Document:

ex103.htm

    SUBORDINATION AND
INTERCREDITOR AGREEMENT

     

    THIS SUBORDINATION AND INTERCREDITOR
AGREEMENT (this “Agreement”)
is entered into as of this August 19, 2008, by and among the noteholders under
the Subordinated Debt Documents (as defined herein) being limited to CASTLERIGG
PNG INVESTMENTS LLC. on the date hereof (individually, a “Subordinated
Creditor” and collectively, the “Subordinated
Creditors” and, if there is only one such Subordinated Creditor, the term
“Subordinated Creditors” and all variations  thereof; e.g. “each
Subordinated Creditor,” as and when used hereinbelow, shall mean and refer to
that one Subordinated Creditor); PNG VENTURES, INC., a Nevada corporation (the
“Company”);
and FOURTH THIRD LLC, a Delaware limited liability
company (“Fourth
Third”), as Agent for all Senior
Lenders party to the Senior Credit Agreements described below and as a Senior
Lender.

     

    R
E C I T A L S

     

    A.           The
Agent, Senior Lenders (as hereinafter defined) and the Company, as “Parent” and
a “Loan Party” thereunder, have entered into an Amended and Restated Credit
Agreement, dated as of June 26, 2008 (as the same may be amended, supplemented
or otherwise modified from time to time as permitted hereunder, the “Senior
Credit Agreement”), pursuant to which, among other things, Senior Lenders
are making certain loans and financial accommodations to New Earth LNG, LLC, a
Delaware limited liability company and wholly-owned subsidiary of the Company
(“Borrower”).  All
obligations of Borrower arising under the Senior Credit Agreement are guaranteed
by the Company under a Guarantee and Collateral Agreement, dated as of June 26,
2008, executed by the Company (among others) in favor of the Agent (as the same
may be amended, supplemented or otherwise modified from time to time as
permitted hereunder, the “Senior
Guarantee and Collateral Agreement”).  All of the obligations
of the Company to Agent and Senior Lenders under the Senior Credit Agreement,
the Senior Guarantee and Collateral Agreement and the other Senior Debt
Documents (as hereinafter defined) are secured by the Collateral (as hereinafter
defined).

     

    B.           Pursuant
to a Securities Purchase Agreement, dated as of August 19, 2008 (as the same may
be amended, supplemented or otherwise modified from time to time as permitted
hereunder, the “Securities
Purchase Agreement”), effective on or about the date
hereof,  the Company has issued to the Subordinated Creditors its
Subordinated Convertible Notes, aggregating $3,188,235 in principal amount (as
the same may be renewed, extended, amended, supplemented or otherwise modified
from time to time as permitted hereunder, individually and collectively, the
“Subordinated
Notes”).

     

    C.           Fourth
Third and Subordinated Creditors have agreed to enter into this Agreement for
the purpose of setting forth the relative rights and priorities of the Agent,
Senior Lenders and Subordinated Creditors under the Senior Debt Documents and
the Subordinated Debt Documents (as hereinafter defined).

     

    NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:

     

    
      	
              1.  

            	
              Definitions. The following terms
      shall have the following meanings in this
  Agreement:

            

    

     

    “Agent” shall mean Fourth Third
LLC, as Agent for the Senior Lenders, or any other Person appointed by the
holders of the Senior Debt as administrative agent for purposes of the Senior
Debt Documents and this Agreement.

     

    “Bankruptcy
Code” shall
mean Chapter 11 of Title 11 of the United States Code, as amended from time to
time and any successor statute and all rules and regulations promulgated
thereunder.

     

    “Business
Day” shall mean
“Business Day” as defined in the Senior Credit Agreements.

     

    “Collateral”
shall mean (i) all real and personal property of the Company in which a lien,
security interest or mortgage has been or hereafter may be granted or created in
favor or the Agent or any Senior Lender as collateral security for the payment
or performance of any Senior Debt or any Subordinated Debt.

     

    “Collection
Action “ shall mean (a) to initiate or join in any suit, action or
proceeding against the Company or any Collateral to enforce payment of or make
demand for all or any part of the Subordinated Debt, (b) to seek monetary
damages against the Company, or (c) to take from or for the account of the
Company, by set-off or in any other matter, all or any part of any moneys which
may now or hereafter be owing by the Company with respect to the Subordinated
Debt.

     

    “Company”
shall have the meaning given to such term in the preamble.

     

    “Distribution”
means, with respect to any indebtedness or obligation, (a) any payment or
distribution by the Company (including the Company in its capacity as a debtor
or debtor-in-possession in a Proceeding) of cash, securities or other property,
by set-off or otherwise, on account of such indebtedness or obligation or (b)
any redemption, purchase or other acquisition of such indebtedness or obligation
by the Company.  The term “Distribution”
shall expressly not include, however, any Common Stock (as defined in the
Securities Purchase Agreement) (i) into which, pursuant to the Securities
Purchase Agreement, the indebtedness represented by the Subordinated Note may be
converted, and (ii) issued pursuant to the exercise of the Warrants (as defined
in the Securities Purchase Agreement).

     

    “Enforcement
Action” shall mean (a) to take from or for the account of the Company by
set-off or in any other manner, the whole or any part of any moneys which may
now or hereafter be owing by the Company with respect to the Subordinated Debt,
(b) to sue for payment of, or to initiate or participate with others in any
suit, action or proceeding against the Company to (i) enforce payment of or to
collect the whole or any part of the Subordinated Debt or (ii) commence judicial
enforcement of any of the rights and remedies under the Subordinated Debt
Documents or applicable law with respect to the Subordinated Debt, (c) to notify
account debtors or directly collect accounts receivable or other payment rights
of the Company or (d) take any action under the provisions of any state or
federal law, including, without limitation, the UCC, or under any contract or agreement, to
enforce against, foreclose upon, take possession of or sell any property or
assets of the Company or any Collateral; provided, however, that the
term “Enforcement
Action” shall not include (i) an exercise of rights and remedies for
specific performance or equitable relief to compel the Company to comply with
any non-payment obligations under the Subordinated Debt Documents so long as it
is not accompanied by (a) a Collection Action or (b) a claim for relief or any
other Enforcement Action against or with respect to any Collateral, or (ii) any
suit or action initiated or maintained by the Subordinated Creditors solely to
prevent the running of any applicable statute of limitations or other similar
restriction on claims.

     

    “Fourth
Third Loan
Documents” shall mean the Senior
Credit Agreement and all other agreements, documents and instruments executed
from time to time in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.

     

    “Permitted
Refinancing” shall mean any
refinancing of the outstanding Senior Debt under the Fourth Third Loan Documents provided
that the financing documentation entered into by the Company in connection with
such Permitted Refinancing constitutes Permitted
Refinancing Senior Debt Documents.

     

    “Permitted
Refinancing Senior Debt Documents” shall mean any financing
documentation which replaces the Fourth
Third Loan Documents and pursuant to which the outstanding Senior Debt
under the Fourth Third Loan Documents is
refinanced, as such financing documentation may be amended, supplemented or
otherwise modified from time to time in compliance with this Agreement, but
specifically excluding any such financing documentation to the extent that it
contains provisions violating Section 3.1
hereof.

     

    “Person” means any natural
person, corporation, general or limited partnership, limited liability company,
firm, trust, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.

     

    “Proceeding”
shall mean any voluntary or involuntary insolvency, bankruptcy, receivership,
custodianship, liquidation, dissolution, reorganization, assignment for the
benefit of creditors, appointment of a custodian, receiver, trustee or other
officer with similar powers or any other proceeding for the liquidation,
dissolution or other winding up of a Person.

     

    “Reorganization
Subordinated Securities” shall mean any debt or equity securities issued
in substitution of all or any portion of the Subordinated Debt, in each case
that are subordinated in right of payment, performance, liens and otherwise to
the Senior Debt (or any debt and/or equity securities issued in substitution of
all or any portion of the Senior Debt) to at least the same extent that the
Subordinated Debt (and the liens securing the Subordinated Debt) are
subordinated to the Senior Debt (and the liens securing the Senior Debt)
pursuant to the terms of this Agreement.

     

    “Secured
Claim” shall mean a “secured claim” within the meaning of such term in
Section 506(a) of the Bankruptcy Code (as presently in effect).

