Document:

Exhibit 10.5

 

EXECUTION VERSION

 

LETTER AMENDMENT NO. 2 AND LIMITED CONSENT
 TO AMENDED AND RESTATED NOTE PURCHASE,
 GUARANTY AND MASTER SHELF AGREEMENT

 

As of December 30, 2010

 

The Prudential Insurance Company of America

c/o Prudential Capital Group

2200 Ross Avenue, Suite 4200E

Dallas, Texas 75201

 

Ladies and Gentlemen:

 

We refer to the Amended and Restated Note Purchase, Guaranty and Master Shelf Agreement dated as of December 31, 1996, as amended by Letter Amendment No. 1 dated as of August 30, 2001 (as so amended, the “Agreement”), among Helen of Troy L.P., a Texas limited partnership (the “Company”), Helen of Troy Limited, a Bermuda company, Helen of Troy Limited, a Barbados company, Helen of Troy Texas Corporation, a Texas corporation (“HOT-Texas”), Helen of Troy Nevada Corporation, a Nevada corporation, HOT Nevada Inc., a Nevada corporation (collectively, the “Guarantors”), and The Prudential Insurance Company of America (“Prudential”). Unless otherwise defined in this Letter Amendment No. 2 and Limited Consent to Amended and Restated Note Purchase, Guaranty and Master Shelf Agreement (this “Amendment”), the terms defined in the Agreement shall be used herein as therein defined.

 

The Company has advised Prudential that HOT-Texas desires to enter into certain transactions that will result in the formation by HOT-Texas of a new subsidiary, KI Acquisition, Inc. (“KIA”), which will merge with and into Kaz, Inc., a New York corporation (“KAZ”), with the effect that KAZ will become a wholly-owned subsidiary of HOT-Texas (collectively, the “Acquisition”). In order to complete the Acquisition, the Company and KIA, among others, have entered into that certain Agreement and Plan of Merger dated as of December 8, 2010 (the “Merger Agreement”), the consummation of which is prohibited pursuant to Section 11.6 of the Agreement.

 

The Company has requested and, subject to the terms and conditions specified herein, the undersigned holders of Notes have indicated their willingness (i) to consent to the Acquisition and (ii) to make certain amendments to the Agreement in connection therewith, in each case as more particularly set forth herein. Accordingly, subject to satisfaction of the conditions set forth in Section 4 hereof, and in reliance on the representations and warranties of the Helen of Troy Entities set forth in Section 3 hereof, the undersigned holders of Notes hereby agree with the Company, effective as of the Effective Date (as defined in Section 4 hereof), as follows:

 

1.                                      Amendments to the Agreement.

 

(a)                                  Amendment to Section 8.1 (Financial and Business Information). Paragraph (e) of Section 8.1 of the Agreement is hereby amended by replacing the reference therein to Section 12(f) of the Agreement with a reference to Section 12(g) of the Agreement.

 

 

(b)                                 Amendment to Section 8.2 (Officer’s Certificate). Paragraph (a) of Section 8.2 of the Agreement is hereby amended by deleting such paragraph in its entirety and replacing it with the following:

 

“(a)                            Covenant Compliance — the information (including detailed calculations) required in order to establish whether the Obligors were in compliance with the requirements of Sections 11.1, 11.2, 11.3, 11.4, 11.5(k) and 11.6 hereof during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and”

 

(c)                                  Deletion of Section 9.4 (Offer to Prepay, With Make-Whole Amount, From Asset Sale Proceeds). Section 9.4 of the Agreement is hereby deleted and replaced with “[Intentionally Omitted]”.

 

(d)                                 Amendment to Section 10.5 (Corporate Existence, Licenses and Permits, etc.). Section 10.5 of the Agreement is hereby amended by replacing the references therein to Sections 11.3 and 11.6 of the Agreement with references to Sections 11.6 and 11.7 of the Agreement.

 

(e)                                  Amendment to Section 10.7 (Covenant to Secure Notes Equally). Section 10.7 of the Agreement is hereby amended by replacing the reference therein to Section 11.2 of the Agreement with a reference to Section 11.5 of the Agreement.

 

(f)                                    Addition of Sections 10.8 (Additional Guarantors), 10.9 (Notes to Rank Pari Passu), 10.10 (Most Favored Lender Status), 10.11 (Specified Subsidiary Guaranties) and 10.12 (Delivery of the Proposed Note Purchase Agreement). Section 10 of the Agreement is hereby amended by inserting new Sections 10.8, 10.9, 10.10, 10.11 and 10.12 to read as follows:

 

“10.8.               Additional Guarantors. In addition to the requirements of Section 10.11, Ultimate Parent will cause any Subsidiary which pursuant to either Bank Credit Agreement, and after the Amendment No. 2 Effective Date, becomes a party to as a borrower or obligor, or otherwise guarantees, Debt in respect of either Bank Credit Agreement, to enter into this Agreement, to become a Guarantor subject to the requirements of Section 14 hereof and to deliver to each of the holders of the Notes (concurrently with the incurrence of any such obligation pursuant to such Bank Credit Agreement) the following items:

 

(a)                                  a joinder agreement in respect of Section 14 of this Agreement;

 

(b)                                 a certificate signed by the President, a Vice President or another authorized Responsible Officer of Ultimate Parent making representations and warranties to the effect of those contained in Sections 6.5, 6.7 and 6.8, with respect to such Subsidiary and the Guaranty set forth in Section 14, as applicable; and

 

(c)                                  an opinion of counsel (who may be in-house counsel for Ultimate Parent) addressed to each of the holders of the Notes satisfactory to the Required Holders, to the effect that the Guaranty by such Person pursuant to Section 14 has been duly authorized, executed and delivered and that such Guaranty constitutes the legal, valid and binding

 

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contract and agreement of such Person enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

10.9.                     Notes to Rank Pari Passu. The Notes and all other respective obligations under this Agreement of the Helen of Troy entities are and at all times shall remain direct and unsecured obligations of the Helen of Troy Entities ranking pari passu as against the assets of the Helen of Troy Entities with all other Notes from time to time issued and outstanding hereunder without any preference among themselves and pari passu with all other present and future unsecured Debt (actual or contingent) of the Helen of Troy Entities which is not expressed to be subordinate or junior in rank to any other unsecured Debt of the Helen of Troy Entities.

 

10.10.              Most Favored Lender Status. If any of the Helen of Troy Entities or any Subsidiary enters into, assumes or otherwise becomes bound or obligated under the Proposed Note Purchase Agreement, and if the Proposed Note Purchase Agreement contains one or more Additional Covenants or Additional Defaults, then the terms of this Agreement shall, without any further action on the part of the Helen of Troy Entities or any of the holders of the Notes, be deemed to be amended automatically to include each Additional Covenant and each Additional Default contained in the Proposed Note Purchase Agreement on the effective date thereof, but only for so long as such Additional Covenants and Additional Defaults remain in effect with respect to the Proposed Note Purchase Agreement. The Company further covenants, upon request of the Required Holders, to promptly execute and deliver at its expense (including, without limitation, the fees and expenses of counsel for the holders of the Notes) an amendment to this Agreement in form and substance satisfactory to the Required Holders evidencing the amendment of this Agreement to include such Additional Covenants and Additional Defaults, provided that the execution and delivery of such amendment shall not be a precondition to the effectiveness of such amendment as provided for in this Section 10.10, but shall merely be for the convenience of the parties hereto.

 

10.11.              Specified Subsidiary Guaranties. Upon the earlier of (a) the effective date of the Proposed Note Purchase Agreement and (b) January 31, 2011, Ultimate Parent shall cause each of the Specified Subsidiaries to enter into this Agreement, to become a Guarantor subject to the requirements of Section 14 hereof and to deliver to each of the holders of the Notes the following items:

 

(i)                                     a joinder agreement in respect of Section 14 of this Agreement;

 

(ii)                                  a certificate signed by the President, a Vice President or another authorized Responsible Officer of Ultimate Parent making representations and warranties to the effect of those contained in Sections 6.5, 6.7 and 6.8, with respect to such Specified Subsidiary and the Guaranty set forth in Section 14, as applicable; and

 

(iii)                               an opinion of counsel (who may be in-house counsel for Ultimate Parent) addressed to each of the holders of the Notes satisfactory to the Required Holders, to the effect that the Guaranty by such Specified Subsidiary pursuant to Section 14 has been duly

 

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authorized, executed and delivered and that such Guaranty constitutes the legal, valid and binding contract and agreement of such Specified Subsidiary enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.”

 

10.12.              Delivery of the Proposed Note Purchase Agreement. The Company shall deliver to each of the holders of the Notes an executed copy of the Proposed Note Purchase Agreement within five (5) Business Days after the execution thereof.

 

(g)                                 Amendment to Section 11 (Negative Covenants). Section 11 of the Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

 

“11.                         NEGATIVE COVENANTS.

 

During the Issuance Period and so long thereafter as any Note is outstanding and unpaid, each Obligor covenants as follows:

 

11.1.                     Consolidated Net Worth. The Obligors will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) $500,000,000, plus (b) 25% of Consolidated Net Income (but only if a positive number) for each completed fiscal quarter, beginning with the fiscal quarter ending on November 30, 2010.

 

11.2.                     Leverage Ratio. The Obligors will not at any time permit the Leverage Ratio to exceed 3.25 to 1.00.

 

11.3.                     Interest Coverage Ratio. The Obligors will not permit the Interest Coverage Ratio for each period of four consecutive fiscal quarters (calculated as at the end of each fiscal quarter for the four consecutive fiscal quarters then ended) to be less than 2.50 to 1.00.

 

11.4.                     Priority Debt. The Obligors will not, at any time, permit the aggregate amount of all Priority Debt to exceed 20% of Consolidated Net Worth (Consolidated Net Worth to be determined as of the end of the then most recently ended fiscal quarter of Ultimate Parent).

