Document:

Document

Exhibit 10.1

Third Amendment to Credit Agreement

This Third Amendment to Credit Agreement (this “Third Amendment”), dated July 7, 2021 (the “Third Amendment Effective Date”), is among Brigham Resources, LLC, a Delaware limited liability company (the “Borrower”); each of the undersigned guarantors, if any (the “Guarantors”, and together with the Borrower, the “Credit Parties”); each of the Banks party hereto; and Wells Fargo Bank, N.A., as administrative agent for the Banks (in such capacity, together with its successors in such capacity, the “Administrative Agent”).
Recitals
A.    The Borrower, the Administrative Agent and the Banks are parties to that certain Credit Agreement dated as of May 16, 2019 (as amended prior to the date hereof, the “Credit Agreement”), pursuant to which the Banks have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.
B.    The parties hereto desire to enter into this Third Amendment to, among other things, (i) evidence the increase of the Borrowing Base from $135,000,000 to $165,000,000, (ii) evidence the increase of the Aggregate Elected Commitment Amount from $135,000,000 to $165,000,000, and (iii) amend certain terms of the Credit Agreement, in each case, as set forth herein and to be effective as of the Third Amendment Effective Date. 
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1.Defined Terms.  Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Third Amendment, shall have the meaning ascribed to such term in the Credit Agreement, as amended hereby.  Unless otherwise indicated, all section references in this Third Amendment refer to the Credit Agreement.
Section 2.Amendments.  In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, the Credit Agreement shall be amended effective as of the Third Amendment Effective Date in the manner provided in this Section 2.
2.1    Additional Definition.  Section 1.2 of the Credit Agreement is hereby amended to add thereto in alphabetical order the following definitions which shall read in full as follows:
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Loans” has the meaning assigned to such term in Section 13.1(b).
“Announcements” has the meaning assigned to such term in Section 1.6.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (a) if the then-current Benchmark is a term rate, any tenor for such Benchmark or (b) otherwise, any payment period for 
Page 1

interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 13.1(c)(iv).
“Benchmark” means, initially, USD LIBOR; provided that if a Benchmark Transition Event, a Term SOFR Transition Event, or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to USD LIBOR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 13.1(c)(i).
“Benchmark Replacement” means, for any Available Tenor:
(a)    with respect to any Benchmark Transition Event or Early Opt-in Election, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
    (i)    the sum of: (A) Term SOFR and (B) the related Benchmark Replacement Adjustment;
    (ii)    the sum of: (A) Daily Simple SOFR and (B) the related Benchmark Replacement Adjustment; 
    (iii)    the sum of: (A) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (x) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for dollar-denominated syndicated credit facilities at such time and (B) the related Benchmark Replacement Adjustment; or
(b)    with respect to any Term SOFR Transition Event, the sum of (i) Term SOFR and (ii) the related Benchmark Replacement Adjustment
provided, that, (I) in the case of clause (a)(i) above, if the Administrative Agent decides that Term SOFR is not administratively feasible for the Administrative Agent, then Term SOFR will be deemed unable to be determined for purposes of this definition and (II) in the case of clause (a)(i) or clause (b) above, the applicable Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion. If the Benchmark Replacement as determined pursuant to clause (a)(i), (a)(ii) or (a)(iii) or clause (b) above would be less than the 
Page 2

Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Papers.
    “Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
    (a)    for purposes of clauses (a)(i) and (a)(ii) of the definition of “Benchmark Replacement”, the first alternative set forth in the order below that can be determined by the Administrative Agent:
        (i)    the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Available Tenor of such Benchmark with the applicable Unadjusted Benchmark Replacement;
        (ii)    the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Available Tenor of such Benchmark;
(b)    for purposes of clause (a)(iii) of the definition of “Benchmark Replacement”, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Available Tenor of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Available Tenor of such Benchmark with the applicable Unadjusted Benchmark Replacement for dollar-denominated syndicated credit facilities; and
(c)    for purposes of clause (b) of the definition of “Benchmark Replacement”, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Available Tenor of USD LIBOR with a SOFR-based rate;
Page 3

provided, that, (x) in the case of clause (a) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrative Agent in its reasonable discretion and (y) if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement that will replace such Benchmark in accordance with Section 13.1(c)(i) will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be, with respect to each Unadjusted Benchmark Replacement having a payment period for interest calculated with reference thereto, the Available Tenor that has approximately the same length (disregarding business day adjustments) as such payment period.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Adjusted Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Papers).
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a)    in the case of clauses (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);
(b)    in the case of clause (c) of the definition of “Benchmark Transition Event”, the date of the public statement or publication of information referenced therein;
(c)    in the case of a Term SOFR Transition Event, the date that is thirty (30) days after the Administrative Agent has provided the Term SOFR Notice to the Banks and the Borrower pursuant to Section 13.1(c)(i)(B); or
Page 4

(d)    in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Banks, so long as the Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Banks, written notice of objection to such Early Opt-in Election from Banks comprising the Majority Banks.
For the avoidance of doubt, (x) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (y) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clauses (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a)    a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b)    a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System of the United States, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided, that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c)    a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative.
Page 5

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date pursuant to clauses (a) or (b) of the definition thereof has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Papers in accordance with Section 13.1(c) and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Paper in accordance with Section 13.1(c).
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“Consolidated Cash Balance” means, at any time, (a) the aggregate amount of cash and cash equivalents held or owned by (either directly or indirectly), credited to the account of or otherwise required to be reflected as an asset on the balance sheet, in each case, of the Borrower or any of its Restricted Subsidiaries less (b) the sum of (i) any cash or cash equivalents set aside to pay royalty obligations, working interest obligations, suspense payments, severance taxes, payroll, payroll taxes, other taxes, employee wage and benefit payments and trust and fiduciary obligations or other obligations of the Borrower or any of its Restricted Subsidiaries owing to third parties, (ii) any cash or cash equivalents to be used to pay other obligations of the Borrower or any Restricted Subsidiary permitted to be paid hereunder for which the Borrower or such Restricted Subsidiary has issued checks or has initiated wires or ACH transfers (or, in the Borrower’s good faith discretion, will issue checks or initiate wires or ACH transfers within five (5) Business Days) but that has or have not yet been subtracted from the balance in the relevant account of the Borrower or any of its Restricted Subsidiaries, (iii) any cash or cash equivalents of the Borrower or any of its Restricted Subsidiaries constituting purchase price deposits held in escrow pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment and refunding of such deposits, (iv) without duplication of clause (b)(iii) hereof, any cash or cash equivalents set aside to be used by the Borrower or any of its Restricted Subsidiaries to pay the purchase price for any acquisition of any assets or property by the Borrower or any Restricted Subsidiary pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party; provided that, solely for purposes of this clause (b)(iv), such cash or cash equivalents shall not be included in the calculation of clause (b) after the earlier to occur of (x) the date that is thirty (30) days after entry by the Borrower or such Restricted Subsidiary into such purchase and sale agreement and (y) the date in which such purchase and sale agreement is 
Page 6

terminated, (v) any cash or cash equivalents of the Borrower or any of is Restricted Subsidiaries constituting proceeds from a disposition permitted by the terms of this Agreement, in each case, that are held in escrow accounts (or other segregated accounts) and solely used in connection with “like-kind exchanges” within the meaning of Section 1031 of the Code; provided that the proceeds excluded pursuant to this clause (v) shall not be included in the calculation of clause (b) above after one hundred eighty (180) days following the receipt by the Borrower or such Restricted Subsidiary of the proceeds from such disposition, (vi) any cash or cash equivalents held in collateral accounts with respect to letters of credit solely to the extent permitted pursuant to Section 9.3, (vii) any cash or cash equivalents set aside and for which the Borrower or any of its Restricted Subsidiaries has issued checks or has initiated wires or ACH transfers (or will issue checks or initiate wires or ACH transfers within thirty (30) days) to make a Restricted Payment permitted to be made pursuant to Sections 9.2(a)(iii) or 9.2(a)(iv) to the extent such Restricted Payment could be made at such time and in an amount not to exceed the applicable amount of such Restricted Payment permitted to be made pursuant thereto, (viii) any cash or cash equivalents subject to a Lien pursuant to clause (h) of the definition of “Permitted Encumbrances”, (ix) any cash or cash equivalents constituting proceeds from an issuance of, or additional contributions to, Equity Interests of the Borrower so long as such proceeds are (A) designated in writing to the Administrative Agent by the Borrower substantially contemporaneously with the receipt thereof to be excluded pursuant to this clause (b)(ix) and (B) segregated and maintained in a separate deposit account of the Borrower or a Restricted Subsidiary maintained exclusively for holding such cash proceeds; provided that any such designated proceeds in this clause (b)(ix) shall not be included in the calculation of clause (b) above after thirty (30) days following the receipt of such designated proceeds by the Borrower (or such later date as agreed to by the Administrative Agent in its sole discretion), and (x) proceeds of any incurrence or issuance of any Permitted Additional Debt so long as such proceeds are (A) designated in writing to the Administrative Agent by the Borrower substantially contemporaneously with the receipt thereof to be excluded pursuant to this clause (x) and (B) segregated and maintained in a separate deposit account of the Borrower or a Restricted Subsidiary maintained exclusively for holding such cash proceeds; provided that any such designated proceeds in this clause (b)(x) shall not be included in the calculation of clause (b) above after thirty (30) days following the receipt of such designated proceeds by the Borrower (or such later date as agreed to by the Administrative Agent in its sole discretion). 
“Consolidated Cash Balance Threshold” means, at any time of determination, an amount equal to ten percent (10%) of the Borrowing Base then in effect.
“Consolidated Total Leverage Ratio” means, (a) with respect to Section 10.1(b), as of the last day of any Rolling Period, the ratio of (i) Total Net Funded Debt as of such date to (ii) Consolidated EBITDA (or, in the case of the Rolling Periods ending on June 30, 2019, September 30, 2019 and December 31, 2019, Annualized Consolidated EBITDA) for the Rolling Period ending on such date and 
Page 7

(b) with respect to any calculation thereof for other purposes hereunder, the ratio of (i) Total Net Funded Debt as of such date to (ii) Consolidated EBITDA for the most recently ended Rolling Period for which financial statements are available.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion.
“Early Opt-in Election” means, if the then-current Benchmark is USD LIBOR, the occurrence of:
(a)    a notification by the Administrative Agent to (or the request by the Borrower to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(b) the joint election by the Administrative Agent and the Borrower to trigger a fallback from USD LIBOR and the provision by the Administrative Agent of written notice of such election to the Banks.
“Erroneous Payment” has the meaning assigned to such term in Section 12.16(a).
“FCA” has the meaning assigned to such term in Section 1.6.
“Federal Funds Effective Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if such rate is not so published for any day which is a Business Day, the Federal Funds Effective Rate for such day shall be the average of the quotation for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.  Notwithstanding the 
Page 8

foregoing, if the Federal Funds Effective Rate shall be less than 0%, such rate shall be deemed to be 0% for purposes of this Agreement.
“Floor” means, the benchmark rate floor, if any, provided in this Agreement (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to USD LIBOR.
“IBA” has the meaning assigned to such term in Section 1.6.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Liquidity” means the sum of (a) unrestricted cash and cash equivalents of the Borrower and its Restricted Subsidiaries, plus (b) Revolving Availability. 
“London Banking Day” means any day on which dealings in dollar deposits are conducted by and between banks in the London interbank Eurodollar market.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Reference Time” with respect to any setting of the then-current Benchmark means (a) if such Benchmark is USD LIBOR, 11:00 a.m. (London time) on the day that is two (2) London Banking Days preceding the date of such setting and (b) if such Benchmark is not USD LIBOR, the time determined by the Administrative Agent in its reasonable discretion.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System of the United States or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System of the United States or the Federal Reserve Bank of New York, or any successor thereto.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’s Website on the immediately succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
Page 9

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“Specified Consolidated Cash Balance Test Date” has the meaning given to such term in Section 2.6(d).
“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Term SOFR Notice” means a notification by the Administrative Agent to the Banks and the Borrower of the occurrence of a Term SOFR Transition Event.
“Term SOFR Transition Event” means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the administration of Term SOFR is administratively feasible for the Administrative Agent and (c) a Benchmark Transition Event or an Early Opt-in Election, as applicable, has previously occurred resulting in the replacement of the then-current Benchmark for all purposes hereunder and under any Loan Paper in accordance with Section 13.1(c) with a Benchmark Replacement the Unadjusted Benchmark Replacement component of which is not Term SOFR.
“Third Amendment” means that certain Third Amendment to Credit Agreement dated as of July 7, 2021, among Borrower, the Guarantors party thereto, the Administrative Agent and the Banks party thereto.

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“USD LIBOR” means the London interbank offered rate for dollars.
Page 10

2.2    Restated Definition.  The definitions of the following terms contained in Section 1.2 of the Credit Agreement are hereby amended and restated in their respective entireties to read in full as follows:
“Aggregate Elected Commitment Amount” means, at any time, an amount equal to the sum of the Elected Commitments, as the same may be increased, reduced or terminated pursuant to Section 2.15.  As of the Third Amendment Effective Date, the Aggregate Elected Commitment Amount is $165,000,000.