     

    “Senior
Debt” shall mean all obligations, liabilities and indebtedness of every
nature of the Company under the Senior Debt Documents from time to time owed to
Agent or any Senior Lender under the Senior Debt Documents, including, without
limitation, the principal amount of all debts, claims and indebtedness, credit
exposure and related obligations arising from any hedging agreements, accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and from time
to time hereafter owing, due or payable, whether before or after the filing of a
Proceeding under the Bankruptcy Code together with (a) any amendments,
modifications, renewals or extensions thereof to the extent not prohibited by
the terms of this Agreement and (b) any interest accruing thereon after the
commencement of a Proceeding, without regard to whether or not such interest is
an allowed claim; provided, however, that in no
event shall the principal amount of the Senior Debt (excluding any interest or
fees added to principal)  exceed the amount that is the excess of (i)
$38,000,000, over (ii) the amount of any prepayments or repayments under the
Senior Credit Agreement (specifically excluding, however, any such prepayments
or repayments occurring solely as a result of a Permitted Refinancing) (the
“Senior
Debt Limit”).  The sum of (i) the amount of principal
outstanding under the Senior Debt Documents that is in excess of the Senior Debt
Limit (including pursuant to any refinancing other than a Permitted
Refinancing), together with interest on such excess principal and fees
attributable to such excess principal shall not be considered Senior Debt for
purposes of this Agreement (such amount, “Excluded
Senior Debt”).

     

    “Senior
Debt Documents” shall mean the Fourth Third Loan Documents and, after the
consummation of any Permitted Refinancing, the Permitted Refinancing Senior Debt
Documents.

     

    “Senior
Default” shall mean any “Event of Default” under the Senior Debt
Documents resulting from the failure of the Borrower to pay, on a timely basis,
any principal, interest, fees or other obligations under the Senior Debt
Documents, including, without limitation, any default in payment of Senior Debt
after acceleration thereof.

     

    “Senior
Lenders” shall mean the holders
of the Senior Debt.

     

    “Subordinated
Debt” shall mean all of the obligations of the Company under the
Subordinated Debt Documents to the Subordinated Creditors or evidenced by or
incurred pursuant to the Subordinated Debt Documents.

     

    “Subordinated
Debt Documents”
shall mean (i) the Securities Purchase Agreement, the Subordinated Note, the
Warrants and all other documents, agreements and instruments now existing or
hereinafter entered into by the Company in connection therewith, and (ii) each
document, if any (“Subordinated
Collateral Documents”) which now or hereafter may be executed and
delivered by the Company that creates a lien, security interest or mortgage on
any property to secure all or any portion of the obligation, indebtedness or
liabilities of the Company under any of the documents referred to in clause (i)
of this definition.

     

    “UCC”
shall mean the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

     

    
      	
              2.  

            	
              Subordination.

            

    

     

    2.1. Subordination
of Subordinated Debt to Senior Debt.  The Company
covenants and agrees, and each Subordinated Creditor by its acceptance of the
Subordinated Debt Documents (whether upon original issue or upon transfer or
assignment) likewise covenants and agrees, notwithstanding anything to the
contrary contained in any of the Subordinated Debt Documents, that the payment
of any and all of the Subordinated Debt shall be subordinate and subject in
right and time of payment, to the extent and in the manner hereinafter set
forth, to the prior payment in full in cash (or other consideration acceptable
to Agent in its sole discretion) of all Senior Debt (but not any Excluded Senior
Debt).  Each holder of Senior Debt, whether now outstanding or
hereafter created, incurred, assumed or guaranteed, shall be deemed to have
acquired Senior Debt in reliance upon the provisions contained in this
Agreement.

     

    2.2. Liquidation,
Dissolution, Bankruptcy.  In the event of
any Proceeding involving the Company:

     

    (a) All
Senior Debt shall first be paid in full in cash (or other consideration
acceptable to Agent in its sole discretion) before any Distribution (other than
Reorganization Subordinated Securities), whether in cash, securities or other
property, shall be made to  the Subordinated Creditors on account of
any Subordinated Debt.

     

    (b) Any
Distribution (other than Reorganization Subordinated Securities), whether in
cash, securities or other property which would otherwise, but for the terms
hereof, be payable or deliverable in respect of the Subordinated Debt shall be
paid or delivered directly to Agent (to be held and/or applied by Agent in
accordance with the terms of the Senior Debt Documents) until all Senior Debt is
paid in full in cash (or other consideration acceptable to Agent in its sole
discretion). Each Subordinated Creditor irrevocably authorizes, empowers and
directs any debtor, debtor in possession, receiver, trustee, liquidator,
custodian, conservator or other Person having authority, to pay or otherwise
deliver all such Distributions to Agent. Each Subordinated Creditor also
irrevocably authorizes and empowers Agent and appoints Agent its
attorney-in-fact, in the name of such Subordinated Creditor, to demand, sue for,
collect and receive any and all such Distributions, at Company's
expense.  This power of attorney is coupled with an interest and is
irrevocable.

     

    (c) Each
Subordinated Creditor agrees not to initiate, prosecute or participate in any
claim, action or other proceeding challenging the enforceability, validity,
perfection or priority of the Senior Debt or any liens and security interests
securing the Senior Debt.  Agent agrees not to initiate, prosecute or
participate in any claim, action or other proceeding challenging the
enforceability, validity, perfection or priority of the Subordinated Debt or any
liens and security interests securing the Subordinated Debt.

     

    (d) Each
Subordinated Creditor, in its capacity as the holder of a Secured Claim, agrees
that Agent and Senior Lenders may consent to the use of cash collateral or
provide (or consent to any other Person providing) financing to the Company (or
trustee) on such terms and conditions and in such amounts as Agent and Senior
Lenders, in their sole discretion, may decide and, in connection therewith, the
Company (or trustee) may grant to Agent and Senior Lenders (or such other Person
providing financing) liens and security interests upon all of its property,
which liens and security interests (i) shall secure payment of all Senior Debt
(whether such Senior Debt arose prior to the commencement of any Proceeding or
at any time thereafter) and all other financing provided by Senior Lenders (or
such other Persons providing financing) during the Proceeding and (ii) shall be
superior in priority to the liens and security interests, if any, in favor of
such Subordinated Creditor on the property of the Company, provided, that (A)
the financing (x) does not compel such Company to seek confirmation of a
specific plan of reorganization for which all or substantially all of the
material terms are set forth in the financing documentation or a related
document or (y) that the financing documentation or cash collateral order does
not expressly require the liquidation of the Collateral prior to a default under
the financing documentation or cash collateral order.  Each
Subordinated Creditor, in its capacity as the holder of Secured Claim, agrees
that it will not object to or oppose, and will consent to, a sale or other
disposition of any property securing all of any part of the Senior Debt free and
clear of security interests, liens or other claims of such Subordinated Creditor
under Section 363 of the Bankruptcy Code or any other provision of the
Bankruptcy Code if Agent and Senior Lenders have consented to such sale or
disposition, provided that such Subordinated Creditor shall have the right to
object to the further use of the proceeds of such sale or other disposition
unless such proceeds are applied to permanently reduce the amount of Senior Debt
outstanding.   Each Subordinated Creditor, in its capacity as the
holder of a Secured Claim, agrees not to:  (1) assert any rights, to
the extent adverse, in the commercially reasonable opinion of the Agent, to the
interests of the Agent and the Senior Lenders, under Sections 362, 363 or 364 of
the Bankruptcy Code with respect to the Collateral, including any rights it may
have to “adequate protection” of such Subordinated Creditor's interest in any
Collateral in any Proceeding or objecting to or opposing any use of cash,
financing, security or priority described in clauses (i) and (ii) above; provided, if the
Agent or any Senior Lender is granted adequate protection in the form of
additional collateral in connection with any cash collateral use or
debtor-in-possession financing, then the Subordinated Creditors may seek or
request adequate protection in the form of a Lien on such additional collateral,
which Lien will be subordinated to the Liens securing the Senior Debt (and such
cash collateral use or debtor-in-possession financing on the same basis) as the
other Liens securing the Subordinated Debt are so subordinated to the Senior
Debt under this Agreement; (2) oppose or object to any adequate protection
sought by or granted to Agent or any Senior Lender with respect to the
Collateral; (3) initiate or prosecute or join with any other Person to
initiate or prosecute any claim, action or other proceeding opposing a motion by
Agent to lift the automatic stay; (4)  vote in favor of any chapter 11 plan
that seeks confirmation under Section 1129(b)(2)(A) of the Bankruptcy Code,
solely to the extent such vote is required to satisfy Section 1129(a)(10) of the
Bankruptcy Code (i.e., each Subordinated Creditor agrees not to vote in favor of
such plan if its allowed secured claim is deemed impaired and no other impaired
class has accepted the plan, determined without including acceptance of the plan
by any insider); (5) seek the dismissal or conversion of a Proceeding,
(6) seek the appointment of a trustee, receiver or examiner in a
Proceeding; or (7) seek to have the automatic stay of Section 362 of the
Bankruptcy Code (or any similar stay under any other applicable law) lifted or
modified with respect to the Collateral; provided, however, that each
Subordinated Creditor may object to any financing under Section 364 in its
capacity as the holder of a Secured Claim to the extent that the principal
amount, together with the aggregate principal amount of Senior Debt outstanding
immediately after giving effect to any payment thereof with the proceeds of such
financing, exceeds the Senior Debt Limit.  Any claim of any
Subordinated Creditor arising during a Proceeding, including a claim under
Section 507(b) of the Bankruptcy Code, shall constitute Subordinated Debt under
this Agreement.  Except for any claim based upon a breach of this
Agreement, each Subordinated Creditor waives any claim it may now or hereafter
have arising out of Agent’s or Senior Lenders’ election, in any Proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, and/or any borrowing or grant of a security interest
under Section 364 or use of cash collateral under Section 363 of the Bankruptcy
Code by the Company, as debtor in possession.  Notwithstanding
anything in this Section 2.2(d) to the contrary but subject to the other
provisions of this Agreement (including Section 2.2(c)), in any Proceeding
involving the Company, a Subordinated Creditor may exercise rights and remedies
generally available to holders of unsecured claims against any of the Company
and otherwise in accordance with the Subordinated Debt Documents and applicable
law. In furtherance of the foregoing, each Subordinated Creditor shall be
entitled to file any pleadings, objections, motions or agreements which assert
rights or interests available to unsecured creditors of the Company arising
under either the Bankruptcy Code or applicable non-bankruptcy law, in each case
if not otherwise in contravention of the express terms of this Agreement,
including any right to object to the sale or use of property under Section 363
of the Bankruptcy Code and/or any financing under Section 364 of the Bankruptcy
Code solely to the extent such objection could be asserted by the holder of an
unsecured claim against the Company.