 

11.5.                     Limitation on Liens. The Obligors will not, and will not permit any of their Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of any Obligor or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits except:

 

(a)                                  Liens for taxes, assessments or other governmental charges that are not yet due and payable or the payment of which is not at the time required by Section 10.4;

 

(b)                                 Liens incidental to the conduct of business or the ownership of properties and assets (including landlords’, carriers’, warehousemen’s, mechanics’, materialmen’ s and other similar Liens for sums not yet due and payable) and Liens to secure the performance of bids,

 

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tenders, leases, or trade contracts, or to secure statutory obligations (including obligations under workers compensation, unemployment insurance and other social security legislation), surety or appeal bonds or other Liens incurred in the ordinary course of business and not in connection with the borrowing of money;

 

(c)                                  leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to the ownership of property or assets or the ordinary conduct of the business of any Obligor or any of its Subsidiaries, or Liens incidental to minor survey exceptions and the like, provided that such Liens do not, in the aggregate, materially detract from the value of such property;

 

(d)                                 any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay;

 

(e)                                  Liens securing Debt of a Subsidiary (other than the Company or HOT-Barbados) to an Obligor or to a Subsidiary;

 

(f)                                    Liens existing as of the Amendment No. 2 Effective Date and reflected in Schedule 11.5;

 

(g)                                 Liens incurred after the Amendment No. 2 Effective Date given to secure the payment of the purchase price incurred in connection with the acquisition, construction or improvement of property (other than accounts receivable or inventory) useful and intended to be used in carrying on the business of an Obligor or a Subsidiary, including Liens existing on such property at the time of acquisition or construction thereof or Liens incurred within 365 days of such acquisition or completion of such construction or improvement, provided that (i) the Lien shall attach solely to the property acquired, purchased, constructed or improved; (ii) at the time of acquisition, construction or improvement of such property, the aggregate amount remaining unpaid on all Debt secured by Liens on such property, whether or not assumed by an Obligor or a Subsidiary, shall not exceed the lesser of (x) the cost of such acquisition, construction or improvement or (y) the Fair Market Value of such property (as determined in good faith by one or more officers of an Obligor to whom authority to enter into the transaction has been delegated by the board of directors of such Obligor); and (iii) at the time of such incurrence and after giving effect thereto, no Default or Event of Default would exist;

 

(h)                                 any Lien existing on property of a Person immediately prior to its being consolidated with or merged into an Obligor or a Subsidiary or its becoming a Subsidiary, or any Lien existing on any property acquired by an Obligor or any Subsidiary at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary or such acquisition of property, (ii) each such Lien on any acquired property shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection

 

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with such acquired property, and (iii) at the time of such incurrence and after giving effect thereto, no Default or Event of Default would exist;

 

(i)                                     Liens securing Debt on property or assets of any Obligor or its Subsidiaries which Liens were given after the Amendment No. 2 Effective Date, provided such Obligor makes, or causes to be made, effective provision whereby the Notes will be equally and ratably secured with any and all other obligations thereby secured, such security to be pursuant to an agreement reasonably satisfactory to the Required Holders and, in any such case, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of the Notes may be entitled under applicable law, of an equitable Lien on such property;

 

(j)                                     any extensions, renewals or replacements of any Lien permitted by the preceding subparagraphs (f), (g) and (h) of this Section 11.5, provided that (i) no additional property shall be encumbered by such Liens, (ii) the unpaid principal amount of the Debt or other obligations secured thereby shall not be increased on or after the date of any extension, renewal or replacement, and (iii) at such time and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; or

 

(k)                                  Liens securing Priority Debt of any Obligor or any Subsidiary, provided that the aggregate principal amount of any such Priority Debt shall be permitted by Section 11.4 and, provided further that no such Liens under this Section 11.5(k) may secure any obligations under the Bank Credit Agreement.

 

11.6.                     Sales of Assets. The Obligors will not, and will not permit any Subsidiary to, sell, lease or otherwise dispose of any substantial part (as defined below) of the assets of the Obligors and their Subsidiaries (including without limitation the sale or transfer of assets in a sale and leaseback transaction or a securitization transaction or a sale of equity interest in any Subsidiary); provided, however, that any Obligor or any Subsidiary may sell, lease or otherwise dispose of assets constituting a substantial part of the assets of the Obligors and its Subsidiaries if such assets are sold in an arm’s-length transaction and, at such time and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and an amount equal to the net proceeds received from such sale, lease or other disposition shall be used within 365 days of such sale, lease or disposition, in any combination:

 

(a)                                  to acquire productive assets used or useful in carrying on the business of the Obligors and their Subsidiaries and having a value at least equal to the value of such assets sold, leased or otherwise disposed of; or

 

(b)                                 to prepay or retire Senior Debt of Ultimate Parent and/or its Subsidiaries, provided that (i) Ultimate Parent shall offer to prepay each outstanding Note in a principal amount which equals the Ratable Portion for such Note, and (ii) any such prepayment of the Notes shall be made at par, together with accrued interest thereon to the date of such prepayment, but without the payment of the Make-Whole Amount. Any offer of prepayment of the Notes pursuant to this Section 11.6 shall be given to each holder of the Notes by written notice that shall be delivered not less than fifteen (15) days and not more than sixty (60) days prior to the proposed prepayment date. Each such notice shall state that it is given pursuant to this Section and that the offer set forth in such notice must be accepted by such holder in

 

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writing and shall also set forth (i) the prepayment date, (ii) a description of the circumstances which give rise to the proposed prepayment and (iii) a calculation of the Ratable Portion for such holder’s Notes. Each holder of the Notes which desires to have its Notes prepaid shall notify Ultimate Parent in writing delivered not less than five (5) Business Days prior to the proposed prepayment date of its acceptance of such offer of prepayment. Prepayment of Notes pursuant to this Section 11.6 shall be made in accordance with Section 9.3 (but without payment of the Make-Whole Amount).

 

As used in this Section 11.6, a sale, lease or other disposition of assets shall be deemed to be a “substantial part” of the assets of Ultimate Parent and its Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by Ultimate Parent and its Subsidiaries during the period of 12 consecutive months ending on the date of such sale, lease or other disposition, exceeds 10% of the book value of Consolidated Total Assets, determined as of the end of the fiscal year immediately preceding such sale, lease or other disposition; provided that there shall be excluded from any determination of a “substantial part” (i) any sale or disposition of assets in the ordinary course of business of the Obligors and their Subsidiaries, (ii) any transfer of assets from any Obligor to any other Obligor or any Subsidiary or from any Subsidiary to any Obligor or a Subsidiary, provided that, in each case, if the transferor is an Obligor or a Guarantor and the transferee is not another Obligor or another Guarantor, such transfer shall be deemed to be included in any determination of a “substantial part” unless, in accordance with the provisions of Section 10.8 or Section 10.11, such transferee shall have become obligated as a Guarantor under the Guaranty set forth in Section 14, and (iii) any sale or transfer of property acquired by any Obligor or any Subsidiary after the Amendment No. 2 Effective Date to any Person within 365 days following the acquisition or construction of such property by any Obligor or any Subsidiary if such Obligor or such Subsidiary shall concurrently with such sale or transfer, lease such property, as lessee.

 

11.7.                     Merger and Consolidation. The Obligors will not, and will not permit any of their Subsidiaries to, consolidate with or merge with any other Person or convey, transfer or lease substantially all of their assets in a single transaction or series of transactions to any Person; provided that:

 

(a)                                  any Subsidiary of an Obligor may (i) consolidate with or merge with, or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to, (x) an Obligor or a Subsidiary so long as in any merger or consolidation involving an Obligor, the Obligor shall be the surviving or continuing corporation or (y) any other Person so long as the survivor is a Subsidiary, or (ii) convey, transfer or lease all of its assets in compliance with the provisions of Section 11.6;

 

(b)                                 any Obligor may consolidate with or merge with, or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to, any other Obligor so long as (i) in any merger or consolidation involving Ultimate Parent, Ultimate Parent shall be the surviving or continuing corporation, and (ii) in any merger or consolidation involving the Company, if the Company is not the surviving or continuing corporation, such surviving or continuing corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement of the Company and the Notes (pursuant to such agreements and

 

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instruments as shall be reasonably satisfactory to the Required Holders), and such surviving or continuing corporation shall have caused to be delivered to each holder of Notes (A) an opinion of nationally recognized independent counsel, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and (B) an acknowledgment from each Guarantor that its respective Guaranty under Section 14 continues in full force and effect; and

 

(c)                                  the foregoing restriction does not apply to the consolidation or merger of Ultimate Parent with, or the conveyance, transfer or lease of substantially all of the assets of Ultimate Parent in a single transaction or series of transactions to, any Person so long as:

 

(1)                                  the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of Ultimate Parent as an entirety, as the case may be (the “Successor Corporation”), shall be a solvent entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia;

 

(2)                                  if Ultimate Parent is not the Successor Corporation, such Successor Corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), and the Successor Corporation shall have caused to be delivered to each holder of Notes (A) an opinion of nationally recognized independent counsel, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and (B) an acknowledgment from HOT-Barbados and each Guarantor that its respective Guaranty under Section 14 continues in full force and effect; and

 

(3)                                  immediately after giving effect to such transaction no Default or Event of Default would exist.

 

11.8.                     Nature of Business. The Obligors and their Subsidiaries will not engage in any business, if, as a result, when taken as a whole, the general nature of the business of the Obligors and their Subsidiaries would be substantially changed from the general nature of the business conducted by the Obligors and their Subsidiaries on the Amendment No. 2 Effective Date.

 

11.9.                     Transactions with Affiliates. The Obligors will not and will not permit any Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than an Obligor or another Subsidiary), except in the ordinary course and upon fair and reasonable terms that are not materially less favorable to such Obligor or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

 

11.10.              Terrorism Sanctions Regulations. The Obligors will not and will not permit any Subsidiary to (a) become a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of

 

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the Anti Terrorism Order or (b) knowingly engage in any dealings or transactions with any such Person.

