Document:

Exhibit 10.4

 

AMENDED AND RESTATED
 EXECUTIVE SEVERANCE AGREEMENT

 

This Amended and Restated Executive Severance Agreement (“Agreement”) is entered into, effective as of November 17, 2014 (the “Effective Date”), by and between Steven C. Anaya (“Executive”) and Cantel Medical Corp. (“Company”).

 

Background

 

A.                                    The Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders.  The Company believes that, to attract and retain experienced and valuable key executive employees, it is important and prudent to provide such executives with fair compensation should their employment be terminated under certain circumstances, including but not limited to change in control situations.

 

B.                                    The Company wishes to encourage the Executive to devote his full time and attention to the performance of his management responsibilities and to assist the Board and other management employees in evaluating business options and pursuing the best interests of the Company’s shareholders without being influenced by the uncertainty of his own employment situation.

 

C.                                    In furtherance of the foregoing, the Company and the Executive previously entered into an Amended and Restated Executive Severance Agreement which, among other things, sets forth the compensation and benefits arrangements payable in connection with a termination of employment of the Executive.   The Board has determined that it continues to be in the best interests of the Company and its stockholders that this Agreement and the Executive Severance Agreements of other executives of the Company be maintained in order to ensure that the Company will have the continued dedication of the executives throughout their tenure.  The Company and the Executive desire to amend and restate the Agreement as more fully set forth herein.

 

In consideration of the premises, the Executive’s employment by the Company on an at-will basis, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive and the Company agree as follows:

 

Agreement

 

1.                                      Defined Terms.  Throughout this Agreement, when the first letter of a word (or the first letter of each word in a phrase) is capitalized, the word or phrase shall have the meaning specified in Appendix A (beginning on page 16).

 

2.                                      Term.  This initial Term of this Agreement will continue through July 31, 2016; provided, however, that beginning on August 1, 2015, and on the first day of each following August, the Term of this Agreement shall automatically be extended by one year, unless either the Company or the Executive shall have provided notice to the other at least six (6) months before such date that the Term shall not be extended.  Notwithstanding the preceding provisions of this Section, (i) if a Change in Control occurs during the Term of this Agreement, such Term (other than with respect to the provisions of Section 4) shall not end before the second anniversary of the Change in Control; provided, however, this sentence shall apply only to the first Change of Control 

 

 

while this Agreement is in effect; and (ii) termination of this Agreement shall not affect the obligations of the Company hereunder on account of the Executive’s Termination of Employment during the Term.

 

3.                                      Termination of Employment; Resignation of Officer and Director Positions.  The Executive is an at-will employee.  The Company may Terminate the Executive’s Employment at any time, for any reason whatsoever or for no reason, subject to its payment obligations under this Section and, if applicable, Section 4 or 5.  The Executive may voluntarily Terminate his Employment at any time by providing at least twenty (20) days’ prior notice to the Company.  Regardless of whether the Executive’s Termination of Employment is voluntary or involuntary, the Executive shall resign from any and all of his director positions and offices with the Company and each Related Employer, effective as of his Termination Date.  Upon Termination of Employment, the Executive shall be entitled to the following, in addition to any benefits payable under Section 4 or 5:

 

(a)                                 Any earned but unpaid base salary through his Termination Date, plus any accrued and unused paid time off (PTO) due to the Executive under the Company’s PTO program through his Termination Date, which amounts shall be paid to the Executive not later than the payment date for the payroll period next following his Termination Date.

 

(b)                                 Provided that the Executive applies for reimbursement in accordance with the Company’s established reimbursement procedures (within the period required by such procedures but under no circumstances later than ninety (90) days after his Termination Date), the Company shall pay the Executive any reimbursements to which he is entitled under such procedures not later than the payment date for the payroll period next following the date on which the Executive applies for reimbursement.

 

(c)                                  Any benefits (other than severance) payable to the Executive under any of the Company’s cash or equity incentive compensation plans, employee benefit plans or programs, the Company’s 2006 Equity Incentive Plan and any successor thereto (the “Equity Plan”) and the agreements issued thereunder (collectively, “Benefit Plans”), to the extent not provided for herein, shall be payable in accordance with the provisions of those plans or programs. This Agreement and all such Benefit Plans that cover the Executive shall be construed in a consistent manner.  In the event of conflict between the terms and conditions of this Agreement and any of the Benefit Plans as they relate to the Executive and any particular payment or award, the order of precedence shall be as follows: (i) this Agreement; (ii) any Benefit Plan that constitutes an employment agreement; (iii) any Benefit Plan that constitutes an annual or long term incentive plan; (iv) the Equity Plan; and (v) any agreement issued under the Equity Plan; provided, however, that no effect shall be given to any provision of this Agreement over any provision of the Equity Plan if and to the extent such provision could not have been approved by the Board as an amendment to the Equity Plan pursuant to Section 14(a) of the Company’s 2006 Equity Incentive Plan (or any corresponding provision of any successor Equity Plan) without stockholder approval or the consent of the Executive, unless and until such approval or consent has been obtained.

 

4.                                      Non-Change of Control Severance and Other Benefits.

 

(a)                                 Subject to (i) the Executive’s timely filing of a duly executed Release in accordance with Section 19, (ii) such Release becoming effective and irrevocable in accordance 

 

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with its terms not later than sixty (60) days after the Executive’s Termination of Employment (the last day of such 60-day period being referred to as the “Release Effectiveness Date”), (iii) the provisions of this Section 4, and (iv) the limitations provided in Section 10, the Company shall provide the Executive with the payments and benefits set forth in this Section, if at any time during the Term other than during a Change in Control Coverage Period either (i) the Company Terminates the Executive’s Employment (other than a termination for Cause, Unacceptable Performance, Disability, or death pursuant to Section 7), or (ii) the Executive voluntarily Terminates his Employment for Adequate Reason pursuant to Section 9.  Notwithstanding the preceding provisions of this Subsection, the Executive shall not be entitled to benefits pursuant to this Section 4, if he is entitled to benefits pursuant to Section 5.

 

(b)                                 As soon as administratively feasible (and not more than ten (10) days) after the Company’s receipt of the duly executed Release and the Release becoming effective and irrevocable, the Company shall pay to the Executive a single lump sum payment equal to the product of (i) the Executive’s Monthly Base Salary Rate as of his Termination Date multiplied by (ii) 12.(1)  For purposes of determining the Executive’s Monthly Base Salary Rate pursuant to the preceding sentence, any reduction to the Executive’s salary during the six-month period preceding his Termination of Employment (other than in connection with an “across-the-board” reduction in salary of all senior executives of the Company with the approval of the Company’s CEO) shall be disregarded.  Notwithstanding the foregoing, if the Release Effectiveness Date falls in the calendar year next succeeding the calendar year of the Termination Date, the lump sum payment will be made no earlier than the first business day of such next succeeding calendar year.

 

(c)                                  If the Termination Date of the Executive occurs subsequent to the last day of a Fiscal Year for which the Executive has not been paid his Bonus, then the Executive shall be entitled to his full Bonus for such Fiscal Year to the extent otherwise earned under the terms of the Bonus Plan for such Fiscal Year (as if the Executive’s employment had not Terminated prior to the next Bonus payment date). Such amount shall be paid to the Executive not later than 2 1⁄2 months following the close of such Fiscal Year.  Amounts payable under this Subsection (c) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.

 

(d)                                 The Company shall pay to the Executive a pro-rated Bonus for the Fiscal Year in which the Termination Date occurs, determined by multiplying (i) the amount of the Executive’s full Bonus for such Fiscal Year that would have been earned under the terms of the Bonus Plan for such Fiscal Year (as in effect immediately prior to the Termination Date) if the Executive’s employment had continued through the next Bonus payment date, by (ii) a fraction, (A) the numerator of which is the number of full or partial months of such Fiscal Year in which the Executive was employed by the Company, and (B) the denominator of which is 12.  Such amount shall be paid to the Executive not later than 2 1⁄2 months following the close of such Fiscal Year.  Notwithstanding the foregoing, if no Bonus Plan has been finalized (i.e., approved by the Compensation Committee and disseminated to the Executive) for the Fiscal Year in which such Termination Date occurs either prior to the commencement of such Fiscal Year or within three months following the commencement of such Fiscal Year, then the Bonus for such Fiscal Year payable under this Subsection (d) will be determined in accordance with the first sentence of 

 

(1)   In the event Executive, on the Termination Date, has completed at least 15 years of employment with the Company or any of its Subsidiaries, this number shall be 18.

 

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Section 5(b)(2) (as if the pro rata Bonus payment under that Section was required).  To the extent that a Bonus is payable to the Executive under Subsection (c) or (d) of this Section 4 for any Fiscal Year, the Executive shall not also be entitled to any Bonus payment for such Fiscal Year under the terms of the applicable Bonus Plan.  Amounts payable under this Subsection (d) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.

 

(e)                                  If the Executive is eligible for and properly elects Continuation Coverage for himself and/or one or more qualified beneficiaries (as defined in ERISA Section 607(3)) under the Company’s medical plan, the Company shall pay the premiums for such coverage (or reimburse the Executive for such premiums) for the twelve (12) month period following the Executive’s Termination of Employment (or such shorter period during which such person is eligible for Continuation Coverage).  Such payments or reimbursements shall constitute taxable income of the Executive to the extent required by law.

 

(f)                                   The Company shall pay the cost of outplacement services incurred by the Executive during the twelve (12) month period following his Termination of Employment and provided by a firm of the Executive’s choice, up to a total of Twenty Thousand Dollars ($20,000).  Payment for outplacement expenses shall be made by the Company promptly following the Company’s receipt of appropriate invoices documenting such expenses.

 

(g)                                  Notwithstanding the preceding provisions or any other provisions herein to the contrary, if the Executive’s Employment is Terminated during a Change in Control Coverage Period, either by the Executive for Good Reason or by the Company for any reason other than for Cause or death, then the Executive shall be entitled to the payments and benefits that would have been provided to the Executive pursuant to Section 5 if the Company had Terminated his Employment without Cause during a Change in Control Coverage Period (reduced by any payments or benefits provided to him pursuant to this Section 4).  In such a case, the Executive shall not be required to execute an additional Release, and any Release requirement specified in Section 5 shall be deemed satisfied on the Change in Control Date.

 

(h)                                 Notwithstanding the preceding provisions of this Section, if the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i), the Company shall promptly deliver written notice to the Executive advising him of the application of such Code Section. Solely to the extent necessary to avoid adverse personal tax consequences to the Executive under Code Section 409A, payments otherwise required to be made to the Executive pursuant to this Section 4 shall be delayed to the earlier of (i) six months and one day after the Executive’s Termination Date, or (ii) the Executive’s death.  For purposes of this Subsection, the Executive’s Date of Termination shall be interpreted in a manner that is consistent with the term “separation from service” as defined in Code Section 409A and the Treasury Regulations thereunder. Interest shall accrue on unpaid amounts delayed under this subparagraph at the prime rate from time to time in effect at JP Morgan Chase Bank or any successor bank commencing from the date that such amounts would otherwise have been due under the applicable provision.

 

5.                                      Change of Control Severance and Other Benefits.

 

(a)                                 Subject to (i) the Executive’s timely filing of a duly executed Release in accordance with Section 19, (ii) such Release becoming effective and irrevocable in accordance 

 

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with its terms not later than the Release Effectiveness Date (i.e., the sixtieth day after the Executive’s Termination of Employment), (iii) the provisions of this Section 5, and (iv) the limitations provided in Section 10, the Company shall provide the Executive with the payments and benefits set forth in this Section, if during a Change in Control Coverage Period, (A) the Company Terminates the Executive’s Employment (other than a termination for Cause or death pursuant to Section 7), or (B) the Executive voluntarily Terminates his Employment for Good Reason pursuant to Section 9.  Amounts payable pursuant to this Section shall be subject to the limitations and reimbursement expressly provided in this Agreement.

 

(b)                                 As soon as administratively feasible (and not more than five (5) business days) after the Company’s receipt of the duly executed Release and the Release becoming effective and irrevocable in accordance with its terms, the Company shall pay to the Executive a single lump sum payment in an amount equal to the sum of the following:

 

(1)                                 the product of (i) two (2) times (ii) the sum of (A) the Executive’s Annual Base Salary, at the greater of the rate in effect on the Change in Control Date or the Termination Date (disregarding any reduction in the rate of the Executive’s salary during the six-month period immediately preceding his Termination of Employment), plus (B) the greater of (I) 50%(2) of the amount determined under clause (A) of this Subsection (b)(1) or (II) the average of the annual Bonuses paid to the Executive for the two most recent Fiscal Years preceding the Fiscal Year in which the Executive’s Employment is Terminated for which an annual Bonus was paid to the Executive.  Amounts payable under this Subsection (b)(1) will be deemed severance; and

 

(2)                                 a pro-rata Bonus amount, determined by multiplying (i) the greater of (A) 50%(3) of the amount determined under clause (A) of the preceding Subsection (b)(1) or (B) the average of the annual Bonuses paid to the Executive for the two most recent Fiscal Years preceding the Fiscal Year in which the Executive’s Employment is Terminated for which an annual Bonus was paid to the Executive, by (ii) a fraction, (A) the numerator of which is the number of full or partial months since the end of the prior Fiscal Year in which the Executive has been employed by the Company, and (B) the denominator of which is 12.  However, if the Executive did not receive the annual Bonus he would have earned under the Bonus Plan for the Fiscal Year immediately preceding his Termination Date if his employment had continued through the Bonus payment date, then the numerator shall be the number of full or partial months in which the Executive was employed by the Company since the beginning of such immediately preceding Fiscal Year to the Termination Date. To the extent that a Bonus is payable to the Executive under this Subsection (b)(2) for the Fiscal Year in which the Termination Date occurs or such immediately preceding Fiscal Year, the Executive shall not also be entitled to any Bonus payment for such Fiscal Year under the terms of the applicable Bonus Plan. Amounts payable under this Subsection (b)(2) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.

 

(2),(3)  This percentage represents the Executive’s bonus percentage in effect as of the date of this Agreement.  Such percentage shall increase automatically at any time the Executive’s bonus percentage is increased by the Company’s Compensation Committee of the Board (or by the Board itself).  Such increase shall be to the new approved bonus percentage as documented in resolutions of the Compensation Committee set forth in a written consent or minutes of proceedings of the Committee (or Board).

 

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Notwithstanding the foregoing, if the Release Effectiveness Date falls in the calendar year next succeeding the calendar year of the Termination Date, the lump sum payment will be made no earlier than the first business day of such next succeeding calendar year.

