Document:

EXHIBIT 10.4

 

THIRD AMENDMENT

 

THIS THIRD AMENDMENT dated as of June 30, 2004 (this “Amendment”)
is to the Credit Agreement (as heretofore amended, the “Credit Agreement”)
dated as of February 25, 2003 among LITHIA MOTORS, INC. (the “Company”),
various financial institutions (the “Lenders”) and DAIMLERCHRYSLER
SERVICES NORTH AMERICA LLC, as agent for the Lenders (the “Agent”).  Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as defined in the Credit
Agreement.

 

WHEREAS, the parties hereto desire to amend the Credit
Agreement in certain respects;

 

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

 

SECTION 1  AMENDMENTS.  Effective on (and subject to the occurrence
of) the Amendment Effective Date (as defined below):

 

1.1          (a)           Section
1.1 of the Credit Agreement shall be amended by adding the following
definitions thereto, each in its appropriate alphabetical position:

 

Senior Subordinated
Indenture means the Indenture, dated as of May 4, 2004,
between the Company and U.S. Bank National Association, as trustee.

 

Senior Subordinated Notes
means the $85,000,000 of 2.875% Convertible Senior Subordinated Notes due 2014
of the Company issued pursuant to the Senior Subordinated Indenture.

 

Third Amendment Effective
Date means the “Amendment Effective Date” under and as
defined in the Third Amendment hereto dated as of June 30, 2004.

 

Unused Revolving
Commitment Amount means, as of any time, (x) the Revolving
Commitment Amount as of such time less (y) the Revolving Outstandings as of
such time.

 

(b)           The
definitions of “Commitment,” “Pro Rata Share,” “Revolving Commitment Amount,”
“Subordinated Debt” and “Termination Date” in Section 1.1 of the Credit
Agreement shall be amended and restated in their entireties to read as follows:

 

Commitment
means, as to any Lender, such Lender’s commitment to make Loans, and to issue
or participate in Letters of Credit, under this Agreement.  The amount of each Lender’s Pro Rata Share
of the Revolving Commitment Amount on the Third Amendment Effective Date is set
forth on Schedule 2.1.

 

Pro Rata Share
means, with respect to any Lender, the percentage which (a) the amount of such
Lender’s Commitment is of (b) the Commitments of all Lenders; provided that, after the Commitments have
been terminated, “Pro Rata Share” shall mean, as to any Lender, the percentage
which the sum of the aggregate principal amount of such Lender’s Revolving
Loans plus the participations of such
Lender in all Letters of Credit is of the sum of the aggregate principal amount
of all Revolving Loans plus the Stated
Amount of all Letters of Credit.  The
Pro Rata Share of each Lender as of the Third Amendment Effective Date is set
forth on Schedule 2.1.

 

Revolving Commitment
Amount means $150,000,000, as reduced from time to time
pursuant to Section 6.1.

 

Subordinated Debt
means (i) the Senior Subordinated Notes and (ii) other unsecured Debt of the
Company that has subordination terms, covenants, pricing and other terms that
have been approved in writing by the Required Lenders.

 

 

Termination Date
means the earlier to occur of (a) May 1, 2007 (or any later date that may be
established as the Termination Date pursuant to Section
2.6) or (b) such other date on which the Commitments terminate
pursuant to Section 6 or 11.

 

(c)           The definition of
“Provider” in Section 1.1 of the Credit Agreement shall be deleted in its
entirety.

 

1.2          Section 2.6 of the
Credit Agreement shall be amended and restated in its entirety to read as
follows:

 

2.6           Extension of
Termination Date.  On each May 1
from and after May 1, 2005 (each, an “Extension Date”), the Termination
Date shall be extended for an additional year (i.e., to the May 1 of the
year following the year in which the then-scheduled Termination Date is to
occur) if the Agent (acting at the request of all of the Lenders) shall have
notified the Company in writing on or prior to such Extension Date that the Termination
Date is so extended for an additional year (such notice an “Extension Notice”).  If the Agent shall have issued an Extension
Notice on or prior to an Extension Date, the Agent shall promptly notify the
Company and each Lender of the new Termination Date.  If no Extension Notice is received by the Company on or prior to
any Extension Date, the Termination Date shall not be extended on such
Extension Date.  For example: (x) if no
Extension Notice is given before May 1, 2005, the Termination Date shall remain
May 1, 2007 (unless such date occurs earlier pursuant to clause (b) of
the definition of “Termination Date”) and (y) if an Extension Notice is given
before May 1, 2005, the Termination Date shall be thereby extended to May 1,
2008, subject to further extension by operation of this Section (unless such
date occurs earlier pursuant to clause (b) of the definition of
“Termination Date”).