“Applicable Margin” means, on any date, with respect to each Eurodollar Tranche or Adjusted Base Rate Tranche, an amount determined by reference to the ratio of Outstanding Revolving Credit to the Borrowing Base, on such date, in accordance with the table below:
												
	Pricing Level	Ratio of Outstanding Revolving Credit to Borrowing Base	Applicable Margin for Eurodollar Tranches	Applicable Margin for Adjusted Base Rate Tranches
	I
	≥90%
	3.00%
	2.00%

	II
	≥75% but<90%
	2.75%
	1.75%

	III
	≥50% but <75%
	2.50%
	1.50%

	IV
	≥25% but <50%
	2.25%
	1.25%

	V
	<25%
	2.00%
	1.00%

Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change; provided that, if at any time Borrower fails to deliver a Reserve Report pursuant to Section 4.1, then the “Applicable Margin” means the rate per annum set forth on the grid when the Ratio of Outstanding Revolving Credit to the Borrowing Base is at its highest level until such Reserve Report is delivered.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution. 
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Base Rate” means, at any time, the rate of interest per annum publicly announced from time to time by Wells Fargo Bank, N.A. as its prime rate.  Each change in the Base Rate shall be effective as of the opening of business on the day 
Page 11

such change in such prime rate occurs.  The parties hereto acknowledge that the rate announced publicly by Wells Fargo Bank, N.A. as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.
“LIBOR Rate” means, subject to the implementation of a Benchmark Replacement in accordance with Section 13.1(c):
(a)    for any interest rate calculation with respect to a Eurodollar Borrowing, the rate of interest per annum determined on the basis of the rate for deposits in Dollars for a period equal to the applicable Interest Period as published by the ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor quoting service approved by the Administrative Agent, at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the first day of the applicable Interest Period. If, for any reason, such rate is not so published then the “LIBOR Rate” shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period, and
(b)    for any interest rate calculation with respect to a Base Rate Borrowing, the rate of interest per annum determined on the basis of the rate for deposits in Dollars for an Interest Period equal to one month (commencing on the date of determination of such interest rate) as published by ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor quoting service approved by the Administrative Agent, at approximately 11:00 a.m. (London time) on such date of determination, or, if such date is not a Business Day, then the immediately preceding Business Day. If, for any reason, such rate is not so published then the “LIBOR Rate” for such Base Rate Borrowing shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) on such date of determination for a period equal to one month commencing on such date of determination.
Each calculation by the Administrative Agent of the LIBOR Rate shall be conclusive and binding for all purposes, absent manifest error.
Notwithstanding the foregoing, (x) in no event shall the LIBOR Rate (including any Benchmark Replacement with respect thereto) be less than 0.00% and (y) unless otherwise specified in any amendment to this Agreement entered into in accordance with Section 13.1(c), in the event that a Benchmark Replacement with respect to the LIBOR Rate is implemented then all references herein to the LIBOR Rate shall be deemed references to such Benchmark Replacement. 
Page 12

“Loan Papers” means this Agreement, the First Amendment, the Second Amendment, the Third Amendment, the Notes, the Facility Guaranty, the Mortgages, the Security Agreement, the other Security Instruments, each Letter of Credit now or hereafter executed and/or delivered, each Fee Letter (excluding any term sheets attached thereto), and all other certificates, agreements or instruments delivered in connection with this Agreement by any Credit Party (or any officer thereof), as the foregoing may be amended from time to time.  Hedge Agreements do not constitute Loan Papers.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that Person or any other Person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.  
2.3    Deleted Definitions.  The definition of “Replacement Rate” contained in Section 1.2 of the Credit Agreement is hereby deleted in its entirety.
2.4    Amendment to Section 1.6 of the Credit Agreement. Section 1.6 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
Section 1.6    Rates.  The interest rate on Eurodollar Borrowings and Adjusted Base Rate Borrowings (when determined by reference to clause (c) of the definition of Adjusted Base Rate) may be determined by reference to the LIBOR Rate, which is derived from the London interbank offered rate.  The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market.  On March 5, 2021, ICE Benchmark Administration (“IBA”), the administrator of the London interbank offered rate, and the Financial Conduct Authority (the “FCA”), the regulatory supervisor of IBA, announced in public statements (the “Announcements”) that the final publication or representativeness date for the London interbank offered rate for dollars for: (a) 1-week and 2-month tenor settings will be December 31, 2021 and (b) overnight, 1-month, 3-month, 6-month and 12-month tenor settings will be June 30, 2023.  No successor administrator for IBA was identified in such Announcements.  As a result, it is possible that commencing immediately after such dates, the London interbank offered rate for such tenors may no longer be available or may no longer be deemed a representative reference rate upon which to determine the interest rate on Eurodollar Borrowings or Adjusted Base Rate Borrowings (when determined by reference to clause (c) of the definition 
Page 13

of Adjusted Base Rate). There is no assurance that the dates set forth in the Announcements will not change or that IBA or the FCA will not take further action that could impact the availability, composition or characteristics of any London interbank offered rate. Public and private sector industry initiatives have been and continue, as of the date hereof, to be underway to implement new or alternative reference rates to be used in place of the London interbank offered rate.  In the event that the London interbank offered rate or any other then-current Benchmark is no longer available or in certain other circumstances set forth in Section 13.1(c), such Section 13.1(c) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will notify the Borrower, pursuant to Section 13.1(c), of any change to the reference rate upon which the interest rate on Eurodollar Borrowings and Adjusted Base Rate Borrowings (when determined by reference to clause (c) of the definition of Adjusted Base Rate) is based.  However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, (i) the administration of, submission of, calculation of or any other matter related to the London interbank offered rate or other rates in the definition of “LIBOR Rate” or with respect to any alternative, comparable or successor rate thereto, or replacement rate thereof (including any then-current Benchmark or any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement reference rate (including any Benchmark Replacement), as it may or may not be adjusted pursuant to Section 13.1(c), will be similar to, or produce the same value or economic equivalence of, LIBOR Rate or any other Benchmark, or have the same volume or liquidity as did the London interbank offered rate or any other Benchmark prior to its discontinuance or unavailability, or (ii) the effect, implementation or composition of any Benchmark Replacement Conforming Changes.
2.5    Amendment to Section 2.6 of the Credit Agreement.  Section 2.6 of the Credit Agreement is hereby amended by adding a new subsection (d) immediately below current subsection (c) to read in full as follows: 
(d)    If, as of the end of the last Business Day of any calendar month (each such date, a “Specified Consolidated Cash Balance Test Date”), commencing with the calendar month ending June 2021, the Consolidated Cash Balance exceeds the Consolidated Cash Balance Threshold, then the Borrower shall promptly (and in any event within three (3) Business Days after such Specified Consolidated Cash Balance Test Date), prepay the Borrowings in an aggregate principal amount equal to the lesser of (A) the amount of such excess and (B) the unpaid principal balance of the Borrowings.  
2.6    Amendment to Section 6.2(b) of the Credit Agreement.  Section 6.2(b) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(b)    (i) immediately before and after giving effect to such Borrowing or issuance of such Letter(s) of Credit, no Default or Event of Default shall have occurred and be continuing and neither such Borrowing nor the issuance of such Letter(s) of Credit (as applicable) shall cause a Default or Event of Default and (ii) 
Page 14

immediately before and after giving effect to such Borrowing, the Consolidated Cash Balance shall not be in excess of the Consolidated Cash Balance Threshold;
2.7    Amendment to Section 9.2(a) of the Credit Agreement.  Clause (iv) of Section 9.2(a) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows: 
(iv)    Borrower may make other Restricted Payments with respect to its Equity Interests so long as (A) no Default or Event of Default or Borrowing Base Deficiency then exists or would result therefrom, (B) after giving effect to such Restricted Payment (and any Borrowings incurred in connection therewith), Liquidity is greater than or equal to ten percent (10%) of the Total Commitment in effect at such time and (C) after giving effect to such payment (and any Borrowings incurred in connection therewith), the Consolidated Total Leverage Ratio on a pro forma basis is less than or equal to 3.00 to 1.00. 
2.8    Amendment to Section 10.1(b) of the Credit Agreement.  Section 10.1(b) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows: 
(b)    Borrower will not permit, as of the last day of any Rolling Period, the Consolidated Total Leverage Ratio to be greater than (i) 4.00 to 1.00 as of the last day of any Rolling Period ending on or prior to June 30, 2021 and (ii) 3.50 to 1.00 as of the last day of any Rolling Period thereafter.
2.9    New Sections 12.15 and 12.16 of the Credit Agreement. Article XII of the Credit Agreement is hereby amended to add new Sections 12.15 and 12.16 as follows: 
Section 12.15    Certain ERISA Matters. 
(a)    Each Bank (x) represents and warrants, as of the date such Person became a Banks party hereto, to, and (y) covenants, from the date such Person became a Bank party hereto to the date such Person ceases being a Bank party hereto, for the benefit of, the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that at least one of the following is and will be true: 
(i)    such Bank is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit or the Commitments or this Agreement; 
(ii)    the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to 
Page 15

such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or
(iii)    (A) such Bank is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Bank to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Bank, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement.
(b)    In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Bank or (2) a Bank has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Bank further (x) represents and warrants, as of the date such Person became a Bank party hereto, to, and (y) covenants, from the date such Person became a Bank party hereto to the date such Person ceases being a Bank party hereto, for the benefit of, the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that none of the Administrative Agent, any Arranger and their respective Affiliates is a fiduciary with respect to the assets of such Bank involved in such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Paper or any documents related hereto or thereto). 
Section 12.16    Erroneous Payments.
(a)Each Bank and Letter of Credit Issuer hereby severally agrees that if (i) the Administrative Agent notifies (which such notice shall be conclusive absent manifest error) such Bank or Letter of Credit Issuer that the Administrative Agent has determined in its sole discretion that any funds received by such Bank or Letter of Credit Issuer from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Bank or Letter of Credit Issuer (whether or not known to such Bank or Letter of Credit Issuer) or (ii) it receives any payment from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, (y) that was not preceded or accompanied by a notice of payment sent by the Administrative Agent (or any of its Affiliates) 
Page 16

with respect to such payment or (z) that such Bank or Letter of Credit Issuer otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) then, in each case an error in payment has been made (any such amounts specified in clauses (i) or (ii) of this Section 12.16(a), whether received as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, an “Erroneous Payment”) and the Bank or Letter of Credit Issuer, as the case may be, is deemed to have knowledge of such error at the time of its receipt of such Erroneous Payment and to the extent permitted by applicable law, such Bank or Letter of Credit Issuer shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.   

(b)Without limiting the immediately preceding clause (a), each Bank and Letter of Credit Issuer agrees that, in the case of clause (a)(ii) above, it shall promptly (and, in all events, within one Business Day of its knowledge (or deemed knowledge) of such error) notify the Administrative Agent in writing of such occurrence and, in the case of either clause (a)(i) or (a)(ii) above upon demand from the Administrative Agent, it shall promptly, but in all events no later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Bank or Letter of Credit Issuer to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.

(c)The Borrower hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any Bank or Letter of Credit Issuer that has received such Erroneous Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Bank or I Letter of Credit Issuer with respect to such amount, (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Credit Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Credit Party for the purpose of making a payment on any of the Obligations, and (z) to the extent that an Erroneous Payment was in any way or at any time credited as payment or satisfaction of any of the Obligations or any part thereof that were so credited, and all rights of the applicable Bank, Letter of Credit Issuer, Administrative Agent or other Secured Party, as the case may be, shall be 
Page 17

reinstated and continue in full force and effect as if such payment or satisfaction had never been received, except to the extent such Erroneous Payment was, and solely with respect to the amount of such Erroneous Payment that was, comprised of funds received by the Administrative Agent from the Borrower or any other Credit Party for the purpose of making a payment on any of the Obligations.
Each party’s obligations under this Section 12.16 shall survive the resignation or replacement of the Administrative Agent or any transfer of right or obligations by, or the replacement of, a Bank, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Paper.
2.10    Amendment to Section 13.1 of the Credit Agreement.  Section 13.1 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows: 
Section 13.1    Alternate Rate of Interest. 
(a)    Circumstances Affecting LIBOR Rate Availability.  Unless and until a Benchmark Replacement is implemented in accordance with clause (c) below, in connection with any request for a Eurodollar Borrowing or a conversion to or continuation thereof or otherwise, if for any reason  the Administrative Agent shall determine (which determination shall be conclusive and binding absent manifest error) that dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Loan,  the Administrative Agent shall determine (which determination shall be conclusive and binding absent manifest error) that reasonable and adequate means do not exist for ascertaining the Adjusted LIBOR Rate or LIBOR Rate for such Interest Period with respect to a proposed Eurodollar Borrowing or  the Majority Banks shall determine (which determination shall be conclusive and binding absent manifest error) that the Adjusted LIBOR Rate or LIBOR Rate does not adequately and fairly reflect the cost to such Banks of making or maintaining such Loans during such Interest Period, then the Administrative Agent shall promptly give notice thereof to the Borrower. Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer exist, the obligation of the Banks to make Eurodollar Borrowings and the right of the Borrower to convert any Loan to or continue any Loan as a Eurodollar Borrowing shall be suspended, and the Borrower shall either  repay in full (or cause to be repaid in full) the then outstanding principal amount of each such Eurodollar Borrowing together with accrued interest thereon on the last day of the then current Interest Period applicable to such Eurodollar Borrowing; or  convert the then outstanding principal amount of each such Eurodollar Borrowing to an Adjusted Base Rate Borrowing as of the last day of such Interest Period.
(b)    Laws Affecting LIBOR Rate Availability.  If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Banks (or any of their respective lending offices) with any 
Page 18

request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Banks (or any of their respective lending offices) to honor its obligations hereunder to make or maintain any Eurodollar Borrowing, such Banks shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Banks. Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer exist,  the obligations of the Banks to make Eurodollar Borrowings, and the right of the Borrower to convert any Loan to a Eurodollar Borrowing or continue any Loan as a Eurodollar Borrowing shall be suspended (the “Affected Loans”) and thereafter the Borrower may select only Adjusted Base Rate Borrowings and  if any of the Banks may not lawfully continue to maintain an Affected Loan to the end of the then current Interest Period applicable thereto, the applicable Affected Loan shall immediately be converted to an Adjusted Base Rate Borrowing for the remainder of such Interest Period.
(c)    Benchmark Replacement Setting.
(i)    Benchmark Replacement.  (A) Notwithstanding anything to the contrary herein or in any other Loan Paper, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of any then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (a)(i) or (a)(ii) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Paper in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Paper and (y) if a Benchmark Replacement is determined in accordance with clause (a)(iii) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Paper in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Banks without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Paper so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Banks comprising the Majority Banks.
(B)    Notwithstanding anything to the contrary herein or in any other Loan Paper, if a Term SOFR Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then the applicable Benchmark Replacement will replace such Benchmark for all purposes hereunder or under any Loan Paper in respect of such Benchmark setting and subsequent Benchmark settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Paper; provided that this clause (B) shall not be effective unless the Administrative 
Page 19

Agent has delivered to the Banks and the Borrower a Term SOFR Notice. For the avoidance of doubt, the Administrative Agent shall not be required to deliver a Term SOFR Notice after a Term SOFR Transition Event and may elect or not elect to do so in its sole discretion.

