Document:

exhibit10-1.htm

Exhibit 10.1

Execution Version

Fourth Amendment

 

to

 

Fourth Amended and Restated Credit Agreement

 

Among

 

Linn Energy, LLC,

 

As Borrower,

 

BNP Paribas,

 

As Administrative Agent,

 

and

 

The Lenders Party Hereto

 

Dated as of October 15, 2010

 

 

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Fourth Amendment to Fourth Amended and Restated Credit Agreement

 

This Fourth Amendment to Fourth Amended and Restated Credit Agreement (this “Fourth Amendment”) dated as of October 15, 2010 (the “Fourth Amendment Effective Date”) is among Linn Energy, LLC, a limited liability company formed under the laws of the State of Delaware (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); each of the Lenders that is a signatory hereto; and BNP Paribas, as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”).

 

R E C I T A L S

 

A.          The Borrower, the Administrative Agent and the Lenders are parties to that certain Fourth Amended and Restated Credit Agreement dated as of April 28, 2009 (as the same has been amended, modified, supplemented or restated from time to time, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

 

B.           The Borrower has requested and the Administrative Agent and the Majority Lenders have agreed to amend certain provisions of the Credit Agreement as more particularly set forth herein.

 

C.           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 Fourth Amendment, shall have the meaning ascribed such term in the Credit Agreement.  Unless otherwise indicated, all section references in this Fourth Amendment refer to the Credit Agreement.

 

Section 2.                      Amendments to Credit Agreement.

 

2.1           Amendments to Section 1.02.

 

(a)             The definition of “Agreement” is hereby amended and restated in its entirety to read as follows:

 

“‘Agreement’ means this Fourth Amended and Restated Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and as the same may from time to time be further amended, modified, supplemented or restated.”

 

(b)             The following new definitions are hereby added to Section 1.02 where alphabetically appropriate as follows:

 

“‘Date of Determination’ means, for any given calendar month, the second (2nd) Business Day in such month following the date on which historical

 

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production volumes for the immediately preceding calendar month become available to the Borrower and its Subsidiaries.”

 

“‘Fourth Amendment’ means that certain Fourth Amendment to Fourth Amended and Restated Credit Agreement dated as of the Fourth Amendment Effective Date among the Borrower, the Lenders signatory thereto, the Guarantors signatory thereto and the Administrative Agent.”

 

“‘Fourth Amendment Effective Date’ has the meaning assigned to such term in the Fourth Amendment.”

 

2.2           Amendment to Section 8.01(d).  Section 8.01(d) is hereby amended to add the following to the end of the first sentence:

 

“ and a confidential report reflecting its projected production for each calendar year for which it has established hedge positions under Section 9.18(a)(i).”

 

2.3           Amendment to Section 9.18 (Commodity Hedges).  Clause (i) of Section 9.18(a) is hereby amended and restated in its entirety as set forth below:

 

“           (i)           Swap Agreements in respect of commodities (x) with an Approved Counterparty and (y) the notional volumes for which (when aggregated with the notional volumes under all other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is executed, (I) 80% of the reasonably anticipated projected production (based upon the Borrower’s internal projections) for each month during the period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, for each calendar month during the period through the remainder of the then current calendar year and for the period of four calendar years thereafter and (II) 70% of the reasonably anticipated projected production (based upon the Borrower’s internal projections) for each month during the period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, for each calendar month during the period starting with the 5th calendar year thereafter.

 

Notwithstanding the foregoing, but subject to the cure provisions of Section 9.18(i), the notional volumes in respect of all commodity Swap Agreements (when aggregated with the notional volumes under all other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements and Acquisition Swap Agreements) will not, as of the first day of the next calendar month following each Date of Determination (the “Applicable Date”), for each month during the period of six calendar months commencing on the Applicable Date, exceed the actual net monthly physical production from proved, developed producing reserves (regardless of projected production levels) for the calendar month most recentl

  

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ended prior to such Date of Determination, calculated separately for each of crude oil and natural gas.”

 

2.4           Amendment to Section 9.18 (Commodity Hedges Cures).  Section 9.18(i) is hereby amended and restated in its entirety as set forth below:

 

“(i)           If, as of any Applicable Date, the Borrower determines that the aggregate notional volumes of all commodity Swap Agreements (other than Acquisition Swap Agreements and basis swaps excluded for purposes of clause (ii) of Section 9.18(a)) for each month in the six (6) calendar month period commencing on the Applicable Date (in each case calculated for each commodity separately) would exceed the actual net monthly production from proved, developed producing reserves for the calendar month immediately preceding the Date of Determination occurring immediately prior to such Applicable Date, then the Borrower shall, prior to the last day of the calendar month during which such Applicable Date occurred, terminate, create off-setting positions, otherwise unwind existing Swap Agreements or take other actions permitted by this Agreement (including delivering revised forecasts of anticipated projected production reasonably acceptable to the Administrative Agent; provided that the delivery of revised forecasts cannot cure the requirements set forth in the second paragraph of clause (i) of Section 9.18(a)) such that, by the end of such calendar month, the Borrower will be in compliance with the limitations set forth in Section 9.18(a) (calculated for each commodity separately).”