     

    (e) Each
Subordinated Creditor agrees to execute, verify, deliver and file any proofs of
claim in respect of the Subordinated Debt requested by Agent in connection with
any such Proceeding and hereby irrevocably authorizes, empowers and appoints
Agent its agent and attorney-in-fact to execute, verify, deliver and file such
proofs of claim upon the failure of any Subordinated Creditor promptly to do so
prior to 10 days before the expiration of the time to file any such proof of
claim; provided, that Agent
shall have no obligation to execute, verify, deliver, and/or file any such proof
of claim.

     

    (f) The
Senior Debt shall continue to be treated as Senior Debt and the provisions of
this Agreement shall continue to govern the relative rights and priorities of
Senior Lenders and the Subordinated Creditors even if all or part of the Senior
Debt or the security interests securing the Senior Debt are subordinated, set
aside, avoided, invalidated or disallowed in connection with any such Proceeding
and this Agreement shall be reinstated if at any time any payment of any of the
Senior Debt is rescinded or must otherwise be returned by any holder of Senior
Debt or any representative of such holder.

     

    (g) The
parties acknowledge and agree that (i) the claims and interests of Agent and the
Senior Lenders under the Senior Debt Documents are substantially different from
the claims and interests of the Subordinated Creditors under the Subordinated
Debt Documents and (ii) such claims and interests should be treated as separate
classes for purposes of Section 1122 of the Bankruptcy Code.

     

    (h) It is
acknowledged and agreed that this Agreement shall constitute a “subordination
agreement” within the meaning of Section 510(a) of the Bankruptcy
Code.

     

    2.3. Subordinated
Debt Payment Restrictions.

     

    (a) Notwithstanding
the terms of the Subordinated Debt Documents, but subject to the provisions of
Section 2.3(c) through Section 2.3(e) below, the Company hereby agrees that it
may not make, directly or indirectly, and each Subordinated Creditor hereby
agrees that it will not accept, any Distribution (other than Reorganization
Subordinated Securities) with respect to the Subordinated Debt until the Senior
Debt is paid in full in cash (or other consideration acceptable to Agent in its
sole discretion).

     

    (b) The
provisions of this Section 2.3 shall not apply to a payment with respect to
which Section 2.2(b) is applicable.

     

    (c) Nothing
contained in this Agreement shall prevent the Company from making, or any
Subordinated Creditor from receiving, at any time or from time to time, any
payments of accrued interest on the Subordinated Notes and any penalty payments
provided for in Section 4(q) of the Securities Purchase Agreement (but for
avoidance of any doubt, no payments of principal, regardless of stated maturity
or demand for payment, except as expressly permitted under subsection (d) below)
as and when due and payable in accordance with the terms of the Subordinated
Notes and the Securities Purchase Agreement as in effect on the date hereof
(without giving effect to any provisions of the Subordinated Notes or the
Securities Purchase Agreement which would have the effect of increasing the
amount or frequency of payment thereof) except: (i) during
the pendency of any Proceeding or (ii) if prior to any such payment being made
the Subordinated Creditors and the Company have received written notice from
Agent that a Senior Default has occurred and is continuing, unless and until
Subordinated Creditors and the Company have received written notice from Agent
that such Senior Default has been waived (which Agent agrees to provide promptly
after the Senior Lenders have waived such Senior Default).

     

    (d) Notwithstanding
the foregoing provisions of subsection (a) above or any other term of this
Agreement to the contrary, upon the consummation of any private investment in
the public equity of the Company, or any similar transaction involving the sale
or exchange of equity securities, debt or convertible debt of the Company
occurring subsequent to the date hereof, provided that the
Senior Lenders receive from the Company, on behalf of the Borrower, sufficient
proceeds therefrom in prepayment of the Senior Debt, to cause the unpaid
principal amount of the Senior Debt to be reduced to Thirty Million Dollars
($30,000,000) or less, the Company may pay to Subordinated Creditors, and the
Subordinated Creditors shall be entitled to receive from the Company to the
extent of any remaining proceeds, the then outstanding amount of the
Subordinated Debt.

     

    (e) Nothing
contained herein shall prevent Subordinated Creditor at any time in accordance
with the terms of the Subordinated Notes and the Warrants from (i) exercising
any right to convert the Subordinated Notes into equity as provided in the
Subordinated Notes, any anti-dilution adjustment rights or rights to conversion
of the Subordinated Notes, rights to receive replacement securities for or to an
adjustment of the convertibility provisions and conversion ratios as set forth
in the Subordinated Notes (whether upon merger, sale of the company or
otherwise), or other rights to receive securities from time to time upon
conversion of the Subordinated Notes, so long as none of the foregoing involves
the payment of money by the Company; or (ii) exercising any outstanding Warrants
to acquire Common Stock.

     

    2.4. Subordinated
Debt Standstill Provisions.

     

    (a) Until the
Senior Debt is paid in full in cash (or other consideration acceptable to Agent
in its sole discretion), no Subordinated Creditor shall, without the prior
written consent of Agent, take any Enforcement Action with respect to the
Subordinated Debt or any Collateral, provided, however, that the
Subordinated Creditors may take any Collection Action with respect to the
Subordinated Debt (but not against any Collateral or any other property or
assets securing Subordinated Debt) upon the acceleration of all or any portion
of the Senior Debt.

     

    (b) Notwithstanding
the foregoing, each Subordinated Creditor may file proofs of claim against the
Company in any Proceeding involving the Company.  Any Distributions or
other proceeds of any Enforcement Action obtained by any Subordinated Creditor
(other than Reorganization Subordinated Securities) shall in any event be held
in trust by it for the benefit of Agent and Senior Lenders and promptly be paid
or delivered to Agent for the benefit of Senior Lenders in the form received
until all Senior Debt is paid in full in cash (or other consideration acceptable
to Agent in its sole discretion).

     

    (c) Notwithstanding
anything contained herein to the contrary, if within 20 days of any acceleration
of the Senior Debt by Senior Lenders such acceleration is rescinded (whether or
not any existing Senior Default has been cured or waived), then all Collection
Actions taken by the Subordinated Creditors in reliance on such acceleration
shall likewise be rescinded.

     

    (d) Notwithstanding
anything in this Agreement to the contrary, no provision herein shall prevent
any Subordinated Creditor from furnishing a notice under the Subordinated Debt
Documents or this Agreement to the Company or Agent to preserve or enforce its
rights with respect thereto, including (without limitation) notices to the
Company of the existence of a Subordinated Default.