 

1.3          Section 5.2 of the Credit Agreement shall be
amended and restated in its entirety to read as follows:

 

5.2           Unused Fees.  The Company agrees to pay to the Agent for
the account of each Lender an unused fee at a rate per annum equal to 0.15% on
such Lender’s share of the daily Unused Revolving Commitment Amount.  All unused fees shall be payable in arrears
as follows: (i) the Agent will present an invoice reflecting the unused fees on
or about April 30th of each year for the period ending on such April
30th for which such fees shall not have been theretofore paid and
the Company shall pay such invoiced amount to the Agent for the account of the
Lenders within one Business Day after receipt of such invoice, and (ii) on the
Termination Date, the Agent will present an invoice reflecting the unused fees
for the period ending on the Termination Date for which such fees shall not
have been theretofore paid and the Company shall pay such invoiced amount to
the Agent for the account of the Lenders on the Termination Date.

 

1.4          Section 5 of the Credit
Agreement shall be amended by (i) changing the designation of Section 5.4 to
Section 5.5 and (ii) by adding the following new Section 5.4:

 

5.4           Administrative Fee.  The Company agrees to pay to the Agent for
its own account (and not for the account of any Lender) an administrative fee
at a rate per annum equal to 0.10% on the daily Unused Revolving Commitment
Amount.  The administrative fee shall be
payable in arrears as follows: (i) the Agent will present an invoice reflecting
the administrative fee on or about April 30th of each year for the
period ending on such April 30th for which such fee shall not have
been theretofore paid and the Company shall pay such invoiced amount to the
Agent within one Business Day after receipt of such invoice; and (ii) on the
Termination Date, the Agent will present an invoice reflecting the administrative
fee for the period ending on the Termination Date for which such fee shall not
have been theretofore paid and the Company shall pay such invoiced amount to
the Agent on the Termination Date.

 

1.5          Section 9.7(k) of the
Credit Agreement shall be amended and restated to read in its entirety as
follows:

 

(k)           Debt with respect to
Floor Plan Financings provided by Persons to whom all the Lenders consent;

 

2

 

1.6          Section 9.20(h) of the
Credit Agreement shall be amended by (x) deleting the existing text therein
that read “[INTENTIONALLY LEFT BLANK]” and (y) inserting the following in lieu
of such deleted text “an Investment in an amount not to exceed $50,000,000 in
Lithia Real Estate, provided such Investment is made within 60 days
after the Third Amendment Effective Date”.

 

1.7          Section 9.20 of the Credit Agreement shall be
amended by substituting the designation “(c), (g) or (h)”
for the designation “(c) or (g)” in clause (y) of the proviso
therein.

 

1.8          Section 9 of the Credit
Agreement shall be amended by adding thereto the following new Section 9.24:

 

9.24         Senior Subordinated
Notes.  Not: (i) make any
redemption, prepayment, defeasance or repurchase of the Senior Subordinated
Notes prior to May 1, 2009 (it being understood that, as a condition to
extending the Termination Date or otherwise in connection with any modification
or waiver of the Loan Documents, the Agent and the Lenders may require that
such date be extended to another future date); or (ii) amend, modify or waive
any rights under the Senior Subordinated Indenture or the Senior Subordinated
Notes without the prior written consent of the Required Lenders.

