellers, parts and other operating assets and pre-delivery payments relating to any of the items in this clause (x); and (y) intermediate or operating leases relating to any of the items in the foregoing clause (x).

 

“ALC Maillot” means ALC Maillot Jaune Borrower, LLC, a Delaware limited liability company.

 

“ALC Warehouse” means ALC Warehouse Borrower, LLC, a Delaware limited liability company.

 

“Bankruptcy Law” means Title 11, U.S. Code, as amended, or any similar federal, state or foreign law for the relief of debtors.

 

2

 

“Below Investment Grade Rating Event” means that at any time within 60 days (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) from the date of the public notice of a Change of Control or of the Company’s intention or that of any Person to effect a Change of Control, the rating on the Notes is lowered, and the Notes are rated below an Investment Grade Rating, by (x) one Rating Agency if the Notes are rated by less than two Rating Agencies, (y) both Rating Agencies if the Notes are rated by two Rating Agencies or (z) at least a majority of such Rating Agencies if the Notes are rated by three or more Rating Agencies; provided, that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

 

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close, and when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close.

 

“Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

 

“Capital Stock” of a Person means all equity interests in such Person, including any common stock, preferred stock, limited liability or partnership interests (whether general or limited), and all warrants or options with respect to, or other rights to purchase, the foregoing, but excluding Convertible Notes and other indebtedness (other than preferred stock) convertible into equity.

 

“Change of Control” means, the occurrence of any one of the following:

 

(x)                                 a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than the Company, a direct or indirect Subsidiary, or any employee or executive benefit plan of the Company and/or its Subsidiaries, has become the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Company’s Common Stock representing more than 50% of the total voting power of all Common Stock of the Company then outstanding and constituting Voting Stock;

 

(y)                               the consummation of (i) any consolidation or merger of the Company pursuant to which the Company’s Common Stock will be converted into the right to obtain cash, securities of a Person other than the Company, or other property; or (ii) any sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to any other Person other than a direct or indirect Subsidiary of the Company; provided, that Aircraft Asset leasing in the ordinary course of business of the Company or any of its Subsidiaries shall not be considered the leasing of “all or substantially all” of the Company’s consolidated assets; provided further, however, that a transaction described in clause (i) or (ii) in which the holders of the Company’s Common Stock immediately prior to such transaction own or hold, directly or indirectly, more than 50% of the voting power of all Common Stock of the continuing or surviving corporation or the transferee, or the parent thereof, outstanding immediately after such transaction and constituting Voting Stock shall not constitute a Change of Control; or

 

(z)                                  the adoption of a plan relating to the Company’s liquidation or dissolution.

 

“Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

 

3

 

“Common Stock” shall mean and include any class of capital stock of any corporation now or hereafter authorized, the right of which to share in distributions of either earnings or assets of such corporation is without limit as to any amount or percentage.

 

“Consolidated Tangible Assets” at any date means the total assets of the Company and its Subsidiaries reported on the most recently prepared consolidated balance sheet of the Company filed with the Commission or delivered to the Trustee as of the end of a fiscal quarter, less all assets shown on such consolidated balance sheet that are classified and accounted for as intangible assets of the Company or any of its Subsidiaries or that otherwise would be considered intangible assets under GAAP, including, without limitation, franchises, patents and patent applications, trademarks, brand names, unamortized debt discount and goodwill.

 

“Convertible Notes” means indebtedness of the Company that is optionally convertible into Capital Stock of the Company (and/or cash based on the value of such Capital Stock) and/or indebtedness of a Subsidiary of the Company that is optionally exchangeable for Capital Stock of the Company (and/or cash based on the value of such Capital Stock).

 

“Default” means any event that is, or after the notice or passage of time or both would be, an Event of Default.

 

“DTC” means The Depository Trust Company.

 

“ECA Indebtedness” means any indebtedness incurred in order to fund the deliveries of new Aircraft Assets, which indebtedness is guaranteed by one or more Export Credit Agencies, including guarantees thereof by the Company or any of its Subsidiaries.

 

“Exchange Act” means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time and the rules and regulations of the Commission promulgated thereunder.

 

“Export Credit Agencies” means collectively, the export credit agencies or other governmental authorities that provide export financing of new Aircraft Assets (including, but not limited to, the Brazilian Development Bank, Compagnie Francaise d’Assurance pour le Commerce Exterieur, Her Britannic Majesty’s Secretary of State acting by the Export Credits Guarantee Department, Euler-Hermes Kreditversicherungs AG, the Export-Import Bank of the United States, the Export Development Canada or any successor thereto).

 

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the applicable Issue Date.

 

“Holder” means a Person in whose name a Note is registered in the Security Register for the Notes, and such Person shall be treated as the owner of such Note for all purposes under the Indenture.

 

“Indenture” means the Base Indenture as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental thereto entered into pursuant to the applicable provisions thereof, including, for all purposes of the Base Indenture and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern the Base Indenture and any such supplemental indenture, respectively. The term “Indenture,” when used with respect to a particular series of Securities (including the Notes), shall also include the terms of such particular series of Securities (including the Notes) established as contemplated by Section 3.01 of the Base Indenture, including by this Supplemental Indenture.

 

“Investment Grade Rating” means a rating equal to or higher than BBB- by S&P, or the equivalent of any other Rating Agency, as applicable, or in each case the equivalent under any successor category of such Rating Agency.

 

“Issue Date” means, with respect to any Note, the date of first issuance of the applicable tranche.

 

4

 

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any Capital Lease, upon or with respect to any property or asset of such Person.

 

“Non-Recourse Indebtedness” means, with respect to any Person, any indebtedness of such Person or its Subsidiaries that is, by its terms, recourse only to specific assets and non-recourse to the assets of such Person generally and that is neither guaranteed by any Affiliate (other than a Subsidiary) of such Person or would become the obligation of any Affiliate (other than a Subsidiary) of such Person upon a default thereunder, other than (x) recourse for fraud, misrepresentation, misapplication of cash, waste, environmental claims and liabilities, prohibited transfers, violations of single purpose entity covenants and other circumstances customarily excluded by institutional lenders from exculpation provisions and/or included in separate guaranty or indemnification agreements in non-recourse financings, (y) recourse to the equity interests of such Person or its Subsidiaries and to a guarantee by the Company or any Affiliate of the Company that does not exceed 10% of the outstanding indebtedness of such Person and its Subsidiaries, including such a guarantee of Warehouse Facility Indebtedness, and (z) the existence of a guarantee that does not constitute a guarantee of payment of principal, interest or premium on indebtedness.

 

“Notice of Default” means a written notice of the kind specified in clause (c) of Section 7.1 of this Supplemental Indenture.

 

“Place of Payment” means, with respect to the Notes, the place or places where the principal of and any premium and interest on the Notes are payable as specified as contemplated in the Indenture.

 

“Rating Agency” means S&P and any additional rating agency that provides a rating with respect to the Notes and is a “nationally recognized statistical rating organization” as defined in Section 3(a)(62) of the Exchange Act (“NRSRO”); provided, that if any such Rating Agency ceases to provide rating services to issuers or investors, the Company may appoint a replacement for such Rating Agency that is a NRSRO.

 

“S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill Financial, Inc.

 

“Securities Act” means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time and the rules and regulations of the Commission promulgated thereunder.

 

“Special Purpose Aircraft Financing Entity” means a Subsidiary of the Company (x) that engages in no business other than the purchase, finance, refinance, lease, sale and management of Aircraft Assets, the ownership of Special Purpose Aircraft Financing Entities and business incidental thereto; (y) substantially all of the assets of which are comprised of Aircraft Assets and/or Capital Stock in Special Purpose Aircraft Financing Entities; and (z) that is not obligated under, or the organizational documents or financing documents of which prevent it from incurring, in each case, indebtedness for money borrowed other than indebtedness incurred to finance or refinance the purchase, lease or acquisition of Aircraft Assets and the purchase of Special Purpose Aircraft Financing Entities or the cost of construction, repair, refurbishment, modification or improvement thereof.

 

“Subsidiary” of any Person means (x) any corporation, association or similar business entity (other than a partnership, limited liability company or similar entity) of which more than 50% of the total ordinary voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or trustees thereof (or Persons performing similar functions) or (y) any partnership, limited liability company, trust or similar entity of which more than 50% of the capital accounts, distribution rights or total equity, as applicable, is, in the case of clauses (x) and (y), at the time owned, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. Unless otherwise specified herein, each reference to a Subsidiary will refer to a Subsidiary of the Company.

 

“U.S. Government Obligation” means (x) any security that is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any

 

5

 

depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation that is specified in clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt.

 

“Voting Stock” means Capital Stock of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or Persons performing similar functions).

 

“Warehouse Facility Indebtedness” means indebtedness under (x) that certain Amended and Restated Warehouse Loan Agreement, dated as of June 21, 2013,  among ALC Warehouse, the lenders party thereto and Credit Suisse AG, New York Branch, as Agent, and (y) (i) that certain Credit Agreement, dated as of March 8, 2012, among ALC Maillot, the subsidiary guarantors party thereto, the lenders party thereto, Credit Agricole Corporate and Investment Bank, as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent; and (ii) that certain Liquidity Facility Agreement, dated as of March 8, 2012, among ALC Maillot, Credit Agricole Corporate and Investment Bank, as liquidity facility provider, and Credit Agricole Corporate and Investment Bank, as administrative agent, in the case of each of the foregoing clauses (x) and (y), as any such agreement may be amended, supplemented, extended, refinanced, renewed or replaced.

 

Section 1.2                 Other Defined Terms.  In addition to the definitions set forth in Section 1.1 above, the following terms shall have the respective meanings given in the Sections of this Supplemental Indenture set forth below:

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Additional   Notes
    	
 
    	
2.6
    
	
Bankruptcy   Default
    	
 
    	
7.1
    
	
Base   Indenture
    	
 
    	
Recitals
    
	
Change   of Control Offer
    	
 
    	
10.1
    
	
Change   of Control Payment
    	
 
    	
10.1
    
	
Change   of Control Payment Date
    	
 
    	
10.1
    
	
Company
    	
 
    	
Recitals
    
	
Event   of Default
    	
 
    	
7.1
    
	
Notes
    	
 
    	
Recitals
    
	
property
    	
 
    	
6.1
    
	
Successor   Company
    	
 
    	
6.2
    
	
Supplemental   Indenture
    	
 
    	
Recitals
    
	
Threshold   Amount
    	
 
    	
7.1
    
	
Trustee
    	
 
    	
Recitals
    

 

ARTICLE II.
 TERMS AND DESCRIPTION OF NOTES

 

Section 2.1                 Indenture.  The changes, modifications and supplements to the Indenture effected by this Supplemental Indenture shall be applicable only with respect to, and shall only govern the terms of, the Notes that may be issued from time to time pursuant to a Board Resolution, Officers’ Certificate or supplemental indenture in accordance with Section 3.01 of the Base Indenture, and shall not apply to any other Securities that may be issued under the Indenture unless a Board Resolution, Officers’ Certificate or supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements. The provisions of this Supplemental Indenture shall supersede any conflicting provisions in the Indenture with respect to the Notes.

 

Section 2.2                 Designation and Amount.  There is hereby authorized and established a series of Securities under the Indenture, designated as the “eNotes Internet Auction Program Medium-Term Notes,” which series shall

 

6

 

include any Securities issued under the Base Indenture, as amended and supplemented by this Supplemental Indenture, and as may be further amended or supplemented from time to time pursuant to a Board Resolution, Officers’ Certificate or supplemental indenture, and such Board Resolution, Officers’ Certificate, or supplemental indenture, including any form of Note attached thereto, may set forth additional terms applicable to the tranche of Notes established thereby, including additional terms with respect to redemption or repurchase of such Notes.  The aggregate principal amount of Notes that may be authenticated and delivered under the Indenture is unlimited.  The Notes will initially be issued as Global Securities and registered in the name of Cede & Co., the nominee of DTC.

 

Section 2.3                 Form of Notes.  The Notes are to be substantially in the form set forth in Exhibit A hereto, with such changes and additions as may be determined from time to time pursuant to a Board Resolution, Officers’ Certificate or supplemental indenture in accordance with Section 3.01 of the Base Indenture and Article II of this Supplemental Indenture.

 

Section 2.4                 Notes issuable in any Number of Tranches.  The Notes will be issued as part of the same series and may be issued in any number of tranches.

 

Section 2.5                 Additional Notes.  The Company may, from time to time reopen any series or tranche and issue additional Notes (the “Additional Notes”) without notice to or consent of the Holders; provided that such Additional Notes are fungible with the relevant Notes or are issued under separate CUSIP numbers (or other relevant identifying numbers).  The Notes and any such Additional Notes shall be consolidated and form a single series of Securities and shall vote together as one class on all matters.  The Company may acquire Notes by means other than a redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisition does not otherwise violate the terms of the Indenture.

 

Section 2.6                 Notes form a Single Series.  Any Notes issued as part of the series of Securities designated as “eNotes Internet Auction Program Medium-Term Notes,” in as many tranches as may be constituted thereunder, together with any other Notes, will form a part of and constitute a single series of Securities under the Indenture and shall be included in the definition of “Securities” in the Indenture where the context requires.

 

Section 2.7                 Sinking Fund.  The Notes shall not be entitled to the benefit of any sinking fund.

 

ARTICLE III.
 APPOINTMENT AND ACKNOWLEDGEMENT

 

Section 3.1                 Appointment of the Authenticating Agent in respect of the Notes. The Company hereby directs the Trustee pursuant to Section 6.14 of the Base Indenture to appoint Zions First National Bank, Corporate Trust Office at One South Main Street, Suite 1200, Salt Lake City, Utah 84133, Attention: Shelene Brown, or such other address as the Authenticating and Paying Agent may designate from time to time by notice to the Trustee and the Company, as the Authenticating Agent to act in that capacity with respect to the Notes that may be issued from time to time under the Indenture and the Trustee hereby so appoints such Person to such capacity.  The appointment by the Trustee of the Authenticating Agent pursuant to the direction of the Company shall be deemed to be an appointment with due care pursuant to Section 6.03(g) of the Base Indenture.  The Trustee shall have no liability for the acts or omissions of the Authenticating Agent, Paying Agent or Securities Registrar.  The Authenticating Agent hereby acknowledges and accepts such appointment, and agrees to act for all purposes as Authenticating Agent with respect to the Notes, according to the terms of the Indenture, including any duties or obligations of the Authenticating Agent.  Each reference to “Authenticating Agent” in the Indenture shall mean Zions First National Bank with respect to the Notes.