     

    (e) Notwithstanding
anything in this Agreement to the contrary, if at any time hereafter, the
Company fails to pay, when due (other than because of a bona fide payment
dispute then being prosecuted in good faith by the Company), any payment in
respect of the Subordinated Notes otherwise then permitted to be paid pursuant
to said Section 2.3(c) or Section 2.3(d) above, Subordinated Creditors may take
Enforcement Action with respect to the Subordinated Debt to collect such
payment(s) then due, provided that the
Subordinated Creditors first shall have given Agent at least 90 days prior
written notice of such payment default and their intent to take Enforcement
Action pursuant hereto in respect thereof; and, provided, further, that, as to
any payments then permitted to be paid under Section 2.3(c) above, subsequent
thereto, either within such 90 day period or thereafter (including during the
pendency of any such Enforcement Action being taken by Subordinated Creditors),
the Company and the Subordinated Creditors do not receive from Agent the written
notice that a Senior Default has occurred and is continuing, in which case
Subordinated Creditors shall delay the commencement of, or desist in, any such
Enforcement Action in respect of such payments unless and until Subordinated
Creditors and the Company have received written notice from Agent that such
Senior Default has been waived (which Agent agrees to provide promptly after the
Senior Lenders have waived such Senior Default).

     

    2.5. Incorrect
Payments.  If any Distribution on account of the Subordinated
Debt is made by the Company or accepted by any Subordinated Creditor in
violation of this Agreement, such Distribution shall not be commingled with any
of the assets of such Subordinated Creditor, shall be held in trust by such
Subordinated Creditor for the benefit of Agent and Senior Lenders and shall be
promptly paid over to Agent for application (in accordance with the Senior Debt
Documents) to the payment of the Senior Debt then remaining unpaid, until all of
the Senior Debt is paid in full.

     

    2.6. Subordination
of Liens and Security Interests; Agreement Not to Contest; Agreement to Release
Liens.  Until the Senior Debt has been paid in full in cash (or
other consideration acceptable to Agent in its sole discretion), all liens and
security interests of the Subordinated Creditors in the Collateral shall be and
hereby are subordinated for all purposes and in all respects to the liens and
security interests of Agent and Senior Lenders in the Collateral, regardless of
the time, manner or order of perfection of any such liens and security interests
and whether such liens and security interests of Agent are set aside, avoided or
unperfected.  Each Subordinated Creditor agrees that it will not at
any time contest the validity, perfection, priority or enforceability of the
Senior Debt, the Senior Debt Documents, or the liens and security interests of
Agent and Senior Lenders in the Collateral securing the Senior
Debt.  In the event that Agent or Senior Lenders release or agree to
release any of their liens or security interests in the Collateral in connection
with the sale or other disposition thereof or any of the Collateral is sold,
disposed of or retained pursuant to a foreclosure or similar action, each
Subordinated Creditor shall (or shall cause its agent to) promptly deliver (and
execute as appropriate) to Agent such termination statements and releases as
Agent shall reasonably request to effect the termination or release of the liens
and security interests of such Subordinated Creditor in such Collateral so long
as (A) the net proceeds of such sale, disposition, foreclosure or similar action
are applied to the permanent payment of the Senior Debt, (B) any proceeds from
such sale or other disposition received by the Agent in excess of the Senior
Debt Limit shall be promptly delivered to the Subordinated Creditors (subject to
any prior rights of third parties) and (C) such release by the Subordinated
Creditors shall not extend to the proceeds from such sale or other
disposition.  In furtherance of the foregoing, each Subordinated
Creditor hereby irrevocably appoints Agent its attorney-in-fact, with full
authority in the place and stead of such Subordinated Creditor and in the name
of such Subordinated Creditor or otherwise, to deliver (and execute as
appropriate) any document or instrument which such Subordinated Creditor may be
required to deliver pursuant to this subsection 2.6.

     

    2.7. Application
of Proceeds from Sale or other Disposition of the Collateral.  In the event of
any sale, transfer or other disposition (including a casualty loss or taking
through eminent domain) of the Collateral, the proceeds resulting therefrom
(including insurance proceeds) shall be distributed and applied as follows: (a)
first, to Agent
to be applied in accordance with the terms of the Senior Debt Documents until
such time as the Senior Debt (other than Excluded Senior Debt) is paid in full
in cash (or other consideration acceptable to Agent in its sole discretion); (b)
second, to the
Subordinated Creditors to be applied in accordance with the Subordinated Debt
Documents until the Subordinated Debt (subject to the limitation set forth in
Section 3.2 below) is paid in full in cash (or other consideration acceptable to
each Subordinated Creditor in its sole discretion); (c) third, to Agent to be
applied in accordance with the terms of the Senior Debt Documents until such
time as all other Senior Debt not paid pursuant to clause (a) is paid in full in
cash (or such other consideration acceptable to Agent in its sole discretion);
and (d) fourth,
to the Subordinated Creditors to be applied in accordance with the Subordinated
Debt Documents until such time as all other Subordinated Debt not paid pursuant
to clause (b) is paid in full in cash (or such other consideration acceptable to
the Subordinated Creditors in their sole discretion).

     

    2.8. Sale,
Transfer or other Disposition of Subordinated Debt.

     

    (a) No
Subordinated Creditor shall sell, assign, pledge, dispose of or otherwise
transfer all or any portion of the Subordinated Debt or any Subordinated Debt
Document: (i)
unless, prior to the consummation of any such action, the transferee thereof
shall execute and deliver to Agent an agreement substantially identical to this
Agreement, providing for the continued subordination of the Subordinated Debt
and liens securing same to the Senior Debt and the liens, security interests and
mortgages securing same as provided herein and for the continued effectiveness
of all of the rights of Agent and Senior Lenders arising under this Agreement
and (ii) unless, following the consummation of any such action, there shall
be no more than ten
holders of the Subordinated Debt; provided, that for
purposes of this clause (ii) holders of the Subordinated Debt that are
affiliates of each other shall be considered one holder.

     

    (b) Notwithstanding
the failure of any transferee to execute or deliver an agreement substantially
identical to this Agreement, the subordination effected hereby shall survive any
sale, assignment, pledge, disposition or other transfer of all or any portion of
the Subordinated Debt, and the terms of this Agreement shall be binding upon the
successors and assigns of the Subordinated Creditors, as provided in Section 10
hereof.

     

    2.9. Legends.
Until the termination of this Agreement in accordance with Section 16 hereof,
each Subordinated Creditor will cause to be clearly, conspicuously and
prominently inserted on the face of any Subordinated Debt Document, as well as
any renewals or replacements thereof, the following legend:

     

               “This
instrument and the rights and obligations evidenced hereby and any security
interests or other liens securing such obligations are subordinate in the manner
and to the extent set forth in that certain Subordination and Intercreditor
Agreement (the “Subordination
Agreement”) dated as of August 19, 2008 among Castlerigg PNGr Investments
LLC., as collateral agent, PNG Ventures, Inc. (the “Company”),
and Fourth Third LLC (“Agent”),
to the indebtedness (including interest) owed by the Company, and the security
interests and liens securing such indebtedness, pursuant to and in connection
with that certain Amended and Restated Credit Agreement, dated as of June 26,
2008, among the Agent, the lenders named therein and the Company, among others
(the “Senior
Credit Agreement”), and the Loan Documents referred to therein as such
Senior Credit Agreement and Loan Documents have been and hereafter may be
amended, supplemented or otherwise modified from time to time and to
indebtedness refinancing the indebtedness under that agreement as contemplated
by the Subordination Agreement; and each holder of this instrument, by its
acceptance hereof, irrevocably agrees to be bound by the provisions of the
Subordination Agreement.”

     

    
      	
              3.  

            	
              Modifications.

            

    

     

    3.1. Modifications
to Senior Debt Documents. Senior Lenders may at
any time and from time to time without the consent of or notice to the
Subordinated Creditors, without incurring liability to the Subordinated
Creditors and without impairing or releasing the obligations of the Subordinated
Creditors under this Agreement, change the manner or place of payment or extend
the time of payment of or renew or alter any of the terms of the Senior Debt, or
amend in any manner any agreement, note, guaranty or other instrument evidencing
or securing or otherwise relating to the Senior Debt; provided that,
without the prior written consent of the Required Subordinated Creditors (as
hereinafter defined), the Senior Lenders shall not agree to any amendment,
modification or supplement to, or waiver or departure from, the Senior Debt
Documents the effect of which is to (a) increase the principal of the Senior
Debt to an amount in excess of the Senior Debt Limit, (b) increase the interest
rate with respect to the Senior Debt by more than 300 basis points, except in
connection with the imposition of a default rate of interest of up to 2.0% in
accordance with the terms of the Senior Debt Documents, (c) extend the
final maturity of the Senior Debt (as set forth in the Fourth Third Loan
Documents in effect on the date hereof), except that the final maturity of the
Senior Debt under each Senior Credit Agreement may be extended by up to two
years, or (d) directly prohibit or restrict the payment of principal of,
interest on, or other amounts payable with respect to, the Subordinated Debt, in
a manner that is more restrictive then the prohibitions and restrictions
currently contained in the Senior Credit Agreements.