 

1.9          Section 13.17 of the Credit Agreement shall
be amended and restated in its entirety to read as follows:

 

13.17       [Intentionally left blank]

 

1.10        Schedule 2.1 to the Credit Agreement shall
be replaced by Schedule 2.1 hereto.

 

SECTION 2   REPRESENTATIONS
AND WARRANTIES. The Company represents and warrants to the Agent
and the Lenders that:  (a) the
representations and warranties made in Section 8 of the Credit Agreement are
true and correct on and as of the Amendment Effective Date (as defined below)
with the same effect as if made on and as of the Amendment Effective Date
(except to the extent relating solely to an earlier date, in which case they
were true and correct as of such earlier date); (b) no Event of Default or
Unmatured Event of Default exists or will result from the execution of this
Amendment; (c) no event or circumstance has occurred since the Closing Date
that has resulted, or would reasonably be expected to result, in a Material
Adverse Effect; (d) the execution and delivery by the Company of this Amendment
and the performance by the Company of its obligations under the Credit Agreement
as amended hereby (as so amended, the “Amended Credit Agreement”) (i)
are within the corporate powers of the Company, (ii) have been duly authorized
by all necessary corporate action, (iii) have received all necessary approval
from any governmental authority and (iv) do not and will not contravene or
conflict with any provision of any law, rule or regulation or any order,
decree, judgment or award which is binding on the Company or any of its
Subsidiaries or of any provision of the certificate of incorporation or bylaws
or other organizational documents of the Company or of any agreement,
indenture, instrument or other document which is binding on the Company or any
of its Subsidiaries; and (e) the Amended Credit Agreement is the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles relating to
enforceability.

 

SECTION 3   EFFECTIVENESS.  The amendments set forth in Section 1
above shall become effective as of such date (the “Amendment Effective Date”)
when the Agent shall have received (a) a counterpart of this Amendment executed
by the Company and the Lenders (or, in the case of any party other than the
Company from which the Agent has not received a counterpart hereof, facsimile
confirmation of the execution of a counterpart hereof by such party) and (b)
each of the following documents, each in form and substance satisfactory to the
Agent:

 

3.1          Reaffirmation.  A counterpart of the Reaffirmation of Loan
Documents, substantially in the form of Exhibit A, executed by each Loan
Party other than the Company.

 

3.2          Other Documents.  Such other documents as the Agent or any
Lender may reasonably request.

 

3

 

SECTION 4  MISCELLANEOUS.

 

4.1          Continuing Effectiveness, etc.  As hereby amended, the Credit Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects.  As of the Amendment
Effective Date, all references in the Credit Agreement, the Notes, each other
Loan Document and any similar document to the “Credit Agreement” or similar
terms shall refer to the Amended Credit Agreement.

 

4.2          Counterparts.  This Amendment may be executed in any number
of counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.

 

4.3          Expenses.  The Company agrees to pay the reasonable costs and expenses of
the Agent (including reasonable fees and disbursements of counsel, including,
without duplication, the allocable costs of internal legal services and all
disbursements of internal legal counsel) in connection with the preparation,
execution and delivery of this Amendment.

 

4.4          Governing Law.  This Amendment shall be a contract made
under and governed by the laws of the State of Michigan applicable to contracts
made and to be wholly performed within the State of Michigan.

 

4.5          Successors and Assigns.  This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and
the successors and assigns of the Lenders and the Agent.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

4

 

Delivered as of the day and year first above written.

 

 

	
   

  	
  LITHIA MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey B. DeBoer

  
	
   

  	
  Title:

  	
  Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAIMLERCHRYSLER SERVICES NORTH AMERICA

  LLC, as the Agent,
  as the Issuing Lender and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Janet Toronski

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TOYOTA MOTOR CREDIT CORPORATION, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Reid Boozer

  
	
   

  	
  Title:

  	
   

  
				

 

S-1

 

SCHEDULE 2.1

 

LENDERS AND PRO RATA
SHARES

 

	
  Lender

  	
   

  	
  Pro Rata
  Share

  of Revolving

  Commitment Amount

  	
   

  	
  Pro Rata
  Share

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC

  	
   

  	
  $

  	
  93,750,000

  	
   

  	
  62.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOYOTA MOTOR CREDIT CORPORATION

  	
   

  	
  $

  	
  56,250,000

  	
   

  	
  37.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTALS

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
  100

  	
  %

  

 

 

EXHIBIT A

 

FORM OF REAFFIRMATION

 

June    , 2004

 