 

Section 3.2                 Appointment of Paying Agent in respect of the Notes.  The Company initially appoints Zions First National Bank to act as Paying Agent for the Notes that may be issued from time to time under the Indenture. Zions First National Bank hereby acknowledges and accepts such appointment, and agrees to (a) act as Paying Agent with respect to the Notes according to the terms of the Indenture, (b) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (c) during the continuance of any default by the Company (or any other obligor upon the Notes) in the making of any payment in respect of any Notes, upon the written request of the Trustee (acting in accordance with the written direction of Holders of at least a majority in aggregate principal

 

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amount in respect of Notes of that series), forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Notes of that series.  Each reference to “Paying Agent” in the Indenture shall mean, unless the Company shall otherwise notify the Trustee and the Holders of Notes, Zions First National Bank.

 

Section 3.3                 Appointment of Security Registrar in respect of the Notes.   (a) For the purposes of the definition of “Security Registrar” set forth in Section 3.05 of the Base Indenture, the second sentence of Section 6.09 of the Base Indenture shall be amended in its entirety and read as follows with respect to Security Registrar for the Notes:

 

Each Security Registrar shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $100,000 and is organized under the laws of the United States or any state thereof.

 

(b)                                 The Company hereby appoints Zions First National Bank to act as Security Registrar for the Notes that may be issued from time to time under the Indenture. Zions First National Bank hereby acknowledges and accepts such appointment, and agrees to act as Security Registrar with respect to the Notes according to the terms of the Indenture.  Each reference to “Security Registrar” in the Indenture shall mean, unless the Company shall otherwise notify the Trustee and the Holders, Zions First National Bank with respect to the Notes.

 

ARTICLE IV.
 SATISFACTION AND DISCHARGE

 

Section 4.1                 Satisfaction and Discharge of Indenture.  Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 4.01 of the Base Indenture is amended and restated in its entirety as follows with respect to the Notes:

 

(a)                                 The Indenture will be discharged as to all Notes and will cease to be of further effect as to all Notes, when either:

 

(i)                                     all Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust) have been delivered to the Paying Agent for cancellation; or

 

(ii)                                  (A) all Notes not theretofore delivered to the Paying Agent for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise, will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Paying Agent for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption, as the case may be; (B) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit (other than a Default or an Event of Default resulting from the borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other indebtedness and, in each case, the granting of Liens in connection therewith) and the deposit will not result in a breach or violation of, or constitute a default under, any material agreement or material instrument (other than the Indenture) to which the Company is a party or by which the Company is bound; (C) the Company has paid or caused to be paid all sums payable or due and owing by the Company under the Indenture; and (D) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be.

 

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(b)                                 In addition, the Company shall deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) stating that all conditions precedent to satisfaction and discharge have been satisfied.

 

(c)                                  Notwithstanding the satisfaction and discharge of the Indenture, the obligations of the Company to the Trustee under Section 6.07 of the Base Indenture and the obligations of the Trustee to any Authenticating Agent under Section 6.14 of the Base Indenture shall survive.

 

ARTICLE V.
 AMENDMENTS AND WAIVERS

 

Section 5.1                 Supplemental Indentures without Consent of Holders.  Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 9.01 of the Base Indenture is hereby amended with respect to the Notes by the following:

 

(a)                                 replacing the language in clause (d) thereof with “to add to or change any of the provisions of the Indenture or the terms of the Notes to such extent as shall be necessary to permit or facilitate the issuance of Notes in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Notes in uncertificated form; provided, in each case, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended”; and

 

(b)                                 replacing the word “indenture” in clause (q) thereof with “Indenture.”

 

Section 5.2                 Supplemental Indentures with Consent of Holders.  Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 9.02 of the Base Indenture is hereby amended with respect to the Notes by the following:

 

(a)                                 replacing the period at the end of clause (c) thereof with “, or”; and

 

(b)                                 adding a new clause (d) after the end of clause (c) thereof, as follows: “(d) reduce the premium payable upon the redemption or repurchase of any Note or change the time at which any Note may be redeemed or repurchased as described in Article X of the Supplemental Indenture or as may be described in an Officers’ Certificate with respect thereto, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise (except amendments to the definition of “Change of Control” or “Below Investment Grade Ratings Event”).”

 

ARTICLE VI.
 CERTAIN COVENANTS OF THE COMPANY

 

Unless otherwise specified with respect to any tranche of Notes pursuant to Section 3.01 of the Base Indenture and Article II of this Supplemental Indenture in a Board Resolution, Officers’ Certificate or supplemenal indenture, the following additional covenants shall apply with respect to the Notes:

 

Section 6.1                 Limitation on Liens.  The Company will not, and will not permit any Subsidiary to, at any time pledge or otherwise subject to any Lien any of its or such Subsidiary’s property, tangible or intangible, real or personal (hereinafter “property”), without thereby expressly securing the Notes (together, if the Company so chooses, with any other securities entitled to the benefit of a similar covenant) equally and ratably with any and all other indebtedness for borrowed money or Capital Lease, including any guarantee, secured by such Lien, so long as any such other indebtedness or Capital Lease shall be so secured, and the Company covenants that if and when any such Lien is created, the Notes will be so secured thereby; provided, that, the foregoing shall not apply to any Lien on any property existing as of the Issue Date or to the following Liens securing indebtedness for borrowed money or Capital Leases, including any guarantee:

 

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(a)                                 any Lien on any property (including Aircraft Assets and Capital Stock in any Special Purpose Aircraft Financing Entity) securing Non-Recourse Indebtedness;

 

(b)                                 any Lien on any property (including Aircraft Assets and Capital Stock in any Special Purpose Aircraft Financing Entity) (i) existing at the time of acquisition of such property or the entity owning such property (including acquisition through merger or consolidation), or (ii) given to secure the payment of all or any part of the purchase, lease or acquisition thereof or the cost of construction, repair, refurbishment, modification or improvement of property (including Aircraft Assets and Capital Stock in any Special Purpose Aircraft Financing Entity) or to secure any indebtedness (including ECA Indebtedness) or Capital Lease incurred prior thereto, at the time of, or within 180 days (18 months in the case of Aircraft Assets and Capital Stock in any Special Purpose Aircraft Financing Entity) after, the acquisition, construction, repair, refurbishment, modification or improvement of property (including Aircraft Assets and Capital Stock in any Special Purpose Aircraft Financing Entity) for the purpose of financing all or part of the purchase, lease or acquisition thereof or the cost of construction, repair, refurbishment, modification or improvement;

 

(c)                                  Liens by a Subsidiary as security for indebtedness owed to the Company or any Subsidiary;

 

(d)                                 a banker’s lien or right of offset of the holder of such indebtedness in favor of any lender of moneys or holder of commercial paper of the Company or any Subsidiary in the ordinary course of business on moneys of the Company or such Subsidiary deposited with such lender or holder in the ordinary course of business;

 

(e)                                  any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien existing on the Issue Date or referred to in the foregoing clauses including in connection with the refinancing of indebtedness of the Company and its Subsidiaries secured by such Lien; and

 

(f)                                   other Liens not permitted by any of the foregoing clauses (a) through (e) on any property, now owned or hereafter acquired; provided, that, no such Liens shall be incurred pursuant to this subsection (f) if the aggregate principal amount of outstanding indebtedness (without duplication for any guarantee of such indebtedness) and Capital Leases secured by Liens incurred pursuant to this subsection (f) subsequent to the Issue Date, including the Lien proposed to be incurred, shall exceed 20% of Consolidated Tangible Assets after giving effect to such incurrence and the use of proceeds of such indebtedness or Capital Leases.

 

(g)                                  For the avoidance of doubt, nothing in this Section 6.1 shall limit Liens that do not secure indebtedness for borrowed money or Capital Leases.

 

Section 6.2                 Release of Liens.  Any Lien that is granted to secure the Notes pursuant to Section 6.1 shall be automatically released and discharged at the same time as the release (other than through the exercise of remedies with respect thereto) of each Lien that gave rise to such obligation to secure the Notes under Section 6.1.

 

Section 6.3                 Merger, Consolidation or Sale of All or Substantially All Assets.  Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 8.01 of the Base Indenture is hereby amended and restated in its entirety as follows with respect to the Notes by this Section 6.3:

 

(a)                                 The Company will not consolidate with or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of the Company’s properties and assets, in one or more related transactions, to any Person unless:

 

(i)                                     the resulting, surviving or transferee Person (the “Successor Company”) is a Person organized and existing under the laws of the United States of America, any state or territory thereof or the District of Columbia;

 

(ii)                                  the Successor Company (if other than the Company) expressly assumes all of the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture;

 

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

 

(iv)                              the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, winding up or disposition, and such supplemental indenture, if any, comply with the Indenture.

 

(b)                                 The Company will be released from its obligations under the Indenture and the Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes; provided, that in the case of a lease of all or substantially all its assets, the Company will not be released from the obligation to pay the principal of and interest on the Notes.

 

(c)                                  For purposes of this Section 6.2, Aircraft Asset leasing in the ordinary course of business of the Company or any of its Subsidiaries shall not be considered the leasing of “all or substantially all” of the Company’s consolidated assets.

 

ARTICLE VII.
 DEFAULTS AND REMEDIES

 

Section 7.1                 Events of Default.  Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.01 of the Base Indenture is hereby amended and restated in its entirety as follows with respect to the Notes by this Section 7.1:

 

Each of the following is an “Event of Default” with respect to any tranche of Notes:

 

(a)                                 default in any payment of interest on any Note of such tranche when due, which default continues for a period of 30 days;

 

(b)                                 default in the payment of principal of, or premium, if any, on any Note of such tranche when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise;

 

(c)                                  default in the performance, or breach, of any covenant or warranty of the Company in the Indenture with respect to the Notes (other than a covenant or warranty with respect to which a default in performance or breach is elsewhere in this Section 7.1 specifically addressed or which covenant or warranty has been included in the Indenture solely for the benefit of one or more series or tranches notes other than the Notes), and continuance of such default or breach for a period of 90 consecutive days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of all Outstanding Notes affected thereby, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” under the Indenture;

 

(d)                                 default under any mortgage, indenture (including the Indenture) or instrument under which there is issued, or which secures or evidences, any indebtedness for borrowed money of the Company (or the payment of which is guaranteed by the Company) (other than indebtedness owed to any Subsidiary or Non-Recourse Indebtedness of the Company) now existing or hereinafter created, which default shall constitute a failure by the Company to pay principal in an amount exceeding $100.0 million (the “Threshold Amount”) when due and payable by the Company at final stated maturity, after expiration of any applicable grace period with respect thereto (such default, a “payment default”), or shall have resulted in an aggregate principal amount of such indebtedness exceeding the Threshold Amount becoming due and payable by the Company prior to the date on which it would otherwise have become due and payable (such default, an “acceleration default”); provided, however, that in connection with any series of the Convertible Notes, (i) any conversion of such indebtedness by a holder thereof into shares of common stock, cash or a combination of cash and shares of common stock, (ii) the rights of holders of such indebtedness to convert into shares of common stock, cash or a combination of cash and shares of common stock and (iii) the rights of holders of such indebtedness to require any repurchase by the Company of such indebtedness in cash upon a fundamental change shall not, in itself, constitute an Event of Default hereunder; or

 

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(e)                       (i)                                              the Company, pursuant to or within the meaning of any Bankruptcy Law: (A) commences proceedings to be adjudicated bankrupt or insolvent; (B) consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking an arrangement of debt, reorganization, dissolution, winding up or relief under applicable Bankruptcy Law; (C) consents to the appointment of a receiver, interim receiver, receiver and manager, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) makes an admission in writing of its inability to pay its debts generally as they become due; or

 

(ii)                                  a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in a proceeding in which the Company is to be adjudicated bankrupt or insolvent; (B) appoints a receiver, interim receiver, receiver and manager, liquidator, assignee, trustee, sequestrator or other similar official of the Company; or (C) orders the liquidation, dissolution or winding up of the Company; and the order or decree remains unstayed and in effect for 90 consecutive days (any such Event of Default specified in this clause (e), for purposes of the Notes, shall constitute a “Bankruptcy Default”).

 

Within 60 days following the date on which the Company becomes aware of a Default or receives notice of such Default, as applicable, if such Default is continuing, the Company shall deliver a certificate to the Trustee specifying any events which would constitute a Default, their status and what action the Company is taking or proposing to take in respect thereof.

 

In the event of a declaration of acceleration of any tranche of Notes solely because an Event of Default described in Section 7.1(d) above has occurred and is continuing, the declaration of acceleration of such Notes shall be automatically rescinded and annulled if (i) the default or defaults triggering such Event of Default pursuant to Section 7.1(d) shall be remedied or cured by the Company or waived by the holders of the relevant indebtedness within 30 days after the declaration of acceleration with respect thereto; (ii) the rescission and annulment of the acceleration of such Notes would not conflict with any judgment or decree of a court of competent jurisdiction; and (iii) all Events of Default with respect to such Notes, except non-payment of principal of, or premium, if any, or interest on, the Notes that have become due solely by such declaration of acceleration of the Notes of such tranche, as the case may be, have been cured or waived as provided in the Indenture.

 

Section 7.2                 Acceleration.

 

(a)                                 Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, the first three paragraphs of Section 5.02 of the Base Indenture are hereby replaced with the following with respect to the Notes:

 

“If an Event of Default (other than an Event of Default described in Section 7.1(e) of the Supplemental Indenture) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes affected thereby may declare the principal of, premium, if any, and accrued and unpaid interest, if any, on all the Notes affected thereby to be due and payable by notice in writing to the Company (and to the Trustee if given by Holders). Upon such a declaration, such principal, premium, if any, and accrued and unpaid interest, if any, will be due and payable immediately.

 

If an Event of Default described in Section 7.1(e) occurs and is continuing, the principal of, premium, if any, and accrued and unpaid interest, if any, on all the Notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.”

 

(b)                                 Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, the fourth paragraph of Section 5.02 of the Base Indenture is hereby amended by replacing the period at the end of clause (b) thereof with “; and” and adding the following clause (c) thereafter: “(c) such rescission would not conflict with any judgment or decree of a court of competent jurisdiction.”

 

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Section 7.3                 Control by Holders.  Notwithstanding Section 5.12 of the Base Indenture, the Trustee may refuse to follow any direction that conflicts with any law, rule, regulation or court order or the Indenture or the Notes, or that the Trustee determines in good faith is unduly prejudicial to the rights of any Holder or that would involve the Trustee in personal liability. Any application by the Trustee for written instructions from the requisite amount of Holders may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under the Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions from the requisite amount of Holders in response to such application specifying the action to be taken or omitted.