(ii)        Benchmark Replacement Conforming Changes.  In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Paper, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Paper. 
(iii)        Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Banks of (A) any occurrence of a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (B) the implementation of any Benchmark Replacement, (C) the effectiveness of any Benchmark Replacement Conforming Changes, (D) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 13.1(c)(iv) below and (E) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Banks (or group of Banks) pursuant to this Section 13.1(c), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Paper, except, in each case, as expressly required pursuant to this Section 13.1(c).
(iv)        Unavailability of Tenor of Benchmark.  Notwithstanding anything to the contrary herein or in any other Loan Paper, at any time (including in connection with the implementation of a Benchmark Replacement), (A) if the then-current Benchmark is a term rate (including Term SOFR or USD LIBOR) and either (1) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (2) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of “Interest Period” for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (B) if a tenor that was removed pursuant to clause (A) above either (1) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (2) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a 
Page 20

Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(v)        Benchmark Unavailability Period.  Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request for a Borrowing of, conversion to or continuation of Eurodollar Borrowing to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to an Adjusted Base Rate Borrowing. During any Benchmark Unavailability Period with respect to any Benchmark or at any time that a tenor for any Benchmark is not an Available Tenor, the component of the Adjusted Base Rate that is based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Adjusted Base Rate.
(vi)        London Interbank Offered Rate Benchmark Transition Event.  On March 5, 2021, IBA, the administrator of the London interbank offered rate, and the FCA, the regulatory supervisor of the IBA, made the Announcements that the final publication or representativeness date for (A) 1-week and 2-month London interbank offered rate tenor settings will be December 31, 2021 and (B) overnight, 1-month, 3-month, 6-month and 12-month London interbank offered rate tenor settings will be June 30, 2023. No successor administrator for IBA was identified in such Announcements. The parties hereto agree and acknowledge that the Announcements resulted in the occurrence of a Benchmark Transition Event with respect to the London interbank offered rate pursuant to the terms of this Agreement and that any obligation of the Administrative Agent to notify any parties of such Benchmark Transition Event pursuant to clause (iii) of this Section 13.1(c) shall be deemed satisfied.
2.11    Amendment to Section 13.2 of the Credit Agreement.  Section 13.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 
Section 13.2    [Reserved.] 
2.12    Amendments to Section 14.2(c) of the Credit Agreement.  
(a)    The parenthetical in Section 14.2(c)(ii)(C) of the Credit Agreement that reads “(other than as a result of the adoption of a Replacement Rate pursuant to Section 13.1(b))”, is hereby amended in its entirety to read as follows:

(other than as a result of the implementation of a Benchmark Replacement in accordance with Section 13.1(c))
(b)    Section 14.2(c)(ii)(I) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 
Page 21

(I)(1) amend any provisions governing the pro rata sharing of payments among Banks in a manner to permit non-pro rata sharing of payments among Bank; (2) subordinate any of the Obligations owed to the Banks in right of payment or (3) subordinate any of the Liens securing the Obligations owed to the Banks (except as otherwise set forth in Section 12.14(a)), in each case without the written consent of each Bank.
2.13    Amendment to Section 14.20 of the Credit Agreement.  Section 14.20 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
Section 14.20    Acknowledgment and Consent to Bail-In of Affected Financial Institutions.  Notwithstanding anything to the contrary in any Loan Paper or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Paper, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)    the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)    the effects of any Bail-In Action on any such liability, including, if applicable:
(i)    a reduction in full or in part or cancellation of any such liability;
(ii)    a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent entity, undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Paper; or
(iii)    the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
2.14    Replacement of Schedule 1 to the Credit Agreement.  Schedule 1 to the Credit Agreement is hereby replaced in its entirety with Schedule 1 hereto and Schedule 1 hereto shall be deemed to be attached as Schedule 1 to the Credit Agreement. After giving effect to this Third Amendment, the amendments to the Credit Agreement set forth in Section 2 hereof and any Borrowings made on the Third Amendment Effective Date, (a) each Bank who holds Loans in an aggregate amount less than its Applicable Percentage of all Loans shall advance new Loans which shall be disbursed to the Administrative Agent and used to repay Loans outstanding to each Bank 
Page 22

who holds Loans in an aggregate amount greater than its Applicable Percentage of all Loans, (b) each Bank’s participation in each Letter of Credit, if any, shall be automatically adjusted to equal its Applicable Percentage, (c) such other adjustments shall be made as the Administrative Agent shall specify so that the Outstanding Revolving Credit applicable to each Bank equals its Applicable Percentage of the aggregate Outstanding Revolving Credit of all of the Banks and (d) upon request by each applicable Bank, the Borrower shall be required to make any break funding payments owing to such Bank that are required under Section 3.3 of the Credit Agreement as a result of the reallocation of Loans and adjustments described in this Section 2.14. 
Section 3.Borrowing Base.  In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, the Borrowing Base is hereby increased from $135,000,000 to $165,000,000 as of the Third Amendment Effective Date.  The Borrowing Base shall remain at such level until the next Determination Date or other adjustment to the Borrowing Base thereafter, whichever occurs first pursuant to the Credit Agreement.  The Borrower, the Administrative Agent and the Banks agree that the Determination provided for in this Section 3 will constitute the Periodic Determination scheduled for on or about May 1, 2021 for the purposes of Section 4.2 of the Credit Agreement and shall not be construed or deemed to be a Special Determination for purposes of Section 4.3 of the Credit Agreement.
Section 4.Aggregate Elected Commitment Amount Increase.  In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, each Bank hereby agrees that, effective as of the Third Amendment Effective Date and after giving effect to Section 2.14 hereof, the Aggregate Elected Commitment Amount shall be increased from $135,000,000 to $165,000,000 and each Bank’s Elected Commitment under the Credit Agreement shall be the amount set forth opposite such Bank’s name on Schedule 1 to the Credit Agreement (as amended hereby) under the caption “Elected Commitment”.
Section 5.Conditions Precedent.  The effectiveness of this Third Amendment is subject to the following:
5.1    Counterparts. The Administrative Agent shall have received counterparts of this Third Amendment from the Credit Parties and each of the Banks.
5.2    Notes.  The Administrative Agent shall have received duly executed Notes (or any amendment and restatement thereof, as the case may be) payable to each Bank requesting a Note (or amendment and restatement thereof, as the case may be) in a principal amount equal to its Maximum Credit Amount (as amended hereby) dated as of the Third Amendment Effective Date.
5.3    Other Fees and Expenses.  The Administrative Agent shall have received all fees separately agreed to by the Borrower with the Arranger, Administrative Agent, and/or any Bank and any fees and other amounts due and payable pursuant to Section 14.3 of the Credit Agreement, in each case, on or prior to the Third Amendment Effective Date.
Page 23

5.4    Other Documents.  The Administrative Agent shall have received such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.
Section 6.Miscellaneous.
6.1    Confirmation and Effect.  The provisions of the Credit Agreement (as amended by this Third Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this Third Amendment, and this Third Amendment shall not constitute a waiver of any provision of the Credit Agreement or any other Loan Paper, except as expressly provided for herein.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.
6.2    Ratification and Affirmation of Credit Parties.  Each of the Credit Parties hereby expressly (a) acknowledges the terms of this Third Amendment, (b) ratifies and affirms its obligations under the Credit Agreement, the Facility Guaranty and the other Loan Papers to which it is a party, (c) acknowledges, renews and extends its continued liability under the Credit Agreement, the Facility Guaranty and the other Loan Papers to which it is a party, (d) agrees that the amendments hereby shall not limit or impair any Liens securing the Obligations and its guarantee under the Facility Guaranty to which it is a party remains in full force and effect with respect to the Obligations as amended hereby, (e) represents and warrants to the Banks and the Administrative Agent that each representation and warranty of such Credit Party contained in the Credit Agreement, the Facility Guaranty and the other Loan Papers to which it is a party is true and correct in all material respects as of the date hereof and after giving effect to the amendments set forth in Section 2 hereof except (i) to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date hereof, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date, and (ii) to the extent that any such representation and warranty is expressly qualified by materiality or by reference to Material Adverse Effect, such representation and warranty (as so qualified) shall continue to be true and correct in all respects, (f) represents and warrants to the Banks and the Administrative Agent that the execution, delivery and performance by such Credit Party of this Third Amendment are within such Credit Party’s corporate, limited partnership or limited liability company powers (as applicable), have been duly authorized by all necessary action and that this Third Amendment constitutes the valid and binding obligation of such Credit Party enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor’s rights generally, and (g) represents and warrants to the Banks and the Administrative Agent that, after giving effect to this Third Amendment, no Default or Event of Default has occurred which is continuing and no Borrowing Base Deficiency exists.
6.3    Counterparts.  This Third Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this Third Amendment by facsimile 
Page 24

or electronic (e.g. pdf) transmission shall be effective as delivery of a manually executed original counterpart hereof.
6.4    No Oral Agreement.  This written Third Amendment, the Credit Agreement and the other Loan Papers executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties.  There are no subsequent oral agreements between the parties that modify the agreements of the parties in the Credit Agreement and the other Loan Papers.
6.5    Governing Law.  This Third Amendment (including, but not limited to, the validity and enforceability hereof) shall be governed by, and construed in accordance with, the laws of the State of New York.
6.6    Payment of Expenses.  The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with this Third Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.
6.7    Severability.  Any provision of this Third Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

6.8    Successors and Assigns.  This Third Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
6.9    Loan Paper.  The parties hereto agree that this Third Amendment shall constitute a “Loan Paper” under and as defined in the Credit Agreement, as amended hereby.
[Signature Pages Follow.]

Page 25

The parties hereto have caused this Third Amendment to be duly executed as of the day and year first above written.
																		
		BORROWER:		BRIGHAM RESOURCES, LLC,
				a Delaware limited liability company
						
						
				By:	/s/ Blake Williams                        	
				Name:	Blake Williams	
				Title:	Chief Financial Officer	

 

                
[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
		GUARANTORS:		BRIGHAM MINERALS, LLC,
				a Delaware limited liability company
						
						
				By:	/s/ Blake Williams                        	
				Name:	Blake Williams	
				Title:	Chief Financial Officer	

																		
				REARDEN MINERALS, LLC,
				a Delaware limited liability company
						
						
				By:	/s/ Blake Williams                        	
				Name:	Blake Williams	
				Title:	Chief Financial Officer	

																		
				BRIGHAM RESOURCES MANAGEMENT HOLDINGS, INC.,
				a Delaware corporation
						
						
				By:	/s/ Blake Williams                        	
				Name:	Blake Williams	
				Title:	Chief Financial Officer	

																		
				BRIGHAM RESOURCES MANAGEMENT, LLC,
				a Delaware limited liability company
						
						
				By:	/s/ Blake Williams                        	
				Name:	Blake Williams	
				Title:	Chief Financial Officer	

      
      
      

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				WELLS FARGO BANK, N.A.,
				as Administrative Agent and a Bank
						
						
				By:	/s/ Zachary Kramer                        	
				Name:	Zachary Kramer	
				Title:	Director	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,
				as a Bank
						
						
				By:	/s/ Nupur Kumar                        	
				Name:	Nupur Kumar	
				Title:	Authorized Signatory	
						
				By:	/s/ Jessica Gavarkovs	
				Name:	Jessica Gavarkovs	
				Title:	Authorized Signatory	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				BARCLAYS BANK PLC,
				as a Bank
						
						
				By:	/s/ Sydney G. Dennis                        	
				Name:	Sydney G. Dennis	
				Title:	Director	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				BBVA USA,
				as a Bank
						
						
				By:	/s/ Julia Barnhill                      	
				Name:	Julia Barnhill	
				Title:	Vice President	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				GOLDMAN SACHS BANK USA,
				as a Bank
						
						
				By:	/s/ Jacob Elder                       	
				Name:	Jacob Elder	
				Title:	Authorized Signatory	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				ROYAL BANK OF CANADA,
				as a Bank
						
						
				By:	/s/ Kristan Spivey                      	
				Name:	Kristan Spivey	
				Title:	Authorized Signatory	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

																		
				UBS AG, STAMFORD BRANCH,
				as a Bank
						
						
				By:	/s/ Anthony N. Joseph                        	
				Name:	Anthony N. Joseph	
				Title:	Associate Director	
						
				By:	/s/ Ken Chin	
				Name:	Ken Chin	
				Title:	Director	

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT — BRIGHAM RESOURCES, LLC]