DaimlerChrysler Services North

America LLC, as the Agent

and the Lenders party

to the Credit Agreement

referred to below

27777 Inkster Road

Farmington Hills, Michigan 48334

Attn: Michele Nowak

 

Re:  Reaffirmation of
Loan Documents

 

Ladies and Gentlemen:

 

Please refer to:

 

(a)           The Security Agreement dated as of February 25, 2003 (the “Security
Agreement”) among Lithia Motors, Inc. (the “Company”), its
subsidiaries and DaimlerChrysler Services North America LLC in its capacity as
Agent (in such capacity, the “Agent”);

 

(b)           The Guaranty dated as of February 25, 2003 (the “Guaranty”)
executed in favor of the Agent and various other parties by all subsidiaries of
the Company; and

 

(c)           The Pledge Agreement dated as of February 25, 2003 (the “Pledge
Agreement”) executed by the Company and certain of its subsidiaries.

 

Each of the undersigned
acknowledges that the Company, the Lenders and the Agent have executed the
Third Amendment (the “Third Amendment”) to the Credit Agreement dated as
of February 25, 2003 (as amended, supplemented or otherwise modified from time
to time, the “Credit Agreement”). 
Capitalized terms not otherwise defined herein have the meanings given
in the Credit Agreement.

 

Each of the undersigned
hereby confirms that the Security Agreement, the Guaranty, the Pledge Agreement
and each other Loan Document to which such undersigned is a party remains in
full force and effect after giving effect to the effectiveness of the Third
Amendment and that, upon such effectiveness, all references in each Loan
Document to the “Credit Agreement” shall be references to the Credit Agreement,
as amended by the Third Amendment.

 

A-1

 

This letter agreement may be
signed in counterparts and by the various parties on separate
counterparts.  This letter agreement
shall be governed by the laws of the State of Michigan applicable to contracts
made and to be performed entirely within such State.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK. 
SIGNATURES FOLLOW]

 

A-2

 

	
   

  	
  HUTCHINS EUGENE NISSAN,
  INC.

  
	
   

  	
  HUTCHINS IMPORTED MOTORS,
  INC.

  
	
   

  	
  LGPAC, INC.

  
	
   

  	
  LITHIA AUTO SERVICES, INC.

  
	
   

  	
  LITHIA BNM, INC.

  
	
   

  	
  LITHIA DE, INC.

  
	
   

  	
  LITHIA DM, INC.

  
	
   

  	
  LITHIA HPI, INC.

  
	
   

  	
  LITHIA KLAMATH, INC.

  
	
   

  	
  LITHIA LAC, INC.

  
	
   

  	
  LITHIA MEDFORD HON, INC.

  
	
   

  	
  LITHIA MOTORS SUPPORT
  SERVICES, INC.

  
	
   

  	
  LITHIA MTLM, INC.

  
	
   

  	
  LITHIA OF ROSEBURG, INC.

  
	
   

  	
  LITHIA RENTALS, INC.

  
	
   

  	
  LITHIA ROSE-FT, INC.

  
	
   

  	
  LITHIA SOC, INC.

  
	
   

  	
  SATURN OF SOUTHWEST
  OREGON, INC.

  
	
   

  	
  LITHIA
  CHRYSLER JEEP OF ANCHORAGE,

  INC.

  
	
   

  	
  LITHIA IMPORTS OF
  ANCHORAGE, INC.

  
	
   

  	
  LITHIA CIMR, INC.

  
	
   

  	
  LITHIA CJDB, INC.

  
	
   

  	
  LITHIA DC, INC.

  
	
   

  	
  LITHIA FMF, INC.

  
	
   

  	
  LITHIA FN, INC.

  
	
   

  	
  LITHIA FVHC, INC.

  
	
   

  	
  LITHIA JEF, INC.

  
	
   

  	
  LITHIA MMF, INC.

  
	
   

  	
  LITHIA NF, INC.

  
	
   

  	
  LITHIA OF ANCHORAGE, INC.

  
	
   

  	
  LITHIA TKV, INC.

  
	
   

  	
  LITHIA TR, INC.

  
	
   

  	
  LITHIA VWC, INC.

  
	
   

  	
  LITHIA VWPC, INC.