 

Section 7.4                 Waivers.  It shall not be necessary for any Act of Holders to approve the particular form of any waiver, but it shall be sufficient if such Act shall approve the substance thereof.  A consent to any waiver by any Holder given in connection with a sale, tender or exchange of such Holder’s Notes will not be rendered invalid by such sale, tender or exchange.

 

ARTICLE VIII.
 DEFEASANCE

 

Section 8.1                 Covenant Defeasance.  The covenants provided pursuant to Section 3.01(r), 9.01(b) or 9.01(g) of the Base Indenture for purposes of Section 13.03 of the Base Indenture are the covenants in Article VI and Article X of this Supplemental Indenture and Section 5.15 of the Base Indenture.

 

ARTICLE IX.
 REDEMPTION OF NOTES

 

Section 9.1                                   Notice of Redemption of Notes.  For purposes of the Notes issued under the Indenture, Article 11 of the Base Indenture is amended as follows:

 

(a)                               All references to “the Trustee” in Sections 11.02, 11.03, 11.04 and 11.07 shall be amended and shall read “the Paying Agent”;

 

(b)                               The reference to “not more than 60 days prior to the Redemption Date” in Section 11.03 of the Base Indenture is amended and shall read as “not less than 5 Business Days prior to the Redemption Date”; and

 

(c)                                For purposes of any notice of redemption delivered under Section 11.04 of the Base Indenture, the reference to “not less than 30 nor more than 60 days prior to the Redemption Date” in Section 11.04 of the Base Indenture is amended and shall read as “not less than 5 Business Days prior to the Redemption Date.”Section 11.06 of the Base Indenture is hereby amended by deleting the words “Record Dates” and replacing them with “Regular Record Date.”

 

ARTICLE X.
 REPURCHASE OF NOTES AT OPTION OF HOLDERS

 

Unless otherwise specified with respect to any tranche of Notes pursuant to Section 3.01 of the Base Indenture and Article II of this Supplemental Indenture in a Board Resolution, Officers’ Certificate or supplemental indenture, the following additional covenant shall apply with respect to the Notes:

 

Section 10.1          Offer to Repurchase Upon Change of Control Repurchase Event.

 

(a)                                 If a Change of Control Repurchase Event occurs, unless the Company has exercised its right, if any, to redeem all of the Notes, as may be set forth in an Officers’ Certificate to this Supplemental Indenture, the Company will make an offer to purchase all of the Notes (the “Change of Control Offer”) at a purchase price in cash equal to 101% of the principal amount of the Notes plus accrued and unpaid interest, if any, to the date of purchase (the “Change of Control Payment”), subject to the right of Holders of record on the applicable Regular Record Date to 

 

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receive interest due on an Interest Payment Date falling on or prior to such payment date. Within 30 days following the date upon which a Change of Control Repurchase Event occurred, or at the Company’s option, prior to any Change of Control but after the public announcement of the pending Change of Control, unless the Company has exercised its right, if any, to redeem all of the Notes as may be set forth in an Officers’ Certificate to this Supplemental Indenture, the Company will mail a notice of such Change of Control Offer to each Holder or otherwise give notice, which will govern the terms of the Change of Control Offer, in accordance with the applicable procedures of DTC, with a copy to the Trustee, stating:

 

(i)                                     that a Change of Control Offer is being made pursuant to this Section 10.1 and that all Notes validly tendered pursuant to such Change of Control Offer will be accepted for purchase by the Company at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the applicable Regular Record Date to receive interest due on an Interest Payment Date falling on or prior to such payment date);

 

(ii)                                  the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed or given, other than as may be required by law) (the “Change of Control Payment Date”);

 

(iii)                               if sent prior to the date of consummation of the Change of Control, that the Change of Control Offer is conditioned on the Change of Control being consummated on or prior to the Change of Control Payment Date; provided, that if a Change of Control is consummated after a proposed Change of Control Payment Date and such Change of Control Offer is therefore not consummated, the Company shall make a Change of Control Offer in accordance with this Section 10.1 within 30 days following the later of the consummation of such Change of Control or a Below Investment Grade Rating Event;

 

(iv)                              that Notes must be tendered in multiples of $1,000, and any Note not validly tendered will remain outstanding and continue to accrue interest;

 

(v)                                 that, unless the Company defaults in the payment of the Change of Control Payment, any Note accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date;

 

(vi)                              that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of such Notes completed, to the Paying Agent specified in the notice at the address specified in the notice, or transfer their Notes to the Paying Agent by book-entry transfer pursuant to the applicable procedures of the Paying Agent, prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

 

(vii)                           that Holders shall be entitled to withdraw their tendered Notes and their election to require the Company to purchase such Notes; provided, that the Paying Agent receives at the address specified in the notice, not later than the close of business on the 30th day following the date of the Change of Control notice, a telegram, facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;

 

(viii)                        that if a Holder is tendering less than all of its Notes, such Holder will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (the unpurchased portion of the Notes must be equal to $1,000 or an integral multiple of $1,000 in excess thereof); and

 

(ix)                              the other instructions, as determined by the Company, consistent with this Section 10.1 that a Holder must follow.

 

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The notice, if mailed or given in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. If (A) the notice is mailed or given in a manner herein provided and (B) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holder’s failure to receive such notice or such defect shall not affect the validity of the proceedings for the purchase of the Notes as to all other Holders that properly received such notice without defect.

 

(b)                                 On the Change of Control Payment Date, the Company will, to the extent lawful:

 

(i)                                     accept for payment all Notes or portions of Notes (of integral multiples of $1,000) validly tendered pursuant to the Change of Control Offer;

 

(ii)                                  deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes so tendered;

 

(iii)                               deliver or cause to be delivered to the Trustee for cancellation the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company in accordance with this Section 10.1; and

 

(iv)                              deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to the making of such Change of Control Payment have been complied with.

 

(c)                                  The Paying Agent will promptly pay to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee or the Authenticating Agent, as applicable, will promptly authenticate, upon receipt of an authentication order, and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in a principal amount of $1,000 or integral multiples of $1,000 in excess thereof.

 

(d)                                 If the Change of Control Payment Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest to the Change of Control Payment Date will be paid on the relevant Interest Payment Date to the Person in whose name a Note is registered at the close of business on such Regular Record Date.

 

(e)                                  Prior to making a Change of Control Payment, and as a condition to such payment (i) the requisite holders of each issue of indebtedness issued under an indenture or other agreement that would be violated by the making of such payment shall have consented to such Change of Control Payment being made and waived the event of default, if any, caused by the Change of Control or (ii) the Company will repay all outstanding indebtedness issued under an indenture or other agreement that would be violated by the making of a Change of Control Payment or the Company will offer to repay all such indebtedness, make payment to the holders of such indebtedness that accept such offer and obtain waivers from the requisite remaining holders of such indebtedness of any event of default arising under the relevant indenture or other agreement as a result of the Change of Control. The Company covenants to effect such repayment or obtain such consent prior to making a Change of Control Payment, it being a default of this Section 10.1 if the Company fails to comply with such covenant.

 

(f)                                   The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 10.1 applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

 

(g)                                  The Company will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue of the conflict.

 

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(h)                                 Other than as specifically provided in this Section 10.1, any purchase pursuant to this Section 10.1 shall be made pursuant to the provisions of Sections 11.03, 11.05 and 11.07 of the Base Indenture.

 

(i)                                     Notwithstanding anything to the contrary in the foregoing clauses (a) though (h), the Company’s obligation to make a Change of Control Offer may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes.

 

ARTICLE XI.
 MISCELLANEOUS PROVISIONS

 

Section 11.1          Effect of Supplemental Indenture.  Upon the execution and delivery of this Supplemental Indenture by each of the Company, the Trustee and the Authenticating and Paying Agent, and the delivery of the documents referred to in Section 11.10 herein, the Base Indenture shall be supplemented in accordance herewith, and this Supplemental Indenture shall form a part of the Indenture for all purposes in respect of any Notes.

 

Section 11.2          Governing Law.  This Supplemental Indenture and each Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

Section 11.3          Effect of Headings.  The article and section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

 

Section 11.4          Severability.  In case any one or more of the provisions contained in the Indenture, this Supplemental Indenture or the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of the Indenture, this Supplemental Indenture or the Notes, but the Indenture, this Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

 

Section 11.5          Ratification of Indenture.  The Base Indenture, as supplemented and amended by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided; provided, however, that the provisions of this Supplemental Indenture shall apply solely to the Notes.  This Supplemental Indenture constitutes an integral part of the Base Indenture with respect to the Notes.  In the event of a conflict between the terms and conditions of the Base Indenture and the terms and conditions of this Supplemental Indenture, the terms and conditions of this Supplemental Indenture shall prevail with respect to the Notes.

 

Section 11.6          Trustee Not Responsible for Recitals.  The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof.  The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

 

Section 11.7          Waiver of Jury Trial.  Section 1.15 of the Base Indenture is hereby incorporated herein.

 

Section 11.8          Counterparts.  This Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

 

Section 11.9          Concerning The Trustee and the Authenticating and Paying Agent.  Neither the Trustee nor the Authenticating and Paying Agent assumes any duties, responsibilities or liabilities by reason of this Supplemental Indenture other than as expressly set forth in the Indenture and, with respect to the Authenticating and Paying Agent, the Authenticating and Paying Agency Agreement. Neither the Trustee nor the Authenticating and Paying Agent makes any representations as to the validity or sufficiency of this Supplemental Indenture. The recitals and statements herein are deemed to be those of the Company and not of the Trustee or the Authenticating and Paying Agent. In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of or affecting the liability of or affording protection to the Trustee.

 

Section 11.10   Documents to be Given to the Trustee.  As specified in Section 9.03 of the Base Indenture and subject to the provisions of Section 6.03 of the Base Indenture, the Trustee shall be entitled to receive an Officers’ 

 

16

 

Certificate and an Opinion of Counsel as conclusive evidence that this Supplemental Indenture complies with the applicable provisions of the Indenture.

 

[Signature page follows]

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed, all as of the day and year first above written.

 

 

	
 
    	
AIR   LEASE CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gregory B. Willis
    
	
 
    	
 
    	
Name:
    	
Gregory   B. Willis
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    

 

[Signature Page to Third Supplemental Indenture]

 

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee

 

 

	
By:
    	
/s/   Diana Vasconez
    	
 
    	
 
    
	
 
    	
Name:   Diana Vasconez
    	
 
    
	
 
    	
Title:   Associate
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Irene Siegel
    	
 
    	
 
    
	
 
    	
Name:   Irene Siegel
    	
 
    
	
 
    	
Title:   Vice President
    	
 
    

 

2

 

ZIONS FIRST NATIONAL BANK, as Authenticating and Paying Agent

 

 

	
By:
    	
/s/   Shelene Brown
    	
 
    	
 
    
	
 
    	
Name:   Shelene Brown
    	
 
    
	
 
    	
Title:   Vice President
    	
 
    

 

3

 

Exhibit A

 

[Form of eNote Internet Auction Program Medium-Term Note]

 

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO AIR LEASE CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

 

AIR LEASE CORPORATION

 

**************************

 

eNotes Internet Auction Program

 

Medium-Term Note

 

[Title of Securities]

 

CUSIP: [                   ]

[ISIN: [                       ]]

 

	
No. [     ]
    	
$[                       ]
    
	
 
    	
(as revised by the Schedule of Increases and
   Decreases in Global Security attached hereto)
    

 

	
ORIGINAL
   ISSUE DATE:
    	
INITIAL
   OPTIONAL
   REDEMPTION
   DATE:
    	
INTEREST   RATE
   (PER ANNUM):
    	
INTEREST
   PAYMENT DATES:
    
	
 
    	
 
    	
 
    	
 
    
	
ISSUE   PRICE:
    	
REDEMPTION
   NOTICE
   PERIOD:
    	
INTEREST
   PERIODS:
    	
DAY   COUNT
   CONVENTION:
    
	
 
    	
 
    	
 
    	
 
    
	
MATURITY
   DATE:
    	
REDEMPTION
   PRICE:
    	
DENOMINATIONS:
    	
REGULAR
   RECORD DATES:
    
	
 
    	
 
    	
 
    	
 
    
	
REPURCHASE   AT
   OPTION OF
   HOLDER:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
OTHER   PROVISIONS:
    	
 
    	
 
    	
 
    

 

AIR LEASE CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., the registered Holder hereof, the principal sum of [                             ] Dollars ($[                       ]) (as revised by the Schedule of Increases and Decreases in Global Security attached hereto) on the Maturity Date or the Redemption Date, as the case may be, and to pay interest thereon from and including Original Issue Date or from and including the most recent date to which interest has been paid or duly provided for, semi-annually on [                       ] and [                       ] in each year, commencing [                           ], or, if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”), at the Interest Rate per annum, until the principal hereof is paid or made available for payment; provided that any principal, and any such installment of interest, that is overdue shall bear interest at the Interest Rate (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the [                       ] and [                       ]  (whether or not a Business Day), as the case may be, next preceding such Interest Payment

 

 

Date. Any such interest so payable but not so punctually paid or duly provided for on any Interest Payment Date will forthwith cease to be payable to the Holder on such Regular Record Date and, at the Company’s election, may either be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Paying Agent, notice whereof to be given to Holders of Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture.

 

Payment of the principal of and interest on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, New York (or, if the Company does not maintain such office or agency, at the corporate trust office of the Paying Agent in The City of New York or if the Paying Agent does not maintain an office in The City of New York, at the office of a Paying Agent in Salt Lake City, Utah), in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of principal and interest on Global Securities shall be made by wire transfer in accordance with the procedures of the Depositary.

 

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon has been executed by or on behalf of  the Trustee or Authenticating Agent, as the case may be, referred to on the reverse hereof by manual signature of one or more authorized signatories, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

	
Dated:   [          ]
    	
AIR   LEASE CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

	
TRUSTEE’S   CERTIFICATE OF AUTHENTICATION
    	
 
    
	
This   is one of the Securities of the series designated therein
    	
 
    
	
referred   to in the within-mentioned Indenture.
    	