 

(c)                                  If the Executive is eligible for and properly elects Continuation Coverage for himself and/or one or more qualified beneficiaries (as defined in ERISA Section 607(3)) under the Company’s medical plan, the Company shall pay the premiums for such coverage (or reimburse the Executive for such premiums) for the twenty-four (24) month period following the Executive’s Termination of Employment (or such shorter period during which such person is eligible for Continuation Coverage).  Such payments or reimbursements shall constitute taxable income of the Executive to the extent required by law.

 

(d)                                 For the twenty-four (24) month period following the Executive’s Termination of Employment, the Company shall continue to provide term life insurance coverage substantially the same as that provided for the Executive immediately before his Termination Date (if any).

 

(e)                                  The Company shall pay the cost of outplacement services incurred by the Executive during the twelve (12) month period following his Termination of Employment and provided by a firm of the Executives’ choice, up to a total of Twenty Thousand Dollars ($20,000).  Payment for outplacement expenses shall be paid directly by the Company promptly following the Company’s receipt of appropriate invoices documenting such expenses.

 

(f)                                   Notwithstanding the preceding provisions of this Section, if the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i), the Company shall promptly deliver written notice to the Executive advising him of the application of such Code Section. Solely to the extent necessary to avoid adverse personal tax consequences to the Executive under Code Section 409A, payments otherwise required to be made to the Executive pursuant to this Section 5 shall be delayed to the earlier of (i) six months and one day after the Executive’s Termination Date, or (ii) the Executive’s death.  For purposes of this Subparagraph, the Executive’s Termination Date shall be interpreted in a manner that is consistent with the term “separation from service” as defined in Code Section 409A and the Treasury Regulations thereunder. Interest shall accrue on unpaid amounts delayed under this subparagraph at the prime rate from time to time in effect at JP Morgan Chase Bank or any successor bank commencing from the date that such amounts would otherwise have been due under the applicable provision.

 

6.                                      Provisions Relating to Parachute Payments.

 

(a)                                 Anything in this Agreement to the contrary notwithstanding, if payments and benefits to or for the benefit of the Executive, whether pursuant to this Agreement or otherwise, would (in the determination of the independent nationally recognized certified accounting firm retained by the Company for this purpose (the “Accounting Firm”)) result in total Parachute Payments (as defined in Subsection (d)(i) below) to the Executive with a Present Value (as defined in Subsection (d)(ii) below) equal to or greater than one hundred percent (100%) of the Parachute Payment Limit, then the Company shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof.  The Executive may then elect, in his sole discretion, which and how much of the aggregate payments or benefits payable to (or for the benefit of) the Executive shall be eliminated or reduced as long as after such election the Present Value of the 

 

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aggregate Parachute Payments is equal to or less than the Parachute Payment Limit minus One ($1.00) Dollar, provided that the Executive shall not be permitted to elect to reduce any payment or benefit that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A.  The Executive shall advise the Company in writing of his or her election within ten (10) days of receipt of such notice.  If no such election is made by the Executive within such ten (10) day period or if the election by the Executive does not sufficiently reduce the payments or benefits so that the Present Value of the aggregate Parachute Payments is equal to or less than the Parachute Payment Limit minus One (1.00) Dollar, the Company shall reduce the payments or benefits (or the remaining payments or benefits) in the following order so that after the Executive’s election (if timely made) and the Company’s reduction, the Present Value of the aggregate Parachute Payments is equal to the Parachute Payment Limit minus One ($1.00) Dollar: (1) by reducing amounts payable pursuant to Section 5 (e) of this Agreement, then (2) by reducing amounts payable pursuant to Section 5(b)(1) of this Agreement, then (3) by reducing amounts payable in respect of equity awards subject to performance-based vesting criteria, then (4) by reducing amounts payable pursuant to Section 5(d) of this Agreement, then (5) by reducing amounts payable pursuant to Section 5(c) of this Agreement, and then (6) by reducing amounts payable in respect of equity awards subject to time-based vesting criteria.  All determinations made by the Accounting Firm under this Section 6 shall be binding upon the Company and the Executive and shall be made within sixty (60) days of the Executive’s Termination Date.

 

(b)                                 As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company that should not have been made (“Overpayment”) or that additional payments that will not have been made by the Company could have been made (“Underpayment”), in each case consistent with a calculation for purposes of reducing the aggregate Parachute Payments to be equal to the Parachute Payment Limit less One ($1.00) Dollar. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive that the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be repaid by the Executive to the Company together with interest at the Applicable Federal Rate provided for in Code Section 7872(f)(2); provided, however, that no such repayment shall be required if and to the extent such payment would not either reduce the amount on which the Executive is subject to taxation under Code Section 4999 or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the Applicable Federal Rate provided for in Code Section 7872(f)(2).

 

(c)                                  All fees and expenses of the Accounting Firm in implementing the provisions of this Section 6 shall be borne by the Company.

 

(d)                                 The following terms shall have the following meanings for purposes of this Section 6:

 

(i)                                     A “Parachute Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Code Section 280G(b)(2)) to (or for the benefit of) the Executive, whether paid or payable pursuant to his Agreement or otherwise, which is 

 

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contingent on a change (A) in the ownership or effective control of the Company, or (B) in the ownership of a substantial portion of the assets of the Company (within the meaning of Code Section 280G(b)(2)); and

 

(ii)                                  “Present Value” of a payment or benefit shall mean the present value as of the date of the Change in Control for purposes of Code Section 280G of the portion of such payment or benefit that constitutes a “parachute payment” under Code Section 280G (b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Code Section 4999 of the Code will apply with respect to such payment or benefit; and

 

(iii)                               “Parachute Payment Limit” means three (3) times the “base amount”, as defined by Code Section 280G(b)(3) and the Treasury Regulations thereunder.

 

7.                                      Termination of Employment by the Company for Cause, Unacceptable Performance, Disability, or Death.

 

(a)                                 The Company may cause a Termination of the Executive’s Employment for Disability at any time.  To do so, the Board must provide the Executive with a notice of termination specifying the Termination Date and the circumstances constituting Disability.

 

(b)                                 The Company may cause a Termination of the Executive’s Employment for Unacceptable Performance at any time during the Term other than during a Change in Control Coverage Period. To do so, the Executive must be provided with a notice of termination from either (i) the Board or (ii) the Chief Executive Officer of the Company with approval of the Board, which in either case specifies the Termination Date and the specific act(s) or failure(s) constituting Unacceptable Performance.  If the notice identifies an act or failure constituting Unacceptable Performance, it shall be accompanied by a resolution duly adopted by a majority of the entire membership of the Board and, if the act or failure is subject to correction under the definition of Unacceptable Performance and related definitions in this Agreement, the notice shall also specify the period during which the act or failure must be corrected, which in no event shall be less than thirty (30) days.  If the Board reasonably determines that the Executive has not corrected the act or failure in all material respects within the required correction period, the Board or the Chief Executive Officer must then provide a second notice of termination stating the reasons for the termination and the Termination Date, and the Executive’s Employment shall terminate on such Date.

 

(c)                                        The Company may cause a Termination of the Executive’s Employment for Cause at any time.  To do so, the Executive must be provided with a notice of termination from either (i) the Board or (ii) the Chief Executive Officer of the Company with approval of the Board, which in either case specifies the Termination Date and the specific act(s) or failure(s) constituting Cause.  If the notice identifies an act or failure constituting Cause, it shall be accompanied by a resolution duly adopted by not less than a majority of the entire membership of the Board (after reasonable notice to the Executive and an opportunity for the Executive, together with legal counsel, to be heard by the Board), finding, in the reasonable opinion of the Board, that one or more of the events of Cause has occurred and specifying in reasonable detail the acts or omissions constituting Cause.  If the act or failure constituting Cause is subject to correction under the definition of Cause and related definitions in this Agreement, the notice shall also specify the period during which the act or failure must be corrected, which in no event shall be less than thirty 

 

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(30) days.  If the Board acting in good faith determines that the Executive has not corrected the act or failure in all material respects within the required correction period, the Board or the Chief Executive Officer must then provide a second notice of termination stating the reasons for the termination and the Termination Date, and the Executive’s Employment shall terminate on such Date.

 

(d)                                       If the Executive dies before a Termination of Employment, his Employment shall terminate automatically on the date of his death.

 

(e)                                        In the case of a Termination of Employment for Cause or Unacceptable Performance pursuant to this Section, the Executive shall not be entitled to benefits or payments pursuant to Section 4 or 5; provided, however, if the Company causes a Termination of the Executive’s Employment for Unacceptable Performance and the Termination Date of such termination occurs during a Change in Control Coverage Period, then such termination shall be deemed a Termination of the Executive’s Employment “other than a termination for Cause” under Section 5(a) and thereby obligate the Company to provide the Executive with the payments and benefits set forth in Section 5.

 

(f)                                         In the case of a Termination of Employment due to Disability (at any time during the Term other than during a Change in Control Coverage Period) or death pursuant to this Section, the Company shall continue to pay to the Executive, if living, or other person or persons as the Executive may from time to time designate in writing as the beneficiary of such payments, the Annual Base Salary in effect at the time when such Disability or death occurred, during the three-month period following such Disability or death.  The Company shall also pay a pro rated Bonus for the Fiscal Year in which the Termination Date occurs, determined by multiplying (i) the amount of the Executive’s full Bonus for such Fiscal Year that would have been earned under the terms of the Bonus Plan for such Fiscal Year (as in effect immediately prior to the Termination Date) if the Executive’s employment had continued through the next Bonus payment date, by (ii) a fraction, (A) the numerator of which is the number of full or partial months in which the Executive was employed by the Company in such Fiscal Year, and (B) the denominator of which is 12.  Notwithstanding the foregoing, if no Bonus Plan has been finalized (i.e., approved by the Compensation Committee and disseminated to the Executive) for the Fiscal Year in which such Termination Date occurs either prior to the commencement of such Fiscal Year or within three months following the commencement of such Fiscal Year, then the Bonus for such Fiscal Year payable under this Subsection (f) will be determined in accordance with the first sentence of Section 5(b)(2) (as if the pro rata Bonus payment under that Section was required).  In addition, if the Termination Date occurs subsequent to the last day of a Fiscal Year for which the Executive has not been paid his Bonus, then the Executive shall be entitled to his Bonus for such Fiscal Year to the extent otherwise earned under the terms of the Bonus Plan for such Fiscal Year (as if the Executive’s employment had not Terminated prior to the next Bonus payment date).  Such Bonus amounts shall be paid to the Executive not later than 2 1⁄2 months following the close of the Fiscal Year in which the Termination Date occurs.  To the extent that a Bonus is payable to the Executive under this Section 7(f) for any Fiscal Year, the Executive will not also be entitled to a Bonus payment for such Fiscal Year under the terms of the applicable Bonus Plan.  Amounts payable under this Subsection (f) will be deemed payments attributable to the Executive’s employment prior to or on the Termination Date and not as severance.  Except for such Annual Base Salary and Bonus, the Company shall have no further obligation pursuant to this Section.

 

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8.                                      Accelerated Vesting of Equity Awards upon Certain Events.

 

(a)                                 In the event of any termination described in Section 4(a) or 5(a) or in the event that the Executive terminates his Employment for Adequate Reason or Good Reason pursuant to Section 9, in any such case prior to the full vesting of stock options or restricted stock then held by the Executive (i.e., the options becoming exercisable in their entirety and the restricted stock ceasing to have any risks of forfeiture), then, effective as of the Termination Date, all such options and restricted stock then held by the Executive will become automatically fully exercisable and all restrictions of such options and restricted stock awards will automatically lapse.  In the event of any termination of the Executive’s Employment as a result of the Executive’s Retirement prior to the full vesting of stock options then held by the Executive, then effective as of the Termination Date, all such stock options will become automatically fully exercisable and all restrictions of such options will automatically lapse.

 

(b)                                 In the event of a termination of the Executive’s Employment pursuant to Section 7 due to death or Disability, in any such case prior to the full vesting of stock options and restricted stock then held by the Executive, all of the Executive’s stock options and restricted stock awards will automatically vest as of the Termination Date.

 

(c)                                  The accelerated vesting provided for in this Agreement in connection with certain Terminations following a Change in Control shall not be deemed to limit any acceleration of vesting that the Executive is entitled to upon a Change in Control under the Company’s Long Term Incentive Plan or any other benefit plan that the Executive is covered by as of the effective time of the Change in Control.

 

(d)                                 Nothing herein shall be deemed to cause the acceleration of the vesting of a Performance Award issued under the Equity Plan.

 

(e)                                  Notwithstanding anything set forth herein, the Company may in its discretion accelerate the vesting of any stock options or restricted stock held by the Executive in the event of a termination of the Executive’s Employment for any reason.

 

9.                                      Resignation by Executive for Adequate Reason or Good Reason.  If an event of Adequate Reason or Good Reason occurs during the Term, the Executive may, at any time within the ninety (90) day period following such event, provide the Company with a notice of termination under Section 4 (in the case of Adequate Reason) or Section 5, if applicable (in the case of Good Reason) specifying the event of Adequate Reason or Good Reason and notifying the Company of his intention to Terminate Employment upon the Company’s failure to correct the event of Adequate Reason or Good Reason (as applicable) within thirty (30) days following receipt of the Executive’s notice of termination.  If the Company fails to correct the event of Adequate Reason or Good Reason (as applicable) and provide the Executive with notice of such correction within such thirty (30) day period, the Executive’s Employment shall terminate as of the end of such period, and the Executive shall be entitled to benefits as provided in Section 3 and Section 4 or 5, as applicable.

 

10.                               Limitation on Payments and Benefits.  Notwithstanding any other provision of this Agreement, payments pursuant to this Agreement shall be subject to the following limitations:

 

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(a)                                 No payment (other than a payment pursuant to Section 3) shall be made pursuant to this Agreement until the Release has become effective according to its terms.

 

(b)                                 If the Executive intentionally and materially breaches any provision of the Confidentiality and Non-Competition Agreement, and fails to cure such breach (if curable) within thirty (30) days, he shall promptly repay to the Company any and all severance amounts previously paid to him pursuant to Section 4 and/or 5, and he shall have no further rights pursuant to this Agreement.

 

(c)                                  Payments hereunder shall be limited to the extent provided in Section 6.

 

11.                               No Obligation to Mitigate.  The Executive shall not be required to mitigate the amount of any payment or benefits provided for under Section 4 or 5 by seeking other employment or otherwise, and the amount of any payment or benefits provided for under Section 4 or 5 shall not be reduced by any payments or benefits received by the Executive as the result of employment by another employer after the Termination Date, or otherwise; provided, however, that the amount payable under Section 4 or 5 shall be reduced by the amount of any severance, termination, or notice pay (or any other similar amounts) required by law to be paid to the Executive by the Company or its subsidiaries and by any salary or other amounts paid to the Executive during any notice period that the Company or its subsidiaries is required by law to provide.