  
	
   

  	
  LITHIA
  CENTENNIAL CHRYSLER PLYMOUTH JEEP,

  INC.

  
	
   

  	
  LITHIA CHERRY CREEK DODGE,
  INC.

  
	
   

  	
  LITHIA
  COLORADO CHRYSLER PLYMOUTH,

  INC.

  
	
   

  	
  LITHIA COLORADO JEEP, INC.

  
	
   

  	
  LITHIA
  COLORADO SPRINGS JEEP CHRYSLER

  PLYMOUTH, INC.

  
	
   

  	
  LITHIA FOOTHILLS CHRYSLER,
  INC.

  
	
   

  	
  LITHIA OF THORNTON, INC.

  
	
   

  	
  LITHIA CB, INC.

  
	
   

  	
  LITHIA DB, INC.

  
	
   

  	
  LITHIA IB, INC.

  
	
   

  	
  LITHIA LMB, INC.

  
	
   

  	
  LITHIA FORD OF BOISE, INC.

  
	
   

  	
  LITHIA OF CALDWELL, INC.

  
	
   

  	
  LITHIA OF POCATELLO, INC.

  
	
   

  	
  LITHIA POCA-HON, INC.

  
	
   

  	
  LITHIA CD, INC.

  
	
   

  	
  LITHIA OF OMAHA, INC.

  
	
   

  	
  LITHIA MBO, INC.

  

 

A-3

 

	
   

  	
  LITHIA RENO SUB-HYUN, INC.

  
	
   

  	
  LITHIA SALMIR, INC.

  
	
   

  	
  LITHIA AUTOMOTIVE, INC.

  
	
   

  	
  LITHIA OF SIOUX FALLS,
  INC.

  
	
   

  	
  CAMP AUTOMOTIVE, INC.

  
	
   

  	
  LITHIA BC, INC.

  
	
   

  	
  LITHIA DC OF RENTON, INC.

  
	
   

  	
  LITHIA DODGE OF
  TRI-CITIES, INC.

  
	
   

  	
  LITHIA FTC, INC.

  
	
   

  	
  LITHIA IC, INC.

  
	
   

  	
  LITHIA OF SEATTLE, INC.

  
	
   

  	
  TC HON, INC.

  
	
   

  	
  LITHIA HYR, INC.

  
	
   

  	
  LITHIA CS, INC.

  
	
   

  	
  LITHIA OF FAIRFIELD, INC.

  
	
   

  	
  LITHIA OF SANTA ROSA, INC.

  
	
   

  	
  LITHIA OF VACAVILLE, INC.

  
	
   

  	
  LITHIA CCTF, INC.

  
	
   

  	
  LITHIA OF TWIN FALLS, INC.

  
	
   

  	
  LITHIA LMM, INC.

  
	
   

  	
  LITHIA OF MISSOULA, INC.

  
	
   

  	
  LITHIA OF OKLAHOMA, INC.

  
	
   

  	
  LITHIA OF BILLINGS, INC.

  
	
   

  	
  LITHIA OF SPOKANE, INC.

  
	
   

  	
  LITHIA OF FAIRBANKS, INC.

  
	
   

  	
  LITHIA OF MEDFORD LM, INC.

  
	
   

  	
  LITHIA OF HELENA, INC.

  
	
   

  	
  LITHIA OF SOUTH CENTRAL
  AK, INC.

  
	
   

  	
  LITHIA NA, INC.

  
	
   

  	
  [LITHIA OF CLOVIS, INC.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

A-4

 

	
   

  	
  LITHIA
  LP OF TEXAS, LLC

  
	
   

  	
  LITHIA
  GP OF TEXAS, LLC

  
	
   

  	
  By:  Lithia Motors, Inc.,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LITHIA
  LAC OF WASHINGTON, LLC

  
	
   

  	
  By:  Lithia LAC, Inc., Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LITHIA
  SH, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOE,
  LLC

  
	
   

  	
  By:  Lithia SH, LLC, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LITHIA
  VS, LLC

  
	
   

  	
  By:  Camp Automotive, Inc.,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

A-5

 

	
   

  	
  LITHIA CJDBS, L.P.