 
    
	
 
    	
 
    
	
DEUTSCHE   BANK TRUST COMPANY AMERICAS,
    	
 
    
	
not   in its individual capacity but solely as Trustee
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
ZIONS   FIRST NATIONAL BANK
    	
 
    	
 
    
	
 
    	
Not   in its individual capacity but solely as
    	
 
    
	
 
    	
Authenticating   Agent
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Authorized   Signatory
    	
 
    
					

 

 

[REVERSE OF NOTE]

 

This Note is one of a duly authorized series of securities of the Company designated as “eNotes Internet Auction Program Medium-Term Notes”  (the “Notes”), issued under an Indenture, dated as of October 11, 2012, (the “Base Indenture”) between the Company, as issuer, and Deutsche Bank Trust Company Americas, as Trustee (the “Trustee”, which term includes any successor trustee under the Indenture), as supplemented by the Third Supplemental Indenture, dated as of January 22, 2014 (the “Third Supplemental Indenture”), among the Company, as issuer, the Trustee and Zions First National Bank, as Authenticating and Paying Agent in respect of the Notes, and an Officers’ Certificate, dated as of [                                      ] (the “Officers’ Certificate”; the Base Indenture, as amended and supplemented by the Third Supplemental Indenture and the Officers’ Certificate is herein called the “Indenture”), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered.

 

The Company may at any time issue Additional Notes under the Indenture in unlimited amounts having the same terms as the Notes, except as otherwise permitted by the Indenture. Any such Notes, together with this Note, will constitute a single series of Securities under the Indenture.  The Notes will initially be issued in the form of one or more Global Securities.  Except as provided in the Indenture, a Global Security shall not be exchangeable for one or more definitive securities.

 

The Notes will constitute senior unsecured obligations of the Company, and will rank pari passu without any preference among themselves.

 

The Notes do not have the benefit of any sinking fund obligation.

 

If so indicated on the face hereof, this Note may be redeemed prior to the Stated Maturity Date as provided in the Indenture.  [In the event of redemption of this Note in part only, a new Note or Notes in an authorized denomination for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.]  If the Issuer elects to redeem this Note, such Note will cease to accrue interest, if any, from the date of redemption, provided the Redemption Price has been paid in accordance with the Indenture.  Upon payment of (i) the amount of principal due and payable and (ii) accrued and unpaid interest, if any (or, if the relevant Notes are Original Issue Discount Securities, the accreted face amount thereof), all of the Company’s obligations in respect of the payment of the principal of, and accrued and unpaid interest, if any, on, this Note shall terminate.

 

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note or of certain restrictive covenants and Events of Default with respect to the Notes, in each case upon compliance with certain conditions set forth in the Indenture.

 

If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes affected thereby, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

 

As provided in and subject to the provisions of the Indenture, the Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Notes, the Holders of at least 25% in principal amount of the Notes affected thereby at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee indemnity or security reasonably satisfactory to it, and the Trustee shall not have received from the Holders of a majority in principal amount of Notes affected thereby at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

 

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or the Holder’s attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

The Indenture and this Note are governed by and construed in accordance with the laws of the State of New York.

 

Unless otherwise specified on the face of this Note, this Note is issuable in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.  As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of any authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent thereof may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary.

 

All terms used in this Note that are not defined herein and are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

To the extent that any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

 

 

SCHEDULE OF INCREASES AND DECREASES IN GLOBAL SECURITY

 

The following increases or decreases in this Note have been made:

 

	
Date of decrease or
   increase
    	
 
    	
Amount of decrease in
   principal amount of
   this Note
    	
 
    	
Amount of increase in
   principal amount of this
   Note
    	
 
    	
Principal amount of this
   Note following such
   decrease or increase
    	
 
    	
Signature of authorized
   signatory of Trustee or
   Security Registrar
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned assigns and transfers this Note to:

 

(Insert assignee’s social security or tax identification number)

 

(Insert address and zip code of assignee)

 

and irrevocably appoints                   as agent to transfer this Note on the Security Register. The agent may substitute another to act for him or her.

 

 

	
Dated:
    	
Signature:
    
	
 
    	
 
    
	
 
    	
Signature   Guarantee:
    

 

(Sign exactly as your name appears on the other side of this Security)

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Note purchased by the Company pursuant to Section 10.1 of the Third Supplemental Indenture, check the box below:

 

[   ] Section 10.1

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 10.1 of the Third Supplemental Indenture, state the amount you elect to have purchased:

 

	
 
    	
$                                     (integral multiples of $1,000)
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Your   Signature:
    	
 
    
	
 
    	
 
    	
(Sign   exactly as your name appears on the face of this Note)
    
	
 
    	
 
    
	
 
    	
Tax   Identification No.:
    	
 
    
						

 

	
Signature   Guarantee*:
    	
 
    	
 
    

 

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).Exhibit 10.1

 

EP Energy Corporation

2014 Omnibus Incentive Plan

 

 

Table of Contents

 

	
SECTION 1                               ESTABLISHMENT   AND OBJECTIVES
    	
1
    
	
 
    	
 
    
	
SECTION 2                               DEFINITIONS
    	
1
    
	
2.1
    	
Award
    	
1
    
	
2.2
    	
Award   Agreement
    	
1
    
	
2.3
    	
Beneficiary
    	
1
    
	
2.4
    	
Board   of Directors
    	
2
    
	
2.5
    	
Cash   Awards
    	
2
    
	
2.6
    	
Cause
    	
2
    
	
2.7
    	
Change   in Capitalization
    	
2
    
	
2.8
    	
Change   in Control
    	
2
    
	
2.9
    	
Code
    	
4
    
	
2.10
    	
Common   Stock
    	
4
    
	
2.11
    	
Consultant
    	
4
    
	
2.12
    	
Covered   Employee
    	
4
    
	
2.13
    	
Director
    	
4
    
	
2.14
    	
Effective   Date
    	
4
    
	
2.15
    	
Employee
    	
4
    
	
2.16
    	
Employer
    	
4
    
	
2.17
    	
Exchange   Act
    	
5
    
	
2.18
    	
Fair   Market Value
    	
5
    
	
2.19
    	
Good   Reason
    	
5
    
	
2.20
    	
Incentive   Award
    	
6
    
	
2.21
    	
Incentive   Stock Option
    	
6
    
	
2.23
    	
Maximum   Annual Employee Grant
    	
6
    
	
2.24
    	
Nonqualified   Option
    	
6
    
	
2.25
    	
Option
    	
6
    
	
2.26
    	
Option   Price
    	
6
    
	
2.27
    	
Other   Stock-Based Award
    	
6
    
	
2.28
    	
Participant
    	
6
    
	
2.29
    	
Performance   Goals
    	
7
    
	
2.30
    	
Performance   Period
    	
9
    
	
2.31
    	
Performance   Shares
    	
9
    
	
2.32
    	
Performance   Units
    	
9
    
	
2.33
    	
Plan   Administrator
    	
9
    
	
2.34
    	
Restricted   Stock
    	
10
    
	
2.35
    	
Restricted   Stock Units
    	
10
    
	
2.36
    	
Restriction   Period
    	
10
    
	
2.37
    	
Rule 16b-3
    	
10
    
	
2.38
    	
Section 16   Insider
    	
10
    

 

i

 

	
2.39
    	
Section 162(m)
    	
10
    
	
2.40
    	
Stock   Appreciation Right
    	
10
    
	
2.41
    	
Subsidiary
    	
10
    
	
 
    	
 
    
	
SECTION 3                               ADMINISTRATION
    	
11
    
	
3.1
    	
Plan   Administrator
    	
11
    
	
3.2
    	
Authority   of Plan Administrator
    	
11
    
	
3.3
    	
Indemnification   of Plan Administrator
    	
12
    
	
 
    	
 
    
	
SECTION 4                               ELIGIBILITY
    	
12
    
	
4.1
    	
Eligibility
    	
12
    
	
4.2
    	
Actual   Participation
    	
12
    
	
 
    	
 
    	
 
    
	
SECTION 5                               SHARES   AVAILABLE FOR THE PLAN
    	
13
    
	
5.1
    	
Aggregate   Shares
    	
13
    
	
5.2
    	
Limitations
    	
13
    
	
5.3
    	
Adjustments   in Authorized Shares
    	
14
    
	
5.4
    	
Effect   of Certain Transactions
    	
14
    
	
 
    	
 
    	
 
    
	
SECTION 6                               STOCK OPTIONS
    	
15
    
	
6.1
    	
Grant   of Options
    	
15
    
	
6.2
    	
Special   Provisions Applicable to Incentive Stock Options
    	
15
    
	
6.3
    	
Terms   of Options
    	
16
    
	
 
    	
 
    
	
SECTION 7                               STOCK   APPRECIATION RIGHTS
    	
19
    
	
7.1
    	
Grant   of Stock Appreciation Rights
    	
19
    
	
7.2
    	
Exercise   of Stock Appreciation Rights
    	
19
    
	
7.3
    	
Special   Provisions Applicable to Stock Appreciation Rights
    	
20
    
	
 
    	
 
    	
 
    
	
SECTION 8                               PERFORMANCE   SHARES AND PERFORMANCE UNITS
    	
21
    
	
8.1
    	
Grant   of Performance Shares and Performance Units
    	
21
    
	
8.2
    	
Value   of Performance Shares and Performance Units
    	
21
    
	
8.3
    	
Payment   of Performance Shares and Performance Units
    	
21
    
	
8.4
    	
Form and   Timing of Payment
    	
22
    
	
8.5
    	
Nontransferability   of Performance Shares and Performance Units
    	
22
    
	
 
    	
 
    	
 
    
	
SECTION 9                               RESTRICTED   STOCK
    	
22
    
	
9.1
    	
Grant   of Restricted Stock
    	
22
    
	
9.2
    	
Restriction   Period
    	
22
    
	
9.3
    	
Other   Restrictions
    	
23
    
	
9.4
    	
Voting   Rights; Dividends and Other Distributions
    	
23
    
	
9.5
    	
Removal   of Restrictions
    	
23
    
	
 
    	
 
    	
 
    
	
SECTION 10                        RESTRICTED   STOCK UNITS
    	
23
    
	
10.1
    	
Grant   of Restricted Stock Units
    	
23
    

 

ii

 

	
10.2
    	
Restriction   Period
    	
23
    
	
10.3
    	
Other   Restrictions
    	
24
    
	
10.4
    	
Dividend   Equivalents
    	
24
    
	
10.5
    	
Issuance   of Shares; Settlement of Awards
    	
24
    
	
 
    	
 
    
	
SECTION 11                        INCENTIVE   AWARDS
    	
24
    
	
11.1
    	
Incentive   Awards
    	
24
    
	
11.2
    	
Performance   Goal Certification
    	
25
    
	
11.3
    	
Discretion   to Reduce Awards; Participant’s Performance
    	
25
    
	
11.4
    	
Required   Payment of Incentive Awards
    	
25
    
	
11.5
    	
Nontransferability   of Incentive Awards
    	
25
    
	
 
    	
 
    
	
SECTION 12                        CASH AWARDS   AND OTHER STOCK-BASED AWARDS
    	
26
    
	
12.1
    	
Grant   of Cash Awards
    	
26
    
	
12.2
    	
Other   Stock-Based Awards
    	
26
    
	
12.3
    	
Value   of Cash Awards and Other Stock-Based Awards
    	
26
    
	
12.4
    	
Payment   of Cash Awards and Other Stock-Based Awards
    	
26
    
	
12.5
    	
Transferability   of Cash Awards and Other Stock-Based Awards
    	
26
    
	
 
    	
 
    
	
SECTION 13                        TERMINATION   OF EMPLOYMENT, SERVICE OR DIRECTORSHIP
    	
27
    
	
 
    	
 
    
	
SECTION 14                        EFFECT OF A   CHANGE IN CONTROL 
    	
27
    
	
 
    	
 
    
	
SECTION 15                        REGULATORY   APPROVALS AND LISTING
    	
28
    
	
 
    	
 
    
	
SECTION 16                        TERM OF PLAN
    	
29
    
	
 
    	
 
    
	
SECTION 17                        GENERAL   PROVISIONS
    	
29
    
	
17.1
    	
Forfeiture   Events
    	
29
    
	
17.2
    	
Continued   Service
    	
29
    
	
17.3
    	
Other   Compensation
    	
29
    
	
17.4
    	
Nontransferability
    	
30
    
	
17.5
    	
Unfunded   Obligations
    	
30
    
	
17.6
    	
Beneficiaries
    	
30
    
	
17.7
    	
Governing   Law
    	
30
    
	
17.8
    	
Satisfaction   of Tax Obligations
    	
30
    
	
17.9
    	
Participants   in Foreign Jurisdictions
    	
31
    
	
17.10
    	
Company   Policies
    	
31
    
	
 
    	
 
    
	
SECTION 18                        COMPLIANCE   WITH RULE 16b-3, SECTION 162(m)
    	
32
    
	
18.1
    	
Rule 16b-3   of the Exchange Act and Section 162(m) of the Code
    	
32
    
	
18.2
    	
Section 409A   of the Code
    	
32
    
	
 
    	
 
    
	
SECTION 19                        AMENDMENT,   TERMINATION OR DISCONTINUANCE
    	
33
    
	
19.1
    	
Amendment   of Plan
    	
33
    

 

iii

 

	
19.2
    	
Termination   or Suspension of Plan
    	
33
    

 

iv

 

EP Energy Corporation

2014 Omnibus Incentive Plan

 

SECTION 1                            ESTABLISHMENT AND OBJECTIVES

 

EP Energy Corporation (hereinafter referred to as the “Company”) hereby establishes an incentive compensation plan to be known as the “EP Energy Corporation 2014 Omnibus Incentive Plan” (hereinafter referred to as the “Plan”).  The Plan shall become effective on January 15, 2014 (the “Effective Date”) and shall remain in effect as provided in Section 16 hereof.

 

The objectives of the Plan are to promote the interests of the Company and its stockholders by strengthening its ability to attract and retain the employment and or services of Participants (as hereinafter defined) by furnishing suitable recognition of their ability and experience, to align their interests and efforts to the long-term interests of the Company’s stockholders, and to provide them with a direct incentive to achieve the Company’s strategic and financial goals.

 

SECTION 2                            DEFINITIONS

 

Unless otherwise required by the context, the following terms when used in the Plan shall have the meanings set forth in this Section 2:

 

2.1                               Award

 

An “Award” granted under the Plan means any Incentive Stock Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Incentive Award, Cash Award or Other Stock-Based Award, in each case payable in cash or in shares of Common Stock as may be designated by the Plan Administrator.