 

12.                               Withholding and Taxes.  The Company may withhold from any payment made hereunder (i) any taxes that the Company reasonably determines are required to be withheld under federal, state, or local tax laws or regulations, and (ii) any other amounts that the Company is authorized to withhold.  Except for employment taxes that are the obligation of the Company, the Executive shall pay all federal, state, local, and other taxes (including, without limitation, interest, fines, and penalties) imposed on him under applicable law by virtue of or relating to the payments and/or benefits contemplated by this Agreement, subject to any reimbursement provisions of this Agreement.

 

13.                               Indemnification.  The Executive shall continue to be entitled to any rights to insurance and indemnification under the Company’s or a Related Employer’s directors and officers liability insurance (“D&O Insurance”), Certificate of Incorporation, and Bylaws, as in effect before the earlier of the Executive’s Termination of Employment or a Change in Control (or rights to insurance and indemnification that are substantially the same thereto), with respect to any claims relating to the period before his Termination Date.  Additionally, any and all D&O Insurance policies obtained by the Company or a Related Employer following the Termination Date that are “claims made” polices shall cover the Executive to the same extent as other former officers of the Company.

 

14.                               Default in Payment.  Any payment not made within ten (10) days after it is due in accordance with this Agreement shall thereafter bear interest, compounded quarterly, at 5% above the prime rate from time to time in effect at JP Morgan Chase Bank or any successor bank.

 

15.                               Effect on Other Plans, Agreements, and Benefits.  Except to the extent expressly set forth herein, any benefit or compensation to which the Executive is entitled under any agreement between the Executive and the Company or any of its subsidiaries or under any plan maintained by the Company or any of its subsidiaries in which the Executive participates or 

 

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participated shall not be modified or lessened in any way, but shall be payable according to the terms of the applicable plan or agreement.  The terms of this Agreement shall supersede and terminate any prior change in control and/or severance agreement, and (except as expressly provided herein and other than pursuant to the Equity Plan or any predecessor equity plan under which awards are granted to the Executive) the provisions of any other agreement or plan providing benefits following a change in control or termination of employment, entered into between the Executive and the Company or any subsidiary thereof.  Notwithstanding the above, any severance benefits received by the Executive pursuant to this Agreement shall be in lieu of any severance benefits to which the Executive would otherwise be entitled under any general severance policy maintained by the Company or the relevant subsidiary for its management personnel or under any employment contract between the Executive and the Company or any subsidiary thereof provided that, for purposes of this sentence, the Long Term Incentive Plan and equity award plans shall not be deemed general severance policies of the Company.  Any and all employment agreements between the Company and the Executive, inclusive of provisions that in accordance with the terms of such agreements survive termination, are hereby terminated and void.

 

16.                               Unsecured Obligation.  All rights of the Executive or any beneficiary of the Executive who succeeds to the Executive’s rights to payments or benefits under this Agreement shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company or payment of any amounts due hereunder.  Neither the Executive nor any such beneficiary shall have any interest in or rights against any specific assets of the Company or any of its subsidiaries, and the Executive and any such beneficiary shall have only the rights of a general unsecured creditor of the Company.

 

17.                               Prohibition Against Assignment.  The Executive may not assign, pledge, anticipate, or transfer any benefit or amount payable hereunder (other than benefits payable upon or following his death), and any attempt to assign, pledge, anticipate, or transfer such and benefit or amount hereunder, whether voluntary or involuntary, shall be null and void.

 

18.                               Successors.

 

(a)                                 The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement before the effectiveness of any such succession shall be a material breach of this Agreement.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined, and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Subsection or otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

(b)                                 This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.  If the Executive should die while any amounts would still be payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

 

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19.                               Release.  In consideration of the Company’s promises and covenants and the performance thereof, the Executive agrees that the Company’s payment obligations under Sections 4 and 5 shall be conditioned on the Executive’s release of the Company and all other persons named in the Release from any and all causes of causes of action that the Executive has or may have against the Company or any such person before the effective date of the Release, other than a cause based on a breach hereof.  The Release shall be substantially in the form attached hereto as Exhibit I.  For the Release to be effective, the Executive (or his representative or agent) must have provided a signed version of the Release to the Company and such Release shall have become effective and irrevocable by its terms within sixty (60) days after the Executive’s Termination of Employment.

 

20.                               Disputes.

 

(a)                                 In any judicial or other proceedings in which the Executive’s right to, or the amount of, benefits hereunder is disputed, the ultimate burden of proof shall be on the Company.

 

(b)                                 Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Little Falls, New Jersey by three arbitrators, one of whom shall be appointed by the Company, one of whom shall be appointed by the Executive, and the third of whom shall be appointed by the first two arbitrators.  If either the Company or the Executive fails to appoint an arbitrator within 20 days of a request in writing by the other to do so, or if the first two arbitrators cannot agree on the appointment of a third arbitrator within 20 days after the second arbitrator is designated, then such arbitrator shall be appointed by the Chief Judge of the United States District Court located in the city of Newark, New Jersey, or upon his failure to act, by the American Arbitration Association so as to enable the arbitrators to render an award within 90 days after the three arbitrators have been appointed.  Following the selection of arbitrators as set forth above, the arbitration shall be conducted promptly and expeditiously and in accordance with the rules of the American Arbitration Association.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of his right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement.

 

(c)                                  The Company shall pay all reasonable out-of-pocket expenses, including reasonable legal fees and legal expenses, incurred by the Executive in connection with any judicial or other proceeding, including any arbitration proceeding, to enforce this Agreement or to construe, determine, or defend the validity of this Agreement.  The Company shall pay (or reimburse the Executive) for any such expense as soon as administratively practicable after the Executive demonstrates evidence that such expense have been incurred and not later than thirty (30) days following the Executive’s submission of such expenses to the Company with a request for reimbursement.

 

21.                               Miscellaneous Provisions.

 

(a)                                 Entire Agreement.  Except as expressly provided herein, this Agreement contains the entire agreement and understanding of the parties regarding the transactions contemplated herein and supersedes all prior agreements, arrangements, or understandings, whether written or oral, relating to the subject matter hereof, including, without limitation, any letters, agreements, or understandings between the Executive and the Company or any subsidiary 

 

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thereof before the date hereof.  By entering into this Severance Agreement, the Executive waives any right that he may otherwise have to participate in any generally applicable severance plan of the Company or any Related Employer.  Notwithstanding the foregoing, nothing herein shall be deemed to limit any rights the Executive may have in connection with his equity awards under the Long Term Incentive Plan or the Company’s Equity Plan and the equity award agreements issued thereunder.

 

(b)                                 Amendment.  No provision of this Agreement may be amended or waived, except by written agreement signed by both the Company and the Executive.

 

(c)                                  Governing Law.  This Agreement is intended to comply with the requirements of Code Section 409A, and it shall be construed in accordance with such intent.  Subject to the preceding sentence, this Agreement shall be construed in accordance with, and governed by, the internal laws of the State of New Jersey without regard to principles of conflict of laws.

 

(d)                                 Headings.  The headings in this Agreement have been inserted solely for ease of reference and shall not be considered in the interpretation or enforcement of this Agreement.

 

(e)                                  Severability.  If any provision of the Agreement is held to be invalid, illegal, or unenforceable, the remainder of this Agreement shall not be affected thereby.  If any provision of this Agreement is held by a court of competent jurisdiction to conflict with any federal, state, or local law, such provision is hereby declared to be of such force and effect as is permissible in such jurisdiction.

 

(f)                                   Rights and Waivers.  All rights and remedies of the parties hereto are separate and cumulative, and no one of them, whether exercised or not, shall be deemed to exclude, limit, or prejudice any other right or remedy that either of the parties hereto may have.  No party to this Agreement shall be deemed to waive any right or remedy under this Agreement, unless such waiver is in writing and signed by such party.  No delay or omission on the part of either party in exercising any right or remedy shall operate as a waiver of such right or remedy or any other right or remedy.  A waiver on any one occasion shall not be construed as a bar to or a waiver of any right or remedy on any future occasion.

 

(g)                                  Notices.  All notices hereunder shall be in writing.  A notice by the Company shall be deemed to have been given only when delivered in person to the Executive or mailed by first class United States Mail, Return Receipt Requested, or sent by overnight delivery (or the fastest delivery available, if overnight delivery is not available) by means of an internationally recognized delivery service, to the Executive at his most recent address on the records of the Company.  A notice by the Executive to the Company shall be deemed to have been given only when delivered in person to the Company’s General Counsel or mailed by first class United States Mail, Return Receipt Requested, or sent by overnight delivery (or the fastest delivery available, if overnight delivery is not available) by means of an internationally recognized delivery service, to the Company’s General Counsel at the Company’s headquarters.

 

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(h)                                 Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument, and may be delivered by facsimile or pdf.

 

22.                               No Reliance.  The Executive represents and acknowledges that in executing this Agreement, the Executive does not rely and has not relied upon any representation or statement by the Company or its agents, other than statements contained in this Agreement.

 

The parties hereto have caused this Agreement to be executed on the day and year first above written.

 

	
 
    	
 
    	
CANTEL MEDICAL CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
Steven C. Anaya
    	
 
    	
 
    	
Andrew A. Krakauer, President and CEO
    

 

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APPENDIX A

 

DEFINED TERMS

 

For purposes of this Agreement, the following terms shall have the meanings specified below:

 

“Adequate Reason” means any of the following without the express written consent of the Executive:

 

(i)                                     a material reduction in the Executive’s authority, duties, or responsibilities or the assignment to the Executive of duties of a substantial nature and on a continuous or regular basis that are materially inconsistent with the duties of the Executive;

 

(ii)                                  a reduction in the Executive’s base compensation (other than in connection with an “across-the-board” reduction in base compensation of the senior executives of the Company approved in advance by the Company’s CEO) or failure to include the Executive with other similarly situated employees in any incentive, bonus, or benefit plans as may be offered by the Company from time to time;

 

(iii)                               a change in the primary location at which the Executive is required to perform the duties of his employment to a location that is more than thirty (30) miles from the location at which his office is located on the Effective Date; or

 

(iv)                              the Company’s material breach of this Agreement.

 

“Annual Base Salary” means the annual base cash compensation payable to the Executive at the rate in effect as of the applicable date (excluding bonuses, incentive compensation, taxable fringe benefits, and any other type of special pay), before any reduction on account of salary reduction contributions pursuant to Code Section 125 or 401(k) or pursuant to a nonqualified deferred compensation plan.

 

“Board” means the Company’s Board of Directors.

 

“Bonus” means an annual cash bonus payable under any Bonus Plan.

 

“Bonus Plan” means any bonus plan, short term incentive compensation plan or other like benefit plan in which the Executive participates, whether or not awards thereunder are discretionary, including without limitation, the Annual Incentive Compensation Plan as in effect for the fiscal year ending July 31, 2015, as amended.

 

“Cause” means the Executive’s:

 

(i)                                     act of fraud, embezzlement, theft, or other intentional material violation of the law in connection with or in the course of his employment;

 

(ii)                                  willful gross misconduct that is likely to materially injure the reputation, business, or a business relationship of the Company; or

 

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(iii)                               willful material violation of the Confidentiality and Non-Competition Agreement.

 

For purposes of the definition of “Cause”, no act, or failure to act, on the part of the Executive shall be deemed “willful,” if it was done or omitted by the Executive in good faith or with a reasonable belief that the act or omission was not opposed to the best interests of the Company.

 

“Change in Control” means the occurrence of any of the following events: (i) at any time after the Effective Date at least a majority of the Board shall cease to consist of “Continuing Directors” (meaning directors of the Company who either were directors on the Effective Date or who subsequently became directors and whose election, or nomination for election by the Company’s stockholders, was approved by a majority of the then Continuing Directors); or (ii) any “person” or “group” (as determined for purposes of Section 13(d)(3) of the Exchange Act), except any majority-owned subsidiary of the Company or any employee benefit plan of the Company or any trust thereunder, shall have acquired “beneficial ownership” (as determined for purposes of Securities and Exchange Commission (“SEC”) Regulation 13d-3) of Shares having more than 50% of the voting power of all outstanding Shares; or (iii) a merger or consolidation occurs to which the Company is a party, in which outstanding Shares are converted into shares of another company (other than a conversion into shares of voting common stock of the successor corporation or a holding company thereof representing 80% of the voting power of all capital stock thereof outstanding immediately after the merger or consolidation) or other securities (of either the Company or another company) or cash or other property; or (iv) the sale of all, or substantially all, of the Company’s assets occurs; or (v) the stockholders of the Company approve a plan of complete liquidation of the Company.

 

“Change in Control Date” means the effective date of an event constituting a Change in Control.

 

“Change in Control Period” means the period beginning on the Change in Control Date and ending two years thereafter.

 

“Change in Control Coverage Period” means the period (A) commencing on the earlier to occur of (i) the Potential Change in Control Date, but only if a Change in Control actually occurs within 15 months after the Potential Change in Control Date, or (ii) the first day of the six (6) month period ending on the Change in Control Date and (B) ending on the last day of a Change in Control Period.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Company” means Cantel Medical Corp. and any successor, to the extent provided in Section 18.

 

“Confidentiality and Non-Competition Agreement” means the confidentiality and non-competition agreement between the Company and the Executive, as in effect from time to time.

 

“Continuation Coverage” means continuation coverage within the meaning of ERISA Sections 601 through 607.

 

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“Disability” means an illness or injury that qualifies the Executive for disability benefits under a long-term disability plan of the Company or a Related Employer in which the Executive is a participant; provided, however, that a Disability shall not be deemed to have occurred hereunder unless the Executive is absent from work or otherwise substantially unable to assume his normal duties for a period of ninety (90) successive days or an aggregate of one hundred twenty (120) days during any consecutive twelve-month period during the Term.

 

“Equity Plan” means that Cantel Medical Corp. 2006 Equity Incentive Plan, as amended and any successor equity plan thereto.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“Exchange Act” means the Securities Exchange Act of 1934, as in effect on the date of this Agreement.

 

“Fiscal Year” means the fiscal year of the Company.

 

“Good Reason” means any of the following during a Change in Control Coverage Period without the Executive’s express written consent:

 

(i)                                     a material reduction in the Executive’s authority, duties, or responsibilities or the assignment to the Executive of duties of a substantial nature and on a continuous or regular basis that are materially inconsistent with the duties of the Executive;

 

(ii)                                  a reduction in the Executive’s base compensation or failure to include the Executive with other similarly situated employees in any incentive, bonus, or benefit plans as may be offered by the Company from time to time;

 

(iii)                               a change in the primary location at which the Executive is required to perform the duties of his employment to a location that is more than thirty (30) miles from the location at which his office is located on the Change in Control Date;

 

(iv)                              the Company’s material breach of this Agreement;

 

(v)                                 a material reduction in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report; or

 

(vi)                              a material reduction in the scope of the budget over which the Executive retains authority or responsibility.