 

Section 3.                      Conditions Precedent.  The effectiveness of this Fourth Amendment is subject to the receipt by the Administrative Agent of the following documents and satisfaction or waiver by the Lenders of the other conditions provided in this Section 3, each of which shall be reasonably satisfactory to the Administrative Agent in form and substance:

 

3.1           Payment by the Borrower to the Administrative Agent of all fees and other amounts due and payable on or prior to the Fourth Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower pursuant to the Credit Agreement.

 

3.2           The Administrative Agent shall have received multiple counterparts as requested of this Fourth Amendment from the Borrower, the Guarantors and the Majority Lenders.

 

3.3           No Default or Event of Default shall have occurred and be continuing as of the Fourth Amendment Effective Date.

 

Section 4.                      Representations and Warranties; Etc.

 

4.1           Representations and Warranties in Loan Documents.  Each Obligor hereby affirms (a) that as of the date of execution and delivery of this Fourth Amendment, all of the representations and warranties contained in each Loan Document to which such Obligor is a party are true and correct in all material respects as though made on and as of the Fourth Amendment Effective Date (unless made as of a specific earlier date, in which case, such representations and warranties remain true and correct in all material respects as of such earlier

  

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date); and (b) that after giving effect to this Fourth Amendment and to the transactions contemplated hereby, no Defaults exist under the Loan Documents.

 

4.2           Organization; Powers.  Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority, and has all material governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and is qualified to do business in, and is in good standing in or has applied to qualify to do business in, every jurisdiction where such qualification is required, except where failure to have such power, authority, licenses, authorizations, consents, approvals and qualifications could not reasonably be expected to have a Material Adverse Effect.

 

4.3           Authority; Enforceability.  The Transactions are within the Borrower’s and each Guarantor’s corporate powers and have been duly authorized by all necessary corporate and, if required, member action (including, without limitation, any action required to be taken by any class of directors of the Borrower or any other Person, whether interested or disinterested, in order to ensure the due authorization of the Transactions).  When executed and delivered, each Loan Document to which the Borrower and any Guarantor is a party will have been duly executed and delivered by the Borrower and such Guarantor and will constitute a legal, valid and binding obligation of the Borrower and such Guarantor, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

Section 5.                      Miscellaneous.

 

5.1           Confirmation.  The provisions of the Credit Agreement (as amended by this Fourth Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this Fourth Amendment.

 

5.2           Ratification and Affirmation of Obligors.  Each Obligor hereby expressly (i) acknowledges the terms of this Fourth Amendment, (ii) ratifies and affirms its obligations under each Loan Document to which it is a party, (iii) acknowledges, renews and extends its continued liability under each Loan Document to which it is a party and agrees that its grant of security interest and/or guarantee, as applicable, under the Security Instruments to which it is a party remains in full force and effect with respect to the Indebtedness after giving effect to this Fourth Amendment.

 

5.3           Loan Document.  This Fourth Amendment is a “Loan Document” as defined and described in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to Loan Documents shall apply hereto.

 

5.4           Counterparts.  This Fourth 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.

 

5.5           No Waiver.  Neither the execution by the Administrative Agent or the Lenders of this Fourth Amendment, nor any other act or omission by the Administrative Agent or the

  

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Lenders or their officers in connection herewith, shall be deemed a waiver by the Administrative Agent or the Lenders of any defaults which may exist or which may occur in the future under any Loan Document.  Similarly, nothing contained in this Fourth Amendment shall directly or indirectly in any way whatsoever impair, prejudice or otherwise adversely affect the Administrative Agent's or the Lenders' right at any time to exercise any right, privilege or remedy in connection with the Loan Documents with respect to any defaults which may exist or which may occur in the future under any Loan Document.  Nothing in this Fourth Amendment shall be construed to be a consent by the Administrative Agent or the Lenders to any default which may exist or which may occur in the future under any Loan Document.

 

5.6           No Oral Agreement.  This Fourth Amendment, the Credit Agreement and the other Loan Documents 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.

 

5.7           Governing Law.  This Fourth 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 Texas.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed effective as of the date first written above.