 

(h)                                 Amendment to Section 12. Section 12 of the Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

 

“12.                    EVENTS OF DEFAULT.

 

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

 

(a)                                  any Obligor defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

 

(b)                                 any Obligor defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or

 

(c)                                  any Obligor defaults in the performance of or compliance with any term contained in Section 11 beyond any period of grace or cure period provided with respect thereto; or

 

(d)                                 any Obligor defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 12) and such default is not remedied within (i) 30 days after the earlier of (A) a Responsible Officer obtaining actual knowledge of such default or (B) any Obligor receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this paragraph (d) of Section 12) or (ii) five (5) Business Days with respect to any default of Section 10.11; or

 

(e)                                  the Guaranty in Section 14 ceases to be a legally valid, binding and enforceable obligation or contract of any Guarantor thereunder (other than upon release of any Guarantor from the Guaranty in accordance with Section 14.3(h) hereof), or any Guarantor thereunder or any Affiliate by, through or on account of any such Person, challenges the validity, binding nature or enforceability of such Guaranty; or

 

(f)                                    any representation or warranty made in writing by or on behalf of any Obligor or any Guarantor or by any officer of any Obligor or any Guarantor in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or

 

(g)                                 (i) any Obligor or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or prepayment premium or interest (in the payment amount of at least $100,000) on any Debt other than the Notes that is outstanding in an aggregate principal amount of at least $20,000,000 beyond any period of grace provided with respect thereto, or (ii) any Obligor or any Subsidiary is in default in the performance of or compliance with any term of any instrument, mortgage, indenture or other agreement relating to any Debt other than the Notes in an aggregate principal amount of at least

 

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$20,000,000 or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared, due and payable or one or more Persons has the right to declare such Debt to be due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), any Obligor or any Subsidiary has become obligated to purchase or repay Debt other than the Notes before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $20,000,000 or one or more Persons have the right to require any Obligor or any Subsidiary to purchase or repay such Debt; or

 

(h)                                 any Obligor, any Material Subsidiary or any Guarantor (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

 

(i)                                     a court or governmental authority of competent jurisdiction enters an order appointing, without consent by any Obligor, any of its Material Subsidiaries or any Guarantor, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of any Obligor, any of its Material Subsidiaries or any Guarantor, or any such petition shall be filed against any Obligor, any of its Material Subsidiaries or any Guarantor and such petition shall not be dismissed within 60 days; or

 

(j)                                     a final judgment or judgments at any one time outstanding for the payment of money aggregating in excess of $20,000,000 are rendered against one or more of any Obligor, its Subsidiaries or any Guarantor and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or

 

(k)                                  if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under Section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified any Obligor or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $20,000,000, (iv) any Obligor or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax

 

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provisions of the Code relating to employee benefit plans, (v) any Obligor or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) any Obligor or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that could increase the liability of any Obligor or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect.

 

As used in Section 12(k), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in Section 3 of ERISA.”

 

(i)                                     Amendment to Section 13.1 (Acceleration). Section 13.1 of the Agreement is hereby amended by deleting the references therein to paragraphs (g) and (h) of Section 12 and replacing them with references to paragraphs (h) and (i), respectively, of Section 12.

 

(j)                                     Addition to Section 14.3 (General Provisions Relating to The Guaranty). Section 14.3 of the Agreement is hereby amended by the addition of the following as a new paragraph (h):

 

“(h)                           The holders of the Notes agree to discharge and release any Guarantor, other than any Guarantor who is also an Obligor, from this guaranty upon the written request of the Company, provided that (i) such Guarantor has been released and discharged (or will be released and discharged concurrently with the release of such Guarantor under this guaranty) as an obligor and guarantor under and in respect of each Bank Credit Agreement and the Company so certifies to the holders of the Notes in a certificate of a Responsible Officer, (ii) at the time of such release and discharge, the Company shall deliver a certificate of a Responsible Officer to the holders of the Notes stating that no Default or Event of Default exists, and (iii) if any fee or other form of consideration is given to any holder of Debt of the Company as consideration for or as an inducement to consenting to the release and discharge of such Guarantor as an obligor or guarantor of such Debt, the holders of the Notes shall receive equivalent consideration for granting their consent to the release and discharge of such Guarantor from this guaranty.”

 

(k)                                  Amendment to Schedule B (Defined Terms). Schedule B of the Agreement is hereby amended as follows:

 

(i)                                     by deleting each of the following defined terms in its entirety and replacing it with the corresponding new defined term specified below:

 

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period, plus, to the extent deducted in computing such Consolidated Net Income and without duplication, (a) depreciation and amortization expense for such period, (b) Consolidated Interest Expense for such period, (c) income tax expense for such period, and (d) other non-cash charges for such period, all as determined in accordance with GAAP. For purposes of calculating Consolidated EBITDA for any period of four consecutive quarters, if during such period Ultimate Parent or any Subsidiary shall have acquired or disposed of any Person or acquired or disposed of all or substantially

 

11

 

all of the operating assets of any Person, Consolidated EBITDA for such period shall be calculated after giving pro forma effect thereto as if such transaction occurred on the first day of such period.

 

“Consolidated Net Worth” means the consolidated stockholder’s equity of Ultimate Parent and its Subsidiaries, as defined according to GAAP, less the sum of (i) minority interests and (ii) Restricted Investments in excess of 10% of stockholders’ equity of Ultimate Parent and its Subsidiaries.

 

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America, provided that for purposes of determining compliance with the covenants set out in this Agreement, any election by the Company or any other Obligor to measure an item of Debt using fair value (as permitted by Statement of Financial Accounting Standards Nos. 157 and 159) shall be disregarded and such determination shall be made by valuing indebtedness at 100% of the outstanding principal thereof.

 

“Guarantors” means Ultimate Parent, HOT-Barbados, HOT-Texas, General Partner, Limited Partner and any person executing a joinder pursuant to Section 10.8 and Section 10.11; “Guarantor” means any one of the aforementioned entities.

 

“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

 

(a)                                  to purchase such Debt or obligation or any property constituting security therefor primarily for the purpose of assuring the owner of such Debt or obligation of the ability of any other Person to make payment of the Debt or obligation;

 

(b)                                 to advance or supply funds (i) for the purchase or payment of such Debt or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Debt or obligation;

 

(c)                                  to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Debt or obligation of the ability of any other Person to make payment of the Debt or obligation; or

 

(d)                                 otherwise to assure the owner of such Debt or obligation against loss in respect thereof.

 

In any computation of the Debt or other liabilities of the obligor under any Guaranty, the Debt or other obligations that are the subject of such Guaranty shall be assumed to

 

12

 

be direct obligations of such obligor, provided that the amount of such Debt outstanding for purposes of this Agreement shall not exceed the maximum amount of Debt that is the subject of such Guaranty.

 

“Investments” means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, Debt or other obligations or securities or by loan, advance, capital contribution or otherwise.

 

“Restricted Investments” means all Investments except the following:

 

(a)           current assets arising from the sale of goods and services in the ordinary course of business of Ultimate Parent;

 

(b)           property to be used in the ordinary course of business;

 

(c)           Investments existing on the Amendment No. 2 Effective Date and described in Schedule 11.1;

 

(d)           Investments in obligations issued by the United States of America or an agency thereof, or Canada (or any province thereof), so long as such agency obligations have been unconditionally guaranteed by the United States of America or Canada, as the case may be, provided that such obligations mature within 365 days from the date of acquisition thereof;

 

(e)           Investments in certificates of deposit or banker’s acceptances issued by an Acceptable Bank, provided that such obligations mature within 365 days from the date of acquisition thereof;

 

(f)            Investments in commercial paper which shall have been given one of the highest two ratings by S&P or Moody’s and maturing not more than 270 days from the date of creation thereof;

 

(g)           Investments in Repurchase Agreements;

 

(h)           Investments in one or more Subsidiaries or any Person that becomes a Subsidiary;

 

(i)            Investments in tax-exempt obligations of any state of the United States of America, or any municipality of any such state, in each case which shall have been given one of the highest two ratings by S&P or by Moody’s, provided that such obligations mature within 365 days from the date of acquisition thereof;

 

(j)            Investments in treasury stock or common stock of Ultimate Parent; and

 

(k)           Investments in money market instrument programs which are classified as current assets in accordance with GAAP, which money market instrument programs are administered by an “investment company” regulated under the

 

13

 

Investment Company Act of 1940 and which money market instrument programs hold only Investments satisfying the criteria set forth in clauses (d), (e), (f) and (g) above.

 

As used in this definition of “Restricted Investments”:

 

“Repurchase Agreement” means any written agreement:

 

(a)           that provides for (1) the transfer of one or more United States Governmental Securities in an aggregate principal amount at least equal to the amount of the Transfer Price (defined below) to Ultimate Parent or any of its Subsidiaries from an Acceptable Bank or an Acceptable Broker-Dealer against a transfer of funds (the “Transfer Price”) by Ultimate Parent to such Acceptable Bank or Acceptable Broker-Dealer, and (2) a simultaneous agreement by Ultimate Parent, in connection with such transfer of funds, to transfer to such Acceptable Bank or Acceptable Broker-Dealer the same or substantially similar United States Governmental Securities for a price not less than the Transfer Price plus a reasonable return thereon at a date certain not later than 365 days after such transfer of funds,

 

(b)           in respect of which Ultimate Parent shall have the right, whether by contract or pursuant to applicable law, to liquidate such agreement upon the occurrence of any default thereunder, and

 

(c)           in connection with which Ultimate Parent, or an agent thereof, shall have taken all action required by applicable law or regulations to perfect a Lien in such United States Governmental Securities.

 

“Acceptable Bank” means any bank or trust company (i) which is organized under the laws of the United States of America or any state thereof, (ii) which has capital, surplus and undivided profits aggregating at least $250,000,000, and (iii) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank or trust company) shall have been given a rating of “A” or better by S&P, “A2” or better by Moody’s or an equivalent rating by any other credit rating agency of recognized national standing.