  
	
   

  	
  LITHIA CJDO, L.P.

  
	
   

  	
  LITHIA CJDSA. L.P.

  
	
   

  	
  LITHIA CM, L.P.

  
	
   

  	
  LITHIA CO, L.P.

  
	
   

  	
  LITHIA CSA, L.P.

  
	
   

  	
  LITHIA DMID, L.P.

  
	
   

  	
  LITHIA DSA, L.P.

  
	
   

  	
  LITHIA HMID, L.P.

  
	
   

  	
  LITHIA NSA, L.P.

  
	
   

  	
  LITHIA OF GRAPEVINE, L.P.

  
	
   

  	
  By:  Lithia GP of Texas, LLC,
  General Partner

  
	
   

  	
  By:  Lithia Motors, Inc.,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LRE SPRINGFIELD, LLC

  
	
   

  	
  By:  Lithia Real Estate, Inc.,
  Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED

  as of the date first written above

  	
   

  
	
   

  	
   

  
	
  DAIMLERCHRYSLER SERVICES
  NORTH

  AMERICA, LLC, as the Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

A-6Exhibit 10.1

 

NOBLE ENERGY, INC.

2004 LONG-TERM INCENTIVE PLAN

 

 

Article I

Purpose of the Plan

 

The purpose of the Noble Energy, Inc. 2004 Long-Term Incentive Plan
(the “Plan”) is to provide incentive compensation opportunities for key
employees of the Company and its affiliates. 
Participants in the Plan will have the opportunity to receive incentive
compensation based upon the attainment of specific performance goals
established by the Compensation, Benefits and Stock Option Committee of the
Board of Directors of Noble Energy, Inc.

 

Article II

Definitions

 

When used in the Plan, the following terms shall have the following
meanings:

 

2.1           “Affiliate”
means any entity that is directly or indirectly controlled by the Company or in
which the Company has a significant equity interest, as determined by the
Committee in its discretion.

 

2.2           “Award”
means an incentive compensation award under the Plan.

 

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

 

2.4           “Code”
means the Internal Revenue Code of 1986, as amended.

 

2.4           “Common
Stock” means common stock, par value $3.331/3 per share,
of the Company.

 

2.5           “Company”
means Noble Energy, Inc., a Delaware corporation.

 

2.6           “Committee”
means the Compensation, Benefits and Stock Option Committee of the Board of
Directors.

 

2.7           “Participant”
means any employee of the Company or an Affiliate who is designated by the
Committee as eligible to receive an Award.

 

2.8           “Performance
Goals” means the performance goals established by the Committee for a
Performance Period pursuant to the Plan.

 

2.9           “Performance
Period” means the three-year period commencing January 1, 2004, and the
three-year period commencing on the first day of each calendar year commencing
after 2004.

 

2.10         “Plan”
means this Noble Energy, Inc. 2004 Long-Term Incentive Plan.

 

 

Article III

Eligibility

 

3.1           The
officers and other employees of the Company or an Affiliate that the Committee
in its discretion determines are key employees may be designated by the
Committee as Participants in the Plan for a particular Performance Period.  Only those employees of the Company or an
Affiliate who are designated by the Committee as Participants for a particular
Performance Period will participate in the Plan for that Performance Period.

 

Article IV

Administration, Amendment and Termination of
the Plan

 

4.1           The
Plan shall be administered by the Committee, which shall have the right and
authority in its discretion to (i) adopt, amend or rescind administrative and
interpretive rules and regulations relating to the Plan, (ii) construe the
Plan, (iii) make all determinations necessary or appropriate for administering
the Plan, and (iv) exercise all of the powers conferred on the Committee under
the Plan.  The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent the Committee shall deem proper to carry out the
intent and purposes of the Plan.  The
determinations made and the action taken by the Committee pursuant to the Plan
shall be conclusive and binding upon all parties having or claiming to have an
interest under the Plan or any Award.

 

4.2           The
Committee shall have the exclusive authority to amend, modify, suspend or
terminate the Plan at any time.