 

	
BORROWER:

	
LINN ENERGY, LLC

	  	  
	  	  
	  	
By:

	
/s/ Kolja Rockov

	  	  	
Kolja Rockov,

	  	  	
Executive Vice President and Chief Financial Officer

	  	  
	  	  
	  	  
	  	  
	
GUARANTORS:

	
LINN ENERGY HOLDINGS, LLC

	  	
LINN OPERATING, INC.

PENN WEST PIPELINE, LLC

MID-CONTINENT HOLDINGS I, LLC

MID-CONTINENT HOLDINGS II, LLC

MID-CONTINENT I, LLC

MID-CONTINENT II, LLC

LINN GAS MARKETING, LLC

LINN EXPLORATION MIDCONTINENT,

LLC

LINN EXPLORATION & PRODUCTION MICHIGAN LLC

LINN EXPLORATION & PRODUCTION MICHIGAN MIDSTREAM LLC

LINN GAS PROCESSING MI LLC

LINN MIDWEST ENERGY LLC

	  	  
	  	  
	  	  
	  	  
	  	
By:

	
/s/ Kolja Rockov

	  	  	
Kolja Rockov,

	  	  	
Executive Vice President and Chief Financial Officer

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 1 

  

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BNP PARIBAS, as Administrative Agent and a Lender

	  
	  
	
By:

	
/s/ Douglas R. Liftman

	
Name:

	
Douglas R. Liftman

	
Title:

	
Managing Director

	  
	  
	
By:

	
/s/ Betsy Jocher

	
Name:

	
Betsy Jocher

	
Title:

	
Director

	  
	  
	  
	
ROYAL BANK OF CANADA, as a Lender

	  
	  
	
By:

	
/s/ Don J. McKinnerney

	
Name:

	
Don J. McKinnerney

	
Title:

	
Authorized Signatory

	  
	  
	  
	
CITIBANK, NA, as a Lender

	  
	  
	
By:

	
/s/ John Miller

	
Name:

	
John Miller

	
Title:

	
Attorney-in-Fact

	  
	  
	  
	
BARCLAYS BANK PLC, as a Lender

	  
	  
	
By:

	
/s/ Ann E. Sutton

	
Name:

	
Ann E. Sutton

	
Title:

	
Director

 

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 2

  

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CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as a Lender

	  
	  
	
By:

	
/s/ Tom Byargeon

	
Name:

	
Tom Byargeon

	
Title:

	
Managing Director

	  
	  
	
By:

	
/s/ Sharada Marne

	
Name:

	
Sharada Marne

	
Title:

	
Director

	  
	  
	  
	
THE ROYAL BANK OF SCOTLAND plc, as a Lender

	  
	  
	
By:

	
/s/ Phillip Ballard

	
Name:

	
Phillip Ballard

	
Title:

	
Managing Director

	  
	  
	  
	
WELLS FARGO BANK, N.A., as a Lender

	  
	  
	
By:

	
/s/ Scott Hodges

	
Name:

	
Scott Hodges

	
Title:

	
Senior Relationship Manager

	  
	  
	  
	
SOCIETE GENERALE, as a Lender

	  
	  
	
By:

	
/s/ Cameron Null

	
Name:

	
Cameron Null

	
Title:

	
Vice President

	  
	  
	  
	
By:

	  
	
Name:

	  

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 3

  

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Title:

	  
	  
	  
	  
	
BANK OF MONTREAL, as a Lender

	  
	  
	
By:

	
/s/ James V. Ducote

	
Name:

	
James V. Ducote

	
Title:

	
Director

	  
	  
	  
	
COMERICA BANK, as a Lender

	  
	  
	
By:

	
/s/ Justin Crawford

	
Name:

	
Justin Crawford

	
Title:

	
Vice President

	  
	  
	  
	
ING CAPITAL LLC, as a Lender

	  
	  
	
By:

	
/s/ Charles Hall

	
Name:

	
Charles Hall

	
Title:

	
Managing Director

	  
	  
	  
	
CREDIT SUISSE, AG Cayman Islands Branch as a Lender

	  
	  
	
By:

	
/s/ Nupur Kumar

	
Name:

	
Nupur Kumar

	
Title:

	
Vice President

	  
	  
	
By:

	
/s/ Rabul Parmar

	
Name:

	
Rabul Parmar

	
Title:

	
Associate

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 4

  

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COMPASS BANK, as a Lender

	  
	  
	
By:

	
/s/ Dorothy Marchand

	
Name:

	
Dorothy Marchand

	
Title:

	
Senior Vice President

	  
	  
	  
	
DnB NOR BANK ASA, as a Lender

	  
	  
	
By:

	
/s/ Sanjiv Nayar

	
Name:

	
Sanjiv Nayar

	
Title:

	
Senior Vice President

	  
	  
	
By:

	
/s/ Nikolai A. Nachamkin

	
Name:

	
Nikolai A. Nachamkin

	
Title:

	
Senior Vice President

	  
	  
	
UNION BANK, N.A., as a Lender

	  
	  
	
By:

	
/s/ Scott Gildea

	
Name:

	
Scott Gildea

	
Title:

	
Vice President

	  
	  
	  
	
U.S. BANK NATIONAL ASSOCIATION,

	
as a Lender

	  
	  
	
By:

	
/s/ John Q. Lozano

	
Name:

	
John Q. Lozano

	
Title:

	
Vice President

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 5

  

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THE BANK OF NOVA SCOTIA, as a Lender

	  
	  
	
By:

	
/s/ Greg George

	
Name:

	
Greg George

	
Title:

	
Managing Director

	  
	  
	  
	
ALLIED IRISH BANKS P.L.C., as a Lender

	  
	  
	
By:

	
/s/ David O’Driscoll

	
Name:

	
David O’Driscoll

	
Title:

	
Assistant Vice President

	  
	
By:

	
/s/ Mark Connelly

	
Name:

	
Mark Connelly

	
Title:

	
SVP

	  
	  
	  
	
CAPITAL ONE, N.A., as a Lender

	  
	  
	
By:

	
/s/ Peter Shen

	
Name:

	
Peter Shen

	
Title:

	
Vice President

	  
	  
	  
	
UBS AG, STAMFORD BRANCH, as a Lender

	  
	  
	
By:

	
/s/ Irja R. Otsa

	
Name:

	
Irja R. Otsa

	
Title:

	
Associate Director

	  
	  
	
By:

	
/s/ Mary E. Evans

	
Name:

	
Mary E. Evans

	
Title:

	
Associate Director

 

 Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 6

  

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MACQUARIE BANK LIMITED, as a Lender

	  
	  
	
By:

	
/s/ Jonathan Rourke

	
Name:

	
Jonathan Rourke

	
Title:

	
Executive Director

	  
	  
	  
	
By:

	
/s/ Lisa Knowles

	
Name:

	
Lisa Knowles

	
Title:

	
Division Director

 

Fourth Amendment to Fourth Amended and Restated Credit Agreement

Signature Page 7

US 578592entest_ex10-1.htm

Exhibit 10.1

 

Escrow Agreement

This Escrow Agreement (the "Escrow Agreement") is entered into as of October 26, 2010, by and between Herman H. Pettegrove (the "Escrow Agent"), Entest BioMedical Inc. (“Purchaser”) and Greg McDonald, DVM (the “Seller”), herein collectively referred to herein as the “Parties” (“Parties”).

RECITALS

WHEREAS, the Seller and Purchaser have entered into a Letter of Intent (LOI) to purchase all capital stock of the McDonald Animal Hospital Inc. located at 225 S. Milpas Street Santa Barbara, CA 93103 (“Transaction”). The LOI attached hereto as Exhibit A.

WHEREAS the LOI requires that the parties enter into an Escrow Agreement

WHEREAS the LOI anticipates that the Purchaser and Seller shall enter into a binding agreement to complete the Transaction (“Definitive Purchase Agreement”) on or before December 14, 2010.

WHEREAS it is agreed that upon execution of a Definitive Purchase Agreement, the terms of that Definitive Purchase Agreement will dictate the terms and conditions of this Escrow Agreement as of and subsequent to the date of  execution of the Definitive Purchase Agreement

ESCROW AGREEMENT

NOW, THEREFORE, in consideration of the preliminary statements and the mutual agreements, covenants, representations and warranties set forth in this Agreement and for other good, valid and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

APPOINTMENT OF ESCROW AGENT;

ESTABLISHMENT OF ESCROW; DEPOSIT

Section 1.1 Appointment of Escrow Agent; Limited Responsibilities. Seller and Purchaser hereby appoint Escrow Agent to act as escrow agent hereunder, and Escrow Agent hereby accepts such appointment and agrees to act as escrow agent and to hold, safeguard, and disburse the Escrow Assets (as defined below) pursuant to the terms and conditions of this Agreement. This Agreement expressly sets forth all the duties of Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations will be read into this Agreement against Escrow Agent. Escrow Agent will not be bound by the provisions of any agreement among the other parties hereto except this Agreement.

  

  

  

Section 1.2 Deposit of Escrow Assets and Documents. In accordance with Schedule A, the Escrow Assets (as defined in schedule A) shall be deposited with the Escrow Agent as per Escrow Agents instruction to the other Parties. Escrow Assets shall be disbursed by Escrow Agent in accordance with Schedule B. Escrow Agent acknowledges that it has received a copy of the LOI and upon receipt of Escrow Assets will promptly provide written notice of such receipt to the other Parties.

ARTICLE II

CLAIMS; TERMINATION OF ACCOUNTS

Section 2.1 Disbursements from Escrow Account.