 

“Acceptable Broker-Dealer” means any Person other than a natural person (i) which is registered as a broker or dealer pursuant to the Exchange Act and (ii) whose long-term unsecured debt obligations shall have been given a rating of “A” or better by S&P, “A2” or better by Moody’s or an equivalent rating by any other credit rating agency of recognized national standing.

 

(ii)           by deleting each of the following defined terms in its entirety:

 

“Asset Sale”

 

14

 

“Capital Stock”

 

“Consolidated Fixed Charges” 

 

“Consolidated Indebtedness” 

 

“Consolidated Net Earnings” 

 

“Consolidated Total Capitalization” 

 

“Credit Facility”

 

“EBITDA”

 

“Excess Proceeds”

 

“Fixed Charges”

 

“Hong Kong Office Space” 

 

“Licenses”

 

“Net Cash Proceeds”

 

“Noteholders’ Share”

 

“Replacement Assets”

 

“Revlon Licenses”

 

“Sale-Leaseback Transaction” 

 

“Trigger Amount”

 

“Vidal Sassoon Agreements”

 

(iii)          by adding each of the following defined terms in the appropriate alphabetical position therein:

 

“Additional Covenant” means any affirmative or negative covenant applicable to any of the Helen of Troy Entities or any Subsidiary, the subject matter of which either (i) is similar (or substantially identical) to that of the covenants in Sections 10 and 11 of this Agreement, or related definitions in Schedule B to this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive than those set forth herein or more beneficial to the holder or holders of the Debt created or evidenced by the Proposed Note Purchase Agreement (and such provision shall be deemed an Additional Covenant only to the extent that it is more restrictive or more beneficial) or (ii) is different from the subject matter of the

 

15

 

covenants in Sections 10 and 11 of this Agreement, or related definitions in Schedule B to this Agreement.

 

“Additional Default” means any provision contained in the Proposed Note Purchase Agreement which permits the holder or holders of Debt to accelerate (with the passage of time or giving of notice or both) the maturity thereof or otherwise requires any of the Helen of Troy Entities or any Subsidiary to purchase such Debt prior to the stated maturity thereof and which either (i) is similar (or substantially identical) to the Defaults and Events of Default contained in Section 12 of this Agreement, or related definitions in Schedule B to this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive or has a shorter grace period than those set forth herein or is more beneficial to the holders of such other Debt (and such provision shall be deemed an Additional Default only to the extent that it is more restrictive, has a shorter grace period or is more beneficial) or (ii) is different from the subject matter of the Defaults and Events of Default contained in Section 12 of this Agreement, or related definitions in Schedule B to this Agreement.

 

“Amendment No. 2 Effective Date” means the date on which all conditions to effectiveness set forth in Section 4 of Letter Amendment No. 2 to this Agreement shall have been satisfied.

 

“Bank Credit Agreement” means, collectively and individually, (i) that certain Credit Agreement, dated as of December 30, 2010, among the Company, Ultimate Parent, Bank of America, N.A., as administrative agent, and the other financial institutions party thereto and (ii) that certain Term Loan Credit Agreement, dated as of December 30, 2010, among the Company, Ultimate Parent, Bank of America, N.A., as administrative agent, and the other financial institutions party thereto, in each case, as amended, restated, joined, supplemented, increased or otherwise modified from time to time, and any renewals, extensions, increases or replacements thereof.

 

“Capital Lease Obligation” means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person.

 

“Consolidated Debt” means as of any date of determination the total amount of all Debt of Ultimate Parent and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

 

“Consolidated EBIT” means, for any period, the sum of Consolidated Net Income for such period, plus, to the extent deducted in calculating Consolidated Net Income for such period, the total of (a) Consolidated Interest Expense for such period, (b) income tax expense for such period for Ultimate Parent and its Subsidiaries, all determined in accordance with GAAP, (c) any asset impairment charges incurred during such period, and (d) any write-downs of goodwill or other intangibles during such period.

 

16

 

“Consolidated Interest Expense” means, for any period, the gross interest expense of Ultimate Parent and its Subsidiaries deducted in the calculation of Consolidated Net Income for such period, determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Net Income” means, for any period, the consolidated net income (or loss) of Ultimate Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied.

 

“Debt” means, with respect to any Person, without duplication,

 

(a)           its liabilities for borrowed money;

 

(b)           its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable and other accrued liabilities arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);

 

(c)           its Capital Lease Obligations;

 

(d)           all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and

 

(e)           Guaranties of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof.

 

Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.

 

“Fair Market Value” means, at any time and with respect to any property, the sale value of such property that would be realized in an arm’s-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell), as reasonably determined in the good faith opinion of the board of directors of Ultimate Parent.

 

“Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBIT for such period of Ultimate Parent and its Subsidiaries, to (b) Consolidated Interest Expense for such period of Ultimate Parent and its Subsidiaries, in each case for the items set forth in clauses (a) and (b) for the period of four consecutive fiscal quarters ending on such date.

 

“Letter Amendment No. 2” means that certain Letter Amendment No. 2, Limited Waiver and Limited Consent to Amended and Restated Note Purchase, Guaranty and Master Shelf Agreement, dated as of December 30, 2010.

 

17

 

“Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Debt on such date to (b) Consolidated EBITDA for the period of the four consecutive fiscal quarters most recently ended.

 

“Material Subsidiary” means, at any time, any Subsidiary of Ultimate Parent which, together with all other Subsidiaries of such Subsidiary, accounts for more than (i) 5% of the consolidated assets of Ultimate Parent and its Subsidiaries or (ii) 5% of consolidated revenue of Ultimate Parent and its Subsidiaries.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Obligor” means the Company, HOT-Barbados or Ultimate Parent, and “Obligors” means, collectively, the Company, HOT-Barbados and Ultimate Parent.

 

“Proposed Note Purchase Agreement” means the proposed Note Purchase Agreement expected to be dated on or about January 12, 2011 among Ultimate Parent, the Company, HOT-Barbados and the Purchasers (as defined therein) with respect to the Company’s issuance and sale of $100,000,000 3.90% senior notes due on or about January 12, 2018.

 

“Priority Debt” means (without duplication), as of the date of any determination thereof, the sum of (a) all unsecured Debt of Subsidiaries (including all Guaranties of Debt of the Obligors but excluding (x) Debt owing to any Obligor or any other Subsidiary, (y) Debt outstanding at the time such Person became a Subsidiary, provided that such Debt shall have not been incurred in contemplation of such person becoming a Subsidiary, and (z) all Guaranties of Debt of the Obligors by any Subsidiary which has also guaranteed the Notes), and (b) all Debt of the Obligors and its Subsidiaries secured by Liens other than Debt secured by Liens permitted by subparagraphs (a) through (j), inclusive, of Section 11.5.

 

“Ratable Portion” means, with respect to any Note, an amount equal to the product of (x) the amount equal to the net proceeds being so applied to the prepayment of Senior Debt in accordance with Section 11.6(b), multiplied by (y) a fraction the numerator of which is the outstanding principal amount of such Note and the denominator of which is the aggregate principal amount of Senior Debt of the Company and its Subsidiaries being prepaid pursuant to Section 11.6(b).

 

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

 

“Senior Debt” means, as of the date of any determination thereof, all Consolidated Debt, other than Subordinated Debt.

 

“Specified Subsidiaries” means, collectively, (a) Idelle Labs, Ltd., a Texas limited partnership, (b) OXO International, Ltd., a Texas limited partnership, (c) Helen of Troy Macao Offshore Ltd., a Macao company, (d) KAZ, (e) Kaz USA, Inc., a Massachusetts corporation, and (f) Kaz Canada, Inc., a Massachusetts corporation; “Specified Subsidiary” means any one of the aforementioned entities.

 

18

 

“Subordinated Debt” means all unsecured Debt of any Obligor or any Subsidiary which shall contain or have applicable thereto subordination provisions providing for the subordination thereof to other Debt of such Person (including, without limitation, being subordinated to the obligations of the Obligors or their Subsidiary under this Agreement or the Notes).

 

(l)           Addition of Schedule 11.1 (Existing Investments). A new Schedule 11.1 is added to the Agreement in the form of Schedule 11.1 to this Amendment.

 

(m)         Addition of Schedule 11.5 (Existing Liens). A new Schedule 11.5 is added to the Agreement in the form of Schedule 11.5 to this Amendment.

 

2.           Limited Consent. Subject to the terms and conditions set forth herein, the undersigned holders of Notes hereby consent the Acquisition to the extent consummated, in all material respects, on the terms and conditions set forth in the Merger Agreement. Except as explicitly set forth in this Section 2, nothing herein is intended to affect the continuing obligations of the Helen of Troy Entities to comply with, or the continuing rights of the holders with respect to, any provision of the Agreement.

 

3.           Representations and Warranties. In order to induce each of the undersigned holders of Notes to enter into this Amendment, the Helen of Troy Entities hereby jointly and severally represent and warrant as follows:

 

(a)                                                                                  The execution, delivery and performance by each of the Helen of Troy Entities of this Amendment, the Agreement as amended hereby and each other document or instrument to be delivered by any of the Helen of Troy Entities pursuant to this Amendment have in each case been duly authorized by all necessary corporate or other organizational action and do not and will not (i) contravene the terms of the certificate of incorporation, the certificate of formation, the bylaws, the partnership agreement or other equivalent organizational documents of any of the Helen of Troy Entities, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any contractual obligation to which any of the Helen of Troy Entities is a party or any order, injunction, writ or decree of any governmental authority binding on any of the Helen of Troy Entities or their respective properties, or (iii) violate any applicable law binding on or affecting any of the Helen of Troy Entities.

 

(b)                                                                                 On and as of the Effective Date, no Default or Event of Default exists under the Agreement, and no default, event of default or potential default or event of default exists under the Bank Credit Agreement.