 

2.2                               Award Agreement

 

The “Award Agreement” is the written agreement setting forth the terms and conditions applicable to an Award granted under the Plan (which, in the discretion of the Plan Administrator, need not be countersigned by a Participant).  The Plan Administrator may, in its discretion, provide for the use of electronic, internet or other non-paper Award Agreements.

 

2.3                               Beneficiary

 

The person or persons designated by the Participant pursuant to Section 6.3(f) or Section 17.6 of this Plan to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant’s death.

 

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2.4                               Board of Directors

 

The Board of Directors of the Company.

 

2.5                               Cash Awards

 

As defined in Section 12.1.

 

2.6                               Cause

 

“Cause” shall mean (i) the Participant’s failure to substantially perform his or her duties to the Company’s satisfaction (other than a failure resulting from the Participant’s incapacity due to physical or mental illness) which has not been cured to the Company’s satisfaction; (ii) the willful engaging by the Participant in conduct which is injurious to the Company or any of its affiliates, monetarily or otherwise; (iii) the Participant’s conviction of, or pleading guilty or nolo contendere to, any felony, or a misdemeanor involving moral turpitude; or (iv) the willful engaging by the Participant in conduct in violation of the Company’s policies or Code of Conduct.

 

2.7                               Change in Capitalization

 

A “Change in Capitalization” means any increase or reduction in the number of shares of Common Stock, any change (including, without limitation, in the case of a spin-off, dividend or other distribution in respect of shares, a change in value) in the shares of Common Stock or any exchange of shares of Common Stock for a different number or kind of shares of Common Stock or other securities of the Company or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.

 

2.8                               Change in Control

 

A “Change in Control” shall mean the occurrence of any of the following after the Effective Date:

 

(a)                                 an acquisition immediately after which any “Person” (as the term “person” is used for purposes of Section 13(d) or 14(d) of the Exchange Act), other than the “Apollo Stockholder” (as such term is defined in the Company’s Amended and Restated Certificate of Incorporation), possesses direct or indirect “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock (the “Outstanding Company Common Stock”); or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors (the “Outstanding Company Voting Securities”); but excluding any acquisition by the Company or any of its Subsidiaries, by any employee benefit plan sponsored or maintained by the Company or any of its Subsidiaries, or any acquisition pursuant to a transaction that

 

2

 

complies with paragraphs (i), (ii) and (iii) of subsection (d) of this Section 2.8;

 

(b)                                 a change in the composition of the Board such that members of the Board during any consecutive 12-month period (the “Incumbent Directors”) cease to constitute a majority of the Board of Directors.  Any person becoming a director through election or nomination for election approved by a valid vote of at least two-thirds of the Incumbent Directors shall be deemed an Incumbent Director; provided, however, that no individual becoming a director as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

 

(c)                                  the approval by the shareholders of the Company of a plan of complete dissolution or liquidation of the Company; or

 

(d)                                 consummation of a reorganization, merger, share exchange, consolidation or sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction pursuant to which:

 

(i)                               all or substantially all of the individuals and entities who have Beneficial Ownership, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will have Beneficial Ownership, directly or indirectly, of more than 50% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, the Company or a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Resulting Corporation”) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; 

 

(ii)                            no Person (other than (1) the Company, (2) an employee benefit plan (or related trust) sponsored or maintained by the Company or Resulting Corporation, or (3) any entity controlled by the Company or Resulting Corporation) will have Beneficial Ownership, directly or indirectly, of 50% or more of, respectively, the outstanding shares of common stock of the Resulting Corporation or the combined voting power of the outstanding voting securities of the Resulting Corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the Corporate Transaction; and

 

3

 

(iii)        individuals who were members of the Incumbent Board will continue to constitute at least a majority of the members of the board of directors of the Resulting Corporation.

 

2.9                               Code

 

The Internal Revenue Code of 1986, as amended and in effect from time to time, and the temporary or final regulations of the Secretary of the U.S. Treasury adopted pursuant to the Code.

 

2.10                        Common Stock

 

Class A common stock of the Company, $0.01 par value per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of Section 5.

 

2.11                        Consultant

 

“Consultant” means a natural person who is neither an Employee nor a Director and who performs services for the Company or a Subsidiary pursuant to a contract, provided that those services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

 

2.12                        Covered Employee

 

A “Covered Employee” means, with respect to any grant of an Award, a Participant who the Plan Administrator deems is or may be or become a “covered employee” as defined in Section 162(m)(3) of the Code for any year and who may receive remuneration over $1 million in such year which would not be deductible under Section 162(m).

 

2.13                        Director

 

“Director” means any individual who is a member of the Board of Directors; provided, however, that any member of the Board of Directors who is employed by the Company shall be considered an Employee for purposes of this Plan.

 

2.14                        Effective Date

 

“Effective Date” shall have the meaning ascribed to such term in Section 1 hereof.

 

2.15                        Employee

 

“Employee” means any employee of the Company or a Subsidiary.

 

2.16                        Employer

 

“Employer” shall mean, as to any Participant who is an Employee, the Company or

 

4

 

Subsidiary that employs the Participant on such date.

 

2.17                        Exchange Act

 

The Securities Exchange Act of 1934, as amended.

 

2.18                        Fair Market Value

 

The “Fair Market Value” of the Common Stock on any date shall be deemed to be the closing sales price for a share of Common Stock as reported on the consolidated transaction reporting system for the national securities exchange on which the Common Stock is listed on that date (or if no Common Stock was traded on such date, on the last previous day on which Common Stock was so traded); provided that with respect to an Award made at the time of an initial public offering, Fair Market Value means the price per share of Common Stock paid by the public as shown on the final prospectus filed with the Securities and Exchange Commission.  If the Fair Market Value of the Common Stock cannot be determined pursuant to the preceding provisions, the “Fair Market Value” of the Common Stock shall be determined by the Plan Administrator in good faith.

 

2.19                        Good Reason

 

“Good Reason” shall, as to any Participant who is an officer of the Company, have the meaning set forth in the Participant’s employment agreement with the Company, if any, or in the absence of an employment agreement definition, shall mean the occurrence of any of the following events or conditions following a Change in Control:

 

(a)                                 a change in the Participant’s position or responsibilities (including reporting responsibilities) which represents a substantial reduction of his or her position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities which are inconsistent with such position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect him or her to any of such positions, except in connection with the termination of his or her employment for Cause, Permanent Disability, as a result of his or her death, or by the Participant other than for Good Reason;

 

(b)                                 a reduction in the Participant’s annual base salary;

 

(c)                                  the requirement by the Participant’s Employer (without the consent of the Participant) that he or she have a principal place of employment which is outside a fifty (50) mile radius of his or her principal place of employment immediately prior to a Change in Control;

 

(d)                                 the failure by the Company or any of its affiliates to provide the Participant with compensation and benefits substantially comparable in the aggregate to those provided for under the compensation and employee benefit plans of the Company and its affiliates as in effect immediately prior to the Change in Control; or

 

5

 

(e)                                  any material breach by the Company of any provision of this Plan.

 

Notwithstanding the above and for purposes of clarity, the term “Good Reason” as used in this Plan shall not apply to a Participant who is not an officer of the Company as of immediately prior to the Change in Control.

 

2.20                        Incentive Award

 

A percentage of base salary, fixed dollar amount or other measure of compensation which Participants are eligible to receive, in cash and/or other Awards under the Plan, at the end of a Performance Period if certain performance measures are achieved.

 

2.21                        Incentive Stock Option

 

An Option intended to meet the requirements of an Incentive Stock Option as defined in Section 422 of the Code, as in effect at the time of grant of such option, or any statutory provision that may hereafter replace such Section.

 

2.23                        Maximum Annual Employee Grant

 

The Maximum Annual Employee Grant set forth in Section 5.2.

 

2.24                        Nonqualified Option

 

An Option which is not intended to meet the requirements of an Incentive Stock Option as defined in Section 422 of the Code.

 

2.25                        Option

 

Option means an Incentive Stock Option or a Nonqualified Option granted under the Plan, as described in Section 6 herein.

 

2.26                        Option Price

 

The price per share of Common Stock at which an Option is exercisable.

 

2.27                        Other Stock-Based Award

 

As defined in Section 12.2.

 

2.28                        Participant

 

An eligible Employee, Director or Consultant to whom Awards are granted under the Plan, to the extent such an individual is designated as a Participant as set forth in Section 4.

 

6

 

2.29                        Performance Goals

 

The Plan Administrator may grant Awards subject to Performance Goals to any Participant, including, without limitation, to any Covered Employee.  As to any such Awards, the Plan Administrator shall establish one or more of the following Performance Goals for each Performance Period in writing.  Each Performance Goal selected for a particular Performance Period shall include any one or more of the following, either individually, alternatively or in any combination, applied to either the Company as a whole or to a Subsidiary or business unit, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to the pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Plan Administrator:

 

·                                          earnings;

earnings before interest and taxes;

·                                          earnings before interest, taxes, depreciation and amortization;

·                                          earnings before interest, taxes, depreciation, amortization and exploration expense;

·                                          earnings per share;

·                                          net income;

·                                          operating income;

·                                          revenues;

·                                          operating cash flow;

·                                          free cash flow (defined as operating cash flow less capital expenditures less    dividends);

·                                          debt level;

·                                          debt ratios or other measures of credit quality or liquidity;

·                                          equity ratios;

·                                          expenses;

·                                          cost reduction targets;

·                                          capital expended;

·                                          working capital;

·                                          weighted average cost of capital;

·                                          operating or profit margins;

·                                          interest-sensitivity gap levels;

·                                          return on assets;

return on net assets;

·                                          return on equity or capital employed;

·                                          return on total capital;

·                                          amount of the oil and gas reserves;

·                                          oil and gas reserve additions;

·                                          oil and gas reserve replacement ratios;

·                                          costs of finding oil and gas reserves;

·                                          oil and gas reserve replacement costs;

·                                          daily natural gas and/or oil production;

·                                          production and production growth;

·                                          absolute or per unit operating and maintenance costs;

 

7

 

·                                          absolute or per unit general and administrative costs;

·                                          absolute or per unit lease operating expenses;

·                                          operating and maintenance cost management;

·                                          performance of investment in oil and/or gas properties;

·                                          capital efficiency targets (capital/new volumes);

·                                          redeployable capital savings targets;

·                                          absolute or per unit cash costs;

·                                          present value ratio;

·                                          drilling inventory growth (% or absolute);

·                                          production or reserves per debt adjusted shares;

·                                          total shareholder return;

·                                          charge-offs;

·                                          asset sale targets;

·                                          asset quality levels;

·                                          value of assets;

·                                          Fair Market Value of the Common Stock;

·                                          employee retention/attrition rates;

·                                          investments;

·                                          regulatory compliance;

·                                          satisfactory internal or external audits;

·                                          improvement of financial ratings;

·                                          safety targets;

·                                          environmental targets;

·                                          ethics and internal controls;

·                                          economic value added;

·                                          achievement of balance sheet or income statement objectives;

·                                          project completion measures; and/or

·                                          other measures such as those relating to acquisitions, dispositions, or customer satisfaction.

 

The Plan Administrator shall adjust the Performance Goals to include or exclude extraordinary charges, gain or loss on the disposition of business units, losses from discontinued operations, restatements and accounting changes and other unplanned special charges such as restructuring expenses, acquisitions, acquisition expenses, including expenses related to goodwill and other intangible assets, stock offerings, stock repurchases and loan loss provisions.  The Plan Administrator may also provide for the manner in which performance will be measured against the Performance Goals (or may adjust the Performance Goals) to reflect the impact of specified corporate transactions (such as a stock split, stock dividend or other Change in Capitalization), special charges, and tax law changes.  In addition, the Plan Administrator may make such adjustments to the Performance Goals applicable to Participants who are not Covered Employees as it determines are appropriate.  Such adjustments may occur at the time of the granting of an Award, or at any time thereafter, but, in the case of Covered Employees, only to the extent permitted by Section 162(m).  Performance Goals may include a threshold level of performance below which no Award shall be earned, target levels of performance at which

 

8

 

specific Awards will be earned, and a maximum level of performance at which the maximum level of Awards will be earned.

 

In establishing Performance Goals with respect to Covered Employees, the Plan Administrator shall ensure such Performance Goals (i) are established no later than the end of the first 90 days of the Performance Period (or such other time permitted by the Internal Revenue Service), and (ii) satisfy all other applicable requirements imposed by Section 162(m), including the requirement that such Performance Goals be stated in terms of an objective formula or standard, and the Plan Administrator may not in any event increase the amount of compensation payable to a Covered Employee upon the satisfaction of any Performance Goal.  Prior to the payment of any “performance-based compensation” within the meaning of Section 162(m), the Plan Administrator shall certify in writing the extent to which the applicable Performance Goals were, in fact, achieved and the amounts to be paid, vested or delivered as a result thereof; provided, that the Plan Administrator may reduce, but not increase, such amount.

 

2.30                        Performance Period

 

That period of time during which Performance Goals are evaluated to determine the vesting or granting of Awards under the Plan, as the Plan Administrator may determine.

 

2.31                        Performance Shares

 

An award granted under the Plan representing the right to receive a number of shares of Common Stock for each performance share granted, as the Plan Administrator may determine.

 

2.32                        Performance Units

 

An award granted under the Plan representing the right to receive a payment equal to the value of a performance unit, as the Plan Administrator may determine.

 

2.33                        Plan Administrator

 

The entity, as specified in Section 3, authorized to administer the Plan.  With reference to the duties of the Plan Administrator under the Plan which have been delegated to one or more persons pursuant to Section 3.1(b), or as to which the Board of Directors has assumed, the term “Plan Administrator” shall refer to such person(s) unless the Compensation Committee of the Board of Directors or the Board of Directors has revoked such delegation.

 

9

 

2.34                        Restricted Stock

 

Common Stock granted under the Plan that is subject to the requirements of Section 9 and such other restrictions as the Plan Administrator deems appropriate.

 

2.35                        Restricted Stock Units

 

An award granted under the Plan representing a right to receive a payment equal to the value of a share of Common Stock.

 

2.36                        Restriction Period

 

The period Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture and are not transferable, as determined by the Plan Administrator pursuant to Section 3.2(b) and as provided in Section 9 and 10 herein.

 

2.37                        Rule 16b-3

 

Rule 16b-3 of the General Rules and Regulations under the Exchange Act.

 

2.38                        Section 16 Insider

 

Any person who is selected by the Plan Administrator to receive an Award pursuant to the Plan and who is or may be or become subject to the requirements of Section 16 of the Exchange Act, and the rules and regulations promulgated thereunder.