(a) Escrow Assets shall be released in accordance with Schedule B.

(b) Termination of Account. Upon payment of all amounts in the Escrow Account, the Escrow Account will be deemed closed, and this Agreement will be deemed terminated with respect to the Escrow Account.

 

ARTICLE III

DUTIES OF ESCROW AGENT

Section 3.1 Degree of Care. Escrow Agent will not be under any duty to give the Escrow Assets held by it hereunder any greater degree of care than it gives its own similar property and will not be required to invest any funds held hereunder except as directed in this Agreement.

Section 3.2 Liability; Indemnification of Escrow Agent. Escrow Agent will not be liable, except for its own gross negligence or willful misconduct and, except with respect to claims based upon such gross negligence or willful misconduct that are successfully asserted against Escrow Agent, the Seller on the one hand and the Purchaser on the other hand will jointly and severally indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, arising out of and in connection with this Agreement. Without limiting the foregoing, Escrow Agent will in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms of this Agreement, including, any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Escrow Assets, or any loss of interest incident to any such delays. This Section will survive notwithstanding any termination of this Agreement or the resignation of Escrow Agent.

  

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Section 3.3 Reliance by Escrow Agent. Escrow Agent will be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service with respect to this Agreement. Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that the person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions of this Agreement has been duly authorized to do so. Escrow Agent may conclusively presume that the undersigned representative of any party hereto which is an entity other than a natural person has full power and authority to instruct Escrow Agent on behalf of that party unless written notice to the contrary is delivered to Escrow Agent.

Section 3.4 Advice of Counsel. Escrow Agent may act pursuant to the advice of counsel with respect to any matter relating to this Agreement and will not be liable for any action taken or omitted by it in good faith in accordance with such advice.

Section 3.5 Subject to Taxes and Regulations. Escrow Agent does not have any interest in the Escrow Assets deposited hereunder but is serving as escrow holder only and having possession only pursuant to this Agreement. The Parties will provide Escrow Agent with any necessary tax identification numbers and related information that may be required or reasonably requested by Escrow Agent for purposes of complying with applicable tax information reporting and withholding requirements.

Section 3.6 No Representation. Escrow Agent makes no representation as to the validity, value, genuineness, or the collectability of any security or other document or instrument held by or delivered to it.

Section 3.7 No Advice. Escrow Agent will not be called upon to advise any party as to the wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder.

Section 3.8 Resignation of Escrow Agent. Escrow Agent (and any successor Escrow Agent) may at any time resign as such by delivering the Escrow Assets to any successor Escrow Agent jointly designated in writing by the Seller on the one hand and the Purchaser on the other hand, or, if no such written designation is made, to any court of competent jurisdiction, whereupon Escrow Agent will be discharged of and from any and all further obligations arising from or in connection with this Agreement. The resignation of Escrow Agent will take effect on the earlier of (a) the appointment of a successor (including a court of competent jurisdiction) or (b) the day which is 30 days after the date of delivery of its written notice of resignation to the other Parties. If at the effective time of Escrow Agent's resignation it has not received a designation of a successor Escrow Agent, Escrow Agent's sole responsibility after that time will be to retain and safeguard the Escrow Assets until receipt of a designation of successor Escrow Agent or a joint written disposition instruction by the Purchaser on the one hand and the Seller on the other hand or a final non-appealable order of a court of competent jurisdiction.

  

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Section 3.9 Disputed Disbursements. In the event of any disagreement between the Parties resulting in adverse claims or demands being made in connection with the Escrow Account or in the event that Escrow Agent is in doubt as to what action should be taken hereunder, Escrow Agent will be entitled to retain the applicable Escrow Assets until Escrow Agent will have received (a) the written determination of a duly empowered  arbitrator or a court of competent jurisdiction  directing delivery of the applicable Escrow Assets, or (b) a written agreement executed by  the Seller and Purchaser directing delivery of the applicable Escrow Assets, in which event Escrow Agent will disburse the applicable Escrow Assets in accordance with such written determination or agreement. Escrow Agent will act on such written determination without further question.

Section 3.10 Compensation of Escrow Agent.  Purchaser will pay compensation due to Escrow Agent of $500.00 for the preparation and execution of this escrow. In the event of a dispute between the Parties, the Parties will not pay direct compensation to the Escrow Agent, however, each agrees to reimburse Escrow Agent for all reasonable expenses, disbursements, and advances incurred or made by Escrow Agent in performance of its duties hereunder (including reasonable fees, expenses, and disbursements of its counsel).