 

(c)                                                                                  Annex I attached to this Amendment contains (except as noted therein) complete and correct lists of the Subsidiaries of Ultimate Parent, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by Ultimate Parent and each other Subsidiary, and all other Investments of Ultimate Parent and its Subsidiaries

 

19

 

in the equity interests in any other corporation or entity (other than a Subsidiary).

 

4.           Conditions to Effectiveness. This Amendment shall become effective as of the date first written above (the “Effective Date”) when and if:

 

(a)          each of the undersigned holders of the Notes shall have received the following, each to be dated effective as of the Effective Date unless otherwise indicated, and each to be in form and substance satisfactory to such holders and executed and delivered by each of the parties thereto, as applicable:

 

(i)           this Amendment; and

 

(ii)          the Merger Agreement;

 

(b)         the Company shall have paid all reasonable unpaid fees and expenses of the undersigned holders’ counsel, Baker Botts L.L.P.; and

 

(c)          the representations and warranties set forth in Section 3 of this Amendment shall be true and correct as of the date of this Amendment.

 

5.             Miscellaneous.

 

(a)           Effect on Agreement. On and after the Effective Date, each reference in the Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Agreement and each reference in the Notes and all other documents executed in connection with the Agreement to “the Agreement”, “thereunder”, “thereof”, or words of like import referring to the Agreement shall mean the Agreement as amended by this Amendment. The Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.

 

(b)           Counterparts. This Amendment may be executed in any number of counterparts (including those transmitted by facsimile) and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same Amendment. Delivery of this Amendment may be made by facsimile or electronic transmission of a duly executed counterpart copy hereof; provided that any such delivery by electronic transmission shall be effective only if transmitted in .pdf format, .tif format or other format in which the text is not readily modifiable by any recipient thereof.

 

(c)           Expenses. The Company and each Guarantor confirms its agreement, pursuant to Section 17.1 of the Agreement, to pay promptly all expenses of the undersigned holders of Notes related to the preparation, negotiation, reproduction, execution and delivery of this Amendment and all matters contemplated hereby and thereby, including, without limitation, all fees and expenses of counsel to such holders (including all fees and expenses of such counsel incurred in connection with the delivery of the Specified Subsidiaries’ Guaranties pursuant to Section 10.11 of the Agreement).

 

20

 

(d)           Governing Law. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.

 

{Remainder of this page blank; signature pages follow.}

 

21

 

If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning at least one counterpart to the Company at 1 Helen of Troy Plaza, El Paso, Texas 79912, Attention: Chairman of the Board and Secretary.

 

	
 
  	
Very truly yours,
  
	
 
  	
 
  
	
 
  	
HELEN OF TROY L.P.,
  
	
 
  	
a Texas limited partnership
  
	
 
  	
 
  
	
 
  	
 
  	
By:
  	
HELEN OF TROY NEVADA CORPORATION, a Nevada corporation, its General Partner
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
 
  	
Title:
  	
Chairman, CEO & President
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
HELEN OF TROY LIMITED,
 a Bermuda company
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
Title:
  	
Chairman, CEO & President
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
HELEN OF TROY LIMITED,
 a Barbados company
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
Title:
  	
Chairman, CEO & President
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
HELEN OF TROY TEXAS CORPORATION,
 a Texas corporation
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
Title:
  	
Chairman, CEO & President
  
						

 

Signature Page to Letter Amendment No. 2 and Limited Consent

 

 

	
 
  	
HELEN OF TROY NEVADA CORPORATION,
 a Nevada corporation
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
Title:
  	
Chairman, CEO & President
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
HOT NEVADA INC., a Nevada corporation
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
/s/ Gerald J. Rubin
  
	
 
  	
Name:
  	
Gerald J. Rubin
  
	
 
  	
Title:
  	
Chairman, CEO & President
  

 

 

	
Agreed to as of the date first above written:
  	
 
  
	
 
  	
 
  
	
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
  	
 
  
	
 
  	
 
  
	
 
  	
 
  
	
By:
  	
/s/ Randall M. Kob
  	
 
  
	
 
  	
Vice President
  	
 
  

 

Signature Page to Letter Amendment No. 2 and Limited ConsentExhibit 10.1

 

KODIAK OIL & GAS CORP.

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”), effective January 1, 2011 (“Effective Date”), is entered into by and between Lynn A. Peterson (“Executive”) and Kodiak Oil & Gas (USA) Inc., a Colorado corporation (“Employer”), and Kodiak Oil & Gas Corp., a Yukon Territory corporation (“Company”).

 

RECITALS

 

WHEREAS, the Board of Directors of Employer and Company desire to provide for the continued employment of Executive, and Executive is willing to commit himself to continue to serve Employer and Company, on the terms and conditions herein provided, although this Agreement may be amended at any time by written agreement among the parties; and

 

WHEREAS, in order to effect the foregoing, Employer, Company and Executive wish to enter into this Agreement on the terms and conditions set forth below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties agree as follows:

 

1.                                      Employment.  Employer hereby employs Executive, and Executive agrees to be employed as the President and Chief Executive Officer  of Employer. Executive will report to the Board of Directors.  Subject to the provisions of this Agreement relating to termination for “Good Reason”, changes may be made from time to time by Employer and Company, in their sole discretion, to the duties, reporting relationships and title of Executive.  Executive will devote his full time and attention to achieving the purposes and discharging the responsibilities of his position.  Executive will comply with all rules, policies and procedures of Employer and Company as modified from time to time, including without limitation, rules and procedures set forth in Employer’s and Company’s employee manuals and handbooks, supervisor’s manuals and operating manuals.  Executive will perform all of Executive’s responsibilities in compliance with all applicable laws and will ensure that the operations that Executive conducts or manages are in compliance with all applicable laws. If Executive dedicates a material amount of his time to any business activity outside of his employment by and service to Company, then Executive shall affirmatively disclose the activity to the Board of Directors of Employer and Company.  During Executive’s employment, Executive shall not engage in any other business activity that, in the reasonable judgment of the Board of Directors of Employer or Company, conflicts with the duties of Executive under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage.

 

2.                                      Term of Employment.  The term of employment (“Term”) shall be for seventeen (17) months from the Effective Date, or May 31, 2012, unless terminated earlier in

 

1

 

accordance with the terms and conditions of this Agreement.  The Term will automatically renew for successive one-year terms on each June 1 thereafter unless and until Employer or Employee provides notice not less than forty five (45) days in advance of the expiration of the current Term, i.e., on or before April 16, that Employer or Employee will not accept a renewal of the Term for another year.

 

3.                                   Compensation. For the duration of Executive’s employment hereunder, Executive will be entitled to compensation that will be computed and paid pursuant to the following subparagraphs.

 

3.1.                         Base Salary. Employer will pay to Executive a base salary (“Base Salary”) at an annual rate of Three Hundred and Fifty Thousand Dollars ($350,000), subject to withholdings and paid ratably in accordance with Employer’s payroll policies, so long as Executive remains employed by Employer.  Executive’s Base Salary will be reviewed annually during the term of Executive’s employment and may be adjusted based on such review.  Any adjustment of the Base Salary shall be in the sole discretion of Employer and Company, provided, however, that the Base Salary may not be reduced by Employer or Company below the then current base salary established by this Section 3.1, as subsequently modified, without Executive’s consent, except that Executive’s Base Salary may be reduced by up to fifteen percent (15%) without Executive’s consent if and to the extent that all other senior executive officers are taking a corresponding percentage reduction because of the financial or operational needs of Employer or Company.

 

3.2                            Discretionary Cash Bonus.  Executive shall be eligible for a discretionary cash bonus (“Cash Bonus”) equal to an amount as determined by the Compensation and Nominating Committee of the Board of Directors of Company (the “Committee”), in its discretion.  The Cash Bonus shall be based on the Committee’s evaluation of the condition of Company’s business, the results of operations, Executive’s individual performance for the relevant period, the satisfaction by Executive or Company of goals that may be established by the Committee, or any combination thereof, as the Committee may decide in its sole discretion.  Each Cash Bonus shall be paid on such date as determined by the Committee, but no later than seventy five (75) days after the end of the calendar year in which the Cash Bonus is approved by the Committee.

 

3.3                            Equity-based Compensation.  Executive shall be entitled to participate in equity-based compensation programs offered by Company in accordance with the terms of any equity-based plans that may be adopted by Company.  Executive understands that as of the date of this Agreement, Company’s only equity-based plan is the 2007 Stock Incentive Plan (the “Plan”).

 

3.4                            Performance Standards.  Executive, Company and Employer agree that a portion of Executive’s Cash Bonus and equity-based compensation may be based on the Committee’s evaluation of Executive’s and Company’s achievement of performance goals that may be established by the Committee after discussion with Executive and other executive officers of Company.  If and to the extent that the Committee does not establish such

 

2

 

performance goals, Executive’s Cash Bonus and equity based compensation will be wholly within the discretion of the Committee.

 

4.                                   Other Benefits.

 

4.1                            Certain Benefits.  Executive will be eligible to participate in all employee benefit programs or plans established by Employer and Company that are applicable to management personnel on a basis commensurate with Executive’s position and in accordance with Employer’s policies from time to time, but nothing herein shall require the adoption or maintenance of any such program or plan.  Employer shall also provide to Executive one parking space near Company’s corporate office during the term of this Agreement, and Employer will pay all related parking fees.

 

4.2                            Vacations, Holidays and Expenses.  For the duration of Executive’s employment hereunder, Executive will be provided such holidays, sick leave and vacation as Employer makes available to its management level employees generally. Employer will reimburse Executive in accordance with Company policies and procedures for reasonable expenses necessarily incurred in the performance of duties hereunder within thirty (30) days of Employer’s receipt of all appropriate receipts, vouchers, or other documentation, and indicating the specific business purpose for each such expenditure.