 

“Long Term Incentive Plan” means the Company’s Long Term Incentive Plan as in effect for the Company’s fiscal year ending July 31, 2015, as amended, and any successor plan thereto.

 

“Monthly Base Salary” means Annual Base Salary, divided by twelve (12).

 

“Potential Change in Control” means that:

 

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(i)                                     the Company has entered into an agreement with any person or persons, the consummation of which would constitute or result in a Change in Control; or

 

(ii)                                  any person has publicly announced its intention to take or consider taking actions that, if consummated, would constitute or result in a Change in Control; or

 

(iii)                               any person has begun a solicitation (as defined in Rule 14a-1 of the Securities Exchange Act) of proxies or consents that has the purpose of effecting or would (if successful) result in a Change in Control; or

 

(iv)                              any person has initiated a tender offer or exchange offer that would, if consummated, result in a Change in Control; or

 

(v)                                 the Board has adopted a resolution to the effect that any person has begun actions that, if consummated, would result a Change in Control.

 

“Potential Change in Control Date” means the date on which any of the events constituting a “Potential Change in Control” occurs.

 

“Related Employer” means the Company and any other employer that is required to be aggregated with the Company pursuant to Code Section 414(b), (c), or (m).

 

“Release” means a Release of All Claims, in substantially the same form as set out in Exhibit A hereto.

 

“Retirement” means the Executive’s termination of his employment with the Company or its subsidiary (other than as a result of death or Disability) on or after (A) the Executive’s 65th birthday if the Executive has completed at least ten years of employment with the Company or any of its subsidiaries, or (B) the Executive’s 60th birthday if the Executive has completed at least 15 years of employment with the Company or any of its subsidiaries.

 

“Shares” means shares of common stock of the Company.

 

“Term” means the term of this Agreement, as determined pursuant to Section 2.

 

“Terminates Employment”, “Terminate(s) the Executive’s Employment”, “Termination of Employment,” or any other variation of such term means a “separation from service” within the meaning of Code Section 409A(a)(2)(A).

 

“Termination Date” means the effective date of the Executive’s Termination of Employment.

 

“Unacceptable Performance” means any of the following:

 

(i)                                     the Executive’s act or failure to act constituting willful misconduct or gross negligence that is materially injurious to the Company or its reputation;

 

(ii)                                  the Executive’s material failure to perform the duties of his employment (except in the case of a Termination of Employment for Good Reason or Adequate Reason or on

 

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account of the Executive’s physical or mental inability to perform such duties) and the failure to correct such failure within a reasonable period after receiving written notice from the Board describing such failure in detail; provided, however, that the quality of the Executive’s performance (determined by achievement of Company or personal targets or otherwise) shall not be a factor in determining whether Executive has performed his duties.

 

(iii)                               the Executive’s violation of any code of ethics or business conduct or written harassment policies of the Company that continues after the Board has provided notice to the Executive that the continuation of such conduct will result in the Termination of the Executive’s Employment;

 

(iv)                              willful material violation of the Confidentiality and Non-Competition Agreement;

 

(v)                                 the Executive’s arrest or indictment for (i) a felony or (ii) lesser criminal offense involving dishonesty, breach of trust, or moral turpitude; or

 

(vi)                              the Executive’s breach of a material term, condition, or covenant of this Agreement and the failure to correct such breach promptly following receipt of written notice from the Board describing such breach in detail.

 

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EXHIBIT I
 RELEASE OF ALL CLAIMS

 

This Release of All Claims (“Release”) has been signed by Steven C. Anaya (“Executive”) on the date indicated below.

 

Background

 

A.                                    The Executive and Cantel Medical Corp. (“Company”) entered into an Amended and Restated Executive Severance Agreement, effective as of November 17, 2014 (“Agreement”), which provides for the payment of benefits to the Executive under certain circumstances following his Termination of Employment.

 

B.                                    The Executive’s Employment with the Company Terminated/will Terminate on               , under circumstances that entitle him to payments under the Agreement, subject to the terms thereof.

 

C.                                    The Company’s obligations under the Agreement are contingent on the Executive signing and providing this Release to the Company within 60 days after receiving it and allowing this Release to become effective as provided herein.

 

D.                                    As a condition of receiving benefits under the Agreement, the Executive wishes to sign this Release.

 

In consideration of the premises and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive agrees as follows:

 

Release

 

1.                                      If the Executive (i) signs and dates this Release and submits it to the Company not later than 60 days after it is provided to the Executive, (ii) complies with the other requirements of this Release and the Agreement, and (iii) and does not provide written revocation of this Agreement to the Company within the seven-day revocation period referred to in Paragraph 8, the Company shall make the payments and pay the benefits required by the Agreement.

 

2.                                      In consideration of the Company’s payment obligations under this Agreement, the Executive releases and discharges the Company, all of its past and/or present divisions, affiliates, officers, directors, shareholders, partners, trustees, employees, agents, representatives, administrators, attorneys, insurers, fiduciaries, successors, and assigns, in their individual and/or representative capacities (hereinafter collectively referred to as “Released Persons”), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, and demands of any kind whatsoever (“Claims”) that the Executive and/or his heirs, executors, administrators, successors, and assigns ever had, now have, or may have against any Released Person by reason of his employment and/or cessation of employment with the Company or a Related Employer, or otherwise involving facts that occurred on or before the date on which the Executive signed this Release, other than (i) a Claim that the Company has failed to pay the Executive a payment described in or contemplated by the Agreement or has 

 

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otherwise breached the terms of the Agreement, or (ii) a Claim that the Company has failed to pay the Executive any vested benefits to which he is entitled under a plan or program of the Company or a Related Employer (collectively, “Excluded Claims”).  Claims, other than Excluded Claims, are hereafter referred to a “Released Claims.”  The Executive gives this Release regardless of whether the Released Claims are known or unknown.  Such Released Claims include, without limitation, any and all Claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1871, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules, and regulations pertaining to employment, as well as any and all claims under state contract or tort law including, but not limited, to those based on allegations of wrongful discharge, breach of contract, promissory estoppel, defamation, and infliction of emotional distress.

 

3.                                      The Executive hereby covenants not to sue or commence or maintain any action or proceeding against any Released Person, none of whom admit any liability, as to any Released Claim.  The Executive hereby agrees that if he hereafter institutes or maintains an action against any Released Person with respect to a Released Claim, and it is determined in such action that a claim or claims brought by the Executive in such action is barred by this Release, he will pay the Released Person for all costs and expenses, including attorneys’ fees, incurred in defending against such claims.  The Executive understands that this Release is final and binding, except as expressly provided herein.  Nothing herein shall (i) prevent the Executive from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission (“EEOC”), (ii) prevent the Executive from participating in any investigation or proceeding conducted by the EEOC, or (iii) establish a condition precedent or other barrier to exercising the aforesaid rights.  While the Executive has a right to participate in any such investigation, he understands that he is waiving his right to any monetary recovery arising from any investigation or pursuit of a claim on his behalf.  The Executive acknowledges that he has the right to file a charge alleging a violation of the ADEA with any administrative agency and/or to challenge the validity of the waiver and release of any claim that he may have under the ADEA without either (i) repaying the Company the amounts paid to him as a result of this Release or (ii) paying the Company any other monetary amounts (such as attorneys’ fees and damages).

 

4.                                      The Executive agrees that if this Release is ever held to be invalid or unenforceable (in whole or in part) as to any particular type of claim or as to any particular circumstance, it shall remain fully valid and enforceable as to all other claims and circumstances.

 

5.                                      Except as permitted by paragraph 3, the Executive represents that he has not filed, and will not hereafter file, any lawsuit against any Released Person relating to his employment and/or cessation of employment with the Company or any Related Employer, or otherwise involving facts that occurred on or before the date on which he signed this Release, other than with respect to any Excluded Claim.  The Executive further understands and agrees that, other than as provided under paragraph 3, if he commences, continues, joins in, or in any other manner attempts to assert any lawsuit released herein against a Released Person with regard to a Released Claim, or otherwise violates the terms of this Release, he shall be required to return all severance payments paid to him by the Company pursuant to the Executive Severance Agreement (together with interest thereon), and he agrees to reimburse the Released Person for all attorneys’ fees and 

 

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expenses incurred by it in defending against such a lawsuit, provided that the right to receive such payments is without prejudice to the Released Person’s other rights hereunder.

 

6.                                      The Executive understands and agrees that the Company’s payments to him and the signing of this Release do not in any way indicate that he has any viable Claims against the a Released Person or that any Released Person admits any liability to him whatsoever.

 

7.                                      The Executive has read this Release carefully, has been given at least 21 days to consider all of its terms and any modifications, material or otherwise, made to this Agreement do not restart or affect in any manner the original 21 calendar day consideration period.  The Executive has been advised to consult with an attorney and any other advisors of his choice and fully understands that by signing below he is giving up any right that he may have to sue or bring any Claims (other than the Excluded Claims) against a Released Person.  The Executive has not been forced or pressured in any manner whatsoever to sign this Release, and he agrees to all of its terms voluntarily.

 

8.                                      The Executive understands that he has 7 days from the date on which he signed this Release below to revoke this Release by notifying the Company of his revocation, that this Release will not become effective until the eighth day following the date on which he has signed this Release, and that if he revokes this Release within such period, the Executive Severance Agreement shall be void.

 

9.                                      The Executive understands and agrees that this Release will be governed by the internal laws of the State of New Jersey, without regard to conflict of law principles, to the extent not preempted by federal law.

 

 

	
 
    	
 
    	
 
    
	
Date
    	
 
    	
(Signature)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(Printed Name)
    

 

23EX 10.01 Purchase Agreement 11.17.14

-1-

                                                    EXHIBIT 10.01

LGI HOMES, INC.
$75,000,000 4.25%Convertible Notes due 2019

PURCHASE AGREEMENT
November 17, 2014
DEUTSCHE BANK SECURITIES INC.
J.P. MORGAN SECURITIES LLC
As Representatives of the 
Several Initial Purchasers listed 
in Schedule I hereto

c/o Deutsche Bank Securities Inc. 
60 Wall Street, 4th Floor 
New York, New York  10005
c/o J.P. Morgan Securities LLC
383 Madison Avenue
New York, New York 10179

Ladies and Gentlemen:
LGI Homes, Inc., a Delaware corporation (the “Company”), hereby confirms its agreement with you (the “Initial Purchasers”), as set forth below.
Section 1.The Securities.  Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Initial Purchasers $75,000,000 aggregate principal amount of its 4.25% Convertible Notes due 2019 (the “Firm Notes”).  In addition, the Company has granted to the Initial Purchasers an option to purchase up to an additional $10,000,000 in aggregate principal amount of its 4.25% Convertible Notes due 2019 (the “Optional Notes” and, together with the Firm Notes, the “Notes”).  The Notes are to be issued under an indenture (the “Indenture”) to be dated as of November 21, 2014 by and between the Company and Wilmington Trust, National Association, as Trustee (the “Trustee”).  

-2-

The Notes will be convertible on the terms, and subject to the conditions, set forth in the Indenture.  As used herein, “Conversion Shares” means the shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”) to be received by the holders of the Notes upon conversion of the Notes pursuant to the terms of the Notes.
The Notes and the Common Stock issuable upon conversion thereof will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the “Act”), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a preliminary offering memorandum dated November 17, 2014 (including the information incorporated by reference therein, the “Preliminary Memorandum”).  As used herein, “Pricing Disclosure Package” shall mean the Preliminary Memorandum, as supplemented or amended by the written communications listed on Annex A hereto in the most recent form that has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of offers to purchase Notes prior to the time when sales of the Notes were first made (the “Time of Execution”).  Promptly after the Time of Execution and in any event no later than the second Business Day following the Time of Execution, the Company will prepare and deliver to each Initial Purchaser a final offering memorandum (including the information incorporated (or deemed to be incorporated) by reference therein, the “Final Memorandum”), which will consist of the Preliminary Memorandum with such changes therein as are required to reflect the information contained in the amendments or supplements listed on Annex A hereto.  The Company hereby confirms that it has authorized the use of the Pricing Disclosure Package, the Final Memorandum and the Road Show Slides (defined below) in connection with the offer and sale of the Notes and the Common Stock issuable upon conversion thereof by the Initial Purchasers.  
Section 2.    Representations and Warranties.  As of the Time of Execution and at the Closing Date (defined below) and on the Subsequent Closing Date (defined below), the Company represents and warrants to and agrees with each of the Initial Purchasers as follows (references in this Section 2 to the “Offering Memorandum” are to (i) the Pricing Disclosure Package in the case of representations and warranties made as of the Time of Execution and (ii) both the Pricing Disclosure Package and the Final Memorandum in the case of representations and warranties made at the Closing Date and on the Subsequent Closing Date, if any):
(a)    The Preliminary Memorandum, on the date thereof, did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.  At the Time of Execution, the Pricing Disclosure Package does not, and on the Closing Date and on the Subsequent Closing Date, if any, will not, and the Final Memorandum as of its date and on the Closing Date and on the Subsequent Closing Date, if any, will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements 

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therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty as to the information contained in or omitted from the Pricing Disclosure Package and Final Memorandum, in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein.  The Company has not distributed or referred to and will not distribute or refer to any written communications (as defined in Rule 405 of the Act) that constitutes an offer to sell or solicitation of an offer to buy the Notes (each such communication by the Company or its agents and representatives (other than the Pricing Disclosure Package and Final Memorandum) an “Issuer Written Communication”) other than the Pricing Disclosure Package, the Final Memorandum and the electronic road show slide presentation made available to investors (the “Road Show Slides”).  Any information in an Issuer Written Communication that is not otherwise included in the Pricing Disclosure Package and the Final Memorandum does not conflict with the Pricing Disclosure Package or the Final Memorandum and, each Issuer Written Communication, when taken together with the Pricing Disclosure Package does not at the Time of Execution and when taken together with the Final Memorandum at the Closing Date and on the Subsequent Closing Date, if any, will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)    As of the Closing Date, the Company will have the authorized, issued and outstanding capitalization set forth in the Offering Memorandum under the heading “Capitalization”; all of the subsidiaries of the Company are listed in Schedule 2-1 attached hereto (each, a “Subsidiary” and collectively, the “Subsidiaries”).  The Common Stock (including the Conversion Shares) conforms in all material respects to the description thereof contained in the Offering Memorandum under the heading “Description of Capital Stock.”  All of the outstanding shares of capital stock of the Company have been, and as of the Closing Date will be, duly authorized and validly issued, are fully paid and non-assessable and were not issued in violation of any preemptive or similar rights and, when issued upon conversion of the Notes, will be validly issued, fully paid and non-assessable, and the issuance of such shares will not be subject to any preemptive or similar rights. A number of shares of Common Stock equal to the maximum number of Conversion Shares issuable upon conversion of the Notes (assuming stock settlement of all conversions and including the maximum number of Conversion Shares issuable in connection with a “make-whole adjustment event”, as such term is defined in the Indenture) (the “Maximum Number of Conversion Shares”) have been duly authorized and reserved for issuance.  Except as set forth in the Offering Memorandum, there are no outstanding (i) options, warrants or other rights to purchase, (ii) agreements or other obligations to issue or (iii) other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Company.
(c)    The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with requisite power and 