SCHEDULE 1

BANKS; ELECTED COMMITMENTS AND MAXIMUM CREDIT AMOUNT
												
	Bank	Maximum Credit Amount	Elected Commitment	Applicable Percentage
	Wells Fargo Bank, N.A.	$112,121,212.12	$37,000,000.00	22.42424242%
	Barclays Bank PLC	$72,727,272.73	$24,000,000.00	14.54545455%
	Goldman Sachs Bank USA	$72,727,272.73	$24,000,000.00	14.54545455%
	BBVA USA	$66,666,666.66	$22,000,000.00	13.33333333%
	Royal Bank of Canada	$66,666,666.66	$22,000,000.00	13.33333333%
	Credit Suisse AG, Cayman Islands Branch	$54,545,454.55	$18,000,000.00	10.90909091%
	UBS AG, Stamford Branch	$54,545,454.55	$18,000,000.00	10.90909091%
	Totals:	$500,000,000.00	$165,000,000.00	100.00000000%

						
	Administrative Agent	Address for Notice
	Wells Fargo Bank, N.A.	Credit Contact:
1700 Lincoln St, Sixth Floor
MAC:  C7300-061
Denver, Colorado
Attn:    Tim Green
Tel:    (303) 863-6765
Fax:    (303) 863-5196
Email:    tim.green@wellsfargo.com

Primary Operations Contact:
1525 W WT Harris Blvd.
Charlotte, NC 28262
MAC D1109-019
Attn:    Syndication Agency Services
Fax:    704-590-3481

SCHEDULE 1Document

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS
Dallas Division

)
)
)
UNITED STATES OF AMERICA           )
)
v.    )
)
AVANOS MEDICAL, INC.,                    )
)
)
Defendant.    )
)
)
)

     -CR-     (     )

DEFERRED PROSECUTION AGREEMENT

Defendant Avanos Medical, Inc. (the “Company”), pursuant to authority granted by the Company’s Board of Directors reflected in Attachment B, the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Department of Justice, Civil Division, Consumer Protection Branch (the “CPB”), and the United States Attorney’s Office for the Northern District of Texas (the “USAO-NDTX”) (collectively, the “Offices”) enter into this deferred prosecution agreement (the “Agreement”). The terms and conditions of this Agreement are as follows:
Criminal Information and Acceptance of Responsibility
1.The Company acknowledges and agrees that the Offices will file the attached one- count criminal Information in the United States District Court for the Northern District of Texas charging the Company with a felony violation of the Federal Food, Drug, and Cosmetic Act
-1-

(“FDCA”), namely the introduction into interstate commerce of a device that is misbranded, in violation of Title 21, United States Code, Sections 331(a), 333(a)(2) and 352(a) (the “Information”). In so doing, the Company: (a) knowingly waives any right it may have to indictment on this charge, as well as all rights to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18, United States Code, Section 3161, and Federal Rule of Criminal Procedure 48(b); and (b) knowingly waives any objection with respect to venue to any charges by the United States arising out of the conduct described in the Statement of Facts attached hereto as Attachment A (the “Statement of Facts”) and consents to the filing of the Information, as provided under the terms of this Agreement, in the United States District Court for the Northern District of Texas. The Offices agree to defer prosecution of the Company pursuant to the terms and conditions described below.
1.The Company admits, accepts, and acknowledges that it is responsible under United States law for the acts of its officers, directors, employees, and agents as charged in the Information, and as set forth in the Statement of Facts, and that the allegations described in the Information and the facts described in the Statement of Facts are true and accurate. The Company agrees that, effective as of the date it signs this Agreement, in any prosecution that is deferred by this Agreement, it will not dispute the Statement of Facts set forth in this Agreement, and, in any such prosecution, the Statement of Facts shall be admissible as: (a) substantive evidence offered by the government in its case-in-chief and rebuttal case; (b) impeachment evidence offered by the government on cross-examination; and (c) evidence at any sentencing hearing or other hearing. In addition, in connection therewith, the Company agrees not to assert any claim under the United States Constitution, Rule 410 of the Federal Rules of Evidence, Rule 11(f) of the Federal Rules of
-2-

Criminal Procedure, Section 1B1.1(a) of the United States Sentencing Guidelines (“USSG” or “Sentencing Guidelines”), or any other federal rule that the Statement of Facts should be suppressed or is otherwise inadmissible as evidence in any form.
Term of the Agreement

1.This Agreement is effective for a period beginning on the date on which the Information is filed and ending three years from that date (the “Term”). The Company agrees, however, that, in the event the Offices determine, in their sole discretion, that the Company has knowingly violated any provision of this Agreement or has failed to completely perform or fulfill each of its obligations under this Agreement, an extension or extensions of the Term may be imposed by the Offices, in their sole discretion, for up to a total additional time period of one year, without prejudice to the right of the Offices to proceed as provided in Paragraphs 29-33 below. Any extension of the Agreement extends all terms of this Agreement, including the terms of the reporting requirement in Attachment D, for an equivalent period. Conversely, in the event the Offices find, in their sole discretion, that there exists a change in circumstances sufficient to eliminate the need for the reporting requirement in Attachment D, and that the other provisions of this Agreement have been satisfied, the Agreement may be terminated early. If the Court refuses to grant exclusion of time under the Speedy Trial Act, Title 18, United States Code, Section 3161(h)(2), the Term shall be deemed to have not begun, and all the provisions of this Agreement shall be deemed null and void, except that the statute of limitations for any prosecution relating to the conduct described in the Statement of Facts shall be tolled from the date on which this Agreement is signed until the date the Court refuses to grant the exclusion of time plus six months, and except for the provisions contained within Paragraph 2 of this Agreement.
-3-

Relevant Considerations

4.The Offices enter into this Agreement based on the individual facts and circumstances presented by this case and by the Company, including:
a.The Company did not receive voluntary disclosure credit pursuant to the Corporate Enforcement Policy in the Department of Justice Manual 9-47.120, or pursuant to the Sentencing Guidelines, because it did not timely and voluntarily disclose to the Offices the offense conduct described in the Statement of Facts attached hereto as Attachment A (“Statement of Facts”);
b.The Company received full credit for its cooperation with the investigation conducted by the Offices, including conducting a thorough internal investigation, meeting requests from the Offices promptly, making factual presentations to the Offices, voluntarily making a key foreign-based employee available for interview, and producing extensive documentation to the Offices, including documents located in foreign jurisdictions;
c.The Company provided to the Offices all relevant facts known to it, including information about the individuals involved in the conduct described in the attached Statement of Facts and conduct disclosed prior to the Agreement;
d.The Company engaged in extensive remedial measures, including:

(i) changing the manufacturing process for the MicroCool surgical gowns to improve the quality of their sleeve seams; (ii) reorganizing its quality and regulatory departments so that they report directly to the CEO; (iii) substantially increasing the budget and headcount of its compliance and quality departments; (iv) creating a stand-alone Compliance Committee of the Board of Directors; (v) enhancing the independence, autonomy, and
-4-

resources of its compliance function by creating a stand-alone compliance department, and by appointing a full-time Chief Ethics and Compliance Officer who reports directly to the CEO and presents compliance reports to the Compliance Committee at least five times per year; (vi) enhancing compliance training for its employees, and (vii) implementing revised procedures for the review and approval of all medical device marketing material;
e.The Company has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);
f.On April 30, 2018, the Company sold to a third-party company that had no involvement in the conduct discussed herein all assets related to the Company’s Surgical and Infection Prevention (“S&IP”) unit, including the name “Halyard Health, Inc.” and all assets and employees related to the Company’s surgical gown business, and the Company does not currently employ nor is it affiliated with any of the individuals who committed the conduct described in the Statement of Facts;
g.The Offices determined that an independent compliance monitor was unnecessary based on the following factors, among others: the Company’s remediation; the state of the Company’s compliance program; the Company’s agreement to report to the Offices as set forth in Attachment D to this Agreement (Corporate Compliance Reporting); and the fact that the Company is no longer manufacturing or selling surgical gowns;
h.The Company has agreed to continue to cooperate with the Offices as described in Paragraph 5, below;
-5-

i.The nature and seriousness of the offense conduct, which involved the misbranding of the Company’s “MicroCool” surgical gowns, which the Company falsely labeled as providing the highest level of protection against fluid and virus penetration. Employees and agents of the Company, including a senior R&D employee who was an internal expert on the gowns’ construction and features, knew that they were misrepresenting the quality of the MicroCool surgical gowns. Through this conduct, hundreds of thousands of MicroCool surgical gowns sold by the Company to hospitals and other health care providers were misbranded. In addition, certain employees and agents of the Company obstructed a for-cause inspection conducted by the United States Food and Drug Administration (“FDA”) into the Company’s surgical gown business in July 2016. These specific agents and employees made numerous false entries in four documents that were requested by FDA investigators during the inspection;
j.Accordingly, after considering (a) through (i) above, the Offices believe that the appropriate resolution in this case is a Deferred Prosecution Agreement with the Company; a victim compensation payment of $8,939,000; a criminal monetary penalty in the amount of $12,600,000, which reflects a discount of twenty-five percent below the low end of the otherwise-applicable Sentencing Guidelines fine range; a disgorgement payment of $689,000; and the Company’s agreement to report to the Offices as set forth in Attachment D to this Agreement.
-6-

Future Cooperation and Disclosure Requirements

5.The Company and its subsidiaries and affiliates shall cooperate fully with the Offices in any and all matters relating to the conduct described in this Agreement and the attached Statement of Facts and other conduct under investigation by the Offices at any time during the Term, until the later of the date upon which all investigations and prosecutions arising out of such conduct are concluded, or the end of the Term. At the request of the Offices, the Company and its subsidiaries and affiliates shall also cooperate fully with other domestic or foreign law enforcement and regulatory authorities and agencies in any investigation of the Company, its subsidiaries, affiliates, or any of their present or former officers, directors, employees, and agents in any and all matters relating to the conduct described in this Agreement and the attached Statement of Facts and other conduct under investigation by the Offices at any time during the Term. The Company’s and its subsidiaries’ and affiliates’ cooperation pursuant to this Paragraph is subject to applicable law and regulations, as well as valid claims of attorney-client privilege or attorney work product doctrine; however, the Company and its subsidiaries and affiliates must provide to the Offices a log of any information or cooperation that is not provided based on an assertion of law, regulation, or privilege, and the Company and its subsidiaries and affiliates bear the burden of establishing the validity of any such assertion. The Company and its subsidiaries and affiliates agree that their cooperation pursuant to this Paragraph shall include, but not be limited to, the following:
a.Upon request of the Offices, the Company and its subsidiaries and affiliates shall truthfully disclose all factual information with respect to their activities and those of their present and former directors, officers, employees, agents, and consultants, including any evidence or allegations and internal or external investigations, about which the
-7-

Company and its subsidiaries and affiliates have any knowledge or about which the Offices may inquire. This obligation of truthful disclosure includes, but is not limited to, the obligation of the Company and its subsidiaries and affiliates to provide to the Offices, upon request, any document, record or other tangible evidence about which the Offices may inquire of the Company and its subsidiaries and affiliates.
b.Upon request of the Offices, the Company and its subsidiaries and affiliates shall designate knowledgeable employees, agents, or attorneys to provide to the Offices the information and materials described in Paragraph 5(a) above on behalf of the Company and its subsidiaries and affiliates. It is further understood that the Company and its subsidiaries and affiliates must at all times provide complete, truthful, and accurate information.
c.The Company and its subsidiaries and affiliates shall use their best efforts to make available for interviews or testimony, as requested by the Offices, present or former officers, directors, employees, agents, and consultants of the Company and its subsidiaries and affiliates. This obligation includes, but is not limited to, sworn testimony before a federal grand jury or in federal trials, as well as interviews with domestic or foreign law enforcement and regulatory authorities. Cooperation under this Paragraph shall include identification of witnesses who, to the knowledge of the Company and its subsidiaries and affiliates, may have material information regarding the matters under investigation.
d.With respect to any information, testimony, documents, records, or other tangible evidence provided to the Offices pursuant to this Agreement, the Company and its
-8-

subsidiaries and affiliates consent to any and all disclosures to other governmental authorities, including United States authorities and those of a foreign government of such materials as the Offices, in their sole discretion, shall deem appropriate.
6.In addition to the obligations in Paragraph 5, during the Term, should the Company learn of any evidence or allegation of a violation of the FDCA or U.S. obstruction or fraud laws committed by the Company’s employees or agents upon any domestic government agency (including the FDA), regulator, or any of the Company’s customers, the Company shall promptly report such evidence or allegation to the Offices.
Total Criminal Monetary Amount

7.The Company and the Offices agree that the Total Criminal Monetary Amount to be paid by the Company pursuant to this Agreement is $22,228,000, which is comprised of the following components as further described below: (i) a victim compensation payment of
$8,939,000 (the “Victim Compensation Amount”); (ii) a criminal monetary penalty of $12,600,000 (the “Criminal Monetary Penalty”); and (iii) a disgorgement payment of $689,000 (the “Criminal Disgorgement Amount”).
Payment of Criminal Monetary Penalty

8.The Offices and the Company agree that application of the Sentencing Guidelines to determine the applicable fine range yields the following analysis:
a.The 2018 USSG are applicable to this matter.

b.Offense Level. Based upon USSG § 2B1.1, the total offense level is 30, calculated as follows:

									
	(a)(2)	Base Offense Level	6
	(b)(1)(J)	Loss of More Than $3,500,000	+18

-9-

									
	(b)(2)(A)(i)	10 or more victims	+2
	(b)(10)	Sophisticated Means	+2
	(b)(16)(A)	Risk of death or serious bodily injury	+2
	TOTAL
		30

Base Fine. Based upon USSG §§ 8C2.4(a)(1) & (e)(1), the base fine is $10,500,000 (the fine amount from the Offense Level Fine Table of the 2014 USSG, which is greater than the pecuniary loss from the offense and the gain to the Company from the offense).