     

    3.2. Modifications
to Subordinated Debt Documents.

     

    (a) Until the
Senior Debt has been paid in full in cash (or other consideration acceptable to
Agent in its sole discretion), and notwithstanding anything to the contrary
contained in the Subordinated Debt Documents, no Subordinated Creditor shall,
without the prior written consent of Agent, agree to any amendment, modification
or supplement to the Subordinated Debt Documents that would (i) impose or make
more burdensome any event of default or covenant under the Subordinated Debt
Documents, (ii) increase the principal amount of the Subordinated Debt, (iii)
increase the rate of interest on the Subordinated Debt by more than 300 basis
points or (iv) directly prohibit or restrict the payment of any amounts payable
with respect to the Senior Debt.

     

    (b) No
Subordinated Creditor shall accept or enter into any agreement  or
instrument pursuant to which the Company provides collateral security for the
Subordinated Debt  or pursuant to which Borrower or any other “Loan
Party” (as defined in the Senior Credit Agreement; herein, a “Loan
Party”) provides a security interest in any Collateral unless such
agreement or instrument has been approved by the Agent in writing, such approval
not to be unreasonably withheld. Any such agreement or instrument that is
substantially similar to the security documents providing collateral security
for the Senior Debt shall be approved by the Agent so long as such security
document indicates that it is subject to this Agreement in a manner and to an
extent reasonably satisfactory to the Agent.  In no event shall any
Subordinated Creditor accept or enter into any agreement or instrument pursuant
to which the Company or any Loan Party provides a security interest in or
mortgage on any property of the Company, in each case, in which the Agent does
not have a first priority perfected security interest. Prior to the Company, any
Loan Party or any Subordinated Creditor entering into any agreement or
instrument that would create a lien, security interest or mortgage in any
Collateral in favor of a collateral agent securing any Subordinated Debt, the
Company, the Loan Party affected and the Subordinated Creditors shall cause such
collateral agent to become a party to this Agreement and agree for this
Agreement to be amended to accommodate a collateral agent, in each case,
pursuant to agreements in form and substance reasonably satisfactory to the
Agent.

     

    (c) In no
event shall any Subordinated Creditor enter into any agreement with the Company
or any Loan Party that places any restriction on the modification of the Senior
Debt Documents or creates any default or event of default or right to
accelerate, put or cause any Subordinated Creditor to purchase, any Subordinated
Debt, that is more extensive or more restrictive than the provisions of Section
3.1.

     

    
      	
              4.  

            	
              Waiver
      of Certain Rights by the Subordinated
  Creditors.

            

    

     

    4.1. Marshaling.
Each Subordinated Creditor hereby waives any rights it may have under applicable
law to assert the doctrine of marshaling or to otherwise require Agent or Senior
Lenders to marshal any property of the Company or any other obligor on the
Senior Debt for the benefit of such Subordinated Creditor.

     

    4.2. Rights
Relating to Agent’s Actions with respect to the Collateral. Each
Subordinated Creditor hereby waives, to the extent permitted by applicable law,
any rights which it may have as the holder of a Secured Claim to enjoin or
otherwise obtain a judicial or administrative order preventing Agent or Senior
Lenders from taking, or refraining from taking, any action with respect to all
or any part of the Collateral, except to the extent such action is expressly
excluded from the definition of Enforcement Action.  Without
limitation of the foregoing, each Subordinated Creditor hereby agrees (a) that
it has no right to direct or object to the manner in which Agent and Lenders
apply the proceeds of the Collateral resulting from the exercise by Agent and
Senior Lenders of rights and remedies under the Senior Debt Documents to the
Senior Debt and (b)  that Agent has not assumed any obligation to act
as the agent for the Subordinated Creditors with respect to the Collateral. The Agent shall have the exclusive right to enforce
against and realize upon the Collateral until the Senior Debt is paid in full in
cash (or other consideration acceptable to Agent in its sole
discretion).  In exercising rights and remedies with respect to the
Collateral, the Agent and Senior Lenders may enforce the provisions of the
Senior Debt Documents and exercise remedies thereunder, all in such order and in
such manner as it or they may determine in the exercise of its or their sole
business judgment.  Such exercise and enforcement shall include,
without limitation, the rights to sell or otherwise dispose of Collateral, to
incur expenses in connection with such sale or disposition and to exercise all
the rights and remedies of a secured lender under the UCC.  In
conducting any public or private sale under the UCC, Agent shall give the
Subordinated Creditors such notice of such sale as may be required by the UCC;
provided, however, that 10 days' notice shall be deemed to be
commercially reasonable notice.

     

    
      	
              5.  

            	
              Representations
      and Warranties.

            

    

     

    5.1. Representations
and Warranties of the Subordinated Creditors.  Each of the
Subordinated Creditors hereby represents and warrants to Agent and Senior
Lenders that as of the date hereof: (a) it is duly formed and validly existing
under the laws of the jurisdiction of its formation; (b) it has the power and
authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary
action; (c) the execution of this Agreement by it will not violate or conflict
with its organizational documents, any material agreement binding upon it or any
law, regulation or order or require any consent or approval which has not been
obtained; (d) this Agreement is its legal, valid and binding obligation of
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by equitable principles; and (e) it is the sole
owner, beneficially and of record, of the Subordinated Debt Documents and the
Subordinated Debt to which it is party.

     

    5.2. Representations
and Warranties of Agent.  Agent hereby
represents and warrants to the Subordinated Creditors that as of the date
hereof: (a) Agent is a limited liability company duly formed and validly
existing under the laws of the State of Delaware; (b) Agent has the power and
authority to enter into, execute, deliver and carry out the terms of this
Agreement on behalf of itself and the Senior Lenders, all of which have been
duly authorized by all proper and necessary action; (c) the execution of this
Agreement by Agent will not violate or conflict with the organizational
documents of Agent, any material agreement binding upon Agent or any law,
regulation or order or require any consent or approval which has not been
obtained; and (d) this Agreement is the legal, valid and binding obligation of
Agent, enforceable against Agent and the Senior Lenders in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles.

     

    6. Subrogation.  Subject to the
payment in full in cash (or other consideration acceptable to Agent in its sole
discretion) of all Senior Debt, the Subordinated Creditors shall be subrogated
to the rights of Agent and Senior Lenders to receive Distributions with respect
to the Senior Debt until the Subordinated Debt is paid in full. Each
Subordinated Creditor agrees that in the event that all or any part of a payment
made with respect to the Senior Debt is recovered from the holders of the Senior
Debt in a Proceeding or otherwise, any Distribution (other than Reorganization
Subordinated Securities) received by such Subordinated Creditor with respect to
the Subordinated Debt at any time after the date that it receives notice that
such payment has been so recovered, whether pursuant to the right of subrogation
provided for in this Agreement or otherwise, shall be deemed to have been
received by such Subordinated Creditor in trust as property of the holders of
the Senior Debt and such Subordinated Creditor shall forthwith deliver the same
to the Agent for the benefit of the Senior Lenders for application to the Senior
Debt until the Senior Debt is paid in full. A Distribution made pursuant to this
Agreement to Agent or Senior Lenders which otherwise would have been made to any
Subordinated Creditor is not, as between the Company and such Subordinated
Creditor, a payment by the Company to or on account of the Senior
Debt.

     

    7. Modification.
Any modification or waiver of any provision of this Agreement, or any consent to
any departure by any party from the terms hereof, shall not be effective in any
event unless the same is in writing and signed by Agent and the Subordinated
Creditors holding a majority of the principal amount of the Subordinated Notes
as in effect on the date hereof (the “Required
Subordinated Creditors”), and then such modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
given. Any notice to or demand on any party hereto in any event not specifically
required hereunder shall not entitle the party receiving such notice or demand
to any other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.

     

    8. Further
Assurances. Each party to this Agreement promptly will execute and
deliver such further instruments and agreements and do such further acts and
things as may be reasonably requested in writing by any other party hereto that
may be necessary or desirable in order to effect fully the purposes of this
Agreement.

     

    9. Notices.
Unless otherwise specifically provided herein, any notice delivered under this
Agreement shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier
service or certified or registered United States mail and shall be deemed to
have been given (a) if delivered in person, when delivered; (b) if delivered by
telecopy, when transmitted and a confirmation is received if transmission and
confirmation occur on a Business Day before 4:00 p.m. (New York time) or, if
after 4:00 p.m. (New York time), on the next succeeding Business Day after such
transmission and confirmation have occurred; (c) if delivered by nationally
recognized overnight courier, one Business Day after delivery to such courier
properly addressed; or (d) if by United States mail, four Business Days after
deposit in the United States mail, postage prepaid and properly
addressed.

     

    Notices
shall be addressed as follows:

     

    
      	
              If
      to the Subordinated Creditors:

               

              Castlerigg
      PNG Investments LLC, as Agent

              c/o
      Sandell Asset Management Corp.