Section 3.11 Disclosure of Relationship. No printed or other matter in any language (including prospectuses, notices, reports, and promotional material) that mentions Escrow Agent's name or the rights, powers, or duties of Escrow Agent will be issued by the other parties hereto or on such parties' behalf unless Escrow Agent will first have given its specific written consent thereto.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Amendment. No amendment of this Agreement will be effective unless in writing signed by each Party.

Section 4.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original agreement, but all of which will constitute one and the same agreement. Any Party may execute and deliver this Agreement by an executed signature page transmitted by a facsimile machine. If a Party transmits its signature page by a facsimile machine, such Party will promptly thereafter deliver an originally executed signature page to the other Parties, provided that any failure to deliver such an originally executed signature page will not affect the validity, legality, or enforceability of this Agreement and the Sales Agreement constitute the entire agreement and understanding between the Parties and supersedes all prior agreements and understandings, both written and oral, with respect to the subject matter of this Agreement.

  

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Section 4.3 Expenses. Each Party will bear its own expenses with respect to the negotiation and preparation of this Agreement.

Section 4.4 Notice. All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five Business Days after the day when mailed by certified or registered mail, postage prepaid, addressed to the following addresses (or at such other address for a party as shall be specified by like notice):

If to Seller:

Greg McDonald, DVM

McDonald Animal Hospital, Inc

225 S. Milpas Street

Santa Barbara, CA 93103

If to Purchaser:

David R. Koos, Chairman & CEO

Entest BioMedical Inc.

If to Escrow Agent:

Herman H. Pettegrove

1350 Main Street

Venice, CA 90291

Phone: (310)392-5400

Section 4.5 Governing Law; Jurisdiction.

(a) The terms and conditions of this Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to its choice of law rules.  Any action arising as a result of this Agreement shall be brought in the state courts located in San Diego County, State of California.

(b) Without prejudice to any other mode of service:

(i) the Parties, and their assigns each  appoint Herman H. Pettegrove as his or her agent for service of process relating to any proceedings before the federal courts in California in connection with this Agreement and agree to maintain the process agent in California notified to the other Parties ;

  

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(ii) The Escrow Agent agrees that it may be served at its office in California for service of process relating to any proceedings before the federal courts in California in connection with this Agreement;

(iv) each Party agrees that failure by a process agent to notify him, her or it of the process shall not invalidate the proceedings concerned; and

(v) each Party consents to the service of process relating to any such proceedings by prepaid mailing of a copy of the process to his, her or its respective agent at the address identified in paragraph (i), (ii) or (iii) above or by prepaid mailing by air mail, certified or registered mail of a copy of the process to it at the address set forth in Section 4.4.

(c) Each of the Parties hereto:

(i) waives objection to the courts in California on grounds of inconvenient forum, venue or otherwise as regards proceedings in connection with this Agreement or any agreements or transactions contemplated hereby; and

(ii) agrees that a final judgment or order of a federal court in California in connection with this Agreement or any agreements or transactions contemplated hereby is conclusive and binding on him, her or it, subject to appellate review, and may be enforced against him, her or it in the courts of any other jurisdiction.

Section 4.6 No Assignment. Other than as expressly set forth in this Agreement regarding the Escrow Agent, no Party may assign its benefits or delegate its duties under this Agreement without the prior written consent of the other Parties. Any attempted assignment or delegation without such prior consent will be void.

Section 4.7 No Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and no other Person will have any right, interest, or claim under this Agreement.

Section 4.8 Public Announcements. The Parties agree, to the extent practicable, to consult with each other regarding any public announcement in advance thereof.

Section 4.9 Representation by Legal Counsel. Each Party is a sophisticated Person that was advised by experienced legal counsel and other advisors in the negotiation and preparation of this Agreement.

  

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Section 4.10 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction will not invalidate the remaining provisions of this Agreement or affect the validity or enforceability of such provision in any other jurisdiction. In addition, any such prohibited or unenforceable provision will be given effect to the extent possible in the jurisdiction where such provision is prohibited or unenforceable.

Section 4.11 Specific Performance. The Parties acknowledges that the benefits that they will derive from the transactions contemplated by this Agreement are unique and irreplaceable. Accordingly, if any of the parties improperly abandon or terminate this Agreement; either party would not have an adequate remedy at law. The claiming Parties therefore will be entitled to a court order requiring such Party to perform this Agreement.

Section 4.13 Successors. This Agreement will be binding upon and will inure to the benefit of each Party and its heirs, legal representatives, permitted assigns, and successors  provided that this Section will not permit the assignment or other transfer of this Agreement, whether by operation of law or otherwise, if such assignment or other transfer is not otherwise permitted under this Agreement.

Section 4.14 Time of the Essence. Time is of the essence in the performance of this Agreement and all dates and periods specified in this Agreement.