(c)Culpability Score. Based upon USSG § 8C2.5, the culpability score is 8, calculated as follows:
(a)Base Culpability Score    5

(b)(4) The organization had 50 or more employees
and an individual within substantial authority personnel participated in, condoned, or was willfully ignorant
of the offense    +2

(e)    Obstruction    +3

(g)(2) The organization fully cooperated in the investigation and clearly demonstrated recognition and affirmative
acceptance of responsibility for its criminal conduct    -2

						
	TOTAL	8
	Calculation of Fine Range:
	
	Base Fine	$10,500,000
	Multipliers	1.6 (min) / 3.2 (max)
	Fine Range	$16,800,000 / $33,600,000

9.The Offices have determined that a Criminal Monetary Penalty in the amount of

$12,600,000, which reflects a twenty-five percent discount off the low end of the applicable
-10-

Sentencing Guidelines fine range, is appropriate given the facts and circumstances of this case, including the Relevant Considerations described in Paragraph 4. The Company agrees to pay the Criminal Monetary Penalty of $12,600,000 to the United States Treasury no later than ten (10) business days after the Agreement is fully executed pursuant to payment instructions provided by the Offices in their sole discretion.
10.The Criminal Monetary Penalty is final and shall not be refunded. Furthermore, nothing in this Agreement shall be deemed an agreement by the Offices that $12,600,000 is the maximum penalty that may be imposed in any future prosecution, and the Offices are not precluded from arguing in any future prosecution that the Court should impose a higher fine, although the Offices agree that under those circumstances, it will recommend to the Court that any amount paid under this Agreement should be offset against any fine the Court imposes as part of a putative future judgment. The Company acknowledges that no tax deduction may be sought in connection with the payment of any part of the Criminal Monetary Penalty. The Company shall not seek or accept directly or indirectly reimbursement or indemnification from any source with regard to the penalty or disgorgement amounts that the Company pays pursuant to this Agreement or any other agreement entered into with an enforcement authority or regulator concerning the facts set forth in the Statement of Facts.
Payment of Criminal Disgorgement Amount

11.The Company hereby agrees to disgorge to the United States the sum of $689,000 (the “Criminal Disgorgement Amount”). The Company shall pay the Criminal Disgorgement Amount plus any associated transfer fees no later than ten (10) business days after the Agreement is fully executed, pursuant to payment instructions provided by the Offices in their sole discretion.
-11-

12.The Criminal Disgorgement Amount paid is final and shall not be refunded should the Offices later determine that the Company has breached this Agreement and commence a prosecution against the Company. In the event of a breach of this Agreement and subsequent prosecution, the Offices may pursue additional civil and criminal forfeiture in excess of the Criminal Disgorgement Amount. The Offices agree that in the event of a subsequent breach and prosecution, they will recommend to the Court that the amounts paid pursuant to this Agreement be offset against whatever forfeiture the Court shall impose as part of its judgment. The Company understands that such a recommendation will not be binding on the Court.
Payment of Victim Compensation Amount

13.The Company agrees to pay a total Victim Compensation Amount of $8,939,000 to purchasers of the misbranded MicroCool gowns between November 1, 2014 and January 15, 2015, that were directly and proximately harmed by the conduct described in the attached Statement of Facts. No later than ten (10) business days after the filing of the Information, the Company shall establish an escrow account (“Escrow Account”) into which it shall deposit the full Victim Compensation Amount. No monies will be paid out of the Escrow Account without prior approval by the Offices.
14.The parties agree that the appointment of a Victim Compensation Claims Administrator (the “Administrator”) is appropriate and necessary to determine the proper administration and disbursement of the Victim Compensation Amount that the Company will pay to the victims of the offense conduct.
15.The Administrator, consistent with a process imposed and required by the Offices, will make recommendations to the Offices regarding: (a) the purchasers who should receive
-12-

payments from Victim Compensation Amount; and (b) the compensation amounts that these purchasers should receive. Only the Offices shall be empowered to make final decisions regarding:
(a)the purchasers who should receive the payments from the Victim Compensation Amount; and

(b)the compensation amounts that these purchasers should receive.

16.The Company agrees to pay for all costs, fees, and expenses incurred by the Administrator. The Company shall execute an engagement letter with the Administrator that must be approved, in advance of execution, by the Offices.
17.Within twenty (20) business days after the filing of the Information, the Company shall submit a written proposal identifying three (3) candidates to serve as the Administrator, setting forth the candidates’ qualifications and credentials. The Offices retain the right, in their sole discretion, to choose the Administrator from among the candidates proposed by the Company. Any submission or selection of the Administrator by either the Company or the Offices shall be made without unlawful discrimination against any person or class of persons. The Offices and the Company will use their best efforts to complete the selection process within thirty (30) calendar days of when the candidates have been submitted to the Offices.
18.The Company agrees that it will not employ or be affiliated with the Administrator for a period of not less than two years from the date on which the Administrator’s term expires. Nor will the Company discuss with the Administrator the possibility of further employment or affiliation during the Administrator’s term. Upon agreement by the parties, this prohibition will not apply to other claims administration responsibilities that the Administrator may undertake in connection with resolutions with foreign or other domestic authorities.
-13-

19.Within five (5) business days of the Administrator being selected, the Company shall provide the Administrator with a list of all purchasers of the MicroCool surgical gowns from the Company between November 1, 2014 and January 15, 2015.
20.The Administrator shall provide written notice to all such purchasers of the process and procedure for submitting a claim for victim compensation. The Administrator shall send the initial notice 60 days after the effective date of this Agreement (or 30 days after the Administrator is selected, whichever is later), and a follow-up notice 60 days later.
21.Any purchaser that believes it is a victim entitled to compensation must submit a claim to the Administrator within one year of the Administrator being selected, pursuant to the process and procedure outlined by the Administrator in the written notice.
22.Any portion of the Victim Compensation Amount that (i) has not been paid out to victims within one year of the Administrator being selected and (ii) is not subject to a pending claim submitted to the Administrator, shall be paid into the Crime Victims Fund. Any portion of the Victim Compensation Amount that is subject to a pending claim submitted to the Administrator shall remain in escrow until the claim is fully resolved, after which the remaining funds, if any, shall be paid into the Crime Victims Fund. No portion of the Victim Compensation Amount shall revert to the Company.
Conditional Release from Liability

23.Subject to Paragraphs 29-33, the Offices agree, except as provided in this Agreement, that they will not bring any criminal or civil case against the Company relating to any of the conduct as described in the attached Statement of Facts or the Information filed pursuant to this Agreement. The Offices, however, may use any information related to the conduct described
-14-

in the attached Statement of Facts against the Company: (a) in a prosecution for perjury or obstruction of justice that was not part of the Offices’ investigation; (b) in a prosecution for making a false statement that was not part of the Offices’ investigation; (c) in a prosecution or other proceeding relating to any crime of violence; or (d) in a prosecution or other proceeding relating to a violation of any provision of Title 26 of the United States Code.
a.This Agreement does not provide any protection against prosecution for any future conduct by the Company.
b.In addition, this Agreement does not provide any protection against prosecution of any individuals, regardless of their affiliation with the Company.
Corporate Compliance Program

24.The Company represents that it has implemented and will continue to implement a compliance and ethics program designed, implemented, and enforced to prevent and detect violations of the FDCA and U.S. obstruction and fraud laws throughout its operations, including those of its subsidiaries, affiliates, agents, and joint ventures, and those of its contractors and subcontractors whose responsibilities relate to the Company’s interactions with domestic government agencies (including the FDA), regulators, and its customers, as well as the Company’s testing and labeling of its devices, including, but not limited to, the minimum elements set forth in Attachment C.
25.In order to address any deficiencies in its internal controls, policies, and procedures, the Company represents that it has undertaken, and will continue to undertake in the future, in a manner consistent with all of its obligations under this Agreement, a review of its existing internal controls, policies, and procedures regarding compliance with the FDCA and U.S. obstruction and
-15-

fraud laws, focusing on the Company’s interactions with domestic government agencies (including the FDA), regulators, and its customers, as well as the Company’s testing and labeling of its devices. Where necessary and appropriate, the Company agrees to adopt a new compliance program, or to modify its existing one, including internal controls, compliance policies, and procedures in order to ensure that it maintains an effective compliance program, including a system of internal controls, designed to effectively detect and deter violations of the FDCA and U.S. obstruction and fraud laws. The compliance program, including the internal controls system, will include, but not be limited to, the minimum elements set forth in Attachment C.
Corporate Compliance Reporting

26.The Company agrees that it will report to the Offices annually during the Term regarding remediation and implementation of the compliance measures described in Attachment
C. These reports will be prepared in accordance with Attachment D.

Deferred Prosecution

27.In consideration of the undertakings agreed to by the Company herein, the Offices agree that any prosecution of the Company for the conduct set forth in the attached Statement of Facts or Information will be and hereby is deferred for the Term. To the extent there is conduct disclosed by the Company that is not set forth in the attached Statement of Facts or Information, such conduct will not be exempt from further prosecution and is not within the scope of or relevant to this Agreement.
28.The Offices further agree that if the Company fully complies with all of its obligations under this Agreement, the Offices will not continue the criminal prosecution against the Company described in Paragraph 1 and, at the conclusion of the Term, this Agreement shall
-16-

expire. Six months after the Agreement’s expiration, the Offices shall seek dismissal with prejudice of the Information filed against the Company described in Paragraph 1, and agree not to file charges in the future against the Company based on the conduct described in this Agreement, the attached Statement of Facts, or the Information. If, however, the Offices determine during this six-month period that the Company breached the Agreement during the Term, as described in Paragraphs 29-33, the Offices’ ability to extend the Term, as described in Paragraph 3, or to pursue other remedies, including those described in Paragraphs 29-33, remains in full effect.
Breach of the Agreement

29.If, during the Term, (a) the Company commits any felony under U.S. federal law;

(b) the Company provides in connection with this Agreement deliberately false, incomplete, or misleading information, including in connection with its disclosure of information about individual culpability; (c) the Company or its subsidiaries and affiliates fail to cooperate as set forth in Paragraphs 5 and 6 of this Agreement; (d) the Company fails to implement a compliance program as set forth in Paragraphs 24-25 of this Agreement and Attachment C; or (e) the Company and its subsidiaries and affiliates otherwise fail to completely perform or fulfill each of their obligations under the Agreement, regardless of whether the Offices become aware of such a breach after the Term is complete, the Company and its subsidiaries and affiliates shall thereafter be subject to prosecution for any federal criminal violation of which the Offices have knowledge, including, but not limited to, the charges in the Information described in Paragraph 1, which may be pursued by the Offices in the United States District Court for the Northern District of Texas or any other appropriate venue. Determination of whether the Company has breached the Agreement and whether to pursue prosecution of the Company and its subsidiaries and affiliates shall be in the
-17-

Offices’ sole discretion. Any such prosecution may be premised on information provided by the Company, its subsidiaries and affiliates, or their personnel. Any such prosecution relating to the conduct described in the attached Statement of Facts or relating to conduct known to the Offices prior to the date on which this Agreement was signed that is not time-barred by the applicable statute of limitations on the date of the signing of this Agreement may be commenced against the Company, or its subsidiaries and affiliates, notwithstanding the expiration of the statute of limitations, between the signing of this Agreement and the expiration of the Term plus one year. Thus, by signing this Agreement, the Company agrees that the statute of limitations with respect to any such prosecution that is not time-barred on the date of the signing of this Agreement shall be tolled for the Term plus one year. In addition, the Company agrees that the statute of limitations as to any violation of U.S. federal law that occurs during the Term will be tolled from the date upon which the violation occurs until the earlier of the date upon which the Offices are made aware of the violation or the duration of the Term plus five years, and that this period shall be excluded from any calculation of time for purposes of the application of the statute of limitations.
30.In the event the Offices determine that the Company has breached this Agreement, the Offices agree to provide the Company with written notice of such breach prior to instituting any prosecution resulting from such breach. Within thirty days of receipt of such notice, the Company shall have the opportunity to respond to the Offices in writing to explain the nature and circumstances of such breach, as well as the actions the Company has taken to address and remediate the situation, which explanation the Offices shall consider in determining whether to pursue prosecution of the Company.
-18-

31.In the event that the Offices determine that the Company has breached this Agreement: (a) all statements made by or on behalf of the Company or its subsidiaries and affiliates to the Offices or to the Court, including the attached Statement of Facts, and any testimony given by the Company or its subsidiaries and affiliates before a grand jury, a court, or any tribunal, or at any legislative hearings, whether prior or subsequent to this Agreement, and any leads derived from such statements or testimony, shall be admissible in evidence in any and all criminal proceedings brought by the Offices against the Company or its subsidiaries and affiliates; and (b) the Company or its subsidiaries and affiliates shall not assert any claim under the United States Constitution, Rule 11(f) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, Section 1B1.1(a) of the USSG, or any other federal rule that any such statements or testimony made by or on behalf of the Company prior or subsequent to this Agreement, or any leads derived therefrom, should be suppressed or are otherwise inadmissible. The decision whether conduct or statements of any current director, officer, or employee, or any person acting on behalf of, or at the direction of, the Company or its subsidiaries and affiliates will be imputed to the Company for the purpose of determining whether the Company has violated any provision of this Agreement shall be in the sole discretion of the Offices.
32.The Company acknowledges that the Offices have made no representations, assurances, or promises concerning what sentence may be imposed by the Court if the Company breaches this Agreement and this matter proceeds to judgment. The Company further acknowledges that any such sentence is solely within the discretion of the Court and that nothing in this Agreement binds or restricts the Court in the exercise of such discretion.
-19-