              40
      West 57th
      Street

              New
      York, New York 10019

              Telephone:
      (212) 603-5700

              Telecopy:   (212)
      603-5710

              Attention:
      Cem Hacioglu (chacioglu@sandellmgmt.com)

               Matthew
      Piskin (mpiskin@sandellmgmt.com)

               

            
	
              With
      a copy to (which shall not constitute notice):

               

              Fox
      Rothschild LLP

              100
      Park Avenue, Suite 1500

              New
      York, New York 10017

              Telecopy:   (212)
      299-2150

              Attention:  Stephen
      M. Cohen

               

            
	
              If
      to the Company:

            
	
              3100
      Knox Street, Suite 403

              Dallas,
      Texas 75205

              Telecopy:
      (214) 520-0507

              Attention:
      Kevin Markey, CEO

            
	
              With
      a copy to (which shall not constitute notice):

            
	
              Hodgson
      Russ LLP

              1540
      Broadway, 24th
      Floor

              New
      York, New York 10036

              Telecopy:
      (212) 751-0928

              Attention:
      Ron Levy, Esq.

            
	
              If
      to Agent or Senior Lenders:

              Fourth
      Third Capital LLC

              375
      Park Avenue

              Suite
      3304

              New
      York, New York 10152

              Attention:
      Brian J. Cavanaugh

              Chief
      Financial Officer

              Telecopy:  (212)
      759-0091

            
	
              With
      a copy to (which shall not constitute notice):

              King
      & Spalding LLP

              1185
      Avenue of the Americas

              New
      York, New York 10036

              Attention:
      Robert S. Finley

              Telecopy:
      (212) 556-2222

            

    

    or in any
case, to such other address as the party addressed shall have previously
designated by written notice to the serving party, given in accordance with this
Section 9.

     

    10. Successors
and Assigns. This Agreement shall inure to the benefit of, and shall be
binding upon, the respective successors and assigns of Agent, Senior Lenders,
the Subordinated Creditors and the Company. To the extent permitted under the
Senior Debt Documents, Senior Lenders may, from time to time, without notice to
any Subordinated Creditor, assign or transfer any or all of the Senior Debt or
any interest therein to any Person and, notwithstanding any such assignment or
transfer, or any subsequent assignment or transfer, the Senior Debt shall,
subject to the terms hereof, be and remain Senior Debt for purposes of this
Agreement, and every permitted assignee or transferee of any of the Senior Debt
or of any interest therein shall, to the extent of the interest of such
permitted assignee or transferee in the Senior Debt, be entitled to rely upon
and be the third party beneficiary of the subordination provided under this
Agreement and shall be entitled to enforce the terms and provisions hereof to
the same extent as if such assignee or transferee were initially a party
hereto.

     

    11. Relative
Rights.                                           This
Agreement shall define the relative rights of Agent, Senior Lenders and the
Subordinated Creditors. Nothing in this Agreement shall (a) impair, as among the
Company, Agent and Senior Lenders and as between the Company and the
Subordinated Creditors, the obligation of the Company with respect to the
payment of the Senior Debt and the Subordinated Debt in accordance with their
respective terms or (b) affect the relative rights of Agent, Senior Lenders or
the Subordinated Creditors with respect to any other creditors of the
Company.  For purposes of clarification, the Company shall have no
rights to assert any rights or benefits hereunder.

     

    12. Conflict.  In
the event of any conflict between any term, covenant or condition of this Agreement and any
term, covenant or condition of any of the Senior Debt Documents or the
Subordinated Debt Documents, the provisions of this Agreement shall control and
govern.

     

    13. Headings.  The
paragraph headings used in this Agreement are for convenience only and shall not
affect the interpretation of any of the provisions hereof.

     

    14. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.

     

    15. Severability. In the event that any
provision of this Agreement is deemed to be invalid, illegal or unenforceable by
reason of the operation of any law or by reason of the interpretation placed
thereon by any court or governmental authority, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby, and the affected provision shall be
modified to the minimum extent permitted by law so as most fully to achieve the
intention of this Agreement.

     

    16. Continuation
of Subordination; Termination of Agreement.  This Agreement
shall remain in full force and effect until the payment in full in cash (or
other consideration acceptable to Agent in its sole discretion) of the Senior
Debt after which this Agreement shall terminate without further action on the
part of the parties hereto.

     

    17. Applicable
Law. This
Agreement shall be governed by and shall be construed and enforced in accordance
with the internal laws of the State of New York, without regard to conflicts of
law principles, other than section 5-1401 of the New York General Obligations
Law.

     

    18. CONSENT
TO JURISDICTION.  EACH SUBORDINATED
CREDITOR AND THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.
EACH SUBORDINATED CREDITOR AND EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS TO
THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH SUBORDINATED CREDITOR AND THE COMPANY HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO SUCH SUBORDINATED CREDITOR AND THE COMPANY AT THEIR
RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

     

    19. WAIVER OF JURY
TRIAL.  EACH SUBORDINATED CREDITOR, THE COMPANY AND AGENT
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE SUBORDINATED DEBT
DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS.  EACH SUBORDINATED
CREDITOR, THE COMPANY AND AGENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE SENIOR DEBT DOCUMENTS AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
SUBORDINATED CREDITOR, THE COMPANY AND AGENT WARRANTS AND REPRESENTS THAT EACH
HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

     

    20. Perfection
Agent.  Agent and each
Subordinated Creditor agree that solely with respect to any Collateral in which
a security interest may only be perfected by title, possession or “control”,
such party shall serve as the contractual representative agent of the other
party solely for purposes of perfecting (to the extent not otherwise perfected)
the liens in favor of the Subordinated Creditors or liens in favor of Agent and
Senior Lenders, as applicable, subject in all events to the relative priorities
established pursuant to this Agreement and to the limitations set forth in this
Agreement with respect to such party’s liabilities, duties and obligations in
respect of the Collateral or otherwise.  Without limiting the
generality of the foregoing, each party shall be deemed to be an agent of the
other party solely for purposes of perfection under the UCC and shall not incur any liabilities,
fiduciary duties or obligations whatsoever to the other party due to the
provisions of this Section 20.  Promptly following the payment in full
of the Senior Debt in cash, cash equivalents or other consideration acceptable
to the Agent, the Agent shall, upon the request of the Subordinated Creditors,
(x) deliver the remainder of such Collateral, if any, in its possession to the
designee of the Subordinated Creditors, and (y) deliver any certificates of
title held by it in respect of the Collateral (such as motor vehicle titles) and
assign the Lien of the Agent on any such certificates of title, without representation, warranty or recourse and
otherwise on terms reasonably acceptable to the Required Subordinated Creditors,
in each case except as may otherwise be required by applicable law or court
order

     

    21. Entire
Agreement.    This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes and replaces, in its
entirety, any agreement or  understanding, whether written or oral,
heretofore made between or among the parties relative to the subject matter
thereof.

     

    

     

    (Signature page follows)

     

    

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    IN WITNESS WHEREOF, the
Subordinated Creditors, the Company and Agent have caused this Agreement to be
executed as of the date first above written.

     

    

     

    
      	
              SUBORDINATED
      CREDITORS

              CASTLERIGG
      PNG INVESTMENTS LLC,

              By:
      Castlerigg Master Investments Ltd., its sole member

               

              By:  Sandell
      Asset Management Corp., its

                      investment
      manager

               

              By:
      /s/
      Patrick T. Burke

                    Name:
      Patrick T. Burke

                    Title:
      Senior Managing Director

            

    

    
 

    
 

    
      	
              “COMPANY”:

              PNG
      VENTURES, INC.

               

                    
                By:       
      /s/
      Kevin
      Markey                                                                       

                Name: 
      Kevin
      Markey                                                                          

                Title:     President

              

            

    

    

     

     

    
      	
              AGENT:

            
	
              FOURTH
      THIRD LLC, a Delaware limited liability company, as Agent and as a Senior
      Lender

               

               

                    
                      
                  By:       
      /s/ Seth
      B.
      Taube                                                                     

                  Name:  Seth
      B.
      Taube                                                                          

                  Title:Exhibit 10.1

 

QUANTUM CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

(As Amended and Restated August 18, 2008)

 

The following constitute the provisions of the Employee Stock Purchase Plan (herein called the "Plan") of Quantum Corporation (herein called the "Company").

1.Purpose.  The purpose of the Plan is to provide Employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions or other contributions.  It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code, although the Company makes no undertaking or representation to maintain such qualification.  The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.  In addition, this Plan document authorizes the purchase of Common Stock under a Non-423(b) Component, pursuant to rules, procedures or sub-plans adopted by the Board or a committee appointed by the Board and designed to achieve tax, securities law or other objectives.  