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authority to own or lease its properties and conduct its business as described in the Offering Memorandum.  Each Subsidiary of the Company that is a “significant subsidiary” pursuant to the definition contained in Rule 1-02(w) of Regulation S-X under the Act (each, a “Significant Subsidiary” and collectively, the “Significant Subsidiaries”) is listed in Schedule 2-2 attached hereto and has been duly organized and is validly existing as a corporation, limited liability company or similar entity in good standing under the laws of the jurisdiction of its organization, with requisite power and authority to own or lease its properties and conduct its business as described in the Offering Memorandum.  The Company and each of the Significant Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification except where the failure to be so qualified would not (i) have, individually or in the aggregate, a material adverse effect on the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (ii) prevent the consummation of the transactions contemplated hereby (the occurrence of any such effect or any such prevention described in the foregoing clauses (i) and (ii) being referred to as a “Material Adverse Effect”).  The outstanding shares of capital stock or other equity interests of each of the Significant Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are free and clear of all liens, encumbrances and equities and claims; and there are no outstanding options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or other equity interests in the Significant Subsidiaries.
(d)    The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Notes.  The Notes, when issued, will be in the form contemplated by the Indenture.  The Notes have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, when delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (collectively, the “Enforceability Exceptions”).
(e)    The Notes to be delivered on the Closing Date or on the Subsequent Closing Date, if any, are convertible into the Conversion Shares in accordance with the terms and conditions of the Indenture.  
(f)    The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture.  The Indenture has been duly and validly authorized by the Company and, when executed and delivered by the Company (assuming the 

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due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be subject to the Enforceability Exceptions.
(g)    The execution and delivery of, and the performance by the Company of its obligations under, this Agreement has been duly and validly authorized by all necessary corporate action on the part of the Company, and this Agreement has been duly executed and delivered by the Company.  
(h)    Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution, delivery and performance by the Company of this Agreement and the Indenture, the issuance and sale by the Company of the Notes to the Initial Purchasers, and the issuance of any Common Stock upon conversion thereof, has been obtained or made and is in full force and effect, except as may be required under state securities or “Blue Sky” laws in connection with the purchase and resale of the Notes by the Initial Purchasers.  
(i)    Neither the Company nor any of the Significant Subsidiaries is or with the giving of notice or lapse of time or both, will be, (i) in violation of its certificate or articles of incorporation, charter, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational documents, as applicable, (ii) in violation of or in default under any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound (the “Contracts”) or (iii) in violation of any law, order, rule or regulation judgment, order, writ or decree applicable to the Company or any of the Significant Subsidiaries of any court or of any government, regulatory body or administrative agency or other governmental body having jurisdiction over the Company or any Significant Subsidiary, or any of their properties or assets, except in the case of clauses (ii) and (iii), for such violations or defaults as would not, individually or in the aggregate, have a Material Adverse Effect.  The execution, delivery and performance by the Company of this Agreement and the Indenture and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Notes to the Initial Purchasers and the issuance of any Common Stock upon conversion thereof) will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, (i) any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Significant Subsidiary is a party or by which the Company or any Significant Subsidiary or any of their respective properties is bound, or (ii) the certificate of incorporation or formation, articles of incorporation or association, charter, by-laws or other organizational documents, as applicable, of the Company or (iii) any law, order, rule or regulation judgment, order, writ or decree applicable to the Company or any Significant Subsidiary of any court or of any government, regulatory body or administrative agency or other governmental body having jurisdiction over the Company or any Significant Subsidiary, or any of their properties or assets, 

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except in the case of clauses (i) and (iii) to the extent the same would not, individually or in the aggregate, have a Material Adverse Effect.
(j)    The audited consolidated financial statements of the Company and its Subsidiaries and the consolidated financial statements of each of  (i) LGI-GTIS Holdings, LLC and its subsidiaries, (ii) LGI-GTIS Holdings II, LLC and its subsidiaries, (iii) LGI-GTIS Holdings III, LLC and its subsidiaries, and (iv) LGI-GTIS Holdings IV, LLC and its subsidiaries, (together, the “LGI Entities”) together with related notes and schedules incorporated by reference in the Offering Memorandum, comply in all material respects with the applicable requirements of the Act and present fairly the financial position and the results of operations and cash flows of the Company and/or the respective LGI Entities, as the case may be, at the indicated dates and for the indicated periods.  Such financial statements and related schedules have been prepared in accordance with United States generally accepted principles of accounting (“GAAP”), consistently applied throughout the periods involved, except as disclosed therein, and all adjustments necessary for a fair presentation of results for such periods have been made.  The summary historical financial and other data included in the Preliminary Memorandum and Offering Memorandum present fairly the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company.  The Company and the LGI Entities, taken as a whole, do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations or any “variable interest entities” within the meaning of Financial Accounting Standards Board Interpretation No. 46), not disclosed in the Offering Memorandum.  There are no financial statements (historical or pro forma) that are required to be included in a prospectus pursuant to the Act that are not included in the Offering Memorandum.
(k)    Each of Ernst & Young LLP and Armanino LLP is an independent registered public accounting firm with respect to the Company and the LGI Entities within the meaning of the Act and the applicable Rules and Regulations and the Public Company Accounting Oversight Board (United States) (the “PCAOB”) as required by the Act.
(l)    The Company is in compliance with the provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the Commission and The NASDAQ Global Select Market thereunder (collectively, the “Sarbanes-Oxley Act”) currently applicable to the Company.  As of the date hereof, there were no outstanding personal loans made, directly or indirectly, by the Company to any director or executive officer of the Company.
(m)    Except as described in the Offering Memorandum, there is no legal, governmental, administrative or regulatory investigation, action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or to which any property of the Company or its Subsidiaries is, or to the knowledge of the Company, would reasonably be expected to be, subject, before any court or regulatory or 

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administrative agency or otherwise which if determined adversely to the Company or any of its Subsidiaries would, individually or in the aggregate, have a Material Adverse Effect, or that seeks to restrain, enjoin or prevent the consummation of or otherwise challenge the issuance or sale of the Notes to be sold hereunder  There are no current or pending legal, governmental, administrative or regulatory investigations, actions, suits, claims or proceedings that are required to be described in a prospectus pursuant to the Act that are not described in the Offering Memorandum.  There are no statutes, regulations or contracts or other documents that are required to be described in a prospectus pursuant to the Act that are not described in the Offering Memorandum.
(n)    Except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) the Company and its Subsidiaries (i) hold all licenses, registrations, certificates and permits from governmental authorities (collectively, “Governmental Licenses”) which are necessary to the conduct of their business, (ii) are in compliance with the terms and conditions of all Governmental Licenses, and all Governmental Licenses are valid and in full force and effect, and (iii) have not received any written or other notice of proceedings relating to the revocation or modification of any Governmental License.
(o)    Since the date of the most recent financial statements of the Company and its Subsidiaries incorporated by reference in the Offering Memorandum, (i) there has not been any event, occurrence or development which reasonably could give rise to a Material Adverse Effect, (ii) there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or any of the Significant Subsidiaries, other than transactions in the ordinary course of business or changes or transactions described in the Offering Memorandum, as each may be amended or supplemented, and (iii) neither the Company nor any of the Significant Subsidiaries has sustained any loss or interference with its business that is material to the Company and its Subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Offering Memorandum.
(p)    The Company and each of the Significant Subsidiaries have filed all material U.S. federal, state, and local tax returns which have been required to be filed and have paid all taxes indicated by such returns and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith and for which an adequate reserve or accrual has been established in accordance with GAAP.  All tax liabilities have been adequately provided for in the financial statements of the Company, and the Company does not know of any actual or proposed additional material tax assessments.
(q)    The statistical, industry-related and market-related data included in the Offering Memorandum are based on or derived from sources which the Company reasonably 

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and in good faith believes are reliable and accurate, and to the extent prepared by them, such Company and Significant Subsidiaries data agree with the sources from which they are derived.
(r)    The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of jurisdictions where the Company and its Subsidiaries conduct business, the applicable rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Company’s knowledge, threatened.
(s)    Neither the Company nor, to the Company’s knowledge, any director, officer, agent, employee, affiliate or representative of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or any similar sanctions imposed by any other body, governmental or other, to which the Company or any of its Subsidiaries is subject (collectively, “other economic sanctions”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person or entity, for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC or other economic sanctions.
(t)    Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee, affiliate or other person associated with or acting on behalf of the Company or any of its Subsidiaries: (i) has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity: (ii) has made any direct or indirect unlawful contribution or payment to any official of, or candidate for, or any employee of, any federal, state or foreign office from corporate funds; (iii) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment; or (iv) is aware of or has taken any action, directly or indirectly, that would result in a violation by such Persons of the OECD Convention on Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”), the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the “FCPA”) or any similar law or regulation to which the Company, any of its Subsidiaries, any director, officer, agent, employee, affiliate or other person associated with or acting on behalf of the Company or any of its Subsidiaries is subject.  The Company, the Subsidiaries and their affiliates have each conducted their businesses in compliance with the FCPA and any applicable similar law or regulation and 

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have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(u)    The Company and each of the Significant Subsidiaries have good and marketable title to all of the properties and assets reflected in the consolidated financial statements hereinabove described or described in the Offering Memorandum, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements or described in the Offering Memorandum or which (i) do not materially interfere with the use made and proposed to be made of such property by the Company and the Significant Subsidiaries or (ii) would not, individually or in the aggregate, have a Material Adverse Effect.  The Company and the Significant Subsidiaries occupy their leased properties under valid and binding leases (subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles) conforming in all material respects to the description thereof set forth in the Offering Memorandum.
(v)    Except in each case as otherwise disclosed in the Offering Memorandum:  (i) the Company and each Significant Subsidiary have complied and are in compliance, in all material respects, with all applicable federal, state, local, foreign and international laws (including the common law), statutes, rules, regulations, orders, judgments, decrees or other legally binding requirements of any court, administrative agency or other governmental authority relating to pollution or to the protection of the environment, natural resources or human health or safety, or to the manufacture, use, generation, treatment, storage, disposal, release or threatened release of hazardous or toxic substances, pollutants, contaminants or wastes, or the arrangement for such activities (“Environmental Laws”); (ii) the Company and each Significant Subsidiary have obtained and are in compliance, in all material respects, with all permits, licenses, authorizations or other approvals required of them under Environmental Laws to conduct their respective businesses and are not subject to any action to revoke, terminate, cancel, limit, amend or appeal any such permits, licenses, authorizations or approvals; (iii) neither the Company nor any Significant Subsidiary is a party to any judicial or administrative proceeding (including a notice of violation) under any Environmental Laws (a) to which a governmental authority is also a party and which involves potential monetary sanctions, unless it could reasonably be expected that such proceeding will result in monetary sanctions of less than $100,000, or (b) which is otherwise material; and no such proceeding has been threatened in writing or is known by the Company or by any Significant Subsidiary to be contemplated; (iv) neither the Company nor any Significant Subsidiary has received notice or is otherwise aware of any pending or threatened material claim or potential liability under Environmental Laws in respect of its past or present business, operations (including the disposal of hazardous substances at any off-site location), facilities or real property (whether owned, leased or operated) or on account of any predecessor or any person whose liability under any Environmental Laws it has agreed to assume; and neither the Company nor any Significant Subsidiary is aware of any facts or conditions that could reasonably be expected to give rise to any such claim or liability; and (v) neither the Company 

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nor any Significant Subsidiary is aware of any matters regarding compliance with existing or reasonably anticipated Environmental Laws, or with any liabilities or other obligations under Environmental Laws (including asset retirement obligations), that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its Subsidiaries.
(w)    No material labor disturbance by or dispute with employees of the Company or any of the Significant Subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened.
(x)    The Company and each of the Significant Subsidiaries carry, or are covered by, insurance, from insurers of recognized financial responsibility, in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is prudent and customary for companies engaged in similar businesses; neither the Company nor any of the Significant Subsidiaries have been refused any coverage under insurance policies sought or applied for; and the Company and the Significant Subsidiaries have no reason to believe that they will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their respective businesses at a cost that would not, individually or in the aggregate, have a Material Adverse Effect.
(y)    Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”)) for which the Company or any member of its “Controlled Group” (defined as any organization that is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have liability (each a “Plan”)  is in compliance in all material respects with all presently applicable statutes, rules and regulations, including ERISA and the Code; (ii) with respect to each Plan subject to Title IV of ERISA (a) no “reportable event” (as defined in Section 4043 of ERISA) has occurred for which the Company or any member of its Controlled Group would have any liability; and (b) neither the Company nor any member of its Controlled Group has incurred or expects to incur liability under Title IV of ERISA (other than for contributions to the Plan or premiums payable to the Pension Benefit Guaranty Corporation, in each case in the ordinary course and without default); (iii) no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has failed to satisfy the minimum funding standard within the meaning of such sections of the Code or ERISA; and (iv) to the knowledge of the Company, each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
(z)    The Company maintains a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that cover the Company and the 

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Significant Subsidiaries and that comply with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  There are no material weaknesses in the Company’s internal control over financial reporting, and there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting since the date of the most recent financial statements of the Company and its Subsidiaries incorporated by reference in the Offering Memorandum.  The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
(aa)    The Company maintains “disclosure controls and procedures” (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act); the Company’s “disclosure controls and procedures” are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and regulations under the Exchange Act, and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with respect to such reports.
(bb)    The Company and its Subsidiaries own or possess the right to use all material patents, inventions, trademarks, trade names, service marks, logos, trade dress, designs, data, database rights, Internet domain names, rights of privacy, rights of publicity, copyrights, works of authorship, license rights, trade secrets, know-how and proprietary information (including unpatented and unpatentable proprietary or confidential information, inventions, systems or procedures) and other industrial property and intellectual property rights, as well as related rights, such as the right to sue for all past, present and future infringements or misappropriations of any 

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of the foregoing, and registrations and applications for registration of any of the foregoing (collectively, “Intellectual Property”) necessary to conduct their business as presently conducted and currently contemplated to be conducted in the future.  Neither the Company nor any of the Significant Subsidiaries, whether through their respective products and services or the conduct of their respective businesses, has infringed, misappropriated, conflicted with or otherwise violated, or is currently infringing, misappropriating, conflicting with or otherwise violating, and none of the Company or the Significant Subsidiaries have received any communication or notice of infringement of, misappropriation of, conflict with or violation of, any Intellectual Property of any other person or entity.  Neither the Company nor any of the Significant Subsidiaries has received any communication or notice alleging that by conducting their business as set forth in the Offering Memorandum, such parties would infringe, misappropriate, conflict with, or violate, any of the Intellectual Property of any other person or entity.  The Company knows of no infringement, misappropriation or violation by others of Intellectual Property owned by or licensed to the Company or the Significant Subsidiaries.  The Company and the Significant Subsidiaries have taken all reasonable steps necessary to secure their interests in such Intellectual Property from their employees and contractors and to protect the confidentiality of all of their confidential information and trade secrets.  
(cc)    None of the Intellectual Property or technology (including information technology and outsourced arrangements) employed by the Company or the Significant Subsidiaries has been obtained or is being used by the Company or the Significant Subsidiaries in violation of any contractual obligation binding on the Company or any of the Significant Subsidiaries or any of their respective officers, directors or employees or otherwise in material violation of the rights of any persons.  The Company and the Significant Subsidiaries own or have a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and the Significant Subsidiaries (the “Company IT Systems”).  The Company IT Systems are adequate for, and operate and perform in all material respects as required in connection with, the operation of the business of the Company and the Significant Subsidiaries as currently conducted, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company and the Significant Subsidiaries have implemented commercially reasonable backup, security and disaster recovery technology consistent in all material respects with applicable regulatory standards and customary industry practices.
(dd)    Neither the Company nor any Significant Subsidiary is or, after giving effect to the offering and sale of the Notes contemplated hereunder and the application of the net proceeds from such sale as described in the Offering Memorandum, will be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “1940 Act”).