Section 4.15 Waiver. No provision of this Agreement will be considered waived unless such waiver is in writing and signed by the Party that benefits from the enforcement of such provision. No waiver of any provision in this Agreement, however, will be deemed a waiver of a subsequent breach of such provision or a waiver of a similar provision. In addition, a waiver of any breach or a failure to enforce any term or condition of this Agreement will not in any way affect, limit, or waive a Party's rights under this Agreement at any time to enforce strict compliance thereafter with every term and condition of this Agreement.

IN WITNESS WHEREOF, each Party has executed, or has caused a duly authorized officer to execute, this Agreement as of the date first above written.

	
PURCHASER:

	
/s/David R. Koos

	  	
David R. Koos, Chairman & CEO

	  	
Entest BioMedical Inc.

	
ESCROW AGENT:

	
/s/Herman H. Pettegrove

	  	
Herman H. Pettegrove, Esq.

	
SELLER:

	
/s/Greg McDonald

	  	
Greg McDonald, DVM

  

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SCHEDULE A

ESCROW ASSETS

 

On or before October 29, 2010, Purchaser shall deliver to the Escrow Agent the amount of $20,000 (“Initial Escrow Deposit”).

In accordance with the terms and conditions of the Definitive Purchase Agreement, the Seller and Buyer shall deposit additional assets as required by the Definitive Purchase Agreement.

 

 

 

 

 

 

  

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SCHEDULE B

Disbursement

 

	
  

	
(a)

	
In the event that  the Definitive Purchase Agreement is not executed by the parties on or before December 15, 2010 then the Initial Escrow Deposit shall be returned to Buyer

 

	
  

	
(b)

	
In the event that negotiations regarding the Transaction terminate due to a breach of 3(M) or 3(N) of the LOI by the Seller then the Initial Escrow Deposit shall be returned to Buyer.

Otherwise:

 

	
  

	
(c)

	
All Escrow Assets (including the Initial Escrow Deposit) shall be disbursed in accordance to terms and conditions dictated by the Definitive Purchase Agreement.

  

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EXHIBIT A (LOI)

October 25, 2010

Greg McDonald, DVM

McDonald Animal Hospital, Inc.

225 S. Milpas Street

Santa Barbara, CA 93103

Re:           Non-Binding Letter of Intent

Dear Dr. McDonald:

This Letter of Intent (“LOI”) constitutes a proposal from Entest BioMedical Inc.  (hereinafter, “Buyer”) to McDonald Animal Hospital Inc. (“Corporation”) and Greg McDonald, DVM (“Seller”) to buy 100% of the stock of the Corporation as more clearly defined below (the “Transaction”) owned by Seller in connection with the operation and management of its business  (the “Business”) located at  225 S. Milpas Street, Santa Barbara, CA 93103 (the “Property”).   Buyer and Seller may be referred to individually as “Party” and collectively as “Parties”.

This proposal supersedes any other previous written or oral proposals or communications between the parties.  The terms of this proposal shall be as follows:

1.           Purchase Price.

The Purchase Price for the acquisition 100% of the stock of the Corporation shall be five hundred Thousand Dollars ($500,000.00) to be paid as follows.

The Purchase Price for the acquisition of the stock shall be payable as follows:

(a)           Buyer shall deposit twenty thousand dollars ($20,000.00) (“Escrow Deposit”) with Herman H. Pettegrove (“Escrow Agent”), Attorney at Law, 1350 Main Street, Venice, CA 90291 – 310.392.5400 within two (2) days of execution by the parties of This LOI. The terms of the Escrow shall provide that:

(i) in the event that Definitive Purchase Agreement (“DPA” as defined in Section 2) is not executed by the parties on or before December 15, 2010 then the Escrow Deposit shall be returned to Buyer

(ii) in the event that negotiations regarding the Transaction terminate due to (a) a breach of 3(M) or 3(N) by the Seller then the Escrow Deposit shall be returned to Buyer and

  

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(iii) it is agreed by the Parties that Escrow Agent shall serve as such regarding any escrow which is required to be established in accordance with any DPA entered into by and among the parties.

(b)           On the Date the Closing of Sale the sum of fifty thousand dollars ($50,000.00), in cash plus two hundred and eighty thousand dollars ($280,000.00) in Entest Biomedical, Inc, common stock  and;

(c)           The assumption of the loan to the landlord for approximately seventy-five thousand dollars ($75,000.00), and;

(d)           The assumption of the outstanding balance to the IRS for approximately twenty-five thousand dollars ($25,000.00), and;

(e)           A promissory note for fifty Thousand Dollars ($50,000.00) due and payable in full on the first day of the fourth (4th) month following the Closing Date of Sale.