 

4.3                            Right of Set-off.  By accepting this Agreement, Executive consents to a deduction from any amounts Employer or Company owes Executive from time to time (including but not limited to amounts owed to Executive as Base Salary or other compensation, fringe benefits, or vacation pay), to the extent of the amounts Executive owes to Employer or Company as a set-off, provided, however, that no such set-off will be made with respect to any amount that is subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code’) if it would result in an impermissible acceleration or deferral of the payment date of such amounts for purposes of applicable rules under Section 409A of the Code (“Section 409A”).  Whether or not Employer elects to make any set-off in whole or in part, if Employer does not recover by means of set-off the full amount Executive owes it or Company, calculated as set forth above, Executive agrees to pay the unpaid balance to Employer immediately upon demand or as soon as permitted by Section 409A.

 

4.4                            Section 409A Matters.

 

(a)                                  This Agreement, and the benefits and compensation provided pursuant to this Agreement, are intended to comply with or qualify for an exemption from Section 409A and this Agreement and all incentive compensation awards referred to herein shall be construed and administered accordingly. It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax or interest imposed pursuant to Section 409A.  To the extent such potential payments or benefits are subject to Section 409A and are or could become subject to additional tax or interest imposed pursuant to Section 409A, the parties shall cooperate to amend this Agreement with the goal of giving Executive the economic benefits described herein in a manner that does not result in such tax or

 

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interest being imposed.  Executive shall, at the request of Employer, take any reasonable action (or refrain from taking any action) required to comply with any correction procedure promulgated pursuant to Section 409A.

 

(b)                                 If a payment that could be made under this Agreement would be subject to additional taxes and interest under Section 409A, Employer in its sole discretion may accelerate some or all of a payment otherwise payable under the Agreement to the time at which such amount is includible in the income of Executive, provided that such acceleration shall only be permitted to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(vii) and the amount of such acceleration does not exceed the amount permitted under Treasury Regulation §1.409A-3(j)(vii).

 

(c)                                  No payment under this Agreement shall be made at a time earlier than that provided for in this Agreement unless such payment is (i) an acceleration of payment permitted to be made under Treasury Regulation §1.409A-3(j)(4) or (ii) a payment that would otherwise not be subject to additional taxes and interest under Section 409A.

 

(d)                                 The right to each payment described in this Agreement shall be treated as a right to a series of separate payments and a separately identifiable payment for purposes of Section 409A.

 

(e)                                  The definition of Good Reason in Section 6.1 herein is intended to constitute “good reason” as such term is used in Treas. Reg. §1.409A-1(n)(2) and shall be interpreted and construed accordingly, and to the maximum extent permitted by Section 409A and guidance thereunder, a termination for Good Reason shall be an “involuntary separation from service” as such term is used in Treas. Reg. §1.409A-1(n).  For purposes of any payments under this Agreement that are to be made with reference to the date of termination of Executive’s employment, “termination” (or any similar term) shall mean “separation from service” with Employer within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder, and Executive shall be considered to have terminated employment with Employer when, and only when, Executive incurs a “separation from service” with Employer within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.

 

(f)                                    To the extent any payments of Severance Pay pursuant to Section 5.2 or 6.2: (i) are paid during the period from the date of Executive’s separation from service through March 15th of the year following such separation from service, such payments are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and thus payable pursuant to the “short term deferral rule” set forth in Section 1.409A-1(b)(4) of the Treasury Regulations; (ii) are paid following said March 15, such payments are intended to constitute separate payments (for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations) made upon an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations, to the maximum extent permitted by said provision; and (iii) are in excess of the amounts specified in clauses (i) and (ii) of this paragraph, shall (unless otherwise exempt under Treasury Regulations) be considered separate

 

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payments subject to the distribution requirements of Section 409A, including the requirement of Section 409A(2)B)(i) of the Code that certain payments upon separation from service be delayed until 6 months following separation from service.  If, on the date of Executive’s separation from service, Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code and applicable administrative guidance issued thereunder, and as a result of such separation from service Executive would receive any payment that would be subject to delay of payment under such guidance, then any such payment shall be made on the date that is the earliest of: six(6) months after Executive’s separation from service, (ii) Executive’s date of death, or (iii) such other earliest date for which such payment will not be subject to additional tax or interest imposed by Section 409A.

 

(g)                                 Notwithstanding anything in this Agreement to the contrary, no Change of Control shall be deemed to have occurred under this Agreement unless such Change of Control constitutes a “change in control event” as such term is used in Treas. Reg. §1.409A-3(i)(5)(i).

 

(h)                                 The preceding provisions shall not be construed as a guarantee by Employer or Company of any particular tax effect with respect to amounts paid to Executive pursuant to this Agreement.  Neither Employer nor Company, nor any of their officers, directors, agents or affiliates, shall be obligated, directly or indirectly, to Executive or any other person for any taxes, penalties, interest or like amounts that may be imposed on Executive or any other person on account of any amounts payable under this Agreement or upon failure to comply with the Code.

 

5.                                   Termination Or Discharge By Employer.

 

5.1                           For Cause.  Employer and Company will have the right to immediately terminate Executive’s employment and this Agreement for “Cause.”  “Cause” shall be determined in the sole discretion of the Committee, and shall mean Executive: (i) has materially failed or refused to satisfactorily perform his assigned duties and job responsibilities, (ii) has willfully engaged in conduct that he knew or should have known would be materially injurious to Employer or Company, (iii) has committed an act of fraud, embezzlement or a willful and material breach of a fiduciary duty to Employer or Company, (iv) has breached Section 7, 8 or 9 of this Agreement, (v) has been convicted of (or pleaded no contest to) any crime that (A) is a felony, (B) involves fraud or dishonesty or (C) impugns the character or reputation of Executive, Company or Employer, (vi) has violated or caused the Company to violate any law that is harmful to the business reputation of Employer or Company.  A failure to terminate Executive’s employment and this Agreement immediately upon the occurrence of any “Cause” shall not be deemed a waiver of Employer’s or Company’s right to do so at a later time for such “Cause.”

 

The foregoing is an exclusive list of the acts or omissions that shall be considered “Cause” for purposes of the termination of Executive’s services by Employer.  If and to the extent that such act or omission may be “cured” by Executive, then Company and Employer shall provide Executive with one (1) month advance written notice detailing the basis for the

 

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proposed termination of services for Cause, and during the one-month period after Executive has received such notice, Executive shall have an opportunity to cure such Cause event(s) before the termination for Cause is finalized, during which notice period Executive shall continue to receive the compensation and benefits provided by this Agreement.  It is acknowledged and agreed by the parties that many of such acts or omissions, including but not limited to those listed in clauses (iii), (iv), (v) and (vi) above, may not be curable.  The parties further agree that it shall be within the sole discretion of the Committee to determine whether any such acts or omissions may be cured and, if so, what actions would constitute an adequate cure of such Cause for purposes of canceling the termination for Cause of Executive’s employment and this Agreement.

 

Upon termination of Executive’s employment hereunder for Cause, Executive will have no rights to any unvested benefits or any other unearned compensation or payments after the termination date.

 

5.2                            Without Cause, Death, or Disability.  Employer may terminate Executive’s employment under this Agreement without Cause and without advance notice; provided, however, that if the termination by Employer without Cause (including for this purpose a termination of employment resulting from Employer’s timely notice of non-renewal of the Term for any year so long as Executive was both willing to renew the Term and able to continue providing services) that does not occur within twelve (12) months after a Change of Control (as defined in Section 6.2 below), Employer will pay severance compensation (“Severance Pay”) to Executive equal to Executive’s Base Salary at the rate in effect on the termination date for a period of eighteen (18) months.  If Executive’s employment is terminated by Employer as a result of Executive’s disability, or if termination occurs as a result of Executive’s death, irrespective of whether there has been a Change of Control (as defined below) prior to such termination, then Executive’s Severance Pay shall also be equal to Executive’s Base Salary then in effect for a period of eighteen (18) months.  No Severance Pay will be paid, however, until Executive has executed, with all applicable revocation periods having expired, a separation and release agreement in favor of Employer, Company and their respective affiliates that is reasonably satisfactory to Employer and Company (“Release”).  The parties agree that a Release shall be executed not more than forty-five (45) days after the termination of Executive’s employment.

 

(a)                                Upon termination of Executive’s employment on account of death, Severance Pay will be payable in a lump sum sixty (60) days after the termination of Executive’s employment, subject to all appropriate deductions and withholdings and, notwithstanding any other requirements of this Agreement, a Release signed by Executive is not required prior to such lump sum payment.

 

(b)                               Upon any other termination of Executive’s employment by Employer without Cause not following a Change of Control (as defined below) or a termination by Employer for disability not following a Change of Control, Severance Pay will be payable, subject to Section 4.4(f) of this Agreement, in equal installments on Employer’s regular payroll dates over the twelve (12) month period following Executive’s execution of a Release, subject to all appropriate deductions and withholdings.  However, the first payment shall be made on the

 

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date sixty (60) days after termination of employment (or the earliest date under Section 4.4(f) of this Agreement) and shall include all amounts that would otherwise be payable before such date.

 

(c)                                Upon termination of Executive’s employment without Cause not following a Change of Control (as defined below), and not on account of death or disability, all unvested incentive compensation previously granted to Executive (whether equity awards, cash payments or employee benefits, including but not limited to any prospective or implied Cash Bonus for a partial year) will immediately terminate and be of no further force or effect, subject only to the provisions of any Award Agreement (as defined in the Plan) relating to post-termination exercise of stock options awarded under the Plan; provided, however, that, notwithstanding the foregoing, any such compensation that constitutes an incentive stock option intended to be qualified under Section 422 of the Code shall, upon termination of Executive’s employment without Cause not following a Change of Control, and not on account of death or disability, be treated exclusively in accordance with the provisions of the applicable award agreement.