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(ee)    The Notes, the Common Stock and the Indenture will conform in all material respects to the descriptions thereof in the Offering Memorandum.
(ff)    Immediately after the consummation of the transactions contemplated by this Agreement, the fair value and present fair saleable value of the assets of each of the Company and its Subsidiaries (each on a consolidated basis) will exceed the sum of its stated liabilities and identified contingent liabilities; none of the Company or its Subsidiaries (each on a consolidated basis) is, nor will any of the Company or its Subsidiaries (each on a consolidated basis) be, after giving effect to the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
(gg)    None of the Company, the Subsidiaries or any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any “security” (as defined in the Act) that is or could be integrated with the sale of the Notes in a manner that would require the registration under the Act of the offer and sale of the Notes in the manner contemplated by this Agreement or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act.  Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers in the manner contemplated by this Agreement and the conversion of the Notes into the Conversion Shares in accordance with the terms of the Indenture, to register any of the Notes or the Conversion Shares under the Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended.
(hh)    No securities of the Company or any Subsidiary are of the same class (within the meaning of Rule 144A under the Act) as the Notes and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(ii)    Neither the Company nor, to the Company’s knowledge, any of its affiliates, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Notes.
(jj)    The Company has furnished to the Representatives, a letter substantially in the form of Annex B hereto from each officer and director of the Company addressed to the Representatives.

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Any certificate signed by any officer of the Company or any Significant Subsidiary and delivered to any Initial Purchaser or to counsel for the Initial Purchasers shall be deemed a joint and several representation and warranty by the Company and each of the Significant Subsidiaries to each Initial Purchaser as to the matters covered thereby.

Section 3.    Purchase, Sale and Delivery of the Notes.  
(a)    On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers, acting severally and not jointly, agree to purchase the Firm Notes in the respective amounts set forth on Schedule 1 hereto from the Company at 97.0% of their principal amount.  One or more certificates in definitive form for the Firm Notes that the Initial Purchasers have agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchasers request upon notice to the  Company at least 36 hours prior to the Closing Date, shall be delivered by or on behalf of the Company to the Initial Purchasers, against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer (same day funds), to such account or accounts as the Company shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date.  Such delivery of and payment for the Firm Notes and Optional Notes (if the option provided for in Section 3(b) hereof shall have been exercised on or before the first business day immediately preceding the Closing Date) shall be made at the offices of Davis Polk & Wardwell LLP, 450 Lexington Ave, New York, New York at 10:00 A.M., New York time, on November 21, 2014, or at such other place, time or date as the Initial Purchasers, on the one hand, and the Company, on the other hand, may agree upon, such time and date of delivery against payment being herein referred to as the “Closing Date.”  The Company will make such certificate or certificates for the Firm Notes available for checking and packaging by the Initial Purchasers at the offices of Davis Polk & Wardwell LLP in New York, New York, or at such other place as the Representatives may designate, at least 24 hours prior to the Closing Date.
(b)    In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the several Initial Purchasers to purchase, severally and not jointly, up to $10,000,000 aggregate principal amount of Optional Notes from the Company at the same price as the purchase price to be paid by the Initial Purchasers for the Firm Notes.  The option granted hereunder may be exercised at any time upon notice by the Representatives to the Company, which notice may be given at any time within 30 days from the date of this Agreement.  Such notice shall set forth (i) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount) of Optional Notes as to which the Initial Purchasers are exercising the option, (ii) the names and denominations in which the Optional Notes are to be registered 

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and (iii) the time, date and place at which such Notes will be delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date; and in such case the term “Closing Date” herein shall refer to the time and date of delivery of the Firm Notes and the Optional Notes).  Such time and date of delivery, if subsequent to the Closing Date, is called the “Subsequent Closing Date” and shall be determined by the Representatives.  Such date may be the same as the Closing Date but not earlier than the Closing Date nor later than 10 business days after the date of such notice.  If any Optional Notes are to be purchased, each Initial Purchaser agrees, severally and not jointly, to purchase the principal amount of Optional Notes (subject to such adjustments to eliminate fractional amount as the Representatives may determine) that bears the same proportion to the total principal amount of Optional Notes to be purchased as the principal amount of Firm Notes set forth on Schedule 1 opposite the name of such Initial Purchaser bears to the total principal amount of Firm Notes.  If the option provided for in this Section 3(b) hereof is exercised after the first business day immediately preceding the Closing Date, the Company will deliver the Optional Notes (at the expense of the Company) to the Representatives on the date specified by the Representatives (which shall be within three business days after exercise of the option) for the respective accounts of the several Initial Purchasers, against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the Company. If settlement for the Optional Notes occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Optional Notes, and the obligation of the Initial Purchasers to purchase the Optional Notes shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 7 hereof.
Section 4.    Offering by the Initial Purchasers.  The Initial Purchasers propose to make an offering of the Notes at the price and upon the terms set forth in the Pricing Disclosure Package and the Final Memorandum as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchasers is advisable.
Section 5.    Covenants of the Company.  The Company covenants and agrees with each of the Initial Purchasers as follows:
(a)    Until the later of (i) the completion of the distribution of the Notes by the Initial Purchasers and (ii) the Closing Date, or the Subsequent Closing Date if applicable , the Company will not amend or supplement the Pricing Disclosure Package and the Final Memorandum or otherwise distribute or refer to any written communication (as defined under Rule 405 of the Act) that constitutes an offer to sell or a solicitation of an offer to buy the Notes (other than the Pricing Disclosure Package, the Road Show Slides and the Final Memorandum) or file any report with the Commission under the Exchange Act unless the Representatives shall previously have been advised and furnished a copy for a reasonable period of time prior to the proposed amendment, supplement or report and as to which the Representatives shall have given 

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their consent, which consent shall not be unreasonable conditioned, delayed or withheld.  The Company will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any amendments or supplements to the Pricing Disclosure Package and the Final Memorandum that may be necessary or advisable in connection with the resale of the Notes by the Initial Purchasers.
(b)    The Company will cooperate with the Initial Purchasers in arranging for the qualification of the Notes for offering and sale under the securities or “Blue Sky” laws of which jurisdictions as the Initial Purchasers may designate and  will continue such qualifications in effect for as long as may be necessary to complete the resale of the Notes; provided, however, that in connection therewith, the Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject.
(c)    (1) If, at any time prior to the completion of the sale by the Initial Purchasers of the Notes, any event occurs or information becomes known as a result of which the Pricing Disclosure Package and the Final Memorandum as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Pricing Disclosure Package and the Final Memorandum to comply with applicable law, the Company will promptly notify the Representatives thereof and will prepare, at the expense of the Company, an amendment or supplement to the Pricing Disclosure Package and the Final Memorandum that corrects such statement or omission or effects such compliance and (2) if at any time prior to the Closing Date or the Subsequent Closing Date (i) any event shall occur or condition shall exist as a result of which any of the Pricing Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or any Issuer Written Communication would conflict with the Pricing Disclosure Package as then amended or supplemented, or (ii) it is necessary to amend or supplement any of the Pricing Disclosure Package so that any of the Pricing Disclosure Package or any Issuer Written Communication will comply with law, the Company will immediately notify the Initial Purchasers thereof and forthwith prepare and, subject to paragraph (a) above, furnish to the Initial Purchasers such amendments or supplements to any of the Pricing Disclosure Package or any Issuer Written Communication (it being understood that any such amendments or supplements may take the form of an amended or supplemented Final Memorandum)  as may be necessary so that the statements in any of the Pricing Disclosure Package as so amended or supplemented will not, in light of the circumstances under which they were made, be misleading or so that any Issuer Written Communication will not conflict with the Pricing Disclosure Package or so that the Pricing Disclosure Package or any Issuer Written Communication as so amended or supplemented will comply with applicable law.

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(d)    The Company will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers as many copies of the Pricing Disclosure Package, any Issuer Written Communication and the Final Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request.
(e)    The Company will apply the net proceeds from the sale of the Notes as set forth under “Use of Proceeds” in the Pricing Disclosure Package and the Final Memorandum.
(f)    For so long as any of the Notes remain outstanding, the Company will furnish to the Initial Purchasers copies of all reports and other communications (financial or otherwise) furnished by the Company to the Trustee or to the holders of the Notes and, as soon as available, copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange on which any class of securities of the Company may be listed; provided, however, that any such reports, financial statements or other communications that are filed with the Commission and are generally available to the public on the Commission’s website shall be deemed to have been furnished to the Initial Purchasers.
(g)    None of the Company or any of its Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Act) that could be integrated with the sale of the Notes in a manner which would require the registration under the Act of the offer and sale of the Notes or the Conversion Shares.
(h)    The Company will not, and will not permit any of the Significant Subsidiaries or their respective Affiliates or persons acting on their behalf to, engage in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act.
(i)    For so long as any of the Notes or the Common Stock issuable upon the conversion thereof are “restricted securities” within the meaning of Rule 144(a)(3) under the Act, the Company will make available at its expense, upon request, to any holder of such Notes and any prospective purchasers thereof the information specified in Rule 144A(d)(4) under the Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act.
(j)    The Company will use its best efforts to (i) effect and maintain the listing of the Maximum Number of Conversion Shares on The NASDAQ Global Select Market and (ii) permit the Notes to be eligible for clearance and settlement through The Depository Trust Company.
(k)    The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock.

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(l)    The Company will reserve and keep available at all times, free of preemptive rights, the Maximum Number of Conversion Shares.
(m)    Between the date hereof and the Closing Date, or the Subsequent Closing Date if applicable, the Company will not do or authorize any act or thing that would result in an adjustment of the conversion rate.
(n)    During the period beginning on the date hereof and continuing to the date that is 60 days after the date of this Agreement, without the prior written consent of the Representatives, the Company will not directly or indirectly, sell, offer, contract to sell or otherwise dispose of, except as provided hereunder, any securities of the Company (or guaranteed by the Company) that are substantially similar to the Notes, or any Notes, or grant any option to sell, pledge, transfer or establish an open “put equivalent position” or liquidate or decrease a “call equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of), or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into the Notes or shares of Common Stock, or publicly announce an intention to do any of the foregoing; provided, however, that (1) the Company may issue shares of its Common Stock or options to purchase its Common Stock, or Common Stock upon exercise of options, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Pricing Disclosure Package and Final Memorandum, but only if the holders of such shares, options, or shares issued upon exercise of such options, agree in writing not to sell, offer, dispose of or otherwise transfer any such shares or options during such 60-day period without the prior written consent of the Representatives (which consent may be withheld at the discretion of the Representatives), provided, further, that the foregoing shall not apply to the sale of the Notes under this Agreement or the issuance of the Conversion Shares, (2) the Company may file a shelf registration statement with the Commission more than 30 days after the date hereof, so long as the Company does not cause such registration statement to become effective under the Act or request the Commission to accelerate the effectiveness of such registration statement under the Act prior to the end of such 60-day period, and (3) such restriction will not apply to (A) grants of stock options, stock appreciation rights, restricted stock, restricted stock units or other stock-based awards pursuant to the Company’s 2013 Equity Incentive Plan, (B) the filing of any registration statement on Form S-8 with respect to the Company’s 2013 Equity Incentive Plan, or (C) issuances of shares of Common Stock pursuant to the exercise, conversion or vesting of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units or other stock-based awards granted under the Company’s 2013 Equity Incentive Plan.  
(o)    The Company will enforce all agreements between the Company and any of its security holders to be entered into pursuant to this Agreement that prohibit the sale, transfer or assignment of any of the Company’s securities.  In addition, the Company will direct the 

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transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such “lock-up” agreements for the duration of the periods contemplated in such agreements.
(p)    As long as there are any Notes outstanding, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to resell any of the Notes that have been reacquired by any of them, unless upon such resale such Note will no longer be a “restricted security” as defined in Rule 144.
Section 6.    Expenses.  The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to (i) the printing, word processing or other production of documents with respect to the transactions contemplated hereby, including any costs of printing the Pricing Disclosure Package and the Final Memorandum and any amendment or supplement thereto, and any “Blue Sky” memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Company, (iv) preparation (including printing), issuance and delivery to the Initial Purchasers of the Notes, (v) the qualification of the Notes and Conversion Shares under state securities and “Blue Sky” laws, including filing fees and reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto up to $10,000, (vi) expenses in connection with the “roadshow” and any other meetings with prospective investors in the Notes, (vii) fees and expenses of the Trustee including fees and expenses of counsel, (viii) the fees and expenses associated with listing the Maximum Number of Conversion Shares on The NASDAQ Global Select Market and (ix) any fees charged by investment rating agencies for the rating of the Notes.  If the sale of the Notes provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of the Company to perform its obligations hereunder or to satisfy all conditions on its part to be performed or satisfied hereunder, the Company agrees to promptly reimburse the Initial Purchasers upon demand for all out-of-pocket expenses (including reasonable fees, disbursements and charges of Davis Polk & Wardwell LLP, counsel for the Initial Purchasers) that shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Notes.
Section 7.    Conditions of the Initial Purchasers’ Obligations.  The obligation of the Initial Purchasers to purchase and pay for the Firm Notes and the Optional Notes, as the case may be, shall, in their sole discretion, be subject to the satisfaction or waiver of the following conditions on or prior to the Closing Date (references to the Closing Date in this Section 7 shall apply to the Subsequent Closing Date, if applicable):