 

2.39                        Section 162(m)

 

Section 162(m) of the Code, and regulations promulgated thereunder.

 

2.40                        Stock Appreciation Right

 

Stock Appreciation Right means an Award granted to a Participant, either alone or in connection with a related Option, as described in Section 7 herein.

 

2.41                        Subsidiary

 

Subsidiary means any corporation in which the Company owns, directly or indirectly, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns, directly or indirectly, at least fifty percent (50%) of the combined equity thereof. Notwithstanding the foregoing, for purposes of determining whether any individual may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” shall have the meaning ascribed to such term in Section 424(f) of the Code.

 

10

 

SECTION 3                            ADMINISTRATION

 

3.1                               Plan Administrator

 

(a)                                 The Plan shall be administered by the Compensation Committee of the Board of Directors or such other committee or subcommittee of the Board of Directors assuming the functions of the committee under the Plan (such committee, the “Plan Administrator”); provided, however, that the Board of Directors shall serve as the Plan Administrator in respect to any Awards made to any Directors.

 

(b)                                 Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Plan Administrator may delegate, on such terms and conditions as it determines in its sole and absolute discretion, to one or more senior executives of the Company or any committee comprised thereof (i) the authority to make grants of Awards to officers (other than officers who are designated as Section 16 Insiders or officers to whom authority to grant or amend Awards has been delegated hereunder) and employees of the Company and any Subsidiary or other individuals who provide services to the Company or any Subsidiary (other than Directors) and (ii) other administrative responsibilities.  Any such allocation or delegation may be revoked by the Plan Administrator at any time.

 

(c)                                  Notwithstanding Sections 3.1(a) and 3.1(b), the Board of Directors may designate itself as the Plan Administrator as to any Participant or groups of Participants.

 

3.2                               Authority of Plan Administrator

 

Subject to the express terms and conditions set forth herein, the Plan Administrator shall have full power and discretion to:

 

(a)                                 determine those individuals to whom Awards shall be granted under the Plan and the number of shares or amount of cash subject to such Awards and prescribe the terms and conditions (which need not be identical) of each such Awards, including, in the case of Options and Stock Appreciation Rights, the Option Price, vesting schedule and duration;

 

(b)                                 set the terms and conditions of any Award consistent with the terms of the Plan, including the designation of any applicable Restriction Period;

 

(c)                                  establish Performance Goals for any Performance Period and determine whether such goals were satisfied;

 

(d)                                 approve forms of Award Agreement for use under the Plan;

 

(e)                                  make any amendments, modifications or adjustments to the terms of any outstanding Awards, as permitted by the Plan;

 

(f)                                   construe and interpret the Plan and the Awards granted hereunder and decide all questions of fact arising in its application;

 

11

 

(g)                                  establish, amend and revoke rules and regulations for the administration of the Plan;

 

(h)                                 exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan; and

 

(i)                                     generally, exercise such powers and perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan.

 

All decisions and determinations by the Plan Administrator in the exercise of the above powers shall be final, binding and conclusive upon the Company, its Subsidiaries, the Participants and all other persons having or claiming any interest therein.

 

3.3                               Indemnification of Plan Administrator

 

Each member of any committee acting as Plan Administrator, while serving as such, shall be entitled, in good faith, to rely or act upon any advice of the Company’s independent auditors, counsel or consultants hired by the committee, or other agents assisting in the administration of the Plan.  The Plan Administrator and any officers or employees of the Company acting at the direction or on behalf of the Company shall not be personally liable for any action, determination, or interpretation taken or made, or not taken or made, in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.

 

SECTION 4                            ELIGIBILITY

 

4.1                               Eligibility

 

Persons eligible to participate in the Plan include all Employees, Directors and Consultants, as determined by the Plan Administrator in its sole discretion.

 

4.2                               Actual Participation

 

Subject to the provisions of the Plan, the Plan Administrator may, from time to time, select from all eligible Employees, Directors and Consultants, those to whom Awards shall be granted and shall determine the nature and amount of each Award. The Plan Administrator may establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan.

 

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SECTION 5                            SHARES AVAILABLE FOR THE PLAN

 

5.1                               Aggregate Shares

 

Subject to adjustment as provided in Section 5.3, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is 12,433,749.

 

Any shares of Common Stock that are potentially deliverable under an Award granted under this Plan that is cancelled, forfeited, settled in cash, expires or is otherwise terminated without delivery of such shares shall not be counted as having been delivered under the Plan.  Likewise, shares of Common Stock that have been issued in connection with an Award of Restricted Stock that is canceled or forfeited prior to vesting or settled in cash, causing the shares to be returned to the Company, shall not be counted as having been delivered under the Plan.  In addition, shares of Common Stock that are held back or tendered (either actually or constructively by attestation) to cover the exercise price or tax withholding obligations with respect to an Award shall not be counted as having been delivered under the Plan.

 

Notwithstanding any other provision in this Section 5.1, the grant of any Award that cannot by its terms be settled in shares of Common Stock shall not result in the reduction of the number of shares of Common Stock available for Awards under the Plan.

 

Shares of Common Stock delivered pursuant to the Plan may be authorized but unissued shares of the Company, treasury shares, or previously issued shares of Common Stock reacquired by the Company, including shares purchased on the open market, as determined by the Plan Administrator.

 

5.2                               Limitations

 

Subject to adjustment as provided in Section 5.3, the following limitations shall apply:

 

The maximum number of shares and maximum amount with respect to which Awards under this Plan may be granted to any Participant in any one calendar year shall not exceed: (i) 2,000,000 shares, in the case of Incentive Stock Options, Nonqualified Options or Stock Appreciation Rights; (ii) 1,000,000 shares in the case of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Other Stock-Based Awards; and (iii) $10,000,000 worth of other Awards under the Plan, including Incentive Awards.  Collectively, the foregoing maximums referred to in this Section 5.2 shall be referred to as the “Maximum Annual Employee Grants.” Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any Director during any single calendar year (excluding Awards made at the election of the Director in lieu of all or a portion of annual and committee cash retainers) shall not exceed $600,000.

 

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5.3                               Adjustments in Authorized Shares

 

(a)                                 In the event of a Change in Capitalization, such adjustment shall be made to (i) the maximum number and class of shares of Common Stock or other stock or securities with respect to which Awards may be granted under the Plan, (ii) the maximum number and class of shares of Common Stock or other stock or securities that may be issued upon exercise of Nonqualified Options and Incentive Stock Options, (iii) the Maximum Annual Employee Grants, (iv) the number and class of shares of Common Stock or other stock or securities which are subject to outstanding Awards granted under the Plan and the Option Price or grant price therefor, if applicable, (v) the Performance Goals (vi) and other terms and conditions of outstanding Awards, as may be determined to be appropriate and equitable by the Plan Administrator, in its sole discretion, to prevent dilution or enlargement of rights. Any such adjustment shall be final, binding and conclusive on all persons claiming any right or interest under the Plan.

 

(b)                                 Any such adjustment in the shares of Common Stock or other stock or securities (i) subject to outstanding Incentive Stock Options (including any adjustments in the exercise price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code or (ii) subject to outstanding Awards that are intended to qualify as performance-based compensation under Section 162(m) shall be made in such a manner as not to adversely affect the treatment of the Awards as performance-based compensation.

 

(c)                                  If, by reason of a Change in Capitalization, a Participant shall be entitled to, or shall be entitled to exercise an Option or Stock Appreciation Right with respect to, new, additional or different shares of stock or securities of the Company or any other corporation, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the shares of Common Stock subject to the Option or Stock Appreciation Right, as the case may be, prior to such Change in Capitalization.

 

5.4                               Effect of Certain Transactions

 

Following (a) the liquidation or dissolution of the Company or (b) a merger or consolidation of the Company (a “Transaction”), (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Transaction (which treatment may be different as among different types of Awards and different holders thereof) or (ii) if not so provided in such agreement, each Participant shall be entitled to receive in respect of each share of Common Stock subject to any outstanding Awards, upon exercise of any Option or Stock Appreciation Right or payment or transfer in respect of any other Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a share of Common Stock was entitled to receive in the Transaction in respect of a share of Common Stock; provided, however, that such stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to Awards prior to

 

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such Transaction, but giving effect to any applicable provision of this Plan or any Award Agreement if the Transaction is a Change in Control.  Without limiting the generality of the foregoing, the treatment of outstanding Options and Stock Appreciation Rights pursuant to clause (i) of this Section 5.4 in connection with a Transaction in which the consideration paid or distributed to the Company’s stockholders is not entirely shares of common stock of the acquiring or resulting corporation may include the cancellation of outstanding Options and Stock Appreciation Rights upon consummation of the Transaction provided either (x) the holders of affected Options and Stock Appreciation Rights have been given a period of at least fifteen (15) days prior to the date of the consummation of the Transaction to exercise the Options and Stock Appreciation Rights or (y) the holders of the affected Options and Stock Appreciation Rights are paid (in cash or cash equivalents) in respect of each share of Common Stock covered by the Options or Stock Appreciation Rights being cancelled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the Transaction (the value of any non-cash consideration to be determined by the Plan Administrator in its sole discretion) over the exercise price thereof.  For avoidance of doubt, (1) the cancellation of Options and Stock Appreciation Rights pursuant to clause (y) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Options and Stock Appreciation Rights may be cancelled without any payment therefor.  The treatment of any Award as provided in this Section 5.4 shall be conclusively presumed to be appropriate for purposes of Section 5.3.

 

SECTION 6                            STOCK OPTIONS

 

6.1                               Grant of Options

 

(a)                                 Options may be granted to Participants in such number, upon such terms, and at such times during the term of the Plan as the Plan Administrator shall determine.

 

(b)                                 An Option granted under the Plan may be either an Incentive Stock Option or a Nonqualified Option; provided, however, that Incentive Stock Options may be awarded only to Employees.

 

6.2                               Special Provisions Applicable to Incentive Stock Options

 

Each provision of the Plan and each Incentive Stock Option granted thereunder shall be construed so that each such option shall qualify as an Incentive Stock Option, and any provision thereof that cannot be so construed shall be disregarded, unless the Participant agrees otherwise.  The total number of shares which may be purchased upon the exercise of Incentive Stock Options granted under the Plan shall not exceed the total specified in Section 5.1, as adjusted pursuant to Section 5.3. Incentive Stock Options, in addition to complying with the other provisions of the Plan relating to Options generally, shall be subject to the following conditions:

 

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(a)                                 Ten Percent (10%) Stockholders

 

A Participant must not, immediately before an Incentive Stock Option is granted to him or her, own stock representing more than ten percent (10%) of the voting power or value of all classes of stock of the Company or of a Subsidiary.  This requirement is waived if (i) the Option Price of the Incentive Stock Option to be granted is at least one hundred ten percent (110%) of the Fair Market Value of the stock subject to the option, determined at the time the option is granted, and (ii) the option is not exercisable more than five (5) years from the date the option is granted.

 

(b)                                 Annual Limitation

 

To the extent that the aggregate Fair Market Value (determined at the time of the grant of the option) of the stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), such options shall be treated as Nonqualified Options.  In applying the limitation in the preceding sentence in the case of multiple option grants, unless otherwise required by applicable law, options which were intended to be Incentive Stock Options shall be treated as Nonqualified Options according to the order in which they were granted such that the most recently granted options are first treated as Nonqualified Options.

 

(c)                                  Additional Terms

 

Any other terms and conditions which the Plan Administrator determines, upon advice of counsel, must be imposed for the option to be an Incentive Stock Option.

 

(d)                                 Notice of Disqualifying Disposition

 

If a Participant shall make any disposition of shares of Common Stock issued pursuant to an Inventive Stock Option under the circumstances described in Section 421(b) of the Code (relating to disqualifying distributions), the Participant shall notify the Company of such disposition within twenty days thereof.

 

6.3                               Terms of Options

 

Except as otherwise provided in Section 6.2, all Incentive Stock Options and Nonqualified Options under the Plan shall be granted subject to the following terms and conditions:

 

(a)                                 Option Price

 

The Option Price shall be determined by the Plan Administrator in any reasonable manner, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Option is granted;

 

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provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 5.3 herein.

 

(b)                                 Duration of Options

 

Options shall be exercisable at such time and under such conditions as set forth in the Award Agreement, but in no event shall any Option (whether a Nonqualified Option or an Incentive Stock Option) be exercisable later than the tenth (10th) anniversary of the date of its grant.

 

(c)                                  Exercise of Options

 

Options granted under this Section 6 shall be exercisable at such times and be subject to such restrictions and conditions as set forth in the Award Agreement and as the Plan Administrator shall in each instance approve, which need not be the same for each grant or for each Participant.

 

(d)                                 Payment

 

The purchase price of shares purchased under Options shall be payable to the Company in full: (a) in cash or its equivalent, (b) by tendering shares of Common Stock (either directly or through attestation) or directing the Company to withhold shares of Common Stock from the Option having an aggregate Fair Market Value at the time of exercise equal to the Option Price, (c) by broker-assisted cashless exercise, (d) in any other manner then permitted by the Plan Administrator, or (e) by a combination of any of the permitted methods of payment. The Plan Administrator may limit any method of payment, other than that specified under (a), for administrative convenience, to comply with applicable law, or for any other reason. A Participant shall have none of the rights of a stockholder until the shares of Common Stock are issued to the Participant.

 

(e)                                  Restrictions

 

The Plan Administrator shall determine and reflect in the Award Agreement, with respect to each option, the nature and extent of the restrictions, if any, to be imposed on the shares of Common Stock which may be purchased thereunder, including, without limitation, restrictions on the transferability of such shares acquired through the exercise of such options for such periods as the Plan Administrator may determine.  In addition, to the extent permitted by applicable laws and regulations, the Plan Administrator may require that a Participant who wants to effectuate a “cashless” exercise of options be required to sell the shares of Common Stock acquired in the associated exercise to the Company, or in the open market through the use of a broker selected by the Company, at such price and on such terms as the Plan Administrator may determine at the time of grant, or otherwise.