 

Article V

Determination of Performance Goals and Awards

 

5.1           Within
the first 90 days of each Performance Period the Committee in its discretion
shall (i) designate the Participants who will participate in the Plan for such
Performance Period, (ii) establish the Performance Goals (and any specific
performance targets with respect thereto) for such Performance Period, and
(iii) grant the Awards for the Participants who will participate in the Plan
for such Performance Period.

 

5.2           The
Performance Goals established by the Committee for a Performance Period may be
based on (i) price, earnings or cash flow per share of stock, (ii) gross
revenues or net profits, (iii) total shareholder returns, (iv) growth in
reserves or production, (v) finding and development costs, (vi) operating
costs, or (vii) other objective performance measurements or goals acceptable to
the Committee.  The Performance Goals
may be based on the performance of the Company itself or in relation to its
peers, or on the performance of a particular Participant, division, department,
subsidiary or other unit to which a particular Participant is assigned.  In establishing the Performance Goals for a
Performance Period, the Committee may establish different Performance Goals for

 

2

 

individual
Participants or groups of Participants, and the Performance Goals may be
weighted to reflect their relative significance to the Company for the
Performance Period.

 

5.3           Awards may be made by the Committee in the
form of stock options or restricted stock granted or awarded under the Noble
Energy, Inc. 1992 Stock Option and Restricted Stock Plan, or in the form of
performance units or other incentive measurements providing for the payment of
bonuses in cash, or in any combination thereof as determined by the Committee
in its discretion.

 

5.4           As soon as practicable after the end of each
Performance Period, the Committee shall certify in writing the level of
attainment of the Performance Goals for such Performance Period, and shall
approve the payments to be made or other action to be taken with respect to the
Awards for such Performance Period. 
Awards shall be subject to all applicable withholding requirements for
federal, state and local taxes.

 

5.5           Any provision of the Plan to the contrary
notwithstanding, (i) in no event shall the total number of shares of Common
Stock for which stock options may be granted or which may be awarded as
restricted stock to any Participant pursuant to the Plan exceed the limitations
applicable to such grants and awards under the Noble Energy, Inc. 1992 Stock
Option and Restricted Stock Plan, as amended from time to time, and (ii) the
maximum amount that may be paid in cash to any Participant under an Award for a
Performance Period shall not exceed $4,000,000.

 

Article VI

Limitation of Rights

 

6.1           The
establishment of the Plan shall not enlarge or otherwise affect the terms of
any Participant’s employment with the Company or an Affiliate, and the Company
or such Affiliate may terminate the employment of any Participant as freely and
with the same effect as if the Plan had not been adopted.

 

Article VII

Miscellaneous

 

7.1           The
Plan is an unfunded plan of incentive compensation, and no Participant shall
have any right to or lien on any asset of the Company or an Affiliate by reason
of or with respect to any Award made under the Plan.

 

7.2           No
member of the Committee shall be liable for any act, omission, or determination
taken or made in good faith with respect to the Plan or any Award made
hereunder, and the members of the Committee shall be entitled to
indemnification, defense and reimbursement by the Company in respect of any
claim, loss, damage, or expenses (including reasonable attorneys’ fees and
expenses) arising therefrom to the full extent permitted by law and under any directors’
and officers’ liability or similar insurance coverage or indemnification
agreement that may be in effect from time to time.

 

3

 

7.3           The
laws of the State of Texas (excluding its principles relating to conflicts of
laws) shall govern the Plan.

 

7.4           The
Plan is intended to comply with the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder, and shall be interpreted and
administered accordingly.

 

7.5           The
Plan has been adopted by the Committee effective for the Performance Period
commencing on January 1, 2004.  Certain
provisions of the Plan will be submitted to the stockholders of the Company for
their approval at the annual meeting of the stockholders of the Company to be
held on April 27, 2004.  If such
provisions are not so approved, the Awards made prior to such annual meeting
shall remain in full force and effect in accordance with their terms and the
provisions of the Plan, but in all other respects the Plan shall terminate and
no further Awards shall be made pursuant to the Plan.

 

IN WITNESS
WHEREOF, this Plan has been executed this 6th day of August, 2004.

 

	
   

  	
  NOBLE ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Charles D. Davidson

  
	
   

  	
   

  	
  Name:

  	
  Charles
  D. Davidson

  
	
   

  	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  

 

4

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