 

(d)                               Upon any termination of Executive’s employment on account of death or disability, all unvested stock options and restricted stock, if any, that were previously granted to Executive under the Plan will immediately become fully vested and no longer subject to any restrictions on ownership or exercise.  With respect to other forms of incentive compensation awarded under the Plan, including, but not limited to, restricted stock units and performance awards, the terms of the applicable award agreement will govern vesting and payment dates upon termination of Executive’s employment on account of death or as a result of disability.  With respect to unvested incentive compensation not granted under the Plan, whether cash payments, employee benefits or a Cash Bonus for a partial year, the Committee shall determine, in its sole discretion, whether to vest or provide any payment or compensation on account thereof, provided however, that if any such incentive compensation is subject to Section 409A, no acceleration of vesting or payment will occur if it would result in additional taxes and interest under Section 409A.

 

(e)                                For purposes of this Agreement, “disability” means the incapacity or inability of Executive, whether due to accident, sickness or otherwise, as determined by a medical doctor acceptable to the Board of Directors of Employer and Company and confirmed in writing by such doctor, to perform the essential functions of Executive’s position under this Agreement, with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on Employer or Company will be required) for an aggregate of ninety (90) days during any period of one hundred eighty (180) consecutive days, or such longer period as may be required under applicable law.

 

(f)                                  Notwithstanding the foregoing, in the event of a termination of Executive’s employment by Employer without Cause during the twelve (12) month  period following a “Change of Control,” as defined in Section 6.2 below, then the Severance Pay to Executive provided by Section 6.2 shall govern.

 

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6.                                   Termination By Executive.

 

6.1.                         Termination by Executive for Good Reason.  Executive shall have the right to terminate his employment for “Good Reason.”  “Good Reason” shall mean any one of the conditions set forth below, so long as: Executive has provided written notice to Employer of the existence of such condition within ninety (90) days of its inception, or Executive’s actual knowledge of its inception; Employer has not remedied the condition caused by the occurrence within thirty (30) days of such notice; and Executive terminates his employment within sixty (60) days after the end of such thirty (30) day period. The following conditions will constitute “Good Reason”:

 

(i) Employer’s or Company’s material breach of this Agreement or any other material written agreement between Executive and Employer or Executive and Company;

 

(ii) the assignment to Executive (without Executive’s consent) of any duties that are substantially inconsistent with or materially diminish Executive’s position, as such position was defined on either the Effective Date of this Agreement or immediately prior to a Change of Control (as defined below); or

 

(iii) a requirement that Executive (without Executive’s consent) be based at any office or location more than 50 miles from Executive’s primary work location immediately prior to a Change of Control (as defined below), not including reasonable travel by Executive consistent with the travel obligations of similar executives holding similar positions with similar responsibilities; or

 

(iv) Employer’s refusal to renew this Agreement at the time it would otherwise expire, provided that at such time Executive was willing to renew the Agreement and was able to continue providing services.

 

If Executive terminates his employment for Good Reason, then compensation shall be provided to Executive in such amounts and on such terms as set forth in Section 5.2 of this Agreement for a termination without Cause that does not occur within twelve (12) months after a Change of Control (as defined below), subject to Executive’s obligation to provide a Release, provided, however, that if Executive terminates his employment for Good Reason during the twelve (12) month period following a Change of Control, then the Severance Pay to Executive provided under Section 6.2 shall govern.

 

6.2                            Termination Following a Change of Control. For purposes of this Agreement, a “Change of Control” shall mean any of the following:

 

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing more than 50% of the total voting power represented by Company’s then outstanding voting securities;

 

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(ii) A merger or consolidation of Company whether or not approved by the Board of Directors of Company, other than a merger or consolidation that would result in the voting securities of Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted or into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of Company or such surviving entity (or the parent of any such surviving entity) outstanding immediately after such merger or consolidation, or a change in the ownership of all or substantially all of Company’s assets to a person not related (within the meaning of income tax Regulations Section 1.409A-3(i)(5)(vii)(b)) to the Company; or

 

(iii) The replacement during any 12-month period of a majority of the members of the Board of Directors of Company with directors whose appointment or election was not endorsed by a majority of the members before the date of the appointment or election.

 

If Executive’s employment is terminated by Employer or Company without Cause or if Executive terminates his employment for Good Reason during the 12-month  period following a Change of Control, Employer shall pay Executive, on the date that is sixty (60) days following the date of such termination, but subject to Section 4.4(f) of this Agreement, a lump sum payment equal to Executive’s Base Salary at the rate in effect on the termination date for a period of twenty four (24) months plus (b) an amount equal to the most recent annual Cash Bonus paid to Executive pursuant to Section 3.2 of this Agreement or the average Cash Bonus paid to Executive under this Agreement and prior employment agreements, whichever is greater, subject only to withholdings and deductions required by law and Executive’s execution of a Release not more than 45 days following the termination of Executive’s employment.  If Executive’s employment is terminated by Company as a result of Executive’s disability during the 12 month period following a Change of Control, Employer shall pay Executive in a lump sum payment on the date that is sixty (60) days following the date of such termination, the amount of Severance Pay calculated under Section 5.2 hereof, subject only to withholdings and deductions required by law and Executive’s execution of a Release not more than 45 days following the termination of Executive’s employment.

 

Immediately upon the occurrence of a Change of Control, all of Executive’s equity-based incentive compensation shall immediately vest irrespective of whether Executive’s employment continues or is terminated thereafter, except to the extent that such compensation is subject to Section 409A and such acceleration would violate Section 409A or subject Executive to additional taxes or interest under Section 409A.

 

7.                                   Covenant Not To Compete.  A restricted period (“Restricted Period”) shall exist during Executive’s continued employment hereunder and during the twelve (12) month period following termination of Executive’s employment for any reason other than a termination without Cause, termination by Executive for Good Reason, or termination for Disability, in which case the Restricted Period is six (6) months.  During the Restricted Period, Executive shall not, without the prior written consent of Company, directly or indirectly engage in or become associated with a Competitive Activity.  For purposes of this Agreement, a “Competitive Activity” means, as of the Termination Date, any business or other endeavor of a

 

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kind being conducted by Company or any of its subsidiaries or affiliates (or demonstrably anticipated by Company or its subsidiaries or affiliates) in a geographic area that is within ten (10) miles of (a) any property that is owned, leased or controlled by Employer or Company at any time during the six (6) months preceding the Competitive Activity or, if Executive’s employment has been terminated, during the last six (6) months of the Term, or (b) any oil or gas prospect that Employer or Company is evaluating or in which either is seeking to acquire an interest at any time during the six (6) months preceding the Competitive Activity or, if Executive’s employment has been terminated, during the last six (6) months of the Term.  Executive shall be considered to have become “associated with a Competitive Activity” if Executive becomes directly or indirectly involved as an owner, principal, employee, officer, director, independent contractor, representative, stockholder, financial backer, agent, partner, advisor, lender, or in any other individual or representative capacity with any individual, partnership, corporation or other organization that is engaged in a Competitive Activity. Notwithstanding the foregoing, Executive may make and retain investments during the Restricted Period, for investment purposes only, in less than 5% of the outstanding capital stock of any publicly-traded corporation engaged in a Competitive Activity if Executive is not otherwise affiliated with such corporation.  Executive’s ownership of interests in oil and gas producing properties (whether a working interest, royalty interest, or other interest) that (a) were acquired prior to the date hereof or (b) are subsequently acquired with the knowledge and approval of Company or Employer will not be considered a Competing Activity.

 

Employer, Company and Executive agree that this provision does not impose an undue hardship on Executive, is not injurious to the public and is necessary to protect the business of Employer, Company and their respective affiliates.  The parties also agree that the nature of Executive’s responsibilities with Employer and Company under this Agreement require Executive to have access to Confidential Information (as defined below), which is valuable and confidential to Company and Employer, that the scope of this Section 7 is reasonable in terms of length of time and geographic areas covered, and that adequate consideration supports this Section 7, including the consideration provided for in this Agreement.

 

If any of the covenants in this Section 7 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it shall be interpreted to extend over the maximum period of time for which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, and enforced as so interpreted, all as determined by such court in such action. Executive acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

 

8.                                   Non-solicitation.  Executive agrees that (i) during the Restricted Period, Executive shall not, without the prior written consent of Company, directly or indirectly, hire, recruit or solicit the employment or services of (whether as an employee, officer, director, agent, consultant or independent contractor), or encourage to change such person’s relationship with Company or any of its subsidiaries or affiliates, any employee, officer, director, agent, consultant

 

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or independent contractor of Company or any of its subsidiaries or affiliates, provided, however, that a general solicitation of the public for employment shall not constitute a solicitation hereunder so long as such general solicitation is not designed to target, or does not have the effect of targeting, any employee, officer, director, agent, consultant or independent contractor of Company or any of its subsidiaries or affiliates; (ii) Executive will not convey any information (whether confidential or otherwise) or trade secrets about any employees, officers, directors, agents, consultants and independent contractors of Company or any of its subsidiaries or affiliates to any other person; and (iii) during the Restricted Period, Executive shall not, without the prior written consent of Company, directly or indirectly, solicit, attempt to do business with, or do business with any customers of, suppliers to, business partners of or business affiliates of Company or any of its subsidiaries or affiliates (such customers, suppliers, partners and affiliates, collectively, “Trade Relationships”) on behalf of any entity engaged in a Competitive Activity, or encourage (regardless of who initiates the contact) any Trade Relationship to use the services of any competitor of Company or its subsidiaries or affiliates, or encourage any Trade Relationship to change its relationship with Company or its subsidiaries or affiliates.

 

9.                                   Confidentiality.  Executive acknowledges that, during the course of Executive’s employment with Employer, Executive may have developed Confidential Information (as defined below) for Employer or Company, and Executive may have learned of Confidential Information developed or owned by Employer, Company or its affiliates or entrusted to Employer, Company or its affiliates by others.  Executive agrees that Executive will not, directly or indirectly, use any Confidential Information or disclose it to any other person or entity, except as otherwise required by law.  Executive further agrees not to retain copies of any Confidential Information.