33.On the date that the period of deferred prosecution specified in this Agreement expires, the Company, by the Chief Executive Officer of the Company and the Chief Financial Officer of the Company, will submit the certification set forth in Attachment E and certify to the Offices that the Company has met its disclosure obligations pursuant to Paragraph 6 of this Agreement. Each certification will be deemed a material statement and representation by the Company to the executive branch of the United States for purposes of Title 18, United States Code, Sections 1001 and 1519, and it will be deemed to have been made in the judicial district in which this Agreement is filed.
Sale, Merger, or Other Change in Corporate Form of the Company

34.Except as may otherwise be agreed by the parties in connection with a particular transaction, the Company agrees that in the event that, during the Term, it undertakes any change in corporate form, including if it sells, merges, or transfers business operations that are material to the Company’s operations, or to the operations of any subsidiaries or affiliates involved in the conduct described in the attached Statement of Facts, as they exist as of the date of this Agreement, whether such sale is structured as a sale, asset sale, merger, transfer, or other change in corporate form, it shall include in any contract for sale, merger, transfer, or other change in corporate form a provision binding the purchaser, or any successor in interest thereto, to the obligations described in this Agreement. The purchaser or successor in interest must also agree in writing that the Offices’ ability to breach under this Agreement is applicable in full force to that entity. The Company agrees that the failure to include these provisions in the transaction will make any such transaction null and void. The Company shall provide notice to the Offices at least thirty (30) days prior to undertaking any such sale, merger, transfer, or other change in corporate form. The Offices
-20-

shall notify the Company prior to such transaction (or series of transactions) if they determine that the transaction(s) will have the effect of circumventing or frustrating the enforcement purposes of this Agreement. At any time during the Term the Company engages in a transaction(s) that has the effect of circumventing or frustrating the enforcement purposes of this Agreement, the Offices may deem it a breach of this Agreement pursuant to Paragraphs 29-33 of this Agreement. Nothing herein shall restrict the Company from indemnifying (or otherwise holding harmless) the purchaser or successor in interest for penalties or other costs arising from any conduct that may have occurred prior to the date of the transaction, so long as such indemnification does not have the effect of circumventing or frustrating the enforcement purposes of this Agreement, as determined by the Offices.
Public Statements by the Company

35.The Company expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents, or any other person authorized to speak for the Company make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by the Company set forth above or the facts described in the attached Statement of Facts. Any such contradictory statement shall, subject to cure rights of the Company described below, constitute a breach of this Agreement, and the Company thereafter shall be subject to prosecution as set forth in Paragraphs 29-33 of this Agreement. The decision whether any public statement by any such person contradicting a fact contained in the attached Statement of Facts will be imputed to the Company for the purpose of determining whether it has breached this Agreement shall be at the sole discretion of the Offices. If the Offices determine that a public statement by any such person contradicts, in whole or in part, a statement contained in the attached Statement of Facts,
-21-

the Offices shall so notify the Company, and the Company may avoid a breach of this Agreement by publicly repudiating such statement(s) within five business days after notification. The Company shall be permitted to raise defenses and to assert affirmative claims in other proceedings relating to the matters set forth in the attached Statement of Facts provided that such defenses and claims do not contradict, in whole or in part, a statement contained in the attached Statement of Facts. This Paragraph does not apply to any statement made by any present or former officer, director, employee, or agent of the Company in the course of any criminal, regulatory, or civil case initiated against such individual, unless such individual is speaking on behalf of the Company.
36.The Company agrees that if it, or any of its direct or indirect subsidiaries or affiliates, issues a press release or holds any press conference in connection with this Agreement, the Company shall first consult with the Offices to determine (a) whether the text of the release or proposed statements at the press conference are true and accurate with respect to matters between the Offices and the Company; and (b) whether the Offices have any objection to the release.
37.The Offices agree, if requested to do so, to bring to the attention of law enforcement and regulatory authorities the facts and circumstances relating to the nature of the conduct underlying this Agreement, including the nature and quality of the Company’s cooperation and remediation. By agreeing to provide this information to such authorities, the Offices are not agreeing to advocate on behalf of the Company, but rather are agreeing to provide facts to be evaluated independently by such authorities.
Limitations on Binding Effect of the Agreement

38.This Agreement is binding on the Company, the Fraud Section, the CPB and the USAO-NDTX, but specifically does not bind any other component of the United States
-22-

Department of Justice, other federal agencies, or any state, local or foreign law enforcement or regulatory agencies, or any other authorities, although the Offices will bring the cooperation of the Company and its compliance with its other obligations under this Agreement to the attention of such agencies and authorities if requested to do so by the Company.
Notice

39.Any notice to the Offices under this Agreement shall be given by personal delivery, or overnight delivery by a recognized delivery service, addressed to the following:
a.Chief of the Market Integrity and Major Frauds Unit and Chief of the Strategy, Policy, and Training Unit, United States Department of Justice, Criminal Division, Fraud Section, 1400 New York Avenue N.W., Washington, D.C., 20005;
b.Director, Consumer Protection Branch, United States Department of Justice, Civil Division, 450 Fifth Street, N.W., Room 6400-South, Washington, D.C. 20001; and
c.Criminal Division Chief, United States Attorney’s Office, Northern District of Texas, 1100 Commerce, Suite 300, Dallas, Texas 75242.
Any notice to the Company under this Agreement shall be given by personal delivery, overnight delivery by a recognized delivery service, or registered or certified mail, addressed to Avanos General Counsel. Notice shall be effective upon actual receipt by the Fraud Section/CPB/USAO- NDTX or the Company. Notice shall also be given by email to any email addresses provided by the Offices or the Company.
-23-

Complete Agreement

40.This Agreement, including its attachments, sets forth all the terms of the agreement between the Company, the Fraud Section, CPB and the USAO-NDTX. No amendments, modifications, or additions to this Agreement shall be valid unless they are in writing and signed by the Fraud Section, CPB the USAO-NDTX, the attorneys for the Company, and duly authorized representatives of the Company.

*    *    *
-24-

												
	AGREED:
	FOR AVANOS MEDICAL, INC.:
	Date:	July 6, 2021	By:	/s/ Joseph F. Woody
				Joseph F. Woody
				Chief Executive Officer
				AVANOS MEDICAL, INC.
	Date:	July 6, 2021	By:	/s/ Joshua S. Levy
/s/ Laura G. Hoey
				Joshua S. Levy
				Laura G. Hoey
				Ropes & Gray LLP
				Counsel for Avanos Medical, Inc.

-25-

												
	AGREED:
	FOR THE UNITED STATES DEPARTMENT OF JUSTICE:
	Date:	July 6, 2021	Date:	July 6, 2021
		GUSTAV W. EYLER		JOSEPH S. BEEMSTERBOER
		Director, Consumer Protection Branch		Acting Chief, Fraud Section
		Civil Division		Criminal Division
	By:	/s/ Allan Gordus	By:	/s/ John Scanlon
		Allan Gordus		John "Fritz" Scanlon
		Senior Litigation Counsel		Trial Attorney
				
		David Gunn		
		Max Goldman		
		Trial Attorneys		
	Date:	July 6, 2021		
		PRERAK SHAH		
		Acting United States Attorney		
		Northern District of Texas		
	By:	/s/ Katherine Miller		
		Katherine Miller		
		Assistant U.S. Attorney		

 
-26-

COMPANY OFFICER'S CERTIFICATE

I have read the Agreement and carefully reviewed its terms and attachments with inside and outside counsel for Avanos Medical, Inc. (the " Company"). I understand the terms of the Agreement and voluntarily agree , on behalf of the Company, to each of its tenn s. Before signing the Agreement, I consulted inside and outside counsel for the Company. Counsel fully advised
me of the rights of the Company, of possible defenses, of the Sentencing Guidel es' provisions, and of the consequences of entering into this Agreement.
I have carefully reviewed the terms of this Agreement with the Board of Directors of the
Company. I have advised and caused outside counsel for the Company to advise the Board of Directors fully of the rights of the Company, of possible defenses, of the Sentencing Guidelines' provisions , and of the consequences of entering into the Agreement.
No promises or inducements have been made other than those contained ij1 the Agreement. Furthermore, no one has threatened or forced me, or to my knowledge any person authorizing the Agreement on behalf of the Company, in any way to enter into the Agreement. I am also satisfied with outside counsels' representation in this matter. I certify that I am the Chief Executive Officer for the Company and that I have been duly authorized by the Company to execute the Agreement on behalf of the Company.

												
	Date:	July 6, 2021	By:	/s/ Joseph F. Woody
				Joseph F. Woody
				Chief Executive Officer
				AVANOS MEDICAL, INC.

-27-

CERTIFICATE OF COUNSEL FOR AVANOS MEDICAL, INC.

I am counsel for Avanos Medical, Inc. (the "Company") in the matter covered by this Agreement. In connection with such representation, I have examined relevant Company documents and have discussed them with the Company's Board of Directors. Based on my review of the foregoing materials and discussions, I am of the opinion that the representative of the Company has been duly authorized to enter into the Agreement on behalf of the Company and that the Agreement has been duly and validly authorized, executed, and delivered on behalf of the Company and is a valid and binding obligation of the Company. Further, I have carefully reviewed the terms of the Agreement with the Board of Directors and the Chief Executive Officer. I have fully advised them of the rights of the Company, of possible defenses, of the Sentencing Guidelines' provisions and of the consequences of entering into the Agreement. To my knowledge, the decision of the Company to enter into the Agreement, based on the authorization of the Board of Directors, is an informed and voluntary one.

												
	Date:	July 6, 2021	By:	/s/ Joshua S. Levy
/s/ Laura G. Hoey
				Joshua S. Levy
				Laura G. Hoey
				ROPES & GRAY LLP
				Counsel for Avanos Medical, Inc.

-28-

ATTACHMENT A STATEMENT OF FACTS
1.The following Statement of Facts is incorporated by reference as part of the Deferred Prosecution Agreement (the “Agreement”) between the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Department of Justice, Civil Division, Consumer Protection Branch (the “CPB”) and the United States Attorney’s Office for the Northern District of Texas (the “USAO-NDTX”) (collectively, the “Offices”) and Avanos Medical, Inc. (“Avanos” or the “Company”). The Company hereby agrees and stipulates that the following information is true and accurate. The Company admits, accepts, and acknowledges that it is responsible for the acts of its officers, directors, employees, and agents as set forth below. Should the Offices pursue the prosecution that is deferred by this Agreement, the Company agrees that it will neither contest the admissibility of, nor contradict, this Statement of Facts in any such proceeding. The following facts establish beyond a reasonable doubt the charge set forth in the Information attached to this Agreement:
At all times relevant to this Statement of Facts, with all dates being approximate and inclusive:
Relevant Individuals and Entities

2.Avanos Medical, Inc. (“Avanos”) was a U.S.-based multinational corporation that was created on October 31, 2014, when Company 1 spun off its health care business unit into a separate, publicly traded company that began trading on the New York Stock Exchange on November 3, 2014 as “Halyard Health, Inc.” Avanos (then-known as “Halyard Health, Inc.”) engaged in, among other things, the design, manufacture and sale of medical devices, including
A-1

disposable surgical gowns. Avanos marketed and sold such surgical gowns directly to hospitals and other health care providers (and through third-party distribution channels) throughout the United States and abroad. On April 30, 2018, Avanos (then known as “Halyard Health, Inc.”) sold to a third-party company that had no involvement in the conduct discussed herein all assets related to the Company’s Surgical and Infection Prevention unit, including the name “Halyard Health, Inc.” and all assets related to the Company’s surgical gown business. In June 2018, the Company changed its name from Halyard Health, Inc. to Avanos Medical, Inc.
3.Employee 1 was employed as a Technical Leader in the Research and Development department of Avanos from the time when the Company was spun off from Company 1 through the period relevant to this Statement of Facts. Prior to his employment with Avanos, Employee 1 was employed as a Research Scientist and then a Senior Specialist in the Research and Engineering department of Company 1 from approximately October 2004 until the spin off in October 2014.
4.Employee 2 was employed as a Quality Engineer in Technical Quality and Quality Technical Leader at Avanos from the time when the Company was spun off from Company 1 through the period relevant to this Statement of Facts. Prior to her employment with Avanos, Employee 2 was employed as a Quality Specialist in Sterility Assurance at Company 1 from approximately November 2012 until the spin off in October 2014.
5.Agent 1 was an agent of Avanos who was hired as a Technical Writer through a staffing agency in approximately July 2015. Agent 1 remained in this position until voluntarily leaving the Company in September 2016.
A-2

AAMI Level 4 Standard

6.In the United States, surgical gowns are subject to regulation by the United States Food and Drug Administration (“FDA”), the federal agency responsible for protecting the health and safety of the American public by enforcing the Federal Food, Drug, and Cosmetic Act (“FDCA”).
7.In or about 2004, the FDA recognized the American National Standards Institute (“ANSI”) and Association for the Advancement of Medical Instrumentation (“AAMI”) system of classification for surgical gowns, known as the “ANSI/AAMI PB70 standard.” The ANSI/AAMI PB70 standard, first established in or about 2003, described the barrier protection levels (ranging from 1 to 4) of surgical gowns and specified the testing necessary to verify each level of protection.
8.Under the ANSI/AAMI PB70 standard, the highest protection level for surgical gowns—“AAMI Level 4”—was reserved for gowns intended for surgeries and other high risk medical procedures on patients suspected of having infectious diseases. Level 4 surgical gowns were intended to protect both health care workers and patients from potential blood-borne pathogens and exposure to such diseases.
9.To qualify for an AAMI Level 4 rating under the ANSI/AAMI PB70 standard, a surgical gown needed to pass certain tests conducted on all critical zones—the areas on a surgical gown where direct contact with blood, body fluids, and other potentially infectious materials were mostly likely to occur. To establish compliance with the standard, a surgical gown needed to demonstrate blood-borne pathogen resistance in each of those zones by preventing fluids from penetrating the gown. The sleeve seam was a critical zone on surgical gowns.
A-3