 

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(f)                                   Nontransferability of Options

 

Options granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the applicable laws of descent and distribution.  Notwithstanding the foregoing and only as provided by the Plan Administrator or the Company, as applicable, Nonqualified Options may be transferred without consideration to a Participant’s immediate family members, directly or indirectly or by means of a trust, corporate entity or partnership (a person who thus acquires this option by such transfer, a “Permitted Transferee”).  A transfer of an option may only be effected by the Company at the request of the Participant and shall become effective upon the Permitted Transferee agreeing to such terms as the Plan Administrator may require and only when recorded in the Company’s record of outstanding options.  In the event an option is transferred as contemplated hereby, the option may not be subsequently transferred by the Permitted Transferee except a transfer back to the Participant or by will or the laws of descent and distribution.  A transferred option may be exercised by a Permitted Transferee to the same extent as, and subject to the same terms and conditions as, the Participant (except as otherwise provided herein), as if no transfer had taken place.  As used herein, “immediate family” shall mean, with respect to any person, such person’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, and shall include adoptive relationships.  In the event of exercise of a transferred option by a Permitted Transferee, any amounts due to (or to be withheld by) the Company upon exercise of the option shall be delivered by (or withheld from amounts due to) the Participant, the Participant’s estate or the Permitted Transferee, in the reasonable discretion of the Company.

 

In addition, to the extent permitted by applicable law and Rule 16b-3, the Plan Administrator may, in its sole discretion, permit a recipient of a Nonqualified Option to designate in writing during the Participant’s lifetime a Beneficiary to receive and exercise the Participant’s Nonqualified Options in the event of such Participant’s death.  Except as otherwise provided for herein, if any Participant attempts to transfer, assign, pledge, hypothecate or otherwise dispose of any option under the Plan or of any right or privilege conferred thereby, contrary to the provisions of the Plan or such option, or suffers the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby, all affected options held by such Participant shall be immediately forfeited.

 

(g)                                  No Repricing or Cashout

 

The Plan Administrator shall have no authority to make any adjustment (other than in connection with a Change in Capitalization or Change in Control in which an adjustment is permitted or required under the terms of the Plan) or amendment, and no such adjustment or amendment shall be made, that reduces or would have the effect of reducing the exercise price of an Option previously granted under the Plan, whether through amendment, cancellation or replacement

 

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grants, or other means, unless the Company’s shareholders shall have approved such adjustment or amendment.  In addition, the Plan Administrator is not permitted to purchase for cash previously granted options with an exercise price that is greater than the Company’s trading price on the proposed date of purchase without shareholder approval.

 

SECTION 7                            STOCK APPRECIATION RIGHTS

 

7.1                               Grant of Stock Appreciation Rights

 

Stock Appreciation Rights may be granted to Participants in such number, and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective employees, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant a Stock Appreciation Right or provide for the grant of a Stock Appreciation Right, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of Performance Goals or other performance measures, the satisfaction of an event or condition within the control of the recipient of the Stock Appreciation Right or within the control of others.  The granting of a Stock Appreciation Right shall take place when the Plan Administrator by resolution, written consent or other appropriate action determines to grant such a Stock Appreciation Right to a particular Participant at a particular price.  A Stock Appreciation Right may be granted freestanding or in tandem or in combination with any other Award under the Plan.  The grant price of a freestanding Stock Appreciation Right shall at least equal the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right, and the grant price of a tandem Stock Appreciation Right shall equal the Option Price of the related option; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 5.3 herein.

 

7.2                               Exercise of Stock Appreciation Rights

 

A Stock Appreciation Right may be exercised upon such terms and conditions and for a term such as the Plan Administrator shall determine; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth (10th) anniversary of the date of its grant.  Upon exercise of a Stock Appreciation Right, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right over the price fixed at the date of grant (which price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant) times (ii) the number of shares of Common Stock with respect to which the Stock Appreciation Right is exercised.  At the discretion of the Plan Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in shares of Common Stock of equivalent value, or in some combination thereof.

 

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7.3                               Special Provisions Applicable to Stock Appreciation Rights

 

Stock Appreciation Rights are subject to the following restrictions:

 

(a)                                 A Stock Appreciation Right granted in tandem with any other Award under the Plan shall be exercisable at such time or times as the Award to which it relates shall be exercisable, or at such other times as the Plan Administrator may determine.

 

(b)                                 The right of a Participant to exercise a Stock Appreciation Right granted in tandem with any other Award under the Plan shall be canceled if and to the extent the related Award is exercised or canceled.  To the extent that a Stock Appreciation Right is exercised, the related Award shall be deemed to have been surrendered unexercised and canceled.

 

(c)                                  A holder of Stock Appreciation Rights shall have none of the rights of a stockholder until shares of Common Stock, if any, are issued to such holder pursuant to such holder’s exercise of such rights.

 

(d)                                 The acquisition of Common Stock pursuant to the exercise of a Stock Appreciation Right shall be subject to the same restrictions as would apply to the acquisition of Common Stock acquired upon exercise of an option, as set forth in Section 6.3.

 

(e)                                  Except as may otherwise be permitted by the Plan Administrator, Stock Appreciation Rights granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the applicable laws of descent and distribution.

 

(f)                                   The Plan Administrator shall have no authority to make any adjustment (other than in connection with a Change in Capitalization or Change in Control in which an adjustment is permitted or required under the terms of the Plan) or amendment, and no such adjustment or amendment shall be made, that reduces or would have the effect of reducing the grant price of a Stock Appreciation Right previously granted under the Plan, whether through amendment, cancellation or replacement grants, or other means, unless the Company’s shareholders shall have approved such adjustment or amendment.  In addition, the Plan Administrator is not permitted to purchase for cash previously granted Stock Appreciation Rights with a grant price that is greater than the Company’s trading price on the proposed date of purchase without shareholder approval.

 

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SECTION 8   PERFORMANCE SHARES AND PERFORMANCE UNITS

 

8.1                               Grant of Performance Shares and Performance Units

 

Subject to the limitations in Section 5.2, Performance Shares or Performance Units may be granted to Participants at any time and from time to time as the Plan Administrator shall determine.  The Plan Administrator shall have complete discretion in determining the number of Performance Shares or Performance Units granted to each Participant and the terms and conditions thereof, taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem appropriate.  Performance Shares and Performance Units may be granted alone or in combination with any other Award under the Plan. Notwithstanding the above, no dividends or dividend equivalents shall be payable on unvested Performance Shares or unvested Performance Units (provided that dividends or dividend equivalents may accrue on such unvested awards and be paid to the extent the shares vest).

 

8.2                               Value of Performance Shares and Performance Units

 

The Plan Administrator shall set Performance Goals over Performance Periods.  Prior to each grant of Performance Shares or Performance Units, the Plan Administrator shall establish an initial number of shares of Common Stock for each Performance Share and an initial value for each Performance Unit granted to each Participant for that Performance Period.  Prior to each grant of Performance Shares or Performance Units, the Plan Administrator also shall set the Performance Goals that will be used to determine the extent to which the Participant receives the number of shares of Common Stock for the Performance Shares or payment of the value of the Performance Units awarded for such Performance Period.  With respect to each such Performance Goal utilized during a Performance Period, the Plan Administrator may assign percentages or other relative values to various levels of performance which shall be applied to determine the extent to which the Participant shall receive a payout of the number of Performance Shares or value of Performance Units awarded.

 

8.3                               Payment of Performance Shares and Performance Units

 

After a Performance Period has ended, the holder of a Performance Share or Performance Unit shall be entitled to receive the value thereof as determined by the Plan Administrator.  The Plan Administrator shall make this determination by first determining the extent to which the Performance Goals set pursuant to Section 8.2 have been met.  The Plan Administrator shall then determine the applicable percentage or other relative value to be applied to, and will apply such percentage or other relative value to, the number of Performance Shares or value of Performance Units to determine the payout to be received by the Participant.  In addition, with respect to Performance Shares and Performance Units granted to each Participant, no payout shall be made hereunder except upon written certification by the Plan Administrator that the applicable Performance Goals have been satisfied to a particular extent.

 

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8.4                               Form and Timing of Payment

 

The payment described in Section 8.3 shall be made in shares of Common Stock, or in cash, or partly in shares of Common Stock and partly in cash, at the discretion of the Plan Administrator and set forth in the Award Agreement.  The value of any fractional shares shall be paid in cash.  Payment shall be made in a lump sum or installments as prescribed by the Plan Administrator and set forth in the Award Agreement; provided that each Award Agreement shall comply with the timing of payment requirements set forth in Section 409A of the Code.  If a number of shares of Common Stock is to be converted into an amount of cash on any date, or if an amount of cash is to be converted into a number of shares of Common Stock on any date, such conversion shall be done at the then-current Fair Market Value of the Common Stock on such date.

 

8.5                               Nontransferability of Performance Shares and Performance Units

 

Except as otherwise provided by the Plan Administrator, Performance Shares and Performance Units granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation or law or otherwise) other than by will or by the applicable laws of descent and distribution.

 

SECTION 9   RESTRICTED STOCK

 

9.1                               Grant of Restricted Stock

 

Subject to the limitations in Section 5.2, Restricted Stock may be granted to Participants in such number and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant Restricted Stock or provide for the grant of Restricted Stock, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events.

 

9.2                               Restriction Period

 

During the Restriction Period, the Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of by the recipient.  In the event of any attempt by the Participant to sell, exchange, transfer, pledge or otherwise dispose of Restricted Stock in violation of the terms of the Plan without the Company’s prior written consent, such Restricted Stock shall be forfeited to the Company.  During the Restriction Period, the Plan Administrator shall evidence the restrictions on the shares of Restricted Stock in such a manner as it determines is appropriate (including, without limitation, by means of appropriate stop-transfer orders on shares of Restricted Stock credited to book-entry accounts).

 

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9.3                               Other Restrictions

 

The Plan Administrator shall impose such other restrictions on Restricted Stock granted pursuant to the Plan as it may deem advisable, including Performance Goals or other performance measures.

 

9.4                               Voting Rights; Dividends and Other Distributions

 

Unless otherwise determined by the Plan Administrator and set forth in a Participant’s Award Agreement, each Participant who receives a grant of Restricted Stock shall have all the rights of a stockholder with respect to such shares (except as provided in the restrictions on transferability), including the right to vote the shares and receive dividends and other distributions paid with respect to the underlying shares of Restricted Stock; provided, however, that no Participant awarded Restricted Stock shall have any right as a stockholder with respect to any shares subject to the Participant’s Restricted Stock grant prior to the establishment of a book-entry account for such shares.

 

9.5                               Removal of Restrictions

 

Subject to applicable laws, Restricted Stock shall become freely transferable by the Participant after the last day of the Restriction Period applicable thereto, subject to any required share withholding to satisfy tax withholding obligations pursuant to Section 17.8.  Any fractional shares subject to such Restricted Stock shall be paid to the Participant in cash.

 

SECTION 10   RESTRICTED STOCK UNITS

 

10.1                        Grant of Restricted Stock Units

 

Subject to the limitations in Section 5.2, Restricted Stock Units may be granted to eligible employees in such number and at such times during the term of the Plan as the Plan Administrator shall determine, the Plan Administrator taking into account the duties of the respective Participants, their present and potential contributions to the success of the Company or its Subsidiaries, and such other factors as the Plan Administrator shall deem relevant in accomplishing the purposes of the Plan.  The Plan Administrator may grant Restricted Stock Units or provide for the grant of Restricted Stock Units, either from time to time in the discretion of the Plan Administrator or automatically upon the occurrence of specified events.

 

10.2                        Restriction Period

 

During the Restriction Period, Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of by the recipient.  In the event of any attempt by the Participant to sell, exchange, transfer, pledge or otherwise dispose of Restricted Stock Units in violation of the terms of the Plan without the Company’s prior written consent, such Restricted Stock Units shall be forfeited to the Company.

 

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10.3                        Other Restrictions

 

The Plan Administrator shall impose such other restrictions on Restricted Stock Units granted pursuant to the Plan as it may deem advisable.  A Participant receiving a grant of Restricted Stock Units shall not be recorded as a stockholder of the Company and shall not acquire any rights of a stockholder unless or until the Participant is issued shares of Common Stock in settlement of such Restricted Stock Units.

 

10.4                        Dividend Equivalents

 

The Plan Administrator may provide that Restricted Stock Units awarded under the Plan shall be entitled to an amount per Restricted Stock Unit equal in value to the cash dividend, if any, paid per share of Common Stock on issued and outstanding shares, on the dividend payment dates occurring during the period between the date on which the Restricted Stock Units are granted to the Participant and the date on which such Restricted Stock Units are settled, cancelled, forfeited, waived, surrendered or terminated under the Plan.  Such paid amounts called “dividend equivalents” shall be (i) paid in cash or Common Stock or (ii) credited to the Participant as additional Restricted Stock Units, or any combination thereof, as the Plan Administrator shall determine.  Unless otherwise determined by the Plan Administrator, dividend equivalents shall vest at such time as the Restricted Stock Unit to which it relates vests.

 

10.5                        Issuance of Shares; Settlement of Awards

 

When the restrictions imposed by Section 10.2 expire or otherwise lapse with respect to one or more Restricted Stock Units, Restricted Stock Units shall be settled (i) in cash or (ii) by the delivery to the Participant of the number of shares of Common Stock equal to the number of the Participant’s Restricted Stock Units that are vested, or any combination thereof, as the Plan Administrator shall determine.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code, including, but not limited to the timing of payments to “specified employees” as defined in Section 409A(a)(2)(B)(i) of the Code.  The delivery of shares pursuant to this Section 10.5 shall be subject to any required share withholding to satisfy tax withholding obligations pursuant to Section 17.8.  Any fractional shares subject to such Restricted Stock Units shall be paid to the Participant in cash.

 

SECTION 11   INCENTIVE AWARDS

 

11.1                        Incentive Awards

 

Prior to the beginning of each Performance Period, or not later than 90 days following the commencement of the relevant fiscal year, the Plan Administrator shall establish Performance Goals or other performance measures which must be achieved for any Participant to receive an Incentive Award for that Performance Period.  The Performance Goals or other performance measures may be based on any combination of corporate and business unit Performance Goals or other performance measures.  The Plan Administrator may also establish one or more Company-wide Performance Goals or other 

 

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performance measures which must be achieved for any Participant to receive an Incentive Award for that Performance Period.  Such Performance Goals or other performance measures may include a threshold level of performance below which no Incentive Award shall be earned, target levels of performance at which specific Incentive Awards will be earned, and a maximum level of performance at which the maximum level of Incentive Awards will be earned.  Each Incentive Award shall specify the amount of cash and the amount of any other Awards subject to such Incentive Award.

 

11.2                        Performance Goal Certification

 

An Incentive Award shall become payable to the extent provided herein in the event that the Plan Administrator certifies in writing prior to payment of the Incentive Award that the Performance Goals or other performance measures selected for a particular Performance Period have been attained.