2.           Due Diligence.

Upon the deposit of the Escrow Deposit by Buyer and for a period of thirty (30) days thereafter (the “Due Diligence Period”), Seller shall provide Buyer with reasonable access to all of the Corporation’s books, records, legal documents, assets and other information (the “Books and Records”), all at no cost to Buyer.   At such time as the Due Diligence Period has expired the parties shall use their best efforts to negotiate and execute a Definitive Purchase Agreement (“DPA”) whereby Seller shall sell 100% of the shares of stock of the Corporation to Buyer under terms and conditions similar to those set forth herein.  The Parties agree and acknowledge that this list of terms and conditions set forth herein is not intended to be all inclusive and the DPA to be executed by the Parties may contain terms different or in addition to those set forth herein.  Both Parties shall use their best efforts to execute a DPA no later than December, 1, 2010 with the Transaction closing no later than December 15, 2010 (the “Closing Date of Sale”).

3.           Basic Terms.

The DPA shall include terms and conditions similar to the following:

A.           Upon the mutual execution by the parties of the Stock Purchase Agreement, Buyer shall have no contingencies and his obligation to close the Transaction shall be unconditional;

B.           Seller shall assign the stock to Buyer;

  

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C.           Seller shall retain  cash and accounts receivable from Business and Buyer shall have no interest or obligations with respect thereto to the extent such retention shall not result in the Corporation having liabilities in excess of what may be agreed upon by the parties pursuant to a DPA as of the Closing Date;

D.           Buyer shall indemnify and protect Seller from all liabilities or obligations of Corporation after the Closing Date of Sale;

E.           Seller shall indemnify and protect Buyer from all liabilities or obligations of Corporation prior to the Closing Date of Sale;

F.           Seller shall not, within a radius of ten (10) miles of the Property, directly or indirectly engage in the practice of veterinary, other than as provided in this agreement for a period of five (5) years from the Closing Date, unless Seller is employed by Buyer;

G.           Seller agrees that it shall not directly or indirectly induce any former patients to patronize anyone other than Buyer for a period of five (5) years from the Closing Date;

H.           Seller agrees that it shall not solicit for hire employees of its Business for a period of five (5) years from the Closing Date;

I             Seller and Buyer agrees to enter into an employment agreement such that Seller shall be employed by Buyer as follows:  (a) Annual salary of fifty thousand dollars ($50,000.00) for three (3) eight hour days per week; (b) a cash bonus equal to 7.14% of the annual gross collections over baseline revenue of $700,000.00; a stock bonus equal to 5% of the annual gross collections over baseline revenue of $700,000.00;

J.           Seller shall represent and warrant that all tax returns and financial information delivered to Buyer in connection herewith are true and accurate and that to the best of Seller’s knowledge it is not aware of any actual, contingent or threatened liabilities, lawsuits or claims against it for any act or omission in connection with the Corporation or operation of the Business;

K.          Buyer shall represent and warrant that it understands that it is purchasing the Assets of the Corporation “as is” without representation or warranty and that Seller is making no representation or warranty with respect to the future success of the Business;

L.           The parties shall be responsible for their own costs or attorneys, advisors and accountants in connection with the consummation of the Transaction.

M.          If any Party fails to negotiate in good faith, or if each Party hereto has not entered into the Purchase Agreement by December 15, 2010 then any obligation to negotiate and prepare the DPA or otherwise deal with any other Party to this LOI shall immediately terminate.

  

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N.           Seller agrees that it shall not entertain any offers to purchase the Corporation during the term of this LOI

O .           Each Party shall be solely responsible for its own expenses, legal fees and consulting fees related to the negotiations described in this LOI, whether or not any of the transactions contemplated in this LOI are consummated.

P.           VENUE, CHOICE OF LAW. The terms and conditions of this LOI shall be governed by and construed in accordance with the laws of the State of California, without reference to its choice of law rules.  Any action arising as a result of this Letter  shall be brought in the state courts located in San Diego County, State of California.

O.           Other than the covenants in Sections 1(a) , 3(M), 3(N), 3(O) and 3(P) of  this LOI, this LOI is not binding upon either the Buyer or the Seller, and the Acquisition is subject to the negotiation and execution of a definitive acquisition agreement between the Purchaser, Company  and Seller.

Very truly yours,

	
“Buyer”

	
By:/s/David R. Koos

	  	
Entest BioMedical Inc.

	  	
David R. Koos, CEO

 

AGREED AND ACCEPTED THIS DAY OF October 25, 2010:

	
“Seller”

	
By: /s/Gregory C.  McDonald, DVM

	  	
Greg McDonald, DVM

	
“Corporation”

	
By: /s/Gregory C Mc Donald

	  	
Gregory C McDonald, Pres.

	  	
McDonald Animal Hospital, Inc

	  	
Greg McDonald, President

 

 

 

 

 

 

 

 

 

 

  

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