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(a)    On the Closing Date, the Initial Purchasers shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchasers, of Baker Botts L.L.P., counsel for the Company, covering the opinion points set forth in Schedule 3. 
(b)    On the Closing Date, the Initial Purchasers shall have received the opinion, in form and substance satisfactory to the Initial Purchasers, dated as of the Closing Date and addressed to the Initial Purchasers, of Davis Polk & Wardwell LLP, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement and such other related matters as the Initial Purchasers may reasonably require.  In rendering such opinion, Davis Polk & Wardwell LLP shall have received and may rely upon such certificates and other documents and information as it may reasonably request to pass upon such matters.
(c)    On the date hereof, the Initial Purchasers shall have received from each of Ernst & Young LLP and Armanino LLP, a comfort letter dated the date hereof, in form and substance satisfactory to counsel for the Initial Purchasers with respect to the audited and any unaudited or pro forma financial information in the Pricing Disclosure Package. On the Closing Date, the Initial Purchasers shall have received from each of Ernst & Young LLP and Armanino LLP, a comfort letter dated the Closing Date, in form and substance satisfactory to counsel for the Initial Purchasers, which shall refer to the comfort letter dated the date hereof and reaffirm or update as of a more recent date, the information stated in the comfort letter dated the date hereof and similarly address the audited and any unaudited or pro forma financial information in the Final Memorandum.
(d)    The Initial Purchasers shall have received, on the Closing Date, a certificate dated the Closing Date in form of Exhibit A hereto, from Charles Merdian, Chief Financial Officer of the Company, with respect to certain financial information contained in the Pricing Disclosure Package and the Final Memorandum.
(e)    The representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the Time of Execution and on and as of the Closing Date as if made on and as of the Closing Date; the statements of the Company’s officers made pursuant to any certificate delivered in accordance with the provisions hereof shall be true and correct on and as of the date made and on and as of the Closing Date; the Company shall have performed all covenants and agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; and, except as described in the Pricing Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), subsequent to the date of the most recent financial statements in such Pricing Disclosure Package and the Final Memorandum, there shall have been no event or development, and no information shall have become known, that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect.
(f)    The sale of the Notes or the Conversion Shares hereunder shall not be enjoined (temporarily or permanently) on the Closing Date.

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(g)    The Initial Purchasers shall have received a certificate of the Company, dated the Closing Date, signed on behalf of the Company by its Chief Executive Officer and the Chief Financial Officer, to the effect that:
(i)    the representations and warranties of the Company contained in this Agreement are true and correct on and as of the Time of Execution and on and as of the Closing Date, and the Company has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date;
(ii)    at the Closing Date, since the date hereof or since the date of the most recent financial statements in the Pricing Disclosure Package and the Final Memorandum (exclusive of any amendment or  supplement thereto after the date hereof), no event or development has occurred, and no information has become known, that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect; and
(iii)    the sale of the Notes and Conversion Shares hereunder has not been enjoined (temporarily or permanently).
(h)    Prior to the Closing Date, the Company shall have furnished to the Representatives, a letter substantially in the form of Annex B hereto from each officer and director of the Company addressed to the Representatives.
(i)    An application for the listing of the Maximum Number of Conversion Shares shall have been approved by The NASDAQ Global Select Market, subject to official notice of issuance. 
On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, opinions, certificates, letters and schedules or instruments relating to the business, corporate, legal and financial affairs of the Company and the Subsidiaries as they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchasers and counsel for the Initial Purchasers.  The Company shall furnish to the Initial Purchasers such conformed copies of such documents, opinions, certificates, letters, schedules and instruments in such quantities as the Initial Purchasers shall reasonably request.
Section 8.    Offering of Notes; Restrictions on Transfer.  
(a)    Each Initial Purchaser hereby represents and agrees with the Company (as to itself only) that it has not and will not use, authorize use of, refer to, or participate in the 

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planning for use of, any written communication that constitutes an offer to sell or the solicitation of an offer to buy the Notes other than (i) the Road Show Slides, the Preliminary Memorandum and the Offering Memorandum, (ii) a written communication that contains no “issuer information” (as defined in Rule 433(h)(2) under the Act) that was not included (including through incorporation by reference) in the Preliminary Memorandum or the Offering Memorandum, (iii) any written communication listed on Annex A or prepared pursuant to Section 5(c) above, (iv) any written communication prepared by such Initial Purchaser and approved by the Company in advance in writing or (v) any written communication relating to or that contains the terms of the Notes and/or other information that was included (including through incorporation by reference) in the Preliminary Memorandum or the Offering Memorandum.
(b)    Each Initial Purchaser hereby represents and agrees with the Company (as to itself only) that (i) it has not and will not solicit offers for, or offer or sell, the Notes by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; (ii) it is a QIB and it will offer the Notes for resale only upon the terms and conditions set forth in this Agreement and the Offering Memorandum and (iii) it has and will solicit offers for the Notes or the Conversion Shares only from, and will offer the Notes and the Conversion Shares only to persons whom the Initial Purchasers reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the Initial Purchasers that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A.
Section 9.    Indemnification and Contribution.  
(a)    The Company agrees to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which any Initial Purchaser or such controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the following:
(i)    any untrue statement or alleged untrue statement made by the Company in Section 2 hereof; 
(ii)  any untrue statement or alleged untrue statement of any material fact contained in the Pricing Disclosure Package, any Issuer Written Communication or Final Memorandum or any amendment or supplement thereto; or
(iii)  the omission or alleged omission to state, in the Pricing Disclosure Package, any Issuer Written Communication or the Final Memorandum or any amendment or 

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supplement thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading;
and will reimburse, as incurred, the Initial Purchasers and each such controlling person for any reasonable legal or other expenses  incurred by the Initial Purchasers or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Pricing Disclosure Package or Final Memorandum or any amendment or supplement thereto in reliance upon and in conformity with written information concerning the Initial Purchasers furnished to the Company by the Initial Purchasers through the Representatives specifically for use therein.  The indemnity provided for in this Section 9 will be in addition to any liability that the Company may otherwise have to the indemnified parties.  The Company shall not be liable under this Section 9 for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld.
(b)    Each Initial Purchaser, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Pricing Disclosure Package or Final Memorandum or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated in the Pricing Disclosure Package or Final Memorandum or any amendment or supplement thereto, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser, furnished to the Company by the Initial Purchasers through the Representatives specifically for use therein; and subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any reasonable legal or other expenses incurred by the Company or any such director, officer or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof.  The indemnity provided for in this Section 9 will be in addition to any liability that the Initial Purchasers may otherwise have to the indemnified parties.  The Initial Purchasers shall not be liable under this Section 9 for any settlement of any claim or action effected without their consent, which shall not be unreasonably withheld.  

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(c)    Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) and (b) above.  In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory  to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties.  After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the Initial Purchasers in the case of paragraph (a) of this Section 9 or the Company in the case of paragraph (b) of this Section 9, representing the indemnified parties under such paragraph (a) or paragraph (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party.  All fees and expenses reimbursed pursuant to this paragraph (c) shall be reimbursed as they are incurred.  After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action 

-25-

effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party, or indemnity could have been sought hereunder by any indemnified party, unless such settlement (A) includes an unconditional written release of the indemnified party, in form and substance reasonably satisfactory to the indemnified party, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any indemnified party.
(d)    In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is unavailable to, or insufficient to hold harmless, an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable  contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof).  The relative benefits received by the Company on the one hand and any Initial Purchaser on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by such Initial Purchaser.  The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, or such Initial Purchaser on the other, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances.  The Company and the Initial Purchasers agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d).  Notwithstanding any other provision of this paragraph (d), no Initial Purchaser shall be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and 

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no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  For purposes of this paragraph (d), each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director of the Company, each officer of the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company.  
Section 10.    Survival Clause.  The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company, its officers and the Initial Purchasers set forth in this Agreement or made by or on behalf of them pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Initial Purchasers or any controlling person referred to in Section 9 hereof and (ii) delivery of and payment for the Notes.  The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 9, 10 and 15 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement.
Section 11.    Termination.  
(a)    This Agreement may be terminated in the sole discretion of the Initial Purchasers by notice to the Company given prior to the Closing Date in the event that the Company shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Date,
(i)    there shall have been, in the sole judgment of the Initial Purchasers, any event or development that, individually or in the aggregate, has or could be reasonably likely to have a Material Adverse Effect, except in each case as described in the Pricing Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto);
(ii)    trading in securities of the Company or in securities generally on the New York Stock Exchange or the NASDAQ Global Select Market or by the Commission shall have been suspended or materially limited or minimum or maximum prices shall have been established on any such exchange or market;
(iii)     a banking moratorium shall have been declared by New York or United States authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States;
(iv)  there shall have been (A) an outbreak or escalation of hostilities between the United States and any foreign power, or (B) an outbreak or escalation of any other insurrection 

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or armed conflict involving the United States or any other national or international calamity or emergency, or (C) any material change in the financial markets of the United States which, in the case of (A), (B) or (C) above and in the sole judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Notes as contemplated by the Pricing Disclosure Package and the Final Memorandum; or
(v) any securities of the Company shall have been downgraded  by any nationally recognized statistical rating organization or any such organization shall have publicly announced that it has under surveillance or review, or has changed its outlook with respect to, its ratings of any securities of the Company (other than an announcement with positive implications of a possible upgrading).
(b)    Termination of this Agreement pursuant to this Section 11 shall be without liability of any party to any other party except as provided in Section 10 hereof.
Section 12.    Defaulting Initial Purchaser.  (a)  If, on the Closing Date or the Subsequent Closing Date, as the case may be, any Initial Purchaser defaults on its obligation to purchase the Notes that it has agreed to purchase hereunder on such date, the non-defaulting Initial Purchasers may in their discretion arrange for the purchase of such Notes by other persons satisfactory to the Company on the terms contained in this Agreement.  If, within 36 hours after any such default by any Initial Purchaser, the non-defaulting Initial Purchasers do not arrange for the purchase of such Notes, then the Company shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Initial Purchasers to purchase such Notes on such terms.  If other persons become obligated or agree to purchase the Notes of a defaulting Initial Purchaser, either the non‐defaulting Initial Purchasers or the Company may postpone the Closing Date or the Subsequent Closing Date, as the case may be, for up to five full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Pricing Disclosure Package, the Final Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Pricing Disclosure Package or the Final Memorandum that effects any such changes.  As used in this Agreement, the term “Initial Purchaser” includes, for all purposes of this Agreement unless the context otherwise requires, any person not listed in Schedule 1 hereto that, pursuant to this Section 12, purchases Notes that a defaulting Initial Purchaser agreed but failed to purchase.
(b)    If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the Company as provided in paragraph (a) above, the aggregate principal amount of such Notes that remains unpurchased on the Closing Date or the Subsequent Closing Date, as the case may be does not exceed one-eleventh of the aggregate principal amount of the Notes to be purchased on such date, then the Company shall have the right to require each non-defaulting Initial Purchaser to purchase the principal amount of the Notes that such Initial Purchaser agreed 

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to purchase hereunder on such date plus such Initial Purchaser’s pro rata share (based on the principal amount of the Notes that such Initial Purchaser agreed to purchase on such date) of the Notes of such defaulting Initial Purchaser or Initial Purchasers for which such arrangements have not been made.

(c)    If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the Company as provided in paragraph (a) above, the aggregate principal amount of such Notes that remains unpurchased on the Closing Date or the Subsequent Closing Date, as the case may be, exceeds one-eleventh of the aggregate principal amount of the Notes to be purchased on such date, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement or, with respect to the Subsequent Closing Date, the obligation of the Initial Purchasers to purchase the Notes on the Subsequent Closing Date, as the case may be, shall terminate without liability on the part of the non-defaulting Initial Purchasers.  Any termination of this Agreement pursuant to this Section 12 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Section 6 hereof and except that the provisions of Section 9 hereof shall not terminate and shall remain in effect.

(d)    Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or any non-defaulting Initial Purchaser for damages caused by its default.

Section 13.    Information Supplied by the Initial Purchasers.  The statements set forth in the first paragraph of the “Plan of Distribution—Price Stabilization and Short Potions” section in the Preliminary Memorandum and the Final Memorandum (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Company for the purposes of Sections 2(a) and 9 hereof.
Section 14.    Notices.  All communications hereunder shall be in writing and, if sent to the Initial Purchasers, shall be mailed or delivered to (i) Deutsche Bank Securities Inc., 60 Wall Street, 4th Floor, New York, New York 10005, Attention: Equity Capital Markets – Syndicate Desk, fax (212) 797-9344, with a copy to Deutsche Bank Securities Inc., 60 Wall Street, 36th Floor, New York, New York 10005, Attention: General Counsel, fax: (212) 797-4564; J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179 (fax: (212) 622-8358), Attention: Equity Syndicate Desk; if sent to the Company, shall be mailed or delivered to the Company at LGI Homes, Inc. 1450 Lake Robbins Drive, Suite 430, The Woodlands, Texas 77380, Attention: Chief Executive Officer.
All such notices and communications shall be deemed to have been duly given:  when delivered by hand, if personally delivered; five business days after being deposited in the 

-29-

mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier.
Section 15.    Successors.  This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnities of the Company contained in Section 9 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in Section 9 of this Agreement shall also be for the benefit of the directors of the Company, its officers and any person or persons who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.  No purchaser of Notes from the Initial Purchasers will be deemed a successor because of such purchase.
Section 16.    APPLICABLE LAW.  THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
Section 17.    No Advisory or Fiduciary Responsibility.  The Company acknowledges and agrees that (i) the purchase and sale of the Notes pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Initial Purchasers, on the other, (ii) in connection therewith and with the process leading to such transaction each Initial Purchaser is acting solely as a principal and not the agent or fiduciary of the Company, (iii) no Initial Purchaser (other than Builder Advisor Group LLC) has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate.  The Company agrees that it will not claim that any Initial Purchaser (other than Builder Advisor Group LLC) has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

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Section 18.    Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

-31-

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the Initial Purchasers.
Very truly yours,
LGI Homes, Inc.
		
	By:
	_/s/ Charles Merdian_________________ 
Name: Charles Merdian 
Title: Chief Financial Officer, Secretary and     Treasurer

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The foregoing Agreement is hereby confirmed 
and accepted as of the date first above written.
DEUTSCHE BANK SECURITIES INC.
		