 

11.3                        Discretion to Reduce Awards; Participant’s Performance

 

The Plan Administrator, in its sole and absolute discretion, prior to a Change in Control, may reduce the amount of any Incentive Award otherwise payable to a Participant upon attainment of any Performance Goal or other performance measure for the applicable Performance Period.  A Participant’s individual performance must be satisfactory, regardless of the Company’s performance and the attainment of Performance Goals or other performance measures, before he or she may be paid an Incentive Award.  In evaluating a Participant’s performance, the Plan Administrator shall consider the Performance Goals or other performance measures, the Participant’s responsibilities and accomplishments, and such other factors as it deems appropriate.

 

11.4                        Required Payment of Incentive Awards

 

The Plan Administrator shall make a determination within thirty (30) days after the information that is necessary to make such a determination is available for a particular Performance Period whether the Performance Goals or other performance measures for the Performance Period have been achieved and the amount of the Incentive Award for each Participant.  The Plan Administrator shall certify the foregoing determinations in writing.  In the absence of an election by the Participant pursuant to Section 11.5, the Incentive Award shall be paid not later than December 31 of the calendar year in which the foregoing determinations have been made; provided, however, that in the event a Participant’s employment agreement provides for the payment of the Incentive Award prior to such date, then such Incentive Award shall be paid not later than the date specified under such employment agreement.  Participants shall receive their Incentive Awards in any combination of cash and/or other Awards under the Plan as determined by the Plan Administrator.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code.

 

11.5                        Nontransferability of Incentive Awards

 

Except as otherwise determined by the Plan Administrator, Incentive Awards may 

 

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not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

SECTION 12   CASH AWARDS AND OTHER STOCK-BASED AWARDS

 

12.1                        Grant of Cash Awards

 

Subject to the terms and provisions of this Plan, the Plan Administrator, at any time and from time to time, may grant cash awards to Participants in such amounts and upon such terms, including the achievement of specific performance criteria, as the Plan Administrator may determine (each, a “Cash Award”).

 

12.2                        Other Stock-Based Awards

 

The Plan Administrator may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted shares of Common Stock, including shares subject to mandatory deferral requirements) in such amounts and subject to such terms and conditions, as the Plan Administrator shall determine (each, an “Other Stock-Based Award”).  Such Other Stock-Based Awards may involve the transfer of actual shares of Common Stock to Participants, or payment in cash or otherwise of amounts based on the value of shares of Common Stock.

 

12.3                        Value of Cash Awards and Other Stock-Based Awards

 

Each Cash Award granted pursuant to this Section 12 shall specify a payment amount or payment range as determined by the Plan Administrator.  Each Other Stock-Based Award shall be expressed in terms of shares of Common Stock or units based on shares of Common Stock, as determined by the Plan Administrator.  The Plan Administrator may establish performance criteria applicable to such awards in its discretion.  If the Plan Administrator exercises its discretion to establish performance criteria, the number and/or value of such cash awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.

 

12.4                        Payment of Cash Awards and Other Stock-Based Awards

 

Payment, if any, with respect to a Cash Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or shares of Common Stock as the Plan Administrator determines.  The value of any fractional shares shall be paid in cash.  The payment hereunder shall comply with the timing of payment requirements set forth in Section 409A of the Code.

 

12.5                        Transferability of Cash Awards and Other Stock-Based Awards

 

Except as otherwise determined by the Plan Administrator, neither Cash Awards 

 

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nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

 

SECTION 13   TERMINATION OF EMPLOYMENT, SERVICE OR DIRECTORSHIP

 

The Award Agreement applicable to each Award shall set forth the effect of a termination of the Participant’s employment, service or directorship upon such Award; provided, however, that, unless explicitly set forth otherwise in an Award Agreement or as determined by the Plan Administrator, all of a Participant’s unvested and/or unexercisable Awards shall automatically be forfeited upon termination of the Participant’s employment, service or directorship for any reason, and, as to Awards consisting of Options or Stock Appreciation Rights, the Participant shall be permitted to exercise the vested portion of the Option or Stock Appreciation Right for three months following termination of his or her employment, service or directorship.  Provisions relating to the effect of a termination of employment, service or directorship upon an Award shall be determined in the sole discretion of the Plan Administrator and need not be uniform among all Awards or among all Participants.  Unless the Plan Administrator determines otherwise, the transfer of employment of a Participant as between the Company and its Subsidiaries shall not constitute a termination of employment.

 

SECTION 14   EFFECT OF A CHANGE IN CONTROL

 

Except as otherwise provided in an Award Agreement, in the event of a Participant’s termination of employment (i) by his or her Employer without Cause or (ii) if Section 2.19 is applicable to the Participant, by the Participant for Good Reason, in each case within two years following a Change in Control:

 

(a)                                 all options and Stock Appreciation Rights then held by the Participant shall become fully vested and exercisable;

 

(b)                                 the Restriction Periods applicable to all shares of Restricted Stock and all Restricted Stock Units then held by the Participant shall immediately lapse;

 

(c)                                  the performance periods applicable to any Performance Shares, Performance Units and Incentive Awards that have not ended shall end and such Awards shall become vested and payable in an amount equal to the target amount thereof (assuming achievement of target levels by both Participants and the Company) within thirty days following such termination; and

 

(d)                                 any restrictions applicable to Cash Awards and Other Stock-Based Awards shall immediately lapse and, to the extent permissible under Section 409A of the Code, if applicable, become payable within ten days following such termination.

 

For avoidance of doubt, the default provisions specified above shall apply to Participants 

 

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who are Employees.  The treatment of outstanding Awards following a Change in Control held by Participants who are Consultants or Directors shall be determined by the Plan Administrator, in its sole and absolute discretion.

 

To the extent that the successor entity does not assume, continue or substitute for outstanding Awards, all Options and Stock Appreciation Rights that are not exercisable immediately prior to the effective time of the Change in Control shall become fully vested and exercisable as of the effective time of the Change in Control, all other Awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Change in Control, and all Awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Change in Control in the Plan Administrator’s discretion.

 

SECTION 15   REGULATORY APPROVALS AND LISTING

 

The Company shall not be required to issue any shares of Common Stock under the Plan prior to:

 

(a)                                 obtaining any approval or ruling from the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency which the Company, in its sole discretion, shall determine to be necessary or advisable;

 

(b)                                 listing of such shares on any stock exchange on which the Common Stock may then be listed; and

 

(c)                                  completing any registration or other qualification of such shares under any federal or state laws, rulings or regulations of any governmental body which the Company, in its sole discretion, shall determine to be necessary or advisable.

 

All certificates, or book-entry accounts, for shares of Common Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Plan Administrator may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Common Stock is then listed and any applicable federal or state securities laws, and the Plan Administrator may cause a legend or legends to be placed on any such certificates, or notations on such book-entry accounts, to make appropriate reference to such restrictions.  The foregoing provisions of this paragraph shall not be effective if and to the extent that the shares of Common Stock delivered under the Plan are covered by an effective and current registration statement under the Securities Act of 1933, as amended, or if and so long as the Plan Administrator determines that application of such provisions are no longer required or desirable.  In making such determination, the Plan Administrator may rely upon an opinion of counsel for the Company.

 

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SECTION 16   TERM OF PLAN

 

The Plan shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Section 19, until all shares of Common Stock subject to it shall have been purchased or acquired according to the provisions herein.  However, in no event may an Award be granted under the Plan on or after the tenth (10th) anniversary of the Effective Date.  After this Plan is terminated, no future Awards may be granted pursuant to the Plan, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions.

 

SECTION 17   GENERAL PROVISIONS

 

17.1                        Forfeiture Events

 

The Plan Administrator may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.  Such events may include, without limitation, termination of employment for Cause, violation of material policies that may apply to the Participant, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company or any of its affiliates or Subsidiaries.

 

17.2                        Continued Service

 

Nothing in the Plan shall:

 

(a)                           interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or service at any time,

 

(b)                           confer upon any Participant any right to continue in the employ or service of the Company or a Subsidiary, nor

 

(c)                            confer on any Director any right to continue to serve on the Board of Directors of the Company or a Subsidiary.

 

No Employee, Director or Consultant shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.

 

17.3                        Other Compensation

 

Unless determined otherwise by the Plan Administrator or required by contractual obligations, the grant, vesting or payment of Awards under the Plan shall not be considered as part of a Participant’s salary or used for the calculation of any other pay, allowance, pension or other benefit unless otherwise permitted by other benefit plans provided by the

 

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Company or its Subsidiaries, or required by law or by contractual obligations of the Company or its Subsidiaries.

 

17.4                        Nontransferability

 

Unless otherwise provided in the Plan, the right of a Participant to the payment of any Award under the Plan may not be assigned, transferred, pledged or encumbered, nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process.

 

17.5                        Unfunded Obligations

 

Any amounts (deferred or otherwise) to be paid to Participants pursuant to the Plan are unfunded obligations.  Neither the Company nor any Subsidiary is required to segregate any monies from its general funds, to create any trusts or to make any special deposits with respect to this obligation.  Beneficial ownership of any investments, including trust investments which the Company may make to fulfill this obligation, shall at all times remain in the Company.  Any investments and the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or a fiduciary relationship between the Plan Administrator, the Company or any Subsidiary and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s Beneficiary or the Participant’s creditors in any assets of the Company or its Subsidiaries whatsoever.

 

17.6                        Beneficiaries

 

The designation of a Beneficiary shall be on a form provided by the Company, executed by the Participant (with the consent of the Participant’s spouse, if required by the Company for reasons of community property or otherwise), and delivered to a designated representative the Company.  A Participant may change his or her Beneficiary designation at any time.  If no Beneficiary is designated, if the designation is ineffective, or if the Beneficiary dies before the balance of a Participant’s benefit is paid, the balance shall be paid to the Participant’s estate.  Notwithstanding the foregoing, however, a Participant’s Beneficiary shall be determined under applicable state law if such state law does not recognize Beneficiary designations under plans of this sort and is not preempted by laws which recognize the provisions of this Section 17.6.

 

17.7                        Governing Law

 

The Plan shall be construed and governed in accordance with the laws of the State of Texas.

 

17.8                        Satisfaction of Tax Obligations

 

The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be withheld with respect to any 

 

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taxable event arising as a result of the Plan.

 

With respect to withholding required upon the exercise of Options or Stock Appreciation Rights, upon the vesting or settlement of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, or upon any other taxable event arising as a result of Awards granted hereunder, the Plan Administrator may require or may permit Participants to elect that the withholding requirement be satisfied, in whole or in part, by having the Company withhold, or by tendering to the Company, shares of Common Stock having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes) that could be imposed on the transaction and, in any case in which it would not result in additional accounting expense to the Company, taxes in excess of the minimum statutory withholding amounts.

 

A Participant is solely responsible for obtaining, or failing to obtain, tax advice with respect to participation in the Plan prior to the Participant’s (i) entering into any transaction under or with respect to the Plan, (ii) designating or choosing the times of distributions under the Plan, or (iii) disposing of any shares of Common Stock issued under the Plan.

 

17.9                        Section 83(b) Elections

 

No Participant may make an election under Section 83(b) of the Code with respect to any Award under the Plan without the consent of the Company, which the Company may grant or withhold in its sole discretion. If, with the consent of the Company, a Participant makes an election under Section 83(b) of the Code, the Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

 

17.10                 Participants in Foreign Jurisdictions

 

The Plan Administrator shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of any countries in which the Company may operate to ensure the viability of the benefits from Awards granted to Participants employed in such countries, to meet the requirements of local laws that permit the Plan to operate in a qualified or tax-efficient manner, to comply with applicable foreign laws and to meet the objectives of the Plan.

 

17.11                 Company Policies

 

All Awards granted under the Plan shall be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Company from time to time, including such policies that may be implemented after the date an Award is granted.

 

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SECTION 18   COMPLIANCE WITH RULE 16b-3, SECTION 162(m)

AND SECTION 409A

 

18.1                        Rule 16b-3 of the Exchange Act and Section 162(m) of the Code

 

The Company’s intention is that, so long as any of the Company’s equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with the rules of any exchange on which the shares of Common Stock are traded and with Rule 16b-3.  In addition, it is the Company’s intention that, as to Covered Employees, unless otherwise indicated in an Award Agreement, stock options, Stock Appreciation Rights, Performance Shares, Performance Units and Incentive Awards shall qualify as performance-based compensation under Section 162(m).  If any Plan provision is determined not to be in compliance with the foregoing intentions, that provision shall be deemed modified as necessary to meet the requirements of any such exchange, Rule 16b-3 and Section 162(m).

 

18.2                        Section 409A of the Code

 

The Plan is intended to be administered, operated and construed in compliance with Section 409A of the Code and any guidance issued thereunder.

 

a)                                     The Plan Administrator may, to the extent permitted by applicable law, including, but not limited to Section 409A of the Code, permit Participants to defer Awards under the Plan.  Any such deferrals shall be subject to such terms, conditions and procedures that the Plan Administrator may establish from time to time in its sole discretion.

 

(b)                                 The terms and conditions governing any Awards that the Plan Administrator determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or shares of Common Stock pursuant thereto, shall be set forth in the applicable Award Agreement or, if applicable, under the terms of any separate plan document, and shall comply in all respects with Section 409A of the Code.

 

(c)                                  Notwithstanding this or any other provision of the Plan to the contrary, the Board of Directors and the Plan Administrator may amend the Plan in any manner, or take any other action, that either of them determines, in its sole discretion, is necessary, appropriate or advisable to cause the Plan to comply with Section 409A of the Code and any guidance issued thereunder, which amendment may be retroactive to the extent permitted by Section 409A of the Code.  Any such action, once taken, shall be deemed to be effective from the earliest date necessary to avoid a violation of Section 409A of the Code and shall be final, binding and conclusive on all Participants and other individuals having or claiming any right or interest under the Plan.

 

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SECTION 19   AMENDMENT, TERMINATION OR DISCONTINUANCE

OF THE PLAN

 

19.1                        Amendment of Plan

 

The Plan Administrator may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company, including, without limitation, any amendment necessary to ensure that the Company may obtain any regulatory approval referred to in Section 15; provided, however, that (i) to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required, and (ii) no change in any Award previously granted under the Plan may be made without the consent of the Participant if such change would materially impair the right of the Participant under the Award to acquire or retain Common Stock or cash that the Participant may have acquired as a result of the Plan.

 

19.2                        Termination or Suspension of Plan

 

The Board of Directors may at any time suspend the operation of or terminate the Plan with respect to any shares of Common Stock or rights which are not at that time subject to any Award outstanding under the Plan.

 

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