MicroCool Surgical Gowns

10.Company 1 developed the “MicroCool Breathable High-Performance Surgical Gown” (hereinafter, “MicroCool gown”) as “sterile, single use surgical apparel intended to be worn by healthcare professionals to help protect both the patient and the healthcare worker from the transfer of microorganisms, body fluids, and particulate matter.”
11.On or about December 23, 2010, the FDA notified Company 1 that it could legally market and sell MicroCool gowns as AAMI Level 4 gowns. Pursuant to FDA regulations, however, Company 1 was required to monitor the MicroCool gown’s continuous compliance with the requirements of AAMI Level 4 in the 2003 ANSI/AAMI PB70 standard.
12.Employee 1 contributed to the development of the MicroCool gown and served as an expert on the gown’s construction and features at both Company 1 and later Avanos. In that role, Employee 1 participated in efforts to improve the MicroCool gown’s performance and profitability, worked closely with Honduras plant workers on sampling and testing the gowns, provided MicroCool data and information to the Company’s marketing and sales divisions, in certain circumstances, and acted as a Company representative to certain hospital customers by providing assurances about the MicroCool gown’s compliance and protection level.
Problems with the MicroCool Gown Sleeve Seam

A.The Flawed Bar-Sealing Manufacturing Process

13.Company 1 manufactured the gown’s fabric in the United States. Company 1 and then later Avanos converted the fabric into finished gowns at a plant in Honduras. As part of the finishing process, Company 1 and then later Avanos used Thermal Impulse Sealers, also known as “bar sealer machines,” to seal the sleeve seams on MicroCool gowns.
A-4

14.The bar sealer machines were highly variable and unstable. Operators of the machines were unable to find any fixed time and temperature control settings that consistently resulted in properly sealed seams. As a result, Company 1 and later Avanos were unable to validate the bar sealer machines at fixed settings. The plant workers in Honduras instead used a visual inspection process to try to ensure that all seams were properly sealed on approximately 80,000 gowns (160,000 sleeves) per week. Improperly sealed sleeve seams could develop cracks or holes in the seams or come apart.
15.As a contributor to the development of the MicroCool gown and an expert on the MicroCool gowns’ construction and features, Employee 1 knew that the bar sealer operators were unable to find any fixed controls and settings on the sealers that consistently resulted in properly sealed sleeve seams on the gowns.
B.Failed Testing

16.To monitor the MicroCool gown’s compliance with the AAMI Level 4 standard after receiving the FDA’s clearance, Company 1 implemented (and Avanos continued) a monthly, liquid-penetration monitoring test that measured the protective quality of each critical zone of the gown, including the sleeve seams. Beginning in or about 2012 and continuing through in or about 2015, the MicroCool gowns repeatedly failed the monthly liquid-penetration monitoring test at the sleeve seam critical zone. Employee 1 knew that the MicroCool gowns were failing these monthly monitoring tests at the sleeve seam.
17.In or about 2012, ANSI and AAMI revised the ANSI/AAMI PB70 standard. The revisions required a more rigorous testing of gowns labeled as AAMI Level 4. In response to this change, Company 1 established an initiative to test the MicroCool gowns under the revised and
A-5

more rigorous 2012 ANSI/AAMI PB70 standard. The MicroCool gowns failed several of the viral-penetration tests that were performed on the gowns’ sleeve seams in connection with this initiative to test the MicroCool gowns to the more rigorous 2012 ANSI/AAMI PB70 standard. Employee 1 knew that the MicroCool gowns were failing these viral-penetration tests at the sleeve seam.
C.Efforts to Fix the Flawed Bar-Sealing Manufacturing Process

18.In or about early 2013, Employee 1 was assigned responsibility for a Corrective and Preventive Action (“CAPA”) intended to find a solution to the problems with the MicroCool gowns’ sleeve seams.
19.As a part of the investigation triggered by the CAPA, Employee 1, along with Company 1 managers, determined that the solution was to replace the bar sealer machines, which could not be validated, with new and different machines in the Honduras manufacturing plant, which they believed could be validated. The new machines were called “Continuous Band Sealers” (hereinafter, “band sealers”).
20.Although the decision to replace the bar sealer machines with band sealers was made in or about early 2013, the band sealers were not used to seal MicroCool gowns’ sleeve seams until mid-January 2015.
21.Employee 1 made statements about the replacement of the bar sealer machines with the band sealers, including on or around September 9, 2013, Employee 1 wrote to other employees of Company 1 that “[s]ealing technology is not a new gown opportunity – it’s a manufacturing upgrade to our current sleeve seaming technology used for AAMI-4 MicroCool and Ultra AAMI- 3 gowns to be in compliance with AAMI claims. It’s a compliance remediation project.”
A-6

22.On or around September 25, 2014, Employee 1 wrote to other employees of Company 1 that “[m]y position is that [the change in the manufacturing method for sealing the MicroCool sleeve seams] is not a design change per the criteria in 5.10. The established attributes/requirements addressed by this Change Control were that the sleeve seam was not meeting the PB70 Level 4 requirement of ASTM-1671, which is now being met with the change.”
Avanos, through Employee 1, Introduced
Misbranded MicroCool Gowns into Interstate Commerce with the Intent to Defraud

23.From on or about November 1, 2014, through on or about January 15, 2015, Avanos, through Employee 1, with the intent to defraud and mislead, knowingly introduced and caused the introduction into interstate commerce medical devices, namely MicroCool surgical gowns, that were misbranded within the meaning of Title 21, United States Code, Section 352(a), in that the labeling of the gowns as “AAMI Level 4” under the 2012 ANSI/AAMI PB70 standard was false and misleading.
24.At all times relevant to this Statement of Facts, Employee 1 was acting within the scope of his employment and with the intention, at least in part, to benefit Avanos.
25.Employee 1 helped other Avanos employees and agents devise marketing materials, presentations, and letter communications to customers about the MicroCool gowns’ purported classification as AAMI Level 4.
26.Employee 1 also made direct misrepresentations about the MicroCool gowns’ purported high quality and compliance with the requirements of AAMI Level 4 under the 2012 ANSI/AAMI PB70 standard in meetings and phone conferences with hospital customers.
27.For example, in or about November 2014, certain hospitals and other potential purchasers of MicroCool gowns requested that Avanos provide assurances that its MicroCool
A-7

gowns met the AAMI Level 4 standard in all critical zones. The hospitals and other potential purchasers stated that the reasons for such requests included (1) the filing of a class action lawsuit alleging that the MicroCool gowns were defective and/or (2) the need to obtain surgical gowns for use in responding to the outbreak of the disease caused by the Ebola virus.
28.Employee 1 was part of a team that coordinated the response to these requests by providing assurances to customers over the phone and contributing to letters sent by an Avanos employee to these customers stating that the MicroCool gowns met AAMI Level 4 standards.
29.Employee 1 reviewed and contributed to four such letters sent to customers in November 2014 that falsely claimed that the MicroCool gowns met the requirements of the revised and more rigorous 2012 ANSI/AAMI PB70 standard—a standard that Employee 1 knew the gowns had never met. To support this claim, Employee 1 inserted into the letters AAMI Level 4 test results for the MicroCool sleeve seams that he had manipulated by, among other things, pre- selecting and pre-testing the sleeve seams used in the testing.
30.From on or about November 1, 2014, through on or about January 15, 2015, Avanos continued to use the bar sealer machines to manufacture hundreds of thousands of misbranded MicroCool gowns that were labeled as complying with the 2012 ANSI/AAMI PB70 standard for classification as AAMI Level 4.
31.From on or about November 1, 2014, through on or about January 15, 2015, Avanos sold approximately $8,939,000 worth of misbranded MicroCool gowns labeled AAMI Level 4 to customers all over the United States and abroad.
A-8

Alteration and Falsification of Records During FDA Inspection

32.In or about July 2016, the FDA conducted a for-cause inspection of Avanos’s surgical gown business. As part of that for-cause inspection, FDA investigators requested that Avanos create a chart summarizing product stability tests conducted on the MicroCool gowns, as well as summaries of product stability tests conducted on other surgical gowns manufactured and sold by Avanos.
33.Employee 2 was part of the group who assisted in fulfilling the FDA investigators’ request for a chart summarizing stability tests conducted on the MicroCool gowns and other surgical gowns manufactured and sold by Avanos.
34.Employee 2 directed Agent 1 to assist in preparing the summaries of the stability test results, which were put in Excel spreadsheet format. Each stability testing summary spreadsheet contained information regarding dozens of stability testing results.
35.Agent 1 or another employee of Avanos prepared the initial drafts of each stability testing summary spreadsheet. These initial drafts contained testing results for failed stability tests that were highlighted in red and labeled “fail” or “inconclusive.” These initial drafts also showed that certain stability tests were not performed on the gowns. For such not-performed tests, the results were labeled “not tested” and highlighted in red.
36.Employee 2 made multiple false entries in three separate testing summary spreadsheets that were requested by the FDA investigators. These false entries included but were not limited to the following: changing (i) notations for failing or not-performed test results that were highlighted in red and labeled “fail,” “not tested” or “inconclusive” to (ii) notations for test results that were highlighted in green and labeled “pass” or “inconclusive,” along with references
A-9

to associated remediation reports. The row labeled “Pass/Fail” in the final versions of each testing summary spreadsheet contained only results that were highlighted in green and labeled “pass” or “inconclusive.” The term “fail” did not appear in the row labeled “Pass/Fail” in the final version of any of the three testing summary spreadsheets requested by the investigators, even though the gowns failed many of the product stability tests performed.
37.Employee 2 informed Agent 1 in July 2016 that the purpose for making these changes to the stability testing summary spreadsheets was to avoid tipping off the investigators that there were failures of stability tests performed on the surgical gowns.
38.For each of the test result notations that Employee 2 changed in the manner discussed above, Employee 2 inserted a reference to a remediation report in which the failing or not-performed stability tests were discussed. Employee 2 instructed Agent 1 to ensure that all the referenced remediation reports contained some rationale for the failed or not-performed stability tests.
39.On at least one occasion, Agent 1 copied and pasted a rationale from (a) a remediation report addressing one type of stability test failure related to the MicroCool surgical gown into (b) a remediation report referenced in one of the stability testing summary spreadsheets requested by the FDA investigators that addressed a different type of stability test failure related to a different type of surgical gown. Agent 1 did not make any effort to ensure that the rationale was valid or true for the latter type of stability test failure and surgical gown. By doing so, Agent 1 made false entries in the remediation report referenced in the stability testing summary spreadsheet requested by the FDA investigators.
A-10

40.At all times relevant to this Statement of Facts, Employee 2 and Agent 1 were acting within the scope of their employment and with the intention, at least in part, to benefit Avanos.
*    *    *
A-11

ATTACHMENT B

CERTIFICATE OF CORPORATE RESOLUTIONS

WHEREAS, Avanos Medical, Inc. (the “Company”) has been engaged in discussions with the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Department of Justice, Civil Division, Consumer Protection Branch (the “CPB”) and the United States Attorney’s Office for the Northern District of Texas (the “USAO-NDTX”) (collectively, the “Offices”) regarding issues arising in relation to the Offices’ investigation of violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and U.S. obstruction and fraud laws by certain of the Company’s employees;
WHEREAS, in order to resolve such discussions, it is proposed that the Company enter into a deferred prosecution agreement with the Offices (the “Agreement”);
WHEREAS, the Company’s Senior Vice President, General Counsel (Interim), and Corporate Secretary, S. Ross Mansbach, together with outside counsel for the Company, have advised the Board of Directors of the Company of its rights, possible defenses, the Sentencing Guidelines’ provisions, and the consequences of entering into such agreement with the Offices;
Therefore, the Board of Directors has RESOLVED that:

1.The Company (a) acknowledges the filing of the one-count Information charging the Company with a felony violation of the FDCA, namely the introduction into interstate commerce of a device that is misbranded, in violation of Title 21, United States Code, Sections 331(a), 333(a)(2) and 352(a); (b) waives indictment on such charge and enters into a deferred prosecution agreement with the Offices; and (c) agrees to pay a Total Criminal Monetary Amount of $22,228,000 under the Agreement with respect to the conduct described in the Information;
B-1

2.The Company accepts the terms and conditions of the Agreement, including, but not limited to, (a) a knowing waiver of its rights to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18, United States Code, Section 3161, and Federal Rule of Criminal Procedure 48(b); and (b) a knowing waiver for purposes of the Agreement and any charges by the United States arising out of the conduct described in the Statement of Facts attached to the Agreement of any objection with respect to venue and consents to the filing of the Information, as provided under the terms of the Agreement, in the United States District Court for the Northern District of Texas; and (c) a knowing waiver of any defenses based on the statute of limitations for any prosecution relating to the conduct described in the Statement of Facts attached to the Agreement and Information or relating to conduct known to the Offices prior to the date on which the Agreement is signed that is not time-barred by the applicable statute of limitations on the date of the signing of this Agreement;
3.The Chief Executive Officer of the Company, Joseph F. Woody, is hereby authorized, empowered and directed, on behalf of the Company, to execute the Agreement substantially in such form as reviewed by this Board of Directors at this meeting with such changes as the Chief Executive Officer of the Company, Joseph F. Woody, may approve;
4.The Chief Executive Officer of the Company, Joseph F. Woody, is hereby authorized, empowered and directed to take any and all actions as may be necessary or appropriate and to approve the forms, terms or provisions of any agreement or other documents as may be necessary or appropriate, to carry out and effectuate the purpose and intent of the foregoing resolutions; and
5.All of the actions of the Chief Executive Officer of the Company, Joseph F. Woody, which actions would have been authorized by the foregoing resolutions except that
B-2

such actions were taken prior to the adoption of such resolutions are hereby severally ratified, confirmed, approved and adopted as actions on behalf of the Company.
												