	By:
	_/s/ Tom Bradshaw_____________ 
Name: Tom Bradshaw 
Title: Managing Director

		
	By:
	_/s/ Brian Willer_______________ 
Name: Brian Willer 
Title: Managing Director

J.P. MORGAN SECURITIES LLC
		
	By:
	_/s/ Tim Oeljeschlager_________ 
Name: Tim Oeljeschlager 
Title: Executive Director

SCHEDULE 1

	
			
	Initial Purchaser
	Amount of Firm Notes
	Amount of Optional Notes

	Deutsche Bank Securities Inc.    
	$20,250,000
	$2,700,000

	J.P. Morgan Securities LLC   
	$20,250,000
	$2,700,000

	Credit Suisse Securities (USA) LLC    
	$13,500,000
	$1,800,000

	Builder Advisor Group, LLC    
	$7,500,000
	$1,000,000

	JMP Securities LLC    
	$6,750,000
	$900,000

	Merrill Lynch, Pierce, Fenner & Smith 
              Incorporated    
	$3,375,000
	$450,000

	BTIG, LLC    
	$3,375,000
	$450,000

	 
	 
	 

	Total   
	$75,000,000
	$10,000,000

SCHEDULE 2-1
Subsidiaries of the Company
		
	1.
	LGI HOMES GROUP, LLC, a Texas limited liability company

		
	2.
	LGI HOMES-PRESIDENTIAL GLEN, LLC, a Texas limited liability company

		
	3.
	LGI HOMES-QUAIL RUN, LLC, a Texas limited liability company

		
	4.
	LGI HOMES – FW, LLC, a Texas limited liability company

		
	5.
	LGI HOMES – SAN TAN HEIGHTS, LLC, an Arizona limited liability company

		
	6.
	LGI HOMES-TEXAS, LLC, a Texas limited liability company

		
	7.
	LGI HOMES-DECKER OAKS, LLC, a Texas limited liability company

		
	8.
	LGI HOMES AZ CONSTRUCTION, LLC, an Arizona limited liability company

		
	9.
	LGI HOMES-WOODLAND CREEK, LLC, a Texas limited liability company

		
	10.
	LGI HOMES-LAKES OF MAGNOLIA, LLC, a Texas limited liability company

		
	11.
	LGI HOMES-SALTGRASS, LLC, a Texas limited liability company

		
	12.
	LGI HOMES-STEWARTS FOREST, LLC, a Texas limited liability company

		
	13.
	LGI HOMES – GLENNWILDE, LLC, an Arizona limited liability company

		
	14.
	LGI HOMES – E SAN ANTONIO, LLC, a Texas limited liability company

		
	15.
	LGI HOMES – WINDMILL FARMS, LLC, a Texas limited liability company

		
	16.
	LGI HOMES – ARIZONA, LLC, an Arizona limited liability company

		
	17.
	LGI HOMES – FLORIDA, LLC, a Florida limited liability company

		
	18.
	LGI HOMES – GEORGIA, LLC, a Georgia limited liability company

		
	19.
	LGI HOMES – MAPLE LEAF, LLC, a Texas limited liability company

		
	20.
	LGI HOMES AVONDALE, LLC, a Georgia limited liability company

		
	21.
	LGI HOMES – SHALE CREEK, LLC, a Texas limited liability company

		
	22.
	LGI HOMES – STERLING LAKES PARTNERS, LLC, a Texas limited liability company

		
	23.
	LGI CROWLEY LAND PARTNERS, LLC, a Texas limited liability company

		
	24.
	LGI HOMES – MAPLE PARK, LLC, a Georgia limited liability company

		
	25.
	LGI HOMES – SUNRISE MEADOW, LLC, a Texas limited liability company

		
	26.
	LGI HOMES CORPORATE, LLC, a Texas limited liability company

		
	27.
	LGI HOMES SERVICES, LLC, a Texas limited liability company

		
	28.
	LGI HOMES AZ SALES, LLC, an Arizona limited liability company

		
	29.
	LGI HOMES – NEW MEXICO, LLC, a New Mexico limited liability company

		
	30.
	LGI HOMES NM CONSTRUCTION, LLC, a New Mexico limited liability company

		
	31.
	LGI JV HOLDINGS, LLC, a Delaware limited liability company

		
	32.
	LGI HOMES – LUCKEY RANCH, LLC, a Delaware limited liability company

		
	33.
	LGI JV HOLDINGS II, LLC, a Delaware limited liability company

		
	34.
	LGI HOMES-WEST MEADOWS, LLC, a Delaware limited liability company

		
	35.
	LGI JV HOLDINGS III, LLC, a Delaware limited liability company

		
	36.
	LGI HOMES-SONTERRA, LLC, a Delaware limited liability company

		
	37.
	LGI JV HOLDINGS IV, LLC, a Delaware limited liability company

		
	38.
	LGI HOMES – BLUE HILLS, LLC, an Arizona limited liability company

		
	39.
	LGI HOMES – KRENSON WOODS, LLC, a Delaware limited liability company

		
	40.
	LGI HOMES – NORTHPOINTE, LLC, a Delaware limited liability company

		
	41.
	LGI HOMES – OAK HOLLOW PHASE 6, LLC, a Delaware limited liability company

		
	42.
	LUCKEY RANCH PARTNERS, LLC, a Delaware limited liability company

		
	43.
	LGI FUND III HOLDINGS, LLC, a Texas limited liability company

		
	44.
	LGI HOMES-MALLARD CROSSING, LLC, a Delaware limited liability company

		
	45.
	LGI HOMES-OAK HOLLOW, LLC, a Delaware limited liability company

		
	46.
	LGI HOMES – SALTGRASS CROSSING, LLC, a Delaware limited liability company

		
	47.
	LGI HOMES – CANYON CROSSING, LLC, a Texas limited liability company

		
	48.
	LGI HOMES – DEER CREEK, LLC, a Texas limited liability company

		
	49.
	LGI HOMES II, LLC, a Texas limited liability company

		
	50.
	RIVERCHASE ESTATES PARTNERS, LLC, a South Carolina limited liability company

		
	51.
	LGI HOMES – COLORADO, LLC, a Colorado limited liability company

		
	52.
	LGI HOMES – NC, LLC, a North Carolina limited liability company

		
	53.
	LGI HOMES – SC, LLC, a South Carolina limited liability company

SCHEDULE 2-1
Significant Subsidiaries of the Company
LGI Homes Group, LLC
LGI Homes Texas, LLC
LGI Homes Decker Oaks, LLC

ANNEX A

1. Pricing Term Sheet, dated November 17, 2014, a copy of which is attached hereto as Annex A-1.

ANNEX A-1

		
	PRICING TERM SHEET
	Strictly Confidential

Dated November 17, 2014

LGI Homes, Inc. 
4.25% Convertible Notes due 2019
The information in this pricing term sheet supplements LGI Homes, Inc.’s preliminary offering memorandum, dated November 17, 2014 (the “Preliminary Offering Memorandum”), and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum.  In all other respects, this pricing term sheet is qualified in its entirety by reference to the Preliminary Offering Memorandum.  Terms used herein but not defined herein shall have the respective meanings as set forth in the Preliminary Offering Memorandum. All references to dollar amounts are references to U.S. dollars.

	
		
	Issuer:
	LGI Homes, Inc. (NASDAQ: LGIH) (the “Issuer”)

	Title of Securities:
	4.25% Convertible Notes due 2019 (the “notes”)

	Aggregate Principal Amount Offered:
	$75,000,000 aggregate principal amount of notes (plus up to an additional $10,000,000 aggregate principal amount if the initial purchasers exercise their option to purchase additional notes)

	Maturity Date:
	November 15, 2019, unless earlier purchased or converted

	Interest Rate:
	4.25% per year

	Interest Payment Dates:
	Interest will accrue from November 21, 2014 and will be payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2015.

	Issue Price:
	100% of the principal amount

	NASDAQ Last Reported Sale Price on November 17, 2014:
	 
$16.55 per share of the Issuer’s common stock

	Initial Conversion Price:
	Approximately $21.52 per share of the Issuer’s common stock

	Initial Conversion Rate:
	46.4792 shares of the Issuer’s common stock per $1,000 principal amount of notes

	Conversion Premium:
	Approximately 30% above the NASDAQ Last Reported Sale Price on November 17, 2014

    

	
		
	Use of Proceeds:
	The Issuer estimates that it will receive net proceeds from the sale of the notes of approximately $72.3 million (or $82.0 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting selling discounts and the Issuer’s offering expenses.

The Issuer intends to use approximately $16.6 million of the net proceeds from the sale of the notes to repurchase shares of the Issuer’s common stock from purchasers of notes in the offering in privately negotiated transactions effected through one of the initial purchasers or its affiliate as the Issuer’s agent. The purchase price per share of the common stock repurchased in such transactions will be equal to the closing sale price per share of the Issuer’s common stock on the date hereof, which was $16.55 per share.

The Issuer intends to use the remainder of the net proceeds from the sale of the notes (including notes sold to the initial purchasers upon exercise of their option to purchase additional notes, if any) for general corporate purposes, which may include capital expenditures, acquisitions, land purchases, working capital, repayment or refinancing of debt and repurchases of additional shares of the Issuer’s common stock.

	Subordination:
	The notes will be (i) subordinated to all of the Issuer’s existing and future senior indebtedness, including secured senior indebtedness, (ii) effectively subordinated to any of the Issuer’s secured indebtedness that ranks equal or junior to the notes, to the extent of the value of the assets securing such indebtedness, and (iii) structurally subordinated to all debt and other liabilities (including trade payables) incurred by the Issuer’s subsidiaries.

“Senior indebtedness” means principal, premium, interest (including interest accruing on or after the filing of a petition in bankruptcy or for reorganization by or against the Issuer whether or not a claim for such interest is allowed in such proceeding), fees, costs, expenses and other amounts (including related hedging or cash management obligations) owed or due under any revolving credit facility, term loan facility, letter of credit reimbursement facility, mortgage warehouse facility or line of credit or any similar facility with commercial bank lenders or similar financial institutions (but excluding, for the avoidance of doubt, any notes or other debt securities issued pursuant to an indenture or note purchase agreement).

	
		
	Future Guarantees:
	If, on or following the first date of original issuance of the notes, the Issuer incurs any capital markets indebtedness that is guaranteed by one or more of the Issuer’s subsidiaries, or any of the Issuer’s subsidiaries incurs any capital markets indebtedness (including, without limitation, any guarantee of capital markets indebtedness incurred by another of the Issuer’s subsidiaries), each subsidiary that guarantees such capital markets indebtedness, and each subsidiary that incurs capital markets indebtedness, shall fully and unconditionally guarantee the notes, and such guarantee of the notes shall rank equally with the guarantee of such capital markets indebtedness or such subsidiary capital markets indebtedness, as the case may be.

Any such subsidiary guarantee of the notes shall be released upon the release (other than discharge upon payment thereof) of the guarantee that triggered such subsidiary guarantee of the notes or the repayment of the subsidiary capital markets indebtedness that triggered such subsidiary guarantee of the notes, so long as, in each case, no other guarantee or indebtedness is outstanding at such time that would otherwise require the subsidiary to guarantee the notes at such time.

	Joint Book-Running Managers:
	Deutsche Bank Securities Inc. 
J.P. Morgan Securities LLC 
Credit Suisse Securities (USA) LLC

	Lead Manager:
	JMP Securities LLC

	Co-Managers:
	Merrill Lynch, Pierce, Fenner & Smith 
                     Incorporated
BTIG, LLC
Builder Advisor Group, LLC

	Trade Date:
	November 18, 2014

	Settlement Date:
	November 21, 2014

	CUSIP/ISIN:
	Restricted CUSIP Number: 50187T AA4
Restricted ISIN Number: US50187TAA43

	Adjustment to Conversion Rate upon Conversion upon a Make-Whole Adjustment Event:
	The following table sets forth the number of additional shares of the Issuer’s common stock to be added to the conversion rate for each $1,000 principal amount of notes for a holder that converts its notes in connection with a make-whole adjustment event (as defined in the Preliminary Offering Memorandum) based on the hypothetical stock prices and effective dates set forth below.

	
													
	 
	   Stock Price   

	Effective Date
	$16.55
	$18.00
	$19.00
	$21.52
	$22.50
	$25.00
	$30.00
	$35.00
	$40.00
	$50.00
	$60.00
	$75.00

	November 21, 2014
	13.9437
	12.4009
	11.1025
	8.5848
	7.8253
	6.2785
	4.2715
	3.0619
	2.2695
	1.3129
	0.7728
	0.3267

	November 15, 2015
	13.9437
	12.2178
	10.8227
	8.1589
	7.3699
	5.7914
	3.8199
	2.6873
	1.9715
	1.1319
	0.6640
	0.2764

	November 15, 2016
	13.9437
	11.7309
	10.2320
	7.4276
	6.6175
	5.0375
	3.1719
	2.1761
	1.5800
	0.9061
	0.5332
	0.2191

	November 15, 2017
	13.9437
	11.1001
	9.4412
	6.4216
	5.5813
	4.0080
	2.3203
	1.5318
	1.1029
	0.6414
	0.3819
	0.1540

	November 15, 2018
	13.9437
	10.0422
	8.1189
	4.7774
	3.9144
	2.4383
	1.1772
	0.7513
	0.5560
	0.3419
	0.2084
	0.0811

	November 15, 2019
	13.9437
	9.0764
	6.1524
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000

The exact stock prices and effective dates may not be set forth in the table above, in which case if the stock price is:
		
	•
	between two stock prices in the table or the effective date is between two effective dates in the table, the number of additional shares will be determined by a straight-line interpolation between the number of additional shares set forth for the higher and lower stock prices and the earlier and later effective dates based on a 365-day year, as applicable;

		
	•
	in excess of $75.00 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate; and

		
	•
	less than $16.55 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.

Notwithstanding anything in the indenture to the contrary, the Issuer may not increase the conversion rate to more than 60.4229 shares of the Issuer’s common stock per $1,000 principal amount of notes pursuant to the events described under “Description of Notes—Adjustment to Conversion Rate upon Conversion upon a Make-Whole Adjustment Event” in the Preliminary Offering Memorandum, though the Issuer will adjust such number of shares of the Issuer’s common stock for the same events for which the Issuer must adjust the conversion rate as described under “Description of Notes—Conversion of Notes—Conversion Rate Adjustments” in the Preliminary Offering Memorandum. 
_________________________________
This communication is intended for the sole use of the person to whom it is provided by the sender. This material is confidential and is for your information only and is not intended to be used by anyone other than you. This information does not purport to be a complete description of the notes or the offering.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the notes nor any shares of common stock issuable upon conversion of the notes have been or will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Prospective purchasers that are qualified institutional buyers are hereby notified that the sellers of the notes may be relying on an exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A under the Securities Act.
ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.

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