2.Definitions.

(a)"Board" shall mean the Board of Directors of the Company.

(b)"Code" shall mean the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(c)"Code Section 423(b) Plan" shall mean an employee stock purchase plan which is designed to meet the requirements set forth in Section 423(b) of the Code, as amended.  The provisions of the Code Section 423(b) Plan should be construed, administered and enforced in accordance with Section 423(b) of the Code.

(d)"Common Stock" shall mean the common stock of the Company.

(e)"Company" shall mean Quantum Corporation, a Delaware corporation.

(f)"Compensation" shall mean all regular straight time earnings, payments for overtime, shift premium, incentive compensation, incentive payments, bonuses and commissions (except to the extent that the exclusion of any such items for all participants is specifically directed by the Board or a committee appointed by the Board).  The Board or a committee appointed by the Board shall have the discretion to determine what constitutes Compensation for Employees outside of the United States.

(g)"Continuous Status as an Employee" shall mean the absence of any interruption or termination of service as an Employee.  Continuous Status as an Employee shall not be considered interrupted in the case of:  (i) a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days or re-employment upon the expiration of such leave is guaranteed by contract or statute; or (ii) notification by the Company of termination under a reduction-in-force.  Termination in the case of a reduction-in-force shall be considered to have occurred at the end of the employee's continuation period.

(h)"Designated Subsidiaries" shall mean the Subsidiaries which have been designated by the Board or a committee appointed by the Board from time to time in its sole discretion as eligible to participate in the Plan.  

(i)"Employee" means any person, including an officer, who is employed by the Company or one of its Designated Subsidiaries.  The Board or a committee appointed by the Board, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment Date, determine (on a uniform and nondiscriminatory basis) that the definition of Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Board or a committee appointed by the Board in its discretion), (ii)  is an officer or other manager, or (iii) is a highly compensated employee under Section 414(q) of the Code.  

(j)"Enrollment Date" shall mean the first Trading Day on or after every February 6 and August 6 of each year.

(k)"Exercise Date" shall mean the date approximately six months after the Enrollment Date of an Offering Period and shall be one Trading Day prior to an Enrollment Date of the immediately following Offering Period.  

(l)"Fair Market Value" means, as of any date, the closing sales price of the Common Stock (or the closing bid, if no sales were reported) as quoted on the stock exchange with the greatest volume of trading in Common Stock on the last market trading day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Board or a committee appointed by the Board deems reliable.

(m)"Non-423(b) Component" means the grant of an option under the Plan which is not intended to meet the requirements set forth in Section 423(b) of the Code, as amended.

(n)"Offering Period" shall mean a period commencing on an Enrollment Date and ending on the Exercise Date, approximately six (6) months later, or as otherwise set forth in Section 4 hereof.

(o)"Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.

(p)"Plan" shall mean this Employee Stock Purchase Plan, which includes a Code Section 423(b) Plan and a Non-423(b) Component.

(q)"Purchase Price" shall have the meaning as set forth in Section 7(b).

(r)"Subsidiary" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.

(s)"Trading Day" shall mean a day on which the New York Stock Exchange is open for trading.

3.Eligibility

(a)Any Employee (as defined in Section 2) who shall be employed by the Company or one of its Designated Subsidiaries on the date his or her participation in the Plan is effective shall be eligible to participate in the Plan, unless the Company, in its own discretion, decides that such participation would infringe any U.S. or foreign law, rules or regulations.

(b)Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately, after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own shares and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary, or (ii) which permits his or her rights to purchase shares under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars (US$25,000) of the fair market value of the shares (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.

(c)No employee of the Company or a Designated Subsidiary shall be eligible to participate in the Non-423(b) Component of the Plan if he or she is an officer or director of the Company subject to the requirements of Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the "Act").

4.Offering Dates.  The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on an Enrollment Date, and shall continue thereafter until terminated in accordance with Section 19 hereof.  The Board or a committee appointed by the Board shall have the power to change the duration of Offering Periods with respect to future offerings without stockholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected.  In no event shall the duration of an Offering Period exceed nine (9) months.  Notwithstanding the foregoing, no offers hereunder shall be made until compliance with all applicable securities law has been obtained.

5.Participation.

(a)An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions on the form provided by the Company and filing it with the Company prior to the applicable Enrollment Date, unless a later time for filing the subscription agreement is set by the Board or a committee appointed by the Board for all eligible Employees with respect to a given Offering Period.  The Company, in its discretion, may decide that an Employee may submit contributions to the Plan by means other than payroll deductions.

(b)Payroll deductions to the Plan for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll date in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10.  If participants are permitted or required to contribute to the Plan by other means, the Company, in its discretion, will determine the procedure for providing the contributions prior to the Exercise Date.

6.Payroll Deductions/Contributions.

(a)At the time a participant files his or her subscription agreement, he or she shall elect to contribute to the Plan (in the form of payroll deductions or otherwise) on each payday during the Offering Period at a rate not exceeding ten percent (10%) of the Compensation which he or she received on such payday, and the aggregate of such payroll deductions pursuant to the Plan during the Offering Period shall not exceed ten percent (10%) of his or her aggregate Compensation during said Offering Period.  A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.  

(b)All contributions made for a participant shall be credited to his or her account under the Plan.  

(c)A participant may discontinue participation in the Plan as provided in Section 10, or may change the rate of payroll deductions or other contributions by submitting written notice to the Company in the form and manner prescribed by the Board or a committee appointed by the Board (or its designee) authorizing a change in the participant's payroll deduction or contribution rate.  The change rate shall be effective (i) in the case of a decrease in rate, with the first payroll period following the Company's receipt of the notice of rate change, and (ii) in the case of an increase in rate at the beginning of the next Offering Period following the Company's receipt of the notice of rate change.  If a participant has not followed the procedures prescribed by the Board or a committee appointed by the Board (or its designee) to change the rate of payroll deductions or other contributions, the rate of his or her payroll deductions or other contributions will continue at the originally elected rate throughout the Offering Period and future Offering Periods (unless terminated as provided in Section 10).  The Board or a committee appointed by the Board may, in its sole discretion, limit the nature and/or number of payroll deduction or contribution rate changes that may be made by participants during any Offering Period.  

7.Grant of Option.

(a)On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Exercise Date during such Offering Period up to a number of shares of the Company's Common Stock determined by dividing such Employee's contributions to the Plan accumulated during the Offering Period ending on such Exercise Date by the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of the Company's Common Stock on the Enrollment Date, or (ii) eighty-five (85%) of the Fair Market Value of a share of the Company's Common Stock on the Exercise Date; provided that in no event shall an Employee be permitted to purchase in one calendar year more than a number of shares determined by dividing US$25,000 by the Fair Market Value of a share of the Company's Common Stock (determined at the time such option is granted), and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.  The option shall be automatically exercised on the Exercise Date during the Offering Period, unless the participant has withdrawn pursuant to Section 10, and shall expire on the last day of the Offering Period.  

(b)The purchase price per share of the shares offered in a given offering Period shall be the lower of:  (i) 85% of the Fair Market Value of a share of the Common Stock of the Company on the Enrollment Date; or (ii) 85% of the Fair Market Value of a share of the Common Stock of the Company on the Exercise Date (such price, the "Purchase Price"). 

(c)Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's contributions may be decreased to 0% at such time during any Offering Period which is scheduled to end during the current calendar year that the aggregate of all contributions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year equal $21,250.  Contributions shall recommence at the rate provided in such participant's subscription scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10.

(d)If the Board or a committee appointed by the Board determines, in its sole discretion, that the exercise of an option or the disposition of Common Stock issued under the Plan will result in tax liability for which the Company or a Designated Subsidiary will have an obligation to withhold, the participant must make adequate provision for the payment of such federal, state, local and foreign income, social insurance, employment and any other applicable taxes.  At any time, the Company or the Designated Subsidiary may, but will not be obligated to, withhold from the participant's compensation the amount necessary for the Company or the Designated Subsidiary to meet applicable withholding obligations, including any withholding required to make available to the Company or the Designated Subsidiary any tax deductions or benefits attributable to the sale or early disposition of Common Stock by the eligible Employee.

8.Exercise of Option.  The participant's option for the purchase of shares will be exercised automatically on each Exercise Date of each Offering Period and the maximum number of full shares subject to option will be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions or other contributions in his or her account unless prior to such Exercise Date the participant has withdrawn from the Offering Period as provided in Section 10.  During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by the participant.  No fractional shares shall be purchased; any payroll deductions or other contributions accumulated in a participant's account which are not sufficient to purchase a full share, or which would cause the limitations under Sections 3 or 7 hereof to be exceeded, shall be returned to the participant after the Exercise Date.