 

“Confidential Information” means any and all information relating to Company or Employer that is not generally known by the public or others with whom Company or Employer does (or plans to) compete or do business, as well as comparable information relating to any of Company’s affiliates. Confidential Information includes, but is not limited to, information relating to the terms of this Agreement, as well as Company’s and Employer’s business, technology, practices, products, marketing, sales, services, finances, strategic opportunities, internal strategies, legal affairs (including pending litigation), the terms of business relationships not yet publicly known, intellectual property and the filing or pendency of patent applications. Confidential Information also includes, but is not limited to, comparable information that Employer or Company may receive or has received belonging to customers, suppliers, consultants and others who do business with Employer or Company, or any of Employer’s or Company’s affiliates.

 

“Confidential Information” does not include any information that is: (i) shown to have been developed independently by Executive prior to Executive’s employment with Employer; or (ii) required by a judicial tribunal or similar governmental body to be disclosed under law (provided that Executive have first promptly notified Employer of such disclosure requirement and have cooperated fully with Employer and Company (at Employer’s expense) in exhausting all appeals

 

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10.                            Property of Employer.  Upon any termination of Executive’s employment, Executive agrees to return to Employer and Company any and all records, files, notes, memoranda, reports, work product and similar items, and any manuals, drawings, sketches, plans, tape recordings, computer programs, disks, cassettes and other physical representations of any information, relating to Employer or Company, or any of their respective affiliates, whether or not constituting Confidential Information.  Executive also agrees to return to Employer and Company any other property belonging to Employer or Company, including but not limited to any laptop computer, no later than the date of Executive’s termination from employment for any reason. Executive acknowledges and agrees that retaining any copies of Confidential Information will be deemed to be the misappropriation of the property of Company or Employer, as the case may be.

 

11.                            Section 280G Safe Harbor Cap.  If it shall be determined that any payment or distribution or any part thereof of any type to or for the benefit of Executive whether pursuant to this Agreement or any other agreement between Executive and Employer or Company, or any person or entity that acquires ownership or effective control of Employer or Company, or ownership of a substantial portion of Employer’s assets (within the meaning of Section 280G of the Code whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or any other agreement, (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), if the net after-tax payment to Executive after reducing Executive’s Total Payments to the Safe Harbor Cap is greater than the net after-tax (including the Excise Tax) payment to Executive without such reduction.

 

The reduction of the amounts payable hereunder, if applicable, shall be made by reducing payments that trigger the excise tax, and such reductions will be first the payment made pursuant to the Agreement and then to payments pursuant to any other agreements that are not subject to Section 409A of the Code, and finally to payments pursuant to any other agreements that are subject to Section 409A of the Code, provided that Executive shall have no ability to designate the order of such reductions.  All mathematical determinations, and all determinations as to whether any of the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code), that are required to be made under this Section 11, including determinations as to whether the Total Payments to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm selected by Employer or Company (the “Accounting Firm”).

 

If the Accounting Firm determines that the Total Payments to Executive shall be reduced to the Safe Harbor Cap (the “Cutback Payment”) and it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that the Cutback Payment is in excess of the limitations provided in this Section 11 (such excess amount hereinafter referred to as an “Excess Payment”), such Excess Payment shall be deemed for all purposes to be an overpayment to Executive made on the date such Executive received the Excess Payment.  Employer or Executive, as applicable,

 

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shall notify the other within 30 days of its receipt of such final determination of the amount of the Excess Payment, along with a copy of the final determination, and Executive shall repay the Excess Payment amount to Employer within 30 days of such notification; provided, however, if Executive shall be required to pay an Excise Tax by reason of receiving such Excess Payment (regardless of the obligation to repay Employer), Executive shall provide Employer with written evidence of such requirement to pay an Excise Tax amount, and shall then be required to repay the Excess Payment reduced by such Excise Tax amount (or if already paid by Executive, Employer shall reimburse Executive within 10 days of proof of payment).

 

12.                               Repayment Provisions.  If Company is required to prepare an accounting restatement due to noncompliance with any financial reporting requirement under United States securities laws, then Company will have the right to require Executive to reimburse Employer for (a) any bonus or other incentive-based or equity-based compensation received by Executive from Employer during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial documents embodying such financial reporting requirement, (b) any profits realized from the sale of securities of Company during such 12-month period and (c) such other incentive-based compensation as may be specified by applicable law, regulation or listing standard.

 

13.                            Remedies.  Notwithstanding other provisions of this Agreement regarding dispute resolution, Executive agrees that Executive’s violation of any of Sections 7, 8, 9 or 10 of this Agreement would cause Employer and Company irreparable harm that would not be adequately compensated by monetary damages and that an injunction may be granted by any court or courts having jurisdiction, restraining Executive from violation of the terms of this Agreement, upon any breach or threatened breach of Executive of the obligations set forth in any of the Sections 7, 8, 9 or 10.  The preceding sentence shall not be construed to limit Employer or Company from any other relief or damages to which it may be entitled as a result of Employee’s breach of any provision of this Agreement, including Sections 7, 8, 9 or 10. Employee also agrees that a violation of any of Sections 7, 8, 9 or 10 would entitle Employer and Company, in addition to all other remedies available at law or equity, to recover from Executive any and all funds, including, without limitation, wages, salary and profits, which will be held by Executive in constructive trust for Employer or Company, received by Executive in connection with such violation.

 

14.                            Arbitration.  If any dispute shall arise between Executive and Employer or Executive and Company in connection with this Agreement and such dispute cannot be resolved amicably by the parties, the same shall be conclusively and finally resolved by binding arbitration.  Any party hereto may commence an arbitration proceeding by providing written notice to the other party requesting the arbitration of an unresolved dispute. Each such dispute, if any, shall be submitted to an arbitrator acceptable to both parties (for this purpose Employer and Company shall be deemed to one party).  If Executive on the one hand, or Company and Employer on the other, refuses or neglects to agree on the appointment of an arbitrator within 30 days after receipt of written notice from the other party requesting the other party to do so, then the Judicial Arbiter Group, Inc., Denver, Colorado (www.jaginc.com) may appoint such arbitrator. The arbitrator shall be experienced in the subject matter of the dispute.  Except as

 

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otherwise specifically set forth herein, the arbitrators shall conduct the arbitration in accordance with the rules of the Judicial Arbiter Group, Inc.  The decision in writing of the arbitrator, when filed with the parties hereto, shall be final and binding on both parties.  Judgment may be entered upon the final decision of the arbitrator in any court having jurisdiction.  Such arbitration shall take place in Denver, Colorado.

 

15.                            Fees.  Unless otherwise agreed, the prevailing party will be entitled to its costs and attorneys’ fees incurred in any arbitration or litigation relating to the interpretation or enforcement of this Agreement.

 

16.                            Disclosure.  Executive agrees to fully and completely reveal the terms of this Agreement to any future employer or potential employer of Executive and authorizes Employer and Company, at their election, to make such disclosure.

 

17.                            Representation of Executive.  Executive represents and warrants to Employer and Company that Executive is free to enter into this Agreement and has no contract, commitment, arrangement or understanding to or with any party that restrains or is in conflict with Executive’s performance of the covenants, services and duties provided for in this Agreement.  Executive agrees to indemnify Employer and Company and to hold them harmless against any and all liabilities or claims arising out of any unauthorized act or acts by Executive that, the foregoing representation and warranty to the contrary notwithstanding, are in violation, or constitute a breach, of any such contract, commitment, arrangement or understanding.  Executive further represents and warrants to Employer and Company that Executive has consulted with his legal, tax, accounting, and investment advisors with respect to the advisability of entering into this agreement to the extent that Executive has determined such consultation to be necessary or appropriate.

 

18.                            Assignability. During Executive’s employment, this Agreement may not be assigned by either party without the written consent of the other; provided, however, that Employer and Company may assign their rights and obligations under this Agreement without Executive’s consent to a successor by sale, merger or liquidation, if such successor carries on Company’s business substantially in the form in which it is being conducted at the time of the sale, merger or liquidation.  This Agreement is binding upon Executive, Executive’s heirs, personal representatives and permitted assigns, on Company, its successors and assigns, and on Employer, its successors and assigns.

 

19.                            Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
IF TO EMPLOYER TO:
  	
KODIAK OIL & GAS (USA) INC.

1625 Broadway, Suite 250

Denver, Colorado 80202

Attention: Chief Financial Officer
  

 

14

 

	
IF TO COMPANY TO:
  	
KODIAK OIL & GAS CORP.

1625 Broadway, Suite 250

Denver, Colorado 80202

Attention: Chairman of the Compensation and Nominating Committee
  
	
 
  	
 
  
	
IF TO EXECUTIVE TO:
  	
Lynn A. Peterson

1625 Broadway, Suite 250

Denver, Colorado 80202
  

 

20.                            Severability.  If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law.  If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties.

 

21.                            Waivers.  No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construed as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law.

 

22.                            Governing Law.  The validity, construction and performance of this Agreement shall be governed by the laws of the State of Colorado without regard to the conflicts of law provisions of such laws.

 

23.                            Entire Agreement.  This instrument contains the entire agreement of the parties with respect to the relationship among Executive, Company and Employer and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this Agreement related to the terms and conditions of Executive’s employment. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have duly signed and delivered this Agreement as of the day and year first above written.

 

	
 
  	
 
  	
EMPLOYER:
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
KODIAK OIL & GAS (USA) INC.
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
/s/ James P. Henderson
  
	
 
  	
 
  	
James P. Henderson, Chief Financial Officer
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
COMPANY:
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
KODIAK OIL & GAS CORP.
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By: :
  	
/s/ James P. Henderson
  
	
 
  	
 
  	
James P. Henderson, Chief Financial Officer
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
EXECUTIVE:
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
/s/ Lynn A. Peterson
  
	
 
  	
 
  	
Name: Lynn A. Peterson
  

 

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