	Date:	July 6, 2021	By:	/s/ S. Ross Mansbach
				S. Ross Mansbach
				Corporate Secretary
				AVANOS MEDICAL, INC.

B-3

ATTACHMENT C CORPORATE COMPLIANCE PROGRAM
In order to address any deficiencies in its internal controls, compliance program, policies, and procedures relating to violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and U.S. obstruction and fraud laws in connection with interactions with any domestic government agency  (including  the  FDA),  regulator,  or  any  of  its  customers,  Avanos  Medical,  Inc.  (the “Company”) agrees to continue to conduct, in a manner consistent with all of its obligations under this Agreement, appropriate reviews of its existing internal controls, policies, and procedures.
Where necessary and appropriate, the Company agrees to adopt a new or to modify its existing compliance program, including internal controls, compliance policies, and procedures in order to ensure that it maintains an effective compliance program that is designed, implemented, and enforced to effectively deter and detect violations of the FDCA and U.S. obstruction and fraud laws. At a minimum, this should include, but not be limited to, the following elements to the extent they are not already part of the Company’s existing internal controls, compliance program, policies, and procedures:
Commitment to Compliance

1.The Company will ensure that its directors and senior management provide strong, explicit, and visible support and commitment to its corporate policy against violations of the FDCA and U.S. obstruction and fraud laws and its compliance codes, and demonstrate rigorous adherence by example. The Company will also ensure that middle management, in turn, reinforces those
C-1

standards and encourages employees to abide by them. The Company will create and foster a culture of ethics and compliance with the law in its day-to-day operations.
Policies and Procedures

2.The Company will develop and promulgate clearly articulated and visible corporate policies against violations of the FDCA and U.S. obstruction and fraud laws, which policies shall be memorialized in a written compliance code.
3.The Company will develop and promulgate compliance policies and procedures designed to reduce the prospect of violations of the FDCA and U.S. obstruction and fraud laws and the Company’s compliance code, and the Company will take appropriate measures to encourage and support the observance of ethics and compliance policies and procedures against violation of the FDCA and U.S. obstruction and fraud laws by personnel at all levels of the Company. These policies and procedures shall apply to all directors, officers, and employees and, where necessary and appropriate, outside parties acting on behalf of the Company, including, but not limited to, agents, consultants, and joint venture partners (collectively, “agents and business partners”). The Company shall notify all employees that compliance with the policies and procedures is the duty of individuals at all levels of the Company.
Periodic Risk-Based Review

4.The Company will develop these compliance policies and procedures on the basis of a periodic risk assessment addressing the individual circumstances of the Company.
5.The Company shall review its compliance policies and procedures regarding the FDCA and U.S. obstruction and fraud laws no less than annually and update them as  appropriate
C-2

to ensure their continued effectiveness, taking into account relevant developments in the field and evolving industry standards.
Proper Oversight and Independence

6.The Company will assign responsibility to one or more senior corporate executives of the Company for the implementation and oversight of the Company’s compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws. Such corporate official(s) shall have the authority to report directly to independent monitoring bodies, including internal audit, the Company’s Board of Directors, or any appropriate committee of the Board of Directors, and shall have an adequate level of stature and autonomy from management as well as sufficient resources and authority to maintain such autonomy.
Training and Guidance

7.The Company will implement mechanisms designed to ensure that its compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws are effectively communicated to all directors, officers, employees, and, where necessary and appropriate, agents and business partners. These mechanisms shall include: (a) periodic training for all directors and officers, all employees in positions of leadership or trust, any positions that require such training (e.g., internal audit, sales, legal, compliance, finance), and, where necessary and appropriate, agents and business partners; and (b) corresponding certifications by all such directors, officers, employees, agents and business partners, certifying compliance with the training requirements. The Company will conduct training in a manner tailored to the audience’s size, sophistication, or subject matter expertise and, where appropriate, will discuss prior compliance incidents.
C-3

8.The Company will maintain, or where necessary establish, an effective system for providing guidance and advice to directors, officers, employees, and, where necessary and appropriate, agents and business partners, on complying with the Company’s compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws, including when they need advice on an urgent basis.
Internal Reporting and Investigation

9.The Company will maintain, or where necessary establish, an effective system for internal and, where possible, confidential reporting by, and protection of, directors, officers, employees, and, where appropriate, agents and business partners concerning violations of the FDCA and U.S. obstruction and fraud laws or the Company’s compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws.
10.The Company will maintain, or where necessary establish, an effective and reliable process with sufficient resources for responding to, investigating, and documenting allegations of violations of the FDCA and U.S. obstruction and fraud laws or the Company’s compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws. The Company will handle the investigations of such complaints in an effective manner, including routing the complaints to proper personnel, conducting timely and thorough investigations, and following up with appropriate discipline where necessary.
Enforcement and Discipline

11.The Company will implement mechanisms designed to effectively enforce its compliance code, policies, and procedures, including appropriately incentivizing compliance and disciplining violations.
C-4

12.The Company will institute appropriate disciplinary procedures to address, among other things, violations of the FDCA and U.S. obstruction and fraud laws and the Company’s compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws by the Company’s directors, officers, and employees. Such procedures should be applied consistently and fairly, and in a manner consistent with the violation, regardless of the position held by, or perceived importance of, the director, officer, or employee. The Company shall implement procedures to ensure that where misconduct is discovered, reasonable steps are taken to remedy the harm resulting from such misconduct, and to ensure that appropriate steps are taken to prevent further similar misconduct, including assessing the internal controls, compliance code, policies, and procedures and making modifications necessary to ensure the overall compliance program regarding the FDCA and U.S. obstruction and fraud laws is effective.
Mergers and Acquisitions

13.The Company will develop and implement policies and procedures for mergers and acquisitions requiring that the Company conduct appropriate risk-based due diligence on potential new business entities, including appropriate due diligence regarding the FDCA and U.S. obstruction and fraud laws by legal, accounting, and compliance personnel.
14.The Company will ensure its compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws apply as quickly as is practicable to newly-acquired businesses or entities merged with the Company, and will promptly (a) train the directors, officers, employees, agents, and business partners consistent with Paragraphs 7 and 8; and (b) where warranted, conduct an audit of all newly acquired or merged businesses as quickly as is practicable concerning compliance with the FDCA and U.S. obstruction and fraud laws.
C-5

Monitoring, Testing, and Remediation

15.In order to ensure that its compliance program does not become stale, the Company will conduct periodic reviews and testing of its compliance code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws designed to evaluate and improve their effectiveness in preventing and detecting violations of the FDCA and U.S. obstruction and fraud laws and the Company’s code, policies, and procedures regarding the FDCA and U.S. obstruction and fraud laws, taking into account relevant developments in the field and evolving industry standards. The Company will ensure that compliance and control personnel have sufficient direct and indirect access to relevant sources of data to allow for timely and effective monitoring and/or testing. Based on such review and testing and its analysis of any prior misconduct, the Company will conduct a thoughtful root cause analysis and timely and appropriately remediate to address the root causes.
C-6

ATTACHMENT D COMPLIANCE REPORTING REQUIREMENTS
Avanos Medical, Inc. (the “Company”) agrees that it will report to the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Department of Justice, Civil Division, Consumer Protection Branch (the “CPB”) and the United States Attorney’s Office for the Northern District of Texas (the “USAO-NDTX”) (collectively, the “Offices”) periodically, at no less than twelve-month intervals during a three-year term, regarding remediation and implementation of the compliance program and internal controls, policies, and procedures described in Attachment C. During this three-year period, the Company shall: (1) conduct an initial review and submit an initial report, and (2) conduct and prepare at least two (2) follow-up reviews and reports, as described below:
a.With respect to the initial review and report, after consultation with the Offices, the Company shall prepare the first written work plan within sixty (60) calendar days of the date this Agreement is executed, and the Offices shall provide comments within thirty (30) calendar days after receipt of the written work plan. With respect to each follow-up review and report, after consultation with the Offices, the Company shall prepare a written work plan within forty-five (45) calendar days of the submission of the prior report, and the Offices shall provide comments within thirty (30) calendar days after receipt of the written work plan. Any disputes between the Company and the Offices with respect to any written work plan shall be decided by the Offices in their sole discretion. All written work plans shall identify with reasonable specificity the activities the Company plans to undertake in execution of the enhanced self-reporting obligations.
D-1

b.By no later than one year from the date this Agreement is executed, the Company shall submit to the Offices a written report setting forth a complete description of its remediation efforts to date, its proposals reasonably designed to improve the Company’s internal controls, policies, and procedures for ensuring compliance with the FDCA and U.S. obstruction and fraud laws, and the proposed scope of the subsequent reviews. The report shall be transmitted to the following:
i.Chief of the Market Integrity and Major Frauds Unit and Chief of the Strategy, Policy, and Training Unit, United States Department of Justice, Criminal Division, Fraud Section, 1400 New York Avenue N.W., Washington, D.C., 20005;
ii.Director, Consumer Protection Branch, United States Department of Justice, Civil Division, 450 Fifth Street, N.W., Room 6400-South,
Washington, D.C. 20001; and

iii.Criminal Division Chief, United States Attorney’s Office, Northern District of Texas, 1100 Commerce, Suite 300, Dallas, Texas 75242.
The Company may extend the time period for issuance of the report with prior written approval of the Offices.
c.The Company shall undertake at least two follow-up reviews, incorporating the Offices’ views on the Company’s prior reviews and reports, to further monitor and assess whether the Company’s policies and procedures are reasonably designed to detect and prevent violations of the FDCA and U.S. obstruction and fraud laws.
D-2

c.The first follow-up review and report shall be completed by no later than one year after the initial review. The second follow-up review and report shall be completed by no later than one year after the completion of the preceding follow-up review. The final follow- up review and report shall be completed and delivered to the Offices no later than thirty days before the end of the Term.
d.The reports will likely include proprietary, financial, confidential, and competitive business information. Moreover, public disclosure of the reports could discourage cooperation, impede pending or potential government investigations and thus undermine the objectives of the reporting requirement. For these reasons, among others, the reports and the contents thereof are intended to remain and shall remain non-public, except as otherwise agreed to by the parties in writing, or except to the extent that the Offices determine in their sole discretion that disclosure would be in furtherance of the Offices’ discharge of its duties and responsibilities or is otherwise required by law.
e.The Company may extend the time period for submission of any of the follow-up reports with prior written approval of the Offices.
D-3

ATTACHMENT E CERTIFICATION
To:    United States Department of Justice Criminal Division, Fraud Section Attention: Chief of the Fraud Section

United States Department of Justice
Civil Division, Consumer Protection Branch
Attention: Director of the Consumer Protection Branch

United States Attorney’s Office for the Northern District of Texas Attention: Criminal Division Chief

Re:    Deferred Prosecution Agreement Disclosure Certification

The undersigned certify, pursuant to Paragraph 33 of the Deferred Prosecution Agreement (“DPA”) filed on July , 2021 in the United States District Court for the Northern District of Texas, by and between the United States of America and Avanos Medical, Inc. (the “Company”), that undersigned are aware of the Company’s disclosure obligations under Paragraph 6 of the DPA, and that the Company has disclosed to the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Department of Justice, Civil Division, Consumer Protection Branch (the “CPB”) and the United States Attorney’s Office for the Northern District of Texas (the “USAO-NDTX”) (collectively, the “Offices”) any and all evidence or allegations of conduct required pursuant to Paragraph 6 of the DPA, which includes evidence or allegations of any violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”) or U.S. obstruction or fraud laws committed by the Company’s employees and agents upon any domestic government agency (including the FDA), regulator, or any of the Company’s customers (“Disclosable Information”). This obligation to disclose information extends to any and all
E-2

Disclosable Information that has been identified through the Company’s compliance and controls program, whistleblower channel, internal audit reports, due diligence procedures, investigation process, or other processes. The undersigned further acknowledge and agree that the reporting requirements contained in Paragraph 6 and the representations contained in this certification constitute a significant and important component of the DPA and of the Offices’ determination whether the Company has satisfied its obligations under the DPA.
The undersigned hereby certify that they are the Chief Executive Officer and the Chief Financial Officer of the Company, respectively, and that each has been duly authorized by the Company to sign this Certification on behalf of the Company.
This Certification shall constitute a material statement and representation by the undersigned and by, on behalf of, and for the benefit of, the Company to the executive branch of the United States for purposes of 18 U.S.C. § 1001, and such material statement and representation shall be deemed to have been made in the Northern District of Texas. This Certification shall also constitute a record, document, or tangible object in connection with a matter within the jurisdiction of a department and agency of the United States for purposes of 18 U.S.C. § 1519, and such record, document, or tangible object shall be deemed to have been made in the Northern District of Texas.
E-2

Date:         Name (Printed):      

Name (Signed):       Chief Executive Officer
AVANOS MEDICAL, INC.

Date:         Name (Printed):      

Name (Signed):       Chief Financial Officer
AVANOS MEDICAL, INC.
E-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00330-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00330-of-00352.parquet"}]]