9.Delivery.  As promptly as practicable after each Exercise Date, the Company shall arrange the delivery to each participant, as appropriate, the shares of Common Stock purchased upon exercise of the option.  The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated methods of share transfer.  The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares.  No participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the participant as provided in this Section 9.

 

10.Withdrawal; Termination of Employment.

(a)A participant may withdraw all but not less than all the contributions credited to his or her account under the Plan at any time prior to the end of the Offering Period by giving written notice to the Company in the form and manner prescribed by the Board or a committee appointed by the Board for such purpose.  All of the participant's contributions credited to his or her account will be paid to him or her promptly after receipt of his or her notice of withdrawal and his or her option for the current Offering Period will be automatically terminated, and no further contributions for the purchase of shares will be made during the Offering Period.  If a participant withdraws from an Offering Period, contributions may not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement.

(b)Upon termination of the participant's employment prior to the end of the Offering Period for any reason, including retirement or death, the contributions credited to his or her account will be returned to him or, in the case of his or her death, to the person or persons entitled thereto under Section 14, and his or her option will be automatically terminated; provided that if an Employee shall take a leave of absence approved by the Company in accordance with Section 2(g) of this Plan during an Offering Period in which the Employee is a participant, the participant will be deemed to have his or her contributions reduced to 0% during such leave of absence, but he or she shall continue to be a participant in the applicable Offering Period and upon his or her return to employment with the Company shall be eligible to participate fully in any remaining portion of the applicable Offering Period.  If the participant fails to return to employment with the Company at the end of such authorized leave of absence, or if his or her employment is otherwise terminated earlier, he or she shall be deemed to have withdrawn from participation in the Plan.

(c)A participant's withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods.

11.Interest.  No interest shall accrue on the contributions of a participant in the Plan, unless required by applicable law.

12.Stock.

(a)The maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 13,734,637, subject to adjustment upon changes in capitalization of the Company as provided in Section 18.  If the total number of shares which would otherwise be subject to options granted pursuant to Section 7(a) hereof at the beginning of an Offering Period exceeds the number of shares then available under the Plan (after deduction of all shares for which options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the shares remaining available for option grant in as uniform a manner as shall be practicable and as it shall determine to be equitable.  In such event, the Company shall give written notice of such reduction of the number of shares subject to the option to each Employee affected thereby and shall similarly reduce the rate of contributions, if necessary.

(b)Until the shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a participant will only have the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder will exist with respect to such shares.

(c)Shares to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse, or as otherwise directed by the participant.

13.Administration.  The Plan shall be administered by the Board of Directors of the Company or a committee appointed by the Board.  The administration, interpretation or application of the Plan by the Board or its committee shall be final, conclusive and binding upon all participants.  Members of the Board who are eligible Employees are permitted to participate in the Plan, provided that:

(a)Members of the Board who are eligible to participate in the Plan may not vote on any matter affecting the administration of the Plan or the grant of any option pursuant to the Plan.

(b)If a committee is established by the Board to administer the Plan, no member of the Board who is eligible to participate in the Plan may be a member of the committee.

Notwithstanding any provision to the contrary in this Plan, the Board or a committee appointed by the Board may adopt rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States.  Without limiting the generality of the foregoing, the Board or a committee appointed by the Board is specifically authorized to adopt rules, procedures or sub-plans regarding eligibility to participate, the definition of Compensation, handling of payroll deductions, making of contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold payroll deductions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates which vary with local requirements.

14.Designation of Beneficiary.

(a)Unless otherwise determined by the Company, a participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to the end of the Offering Period but prior to delivery to him of such shares and cash.  In addition, unless otherwise determined by the Company, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to the end of the Offering Period.

(b)Unless otherwise determined by the Company, such designation of beneficiary may be changed by the participant at any time by written notice to the Company in the form and manner prescribed by the Board or a committee appointed by the Board for such purpose.  In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate or determine to be the appropriate recipients of the shares and/or cash under applicable law.

(c)All beneficiary designations will be in such form and manner as the Board or a committee appointed by the Board may prescribe from time to time.

15.Transferability.  Neither contributions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the participant.  Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 10.

16.Use of Funds.  All contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such contributions, unless required by applicable law.  Until shares of Common Stock are issued, participants will only have the rights of an unsecured creditor with respect to such shares.

17.Reports.  Individual accounts will be maintained for each participant in the Plan.  Statements of account will be given to participating Employees at least annually as promptly as practically feasible following an Exercise Date, which statements will set forth the amounts of contributions, the per share Purchase Price, the number of shares purchased and the remaining cash balance, if any.

18.Adjustments Upon Changes in Capitalization.  In the event that any dividend or other distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares of Common Stock or other securities of the Company, or other change in the corporate structure of the Company that affects the shares of Common Stock, then the Board or a committee appointed by the Board shall, in such manner as it may deem equitable, adjust the number and class of shares of Common Stock (or other securities, property or cash) that may be delivered under the Plan, and the number, class, and price of shares of Common Stock subject to any option under the Plan which has not yet been exercised, as determined by the Board or a committee appointed by the Board (in its sole discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.  

19.Amendment or Termination.

(a)The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan.  Except as provided in Section 18 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors or a committee appointed by the Board on an Exercise Date if the Board or its committee, as applicable, determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its shareholders.  Except as provided in Section 18 and this Section 19 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant.  To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain shareholder approval in such a manner and to such a degree as required.

(b)Without shareholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding or contributing to the Plan in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan.

(c)Notwithstanding anything to the contrary in this Plan, in the event the Board (or its committee) determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board (or its committee) may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(i)amending the Plan to conform with the safe harbor definition under Statement of Financial Accounting Standards 123(R), including with respect to an Offering Period underway at the time; 

(ii)altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

(iii)shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; 

(iv)allocating shares; and

(v)reducing the maximum percentage of Compensation a participant may elect to set aside as contributions.

Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants.

20.Notices.  All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

21.Stockholder Approval.  If required by Section 19, any amendment to the Plan shall be subject to approval by the stockholders of the Company within twelve months before or after the date such amendment is adopted.  If such stockholder approval is obtained at a duly held stockholders' meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company present or represented and entitled to vote thereon, which approval shall be:

(a)solicited substantially in accordance with Section 14(a) of the Act and the rules and regulations promulgated thereunder, or (2) solicited after the Company has furnished in writing to the holders entitled to vote substantially the same information concerning the Plan as that which would be required by the rules and regulations in effect under Section 14(a) of the Act at the time such information is furnished; and

(b)obtained at or prior to the first annual meeting of stockholders held subsequent to the later of (i) the first registration of Common Stock under Section 12 of the Act, or (ii) the acquisition of an equity security for which exemption is claimed.

In the case of approval by written consent, it must be obtained in accordance with applicable state law.

22.Conditions Upon Issuance of Shares.  Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.  

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

23.Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board or a committee appointed by the Board.  The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation.  The Board or a committee appointed by the Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

24.Merger or Asset Sale.  In the event of a merger of the Company with or into another corporation or the sale of substantially all of the assets of the Company, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period then in progress shall be shortened by setting a New Exercise Date and such Offering Period shall end on the New Exercise Date.  The New Exercise Date shall be before the date of the Company's proposed merger or asset sale.  The Board or a committee appointed by the Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

25.Code Section 409A.  The Code Section 423(b) Plan is exempt from the application of Section 409A of the Code.  The Non-423(b) Component is intended to be exempt from Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent.  In the case of a participant who would otherwise be subject to Section 409A of the Code, to the extent an option to purchase shares of Common Stock or the payment, settlement or deferral thereof is subject to Section 409A of the Code, the option to purchase shares of Common Stock shall be granted, paid, exercised, settled or deferred in a manner that will comply with Section 409A of the Code, including the final regulations and other guidance issued with respect thereto, except as otherwise determined by the Board or a committee appointed by the Board.  Notwithstanding the foregoing, the Company shall have no liability to a participant or any other party if the option to purchase Common Stock under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Board or a committee appointed by the Board with respect thereto.

26.Governing Law.  Except to the extent that provisions of this Plan are governed by applicable provisions of the Code or any other substantive provision of federal law, this Plan shall be construed in accordance with, and shall be governed by, the substantive laws of the State of California without regard to any provisions of California law relating to the conflict of laws.  

 

EXECUTION

IN WITNESS WHEREOF, the Company, by its duly authorized officer, has executed this amended and restated Plan on the date indicated below.

QUANTUM CORPORATION

Dated:August 18, 2008 

By:/s/ Shawn D. Hall                  

Name:Shawn D. Hall 

Title: VP, General Counsel and Secretary

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